How to calculate shareholder basis for a single-owner S-Corp? Tracking basis correctly

Tracking S-Corp basis is definitely something that trips up a lot of solo business owners, so you're not alone! Let me help clarify: For question 1, yes, you'll want to use your K-1 (1120-S) Part III. Start with Box 1 (Ordinary business income/loss) as your foundation, but you need to adjust for pretty much all the other income/deduction items in Part III. Items that increase your basis include ordinary income, separately stated income items, and additional capital contributions. Items that decrease your basis include distributions, ordinary losses, and separately stated deduction items. Unfortunately, there isn't a single box that summarizes your net basis change for the year. The IRS requires shareholders to track this themselves, which is why so many people get confused. As for finding your current basis from previous returns, there's no official place this appears. Your best bet would be to reconstruct your basis from the beginning using all your past K-1s and any records of your initial investment and subsequent capital contributions.

When I was struggling with tracking my S-Corp basis, I discovered this tool called taxr.ai (https://taxr.ai) that helped me reconstruct my basis from previous years. I uploaded my old K-1s and tax returns, and it analyzed them to help me track my basis properly. The tool breaks down exactly what impacts your basis - showing which Part III items increase or decrease it. It also flags potential issues like distributions that might exceed basis (which can create unexpected tax consequences). For me, the biggest help was that it created a year-by-year basis tracking worksheet that I can keep updating.

Just wanted to update after trying taxr.ai from the recommendation above. It actually worked really well for my situation! I uploaded my past 6 years of K-1s and tax returns, and it walked me through reconstructing my basis history year by year. The most helpful part was how it identified which Box 16 codes on my K-1 were distributions that reduced my basis. Turns out I was over-reducing my basis by counting some pass-through items incorrectly. It also flagged a year where I nearly took distributions that would have exceeded my basis (didn't realize how close I was to creating a taxable event). Now I have a clear tracking worksheet and understand which items from my K-1 affect basis going forward. Definitely worth checking out if you're struggling with this like I was.

If you're also having trouble getting answers directly from the IRS about S-Corp basis questions (I was on hold forever), I tried a service called Claimyr (https://claimyr.com) that actually got me through to a real IRS agent who specializes in business tax issues. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had specific questions about how to handle some unusual items on my K-1 that were affecting my basis calculation, and was shocked when I got through to someone who could actually help in about 15 minutes. They confirmed how tax-exempt income should be handled for basis purposes and clarified some confusion I had about the ordering of adjustments.

I need to admit I was completely wrong about Claimyr from my skeptical comment above. I decided to try it after continuing to struggle with some basis questions that online forums couldn't answer clearly. It actually worked! Got me through to an IRS representative in the business tax department in about 20 minutes (versus the 2+ hours I spent on my previous attempts). The agent walked me through how to properly track my S-Corp basis and confirmed that I needed to include certain Section 199A information that I had been excluding. For anyone like the original poster who's trying to reconstruct basis from previous years, the agent I spoke with suggested requesting tax account transcripts for your business for the years in question, which can help verify the K-1 amounts you're using for your calculations.

One thing that helped me track my S-Corp basis was creating a simple spreadsheet with columns for: - Beginning basis - Ordinary income/loss (Box 1) - Other income items (Boxes 2-10) - Non-deductible expenses (Box 16, code C) - Distributions (Box 16, code D) - Ending basis I start each new year with the ending basis from the previous year. As a solo shareholder, this method has worked well for the 5 years I've had my business.

Question for anyone who's been through an audit - does the IRS ever ask to see your basis calculations during an audit of an S-Corp return? I'm wondering how detailed my documentation needs to be.

Great question about S-Corp basis tracking! As someone who went through this same confusion a few years ago, I can share what I learned from my CPA. For your specific questions: 1. Yes, use the K-1 Part III, but don't just focus on Box 1. You need to look at ALL the boxes - income items (Boxes 1-10) generally increase basis, while deductions and losses (Boxes 11-13) decrease it. Also check Box 16 carefully for distributions and other adjustments. 2. Unfortunately no - there's no single summary box. The IRS expects shareholders to maintain their own basis calculations, which is honestly one of the more frustrating aspects of S-Corp ownership. 3. Since there's no official place this appears on returns, you'll need to reconstruct from Day 1. Start with your initial investment/contribution when you formed the S-Corp, then work through each year's K-1 systematically. One critical tip: Make sure you're handling the ORDER of adjustments correctly. Income and contributions increase basis first, then losses and deductions reduce it, and finally distributions come out last. This order matters because it affects how much loss you can deduct in any given year. Given your simple structure (sole owner, no loans, minimal complexity), your calculation should be straightforward once you get the methodology down. I'd strongly recommend setting up a tracking system now so you don't have to reconstruct again in the future!