Setting up an S Corp Tax Return: A Step-by-Step Guide

📝Setting up an S Corp tax return involves various steps, including applying for an EIN and choosing the calendar year as the reporting period.

💼Consulting, accounting, and legal services are some of the business types that often choose S Corp status.

💡Income and expenses in an S Corp tax return are reported on a cash basis, meaning cash inflows and outflows are considered.

🏢S Corp tax returns do not require reporting of inventory, making it simpler for service-based businesses.

💰Wages paid to shareholders in an S Corp must be reported on the tax return and are subject to employment taxes.

How do I convert from an LLC to an S Corp for tax purposes?

—Converting from an LLC to an S Corp involves filing Form 2553 with the IRS and meeting the eligibility requirements. Consult with a tax professional or attorney for guidance specific to your situation.

Can cryptocurrency transactions be included in an S Corp tax return?

—Yes, cryptocurrency transactions held by an S Corp can be reported on the tax return. Consult with a tax professional to ensure proper reporting and compliance with IRS guidelines.

Do I need to report inventory on an S Corp tax return?

—Service-based businesses typically do not have inventory and therefore do not need to report it on the S Corp tax return. However, consult with a tax professional to determine if any exceptions apply to your specific business.

What is the advantage of choosing S Corp status for my business?

—Some advantages of choosing S Corp status include potential tax savings, limited liability protection, and the ability to pass through business income and losses to shareholders.

Are wages paid to shareholders subject to employment taxes in an S Corp?

—Yes, wages paid to shareholders in an S Corp are subject to employment taxes, including Social Security and Medicare taxes. These taxes must be reported on the S Corp tax return.

00:00In this video, Anthony Fontana, a CPA with EA Tax Resolutions, provides a step-by-step guide on setting up an S Corp tax return.

01:00Anthony notes that the process begins with applying for an EIN (Employer Identification Number) and choosing the calendar year as the reporting period.

04:00He emphasizes that consulting, accounting, and legal services are common types of businesses that choose S Corp status.

06:00Anthony explains that income and expenses in an S Corp tax return are reported on a cash basis, meaning cash inflows and outflows are considered.

08:00He also mentions that S Corp tax returns do not require reporting of inventory, simplifying the process for service-based businesses.

10:00Anthony highlights the importance of reporting wages paid to shareholders on the tax return and notes that they are subject to employment taxes.