As an LLC taxed as an S-Corp, how do I take out previous year's retained earnings, which were taxed on personal return, without being taxed again in the year they are paid out??

Margery Cook · ‎January 02, 2024

I have a Retained Earnings account, plus Partner 1 and Partner 2 equity accounts. If the LLC makes a profit of $50,000 in 2023, that passes through to their 1040s where they pay income tax on it - even though that money was not actually paid out to the partners in 2023. If the LLC then wants to pay that gain to the partners in 2024, how do I enter that in QuickBooks so that it does not appear on their 2024 K-1s and result in double taxation to the partners? Do I pay it from the Retained Earnings account? Can I do this on the check? If it is a journal entry, please give detailed instructions.

Rainflurry · ‎January 02, 2024

@Margery Cook

Create an equity account called '2024 - Distributions' and assign that to the payment(s)/check(s). This has no impact on your P&L, it only affects your balance sheet. Your CPA/tax accountant should provide you with the proper adjusting entries to close out Distributions to Retained Earnings after preparing your tax return.

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As an LLC taxed as an S-Corp, how do I take out previous year's retained earnings, which were taxed on personal return, without being taxed again in the year they are paid out??

As an LLC taxed as an S-Corp, how do I take out previous year's retained earnings, which were taxed on personal return, without being taxed again in the year they are paid out??

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