Basis on form 7203 is wrong-can I adjust without looking bad?

Forum|Forum|1 year ago
February 22, 2025
1 reply
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Turbotax says my basis in my S Corp is over $49,000 on form 7203, but really my business bank account had only a few thousand dollars at year end. Somehow Turbotax did not record the distributions I entered the last few years. If I adjust the basis to only a few thousand dollars, will that flag something bad to the IRS?

JamesG1

Level 15

I would not make a such an adjustment. The previous year's tax return must be amended.

Distributions are reported on line 16 of the Schedule K-1 (Form 1120-S) code D.

Determine the taxability of the distribution by reporting the distribution on line 6 of the IRS form 7203 S Corporation Shareholder Stock.

If a previous year's IRS form 7203 is incorrect, that previous year's tax return and all subsequent years tax returns should be amended and the attached IRS forms 7203 corrected.

In addition, the Federal 1040 tax returns of the owner(s) may need to be corrected and amended.

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PlarkaAuthor

Level 2

It would be easier if I just put the money back into my business account. Would that cause problems and it's better to amend everything?

PatriciaV

Level 15

Should the IRS question how your capital basis was calculated and follow the money, it will be obvious that you took distributions that were not reported on the tax return. JamesG1 provided good advice for remedying this situation.

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