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Schedule K-1 1120S

Tax Year 2012

Shareholder's Share of Income from S-Corporation
This worksheet is used if the taxpayer and/or spouse was a shareholder in an S-corporation to calculate the income and expenses reported on Form Schedule K-1 1120S.

 

Tax Treatment of S-Corp Income
An S-corporation is a "flow-through" entity which means the shareholders pay taxes on their pro rata share of the S-corporation's income, regardless of whether the income is actually distributed to the shareholders. This income is considered investment income, and self-employment taxes are not imposed. However, a shareholder that works for the S-corporation may be required to receive wages as an employee of the corporation.

 

Identifying an S-Corporation
An S-corporation can only be formed by filing the appropriate paperwork with the state of incorporation. If the taxpayer is not in a formally recognized corporation, he or she should not receive a Schedule K-1 1120S and should not use this worksheet.

 

Alternative Forms
The taxpayer may need to use a different worksheet to report their business income and expenses, as follows:

  • Schedule K-1 1065 - If the taxpayer received a Schedule K-1 as a partner, use this worksheet instead of the Schedule K-1 1120S worksheet.
  • W-2 - If the taxpayer received a Form W-2 as an employee of an S-corporation, use this worksheet instead of the Schedule K-1 1120S worksheet to report the information on the W-2 even if he or she was also a shareholder of the corporation.
  • Form 1099-DIV - If the taxpayer received a Form 1099-DIV for dividends received as a shareholder of an S-corporation, use this worksheet instead of the Schedule K-1 1120S to report the information on the Form 1099-DIV instead of this worksheet.

Related Forms
The following forms are automatically generated as required depending on the information entered on this worksheet:

Important Note: The actual amounts of loss and deductions the taxpayer may claim on their tax return may be less than the actual amounts reported on Schedule K-1 depending on the application of the at-risk and passive activity rules.

 

For additional information, see 2011 Shareholder's Instructions for Schedule K-1 (Form 1120S).

Reporting Multiple Schedule K-1's
Each Schedule K-1 (1120S) should be reported on a separate worksheet. After completing the first Schedule K-1 (1120S) worksheet, click "Add" next to "Schedule K-1 (1120S) Shareholder's Share" from the Worksheets page to open a new Schedule K-1 (1120S) worksheet and add it to the return.
Part I – Information about the S Corporation
Corporation Name Enter the official name of the S-corporation as set forth in the corporate charter or other legal document that created the S-corporation.
Corporation EIN Enter the S-corporation's Employment Identification number.
Corporation Address Enter the S-corporation's address as reported on the Schedule K-1 (Form 1120S).
Checkbox Check this box if this is the final K-1 for this entity on behalf of this particular taxpayer.
Part II – Information about the Shareholder
Taxpayer or Spouse Shareholder Identification
Select whether this Schedule K-1 is for the taxpayer or spouse. The appropriate name will autopopulate.

 

Special Note for Married Partners: If both the taxpayer and the spouse are shareholders of the same S-corporation, each will receive his or her own Schedule K-1. Each Schedule K-1 must be reported separately on its own worksheet even though the information may be identical.

State Returns Resident Return
Select "Yes" if the user wants the information entered on this federal Schedule K-1 (1120S) worksheet incorporated into the taxpayer's resident state return. Otherwise, select "No".

 

Nonresident or Part-Year Return
Select "Yes" if the user wants the information entered on this federal Schedule K-1 (1120S) worksheet incorporated into the taxpayer's nonresident or part-year resident state return. Otherwise, select "No".

Investment At Risk Investment in Business At Risk
Select "All investment is at risk" if the taxpayer meets the requirements which exempt the limitation of business losses from the at risk rules.

 

Some Investment Not At Risk
Otherwise, select "Some investment not at risk". If this selection is made, the following information must also be entered:

  • Beginning Adjusted Basis - Enter the taxpayer's beginning adjusted basis in the S-corporation, which can be found on Line 10b of the previous year's Form 6198.

  • Increases to Basis - Enter the taxpayer's increases in basis in the S-corporation.

  • Decreases to Basis - Enter the taxpayer's increases in basis in the S-corporation.

See the Shareholder's Instructions accompanying the Schedule K-1 for further directions on properly calculating the basis.

 

See Form 6198 for the details and requirements to meet these tests of exemption from the at risk rules.

 

Note: Form 6198 will be automatically added to this return if applicable.

 

Special Circumstances for S-Corporation
The losses and deductions limited by the at-risk rules include a loss on the disposition of assets and the Section 179 expense deduction. However, if the taxpayer acquired the stock before 1987, the at-risk rules do not apply to losses from an activity of holding real property placed in service before 1987 by the corporation. (The activity of holding mineral property does not qualify for this exception.) The corporation should identify on an attachment to Schedule K-1 the amount of any losses that are not subject to the at-risk limitations as a result of this exception.

