Why Section 179 Is Not Flowing to the Return in Drake Tax
Because it is not supposed to. A partnership or S corporation does not deduct section 179 at the entity level: the expense passes through to the owners on Schedule K-1 and the limitations are applied on their returns. The tentative 179 figured from the 4562 screen appears on Form 1065 page 4 line 12 and K-1 box 12, or Form 1120-S page 3 line 11 and K-1 box 11.
- Data entry
- Screen 4562
- Section 179 on the asset
| Trial balance account | Drake Tax screen and field | Lands on |
|---|---|---|
| Section 179 election | Screen 4562, on the asset | Tentative 179 computed |
| Where it appears on a 1065 | Not page 1 line 16a | Page 4 line 12 and K-1 box 12 |
| Where it appears on an 1120-S | Not page 1 line 14 | Page 3 line 11 and K-1 box 11 |
| Limitation | Applied at the partner or shareholder level | The owner individual return |
| Missing Form 4562 | EF Message 0684. Complete a 4562 screen | Blocks e-file |
| Section 179 recapture | Its own treatment, not a reversal of the deduction | Owner return |
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Try it freeWhy Section 179 Is Not Flowing to the Return in Drake Tax on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment (the account this page is about) | 145,000.00 | |
| 1510 | Accumulated depreciation | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings | 86,300.00 | |
| 3950 | Shareholder distributions | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Equipment | 145,000.00 | |
| Cash | 145,000.00 |
Not a bug
The question gets asked every season: the 4562 screen shows a section 179 election, and page 1 of the 1065 or 1120-S shows nothing for it.
That is correct behavior. A pass through entity does not deduct section 179. The expense passes through to the partners or shareholders on their K-1s, and any limitation is figured at the owner level, not at the entity level.
Where to look instead
1065 returns: Form 1065 page 4 line 12, and Schedule K-1 box 12.
1120-S returns: Form 1120-S page 3 line 11, and Schedule K-1 box 11.
The tentative section 179 expense is figured from the entries on the 4562 screen and appears in those places.
Why the limitation sits at the owner level
Section 179 is limited by taxable income from the active conduct of a trade or business, and that is an owner level fact. A shareholder with other business income may absorb the full amount; one without may carry it forward.
The entity cannot know the answer, which is why it reports the amount and leaves the limitation to the K-1 recipient. It is the same logic that moves interest income and charitable contributions off page 1.
EF Message 0684
If there is an amount on Schedule K line 12 and no Form 4562 in the return, Drake raises EF Message 0684. Completing a 4562 screen with the relevant information clears it.
That happens most often when a prior preparer entered the 179 figure as an override somewhere rather than entering the asset, so the amount exists with no asset detail behind it.
What this means for a trial balance
Nothing on the trial balance tells you about a section 179 election. The expense the client booked is book depreciation, and the election is a tax decision made on the return.
So the asset additions for the year are the input: they go on the 4562 screen, the election is made there, and the book to tax difference goes on Schedule M-1. Mapping the client book depreciation figure to a deduction field, on top of the asset entries, deducts the same cost twice.
Tax return treatment
| Form | Line |
|---|---|
| Form 1065 | Page 4 line 12 and Schedule K-1 box 12, not page 1 |
| Form 1120S | Page 3 line 11 and Schedule K-1 box 11, not page 1 |
| Form 1120 | Deducted at the entity level, through Form 4562 |
Common questions
Why is section 179 not showing on page 1 of my 1065 or 1120-S?
Because a pass through entity does not deduct section 179 at the entity level. It appears on Form 1065 page 4 line 12 and K-1 box 12, or Form 1120-S page 3 line 11 and K-1 box 11, and the limitation is applied on the owner individual return.
What is EF Message 0684?
It appears when Schedule K line 12 has a section 179 amount but the return contains no Form 4562. Completing a 4562 screen with the asset information clears it. It usually means the figure was entered as an override instead of as an asset.
Where is the section 179 limitation applied?
At the partner or shareholder level, not on the 1065 or 1120-S. The limit depends on the owner taxable income from the active conduct of a trade or business, which the entity cannot know, so the entity reports the amount and the owner applies the limit.
Does the client trial balance tell me about section 179?
No. The trial balance carries book depreciation; the election is a tax decision made on the return from the asset detail. That is also why mapping the book depreciation figure to a deduction field, on top of the asset entries, deducts the same cost twice.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 18, 2026.