1120S: Do I put my owner's draws/distributions on line 7 when filing S-Corp taxes?

The distributions you took as the owner of your S-Corp should NOT go on line 7 of Form 1120S. Line 7 is for "Compensation of officers," which would include your actual salary ($60k). Your distributions ($67.5k) are reported on Schedule K-1 (Form 1120S), which is generated as part of your S-Corp tax return. These distributions are reported in Box 16, Code D (Property distributions) of the K-1. TaxAct should handle this automatically when you classify them correctly as shareholder distributions in the software. Remember that S-Corp distributions aren't deductible business expenses - they're a distribution of already-taxed profits. The S-Corp's income passes through to your personal return via the K-1, and you'll pay tax on your share of the company's profits regardless of whether you took distributions or left the money in the company.

I had similar confusion when filing my S-Corp taxes last year. Ended up using https://taxr.ai to analyze my previous returns and found I'd been making this exact mistake for two years! Their system scanned my old returns and flagged that I was incorrectly putting distributions on line 7. The software explained how S-Corp distributions should be properly reported on K-1 instead of as expenses on the 1120S. What really helped was uploading my QuickBooks reports to their system, which then suggested the proper classifications for each transaction. Saved me from potential audit headaches and helped me file correctly going forward.

I need to admit I was wrong about taxr.ai. After expressing skepticism in my previous comment, I decided to try it myself since I was facing similar S-Corp distribution confusion. Uploaded my QuickBooks file and previous 1120S returns, and it immediately identified that I'd been inconsistently categorizing my distributions between years. The analysis showed exactly where on the K-1 my distributions should appear (Box 16, Code D) and even explained the difference between distributions and returns of capital. The explanation about how distributions aren't deductible expenses but rather a withdrawal of already-taxed profits finally made everything click. Definitely worth checking out at https://taxr.ai if you're handling S-Corp taxes yourself.

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Just wanted to add - make sure your salary ($60k) is reasonable compared to your distributions ($67.5k). The IRS looks closely at S-Corps where owners take minimal salary and large distributions to avoid payroll taxes. Your split seems reasonable to me, but it's something to keep in mind when planning your compensation structure. I learned this the hard way during an S-Corp audit. They looked at industry standards for someone in my position and determined my salary was too low compared to my distributions. Ended up having to reclassify some distributions as salary and pay back payroll taxes plus penalties.

Don't forget that in TaxAct, you need to enter your distributions in the "Distributions & Withdrawals" section, not as a regular expense. I made this mistake my first year and it totally messed up my return! Also, make sure your salary showing on the W-2 you issued yourself matches what you put on line 7 of your 1120S. I've seen people put different amounts and that's just asking for a notice from the IRS.

Great question! I went through this exact confusion last year. Your $67.5k distributions should definitely NOT go on line 7 of Form 1120S - that's only for officer compensation (your $60k salary). Here's the correct treatment: - Line 7 (Form 1120S): Your $60k salary as officer compensation - Schedule K-1, Box 16 Code D: Your $67.5k distributions The key thing to remember is that distributions aren't a deductible business expense - they're just you taking out profits that have already been taxed at the corporate level. TaxAct should handle this correctly if you categorize them as "shareholder distributions" in the software. One tip: make sure your books show these distributions coming out of retained earnings or current year profits, not as an expense account. This will help everything flow correctly through the tax software and avoid any confusion during filing.

Just to add another perspective - I've been running my S-Corp for 6 years now and this distributions vs. salary classification is one of the most common mistakes I see new S-Corp owners make. You're absolutely right to double-check this! Your setup sounds very similar to mine. The $60k salary goes on line 7 as officer compensation (and should match your W-2), while the $67.5k distributions only appear on your K-1 in Box 16, Code D. One thing that helped me understand this better: think of distributions as withdrawing money you've already earned and will pay personal income tax on (via the K-1), while salary is a business expense that reduces the S-Corp's taxable income. That's why distributions can't be deducted on the 1120S - they're not an expense, just a withdrawal of profits. Your salary-to-distribution ratio looks reasonable for IRS purposes too. Keep good records of when you took each distribution throughout the year - it helps if you ever get questioned about the timing or amounts.