On a Schedule K-1 tax form, S corporations generally allocate items to the shareholder on a pro-rata-share basis.
How ProConnect Tax calculates pro rata shares:
- The program divides each item on a Schedule K by the number of days in the tax year and the total number of active shares for the tax year.
- The program only computes a weighted average if you make entries on the Change in Stock Ownership screen.
- Otherwise, the program will assume that the percentage entered in the Stock Ownership screen is the same throughout the year.
Note: You don't need to make entries in the Change in Stock Ownership screen for any shareholder whose ownership didn't change during the tax year.
How to enter information for a change in stock ownership:
- Select Shareholder Information.
- Select Change in Stock Ownership.
- Under General Information, enter a Beginning date and Ending date for each period of the year (you can enter up to 12 periods if there are multiple changes in ownership).
- Enter as many periods as needed to account for the entire tax year and avoid overlapping dates.
- In Period 1, enter the Total number of shares outstanding, if any. If the number doesn't change throughout the year, leave the field blank on the remaining periods.
- Select Shareholder in the General Information window.
- Leave the Beginning date and Ending date inputs of each period blank if you entered dates for those periods in the General Information window.
- For each period, enter the Number of shares owned or Percentage.
- Note: If a shareholder didn't have a change in ownership, don't make an entry.
- Repeat steps 7 and 8 for each shareholder who had a change in ownership.
Using the K-1 allocation override
If you already calculated the pro-rata share percentage outside ProConnect Tax, you can enter each shareholder’s percentage in K-1 Allocation Percentage [Override] on the Stock Ownership screen. This percentage will be applied to each item on the Schedule K-1.
Using Schedule K-1 amount overrides
Use the Schedule K-1 Overrides screen if you wish to allocate items to shareholders by dollar amount, instead of percentage.
- Under Input Return, select Schedule K-1.
- Select Schedule K-1 Overrides.
If you choose this method, you must override the amount on the applicable box for each shareholder to balance with Schedule K.