Form 7203 is used by shareholders of an S corporation to determine if there are any limitations on their share of the S corporation's deductions, credits, and other items.
If a client has received Schedule K-1 from an S corporation, ask them if they also received a copy of Form 7203. While it's not the responsibility of the preparer who issued the Schedule K-1 to prepare Form 7203 for the taxpayer, they may have done so.
When preparing the tax return for a client that received Schedule K-1 from an S corporation, you should include Form 7203 with their individual tax return if any of the following are true:
- They are claiming a deduction for a loss on Schedule K-1 (Form 1120-S).
- They disposed of stock in the S corporation.
- They received a non-dividend distribution from the S Corporation.
- They received a loan repayment from the S Corporation.
When completed, Form 7203 will show you whether the taxpayer has sufficient basis to claim any of the loss, deduction, or credit items on the Schedule K-1.
Completing Form 7203 in ProWeb
In TaxSlayer ProWeb, Form 7203 is accessed in the course of entering Schedule K-1 from an S corporation, so the first step is to enter the S corporation Schedule K-1.
When you enter an S corporation Schedule K-1, the final step asks if you would like to complete Form 7203, and if you answer Yes you'll be taken into the form. Otherwise, to complete or edit Form 7203 in TaxSlayer ProWeb, from Federal Section of the tax return (1040) select:
- Income
- Other Income
- K-1 Earnings
- Schedule K-1 Form 1120S - Click the pencil icon to edit the K-1.
- Shareholder Stock and Basis Limitation - Form 7203 - Complete each section as needed.
Additional Information:
IRS Form 7203 - Form lines and explanations