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DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 789
Experience:  Years of Experience in Business & Personal Taxes
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Hi, how is the tax calculated on the profit of an S-corp incorporated

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Hi, how is the tax calculated on the profit of an S-corp incorporated in NJ? Is there any tax bracket or some other way? Actually this is my first time and i really don't have an idea. It would be greatly helpful if you can explain me in detail.

DanielleCPA :

Welcome and thanks for your question!

DanielleCPA :

Are you asking about how you are taxed on your S Corp income at a personal level?

DanielleCPA :

Or the corporate level on the NJ return?

Customer:

If you can tell me the difference of both that would be really helpful

DanielleCPA :

At a personal level, you are taxed on your S Corp net ordinary income (Box 1 of Form K-1) at ordinary income tax rates. This applies at both the federal and state level.

DanielleCPA :

It is not taxed differently than any other income.

DanielleCPA :

S corporations are not taxed federally.

Customer:

Does net ordinary income means personal payroll?

DanielleCPA :

For most companies, net ordinary income is the net profits of the company.

Customer:

I think I am a bit confused at understanding the difference between personal level and corporate level.

DanielleCPA :

Net taxable profits of the company.

DanielleCPA :

Your personal payroll is taxed as it always is.

DanielleCPA :

One of the features of an S Corporation is it does not pay federal tax at a corporate level. All income and deductions "passthrough" to the shareholder and are reported on the shareholder's personal return. The S Corporation files a federal 1120S. As part of that filing, a Schedule K-1 is completed, which is used to report the shareholder's share of the income and assist them in the preparation of their personal tax return.

DanielleCPA :

At a corporate level, New Jersey also requires its own S Corp return, Form CBT-100S. There is also a New Jersey K-1 schedule that is included as part of that return.

DanielleCPA :

At the corporate level, New Jersey does not levy a tax based on net income, but it does have a minimum tax based on gross receipts.

DanielleCPA :

The minimum tax varies based on gross receipts. Let me give you a schedule.

Customer:

Thanks so much

DanielleCPA : <table border="0" cellspacing="0" cellpadding="0" width="378">


.

New Jersey Gross Receipts




.

Minimum Tax for period begin:




.

Prior to



On or after




.

1/1/2012



1/1/2012





Less than $100,000



$500.00



$375.00





$100,000 or more but less than $250,000



$750.00



$562.50





$250,000 or more but less than $500,000



$1,000.00



$750.00





$500,000 or more but less than $1,000,000



$1,500.00



$1,125.00





$1,000,000 or more



$2,000.00



$1,500.00




Customer:

that helps in understanding :)

DanielleCPA :

You're welcome.

Customer:

What about if we are doing business in different states e.g. CA, MO and NY. Our employees our working at client sites in these states. do we need to pay corporate taxes in these states as well?

DanielleCPA :

Yes, because the employee performing work in those states create what is known is nexus. Nexus is essentially a strong enough connection to a particular state for them to tax you. The rules vary based on state to state (each state decides what circumstances create nexus within their borders), but an employee working within a state almost always creates nexus.

Customer:

Thanks so much for your detailed answers. That really helped me in understanding the tax rules. :) have a great evening.

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