March 2010 Newsletter

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S-Corporation Filing Deadline

IRS DEADLINE: March 15

Where a corporation was formed in 2009 or earlier, and the shareholders want to elect S-Corporation status for Federal Tax purposes, IRS Form 2553 must be submitted no later than March 15, 2010.

See my post to the CorpNet Small Business Blog for links to the IRS website and important tax forms at:

S Corporation Tax Info

S Corporations and Federal Income Taxes

One of the most often missed tax deadlines is coming up: IRS Form 1120S is due March 15th for corporations who operated under the sub-chapter S designation in 2009.

No Extensions for S Corp Election.

An automatic extension for filing INCOME tax documents can be filed (IRS form 7004). But BE WARNED: There is NO EXTENSION for filing IRS Form 2553 S Corporation Status.

While relief for a late election may be available if the corporation can show that the failure to file on time was due to reasonable cause, let's play it safe and simply submit the form on time. See the IRS Instructions for IRS Form 2553 for more details about deadlines.

Instructions for IRS Form 2553 (S Corporation Election)

The S Corporation Tax Form (1120S)

The 1120S is the form used to report income/loss for an S Corporation. Schedule K on this form serves a similar purpose as a W-2 (or W-9). It reports S Corporation income (or loss) in a prorated fashion. For instance, generally, a 25% shareholder in an S corporation will be assigned 25% of the corporate profits on his/her personal tax liability.

The IRS compares amounts from the 1120S to individual tax returns and the figures must match.

Filing Form 1120S

While complex, form 1120S can be filled out accurately when there are clear records to follow. The purpose of the form is to draw a picture of company finances for the IRS. It provides information about profits (or losses) that flowed through the corporation to the principals. The information needed to fill out the form includes:

• Information about each shareholder - this will be used by the IRS to match with personal tax returns: Social Security Number, name and address.
• A history of each shareholder's account - any transactions, including interest or gain on capital accounts. (Some transactions, called 'reportable' require IRS form 8886). Documents describing loans to and from the S Corp to shareholders are included here.
• S Corp financial statements - a full accounting of ins and outs.
• Wage information reported on W-2 (and W-9 for subcontractors).
• Sales tax returns and information about State and local taxes paid (property, business, etc.)

Federal Tax ID Required

To Elect S Corporation Status or to file corporate income tax returns, A corporate EIN (Employer Identification Number) (also called a “Tax ID”) is required, even if there are no employees.

A CorpNet team member can obtain this number for you for a small fee. Or, if want to to obtain it yourself, it's FREE! the Federal EIN can be obtained via the IRS forms below:

IRS Form SS4 - Federal EIN (Tax ID)

Federal Instructions for IRS Form SS4

I hope this helps. Good luck in your new business!

Nellie Akalp, Co-Founder & CEO, CorpNet, Incorporated. Corpnet.com

(c) Nellie Akalp and CorpNet, Incorporated 2010 - All Rights Reserved

About the Author

Nellie Akalp graduated magna cum laude from the University of La Verne, College of Law in 1999 where she obtained her Juris Doctorate Degree. She also served on the school's Law Review for three consecutive years. Mrs. Akalp brings significant experience to the legal document filing industry, having founded several document filing companies in the past, including MyCorporation.com, which was sold to Intuit back in 2005. Her past companies combined have been responsible for helping more than one hundred thousand Corporations and LLC's get their start.

Currently, Mrs. Akalp is the CEO & Founder of CorpNet, Incorporated, her second legal document filing service company based on the simple philosophy of truth in business and her sincere passion/desire to assist small business owners and entrepreneurs in America get their business off the ground in a fast, reliable, and affordable manner. Mrs. Akalp is responsible for overseeing and managing the daily operations of the business and frequently authors much of the content published at www.CorpNet.com.

NO LEGAL ADVICE:

CorpNet, Incorporated is NOT A LAW FIRM and cannot provide you with legal advice. In addition, Philip K. Akalp is only licensed to practice law in California. Furthermore, by publishing this article, NO SPECIAL RELATIONSHIP has been created between you and Philip K. Akalp; no attorney-client privilege exists.

This document is intended to provide GENERAL INFORMATION ONLY. Before making the decision to Incorporate or Form an LLC, or any other decision regarding your business or its tax liability, please contact a Licensed Attorney or Certified Public Accountant in your jurisdiction.