When choosing a business structure, most entrepreneurs have two goals in mind: protecting personal assets from threats and avoiding business taxes on personal tax returns. Thanks to the Tax Cuts and Jobs Act (TCJA), S Corps are becoming a top option for business owners. How do you know if opting for an S Corporation is right for you? In this guide, you’ll learn everything there is to know about S Corp taxes, S Corp tax filing deadline, how to use an S Corp tax calculator, filing S corp taxes, S Corp vs LLC and the S Corp tax rate.

Most Asked Questions to a FlyFin CPA

Can my S Corp pay my personal taxes?

No, your S Corp cannot pay your personal taxes. S Corp income passes through to your personal tax return, and you pay taxes individually. The S Corp can't deduct personal taxes as business expenses.

How do you file taxes as an S corp?

As an S Corp, you file taxes using IRS Form 1120S. Report income, deductions, and credits on this form. Shareholders report their share of income and deductions on their personal tax returns using Schedule K-1. Always keep detailed records and consult a CPA.

Do you pay federal income taxes with an S Corp?

As an S Corp, the business itself doesn't pay federal income tax. Instead, income, deductions, and credits pass through to shareholders, who report them on their personal tax returns. This can lead to potential tax savings.

Does an S Corp get taxed on salary or distributions?

An S Corp itself isn't taxed on salary or distributions. Shareholders pay tax on their share of the S Corp's income. Salaries are subject to payroll taxes, while distributions aren't but must be reasonable to avoid IRS issues.

What taxes do you pay on S Corp salary?

As an S Corp owner, your salary is subject to federal income tax, state income tax (if applicable), and payroll taxes (Social Security and Medicare). You can also take business deductions to reduce taxable income.

When are S Corp taxes due in 2024?

S Corp tax returns for 2024 are due by March 15. Ensure all deductions and relevant tax documents are prepared in advance to avoid penalties. If needed, you can file for a six-month extension to September 15.

How are S Corp distributions taxed?

S Corp distributions are generally not taxed at the shareholder level if they don't exceed the shareholder's stock basis. They are considered a return of investment. However, wages paid by the S Corp are subject to payroll taxes and eligible for business deductions.

How is an S corp taxed?

An S Corp itself isn't taxed. Instead, income, deductions, and credits pass through to shareholders, who report them on personal tax returns. This avoids double taxation. Shareholders pay tax at individual rates.

When are S Corp tax returns due?

S Corp tax returns are due by March 15th each year. If this date falls on a weekend or holiday, the deadline is the next business day. Filing on time ensures you can claim all eligible deductions. Extensions may be requested if needed.

Do S Corps pay taxes?

S Corps don't pay federal income tax. Instead, income, deductions, and credits pass through to shareholders, who report them on personal tax returns. However, S Corps may owe state taxes and other fees.

How do you file S Corp taxes?

To file S Corp taxes, use Form 1120S to report income, deductions, and credits. Shareholders receive Schedule K-1 to report their share of income on personal tax returns. Ensure all business deductions are accurately documented.

Can an LLC be taxed as an S Corp?

Yes, an LLC can elect to be taxed as an S Corp by filing Form 2553 with the IRS. This can provide potential tax benefits, such as avoiding self-employment tax on a portion of income and allowing certain deductions.

Can my S Corp pay my personal taxes?

No, your S Corp cannot pay your personal taxes. S Corp income passes through to your personal tax return, and you pay taxes individually. The S Corp can't deduct personal taxes as business expenses.

How do you file taxes as an S corp?

Do you pay federal income taxes with an S Corp?

Does an S Corp get taxed on salary or distributions?

Table of contents

What is an S Corp?...Read more

Eligibility requirements for S Corps...Read more

The one class of stock requirement...Read more

Number of shareholders...Read more

Do S Corps get 1099?...Read more

S Corptaxes...Read more

C Corp vs S Corp...Read more

S Corpvs LLC...Read more

What taxes do you pay on S Corp salary?...Read more

When is the S Corp tax filing deadline?...Read more

What is the 1120-S Form?...Read more

How does an S Corp tax calculator work?...Read more

How to file taxes for S Corporation?...Read more

What is an S Corp?

