How to enter dividend distribution for S-Corporation

[EMS]

How do you report a dividend distribution to an S-Corp Shareholder?

[Jim-from-Ohio]

If the 1120S includes a balance sheet, it goes on Schedule K.  If not doing a balance sheet it goes directly on the K-1, box 16, code D. 

[Accountant-Man]

Is it really a dividend, or is it an S corp distribution? They are different.

[EMS]

It's a distribution in excess of basis

[Jim-from-Ohio]

Schedule D, capital gain

[abctax55]

As I'm not sure what you are actually asking:

On the F 1120-S = distributions show on M-2, line 7.  

On the F 1040 = Form 8949 > Sch D as a capital gain (usually long-term)  - as @Jim-from-Ohio stated.

[TaxPandaCPA]

Dividend distributions to an S-Corporation shareholder are generally referred to as "distributions" rather than "dividends," as S-Corporations typically do not pay dividends in the same way that C-Corporations do.

Here’s how to report these distributions:

1. Recording the Distribution on the S-Corporation’s Books:
Distributions Account:
Record the distribution in the S-Corporation’s books as a reduction in the "Distributions" or "Retained Earnings" account, depending on how your chart of accounts is set up.
The entry typically involves debiting the Distributions account and crediting Cash (or another asset account if the distribution is non-cash).

2. Reporting the Distribution on Form 1120-S:
Schedule K (Form 1120-S):

Distributions are reported on Schedule K of the S-Corporation’s Form 1120-S. The total distributions made during the year are reported on Line 16d ("Distributions").
Schedule K-1 (Form 1120-S):

Each shareholder's share of the distribution is reported on their individual Schedule K-1, which they will receive from the S-Corporation.
This is reported in Box 16 ("Other Information") with code D for "Distributions."

3. Reporting the Distribution on the Shareholder’s Tax Return:
Form 1040 (Shareholder’s Individual Tax Return):

The distribution itself is generally not taxable to the shareholder if it does not exceed their basis in the S-Corporation.
However, shareholders must track their basis in the S-Corporation, as distributions that exceed their basis are taxable and reported as capital gains on the shareholder’s Form 1040.
Schedule E (Supplemental Income and Loss):

The shareholder’s share of the S-Corporation’s income, which flows through to them, is reported on Schedule E. The distribution itself does not get reported here, but it affects the shareholder’s basis.

4. Basis Tracking:
Reduce Shareholder Basis:
Distributions reduce the shareholder’s basis in the S-Corporation. Shareholders should adjust their basis in the stock by the amount of the distribution.

5. Additional Considerations:
No Double Taxation:
Unlike C-Corporations, S-Corporation distributions are not subject to double taxation. Income is taxed at the shareholder level when earned, not when distributed.

State Reporting:
Some states may have additional requirements or forms for reporting S-Corporation distributions. Check your state’s tax guidelines for any additional reporting requirements.

By following these steps, you can ensure that the dividend (distribution) to an S-Corporation shareholder is accurately reported both on the corporation’s return and the shareholder’s individual return. Tracking basis correctly is crucial, as it determines the taxability of the distribution.