This article focuses solely on the entry of the Credit and Foreign Transaction items which are found on Boxes 13 and 14 of the Schedule K-1 (Form 1120S) Shareholder’s Share of Income, Deductions, Credits, etc. For additional information regarding the requirements for Schedule K-1 (Form 1120S), see: Shareholder’s Instructions for Schedule K-1 (Form 1120S).
To enter the Credit and Foreign Transactions items from a K-1 (Form 1120S) in the tax program from the Main Menu of the Tax Return (Form 1040) select:
Income Menu
Rents, Royalties, Entities (Sch E, K-1, 4835, 8582)
K-1 Input and select ‘New’ and double-click on Form 1120S K-1 S Corporation which will take you to the K-1 Heading Information Entry Menu. If the initial K-1 entry was previously keyed in, double click on the entry in the K-1 pick list.
After entering all of the information required on the K-1 Heading Information screen, select ‘OK’. The 1120S Edit Screen has two distinct sections entitled ‘Heading Information’ and ‘Income, Deductions, Credits, and Other Items.’
The K-1 1120S Edit Screen in Keystone Tax Solutions Pro has an entry for each box on found on the Schedule K-1 (Form 1120S) that the taxpayer received. A description of the Credit items contained in Box 13, including each of the Codes that can be entered in Box 13 are found below. The amounts shown in Box 13 reflect the taxpayer’s share of credits from the corporation. These amounts do not take into consideration the following limitations. The adjusted basis of the shareholder’s interest in the corporation; the amount for which the taxpayer is at risk; or the passive activity limitations. See: Publication 925 – Passive Activity and At-Risk Rules. It should be noted that none of these credits will automatically carry (except for Backup Withholdings which is reported in Box 13 with a Code O) from this menu to any schedule or form on the 1040. The amounts found in Box 13, (other than Backup Withholdings) will have to be entered on the appropriate form in other sections of Keystone Tax Solutions Pro.
CREDITS
Line 13A – Low Income Housing Credit (section 42(j)(5)) pre-2008 – Amounts reported in Box 13, Code A represent an allowable low income housing credit which is reported on line 4 of Form 8586 or line 1d of Form 3800. Form 8586 or Form 3800 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form 8586, Part I – Building Placed in Service Before 01/01/2008, Credit from Pass Through Entities Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 8586.
Line 13B – Low Income Housing Credit (other) pre-2008 – Amounts reported in Box 13, Code B represent an allowable low income housing credit which is reported on line 4 of Form 8586 or line 1d of Form 3800. Form 8586 or Form 3800 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form 8586, Part I – Buildings Placed in Service Before 01/01/2008, Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 8586.
Line 13C – Low Income Housing Credit (section 42(j)(5)) post-2007 – Amounts reported in Box 13, Code C represent an allowable low income housing credit which is reported on line 11 of Form 8586 or line 4d of Form 3800. Form 8586 or Form 3800 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form 8586, Part II – Buildings Placed in Service After 12/31/2007, Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 8586.
Line 13D – Low Income Housing Credit (other) post-2007 – Amounts reported in Box 13, Code D represent an allowable low income housing credit which is reported on line 11 of Form 8586 or line 4d of Form 3800. Form 8586 or Form 3800 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form 8586, Part II – Buildings Placed in Service After 12/31/2007, Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 8586.
Line 13E – Qualified rehabilitation expenditures (rental real estate) – Amounts reported in Box 13, Code E represent a taxpayer’s share of the qualified rehabilitation expenditures and other information the taxpayer needs to complete Form 3468 related to rental real estate activities using Code E. The taxpayer’s share of qualified rehabilitation expenditures from property not related to rental real estate activities will be reported in Box 17, Code C. See: Instructions for Form 3468. If the corporation is reporting expenditures from more than one activity, the attached statement will separately identify the expenditure. Form 3468 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting, Credits Menu, General Business Credit (3800), Current Year Business Credits, Form 3468.
Line 13F – Other rental real estate credits – Amounts reported in Box 13, Code F will be identified by the corporation as to the type of credit and any other information the taxpayer may need to determine these rental real estate credits.
Line 13G – Other rental credits – Amounts reported in Box 13, Code G will be identified by the corporation as to the type of credit and any other information the taxpayer may need to determine these rental credits.
