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Each shareholder's distribution amount for the corporation's fiscal year should be reported on Schedule K-1 (Form 1120-S) Shareholder’s Share of Income, Deductions, Credits, etc., Line 16, with "D" as the reference code. When the shareholder follows the IRS Shareholder's Instructions for Schedule K-1 (Form 1120-S), this amount will not flow through to his income tax return as ordinary taxable income. The shareholder is instructed to reduce his basis in the stock of the S corporation unless the distributions exceed the shareholder's basis in the stock, in which case the excess is reported on Schedule D (Form 1040) Capital Gains and Losses and Form 8949 Sales and Other Dispositions of Capital Assets of the shareholder's individual income tax return.

Salaries paid to shareholders of an S corporation are reported on Form W-2 Wage and Tax Statement, as are all wages and salaries, and on Line 7 or 8 of Form 1120-S U.S. Income Tax Return for an S Corporation.

Dividend distributions paid to shareholders of an S corporation are reported on Form 1099-DIV Dividends and Distributions , and on Schedule K, Line 17c.

Loan repayments to shareholders are reported on Schedule K, Line 16e, and on each individual shareholder's Schedule K-1, line 16, with "E" as the reference code.

Payments to shareholders for reimbursement of expenses should be reported on the appropriate expense line.

For financial reporting, S corporation distributions to shareholders should be reported in the "Equity" section of the balance sheet as a reduction of undistributed accumulated earnings.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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