Form 7203 Impossible to Fill Out

[supergrover91]

My father and I started our little S Corp 20 years ago. We didn't "purchase" stock. We are just 50/50 owners with no initial cash input. We never kept a stock basis worksheet (shame on us, I guess). I have no idea how I'm supposed to fill out the new Form 7203. I don't even have K1s from that long ago. Any suggestions? Can I still submit my taxes without filling it out completely? I no longer get an error, as long as I put a Stock Block of 1. But that's all I entered. Ugh!!! By the way, my father uses HR Block and the form doesn't even exist in the desktop version so he was able to e-file with no issues.

[Boots00001]

See the following for guidance:

The stock basis in the S corporations should have been known for every tax return filed.

Form 7203 is filed by S corporation shareholders who:

• Are claiming a deduction for their share of an aggregate loss from an S corporation (including an aggregate loss not allowed last year because of basis limitations),

• Received a non-dividend distribution from an S corporation,

• Disposed of stock in an S corporation (whether or not gain is recognized), or

• Received a loan repayment from an S corporation.

If one of these requirements applies, then Form 7203 is required.

Basis is handled as follows:

1. Basis is increased by (a) all income (including tax-exempt income) reported on Schedule K-1 (Form 1120-S), and (b) the excess of the deduction for depletion (other than oil and gas depletion) over the basis of the property subject to depletion.

2. Basis is decreased (but not below zero) by (a) property distributions (including cash) made by the corporation reported on Schedule K-1 (Form 1120-S), box 16, code D, minus (b) the amount of such distributions in excess of the basis in your stock.

3. Basis is decreased (but not below zero) by (a) nondeductible expenses, and (b) the depletion deduction for any oil and gas property held by the corporation, but only to the extent your share of the property's adjusted basis exceeds that deduction.

4. Basis is decreased (but not below zero) by all losses and deductions reported on Schedule K-1 (Form 1120-S).

 If Form 7203 is needed then your best efforts to calculate the stock basis is needed. Previous tax returns should contain the information needed.

[supergrover91]

Unfortunately, the stock basis was not known on each tax return so I'm kind of screwed now. This is so beyond the knowledge of a small business owner using TurboTax to do their personal taxes. Lesson learned, I suppose.

[fmorelli]

Well yes ... except Form 7023 shows no value for Stock Basis (Pt 1, Line 1) and there is no ability to correct this in TurboTax online. Then Pt 1, 3a auto populates from K-1 which a loss (which is wrong ... and the TT error check catches that and asks to amend). If a loss, TT should be entering 0. Without a Pt 1, Line 1 basis ... Pt 1, Line 10 (the stock basis minus various 3-9) will be ZERO so there can be no loss taken, and Form 7023 becomes uncomputable one Pt 3 35 Col A has the loss entered.

Without a stock basis, no loss can be claimed. TT provides no ability to enter that information in Form 7023. Best as I can tell - if there is a loss, TT cannot be used to e-file a federal return.

[supergrover91]

My father (the other shareholder in my company) uses HR Block to do his taxes and Form 7203 isn't even in their system. It never asked for it and you can't even find any mention of it in their help section! I finally managed to put mine together in TT after about 5 hours pulling old tax files and doing all the calculations for the last 20 years. Once I had the data, I had no trouble entering it in TT. I'm still bitter though, because I spent an hour on the phone with TT trying to get help with it and the person I was on with was COMPLETELY clueless about the form.

[Boots00001]

Yes that is difficult. The best you could do is estimate the basis. Totally adjusted based on the yearly profit over the years. You could also try a zero basis to see the impact. A bit of trial and error to see the impact, and also a credible effort to meet the requirements.

[AliciaP1]

Form 7203 is necessary if you are reporting a loss from your S-Corp or took a non-dividend distribution from your S-Corp.  If either of these applies to your father, his returns will be held up in processing if the form is not provided.  

If you did not invest money to "purchase" stock in the S-Corp, other activities of the business and you can still impact and raise the value of your basis.  As you stated, S-Corp owners have always been responsible for tracking their basis, only now the IRS is requiring that information be reported.

Please see S Corporation Stock and Debt Basis for more specific guidance on completing the form.

@supergrover91

[cvaloros1]

I'm in a slightly similar boat as the original post.  I have a S-Corp with me at 51% and my wife at 49%, formed in 2009.  No initial money in and the company is a consulting company so any physical expense is small and paid by the company.  The company has basically just cash as an asset (I pay myself salary for the work done, then keep extra cash in reserve).  

What I gather is that my stock block is 1 (we didn't purchase new stock or anything).  What I gather is my initial stock basis (January 1, 2021) for form 7203 is 51% of the company value, then I fill out the lines from my schedule K-1 (lines 1, 16D, 16C), and a final stock basis.  Can I use Line 27, Schedule L of my company's 2020 1120S for the company value, since this is the company's end of tax year shareholder equity?

Thus - my Jan 1, 2021 stock basis for Line 1, Part 1, Form 7203 is 0.51 * [Line 27, Schedule L, Form 1120S - 2020]?

THanks,

[Mike9241]

your stock basis line 1 of 7203 should be 51% of the sums of lines 22 thru 26 at the beginning of the year and line 15 should be 51% of the sums of lines 22 thru 26 at the end of the year for you 

the 7203 for your spouse should be the other 49%

if cash is the only asset and there are no liabilities then 51% of the cash beginning of the year/end of the year should match line 1 and 15 

and 49% of cash should match the spouse7203 lines 1 and 15 

[KAtac]

We have run into the same thing, HR Block still does not support form 7203 in their 2023 Premium and Business software. The 7203 is required for us this year so we obtained the form from the IRS website and completed it.  However... 1) it can't be uploaded in the e-file with our return due to HR Block not supporting it, 2)  HRBlock does not support uploading .PDF attachments, 3) visited an HR Block office they hadn't heard of 7203 but after researching they confirmed the HR Block consumer software doesn't support it 4) IRS.gov still doesn't support uploading attachments.  For such an important form that IRS will hold up processing, it's ridiculous that we have no way to transmit it.  Only option left is to mail it to the IRS but we know from past experience that will be futile.  We mailed a return 2 years ago, IRS cashed the check right away, then a year later sent us a letter reporting that our return was delinquent (they lost it internally).  Very low % chance they'll be able to pair a mailed in 7203 form to the e-filed return.  Any other ideas?