Dealing with a vendor refund made to a shareholder 3 years after s-corp has been closed.

DIYifUcan — Tue, 24 Feb 2026 03:54:56 GMT

I was 25% owner of an S-Corp which was dissolved in 2019. In 2014, we had hired a lawyer and paid a retainer of $3000. The company filed a final tax return for 2019 which indicates that all cash and securities had been distributed to the shareholders. Per the return, assets are listed at the start of 2019 and none remained at the end of 2019. There was no mention of the retainer (as an asset) in the return, so I have to assume it had at some point been treated as an expense. Possibly relevant, is that each shareholder had a Total Qualified Business Loss carryover; and an NJ-BUS-2 carryover.

In 2022, the law firm discovered the s-corp still had a credit in the amount of the retainer, and sent each share holder a proportionate share of the retainer. I got a check for $750.

I would expect that this should be entered on Schedule C, and would be offset by the loss carryover on Schedule C (Form 8995-A). However, I am retired, and have no employment or business activities, so I'm not sure I can call this 'Qualified business income.' Further, TurboTax doesn't seem to use the loss carryover to reduce the current income; wants to charge self-employment tax; and doesn't fill the above form automatically.

How should I properly deal with the $750 on my 2022 return?

Re: Dealing with a vendor refund made to a shareholder 3 years after s-corp has been closed.

RobertB4444 — Thu, 02 Mar 2023 16:25:54 GMT

Enter it as 'miscellaneous income'. This is literally the reason that category was created.

In TurboTax go to wages and income and roll all the way to the bottom. 'Miscellaneous income' is the very last option and 'other reportable income' is the very last option on the next page.

When you click on that the system will ask you about the income. You'll tell it 'yes' you had other reportable income and 'Refund of Retainer' seems like a good description. Then it will put it on the return and you're set.

topic Dealing with a vendor refund made to a shareholder 3 years after s-corp has been closed. in Business & farm

Dealing with a vendor refund made to a shareholder 3 years after s-corp has been closed.

Re: Dealing with a vendor refund made to a shareholder 3 years after s-corp has been closed.