This was very helpful! I have two S Corps where I have kept meticulous records so no problem. But a family S Corp around for 45 years does not have good records going back to the beginning. I am going to do my best but a little overwhelming.
Love your Videos! How do you correct a incorrect calculated basis? Would that go on 7203 Line 12 or 13? I was trying to find a video on how to correct a basis.
Thank you for the video, especially for examples. I as a stockholder need to translate the K-1 forms into Schedule E part II. Do you have a video for this task or plans to do one?
Hi Jason, very nice explanation on the loss situation. I have a question, in my case I've turned a profit. Last year was the first year for my business, so this year I'm trying to file the 1120S for my single entity S corp myself. Last year during the beginning of the tax year, the bank account had $5k balance and that was shown on line 1. Does that mean for this year's taxes, I should show the balance on the account on Jan 1st 2023 on line 1? I heard the IRS doesn't care about your bank account, they care about your income and expenses. So this form is like giving them a peek into my bank account directly? Also, while I have to run payroll, I took $10k out of my business account last year. Would that have to be mentioned as distributions in line 6. I just took cash from the bank.
Hi Jason, if an S Corp Shareholder contributes money to the company, does it go on line m? How about the forgiven PPP loans? Do they increase stock basis? Thank you
Good question! If an S corporation shareholder contributes more capital to the company in the form of equity, those amounts would be reported in Part 1 Line 2. Part 1 Line 3m is used to report amounts that are included in income that create increases to stock basis. Capital contributions are not considered income to the S corporation.
Jason - could we set up a time to discuss the 7203 form on the phone or by Zoom call? I'm at a loss as to how to reconstruct this form dating to my inception of my S-Corp in 2016. Let me know best way to do this. Thanks, Ken Gornall
2:30 selling a corp is where we are at. Does the stock basis offset anything on my k-1 such as my ordinary business income mainly due to the sale of business property that is all depreciation recapture ?
Hi. Is 7203 required for this tax year? My tax software (taxwise ccc) doesn't even offer the form this year! If you suggest any other tax software company please advise
The Form 7203 is only required in certain circumstances, however, however, my recommendation is to always use the form because it helps track your basis in the S corporation stock. The form is still in draft mode, so your tax software probably doesn't have the final version yet, which is why it is not showing as an available form.
Hi, I have a question. If we don't have stockholders basis in the beginning of the year, how can we roughly come up with beginning basis? Should we use beginning capital from k1?
Unfortunately the only way to find a true beginning basis number is to do a complete basis roll forward. The shareholder uses the Form 1120S, K1s, and their Form 1040s from inception to calculate the roll forward. Using any other method is really just a guess.
Good question! Many S corporations prepare a proforma 7203 to help their shareholders track their stock and debt basis. However, the responsibility ultimately falls on each individual to prepare their own Form 7203 and include it with their Form 1040.
@@JasonDKnott thanks Jason! Would you pls confirm if you keep last year’s PPP loan forgiveness reported in line 3 on Schedule M2 in this year’s return? In other words, the PPP is an accumulated item will always carry over in M2 going forward, correct?
Your basis would start at zero because it was formerly a DRE that is now an S corporation. However, you must account for any assets & liabilities that are contributed as part of the election to S corporation.
@@JasonDKnott Thank You! One more question, I elected my single member LLC to file as a S-Corp beginning 1/1/21. On My 2020 1040 Schedule C I never marked that the business was disposed of or sold. Do I need to amend 2020? If not, what am I required to do for my 2021 personal tax return and 2021 S-Corp tax return?
Is there a similar form for partners in partnerships (1065)? Partners with loses and distributions have to report basis calculation to the IRS as well, right?
There is no specific IRS form for Form 1065 partnerships, but partners must still track their basis in their partnership investment just like the S corporation shareholders. If a partner is deducting a loss on Schedule E Page 2, they are generally required to attach a basis worksheet to ensure they have sufficient basis in the partnership interest.
@@JasonDKnott Thank you. So 7203 form was only created for an S Corp? I find it so weird, why the IRS did not include partnerships as well since the requirements to have to attach the basis statement is the same. Do partners have to attach basis calculation upon distributions as well or only when there is a loss?
1. On Form 7202 next year Line 2 will be 0 or do we leave it at 1,500 to match the capital contributions on the balance sheet. 2. Let's assume in Year 1, Person A is 100% owner with ending basis of $250. If in Year 2 Person A brings a friend to have 50/50 ownership would we decrease Person A's basis on Line 13 by (125) and increase Person B's basis by 125 on Line m? Thank you
Jason, we are unable to file personal taxes using any software (Turbotax, Intuit etc.) They don't have this 7203 in their software. Do you have any recommendations as to how to file taxes now? Or do we need to wait. Thanks
Because the form wasn't finalized until January 2022, many providers haven't fully updated their software to offer the Form 7203 - it might still be in draft mode with the tax software provider. My recommendation is to extend the return until its available.
