S Corp paid personal estimated taxes for S/H

[LSTAX]

The 100% share holder of an S Corp paid their personal estimated taxes from the business checking account.  I explained to them it is not a payroll tax expense of the business and had them code it to a distribution. If the amount is $10,000, is it entered on screen 8 distributions [including cash] other than dividends, assuming they have basis?

[George4Tacks]

That sounds good to me. 

[sjrcpa]

It is still a distribution even if they do not have basis.

[LSTAX]

Yes - but my biggest issue is that when I enter it on sc 8 and it flows to the K1 16D and lowers retained earnings on 1120S schedule L Line 24 -  the balance sheet is out of balance.

[sjrcpa]

Did you start with a trial balance that did balance? If so, you've got a data entry error.

[qbteachmt]

If your client coded it as Distribution as expense then you can check the math for income and expense, to see if the error is from this section. It not only isn't payroll expense, it isn't any type of Expense at all.

[LSTAX]

They don't supply a Trial Balance.  I take the P&L and make handwritten adjustments at the bottom to make it match the tax return.  I add back 50% meals and 100% of the tax that was paid and recorded as an expense - so Net Income is higher.

[LSTAX]

I think this is the heart of the problem.  Do you have a resource (article, book, etc) of how to build a trial balance and tie it to the tax return?  Thank you

[qbteachmt · Accepted solution]

"Do you have a resource (article, book, etc) of how to build a trial balance"

Every account (activity or category) has an ending balance that is the total for the year (income and expense) or the final position of that account (bank, loans, credit card, etc).

You cannot use income and expense, only. Not all inflows are income and not all outflows are expense. Do they not have a Balance Sheet? How did they generate what they gave as income and expense? If they use a bookkeeping system, it should have the reports you need. Look for things like principal payments posted as expense and sales tax posted as income, for common errors.

[LSTAX]

I guess I will have to create my own BS/TB for clients who don't use a bookkeeping program and only track expenses and income.  Thanks for the tips!