I use personal funds to pay a business credit card how do I show this on my K-1 and how does it affect my M1 ACC and m2 calculations? I'm assuming I treat this as a shareholder loan?

#1;I guess aslongas you loan the personal funds to the S-Corp and keep a record of the loan and try to have the corporation make regularly scheduled repayments, then on line 4 on sch k of 1120s;you also need to report taxable interest income on line 8a of form 1040.Interest income is subject to income taxes, but not self employment or payroll taxes. It will be coded as interest income on your K-1, line 4and will thus be reported as interest income on your personal tax return. usually the amount of interest not charged by below-market loans is considered income and is taxable to the borrower. Taxpayers determine this taxable amount by subtracting the amount of interest actually paid from the amount of interest that would be due if the shareholder loan was charged at the federal rate. Borrowers should compute this amount annually and report when filing their taxes.If the loan exceeds $10k, the corp needs to start tracking and paying interest on the loan principal.so the interest income tha tyu receive from your S corp increase the bala in your AAA/sh basis and the main purpose of the M-1 is to account for discrepancies between a corp's book income and expenses and its taxable income and expenses;so as, Sch M-1 adjustments are based on method of accounting. Generally, tax law requires taxable income to be computed under the same method of accounting as you use for its books. For cash-method taxpayers, income is included in gross income when payment is actually or constructively received; deductions are allowable when payment is made. Accrual-method taxpayers record revenue and expenses when all three of the following have occurred: all events have occurred that establish the fact of the transaction; the amount of the tax law provides a recurring-item exception for the economic performance test. An item is treated as incurred during the tax year if all events with respect to the item have been met; economic performance occurs within the shorter of a reasonable period or 8 1/2 months after the close of the tax year; the item is recurring in nature; and it is either not a material item or the accrual in the tax year provides a better matching of income and expenses.for m2 ,, it is al;so based on the sch m1 situation,depending on your s corp acct method I guess.in general s corp's int exp reduces its ordinary earnings reported in line 20 of 1120S and balances in m1 and m2


#2; Any funds contributed by the shareholder are either capital contributions or loans from the shareholder. If the s corp pays personal expenses for the convenience of the shareholder, the payment has to be reclassified as a loan from shareholder repayment or a distribution. There needs to be a very clear distinction between shareholder and corporation with these transactions and the documentation should be the same as if the transactions were with an unrelated third-party.Without other shareholders to help keep things formal and a clear separation between biz expenses and shareholder personal expenses, the single s/h can get lazy and end up using their S-Corp like a personal checking account. If matched with very poor documentation, this can lead to big problems with the IRS – even loss of the S-election status in serious cases.to avoid this ,you need to keep your personal expenditures and transactions out of the S-Corp. It is a separate legal entity and there is no reason for co-mingling personal and biz transactions except for the occasional payment for the convenience of the s/h.also you may reimburse any expenses paid personally on a regular basis via an signed expense report by attaching receipts and document.you need to avoid using personal credit cards for the business; however, if you must resort to this, try to use the card(s) exclusively for business and then use other personal credit cards for personal transactions. The irs recommends that shareholder loan contracts include specifics that would be found in a loan between unrelated parties. Contracts should specify the loan amount, interest rate applied, repayment term, and the consequence for not repaying appropriately.

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