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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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How do I need to file if I own an S-Corp, have no employees.

Customer Question

How do I need to file if I own an S-Corp, have no employees. I have already paid and filed my 1120 to the IRS for the year. How do I file my personal taxes with my wife? Last year I was employed by Bank of America and I filed our taxes married filing jointly with our 2 children as dependants.
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.

Hello randy,

 

Can you please explain what you mean when you say you already "paid" and filed your 1120 form? What did you pay with the filing of that form?

 

Did you pay yourself a salary during the year from the S Corp.

 

Did you withdraw any profits from the S Corp in the form of dividends?

 

Did your S Corp issue you a W-2 form for any salary you drew and did the S Corp issue you a K-1 form to report your other distributions?

 

 

Customer: replied 4 years ago.
I get checks from clients and I deposit them into my business account. I use turbo tax to record invoices and sync with my business bank account. At the end of each month I transfer the money to my personal account. Whatever I make for the month is what I earn. Im not on salary. I filled out the 1120 and paid the IRS $5000 for the year from the Business Account. This is all Ive done. I have not paid any state taxes. My wife works for a company called Consigliere Group and I have her W2. I wondering how do we file joint on a personal return, or do I just exclude my self. Im trying to understand what I have to do now.
Expert:  Merlo replied 4 years ago.

Hello again randy,

 

There should have been no tax due with the filing of the form 1120-S, which is adding to the confusion here. I am not sure where you calculated you owed $5,000 in tax simply by completing the form 1120-S.

 

Are you certain that you completed form 1120-S and not just the regular form 1120 which is used by "C" Corporations?

 

S Corporations do not pay a separate tax. All of the income flows through to the shareholders and is reported on their personal returns either in the form of W-2 wages or dividends.

 

Please confirm which form you filed.

 

 

 

 

Customer: replied 4 years ago.
Sorry, it is the 1120S.
Customer: replied 4 years ago.
I have no employees. I paid myself whatever the business made. I filled out the 1120S at the end of the year and based on my numbers paid $5000. The IRS has already recieved this as of Jan 19 2010. So, I guess I dont have file a personal return? What about state taxes? Do I just fill out Turbo Tax with my wifes w2 and nothing formyself?
Expert:  Merlo replied 4 years ago.

Hello again randy,

 

Without actually seeing your form, it is difficult to know what happened here, but the S Corp itself would not pay any tax.

 

With an S Corporation, the IRS requires that you pay yourself a reasonable salary, the same as you would receive from any other employer. The S Corp would cut you a payroll check and deduct payroll taxes and at the end of the year the S Sorp would issue you a W-2 form to report the wages you were paid and the taxes that were withheld from your checks. The S Corp then files payroll tax reports with the IRS to remit those taxes.

 

Once you have paid yourself a reasonable salary, the rest of the S Corp profits can be taken in the form of dividends. Unlike the salary that is paid to you, dividends are only subject to ordinary income tax and are not subject to SS and Medicare taxes. This is the reason that the IRS requires that you first pay yourself a reasonable salary from the S Corp, so that you are not "dodging" the payment of SS and Medicare taxes by declaring all of your profits as dividends.

 

When the S Corp files the form 1120-S, it also issues K-1 forms to each shareholder, and those K-1 forms will report the amount of dividends you were paid.

 

When it comes time to file your personal return, you would report your W-2 earnings from the S Corp in the same manner as wages you would have received from any other employer. And then you would report your dividend income from the K-1 from on Schedule B of your tax return.

 

It appears from your post that you drew no salary from the S Corp and possibly did not issue K-1 forms. There is also an error somewhere on your form 1120-S, as the S Corp itself should not have paid taxes. All of the profits should be flowing through directly to you in the form of wages and dividends and reported on a W-2 form and the K-1 form.

 

If these procedures were not followed, and the fact that there is an apparent error on your form 1120-S, I would strongly recommend at this point that you seek the help of a tax professional who can help you correct these forms, as it is beyond the scope of this forum for me to help you with that in any detail. All I can do is provide you with the information on how your S Corp profits and tax return should have been handled, and apparently it was not handled in this manner.

 

That being the case, you will need someone to assist you with filing an amended form 1120-S and also help you to rectify the situation where you did not pay yourself an actual salary from the company.

 

 

Thank you randy

 

 

Customer: replied 4 years ago.
Because I didnt pay myself a salary, all the income from the SCORP is considered my income. Would you like to see the form?
Expert:  Merlo replied 4 years ago.

Hello randy,

 

All of the income from the S Corp is ALWAYS your income, regardless of whether you leave it in the company or you take it out. You pay taxes on the company's total profits each year. But those profits MUST be paid to you in the form of a reasonable salary, with the remaining amounts taken in the form of a dividend distribution.

 

You should not have paid any taxes with the filing of the Form 1120-S. That form is basically for information purposes only, and it reports the income and expenses of the corporation. But no tax is due with that form. Instead, the owner pays taxes on his own return.

 

An S Corp return can be quite complex, and if you have never filed one before it would be impossible for me to try and walk you through filing an amended return. You have way too many errors here if you paid tax with the 1120-S and coupled with the fact that you did not pay yourself a salary and issue yourself a W-2 form. The corrections that need to be made for your entire reporting go far beyond the scope of what we can offer in this forum. I can only tell you the way it should have been handled. But since you have now already filed, you will have no choice but to amend these returns, and that is going to be far more complex because of the other omissions you have here without paying yourself a salary as was required.

 

I strongly recommend you tax this to a tax professional at least for this year, otherwise the IRS may end up taxing you the full amount of income tax and self employment taxes on your entire earnings, and this could be quite costly to you.

 

 

Thank you randy

 

 

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