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S Corp Basis 7203: NEW IRS Form 7203 [S Corporation] Shareholder Stock & Debt Basis Limit Form 1040 - YouTube
Channel: JJ THE CPA
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jj the cpa here hope you're doing well
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there's a new form
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related to s corp owners
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and it's form
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7203
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now form 7203 is something that's
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generated and filed
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with the individual tax return form
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1040. it is not something generated with
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the s corp tax return however form 7203
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is in essence the information that you
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would get not only from the k1 but
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from the s corp tax return what would
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these things be well on your form 7203
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this is now tracking your basis as an s
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corp owner in that escort it's tracking
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your stock basis as well as your at-risk
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basis which is only achieved by you
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making loans to the escort so this is
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going to be a form that indicates your
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beginning stock basis and then income
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increases the basis losses decrease the
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basis
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if you took money out distribution that
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decreases your basis if you loan money
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to the business that increases your at
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risk basis if you got paid back that's
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going to decrease your at risk basis
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when do you need to file a form 7203 now
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again it does not get filed with the
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form 1120s does not get filed with the s
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corp return at all
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it is only filed with the individual tax
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return form 1040 is the attachment it
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goes to
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now you're required to
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submit the form 7203
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if you are taking a loss that year
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if you're taking a non-dividend
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distribution which means a distribution
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if you disposed of the s corp meaning
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the stock
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and if you received a loan repayment
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from the s corp
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so it wouldn't be required in a year
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where there's income to pick up with no
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distribution it wouldn't be required in
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a year where there's no loss it's income
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no distribution
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it wouldn't be required in a year where
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it's income meaning no loss no
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distribution and no loan repayment
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if there's income
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no distribution
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no loss and a loan was made to
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doesn't appear that it's then required
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in that circumstance but the irs does
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indicate that you would want to track
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your basis every year even if it's not
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required i'm going to give you a link to
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the form 7203 as well as the
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instructions this is a brand new form
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just got finalized
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in december of 2021 and we're seeing
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that pretty much every tax return we're
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filing that has an s corp flow through
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schedule k1 on it it is now needing to
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be filed with that form 1040 because our
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clients are taking distributions and
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therefore that is why it's required one
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of the key things to really check is
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that beginning basis that you're now
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putting on the form 7203 so before 2021
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in the circumstances that we just
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indicated the irs required that a
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schedule
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be attached to the tax return but there
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was no format there was no form it was
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just provide the irs the information in
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a pdf format but it could be in excel
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could be in word there was no actual
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template of what to provide to the irs
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which also really means that the irs
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doesn't really have a way of knowing
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what the ending basis is at 2020.
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so you have to take the responsibility
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to ensure that your beginning basis is
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correct one of the things that
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definitely affects the s corp basis is
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the tax-exempt income that could be
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realized from ppp loan forgiveness
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especially in 2020 there might have been
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some confusion on how that got reported
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in 2020 on the s corp return it may have
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not been reported as tax-exempt income
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in 2020 therefore there may have not
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been
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an increase to basis in 2020 for the ppp
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that happened in 2020 now for more on
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that i'm going to give you a link to a
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video where i talk about this
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extensively for the s corp and then i
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also talk about it with the revenue
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procedures that come out that i really
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wanted to focus more on the form 7203
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why you need it when you need to prepare
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it but again at that beginning basis the
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first line item on form 7203 your
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starting basis be sure that
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that it includes the increase to basis
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that should have happened in 2020
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if it doesn't then what you would need
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to consider is do you need to amend your
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2020 tax return
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to update the basis here's the deal
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though if there was no requirement for
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you to file
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your basis with the irs in 2020 for your
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s corp at the individual level
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then what we've done with clients is if
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we're in a situation where the basis
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didn't get increased in 2020 for ppp one
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because it was picked up as an m1 item
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which is
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income on books not on the tax return
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but it wasn't picked up as tax-exempt
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income specific then it most likely
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didn't increase that shareholders basis
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in 2020. therefore if there was no
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requirement to file the basis
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in 2020
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for the s corp at the individual level
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then personally what i'm doing versus
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amending the return which there would
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still then be no requirement to file
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that form with the irs because there
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would be no loss
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then we are just doing an adjustment
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there's a section in form 7203 we do
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other increases and an explanation of
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prior year adjustment tax-exempt income
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for ppp one you will see if there is
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tax-exempt income in 2021 that is an
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increase to basis you want to ensure
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that that is also being reflected so i'm
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getting in the weeds i'm going to give
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you a link to the videos that i've done
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specific to ppp and the s corp
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all right hey thanks for tuning in i'd
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love it if you'd subscribed and then
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don't you ever forget you've never met a
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cpa quite like me have a great one
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