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Hi from Just Answer. I'm PDtax. I'll assist.
Your client gets W-2 wages and $0 dividends from his S corp. The S corp reports the business income and expenses, and the net income is passed through to the owner via form K-1. he then reports all of the other income on his personal return.
Lots of S corp owners take a base wage and a draw like your client did. The draws are NOT dividends. They are just draws against his income for the year.
The $80,000 might be approximately the S corp income for the year. It's pretty common that the owner will draw all the unneeded cash. But the S corp income might be only $77,300. That's the number to report on page 2, Schedule E, from the S corp.
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That means the owner reports 160400 s profit plus 36400 wages. The dividends are not a deduction.
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