Menu

Search

Knowledge Base


11414: 1041/1065/1120S - Last K-1 Entered Shows Incorrect Distribution


1065 Partnership

Why is the distribution on the last K1 in a 1065, 1120S, or 1041 return sometimes larger or smaller than it should be?

This is the result of a K-1 rounding issue. The last K-1 has been adjusted to bring the total distribution for all K-1s to 100% of the distributable amount. The entity whose K1 screen is the last entered is considered the rounding partner, shareholder or beneficiary, unless you make a different selection for that purpose.

Note: You can display the optional K1PLIST~, K1SLIST or K1FLIST~ in View/Print mode to see ownership or beneficiary percentages on all K-1s. From the Home window of the software, select Setup > Options and then select the Form & Schedule Options tab. Mark K-1 list (bus. returns only) if greater than and select 0 from the drop list. Click OK to exit and save your changes.

The rounding K-1 is adjusted when the distribution percentages for all partners, shareholders, or fiduciaries are more than or less than 100% because:

  • The partner or shareholder ownership percentages or beneficiary percentages do not add up to 100%
  • Special allocations are incorrect because they are either:
    • Incorrect Total - in a distribution category, the total allocated does not equal 100% of the distributable amount. The total is either more or less than 100%, or 
    • Incomplete - in a distribution category, special allocations have been made to some, but not all owners or beneficiaries and the total allocated is not equal to 100% of the total distribution.

In these circumstances, the software applies the correct percent to all of the K-1s before the rounding K-1 and then adjusts that K-1 to bring the total to 100%.

Note: Through the linked SA windows (see Related Links below), the software handles an incomplete allocation by allocating any remaining distributable amount pro-rata to the remaining partners, instead of adjusting the rounding K-1.

In partnership returns

Rounding occurs when:

  • The partners' ownership percentages (section J of screen K1) do not add up to 100%. 
  • A special allocation is totaled incorrectly or incomplete. The rounding K-1 can be affected: 
    • If an SA window allocation is totaled incorrectly, the rounding K-1 is adjusted to bring the total to 100%.
    • If an SA window allocation is incomplete, any amount remaining is allocated to the remaining partners on a pro-rata calculation of partners' ownership percentages.

In S corporation returns

Rounding occurs when:

  • Shareholder's % of stock ownership on K1 screens and shareholders' ownership percentages do not add up to 100%.
  • Or special allocations on K1 screen overrides are incorrectly totaled or limited.

In fiduciary returns

Rounding occurs when:

  • The federal beneficiary distribution percentages do not add up to 100% (the Fed % field on the K1 screens).
  • Special allocations on K1 screen overrides are incorrectly totaled or limited.

Related Links


Also In This Category


On a scale of 1-5, please rate the helpfulness of this article


Not Helpful
Very Helpful
Optionally provide private feedback to help us improve this article...

Thank you for your feedback!


Details
Article has been viewed 10K times.
Last Modified: 4 Months Ago
Rated 3 stars based on 1 vote
Options