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An S-Corp sole shareholder loaned the Corp monies. Corp is…

An S-Corp sole shareholder loaned...
An S-Corp sole shareholder loaned the Corp monies. Corp is paying her back with interest. I deducted the interest expense on the 1120S BUT can I show the interest paid to her on the K-1 line 4 or do I have to complete the 1099-Int? The net profit is has the total interest expense including what the scorp paid her and line 4 would be her interest to added to her personal income. Also on the K-l (if the interest income can be shown on line 4 of the K1) does the amount also have to be shown in box 17 item A as well?
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Answered in 9 minutes by:
3/12/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,697
Experience: Taxes, Immigration, Labor Relations
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When interest is paid to the creditor without relation of been a partner - that is not reported on K1 - and the creditor will report that amount on his/her individual tax return as interest income.

If that payment is specifically related to partner- partnership relation - interest payments are reported on K1 as guaranteed payments .

.

Specifically on K1 box 4 - we report interest income RECEIVED by S-corportaion.

In your case - these is interest paid by S-corportaion - so do not use that box.

Similarly - box 17 code A reports investment income RECEIVED by S-corportaion - so that is not to be used in this situation either.

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Lev
Lev, Tax Advisor
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Customer reply replied 1 month ago
Nope you answered it wonderfully!
Thank you!
Customer reply replied 1 month ago
I apologize. What line is the guaranteed payments on the k-1?
Customer reply replied 1 month ago
Sorry. Not sure if you got this last question> I had it after I looked at the 1120S K-1.. What line is the guaranteed payments on the k-1?

Sorry - I confused with the partnership.

There is no guaranteed payments for S-corporation.

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Customer reply replied 1 month ago
Ok I wondered. No prob. so where do I enter the interest paid to a shareholder for that loan? 1099-Int?

No need to issue form 1099int unless that S-corportaion is specifically in the blending business.

So you will simply report that interest expenses on 1120S line 13

and the creditor will income that amount on form 1040 line 8a.

No need for any additional forms.

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Customer reply replied 1 month ago
Ok just to verify. I don't need to issue the Shareholder any tax forms on interest that the corp paid her either by 1099-Int nor on the her K-1 that will be issued to her?

That is correct.

K1 - indicates income and deduction items that S-corporation passed to shareholder.

That loan note is NOT related to shareholder's relation - and is not reported on K1.

You may issue a separate note with exact amount - so reporting on 1120S and 1040 will match.

There is no specific reporting requirements besides that.

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Customer reply replied 1 month ago
Ok thank you.....
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