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difference between 1120s k-1 and dividend distribution

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Level 1
last updated ‎January 14, 2020 3:12 PM

why dont i classify as dividend instead of 1120s K-1 distribution?

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Level 15
Level 15
last updated ‎January 14, 2020 3:12 PM

Do S-Corps pay dividends?


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Level 12
last updated ‎January 14, 2020 3:12 PM

Have you much experience doing business returns?

1120S = S Corp

1120 = C Corp

You can google "S corp dividend" to learn why these are not Dividends but Distributions. Examples:

"While an S corporation does distribute profits to its shareholders, they are not considered dividends because that term specifically refers to profits paid out after taxes. An S corporation is not subject to corporate tax. Dividends are paid by C corporations after net income is calculated and taxed."

and...

"A subchapter S corporation is taxed as a disregarded entity and does not have to pay corporate-level taxes. Instead, the corporation passes its profits and losses through to its shareholders to be taxed at an individual tax rate."

 

In other words, the K-1 is reporting the operations of the S Corp. The Distribution amount is reporting funds given to that shareholder, which in and of itself is not a taxable event, except in cases when that exceeds basis, and with a few other details that would need to be examined.

 

Their taking of the funds is not by definition Taxable. That's why you follow what the K-1 tells you. You don't get to arbitrarily Name That Category.

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