Overview of S Corporations
S corps don’t pay taxes. They allow shareholders to split income and report it on their personal returns, resulting in tax savings compared to corporations. Profits are taxed once through the owner’s personal tax return. To become an S corporation, a business must meet certain requirements and file an IRS election form.
Tax Responsibilities and Obligations
Owners of S corporations pay income taxes based on their personal situations and file using IRS Schedule K-1. State tax treatment may vary, and there are quarterly payroll tax filings and compliance obligations for owners. It is advisable to seek professional advice when handling tax matters.
Payment Deadlines and Considerations
Quarterly tax payments for S corporations are due on June 15, September 15, and January 15. Owners only pay self-employment tax on wages, and there are no taxes on profits. There are potential tax obligations that come with operating as an S corp.
Comparison with Other Business Entities
S corporations are best suited for smaller companies, whereas C corporations allow foreign owners and shareholders. S corps must pay a reasonable salary, and the IRS closely scrutinizes returns to prevent abuse. LLCs generally pay less taxes than S corps, with different tax implications on wages and employment taxes. If purchasing outside New Jersey, Use Tax obligations may apply.
Additional Information
For those wondering about the frequency of filing taxes as an S corp, the necessary tax payments, and professional assistance with tax filing, seeking guidance from tax professionals like H&R Block with their competitive pricing and extensive branch network is recommended.