I notice in the retained earnings calculation, it includes adding the retained earnings from the prior year. My understanding is for an S-Corp the retained earnings end up on your K-1 as an equivalent of a distribution for tax purposes. But since it adds in the retained earnings from the prior year it appears you can be taxed over and over again for the same retained earnings. What am I missing?
For example:
Year 1: retained earnings = $5000
Year 2: retained earnings = new retained earnings $1000 + Year 1 retained earnings = $6000
Year 3: retained earnings = new retained earnings $0 + Year 2 retained earnings = $6000
It looks like unless you book some kind of loss you'll be hit with taxes every year on retained earnings from prior years. And indeed my "retained earnings" seem to be growing despite not being an actual amount in an account somewhere.
