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I am using TurboTax Premier to do my taxes for 2022. I have a K-1 from my S-Corp, and TurboTax is telling me I need to fill out form 7023 for this K-1, a form I have never had to fill out before. I have had a few different S-Corps going back about 10 years and always do my own taxes (with software, but not always TurboTax).

I started the corporation in 2021 near the end of the year. As such, I didn't have any distributions for 2021, which may be why I didn't run into this last year.

My K1 has code "D" for line 16 with a positive dollar figure (not a loss). Again, my K-1 from 2021 has no value in this box as I did not take distributions. Looking back at older K-1s, I see that I normally had a code D and a (positive) dollar value.

I've searched reddit, the TT forums, and google in general, and I am unable to find anything definitive that says I need to fill out this form. It appears this form was new in 2021, which would explain why I never saw it for past S-Corp filings (pre-2020).

The form itself states that it should be used to when an individual: received a non-dividend distribution from an S-Corp. I also can't find anything definitive that says whether my distribution was a dividend or non-dividend distribution.

Is this something that all S-Corp owners in my situation had to start doing in 2021, and I was just unaware because I didn't pull any money out of the corporation that year?

Bottom line, based on the above, is it normal to be asked to fill this out, or is TT glitching?

2 Answers 2

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You need to file this form to track your basis in your S-Corp. Your K-1 said that your basis has changed (line 16), so you need to show the IRS what your new basis now is. If the distribution exceeds your basis, it will be treated as capital gains to the extent that it exceeds.

Your distribution was a non-dividend distribution. S-Corps don't have dividends.

Since S-Corps don't have any retaining earnings, any distribution that you contributed back to S-Corp (or didn't actually withdraw) adds to your basis.

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Not a tax pro by any means, but, in general, if you received bonafide distributions (not dividends - these are generally two different things when dealing with s-corps) from your s-corp, you need to file Form 7203.

To decrease the pain, check out the IRS instructions for said form. Also, you may find this site and this site handy (I know I did...)!

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