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Self-employment income and deductions in the S-Corporate return

SOLVED•by Intuit•84•Updated January 17, 2024

This article will assist you with indicating self-employment income in an 1120s return in ProSeries.

Per the Schedules K and K-1 (General Information) section on page 22 of IRS instructions for Form 1120S:

"The corporation is liable for taxes on lines 22a, 22b, and 22c, on page 1 of Form 1120S. Shareholders are liable for tax on their shares of the corporation's income (reduced by any taxes paid by the corporation on income). Shareholders must include their share of the income on their tax return whether or not it is distributed to them. Unlike most partnership income, S corporation income isn't self-employment income and isn't subject to self-employment tax."

To enter self-employed health insurance on Form 1120-S so that it flows to a Schedule K-1:

  1. Go to Form 1120-S, page 3-5, Schedule K,  Line 17.
  2. Scroll down to the Other Items to be Reported on Schedules K-1 Smart Worksheet.
  3. Manually enter the description "Self Employed Health Insurance" and the amount paid on the Line A expanding table.

For more information, look to IRS instructions for Form 1120S and Chapter 6 of Pub. 535.

Per the IRS instructions for Form 1120S:

"Report amounts paid for health insurance coverage for a more than 2% shareholder (including that shareholder's spouse, dependents, and any children under age 27 who are not dependents) as an information item in box 14 of that shareholder's Form W-2."

In ProSeries, if a W-2 wasn't issued, amounts can be allocated based on shareholder percentages:

  1. Open Form 1120S, p3-5.
  2. Scroll down to the Schedule K section.
  3. Locate the Other Items to be Reported on the Schedule K-1 Smart Worksheet section on page 4.
  4. Enter in the health insurance on line A.

This amount will flow to Schedule K-1, under the Supplemental Information, based on shareholder percentages.

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