The Biggest Challenge for S Corporations in 2022 Filing Season

If you own an S corporation, filing your 1120S and 1040 is about to get more complicated. Reason being, in 2022, S-Corp shareholders may have additional filing requirements to fulfill when they file your 2021 tax return. This requirement may be hard to fulfill especially for those business owners who do not maintain a proper accounting system and do not have financial statements available for their S corporations.

The IRS recently drafted Form 7203, to mandate S Corp owners to disclose their Stock and Debt Basis. The final form is expected to be available for filing with 2021 tax return, however, it is still currently pending from final release from the IRS. 7203 is required for S corporation shareholders if certain conditions exist, including claiming a deduction for their share of an aggregate loss, receiving a distribution, disposing of stock, or receiving a loan repayment from an S corporation.

It is the S Corporation shareholder’s responsibility to maintain stock and debt basis, and it can be complicated to account for all the data, especially for business owners who do not track their basis historically. This form is beneficial, as it will ensure basis is consistently maintained throughout the year.

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Contents of this video
0:00 - Intro
0:13 - Overview for S Corps
0:30 - Form 7203
1:24 - Who Must File
2:49 - Key Points
3:34 - Outro
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DISCLAIMER:
Tax Tips discussed here were prepared for the purpose of this video. To apply these strategies, please consult with your CPA or professional tax preparer.

[yueliang]

useful video, question for you. I am the sole owner of LLC and started file tax as S corp at the beginning of 2020 . My business is simply buying goods and selling them. How can I figure out our stock basis for the beginning of 2021?