The S Corp definition is a type of corporation or legal business entity in the Subchapter S of Chapter 1 of the Internal Revenue Code. An S Corp is an ordinary corporation that has opted for an S Corporation tax status. You’re eligible for a corporate shareholder’s limited liability when you form an S Corp. Limited liability is a type of legal protection for owners and shareholders and ensures an individual isn’t responsible for a company’s debt or losses. With an S Corp, you’ll need to pay taxes as if you’re a partner in a partnership or a sole proprietor. This includes paying self-employment taxes. Let’s look at some S Corporation examples. Say your company has five shareholders, all meeting IRS requirements. Each shareholder holds 20% of the shares. Or, the company has only two shareholders, one holding 60% of the shares and the other holding 40%. Both shareholders must file their own tax returns relating to the business profits.

Eligibility requirements for S Corps

There are certain requirements a company must meet for a company to file with S Corp status. First and foremost, the company must be a U.S. based company. So any plans for an offshore company won’t qualify. Next, you’ll need to apply to form an S Corp using Form 2553. It’s important to do this as soon as possible so that you don’t miss the S Corp tax filing deadline 2024. This is what Form 2553 for an S Corp looks like:

Form 2553 for Election by a Small Business Corporation under the Internal Revenue Code. File for S corporation status. Fax or visit IRS website for instructions. Taxes.

You’ll also need to make sure that your business doesn’t have more than 100 shareholders. A shareholder is an individual, company or institution that owns a share of the company’s stock, essentially owning the company. Married couples are treated as one shareholder. Other eligible shareholders include:

Image listing eligible S Corpshareholders including individuals, exempt organizations, trusts, estates, US citizens or resident aliens. No mention of self-employed, 1099, freelancer or taxes.

Ineligible shareholders include: nonresident aliens, foreign trusts, limited liability partnerships and limited liability companies with multiple members.

The one class of stock requirement

Usually, companies have a class of shares, which is a type of stock with different voting rights. Corporations with an S status are only allowed to have once class of stock. This means that one class can have voting rights while the other doesn’t, a voting stock and a non-voting stock. This could come in handy if the shareholders are owned by family members and the family members want to give ownership to their children without losing control of the company. The shareholders with stock in the corporation all get the same amount of dividends or distribution of company profits. If the corporation dissolves or liquidates the business, asset distributions will be given to the shareholders at the same time. Giving out stock to more than 100 shareholders or to ineligible shareholders could put the company at risk of losing the option to file with S Corp status.

Number of shareholders

So we’ve already discussed that there can’t be more than 100 shareholders. If they want to have more shares than allowed, the shareholders will need to agree to an amendment showing the change. The exception to this rule is family members can choose to be counted as one shareholder.

Image explaining shareholders and their relations. Includes husband, wife, children, grandchildren, and their spouses. No mention of self-employment, 1099, freelancer, or taxes.

A family member is considered someone of lineal descent from a common ancestor, not more than six generations from the youngest family member.

Do S Corps get 1099?

S Corps do not receive 1099 tax forms for S Corp tax purposes. However, They are required to send 1099s to all vendors, even corporations.

Alt text: A guide to 1099s for self-employed individuals, freelancers, and businesses with various statuses such as sole proprietor, partnership, LLC, and corporation. Covers taxes and 1099-MISC forms.

However, there are some exceptions. You would receive a 1099-MISC if you paid any attorney fees, even for corporations. Or for any gross proceeds paid to an attorney (like settlements for claims) or payments made to medical care providers that are for-profit. Remember that 1099-MISC forms are only used for services rendered and not for purchasing goods or merchandise. The services must be related to the business and not for personal use. Companies would send Form 1099-A to S corporations if they helped sell secure property or Form 1099-B if they bartered exchanges together. However, there are some exceptions. You would receive a 1099-MISC if you paid any attorney fees, even for corporations. Or for any gross proceeds paid to an attorney (like settlements for claims) or payments made to medical care providers that are for-profit. Remember that 1099-MISC forms are only used for services rendered and not for purchasing goods or merchandise. The services must be related to the business and not for personal use. Companies would send Form 1099-A to S corporations if they helped sell secure property or Form 1099-B if they bartered exchanges together.

