K1 Explained / K1 is from a passthrough Entity / Income tax tips #15 / k1 passes to a 1040 return

yo yo yo CPA strength back again

strongest CPA guy anyway we're gonna do

we're gonna talk about Kate ones right

now we're just gonna talk about what it

is where it comes from comes from a

pass-through entity big pass-through

entities are s corpse and partnerships

we're gonna focus we're going to focus

on k1 from an S corp today an 11 20s

okay now it's called 1120 s and S Corp I

should put escort escort is a

pass-through entity meaning the entity

itself doesn't doesn't pay taxes on the

income or loss it passes through to the

shareholders and it passes through via a

k1 so I'm going to show you one second

but you're gonna have you're gonna have

your 1120s tax return and then it's

gonna then the shareholders are going to

get K ones from from the income or loss

from the pass-through entity from the 11

20s and those K ones are going to go

through to the to the shareholders

personal tax returns so let's go we have

11 20s it files its own tax rate it's

gonna file its own tax return so we have

the 1120s the escort makes a profit of

$10,000 now it has two shareholders Tom

at 50 percent in Marion 50 percent this

S Corp is going to file a tax return

it's going to send it to the IRS the IRS

is going to get it and it's gonna say oh

okay there's there's two K ones here Tom

Tom and Mary both fifty percent so the

IRS is gonna know already with the

filing of the 1120s you know they're

gonna be waiting for those K ones to

come in by the Social Security number on

the K ones so anyways the escorts going

to file it's going to have it's gonna

have a profit of ten thousand dollars

there's two shareholders so they're 50

50 50

50/50 owners 50% each on a k1 basically

you know there's there's a lot of lot of

sheets maybe 10 to 20 pages depending on

what's going on in the escort and a

couple of the sheets are going to be k

ones you have two K ones you're gonna

have Tom with his k1 it's gonna say

$5,000 profit it's gonna have some other

stuff too everything took shareholder

distributions or a bunch of other stuff

but I mean I want to focus it on the

profit so you had $10,000 profit with

two shareholders so there's gonna be

$5,000 profit on times kt 1 and then

$5,000 profit on marries k1 then it's

going to pass the decay ones are going

to go from you know really emil the the

1120 SDS corp and the reason it's a

pass-through entity because the profit

or loss passes through to the personal

tax returns to the 1040 and you got

Tom's 1040 first page of the 1040 first

half of it is is all the different types

of income line 17 is income from S Corp

so you would have a $5,000 profit and

that would be incorporated in his in his

tax return with all his personal other

other various worldwide income sources

then your deductions or credits how much

federal Holdings you gave that year also

similarly marries k1 would flow over to

marries personal tax return with her

income same as Tom's you know where all

our income all our different incomes and

then $5,000 would be added in line 17 on

the S corp income k1 gets generated from

the pass-through entity when it went

into when it file when it files his tax

return to based on the shareholders and

it passes through the income loss passes

through to the individual purse to the

shareholders on their individual tax

return via a k1 yeah I hope I hope this

helped I I had a hard time picturing the

K ones really until I started doing a

bunch of tax returns then I got it but

just think it's a

the paper from the S Corp you're going

to get piece of paper k ones for all the

shareholders in profit or loss and then

the k1 is going to go from it's just

going to slide over it's going to

originate from the escort from the

pass-through entity and then it's going

to slide over to the personal tax

returns hope this helped out anyways

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