Out of all the forms of tax returns to manage, many people find that S-Corporation tax returns can be among the worst to deal with. If you are not sure what to do when this time comes around, fear not. What you need to do when you want to prepare your S-Corporation returns is make sure that you have a few choice items with you to make the transition and the overall management easier.
The Form that we need to fill in at this junction, then, is known as a Form 2553: S-Corporation. As we know, an S-Corporation is a pass-through model of taxation. This means that, instead of paying out federal tax on profits, you pay it out to the shareholders and people of the company. However, while this is a great thing, you still need to fill out a tax return. The IRS is going to want to look at you pretty in-depth if you are an S-Corporation. So, to make life a little easier during any discussions, you should look to have the following documents in place.
Start off by filling in the Form 2553 and making sure that you can get S-Corporation status. So long as you have less than 100 employees and a single class of stock, you should be able to make the cut. Once this is done, we are going to need to go and fill out a Form 1120S.
This is the actual tax return for you company, and what you need if you want to pay your returns off, naturally. To make this work, you will need to fill out a tax return like any other company. So, you are trying to include as much detail as possible rather than figures, as most of your income is going elsewhere. What the tax return has to show, instead, is to try and give some kind of detail about your company.
Usually, you want to try and make sure that you fill out information such as stocks the corporation has, other partnerships people are involved in, the total assets at the end of the year and also you need to fill in what is known as Schedule K.
This means providing details about shareholders, which should have details about income, deductions, credit and various other shareholder dealings.
As ever, when dealing with S-Corporation tax returns, bringing in a professional CPA is advised. The challenge of getting the right kind of management with your tax returns is very hard, especially when handling a corporation of this kind.
With so many extra sections to try and fill in and the information needed from each participant a little challenging to get your head around, having a CPA there to help you manage everything helps.
If you are looking for a San Diego CPA to help with your tax preparation needs, contact Abbo Tax CPA.