Accounting Articles > Federal Income Tax:
Form 1120S distributions reported on schedule K-1
S Corporations are pass-through entities from an Internal Revenue Service standpoint.
This is to say that, if you are an S Corp and you have an income taxable year, then the income is generally payable on your personal income tax return, or Form 1040. The income or loss is passed through on Schedule K-1.
I could write several chapters on these complicated forms. But for our purposes here, the K-1 is the bridge from the S-Corporation return to your personal income tax return. If there is income, then you will pay income tax at the personal level. The main point is that you will only pay income tax once, rather than being subject to the double income taxation of a regular or C Corporation. If there is a loss, then the loss could possibly be deducted on your personal income tax return if you have a basis for the deductibility of that loss.
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