Recent IRS Rules for S Corporations: Activity and Basis Reporting, NRAs, QBI, and IRS Basis Audits

Basis adjustment is the biggest S corporation issue for IRS audits and the focus of the latest IRS initiative. Having up-to-date basis schedules for S corporations is critical. Form 1120-S requires submission of basis schedules with the return. Practitioners may need to calculate or update these schedules.

Notice 2019-66 did away with the requirement that partnerships must separately report activities, but the IRS did not afford S corporations this same relief. Section 465 limits the amount of deductible losses owners can claim based on amounts at risk. If the corporate items of income, loss, or deduction reported on Schedule K-1 are from more than one activity covered by the at-risk rules, the corporation must report information separately for each activity. Activity-by-activity reporting creates a burden for many S corporations, yet tax advisers and return preparers must be familiar with the at-risk rules and handle the reporting requirements appropriately each year.

Similar to other businesses, the recent tax law provided S corporations with the benefit of a QBI deduction. There are steps tax practitioners can take to help maximize this deduction. And since there are substantial penalties for noncompliance, proper reporting for the flow-thru deduction on Schedules K and K-1 reporting is essential.

Before recent tax reform, an ESBT (electing small business trust) beneficiary had to be an eligible S corporation shareholder. Now, a nonresident alien can be a potential current beneficiary of an ESBT without being a disqualified shareholder.

Listen as our panel of experts covers the latest developments with S corporations, including basis and at-risk reporting, NRAs as shareholders of ESBTs, Section 1371(f) regulations, and other recent developments.

1. Basis reporting
2. Separate reporting of activities
3. Specific IRS challenges to S corporations
4. Nonresident aliens as ESBT beneficiaries
5. QBI calculations and reporting
6. Section 1371(f) regulations
7. Other S corporation developments

The panel will review these and other key issues:

• Updating basis schedules to prepare for IRS challenges
• Calculating and reporting QBI flow-through items
• Handling separate reporting of activities
• Current court cases and challenges to S corporations

Learning Objectives

After completing this course, you will be able to:

• Determine when establishing an ESBT could benefit an S corporation
• Decide when to report activities separately
• Ascertain when to include basis schedules in Form 1120-S
• Identify where to report QBI items on Schedule K

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).