Hello,
I am new to S-Corp. I received 1099-INT from the Bank where I hold an S-Corp Bank Account. Exactly on which line in 1120S do I report this as Taxable Income?
Also, do I have to report this on Schedule-K-1?
SPKB69.

“I am new to S-Corp. I received 1099-INT from the Bank where I hold an S-Corp Bank Account. Exactly on which line in 1120S do I report this as Taxable Income?”--->Sch K line 4;you need to enter only taxable portfolio interest on line 4. Taxable interest is interest from all sources except interest exempt from tax and interest on tax-free covenant bonds.
“Also, do I have to report this on Schedule-K-1?”--->on line 4;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.

Since the interest income increases cash, where would be the appropriate offset in shareholders' equity? Is that done on Line 25 as an adjustment to shareholder's equity?

#1;The classification of interest income as trade or business income or as portfolio income by an S cor has important implications to the entity's owners beyond the obvious increase in their taxable incomes. as said previously, it will be coded as interest income on your Sch K-1, and will thus be reported as interest income on your personal tax return on 1040; interest income generally is portfolio income, provided it is not derived in the ordinary course of a trade or business. It increase a shareholder’s basis, AAA/stock basis, in an S corp.


#2; as longas it is portfolio income, the interest income would be reported on line 4 of Sch K and K-1 (rather than on page 1 of Form 1120S) and on Sch L of 1120S.