Have Tax Questions? Ask a Tax Expert for Answers ASAP
Yes, the corporate profit is taxable to the shareholders each year. When you prepare the 1120S, you will prepare a K-1 for yourself. The K-1 tells the shareholder how much of the corporate income to report on their individual return based on ownership percentage.
The corporation does not pay taxes on its net income.
I paid 12,000 via w2, should I have paid more?
I owned 100%
There are requirements regarding personal service corporations in this area. I will have to review them and get back to you. The issue is the avoidance of payroll taxes.
ok, should I hold this chat session open?
No, I found what I was looking for. The IRS will asses self-employment tax on the earnings left in the corporation (ie. the K-1 amount).
To sum up, you will owe income tax and most likely self-employment tax on the undistributed earnings from 2008. Sorry for the bad news.
under my personal account
I file the 1120 s and then an amended 1004 personal
Yes, the income is reported on your individual tax return. First, complete the 1120S and the K-1, then prepare the 1040X.
doesn't sound like being an s corp was a benefit
Actually, the main benefit is to avoid double taxation is you had a C corp. C corp's pay tax. Then the shareholder pays tax on any dividends.
what if I filed a 1120 not as a s corp
Then you would pay corporate tax on the profit, and tax again when you pay out the cash to yourself as a dividend.
that seems like it would be more 15% on the corporate side and the normal individual rate
seems like I'm going to get hit pretty hard with interest and penalties
Corporate tax rate for a personal service corp is 35%
I'll stick with the S corp and pay what i need on my amended return
Unfortunately, yes. After you file, the IRS will send you a bill. You can request an abatement of penalties if you can convince them you had a good reason for paying late.
just "stupidity" and don't think they'll accept that
thanks, XXXXX XXXXX my medicine.