Filing Taxes For An S-Corp
I warned you that this blog was going to be about more than just online marketing. If you don’t have an S-Corp, this entry probably won’t be that interesting to you unless you really like to learn about taxes.
Please keep in mind that I am NOT a tax professional and only know what I learned from digging through IRS documentation yesterday. In other words, don’t try this at home.
With that disclaimer out of the way, let me just say that I didn’t want to do my own taxes this year. Unfortunately, I couldn’t find an accountant who would take me on as a client. I sent out about 10 emails to accountants explaining my situation and none of them got back to me. I even called a couple and they turned me away. I guess their CPA classes don’t teach them what to do when a client works a full-time job half the year, owns an S-Corp, lived in two states, sold their house, and moved to a foreign country.
I admit my tax situation is complicated, but if it were easy I wouldn’t need a CPA!
So I was forced to dive into my taxes headfirst yesterday. I’ve always done my taxes myself, but this is the first year that my business actually made enough money for me to really take notice of what I was doing. I know that last year I made a few mistakes and I didn’t want to repeat them again.
I use TurboTax, which I like because they walk you through things and the software keeps track of your returns throughout the years. This makes it easy to look back and see what you did last year without rummaging through paperwork. The bad part is that it’s not always completely clear what product you should use for your situation. More on this later.
The first thing owners of an S-Corp should do is file their corporation’s taxes. The biggest confusion point for me last year was that I tried to do my own taxes first, and you’re bound to run into problems that way.
What you don’t want to do is use the “Home Business” version of TurboTax. This is meant for Sole Proprietors, not S-Corps. Instead, you want to click the “Business Products” tab and purchase the “Business” license for both Federal and the State your business is located in. Even if you run your S-Corp out of your home (which I do), trust me when I say that the “Home Business” version is not for you!
Once you download and install the correct software, it’s pretty intuitive what you need to do. After all, you’ve been keeping meticulous records throughout the year, right? Right?
The TurboTax Business software will create a PDF with a completed 1120S and a Schedule K-1 (along with your state’s forms) that you’ll have to print out and mail to the IRS before March 15. We’ll also need to refer to these forms when we do our personal taxes, which is the next step.
When you do your personal taxes you can choose any of the TurboTax packages that suit you except for the Home Business. It is counter-intuitive not to sign up for the Home Business package when you have a home business, but as I said before, that’s for Sole Proprietors who file a Schedule C, not for S-Corps.
In my case, I earned income from my full-time job and salary from my S-Corp. I wasn’t exactly sure how to claim the salary from my S-Corp so I clumped it in with my other W-2 income. If this is wrong, somebody please correct me.
As you’re walking through the TurboTax software, it will ask you if you received any K-1 Schedules. You may not have received any in the mail, but you created one when you did the taxes for your S-Corp! Be sure to answer yes and add the information from your S-Corp’s K-1 to your personal taxes.
That’s about it. The rest of your personal taxes shouldn’t concern your S-Corp at all because you already deducted everything when filling out the 1120S. I realize I didn’t get into too much detail, but I did find it very confusing choosing a TurboTax product and I thought it would be helpful if I documented what I believe is the correct way for S-Corps to file their tax returns.
Good luck!
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Thanks for the post, its a great start! I’m just starting to look into filing my own taxes for my s-corp as well. Did you have to file any taxes quarterly during the calendar year for your s-corp?
Thanks