How to Report Dividends From S Corporations
- 1). Include any S corporation dividends earned over the previous year on your tax return. You should receive an IRS Schedule K-1 from the S corporation from which you have received dividends, along with instructions for using Schedule K-1 (Form 1065) to report the corporation's income, losses, deductions and credits. All taxable dividends must be reported even if you do not receive Form K-1 from the paying corporation.
- 2). Download and print Schedule K-1 from the IRS website if the S corporation fails to send you a form. All annual profits, losses and dividend distributions are passed directly down to shareholders, so it is necessary to report dividends from S corporations accurately on your tax returns, to avoid potential audit proceedings by the IRS. An S corporation is treated similar to a partnership or LLC (Limited Liability Company) by the IRS, which means the corporation will report your share of the corporation's income, losses, deductions and so forth.
- 3). Handle S corporation items, such as income, deductions and the like, in the same manner the corporation handles said items on its tax return. If the corporation fails to file a return or an inconsistency exists between your handling of items versus the corporation's handling of items, you are required to file Form 8082, Notice of Inconsistent Treatment or Administrative Adjustment Request, with your personal return to provide identification and explanation of any inconsistencies. If you fail to file Form 8082 in this situation, you may be subject to a penalty.
- 4). Examine the Schedule K-1 you receive from the S corporation. Immediately notify the corporation of any errors, and request an amended form. Do not change items yourself on your Schedule K-1 copy, and make sure the corporation sends a corrected copy to the IRS as well.
- 5). Follow IRS instructions to report dividends from S corporations. The IRS provides detailed directions and tips for properly completing a Schedule K-1 (Form 1065). Consult with a tax attorney or qualified tax preparer to ensure you have accurately reported all investment earnings.