| How do I zero out the balance sheet ?===> you need to prepare the balance sheet on page 4, Sch L of Form 1120S. The beginning balances of the assets, liabilities and equity are the ending reported balances from the prior year's, 2015, tax return. Since you are preparing a final tax return, the ending balances of all assets, liabilities and equity should be zero. If any assets have a balance at year-end, distributions of cash or property will need to be made. If any liabilities have a balance at year-end, the capital accounts will need to be adjusted.Dissolution can be more complicated than corp formation. Don't assume that your corp is finished the moment you get rid of your merchandise and close the doors for the last time. From a legal standpoint, your corp continues to exist as a business entity regardless of whether or not you are still doing - or have ever done business. As such, the state continues to expect the corp to fulfill its legal requirements until such time as it has been officially dissolved. Shareholders are not legally entitled to their share of the corp's assets until it has been officially dissolved with the secretary of state. If all assets have been liquidated, all debts paid off, and any residual cash / assets distributed, it sounds like all that remains of the balance sheet is a debit (negative) bal in retained earnings, and probably some positive balance elsewhere in equity (owner's investment, e.g.). And if all entries have been in balance all along, then this negative RE bal and the positive amount in OE are of equal magnitude, just going in opposite directions.If so, you simply wash the two against each other with one final JE, and it's a wrap (as you did on the tax return). It might seem counterintuitive to do so, since it's not really a 'distribution' of anything. But the proper interpretation isn't so much 'distribution', as 'adjustment of the OE to its correct amount'.For example, say you start a corp with a $10k initial investment. The only thing the company does is to pay a $3k expense, then you decide to liquidate. At this point the bal sheet shows $7k cash, ($3k) RE, and $10k in OE. you return the $7k back to your personal wallet, leaving neg've $3k in RE, and pos've $3k in OE, on the balance sheet.But the positive $3k OE bal is misleading... after the corp lost $3k, you are only entitled to get back the $7K. (Of course you'll claim a $3K loss on your personal return, since you invested $10k and got back $7K. But that has nothing to do with the corporate books.)Thus, cancelling the negative $3K in RE against the positive $3K in OE with a final JE just restates that OE balance down to its correct amount of zero.
How do I pass on this information to the single shareholder's K-1 =>It depends; if you receive distribution form the S corp,
you need to report distribution on Sch K1 of 1120s for your final return; you need to compute the gain and pass it thru on the K1. until the S corp is formally dissolved, it will continue to be required to file all relevant federal, state, and municipal tax reports. Failure to do so will result in the normal penalties and fees associated with a late filing. Dissolution occurs at the state level, not the federal levelYour S corp will need to file annual reports every year (and pay the penalties for neglecting to file them) until the corp is dissolved.So, you need to file an IRS Form 966 within 30 days of approving dissolution. For tax accounting purposes, you will need to file one last S corp 1120S tax return, marking the return as final return. The form must be submitted to the same IRS center where the corp sends its tax returns.For more accurae professina help, you may contact an Enrolled Agent or a CPA doing taxes in your local area.
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