Welcome back! Ask questions, get answers, and join our large community of tax professionals.
cancel
Showing results for 
Search instead for 
Did you mean: 

Sub-S distributions are different for each member, but treated pro rata in software. How to fix to show each members exact distributions

CoachSteve
Level 1

4 person Sub-S with 1st year of operation in 2018.  Only one member took a distribution in 2018.  When entering the amount on Sch K in the "Shareholder Distributions and Dividends Smart Worksheet" it automatically allocates the amount to the 4 members in a pro rata share.

Is there a separate place to enter non-pro rata distributions (cash only) and then enter directly on each member's K-1?  Or, do I need to override the distributions on each K-1 separately?

Steve P.

Labels (1)
0 Cheers
1 Solution

Accepted Solutions
IRonMaN
Level 15

Coach - the other three players need to be in the game too.  You can't have only one player take a distribution and leave the rest of the team sitting on the bench ------------------ that kinda kills your sub S election.  You might want to think about talking to the shareholder about drafting a note payable back to the corp for that amount until you can get things straightened out in 2019.  As a side note, hopefully everyone is taking out some wages before they think about taking out distributions.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)

View solution in original post

0 Cheers
13 Replies 13
IRonMaN
Level 15

Coach - the other three players need to be in the game too.  You can't have only one player take a distribution and leave the rest of the team sitting on the bench ------------------ that kinda kills your sub S election.  You might want to think about talking to the shareholder about drafting a note payable back to the corp for that amount until you can get things straightened out in 2019.  As a side note, hopefully everyone is taking out some wages before they think about taking out distributions.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)

View solution in original post

0 Cheers
TaxGuyBill
Level 15
So as Ironman pointed out, distributions in a S-corporation are *REQUIRED* to be equal.  If they aren't, the S-election is voided and it becomes a C-corporation.
0 Cheers
Accountant-Man
Level 11

If I could mark Ironman's answer as helpful more than once, I would. UNLESS YOU WANT TO TERMINATE THE S ELECTION, ALL DISTRIBUTIONS MUST BE PRO RATA.

Coach, please open a book on S corps.

** I'm still a champion... of the world! Even without The Lounge.
0 Cheers
abctax55
Level 15
Or attend a webinar (or 3).
Former Chump..umm... AllStar...This message was typed from 6 feet away so you can safely read it immediately.

If a post answers your question, click on *Accept as solution* for future searches
0 Cheers
CoachSteve
Level 1
I did some research and discovered that while distributions are required to be proportionate, they don't have to all be made at the same time.  In our case a member who was leaving the business took money out of the business (in excess of his salary) before year-end.  The other members took their share in 2019 (when cash was available).  This is perfectly legitimate.  So my question stands:  is there a separate place to enter non-pro rata distributions (cash only) and that carries to each member's K-1?  Or, do I need to override the distributions on each K-1 separately?
0 Cheers
sjrcpa
Level 15
When I have this situation I tend to book Distributions Payable for the 2019 portion. Then show all of the distributions-actual pd in 2018 and amt to pay in 2019 on the 1120S.

ex-AllStar
0 Cheers
poolcleaner
Level 8
Susan, would that work for a cash basis S Corp?
0 Cheers
sjrcpa
Level 15
I think so.

ex-AllStar
0 Cheers
Accountant-Man
Level 11
It should work.
** I'm still a champion... of the world! Even without The Lounge.
0 Cheers
poolcleaner
Level 8
Thank you both.  I don't have anyone who has done this but just in case........
0 Cheers
sjrcpa
Level 15
It is usually a one off for me. I tell them you messed up distributions and they fix it ASAP.

ex-AllStar
0 Cheers
abctax55
Level 15
I've resorted to it once.  Then, just like with missed W-2, my client either cleans up their act or I send 'em on their way.
Former Chump..umm... AllStar...This message was typed from 6 feet away so you can safely read it immediately.

If a post answers your question, click on *Accept as solution* for future searches
0 Cheers
sjrcpa
Level 15
ditto.

ex-AllStar
0 Cheers