Material Participation Material Participation
Select "Yes" if this business meets any of the following requirements, which exempt the limitation of business losses from the passive activity rules:
  • The business was not a rental activity, and the taxpayer meets one of the tests for material participation,
  • The business was a rental activity, but the activity is one of the 5 exceptions of rental activities, and the taxpayer meets one of the tests for material participation.
  • The business was a rental real estate activity, and the taxpayer was a real estate professional, or
  • The taxpayer meets the exception for an oil or gas activity.

Otherwise, select "No".

 

See Form 8582 for the details and requirements to meet these tests of exemption from the passive activity rules.

 

Note: Form 8582 will be automatically added to this return if applicable.

Active Participation Select "Yes" if the taxpayer meets the requirements of active participation as described below. Otherwise, select "No".

 

Do not select "Yes" if the taxpayer is using this worksheet to report royalty income.

 

Active Participation
The taxpayer and spouse must have owned at least 10% of the rental property during the entire tax year and made management decisions in a significant and bona fide sense. Management decisions that may count as active participation include:

  • Approving new tenants,
  • Deciding on rental terms,
  • Arranging repairs and maintenance,
  • Approving capital or repair expenditures, and
  • Other similar decisions.

Note: The requirements for active participation are less stringent than the requirements for material participation.

 

Special Allowance
If the taxpayer marks "Yes", the taxpayer will be eligible to deduct up to $25,000 in passive loss from nonpassive income, adjusted by the taxpayer's Modified Adjusted Gross Income.

 

For more details and information, see Form 8582.

Prior Year
Unallowed Loss
Enter the prior year unallowed loss for this S-corporation from Worksheet 5, column (c) of the previous year's Form 8582, if applicable.
Part III – Shareholder's Current Year Income, Deductions, Credits and Other
Enter the amounts from the boxes in the Schedule K-1 Form 1120S the taxpayer received into the same line numbers in this section of the worksheet. Use the pulldown lists to select the corresponding code and then enter the amount in the boxes to the right when applicable.
Line 1 Ordinary Business Income or Loss
Enter the amount from Box 1. Use a minus sign before the amount if this amount is a loss.
Line 2 Net Rental Real Estate Income or Loss
Enter the amount from Box 2. Use a minus sign before the amount if this amount is a loss.

 

This amount may or may not be passive activity income or loss depending on the taxpayer's information entered above.

 

Note: If the corporation has more than one rental real estate activity, complete a separate 1120S worksheet for each rental activity reported.

Line 3 Other Net Rental Income or Loss
Enter the amount from Box 3. Use a minus sign before the amount if this amount is a loss.

 

This amount is passive activity income or loss for all shareholders.

Line 4 Interest Income
Enter the amount from Box 4. Use a minus sign before the amount if this amount is a loss.

 

This amount is portfolio income and is not passive activity income.

Line 5a Ordinary Dividends
Enter the amount from Box 5a. Use a minus sign before the amount if this amount is a loss.

 

This amount is portfolio income and is not passive activity income.

Line 5b Qualified Dividends
Enter the amount from Box 5b. Use a minus sign before the amount if this amount is a loss.

 

This amount is portfolio income and is not passive activity income.

Line 7 Net Short Term Capital Gain or Loss
Enter the amount from Box 7. Use a minus sign before the amount if this amount is a loss.

 

This amount is portfolio income and is not passive activity income.

Line 8a Net Long Term Capital Gain or Loss
Enter the amount from Box 8a. Use a minus sign before the amount if this amount is a loss.

 

This amount is portfolio income and is not passive activity income.

Line 10 Other Income or Loss
Select the Code from the dropdown list, and enter the amount from Box 10. Enter each line in this box separately. Use a minus sign before the amount if this amount is a loss.
Line 11 Section 179 Deduction
Enter the amount of Section 179 deduction reported in Box 11.

Line 12

Other Deductions
Select the Code from the dropdown list, and enter the amount from Box 12. Enter each line in this box separately. Use a minus sign before the amount if this amount is a loss.

Line 13

Credits and Credit Recapture
Select the Code from the dropdown list, and enter the amount from Box 13. Enter each line in this box separately. Use a minus sign before the amount if this amount is a loss.
Line 15 Alternative Minimum Tax (AMT) Items
Select the Code from the dropdown list, and enter the amount from Box 15. Enter each line in this box separately. Use a minus sign before the amount if this amount is a loss.

Line 16

Items Affecting Shareholder's Basis
Select the Code from the dropdown list, and enter the amount from Box 16. Enter each line in this box separately. Use a minus sign before the amount if this amount is a loss.
Line 17 Other Information
Select the Code from the dropdown list, and enter the amount from Box 17. Enter each line in this box separately. Use a minus sign before the amount if this amount is a loss.
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