My CPA says to enter 10,000,000% for allocation percentage on 1120S Schedule K-1. Is this right?

So I'm filling out my tax forms for my small business and something weird is coming up. In my company formation docs, it shows I have 100,000,000 shares in the business. Now I'm working with my tax accountant on my Form 1120S, and she's telling me to enter 10,000,000% for the allocation percentage on Schedule K-1 (specifically lines G and H). That percentage seems completely insane to me - how can anything be over 100%? I'm not a tax expert by any means, but this just doesn't make logical sense. Has anyone dealt with this before or know what's going on? I don't want to question her expertise too much, but I also don't want to submit something that looks completely wrong and triggers an audit.

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20 comments

Keisha Brown

•8M

This definitely sounds off. The allocation percentage on Schedule K-1 represents your ownership stake in the S corporation, and by definition, it can't exceed 100%. Line G shows your percentage of stock ownership and line H shows your percentage share of profit, loss, and capital. These figures should typically match unless there's a special allocation agreement. The 100,000,000 shares you mentioned refers to the total number of shares you own, not a percentage. The percentage would be calculated as (your shares/total outstanding shares) × 100. For example, if there are 200,000,000 total shares in the company and you own 100,000,000, your percentage would be 50%. I'd recommend asking your accountant to clarify - there might be a miscommunication somewhere.

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Keisha Brown

•8M

You're absolutely right - if OP is the sole shareholder, the percentage should be 100%, not 10,000,000%. Even in the most complex partnership arrangements with special allocations, percentages still can't exceed 100% total across all partners/shareholders. The percentage represents a portion of the whole, so mathematically it cannot exceed 100% in this context. This sounds like either a serious misunderstanding or possibly a decimal point error of some kind. I strongly recommend OP get clarification from their accountant before filing.

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Amina Toure

•8M

The system works by analyzing your tax documents and corporate formation papers to identify inconsistencies. It doesn't just check for obvious errors - it actually compares what you've entered against tax code requirements for forms like the 1120S and Schedule K-1. It specifically looks at ownership allocations and flags anything mathematically impossible like percentages over 100%. I was initially skeptical too, but it caught several issues my previous accountant missed. It definitely understands S-corp rules - it identified that my profit/loss allocation didn't match my ownership percentage and explained exactly how to correct it based on my operating agreement. The analysis took about 10 minutes and saved me from what could have been a serious audit trigger.

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FireflyDreams

•8M

Just wanted to follow up and say I tried taxr.ai after seeing this thread, and it was legitimately helpful. I uploaded my corporate docs and draft K-1, and it immediately flagged that my accountant had gotten the allocation percentages wrong. Turns out they were calculating based on originally authorized shares rather than actually issued shares. The system explained exactly why my percentage should be 65% rather than the 43% my accountant calculated. Definitely worth checking out if you're dealing with complex ownership structures.

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Natasha Kuznetsova

•8M

If you're still struggling to get answers from your accountant about this K-1 allocation percentage issue, I had a similar experience and finally got clarity by using Claimyr (https://claimyr.com) to speak directly with an IRS agent. I waited on hold for 3+ hours on my own with no luck, but their service got me through to a specialist in about 30 minutes. The IRS agent confirmed that allocation percentages on Schedule K-1 absolutely cannot exceed 100% and explained how to properly calculate it based on my share structure. They have a demo video explaining how it works here: https://youtu.be/_kiP6q8DX5c

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Natasha Kuznetsova

•8M

It's not about "cutting the line" - they use a system that continuously redials and navigates the IRS phone tree until it connects, then calls you when they get a human. It's basically doing the waiting for you. I was skeptical too, but after trying to get through on my own for days, I was desperate enough to try. They don't have any special relationship with the IRS. It's just an automated system that handles the frustrating wait time and menu navigation. I ended up speaking with a really helpful agent who explained that K-1 allocation percentages must equal exactly 100% across all shareholders, and anything else would trigger automatic review. The IRS has been understaffed since the pandemic, which is why getting through has been so difficult for everyone.

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Emma Anderson

•8M

I feel like I need to eat my words here. After my skeptical comment yesterday, I decided to try Claimyr out of desperation, and I actually got through to an IRS representative in about 40 minutes. I explained my S-corporation allocation percentage question, and they confirmed that percentages on Schedule K-1 can never exceed 100% - it's mathematically impossible and would be an immediate audit flag. The agent explained that the correct way to handle this is to calculate your ownership percentage based on shares you own divided by total outstanding shares. Really surprised this worked after struggling for weeks to get through on my own.

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Malik Thompson

•8M

Former tax preparer here. There's definitely an error somewhere. Schedule K-1 allocations are always shown as percentages of the whole, meaning the maximum valid entry would be 100%. The most common errors I've seen: 1) Confusing the number of shares with the percentage (they're completely different concepts) 2) Decimal point errors (mistaking 100.00% for 10000%) 3) Misunderstanding what the form is asking for I'd strongly suggest asking your accountant to explain their reasoning. If they can't provide a clear explanation, you might want to consider getting a second opinion.

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Malik Thompson

•8M

Yes, entering 10,000,000% would almost certainly trigger an automatic review if not a full audit. The IRS systems are designed to flag mathematically impossible entries, and anything over 100% on an allocation percentage field would be immediately flagged. The severity of the consequences depends on whether it's viewed as an honest mistake versus an intentional misrepresentation. At minimum, you'd likely receive a correction notice and potentially have your return rejected. At worst, if the IRS believes there was intentional misreporting, it could lead to penalties. This is why it's crucial to address this before filing - mathematical impossibilities are among the easiest issues for automated systems to detect.

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Jayden Hill

•2M

This is absolutely incorrect and you need to address this immediately before filing. Schedule K-1 allocation percentages represent your ownership stake and literally cannot exceed 100% - it's mathematically impossible. Even if you owned every single share of the company, you'd show 100%, not 10,000,000%. I suspect there's been a major miscommunication somewhere. Your 100,000,000 shares is just the number of shares you own, not a percentage. The percentage should be calculated as (your shares ÷ total outstanding shares) × 100. If you're the sole owner, that's 100%. If there are other shareholders, it would be some fraction of 100%. Please sit down with your accountant and ask them to walk through exactly how they calculated 10,000,000%. There's either a serious misunderstanding about what the form is asking for, or perhaps they meant something entirely different (like 100.000000% with decimal precision). Filing with 10,000,000% would almost certainly trigger an immediate audit flag since it's mathematically impossible. Don't sign anything until this gets cleared up properly.

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Dmitry Volkov

•1M

This is exactly right. I've seen this kind of confusion before where people mix up the total number of shares with percentage ownership. The key thing to remember is that percentages on Schedule K-1 must always add up to 100% across all shareholders - no more, no less. If you're filing as an S-corp, the IRS computer systems will immediately flag any allocation percentage over 100% as an error. I'd definitely recommend getting this sorted out before filing, because an obvious mathematical error like this could delay your return processing or worse, trigger unnecessary scrutiny of your entire filing.

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