S Corptaxes

Things can get a bit confusing when it comes to S Corp taxes. S Corps don’t pay federal taxes in a typical way. Instead of paying taxes on their profits, the individual shareholders must pay taxes. If the corporation pays its employees a salary, it’s responsible for withholding federal taxes, including Medicare and Social Security. Then the company will need to file Form 941 quarterly to fulfill the S corp estimated quarterly taxes requirement. An S Corp tax estimator can help with this. Form 1120-S reports the company’s income, deduction and payments. The S Corp tax rate is minor and similar to an individual taxpayer. But the S Corp tax rate the owner pays is based on the participation of the business owners. This is how S Corp tax filing goes:

Fill out a corporate tax return using Form 1120-S.
Share the profit and loss for each shareholder using the K-1 Schedule.
Shareholders use the K-1 to file income taxes.

C Corp vs S Corp

Regular corporations, or C Corps, are taxed on business profits, meaning the business itself is taxed. Owners pay taxes on their salary or bonuses. C Corps are essentially taxed twice. The company pays federal income taxes and shareholders pay taxes through dividends. On the contrary, an S Corp business doesn't pay taxes, meaning there’s no corporate tax. Instead, the owner reports the company earnings as personal revenue. The formation of a corporation is different from a C Corp vs S Corp. When a company is formed, it’s automatically considered a C Corp. If you want the S Corp designation, you’ll need to apply for this using Form 2553. When it comes to ownership, C Corps have a lot of freedom, since anyone can be an owner and you can have unlimited owners. On the other hand, ownership with an S Corp is limited to U.S. citizens with less than 100 company shareholders. Comparing S Corp vs C corp with the help of a tax pro can be useful to figure out what works for your business.

S Corpvs LLC

An LLC, or limited liability company, protects the owner from being held accountable for a company’s debt or losses. LLCs and corporations can be taxed as an S Corporation if they elect that status. An LLC is taxed like a partnership or sole proprietorship. This means, as an owner, you’re considered self-employed and need to file your own local, state and federal taxes, including Social Security and Medicare taxes. With S Corp taxes, things are a bit different. If you’re an S Corp owner, you can consider yourself an employee for tax purposes and therefore enroll yourself on the company’s payroll, avoiding self-employment taxes. LLCs have a lot more freedom when it comes to the number of shareholders since there’s no limit. S Corporations can only have up to 100 shareholders with either individuals or certain trusts as owners. LLCs also don’t face as many regulations as corporations. LLCs can have multiple equity classes, whereas S corporations have the option of a single class of stock. Depending on your business needs and goals, there are pros and cons to an S Corp vs LLC. Therefore, it's best to weigh out both options before choosing what's best for your business.

What taxes do you pay on S Corp salary?

When you're running an S Corp, figuring out what taxes you pay on your salary can feel a bit overwhelming, but it doesn't have to be! Let’s break it down. First off, as an owner-employee, you need to pay yourself a reasonable salary, and that salary is subject to standard payroll taxes. This means you’ll be looking at FICA taxes, which cover Social Security and Medicare. Together, that’s around 15.3% of your salary, split between you and the company. Any extra profits you take as dividends aren’t hit with self-employment taxes. This can lead to some nice savings compared to other business structures like sole proprietorships or partnerships. To get a better idea of your tax situation, an S Corp tax rate calculator can be handy. Just plug in your salary and any distributions, and it’ll give you a clearer picture of what you owe. Remember, while your salary is taxable, those dividends are treated differently, which is a perk of S Corp taxation.

When is the S Corp tax filing deadline?

Knowing the S Corp tax filing deadline can help you stay on top of your business finances and avoid penalties. For 2024, the S Corp tax filing deadline falls on March 15. This means you’ll need to submit your Form 1120-S, which is the tax return specifically for S Corps. When preparing to file, make sure you’ve gathered all your necessary financial records. This includes income statements, expense reports, and any information regarding distributions to shareholders. Using an S Corp tax calculator can really help streamline this process, giving you a clearer picture of your S Corp tax liability and helping you plan ahead. If you find that you’re not quite ready to file by March 15, you can file for an extension using Form 7004. This gives you an additional six months, pushing your tax filing deadline for S Corp to September 15. However, keep in mind that an extension to file is not an extension to pay.