Line 13H – Undistributed Capital Gains Credit – Amounts reported in Box 13, Code H represent taxes paid on undistributed capital gains by a regulated investment company. Report these taxes on Form 2439 which will flow to Line 73 of Form 1040. Form 2439 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting, Payments, Estimates, EIC, Shareholders LT Gain. See: Instructions for Form 2439.
Line 13I – Alcohol & cellulosic credit (other) – Amounts reported in Box 13, Code I represent a Biofuel Producer Credit which is reported on Form 6478. Form 6478 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form (6478), Biofuel Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 6478.
Line 13J – Work opportunity credit – Amounts reported in Box 13 Code J represent a Work Opportunity Credit which is reported on Form 5884. Form 5884 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form (5884), Work Opportunity Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 5884.
Line 13K – Disabled access credit – Amounts reported in Box 13, Code K represent a Disabled Access Credit which is reported on Form 8826. Form 8826 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form (8826), Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See. Instructions for Form 8826.
Line 13L – Empowerment Zone Community Credit – Amounts reported in Box 13, Code L represent an Empowerment Zone Employment Credit which is reported on Form 8844. Form 8844 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits, General Business Credit (3800), Current Year Business Credits, Form (8844), Form 8844 Credit from Pass Through Entities, Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 8844.
Line 13M – Credit for increasing research activities – Amounts reported in Box 13, Code M represent a Credit for increasing research activities which is reported on Form 6765. Form 6765 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting, Credits Menu, General Business Credit (3800), Current Year Business Credits, Form (6765), Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See: Instructions for Form 6765.
Line 13N – Credit for employer social security & Medicare taxes – Amounts reported in Box 13, Code N represent a Credit for Employer Social Security & Medicare Taxes Paid on Certain Employees which is reported on Form 8846. Form 8846 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, Form 8846, Form 8846 Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type. See Instructions for Form 8846.
Line 13O – Backup Withholdings – Amounts reported in Box 13, Code O represent a taxpayer’s share of the credit for backup withholdings on dividends, interest income, and other types of income. This amount is automatically pulls to Form 1040, Line 64 and a statement will be submitted with the return that identifies the corporation’s name, address, EIN and the backup withholding amount.
Line 13P – Other Credits – Amounts reported in Box 13, Code P will be identified by the corporation as to the type of credit and any other information the taxpayer may need to determine the treatment of these credits. Generally, you are not required to complete the source credit form if the taxpayer is an individual and their only source for a credit listed in Form 3800, Part III, is from a partnership, S corporation, estate, trust, or cooperative.
Accordingly, many of the credits identified by the corporation in Box 13, Code P are reported directly on Form 3800, Part III. Typically these credits can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, General Business Credit (3800), Current Year Business Credits, select the applicable source credit, Credit from Pass Through Entities. Select NEW and enter the EIN, Name, Amount and K-1 3800 Type for the credit. However, the specific instructions for the credit and the Shareholder’s Instructions for Schedule K-1 (Form 1120S) should be reviewed.
FOREIGN TRANSACTIONS
Lines 14A through Line 14Q and any attached Statements to Box 16 – The K-1 1120S Edit Screen in Keystone Tax Solutions Pro has an entry for each of the Codes that can be entered in Box 16; however none of these amounts will automatically carry to Form 1116. Instead, this information should be used by the taxpayer to determine if they can claim a Foreign Tax Credit. Form 1116 can be accessed from the Main Menu of Keystone Tax Solutions Pro by selecting Credits Menu, Foreign Tax Credit (1116). See: Instructions for Form 1116; and Publication 514 – Foreign Tax Credit for Individuals.
NOTE: This is a guide on entering the Credit items and Foreign Transactions items from Schedule K-1 (Form 1065) into the tax program. This is not intended as tax advice.
Additional Resources:
Shareholder’s Instructions for Schedule K-1 (Form 1120S)
Schedule K-1 (Form 1120S) – Heading Information
Schedule K-1 (Form 1120S) – Income (Loss) Items
Schedule K-1 (Form 1120S) – Deductions
Schedule K-1 (Form 1120S) – Alternative Minimum Tax (AMT) Items
Schedule K-1 (Form 1120S) – Items Affecting Shareholders Basis