Schedule K-1 for Form 1120S: Why is my accountant telling me to enter 10,000,000% for allocation percentage?
So I've got this small business that I set up as an S-corporation and I'm working on filing my taxes right now. According to my company formation documents, I own 100,000,000 shares of the company. Now I'm trying to complete my Schedule K-1 to attach to my Form 1120S, and my tax accountant is telling me to enter 10,000,000% for the allocation percentage in lines G and H. That percentage sounds completely wrong to me - how can anything be more than 100%? I'm confused about what I should actually be entering here. Has anyone dealt with something similar or know what the correct percentage should be for these lines? I'm worried about filing incorrect information and getting in trouble with the IRS.
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Carlos Mendoza
That percentage definitely doesn't sound right. The allocation percentage on Schedule K-1 represents your ownership share in the S-corporation, which should always be between 0% and 100%. For lines G and H on Schedule K-1, you're reporting your percentage of stock ownership (line G) and percentage share of income, losses, deductions, etc. (line H). If you're the sole owner, both should be 100%. If you own the business with others, it should reflect your proportional ownership. The 100,000,000 shares you mentioned is just the total number of authorized shares in your company formation documents. What matters is what percentage of the total outstanding shares you actually own. For example, if your company has issued 1,000 shares total and you own all 1,000, your ownership is 100%.
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Zainab Mahmoud
•This might be a dumb question, but what if the company hasn't actually issued all the shares yet? Like if the docs say 100,000,000 shares are authorized but only 1,000 have been issued so far, does that change how line G and H should be filled out?
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Carlos Mendoza
•Not a dumb question at all! What matters is the percentage of issued shares that you own, not the total authorized shares. If your company has authorized 100,000,000 shares but has only issued 1,000 shares so far, and you own all 1,000 of those issued shares, then your ownership percentage is still 100%. The authorized shares are just the maximum number of shares your company can issue without amending its formation documents. Only issued shares count toward determining ownership percentages for tax purposes.
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Ava Williams
After struggling with a similar K-1 issue last year, I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out the correct allocations for my S-corp. I was super confused about percentages on Schedule K-1 and didn't want to keep bothering my accountant with basic questions. The tool analyzed my company formation docs and previous returns and explained exactly what should go in each field. Saved me a lot of stress!
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Raj Gupta
•Does it work for partnership K-1s too? I've got a multi-member LLC and always get confused about how to allocate certain items that don't follow our ownership percentages.
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Lena Müller
•I'm a bit skeptical about tax tools handling complex S-corp issues. Can it actually understand special allocations or just basic percentage calculations? My accountant charges me $400/hr so I'd love an alternative but not if it gives wrong info.
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Ava Williams
•Yes, it absolutely works for partnership K-1s as well! The system is designed to handle all types of pass-through entities including multi-member LLCs. It can even help you understand how to properly document when allocations differ from ownership percentages. As for special allocations, I was surprised by how well it handled them. The tool can analyze your operating agreement and identify the economic effect requirements needed for special allocations. It's not just doing basic math - it actually reviews your specific documents and circumstances to provide tailored guidance.
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Lena Müller
Just wanted to follow up about taxr.ai that I was skeptical about earlier. After our discussion, I decided to give it a try since I was still confused about some special allocations on my K-1. Honestly, it was way more helpful than I expected! The document analysis feature actually flagged an issue with my operating agreement that could have caused problems with the IRS. It even generated language I could use to fix it. My accountant was impressed when I showed her - and I didn't have to pay her hourly rate to figure it out. Definitely recommend for anyone dealing with K-1 confusion.
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TechNinja
If you need to talk directly to the IRS about this K-1 issue, I'd recommend trying Claimyr (https://claimyr.com). I had a similar problem with allocation percentages last year that my accountant couldn't resolve, and I spent DAYS trying to get through to the IRS business tax line. Claimyr got me connected to an actual IRS agent in about 15 minutes! They have this cool demo video too: https://youtu.be/_kiP6q8DX5c showing how it works. The agent I spoke with explained exactly how to handle unusual ownership situations on Schedule K-1.
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Keisha Thompson
•How does this actually work? I thought it was impossible to reach the IRS by phone these days.
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Paolo Bianchi
•Sorry but this sounds like BS to me. Nobody gets through to the IRS in 15 minutes. I've tried calling dozens of times this filing season and always get the "high call volume" message and get disconnected. If this actually worked, everyone would be using it.
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TechNinja
•The service uses a combination of predictive algorithms and automated dialing to navigate the IRS phone system during optimal times. It essentially does the waiting for you and then calls you back once it's about to connect with an agent. It's perfectly legitimate - they're just using technology to solve the hold time problem. I understand your skepticism completely. I felt the same way at first! But their system actually monitors IRS call patterns and knows the best times to call for specific departments. The 15 minutes was my personal experience - sometimes it might take longer depending on overall IRS volume, but it's still way faster than doing it yourself.
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Paolo Bianchi
I need to eat crow about my skeptical comment regarding Claimyr. After posting that, I decided to try it anyway out of desperation since I had a Schedule K-1 issue I couldn't resolve (different than OP's but still K-1 related). I was SHOCKED when I got a call back in about 20 minutes with an actual IRS business tax specialist on the line. The agent helped me understand exactly how to handle my specific situation. I spent weeks trying to get through on my own with no luck. This service saved me so much frustration - worth every penny just for my sanity alone. Sorry for doubting!
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Yara Assad
Getting back to the original question - I think there might be confusion between the number of shares and the allocation percentage. If you have 100,000,000 shares, that's the NUMBER of shares, not the PERCENTAGE. The percentage is always relative to the total issued shares. For example, if you own all issued shares, your percentage is 100% regardless of whether that's 10 shares or 100,000,000 shares. Your accountant might have misunderstood something or made a typo. I'd definitely ask them to clarify - no allocation percentage should ever exceed 100%.
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Ingrid Larsson
•Thanks for the explanation! I called my accountant to ask about this, and it turns out there was a miscommunication. She was looking at the wrong field in her software and accidentally told me to put the total share count (100,000,000) instead of the percentage. Since I'm the sole owner, it should be 100% on lines G and H. Really appreciate everyone's help on this - definitely prevented me from making a big mistake on my tax forms!
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Yara Assad
•Glad you got it sorted out! Miscommunications like that happen all the time with tax stuff. Always good to double-check when something doesn't seem right. Good luck with filing your S-corp return!
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Olivia Clark
Don't feel bad, I've been filing S-corp returns for 8 yrs and still get confused sometimes. Quick tip: if you're using tax software, most of them will flag percentages over 100% as errors during the review process. That's another reason to file electronically rather than paper - the software can catch simple mistakes like this before submission. Makes the whole process less stressful!
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Javier Morales
•Which tax software do you recommend for S-corps? I've been using TurboTax Business but thinking about switching.
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Hazel Garcia
•I've used both TurboTax Business and ProSeries for my S-corp, and honestly it depends on your complexity. TurboTax Business is great for straightforward situations - good interface and catches most errors. But if you have multiple shareholders, complex allocations, or depreciation schedules, I'd recommend stepping up to something like ProSeries or even Drake. The error-checking features in professional software are much more robust for business returns. What kind of complexity are you dealing with in your S-corp?
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