What is the 1120-S Form?

The 1120-S form is essential for any S Corporation when it comes to reporting income, deductions, and credits to the IRS. If you run an S Corp, you'll need to file this form annually, and it essentially tells the IRS how much money your business made or lost over the year. When filling out the Form 1120-S, you’ll need to include details about your business (income, expenses, and any distributions made to shareholders). It’s important to be thorough and accurate to avoid any issues down the line. Along with the 1120-S form, you might also need to include Schedule K-1 for each shareholder, which reports their share of income, deductions and credits. Filing S Corp taxes can be a bit daunting, especially if you’re new to the process, but understanding the 1120-S form is a step in the right direction.

How does an S Corp tax calculator work?

An S Corp tax calculator is a handy tool that helps you estimate your tax obligations as an S Corp. If you're filing S Corp taxes, understanding how much you owe can feel overwhelming, but this calculator simplifies the process. Here’s how it works. First, you enter key financial information. Think business income, expenses and any distributions you’ve made to shareholders. The calculator uses this data to estimate your taxable income. Once you input your numbers, the S Corp tax calculator will provide an estimate of the taxes owed, including any applicable self-employment taxes and payroll taxes for owner-employees. It’s also essential to remember that when you file Form 1120-S, you'll need to report all this information accurately. While the calculator gives you a good ballpark figure, it’s always wise to consult a tax professional for more precise calculations and to ensure compliance with IRS regulations.

How to file taxes for S Corporation?

Filing taxes for an S Corporation can seem a bit complicated at first, but with the right steps, it becomes much more manageable. Unlike LLC vs S Corp, an S Corp has its own specific requirements. First, you’ll need to fill out Form 1120-S. To get started, gather all your financial documents, including income statements, expense reports and details on any distributions to shareholders. S Corp taxation involves pass-through taxation, meaning the profits and losses pass directly to the shareholders’ personal tax returns. When completing the 1120-S form, make sure to include Schedule K-1 for each shareholder. After filling out the form, double-check all your information and file it by the deadline, typically March 15 for most S Corps. If you find that you need more time, you can request an extension using Form 7004, but remember that this doesn’t extend the time to pay any taxes owed. While the process may seem daunting, breaking it down into manageable steps can make filing S Corp taxes a lot smoother. If you ever feel stuck, consider consulting a tax professional for guidance. FlyFin's Ultimate Plan is designed for S Corps. This plan offers a range of features, including access to a CPA expert in complex business structures, complete state tax filing services, and free audit insurance. It also provides specialized support for international tax obligations, one-on-one video calls, and unlimited tax assistance and strategic planning from a CPA. Additionally, the plan includes a quarterly tax calculator, a tax deduction calculator, an income tracker, and help with calculating monthly set-aside amounts.

NPO

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Federal Taxes

Paying business tax means following the US corporate tax rate, dealing with federal and state level tax liabilities and filing accurate returns.

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C Corp

Everything you need to know about C Corp taxes in our comprehensive guide. Learn about Form 1120, understand corporate tax, and how to tax plan for a C Corporation.

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LLC

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Sole Proprietor

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Partnership

Learn about Form 1065 and SChedule K-1 for your partnership taxes. Get guidance for your partnership tax return and make partnership LLC tax filing easy and accurate.

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LLC vs S Corp vs C Corp

When we look for an LLC Vs SCorp Vs CCorp comparison, we find a lot of differences between the three, and then there are similarities in taxes and business rules and regulations.

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NPO

Nonprofit status may be right for your business if you're ready to incorporate and your organization seeks to benefit society.

LEARN MORE →

Federal Taxes

Paying business tax means following the US corporate tax rate, dealing with federal and state level tax liabilities and filing accurate returns.

LEARN MORE →

C Corp

Everything you need to know about C Corp taxes in our comprehensive guide. Learn about Form 1120, understand corporate tax, and how to tax plan for a C Corporation.

LEARN MORE →

LLC

Learn how to file LLC for your small business, navigate LLC taxes and tackle single member LLC tax reporting. FlyFin can help file taxes as an LLC and save on taxes.

LEARN MORE →

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction. Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.