on the business tax 1120-s form, why are the distributions to shareholders not being carried over to the retained earnings section?

Forum|Forum|1 year ago
January 17, 2025
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Entered distribution amount in the shareholder information section and when got to balance sheet section, which I was able to skip, then it went to retained earnings section which did not have the correct number. I choose to update it with the correct numbers but it would update the Less: Shareholder Distribution - left it at $0. Even though I had entered an amount. I have talked to 3 people and got no where. Is there a problem with your software?

ThomasM125

It is possible that your retained earnings is negative before you made the distribution. In that case, the distribution would not be made from retained earnings, since there is none, but would be either a loan to the shareholder or a liquidation of assets or a return of capital the shareholder contributed. In either case it would not represent a reduction in retained earnings so that is why your retained earnings balance does not reflect the distribution.

I suspect that TurboTax does not apply the distribution to your balance sheet since that entry would typically be made at the financial statement preparation stage, often in QuickBooks.

The distribution you enter is necessary for tax reporting purposes as it shows up on your schedule K line 16d (Distributions) and on your schedule K-1 line 16 (as items affecting shareholders).

On your balance sheet, you can reflect the distribution directly on line 22 (capital stock), line 23 (additional paid in capital) or line 19 (loans from shareholders), depending on the nature of the distribution.

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