S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation.
Have only allowable shareholders.
May be individuals, certain trusts, and estates and
May not be partnerships, corporations or non-resident alien shareholders.
Have no more than 100 shareholders
Have only one class of stock
Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
To become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders.
If you are an S corporation then you may be liable for…
• Income Tax Form 1120-S & Form 1120-S (Sch K-1)
• Social security and Medicare taxes and income tax withholding Form 941
• Federal unemployment (FUTA) tax Form 940
• Depositing employment taxes
• Excise Taxes
If you are an S corporation shareholder, then you may be liable for…
• Income Tax Form 1040 or 1040-SR
• Estimated tax Form 1040-ES
Please contact my office for more information.