To correct a shareholder's distribution please follow these steps: Within your return under Business Info click the sub tab Shareholder Information Click Done Entering Shareholders Verify the ownership percentages when there are multiple shareholders On the 2021 Distributions to Shareholders screen mark "Yes, the corporation made distributions to shareholders in 2021" then click Continue Enter the combined cash and/or combined property that was distributed to all Shareholders Review your retained earnings reconciliation again and it will reflect correctly.

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llbyer

Solved

Shareholder distributions for an 1120-S return that are calculated automatically and shown on the retained earnings reconciliation summary are incorrect. How do I fix?

Forum|Forum|4 years ago
February 22, 2022
2 replies
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TurboTax Online

Best answer by AliciaP1

Token number is 934705

Distributions are limited to the amount of Equity you have in the business. In your case, your retained earnings from 2020 are the maximum amount you can count as distributions. The excess distributions need to be reclassified and reduce the "Loan from Shareholder" amount on your balance sheet.

Then walk through the questions in the Balance Sheet section of your Federal Taxes and confirm the amounts to clear the imbalance.

AliciaP1

To correct a shareholder's distribution please follow these steps:

Within your return under Business Info click the sub tab Shareholder Information
Click Done Entering Shareholders
Verify the ownership percentages when there are multiple shareholders
On the 2021 Distributions to Shareholders screen mark "Yes, the corporation made distributions to shareholders in 2021" then click Continue
Enter the combined cash and/or combined property that was distributed to all Shareholders

Review your retained earnings reconciliation again and it will reflect correctly.

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llbyerAuthor

Your suggestion was the first thing I did. Unfortunately, it didn't work. On the Retained Earnings Reconciliation Summary screen, it's showing the Shareholder Distributions as the same amount as beginning Retained Earnings, which doesn't make sense. It's simply not picking up the amount I input as Shareholder Distributions. Appears to be a bug in the program. Thanks.

AliciaP1

It would be helpful to have a TurboTax ".tax2021" file that is experiencing this issue.

You can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions:

At the top menu in the black line at the top of the page go to Online.

From the menu, select Send Tax File to Agent.
You will see a message explaining what the diagnostic copy is.  Click Send and then you will get a Token number.
Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

@llbyer

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AliciaP1

Shareholder distributions are limited to current year's earnings. The distribution of accumulated earnings (retained earnings) are considered a dividend distribution and need to be recorded and reported (on a 1099-DIV) as such.

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jaymax69

Interesting I thought it was limited by Retained Earnings/balance at the beginning of the year plus Ordinary Income. This seemed to make sense since they are all retained earnings anyway until a distribution is taken.

So my question/concern is what kind of dividend would they be classified as on the 1099-DIV because these are accumulated earnings previously taxes and shouldn't be taxable? Also what are line 5a and 5b (ordinary and qualified dividends) on the schedule K-1 for if not for that? Some kind of foreign earned income I believe it references in the instructions...