@@daddydrew23 We are in the EXACT same boat. Our accountant's software said it would be available today, but when he checked this morning, it still isn't showing up.
You can find your stock & debt basis by referencing the prior year tax returns. If the CPA prepared the Form 1120-S with a basis schedule for each K-1, the supplemental statements should have a basis schedule for each shareholder. If the Form 1120-S does not include basis schedules, then you'll need to compute your basis on your own.
@@JasonDKnott Will it be on a separate worksheet or a specific form that I should be looking for. I don’t see anything on the K-1 itself. And I don’t think he sent me all the worksheets
The accountant preparing the Form 1120-S should be preparing basis schedules for each shareholder, however, not all accountants complete this step. In my opinion, this is why the IRS added this form to force preparers to start adequately tracking stock & debt basis. When the shareholder has the basis schedule prepared as part of the K-1 package, the shareholder can use that information to assist with completing the Form 7203.
@@JasonDKnott Thank you for the reply and great information ! could you do an in-depth video on exactly where the info is located on the k1 to transfer to the 7203 . I think I also need a new accountant are you in the Dallas area ?
For additional Form 7203 tutorials: ruclips.net/p/PLTdpzKOWNutQwxDCJfxbNi32j17aP2JDV
This was very helpful! I have two S Corps where I have kept meticulous records so no problem. But a family S Corp around for 45 years does not have good records going back to the beginning. I am going to do my best but a little overwhelming.
Thanks for watching! Yes, tracking basis for a 45 year old company can be a daunting task!
OMG , I am so grateful for your video and how well you explain everything ❤
You're very welcome. Glad to hear it was helpful.
Jason, thank you for this video. I might be able to say my llc is elected as an S corp in 2021. That's when the IRS required this form.
Jason thank you so much you are awesome! Did I miss your explanation for part 3? Would the 421 loss just be added to line 35 (c)?
Fantastic video. Thank you, Thank you, Thank you!
Nice job Jason.
Thank you!
This is a very helpful video. Thanks!
Love your Videos! How do you correct a incorrect calculated basis? Would that go on 7203 Line 12 or 13? I was trying to find a video on how to correct a basis.
Thank you for the video, especially for examples. I as a stockholder need to translate the K-1 forms into Schedule E part II. Do you have a video for this task or plans to do one?
You're welcome! We don't have a video yet on transferring the numbers to Schedule E on your Form 1040, but we will make a video soon.
Hi Jason, very nice explanation on the loss situation. I have a question, in my case I've turned a profit. Last year was the first year for my business, so this year I'm trying to file the 1120S for my single entity S corp myself. Last year during the beginning of the tax year, the bank account had $5k balance and that was shown on line 1. Does that mean for this year's taxes, I should show the balance on the account on Jan 1st 2023 on line 1? I heard the IRS doesn't care about your bank account, they care about your income and expenses. So this form is like giving them a peek into my bank account directly? Also, while I have to run payroll, I took $10k out of my business account last year. Would that have to be mentioned as distributions in line 6. I just took cash from the bank.
Hi Jason, if an S Corp Shareholder contributes money to the company, does it go on line m? How about the forgiven PPP loans? Do they increase stock basis? Thank you
Good question! If an S corporation shareholder contributes more capital to the company in the form of equity, those amounts would be reported in Part 1 Line 2. Part 1 Line 3m is used to report amounts that are included in income that create increases to stock basis. Capital contributions are not considered income to the S corporation.
Thank you Jason.
You're welcome!
Jason - could we set up a time to discuss the 7203 form on the phone or by Zoom call? I'm at a loss as to how to reconstruct this form dating to my inception of my S-Corp in 2016. Let me know best way to do this. Thanks, Ken Gornall
2:30 selling a corp is where we are at. Does the stock basis offset anything on my k-1 such as my ordinary business income mainly due to the sale of business property that is all depreciation recapture ?
Hi. Is 7203 required for this tax year? My tax software (taxwise ccc) doesn't even offer the form this year! If you suggest any other tax software company please advise
The Form 7203 is only required in certain circumstances, however, however, my recommendation is to always use the form because it helps track your basis in the S corporation stock. The form is still in draft mode, so your tax software probably doesn't have the final version yet, which is why it is not showing as an available form.
Hi, I have a question. If we don't have stockholders basis in the beginning of the year, how can we roughly come up with beginning basis? Should we use beginning capital from k1?
