S-Corp, Schedule K-1, Form 1120s
Submitted by hopbrook on Mon, 2008-03-31 19:14.
Hi Linda,
I started an S-corp in June 2007, and did my taxes for the first time (sort of blindly) and got my 1120s returned from the IRS saying they need a separate Schedule K-1 for each payee. I had an Ordinary business loss in 2007 after salary and expenses. I am the only employee. I use a payroll service to take care of the tax deposits quarterly. I did not file a K-1 with my 1120s. I guess my question is, do I report the loss on the K-1, and then also on my 1040. I'm a bit confused about what to do, and the instructions on the form seem vague to me.
Thanks
Form 1120 is a type of tax
Form 1120 is a type of tax form which has to be filed with the Internal Revenue Service (IRS). In order to download Form 1120, visit the given links - savewealth.com.
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So, if a S Corporation owner
So, if a S Corporation owner wants to reorganize as an LLC taxed as an S corporation (by filing Form 8832) he should be able to do so without adverse tax effect as long as ownership does not change. I would be interested to know if the answer is the same if one spouse converts his S corporation to an LLC owned by the two spouses jointly when the spouses file joint tax returns- is this merger a change of ownership for tax purposes?
Reorganizing an S corp
Hi,
I'm not sure what your goal is here.
From a tax perspective, this doesn't make any sense since the entity would be taxed the same. All the S corp rules would apply to the LLC if it elects to be taxed as an S Corp. I'm pretty sure you would have to dissolve the current S Corp (which is a taxable event) and then contribute the assets to the LLC and make the election to be taxed as an S Corp. I must be missing something. :(
Transfers to spouses are non-taxable. Why not just give your spouse shares in your existing S-Corp. That would be very easy and the only difference between your current returns and the new one would be 2 K-1s instead of 1.
L:)
You can use Form 1045,
You can use Form 1045, Application for Tentative Refund, instead of Form 1040X to apply for a refund based on the carryback of a net operating loss, an unused general business credit, or a net section 1256 contracts loss; or an overpayment of tax due to a claim of right adjustment under section Business Planning. But Form 1045 must be filed within 1 year after the end of the year in which the loss, credit, or claim of right adjustment arose. For more details, see the Instructions for Form 1045.
Completing the K-1
Hi,
I'm guessing you did your 1120S return by hand. Pretty much any tax software will automatically complete the K-1s for you.
It's really hard to give specific advice because the purpose of the K-1 is to transfer certain items from the business return to the personal return. Income on the S return retains it's original characteristics as it's transfered. For instance if you have $50 of interest on your business savings account, the $50 will show up on the interest income portion of your Schedule B.
Without all the details I'm kind of shooting blind, but if you only had an ordinary loss (& no depreciation) then create a K-1 for yourself and put the loss in box 1. If you had any meals expense, put the 50% non-deductible portion in box 16 with the code "C". If you had depreciation, there are likely other items to report. Since you are the only owner your K-1 will show the same values as the 1120S.
You might want to consider finding a 2007 version of some business tax software & using that to help you prepare the return.
L:)
S Corp Madness,
My S Corp is showing a loss for 2007. No depreciation, just a regular loss.
I wrote checks throughout the tax year to myself and my partner and need to know how to declare that money. The way it is showing up now, my s corp took a loss so that means on our personal taxes we take a neg income for the year?
Thanks,
SityChik
S Corp Losses
When you say you wrote checks to yourself & your partner. I'm assuming you mean the other shareholder as "partner" has multiple connotations. :)
If the payments you wrote were salaries with the appropriate employment taxes paid and assuming you both materially participated in the company and have sufficient basis in the S-corp, then yes, you can use the losses to offset other income on your personal returns.
However, if you just took money as you needed it without treating it as payroll, then those payments are distribution and they are not an expense of the company. Instead those are treated as return of capital to the shareholders and reported as property distributions in line 16 on the K-1. If you don't have sufficient basis to absorb the distributions, the distributions are treated as capital gains. Otherwise the distributions don't show up on your personal return at all.
You do pay income tax on those payment but it's a bit indirect. Say you put in $2,000 to start your S-Corp and it had taxable income of $10,000 and you took $12,000 of distributions. Rather than reporting a $2,000 loss, you have a $10,000 taxable income and your basis in the company is now $0. (2K + 10K - 12K) So you're paying 2007 tax on the $10K income and the other $2K is return of your initial contribution.
Make sense?
L:)