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A few problems with what you are doing. First, there is no need for you
to do a 1099-DIV for yourself, because the distibutions that you received
from the S-Corp are not the type of distributions covered by the 1099-DIV.
This is what appears to be introducing your "extra" $35,000 in income.
From the 1099-DIV form.
"File Form 1099-DIV, Dividends and Distributions, for each person:
- To whom you have paid dividends (including capital gains dividends) and
other distributions on stock of $10 or more,
- For whom you have withheld and paid any foreign tax on dividends and other
distributions on stock,
- For whom you have withheld any federal income tax under the backup
withholding rules, or
- To whom you have paid $600 or more as part of a liquidation."
On to the 1120S form. You will fill that in, and that is pretty straight
forward. Your first $35,000 in wages/salary is a deduction and placed on
Line 8, "Salaries and wages (less employment credits)."
By the time we get to Line 21 of your form 1120S we should have the $35,000
in dividends/distributions that you also paid yourself. The net profit of
the S-Corp is the dividend/distribution you give/gave yourself.
Line 21, "Ordinary business income (loss)" of your Form 1120S will flow to
Schedule K, "Shareholders? Shares of Income, Deductions, Credits, etc." on
Line 1 "Ordinary business income (loss)."
That number, in turn, will flow to your Schedule K-1, "Shareholder?s Share of
Income, Credits, Deductions, etc." Line 1, "Ordinary income (loss) from trade
or business activities."
You will send your 1120S, K, K-1, etc. to the IRS. You will also "send" a
copy of the K-1 to yourself. In other words, you will keep a copy of the
K-1 for yourself.
Now, to your 1040 form and how the above number gets there.
The number on your Schedule K-1, Line 1, will flow to your Schedule E,
"Supplemental Income and Loss (From rental real estate, royalties,
partnerships, S corporations, estates, trusts, REMICs, etc.), Part II, Line
28, "Income or Loss From Partnerships and S Corporations."
From there, your distributions will end up on Line 17 of your 1040 form,
"Rental real estate, royalties, partnerships, S corporations, trusts, etc."
That should take care of it. You will have a Form W-2 for your $35,000 in
wages/salary and the Schedule E for the $35,000 in distributions/dividends,
making for a total of $70,000 of income.
You will send your 1040, Schedule E, etc. under separate cover to the IRS.
This Power HomeBiz Guide has a summary of your situation.
"Mary owns a print shop. In keeping with the industry standard, Mary decides
that a reasonable salary for a print shop manager is $35,000 and pays herself
accordingly. Mary?s total earnings for the year are $60,000: $35,000 paid in
salary and the remaining $25,000 paid as a distribution from the S corp."
If you need any clarification, feel free to ask.
I have an LLC (Limited Liability Company) and the paperwork is very similar
to that of an S-Corp, at least when it comes to taxes. I also referenced the
IRS (Internal Revenue Service) web site at http://www.irs.gov for forms.
Looking Forward, denco-ga - Google Answers Researcher