New York, NY (PRWEB) April 5, 2005 -
Â Tax-Definition.org (http://www.tax-definition.org) is happy to share the following Tax Tips for small businesses / S Corporations -
Tax Tips for S Corporations:
Description: The ÂCÂ and ÂSÂ corporations refer to the Internal Revenue CodeÂs subchapters. The ÂSÂ corporation status eliminates the possibility of double taxation on the profits in businesses.
There are many things that you are required to do before filing your taxes if youÂre small business owner. The IRS tax code has recognized different kinds of corporations, namely, personal service, non-profit corporations, and financial institutions.
The most favorite legal structures for all the tax paying business owners are ÂCÂ and ÂSÂ corporations. The ÂCÂ and ÂSÂ corporations refer to the Internal Revenue CodeÂs subchapters. The corporations are differentiated by the way in which the incomes are reported.
There are many benefits in selecting the ÂSÂ corporation status. It eliminates the possibility of double taxation on the profits in businesses. The profits of ÂSÂ corporations are taxed directly to the shareholders and the business owners. No federal corporate taxes are to be paid; just one annual tax return is supposed to be filed with this status.
On the other hand, ÂCÂ corporations have to pay the income tax at two levels, one at the corporate level and the profits of individual shareholders at the other. The losses in ÂCÂ corporation remain within the corporation.
The shareholders in ÂSÂ corporations take their operating losses on their own returns. The limited liability is combined with the pass-through tax treatment that allows deductions and incomes to go directly to the shareholders. The result is the same as that of a limited liability company, sole proprietorship, or partnership.
Even though an ÂSÂ corporation is not considered to be a tax-paying entity, it has to report taxes. Form 1120S has to be filled while filing the annual corporation tax return. The form gives the details of the income, expenses, profits, and losses of the corporation. The shareholders of this corporation are issued separate forms known as the Form K-1s. This form reports about the income that the shareholders get from the corporation along with their tax returns.
The people employed with an ÂSÂ corporation also get taxed and their taxes are filed along with the company. The ÂSÂ corporations are supposed to file their state tax returns though. It is important to meet the deadlines for filing your taxes. You are supposed to file the Form 2553 with the IRS before the 15th day of the third month after the taxable year for your corporation begins.
If youÂre unable to file your tax on time due to a plausible reason, you are given additional six monthsÂ time. In case of further delay, for about a year, youÂre given the choice of electing the ÂSÂ corporation status in the next year. YouÂre not supposed to fill up the Form 2553 till the corporation charter is granted by the state. Usually, the President of an organization is supposed to file the tax returns.
Financial Records Information:
The ÂSÂ corporation is supposed to file and pay the employment taxes, where the shareholders are spared from the pay-estimated taxes. To elect the ÂSÂ corporation status, you need to get consent from the shareholders, present as well as prospective. Unless and until all the shareholders give their consent, the election for ÂSÂ corporation remains invalid.
Reprint rights: You are free to use / reprint this article - please just include the below copyright and URL / link to website:
(C) 2005 Tax-Definition.org