Tax Tips for S Corporations

From Tax Definition.org:

Tax Tips for S Corporation

The S" corporation status eliminates the possibility of double taxation on the profits in businesses.
New York, NY (PRWEB) April 5, 2005 --- 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:
http://www.tax-definition.org/Define-Payroll-taxes.html
Description: The C" and S" corporations refer to the Internal Revenue Codes subchapters. The S" 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 youre 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 C" and S" corporations. The C" and S" corporations refer to the Internal Revenue Codes subchapters. The corporations are differentiated by the way in which the incomes are reported.
There are many benefits in selecting the S" corporation status. It eliminates the possibility of double taxation on the profits in businesses. The profits of S" 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, C" 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 C" corporation remain within the corporation.
The shareholders in S" 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 S" 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 S" corporation also get taxed and their taxes are filed along with the company. The S" 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 youre unable to file your tax on time due to a plausible reason, you are given additional six months time. In case of further delay, for about a year, youre given the choice of electing the S" corporation status in the next year. Youre 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:
http://www.tax-definition.org/Define-Financial-records.html
The S" corporation is supposed to file and pay the employment taxes, where the shareholders are spared from the pay-estimated taxes. To elect the S" 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 S" corporation remains invalid.
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Audit 6 red flags you should know

From Yahoo finance



If history is any indicator, less than 1% of Americans will be audited by the Internal Revenue Service in the coming year. And while some of these audits are totally random, and there's nothing that the individual taxpayer can do about them, many audits are actually instigated by the taxpayers themselves.


Read more by clicking the above link

February 8, 2010 Client Update

Another update.  We have finished virtually all W-2 forms and have turned our attention to 1099 forms for your non-employees.  Remember that all forms have to be mailed no later than February 16, 2010 to avoid any IRS inquiry. We will mail any necessary copies to the IRS and the Social Security Administration on your behalf. We do strive for perfection but occasionally we miss.  Please let us know if there is a problem or any questions about your employees W-2 forms.

Interestingly the IRS changed the deadline last year for mailing 1099 brokerage and retirement accounts to February 15th or later if the 15th falls on a weekend.  Congress in 2008 changed the law, requiring brokers to include cost basis statements for securities sold when they send their annual 1099 forms to their customers. This later due date has frustrated some clients expecting refunds when it came time to file their taxes, no 1099, no filing, delayed refund.

Speaking of delays, the Illinois Department of Revenue has yet to release, as of today, the final version of its 1040 and schedules to mail/file your 2009 income tax return.  Although you can efile the Illinois return, you cannot mail it in. Unbelievable.     

If the IRS Commissioner has his way, Congress may legislatively fix the Internal Revenue Code to match the modern-day use of employer-provided cell phones. Currently, when an employee engages in personal use of an employer-provided cell phone, the employer is required to report that personal usage as income to the employee. For many employers, such as you and me, distinguishing between business and personal use is so burdensome that they simply have neglected to comply with the law; risking the consequences if audited by the IRS.

However, IRS Commissioner Doug Shulman recently issued an announcement declaring that the current law is so obsolete, the IRS has asked Congress to enact legislation so that the personal use of employer-provided cell phones will no longer be taxable. Importantly, the Commissioner’s announcement does not suggest that the IRS will not enforce the current law.  Indeed, last June, the IRS issued Notice 2009-46 seeking comments on three suggested approaches for determining the amount of personal cell phone usage to be included in employee income:  minimal personal use requiring an employee to keep track, safe harbor percentage method, perhaps 75 %, or statistical sampling of the employee's usage.    It should be mentioned that the aforementioned Notice and its three methodologies was not well-received by the general public, let alone employers and their tax advisers.

Remember the due date for your corporate return is March 15, 2010.  If you do not want us to apply for an automatic six month extension for filing your income tax return, please let us know.