topic Re: Retained Earnings in Get your taxes done using TurboTax

Retained Earnings

WBD1 — Mon, 05 Apr 2021 18:57:16 GMT

I have an S corporation that we dissolved this year and need to account for the retained earnings. Is turbo tax able to handle this? Is there a place to report it in any of the turbo tax products?

Re: Retained Earnings

ToddL99 — Mon, 05 Apr 2021 19:28:42 GMT

Yes, TurboTax Business will allow you to report the dissolution of your business and distribution of retained earnings.

See the attached screenshot for aid in navigating to the "Filing final return?" question in the "About Your Business" interview of TurboTax Business' S-Corp tax program.

In a dissolution, retained earnings are accounted for by way of distributions to the shareholders. After all other liabilities are met (i.e. "paid off") remaining assets should equal your retained earnings. Distributing those assets will "zero-out" retained earnings.

S-Corporation distributions are non-taxable. S corporation shareholder distributions are payments of corporate earnings that have previously been reported as income to the shareholders. The total distributions (except for dividends) -- including cash -- made to each shareholder and reported on line 17c of Schedule K-1 should be reported on line 16d of Form 1120S, U.S. Income Tax Return for an S Corporation.

Re: Retained Earnings

WBD1 — Thu, 08 Apr 2021 17:27:27 GMT

Thank you very much for your reply. It was very concise. I was wondering about the personal tax return however. My business accountant finished the business return and now I want to do my personal return using Turbo Tax. Do I need to do something special on that return to show the retained earnings/ shareholder equity that I got from the business? What is the process in Turbo Tax for that?

Thank you again.

Re: Retained Earnings

ToddL99 — Sat, 10 Apr 2021 14:59:32 GMT

S-Corp earnings are taxed in the year they are earned. The "retained earnings" balance is not reported and taxed again on your personal return when you dissolve the S-Corp.

All you need to report on your personal return is the information on the 2020 Schedule K-1 from the S-Corp, making sure that you indicate this is a final K-1 (see below).

The Schedule K-1 will report your share of current year earnings, deductions and credits.

To report the K-1 on your personal return:

Down the left side of the screen, click on Federal.
Across the top of the screen, click on Income & expenses.
Under Your income and expenses, scroll down to Schedule K-1 and click Edit/Add to the right.
At the screen Tell us about your Schedule K-1, you tell the software which Schedule K-1 you received.
For several screens, you will be entering data right off the K-1 form.

Re: Retained Earnings

jeffreyrstcyr — Tue, 01 Feb 2022 16:45:58 GMT

My retained earnings does not let me ZERO out on my balance sheet. I have created my k1 to file my business income for my personal taxes but for my TurboTax business, it does not let me zero out my retained earnings on the balance sheet. It continues to add the business income into 2021 retained earnings. Where do I go?

Re: Retained Earnings

PatriciaV — Tue, 01 Feb 2022 19:19:56 GMT

@jeffreyrstcyr

Have you reported the distribution of earnings in the Member/Shareholder Capital section of TurboTax?

Does your Schedule K-1 Line 16 show withdrawals/distributions?

Retained earnings reflect the income/loss of the company, but are also reduced by distributions to the members.

In the year a company dissolves, all assets are distributed and retained earnings are reduced to zero.