How to File Taxes as an S Corporation: A Comprehensive Guide

💼S corporations provide tax advantages by allowing business owners to avoid self-employment taxes.

📝To become an S corporation, you must have an existing LLC or C corporation and file Form 2553 with the IRS.

💡Filing taxes as an S corporation requires using Form 1120S and completing schedules B, D, and K.

⚖️It is crucial to pay yourself a reasonable salary as an S corp owner to stay compliant with the IRS.

📄Document and keep records of your business activities, income, and expenses for tax purposes.

Can any business become an S corporation?

—No, certain business types like financial institutions, insurance companies, and sales corporations are ineligible for S corp status.

What are the advantages of electing S corp status?

—S corporations allow business owners to avoid self-employment taxes and issue shares as common stock to employees or investors.

How do I change my tax status to become an S corporation?

—You must have an existing LLC or C corporation and submit Form 2553 to the IRS, requesting S corp tax status.

What is the tax form for filing taxes as an S corporation?

—S corporations use Form 1120S, the U.S income tax return for S corporations, along with schedules B, D, and K.

What happens if I don't pay myself a reasonable salary as an S corp owner?

—Not paying a reasonable salary can lead to non-compliance with the IRS and potential reclassification of distributions as wages, resulting in tax liabilities.

00:02Learn about the benefits of filing taxes as an S corporation and how it can help you avoid self-employment taxes.

02:22Understand the requirements and steps to change your tax status and elect S corp status.

04:37Discover how to file your tax return as an S corporation using Form 1120S and completing schedules B, D, and K.

06:10Learn about the importance of paying yourself a reasonable salary as an S corp owner to stay compliant with the IRS.

10:31Ensure compliance as an S corp owner by documenting and keeping records of your business activities, income, and expenses.