My wife and I own a business we are 50/50 partners. We file tax form 1120S every year. We have a question in regards to our K-1 and shareholders basis Statement for tax year 2022.
We are showing a net ordinary income from our P/L of $40,550.00
We each take a salary and pay payroll taxes. Our combined salary for the year totaled $62K.
During the year my wife was paying personal bills from the company bank account which came to $53K. In our QuickBooks we placed those personal bill we paid in our Shareholders Distribution account on the balance sheet.
Now for 2022 our total incomed earned was $323,993.00 and we had expenses: our officer salaries, employee salaries and business related expenses which totaled $283,443.00. At the end of the year it shows our P/L Net Ordinary Income: $40,550.00
Now when it comes to our Shareholders Basis Statement and K-1 this is where we are getting a bit confused. I will list what mine looks like
Our beginning Share Holder Basis combined is $150K broken down per officer is $75K
This is what my Shareholder Basis Statement looks like and my wife's would be identical.
Line 1 Beginning Balance year: $75K (Total combined basis $150K divided by two)
Line 2 Adjustments to income: $20275.00 ($40,550 divided by two)
Line 3 Total Adjustment for income and gains $20275.00
Line 5 Non deductible expenses: $26.5K ($53K divided by two) Personal bills we paid through the business
Line 7 net increase/decrease $-6,224.00
Line 9 Increase by income: $20,275.00
Line 10 Subtotals: $95,275.00
Line 12 Subtotals: $95,275.00
Line 13 Decrease loss and deduction items: $-26.5K
Line 14 Subtotals: $68,775.00
Line 16 Balance end of year $68,775.00
Now for the K-1s, we have them listed as per owner:
Line 1 Ordinary Income: $20,275.00
Line 17 V* is $37K (wages from our employees excluding our wages. Total Employee Wages $74K divided by 2)
Here is our question: Do we pay taxes on the non deductible expenses (personal bills paid from business bank acct) my portion came to $26.5K. If so, where would be list it on the K-1 so it gets properly added to our personal 1040 tax return as taxable income.
And yes were are aware it's a no-no to made personal purchases from the business account. We don't know how to go about taking owner distributions/withdrawals.
Thank you in advance for the assistance.
