S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income.
To qualify for S corporation status, the corporation must meet the following requirements:
(1) Be a domestic corporation;
(2) Have only allowable shareholders;
• May be individuals, certain trusts, and estates and
• May not be partnerships, corporations or non-resident alien shareholders
(3) Have no more than 100 shareholders;
(4) Have only one class of stock;
(5) Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).
In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation signed by all the shareholders.
States impose tax laws and regulations for corporate income and distributions, some of which may be directed specifically at S Corporations. Some but not all states recognize a state tax law equivalent to an S corporation, so that the S corporation in certain states may be treated the same way for state income tax purposes as it is treated for Federal purposes. A state taxing authority may require that a copy of the Form 1120S return be submitted to the state with the state income tax return.
Some states such as New York and New Jersey require a separate state-level S election in order for the corporation to be treated, for state tax purposes, as an S corporation.
S Corporation needs to file Form 1120-S to report the income, gains, losses, deductions, credits, etc. Form 1120-S generally must be filed by March 15 of the year immediately following the calendar year covered by the return or, if a fiscal year (a year ending on the last day of a month other than December) is used, by the 15th day of the third month immediately following the last day of the fiscal year. The corporation must complete a Schedule K-1 for each person who was a shareholder at any time during the tax year and file it with the IRS along with Form 1120S. The second copy of the Schedule K-1 must be mailed to the shareholder.
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
A business asset refers to a valuable item owned by a company, including a wide range of categories like physical, tangible goods, such as vehicles and real estate, as well as intangible items. The U.S. tax code sections 1231, 1245, 1250, and capital assets primarily cover most of business assets. This article will provide a brief overview of the capital assets.
Sections 1231, 1245, and 1250 of the United States Internal Revenue Code pertain to the tax treatment of gains and losses on the sale or disposition of certain types of property. This article will discuss the different types of business assets covered and depreciation of U.S. business assets.
In addition to the four employee benefits previously discussed, it is essential to consider a fifth benefit: health insurance, which represents the most significant expense associated with employee benefits in contemporary workplaces. The Affordable Care Act (ACA) stipulates that organizations employing 50 or more full-time employees are subject to a tax penalty unless they provide adequate healthcare coverage that complies with ACA standards for their full-time workforce.
It is also advisable for employees to engage in a comprehensive dialogue with prospective candidates regarding the company's benefits package prior to joining the organization. It should be noted that the provision of employee benefits is not a mandatory requirement. However, there are five notable exceptions where such provisions are legally binding: Social Security
