Issuing IRS Schedule K-1 to Shareholders

Form 1120S

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Once the S-Corporation's Form 1120S is prepared, you are ready to begin preparing Schedule K-1 for each shareholder.

Schedule K-1 of Form 1120S is used to report each shareholder's pro-rated share of net income or loss from an S-Corporation, along with various separately stated income and deduction items. Schedule K-1 can also be used to summarize a shareholder's beginning and ending stock basis for the year.

Here's the minimum you need to prepare the Schedule K-1:

  • a completed 1120S tax return for the S-Corporation,
  • a complete transaction history and summary statement of each shareholder's capital accounts,
  • tax software that prepares 1120S tax returns.
  • complete information about each shareholder: name, address, and SSN.

S-Corporation Shareholder Allocations

Reporting Net Profit or Loss

Separately Stated Items Reported on Schedule K-1

  • Section 1231 gains and losses,
  • Net short-term capital gains and losses,
  • Net long-term capital gains and losses,
  • Dividends eligible for the dividends received deduction (if a shareholder is a C-Corporation),
  • Charitable contributions,
  • Taxes paid to a foreign country,
  • Tax-exempt interest and related expenses,
  • Investment income and expenses,
  • Amounts previously deducted, such as bad debts,
  • Real estate income and expenses,
  • Section 179 deductions,
  • Tax credits, and
  • Non-deductible expenses, such as 50% of meals and entertainment expenses.

    Deadline for Sending Schedule K-1

    S-Corporations are required to issue a Schedule K-1 to shareholders by March 15th (the deadline for Form 1120S), or by the extended deadline (September 15th).