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S Corporation Filings Impact Your Individual Return

One of the most common questions we receive from S Corporation owners is, “Why do I need to file my corporate taxes before I file my individual taxes?”

It’s important for us to first define a subchapter S Corporation (S-Corp). An S-Corp is a “pass through” entity that is generally not subject to federal or state taxes. However, New York City does have an income tax for S-Corps because the city of New York does not recognize the S-Corp status and treats the S-Corp as a regular corporation. There are several other states that also do not recognize the S-Corp status.

How are income and expenses reported?

They are “passed” onto the shareholder(s). This may include income from wages, interest, capital gains, and others. Or on the expense side, this may include deductions related to education, charity, and others. To account for all of these pass-through items, the IRS created the form Schedule K-1. This form helps bookkeepers and accountants to ensure that the income and expenses items flow properly to the individual shareholder’s tax return or Form 1040. Thus, it’s imperative that the s corporation filings occur prior to filing individual returns.

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What if an S-Corp has S-Corp shareholders?

This is certainly a possibility. However, it can create an added complexity for tracking the pass through items and reporting them properly on the final shareholder’s tax return. The same applies to partnerships that are investors.

Contact our office at (904) 330-1200 or info@taxproff.com to discuss Tangible Personal Property Tax for your business, or if you have any questions.