Company Basis for 2019 Taxes: Are You Tracking?

Company basis is an owner’s investment in a particular business.

It’s probably one of the most difficult accounting points business owners must understand and track throughout the year. Basis must be tracked accurately for annual tax reporting.

For S corporation shareholders, tracking company basis is a required schedule for 2019.

S corporation business owners must keep track of how much money they have put into the company and earned versus the amount they have removed as distributions.

The IRS gave limited further clarification of the new checkbox on line 28, column (e), of Schedule E (Form 1040).

The web page states:

As stated in Part II of the Schedule E (Form 1040), a taxpayer who owns an interest in an S corporation and reports a loss, receives a distribution, disposes of stock, or receives a loan repayment from the S corporation must check a corresponding box under line 28, column (e), and attach a computation detailing their S corporation basis. The discussion about basis rules for S corporations in the Instructions for Schedule E (Form 1040) for Parts II and III does not limit or modify this requirement.

If you’re a current customer of Morgan & Associates CPAs, and we have filed your tax returns, we keep track of the company basis for you.

If you are preparing individual returns for S corporation shareholders, make sure to note the expanded list of situations when a basis computation must be attached.

Contact the experts at Morgan & Associates if you have more questions about tracking your company basis.