How to Prepare S-Corp Taxes
An S-Corporation is a smaller corporation of less than 100 employees that passes through income and losses directly to its employees for federal tax purposes. Many S-Corporations have as few as 1 shareholder. While S-Corporation taxes can be simpler to prepare than C-Corporation taxes, they are often much more complicated than individual or even sole proprietorship returns.
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Instructions
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Read the Internal Revenue Service (IRS) instructions for Form 1120S, "U.S. Income Tax Return for an S Corporation." Especially if you are not working with a tax adviser, you will need these instructions in order to understand how to complete your tax return.
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Gather your financial records. Through the course of the year, you or your tax adviser should have kept detailed records of all financial transactions, including all of your income and expenses for the year.
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Start with your income items. Following the directions on Form 1120S, you should enter your gross receipts from sales, less any returns, on line 1c. On page 2 of your 1120S, calculate your cost of goods sold, and transfer this amount to line 2. Subtract line 2 from line 1c to determine your gross profit. If you have sold any property, compute the gain or loss on Form 4797 and transfer to line 4. Add in any other income you may have, and your total income will appear on line 6.
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Compute your deductions. You will subtract your deductions from your total income to determine your ordinary business income, which will appear on line 21. Allowable deductions are compensation of officers, salaries and wages, repairs and maintenance, bad debts, rents, taxes and license, interest, depreciation not claimed elsewhere, depletion, advertising, pension and profit-sharing plans, employee benefit programs, and other deductions.
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Calculate your tax. Schedule D of Form 1120S will list your tentative tax, based on your ordinary business income. Add in any excess net passive income of LIFO recapture tax as directed, and subtract any estimated tax payments or previous year's overpayments. Use the IRS instructions to compute any estimated tax penalty, if necessary. Total these amounts to find your tax liability or overpayment amount.
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Sign your return. Federal tax filings are not valid without a signature.
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References
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