S Corporation Payroll and Tax Compliances list

S Corporation: This is a business entity structure that makes a separate tax election under Sub Chapter S with the Internal Revenue Service.

Important points relating to S Corporations

1. S Corporations or LLC with S tax election required to file form 2553. S corporation election must be made within the 15th day of the third month of the tax year for which the election is required to be effective.
2. S Corporations do not pay any taxes but their income or losses pass through to their shareholders.
3. Shareholders file their taxes on their personal tax returns.
4. S Corporations are allowed to issue only one class of stock.
5. S corporations can have only individual shareholders.
6. S Corporations can have no more than 100 shareholders.
7. S Corporations cannot have non-resident aliens as shareholders.
8. S Corporation owner-employees: It is recommended that most S Corporation owners take a reasonable salary from the profit generated from the business. The salary has to be consistent to the industry standards and the market rates.
9. S Corporation under the new tax reforms is allowed to deduct an additional 20% for qualified business income.

 

Federal Payroll and income  tax reports

1. 941: Social security and Medicare tax report for S Corporation employers.
2. 940: Annual federal unemployment tax reports for S Corporation employers
3. 1120-S: Annual income tax assessment for S Corporations.
4. W2s- This is required to be distributed end of the year to employees
5. K-1- This is the form that provides the shareholders’ share of profits, losses, deductions or credits.
6. 1099- This is the 1099 Contractor report to be distributed to the contractors

State compliances: Each state has a different set of compliance requirement, therefore check with your tax professional to ensure you do not miss any important deadlines.

 

Other IRS links and publications. Check out this link that has business tax compliance checklist