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Preparing IRS Form 1040 Schedule E

for S-Corporation Shareholders

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Shareholders receiving a Schedule K-1 must report the amounts on IRS Form 1040 Schedule E, page 2. Tax software programs usually have a Schedule K-1 input screen, where you can type in the information from the K-1 onto a screen that looks exactly like the K-1.

Generally speaking, ordinary net business income or loss is reported on Schedule E. Other income items are reported in the appropriate part of the 1040 tax return. For example, interest and dividends passed-through by an S-Corporation are reported on Schedule B. Capital gains are reported on Schedule D. And so forth. Your tax software program will take the information on the K-1 input screen and report the income and expense amounts in the right place on your Form 1040.

Request an Extension

The first thing any S corporation shareholder should do is request an automatic extension of time to file. Why? The deadline for IRS Form 1120S is March 15th, and truth be told, few S Corporations can meet this deadline. S Corporations can file Form 7004 to request an automatic extension of 6-months (until September 15th). Shareholders should request an automatic extension as well, making their personal tax deadline October 15th. S Corporations will not issue Schedule K-1s until the Form 1120S is completed, so shareholders will need to wait to file their return if the corporate return is not finished.
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