Tax Preparation Websites
December 14th, 2006
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Question: Are my S-corp Distributions supposed to be taxed on my personal tax return?
My tax guy and myself had a parting of the ways. He already did my corporate tax return, but I am doing my personal one. I’ve been using one of the websites for tax preparation and all is pretty easy and simple. I worked for a company for half a year and then went into business on my own so I have 2 w-2′s, plus my K-1. So here’s my problem….the software shows me getting back 6500 just from my two w-2′s. On another schedule I’m asked to enter my distributions which is line 16 on the k-1. When I do this, my refund is reduced by 2500. It appears to me that the additional distribution funds are being taxed as income. Is that correct? I thought the whole point of the s-corp is to avoid double taxation? I already paid the tax for the distributions on my paychecks. If I made $1000, I took $500 as a dist. and 500 as income, but I paid tax for $1000 on $500 I paid myself as income. So I’ve already paid taxes on the distributions. Am I missing something here?
Answer: Amounts on line 16 of the K1 would be
A tax exempt interest income
B other tax exempt income
C nondeductible expenses
D property distributions
E repayment of loans from shareholderslook at page 12 of these instructions to see what if any would be taxable from line 16
http://www.irs.gov/pub/irs-pdf/i1120ssk.pdf
Income from a S corporation flows through to the owners or shareholders of the corporation.
This is the purpose of the K1 ,, it shows each shareholder what their profit or loss in the corporation was.
You enter the information from the K1 on Schedule E of Form 1040 and that ends up on line 17 of the form 1040.
Income from a S corp is taxed as ordinary income.
You have not paid tax on this income until you do so on your personal tax return, the S corp does not pay taxif the S corp paid you during the year, The S corp would send either a 1099 or a W-2 to you and also to the IRS
either way, you don’t pay tax on money you receive from the S corp until you file your personal tax return.
The S corp might also be filing a 941 each quarter and a annual form 940
Wages paid are deducted from the income the S Corp makes so you are not being taxed twice
Economy has many doing their own taxes
Tough times have many turning away from tax preparation services, to crunch the numbers themselves.
Tax Websites
Posted in 
Tags: