Where do I place Officer Withdraw on the 1120S and K1 form?

[edmund360]

Where do I place Officer Withdraw on the 1120S and K1 form? I don't usually remove cash from business account. However where do I place it on the Corporate Tax Return 1120S? On Line 7 of form and on k1? If so where on the Ki?

Thank you,

Ed

[ThomasM125]

You can enter your shareholder distributions on the Shareholder Distributions and Dividends Smart Worksheet which you will find on page 3-5 of form 1120-S. It's below schedule K on page 4 of form 1120-S. 

It will flow over to line 16 of schedule K-1.

[edmund360]

Thank you. It populated the K1 on line 16.

ED

[edmund360]

Where would you place that information on the 1040? I understand it may populate from the K1. Do you place it on Schedule C ? 

[CatinaT1]

No.  You have a corporation if you are filing an 1120S, not self-employment so no Schedule C.  Your income will flow to your personal return when you enter the K1 form.

[edmund360]

Right. I want to know where it will go or be placed on the 1040 form. I think I have to pay the SS and unemployment tax? No?

Edmund

[edmund360]

I entered it on the TT Premier program. Entered on line 16 of K1. Do not see where it transfers on 1040?

Thanks,

Ed

[JeffreyR77]

The amount entered on Line 16 of the K1 reports distributions that reduce a shareholder's basis in the corporation and does not represent income reportable on the form 1040. 

Distributions reported on Line 16 of the K1 do not represent reasonable compensation for an officer of the corporation or an expense of the corporation.  Distributions reported on the K1 are not subject to FICA or Medicare taxes. Distributions are not reported on any line of the 1120S. 

Here is additional information on reporting distributions on form 1120S K1 .

For guidance on reasonable compensation requirements for officers of S-Corporations, please refer to Reasonable Compensation Requirements

[edmund360]

But isn't this income from my sales that hasn't been taxed at all yet? If I take a withdraw of cash from my business account don't I owe any taxes to federal, state, and local income entities?

Thank you,

Edmund

[Irene2805]

I think you're confusing basis distributions and ordinary business income.

• Distributions come from your ownership basis in the S-Corp and are reported  on line 16 of the K-1.
• Ordinary business income comes from the operations of the S-Corp (sales & services).  Your share is reported on line 1 of the K-1, included in your 1010 and taxed there as income.

To enter the K-1 from your S-Corp into your personal 1040 return, please follow these steps:

1. Click on Federal Taxes > Wages & Income [In TT Self-Employed:  Personal > Personal Income > I'll choose what I work on].
2. Under S-corps, Partnerships, and Trusts [in desktop:  Business Investment and Trust Income], click on the Update box next to Schedule K-1. 
3. On the Tell Us About Your Schedules K-1 screen, click on the Start/Update box next to S corporations (Form 1120S).  
4. If you have already entered K-1 SCorp information, you will see the SCorp. K-1 Summary screen.  Click Add Another K-1 to enter your information  (or click on Edit to continue with the existing form entry).  
5. If you haven't started enter K-1S information, continue through the screens, entering the requested information.

[edmund360]

What is 1010?

[gloriah5200]

Schedule K Box 16 code D is where you will enter officer distributions on the 1120S and box 16 code d on the 1120S Schedule K-1

For additional information please refer to the:

 IRS Form 1120-S

@edmund360 "1010" above is a typographical error and should read "on your Form 1040"

[Edited 02/11/2021|6:50 pm PST]

[edmund360]

Yes. Why doesn't this show as income somewhere to pay a Fed and State Tax?

[edmund360]

Yes. Why doesn't this show as income somewhere to pay a Fed and State Tax?

[ThomasM125]

A draw or dividend from an S corporation is not normally taxable income. When you report your corporate income, you pay tax on it on your personal tax return from the entry on your schedule K-1. If you take a draw, you are simply taking that profit out that you already paid tax on, so it is not taxed again.

The only time it would be taxed is if you withdrew more than your investment (basis) in the corporation, in which case you would report an investment sale to reflect capital gain income.

If your corporation was a normal (C) corporation, the dividend would be taxable, since a C corporation pays tax on it's own income. So, a distribution would be taxed to the shareholder as a dividend. That may be what is confusing you!