Episode Description
In this podcast, I break down one of the most common — and most dangerous — mistakes I find on S corporation tax returns: the "loan to shareholder." If you own an S corporation, there's a good chance this is sitting on your balance sheet right now, and you probably have no idea it's there or why.
Here's the problem. When you take out more money from your S corporation than it actually has, you create what's called an excess distribution — and that money is taxable. But instead of catching it, a lot of accountants just bury the difference in "loan to shareholder" to balance the books. Now you're stuck owing money back to your own company, potentially with interest, or paying capital gains taxes on money you thought was yours.
Here's what I cover in this podcast:
▪️ What "loan to shareholder" actually means and why it's probably on your Schedule L (page 5 of your return) without you knowing
▪️ How excess distributions happen — with a simple $100,000 example that makes it crystal clear
▪️ Why COVID-era SBA loans created this exact problem for so many business owners
▪️ The real reason your accountant put it there — balancing the books vs. an actual basis issue
▪️ How changing accountants over the years can create a phantom loan to shareholder you never actually owed
▪️ The strategy we use to fix it: proper loan documents, amortization schedules, and rebuilding your shareholder basis from scratch
▪️ Why Form 7203 (the new IRS basis schedule requirement) matters and how it protects you
If you're an S corporation owner, knowing your shareholder basis is one of the most important things you can do to avoid paying taxes you don't owe. A lot of business owners are carrying this mistake for years — and it's completely fixable if you structure it correctly.
🆓 Download FREE PDF: 7 Write-Offs Every S-Corporation Business Owner MUST Know: https://7taxwriteoffs.com/?el=podcast&htrafficsource=buzzsprout
*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your attorney, accountant, tax preparer, and/or other advisor regarding your specific situation or your client’s specific situation. The information and all accompanying material are for your use and convenience only.