Form 1120 IRS Penalties - Reduction Against Accumulated earnings

[mircpa]

Got a question for our seniors

I am preparing Final 1120 for a client who discontined business in dec 2011, business has $ 7,232.00 of accumulated retained earnings from past years. Paid around $ 1,200.00 IRS payroll taxes related penalties in 2011. My question can this amount reduce accumulated earnings under schedule M2 and issue 1099-Div for $ 6,032.00. I know this cannot be written off against business income.

[OldJack]

No.. it is a 1120 page 5, Sch-M1, line 5c adjustment to taxable v. book income. No.. a 1099-Div is only for actual dividend payments out of the $6,032 remaining accumulated retained earnings.