Understanding Your K-1 (Form 1120S - S Corporations)

What is a K-1

The form K-1 is a tax document that is used to report the incomes, losses, and dividends of a shareholder of a business. Since s corporations are taxed as pass through entities, the income of the business is disbursed to the shareholders on a K-1 who then report and pay income tax on their personal returns. 

The form K-1 can be broken down into three separate parts as follows: 

Part 1 - Information about the corporation.

The first part of a K-1 for s corporations is where information about the business is entered. Information such as company name, employer identification number, and address are included on the first section of a K-1 

Part 2 - Information about the shareholder.

The second part of the K-1 form is where information about the shareholder can be found. This includes personal information such as identifying numbers, name, and address. Also on part 2 is how much percentage of stock ownership the shareholder had during the tax year.  

Part 3 - Shareholder’s Share of Current Year Income, Deductions, Credits, and Other Items. 

The third part of the K-1 form is where you will find the shareholder’s share of income which includes: ordinary, real estate, interest, dividends, royalties, short and long term capital gains, collectibles, unrecaptured 1250 gain, section 1231 gain and other income is reported here on lines 1-10.

Section 179 and other deductions are recorded on lines 11 and 12. 

Credits, foreign transactions, alternative minimum tax, items affecting shareholder basis and other information are also found here on lines 13-17.

 Additional information 

Link to Form K-1 (1120S) - https://www.irs.gov/pub/irs-pdf/f1120ssk.pdf

Instructions - https://www.irs.gov/pub/irs-pdf/i1120ssk.pdf

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