S-Corp Dividends

Forum|Forum|5 years ago
February 17, 2021
1 reply
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My cpa had me record some distributions in 2019 as taxable dividends because we were trying to remove some old c-corp retained earnings. I do not see those dividends on my K-1 for 2019 and there is still a balance in "taxable dividends" in 2020. Can I do a journal entry to clear out that account for 2019 and put it into my "owners capital"?

TurboTax Business Windows

M-MTax

Level 15

For a balance sheet entry?

lKgarcia2020Author

Level 2

yes.

lKgarcia2020Author

Level 2

If it continued to happen each year, it would look like disquised wages trying to save paying employment taxes on them and could draw IRS attention and cause them to want to "recharacterize them" as wages.

You need to have notes on it in the annual minutes of the corporation and documentation, in case IRS sends you an "inquiry" correspondence.

Generally, C Corporations pay dividends, not S Corporations.

Thank you. This should be just an adjustment for this year. My first year doing my own return and so I'm able to really understand what my accountant was doing and clean everything up. Loving TurboTax so far.