K-1 impact on personal 1040

Forum|Forum|6 years ago
June 20, 2020
5 replies
22 views

Hello, I have a bit complicated situation:

Client has a K-1 from 1120-S with negative balance on line 1 Ordinary business income (loss) of ($50,000). He also has an officer compensation of $70,000, which i entered in Other Income since he didn't 1099 it.

The question is shouldn't the K-1 loss of ($50,000) be deduct from the $70,000 and leave a balance of $20,000 as income??

In his personal 1040 form, the K-1 loss of $50,000 is not reflecting. It only shows the $70,000 income that he has to pay taxes on.

This topic has been closed for replies.

qbteachmt

Level 15

Let's examine this part: "since he didn't 1099 it."

When you work for an S Corp, you are an Employee and get paid through payroll and get a W2.

If you are a shareholder, you never get a 1099-M from your own entity.

All of which means this: "The question is shouldn't the K-1 loss of ($50,000) be deduct from the $70,000 and leave a balance of $20,000 as income??"

Likely is not the right question to be asking. It seems the 1120S might need to be amended and payroll for 2019 needs to be fixed.

Don't yell at us; we're volunteers

M

mkedikianAuthor

Level 3

Thank you for your response.

Since I have to work with what i am given, i have to figure out the best case to prepare his taxes.

I can not go back to him and say, you have to go back and convert the $70,000 cash withdrawal into payroll and issue yourself 2019 W-2. I can ask him to do that moving forward.

Any other suggestions?

abctax55

Level 15

"I can not go back to him and say, you have to go back and convert the $70,000 cash withdrawal into payroll and issue yourself 2019 W-2."

You could have last December when you first asked about the situation... just sayin'

https://proconnect.intuit.com/community/proseries-discussions/discussion/yes-i-prepared-the-1120-s-and-the-k-1-client-did-not-i/01/33265#M18712

And actually, yes you CAN ask him to go back and convert the $70,000 cash withdrawal into payroll and issue yourself 2019 W-2. The pain of doing it the right way should get his attention.

You can also decline to prepare the incorrect returns

HumanKind... Be Both

Accountant-Man

Level 13

A cash withdrawal to an owner/employee is not deductible, so the company profit is really 20k. That should be on the k1. Have the preparer fix it.

** I'm still a champion... of the world! Even without The Lounge.

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