S Corporation Taxes
S Corporation Taxes
- An eligible domestic corporation can avoid double taxation (once to the shareholders and again to
the corporation) by electing to be treated as an S corporation. Generally, an S corporation is exempt from federal income taxes other than tax on certain capital gains and passive income. On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss.
With an S corp, the shareholders are required to pay income tax on their share of the corporation's income whether they take any money out of the corporate account or leave it in there.
With an S corp, the Section 179 deduction is limited to just the one amount. An S corp's rental losses are subject to the restrictive passive loss rules.
One of the benefits of a corporation is having it provide lucrative employee benefits that are deductible by the corp and tax free to the employees. Medical, life insurance, education, childcare, and retirement plans are just a few of the types of benefits available.
As compared to regular C corporations, S corporation owners can use the business’s losses—such as those incurred during the startup phase—on their personal returns as deductions. Note that this “S corporation advantage” is also shared by single member and multiple member LLC electing default treatment.
S Corp Taxes - Documents Needed
The minimum you need to prepare for S Corporation taxes:
- Financial Statements: Income Statement & Balance Sheet,
- History and summary statement of each shareholder's capital accounts,
- 1120S tax returns.
- personal information about each shareholder: name, address, and SSN.
You may need additional financial records, such as:
- payroll tax returns,
- copies of W2 statements,
- sales tax returns,
- transaction details of federal, state, and local taxes paid.
S Corporation Taxes - Deadline for Filing
The deadline for filing Form 1120S is March 15th, or the 15th day of the third month following the end of the corporation's tax year. (S-Corporations almost always have a calendar year.) The corporation can request an automatic 6-month extension using IRS Form 7004. The extended deadline for corporate returns is September 15th.
| S Corporation Taxes