South Carolina Form SC 1120S

[csanford2]

I am working on my South Carolina S Corporation return and the Total Income Taxed to Shareholders appears to add the Section 179 expense rather than deduct it which basically doubles my Income Taxed to Shareholders on the South Carolina return.  It is adding lines 1-12 from Schedule K from the Federal 1120-S instead of Lines 1-10 (income lines) as it was for 2021.  Any suggestions?

Thank you!

[RobertB4444]

South Carolina does not recognize bonus depreciation.  The amount is added back in to your income and then the asset is depreciated normally for South Carolina purposes.

Here is South Carolina's ruling on that.

@csanford2 

[csanford2]

Thanks so much for your response!  My net book income is $211 after deducting $69,071 of Section 179 expenses.  The amount shown in Line 1 of the South Carolina 1120S is $138,353  - which is the Section 179 of $69,071 plus the net book income of $211 (lines 1-10 of Schedule K on the federal return) plus Section 179 of $69,071 which is line 11 of Schedule K of the Federal return.  The description of line 1 on the South Carolina 1120S says it includes line 1-12 of schedule K of the federal 1120S which adds back again the Section 179 expense.  It appears the Section 179 is added twice.  In 2021, this line in the SC 1120S included only lines 1-10 which is the income section.  In 2022, this amount appears to include the Section179 expense in line 11 as an add back because it is included in lines 1 -12 instead of lines 1-10 on Schedule K of the Federal 1120S.  

Any help would be appreciated.  Thank you!

[AliciaP1]

It would be helpful to have a TurboTax ".tax2022" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions: 

At the top menu in the black line at the top of the page go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click Send and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@csanford2

[csanford2]

I contacted the SC Department of Revenue and they said the following: " We did make a change on the SC1120S to include lines 1-12 from the federal Schedule K instead of lines 1-10. This was to help simplify the active trade or business income calculation for taxpayers making that election. So the 179 deduction would be included as a deduction, so it should decrease your income."

I believe the TurboTax calculation for line 1 of the South Carolian 1120S is adding Line 11 of the Federal Return on Schedule K instead of deducting the amount in Line 11 of the Federal Return to get the amount on Line 1 of the South Carolina 1120S.  This results in the income for the SC return on Line 1 being double what it should be by the amount of the Section 179.  Any guidance would be appreciated.  Thank you!

[BrittanyS]

We can look into the calculation issue you are having if you would like to provide the diagnostic code, as AliciaP1 said.  You can follow these instructions to get the token and reply to this thread with the code.

Here are the instructions: 

At the top menu in the black line at the top of the page, go to Online. 

1. From the menu, select Send Tax File to Agent. 
2. You will see a message explaining what the diagnostic copy is.  Click Send, and then you will get a Token number. 
3. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see precisely what you are seeing, determine what is going on in your return, and provide you with a resolution.

@csanford2 

[csanford2]

My token is 1076366.

Thanks so much for your help! 

[AliciaP1]

Your Schedule K from your federal 1120S has amounts on lines 1, 4, and 11.  These added together (which includes the amount reported for your Section 179) are what is reported on your SC Form 1120S Line 1, which correctly should be reporting "line 1 through 12, Schedule K of the federal 1120S".  

@csanford2  

[csanford2]

Thank you so much for your response.  I'm still struggling to understand why line 11 of Schedule K of the Federal return would not be treated as a deduction in calculating line 1 of the South Carolina 1120S since it is a deduction on Schedule K of the Federal Return.  The end result is an income amount on the South Carolina return which includes my Section 179 expense twice in the total. 

I appreciate any clarification you can provide!

[AliciaP1]

It's not including it twice.  Line 1 of the Federal Schedule K shows your net income after the Section 179 deduction.  Line 11 shows the deduction because, for some income calculations and states, it needs to be added back.

When the SC Form 1120S asks for the sum total of lines 1-12 of the federal Schedule K, it is merely adding back the Section 179 deduction to get to reportable S-Corp income for the state.

@csanford2 

[csanford2]

Thank you for your response!  

I presented these facts to the SC Department of Revenue as also shown in my tax return supplied earlier. 

"My Book Income is $191 (excluding interest income of $20).  My Section 179 expense is $69,072.

Line 21 of my Federal Return is $69,263 (Book Income $191 plus Section 179 of $69,072)

Line 1 of Schedule K of the Federal Return is $69,263

Line 4 of Schedule K of the Federal Return is $20

Line 11 of Schedule K of the Federal Return is $69,072.

The TurboTax calculation for Line 1 of the South Carolina 1120S is showing $138,355 ($69,263+$20+$69,072).  

Should Line 1 of the South Carolina return be $211? ($69,263+$20-$69,072) which treats Section 179 as a deduction?"

They concurred that the amount on Line 1 of the South Carolina 1120S should be $211 instead of $138,355.

Any help would be appreciated.

Thank you!

[AliciaP1]

The Schedule K correctly shows line 11 as a positive number and therefore the SC 1120S line 1 is correctly reported at $138,355 based on the instructions for the form.  This is not a TurboTax issue and you may want to seek assistance from a tax professional in your area.

Per the instructions for IRS Form 1120S Schedule K line 11:

Complete Part I of Form 4562 to figure the corporation's section 179 expense deduction. The corporation doesn't take the deduction itself, but instead passes it through to the shareholders. Attach Form 4562 to Form 1120-S and show the total section 179 expense deduction on Schedule K, line 11.

Per the instructions for IRS Form 4562 Part I:

Enter the total cost of all section 179 property you placed in service during the tax year (including the total cost of qualified real property that you elect to treat as section 179 property).

Per the instructions for SC Form 1120S line 1:

Line 1: Enter the total of federal Schedule K line 1 through line 12 income (loss) amounts.

@csanford2 

[csanford2]

Thank you for your response!