Are my S-corp Distributions supposed to be taxed on my personal tax return?

Are my S-corp Distributions supposed to be taxed on my personal tax return?
My tax guy and myself had a parting of the ways. He already did my corporate tax return, but I am doing my personal one. I've been using one of the websites for tax preparation and all is pretty easy and simple. I worked for a company for half a year and then went into business on my own so I have 2 w-2's, plus my K-1. So here's my problem....the software shows me getting back 6500 just from my two w-2's. On another schedule I'm asked to enter my distributions which is line 16 on the k-1. When I do this, my refund is reduced by 2500. It appears to me that the additional distribution funds are being taxed as income. Is that correct? I thought the whole point of the s-corp is to avoid double taxation? I already paid the tax for the distributions on my paychecks. If I made $1000, I took $500 as a dist. and 500 as income, but I paid tax for $1000 on $500 I paid myself as income. So I've already paid taxes on the distributions. Am I missing something here?


Answers:

Chosen Answer
Jo Blo:  Amounts on line 16 of the K1 would be A tax exempt interest income B other tax exempt income C nondeductible expenses D property distributions E repayment of loans from shareholders look at page 12 of these instructions to see what if any would be taxable from line 16 http://www.irs.gov/pub/irs-pdf/i1120ssk.pdf Income from a S corporation flows through to the owners or shareholders of the corporation. This is the purpose of the K1 ,, it shows each shareholder what their profit or loss in the corporation was. You enter the information from the K1 on Schedule E of Form 1040 and that ends up on line 17 of the form 1040. Income from a S corp is taxed as ordinary income. You have not paid tax on this income until you do so on your personal tax return, the S corp does not pay tax if the S corp paid you during the year, The S corp would send either a 1099 or a W-2 to you and also to the IRS either way, you don't pay tax on money you receive from the S corp until you file your personal tax return. The S corp might also be filing a 941 each quarter and a annual form 940 Wages paid are deducted from the income the S Corp makes so you are not being taxed twice
2007-04-04 06:28:49
mslex:  I have been in a similar situation with leaving a CPA. I tried doing my own taxes, efiling. A friend referred me to H&R Block's online tax preperation. It was less than thirty dollars. They also have an option for an additional fee that waives your liability for tax errors and H&R Block will fight on your behalf. This is the cheapest way to get help.
2007-04-04 06:37:39
Molly:  The income from lines 1-10 on your K-1 should show up in income somewhere on your tax return. Also, other pass through expense or credit items from lines 11 -14 will be included in gross AGI. What is on line 16d should NOT be included in your taxable income.
2007-04-04 06:39:33