Issuing IRS Schedule K-1 to Shareholders
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).