Unfortunately the only way to find a true beginning basis number is to do a complete basis roll forward. The shareholder uses the Form 1120S, K1s, and their Form 1040s from inception to calculate the roll forward. Using any other method is really just a guess.
@@JasonDKnott thanks so much!!!
Thanks!
is my company supposed to provide me with a 7203 or am I supposed to look at my k1 and try to fill in the numbers on a blank 7203?
Good question! Many S corporations prepare a proforma 7203 to help their shareholders track their stock and debt basis. However, the responsibility ultimately falls on each individual to prepare their own Form 7203 and include it with their Form 1040.
Thanks! I have a question - does paid in capital impact shareholder’s basis?
Yes! If a shareholder contributes cash or other property which is treated as APIC, those amounts are added to the shareholder's basis.
@@JasonDKnott thanks Jason! Would you pls confirm if you keep last year’s PPP loan forgiveness reported in line 3 on Schedule M2 in this year’s return? In other words, the PPP is an accumulated item will always carry over in M2 going forward, correct?
tHANKS!
sURFING cpa hAWAII
Glad it was helpful!
If we were filing as a single member llc for a couple years, then converted to 1120S, do we need to calculate a beginning stock basis?
Your basis would start at zero because it was formerly a DRE that is now an S corporation. However, you must account for any assets & liabilities that are contributed as part of the election to S corporation.
@@JasonDKnott Thank You! One more question, I elected my single member LLC to file as a S-Corp beginning 1/1/21. On My 2020 1040 Schedule C I never marked that the business was disposed of or sold. Do I need to amend 2020? If not, what am I required to do for my 2021 personal tax return and 2021 S-Corp tax return?
Is there a similar form for partners in partnerships (1065)? Partners with loses and distributions have to report basis calculation to the IRS as well, right?
There is no specific IRS form for Form 1065 partnerships, but partners must still track their basis in their partnership investment just like the S corporation shareholders. If a partner is deducting a loss on Schedule E Page 2, they are generally required to attach a basis worksheet to ensure they have sufficient basis in the partnership interest.
@@JasonDKnott Thank you. So 7203 form was only created for an S Corp? I find it so weird, why the IRS did not include partnerships as well since the requirements to have to attach the basis statement is the same. Do partners have to attach basis calculation upon distributions as well or only when there is a loss?
good job
Thanks for watching!
1. On Form 7202 next year Line 2 will be 0 or do we leave it at 1,500 to match the capital contributions on the balance sheet.
2. Let's assume in Year 1, Person A is 100% owner with ending basis of $250. If in Year 2 Person A brings a friend to have 50/50 ownership would we decrease Person A's basis on Line 13 by (125) and increase Person B's basis by 125 on Line m?
Thank you
Jason, we are unable to file personal taxes using any software (Turbotax, Intuit etc.) They don't have this 7203 in their software. Do you have any recommendations as to how to file taxes now? Or do we need to wait. Thanks
Because the form wasn't finalized until January 2022, many providers haven't fully updated their software to offer the Form 7203 - it might still be in draft mode with the tax software provider. My recommendation is to extend the return until its available.
@@JasonDKnott Yes. But we are purchasing a home and need to file for income purposes. The Scorp taxes have been filed but they want personal returns.
@@daddydrew23 We are in the EXACT same boat. Our accountant's software said it would be available today, but when he checked this morning, it still isn't showing up.
Where do I find my basis from 2020? I am looking at my returns done for last year by my CPA
You can find your stock & debt basis by referencing the prior year tax returns. If the CPA prepared the Form 1120-S with a basis schedule for each K-1, the supplemental statements should have a basis schedule for each shareholder. If the Form 1120-S does not include basis schedules, then you'll need to compute your basis on your own.
@@JasonDKnott Will it be on a separate worksheet or a specific form that I should be looking for. I don’t see anything on the K-1 itself. And I don’t think he sent me all the worksheets
where you get $1500. Is any calculation?
The $1,500 is the cash contribution the shareholder made to the S corporation in exchange for the stock.
So a loss is allowable if there is enough basis. What happen if the shareholder doesn't have enough basis?
Generally the losses are suspended and carried forward until the shareholder has sufficient basis.
Very difficult to follow as i do not have a basis worksheet
shouldn't the accountant who prepared the k1 also provide the 7203
The accountant preparing the Form 1120-S should be preparing basis schedules for each shareholder, however, not all accountants complete this step. In my opinion, this is why the IRS added this form to force preparers to start adequately tracking stock & debt basis. When the shareholder has the basis schedule prepared as part of the K-1 package, the shareholder can use that information to assist with completing the Form 7203.
@@JasonDKnott Thank you for the reply and great information ! could you do an in-depth video on exactly where the info is located on the k1 to transfer to the 7203 . I think I also need a new accountant are you in the Dallas area ?