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Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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I had a 1099-C for about $135,000. My husband didn't have any withholding on Social Security. His employer couldn't withhold due to incompetence. I felt utter dread wash over me. Memories of owing the IRS before were constantly on my mind. I called a local CPA. Besides being clueless, he wanted to charge me for every question I had about insolvency. I looked on line and found little hope of the countless stories of permanently disabled people like myself getting their student loans forgiven only to be asked to pay taxes on it as if it were income.
Somewhere, somehow, I find an article by Gary Bode. I bookmarked it for when it's time to do the actual taxes. With his excellent help in how to do all of this out of a virtual office I get my part of the work done. My questions got answered, for free. I give a retainer, do what I said I did and wait. I hear from Gary. I go into shock! How can this be? Not only do I not owe on the 135,000....Gary itemizes and after paying what was almost nothing in taxes we get $950.00 back! No more hubby doing the taxes online! I will use Gary Bode as long as he will agree to work with me!
It was so easy, no worries, but professional and top notch. I know I have thanked you Gary but I am so grateful. Thank you ever so much again!

Carla Bray

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S Corporation CPA Accountant discusses Schedule K-1 when using Form 8825 to report Rental Property | federal tax form 1120-S | federal tax form 8825| federal tax form Schedule K-1

rental property cpa discusses federal tax form 1120-S, federal tax form 8825 and federal tax form Schedule K-1

If you don’t completely understand your Schedule K-1, ask your S Corporation CPA to explain it. After all the IRS taxes you on the financial information it contains. For a free phone consult call (910) 399-2705.

S Corporation CPAs field calls on Form 8825 logistics. A common topic is the 1120-S Schedule K-1 that reports the rental property activity from Form 8825. So here’s some background and a few tips I’ve learned.

Federal tax Form 1120-S, US Income Tax Return for an S Corporation

Form 1120-S includes Form 8825 and Schedule K-1. So let’s say:

  • You’re a real estate agent operating or electing to be taxed as an S Corporation.
  •  The same S Corporation owns some rental property.
  • All your real estate agent transactions go on federal tax Form 1120-S.
  • Your rental property activity goes on Form 8825 which becomes part of your S Corporation’s federal tax form 1120-S.
  • If you only have rental property  activity in the LLC or S Corporation, most of Form 1120-S is blank except for Form 8825.

Federal tax Form 8825, Rental Real Estate Income and Expenses of a Partnership or an S Corporation

Form 8825 attaches to your annual Form 1120-S.

Federal tax Form Schedule K-1Shareholder’s Share of Current Year Income, Deductions, Credits, Other Items

Schedule K-1 reports the tax information in Form 1120-2 to the Shareholders. Lots of little quirks here about what goes where. The reporting of information from Form 8825 is one such quirk.

  • The ordinary income from your real estate agent activity flows into Line 1 of Part III of Schedule K-1, Ordinary Business income (loss).
  • The rental property income from your rental real estate property flows into Line 2 of Part III of Schedule K-1, Net rental real estate income (loss).

It seems that most tax software reports both the ordinary income and the rental property activity, from Form 8825, on a single Schedule K-1. But the IRS doesn’t like that. I think most rental property CPAs take the single Schedule K-1 the software generates and use it to report ordinary income and associated items. So Line 2 of Schedule K-1 is blank. Then we create a second Schedule K-1 within the software to report rental property activity on Line 2.

“You’re personally taxed on the financial info contained in federal tax form Schedule K-1. It’s prudent to check it carefully.”
– Gary Bode, S Corporation CPA and rental property accountant

Federal tax Form 1120-S has plenty of quirks. But I find most S Corporation clients understand it. And of course I answer any questions they might have. Most Landlords understand federal tax form 8825. But Schedule K-1 is different. The allocation of income and rental property activity to the Shareholders is only one issue. Have your S Corporation CPA explain Schedule K-1 if you don’t understand it. Why? The S Corporation is a pass through entity; Schedule K-1 contains the information the IRS taxes you on when it flows into Form 1040.

Our virtual office can handle your S Corporation’s Form 1120-S, Form 8825 and Schedule K-1 regardless of where you live.

I’m a rental property CPA and run my practice as an S Corporation. There’s rental property in my extended family. So I keep up on current issues with S Corporations and rental property. For a free phone consult call (910) 399-2705.

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2 comments to S Corporation CPA Accountant discusses Schedule K-1 when using Form 8825 to report Rental Property | federal tax form 1120-S | federal tax form 8825| federal tax form Schedule K-1

  • Peter

    I am running a motel in California and wanted to create a LLC to report the income and expenses. I am thinking to report on form 8825 under commercial building code. Is that correct? If not, which form is correct.

    • Well Peter, an LLC can choose to be taxed as a single member LLC, a C Corporation, an S Corporation or a Partnership. Pro and cons of each are beyond the scope of a comment. Only S Corporations and Partnerships use Form 8825. SMLLC uses Schedule E. Hope that helps.

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