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S Corporations: K-1s are(n’t) all alike!

So once again you are looking all over the K-1 for the owner’s capital contributions, or whether the distributions are cash or property, or the borrower’s share of liabilities. Where the heck did it go? You found it on the last one you looked at!

Likely that was a 1065 K-1 from a partnership or LLC. The 1120S K-1 just doesn’t have as much information.

With an 1120S (S-Corp) shareholder, unless a supplemental schedule is attached you will not have capital account information including capital contributed. You can find distributions on Line 16 with a code of ‘D’ (2006 forms).

And if you are thinking you don’t even need a K-1 since the shareholders get paid wages, think again. Many tax advisors suggest that S-Corp shareholders pay themselves little in wages (to reduce payroll taxes) and pay more in distributions. If you don’t check the 1120S k-1 you may be missing a large part of the owner’s personal cashflow.

(Actually, I am impressed you even GOT the K-1! Lenders everywhere tell me it is like pulling teeth to get the borrower’s to turn them over.)

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.