@Anonymous_, You are absolutely correct about Schedule L however; it is shareholder basis which is affected by the shareholder Capital Contributions that TurboTax did not ask about and here is why it matters. Shareholder basis is the determining factor as to whether or not losses can be deducted personally (in the case of an S-Corp). Programming TurboTax Business to ONLY ask about and document deductions to Shareholder Basis (e.g., distributions, loan repayments from the corp.) compounds the problem with losses AND negatively affects all subsequent returns prepared with TurboTax Business. In other words, not being asked to enter the Capital Contributions during the interview, a user would erroneously leave out the Paid-in-Capital, subsequently reducing their Shareholder Stock Basis.
For example, an S-Corp in its first year of business (having no retained earnings) has a loss to report on the 1120S of $3,000 and the shareholder only has $3,000 in initial capital (i.e., stock basis) invested into the S-Corp. The loss would drain the shareholder of all stock basis in the company for the tax year, preventing the loss from becoming deductible personally however; during the same year the shareholder contributed $3,000 in Paid-in-Capital in order to restore his/her initial investment/stock basis. By doing so, the shareholder would be able to deduct the entire loss personally. If TurboTax Business NEVER ASKED about the Capital Contribution during the interview (which it doesn't), the shareholder may not know, or forget to go to forms mode and enter it manually. Then to magnify the situation, TurboTax Business would not have a complete picture of the shareholder's basis and as a result, transfer the error to all subsequent tax returns. Additionally, the information the corporation reports to the IRS does not match information that the shareholder reports on their personal tax return. FLAG!
Regarding the Schedule L, I (and the IRS) recommend that all corporations complete Schedule L from the beginning of incorporation in order to eliminate headaches down the road when you realize that you should have been completing the Schedule L all along.
