S corporation and small business owners
Tax planning and accounting for S corporations
An S corporation can save real money, or cost more than it saves. The difference is in the salary, the payroll, the books and the owner’s personal return, and we handle all of them together.
We work remotely with S corporations, LLCs and partnerships in every state, and prepare the owners’ personal returns alongside the business return so nothing falls between them. Every return is prepared or reviewed by an Enrolled Agent, enrolled to practice before the IRS.
Who this is for
- Owners deciding whether to elect S corporation status
- Existing S corporations that need cleaner books, a defensible salary or a better plan
- LLCs and partnerships filing a business return of their own
- Owners who want the business and personal returns prepared by the same team
What we handle
- The election. A side-by-side projection with and without the election, then Form 2553 filed on time if it pays.
- Reasonable compensation. A salary set from market pay for your role, documented, and revisited each year.
- Payroll. Owner payroll set up and checked each quarter, with health insurance and retirement contributions reported correctly.
- The business return. Form 1120-S and the owners’ K-1s, plus state returns, filed by the deadline.
- Basis and distributions. Shareholder basis tracked every year, so losses and distributions are treated correctly.
- Owner reimbursements. An accountable plan for home office, mileage and phone costs.
- State planning. Pass-through entity tax elections where your state offers one and it helps.
- Monthly bookkeeping. Reconciled books and a profit and loss you can read, so the plan runs on current numbers.
Common questions
When does an S corporation election save money?
When the business has steady profit well above what a reasonable salary for your work would be. The salary is subject to payroll tax, and the remaining profit taken as distributions is not subject to self-employment tax. The saving has to exceed the added cost of payroll, a separate business return and any state fees. In some states the election also allows a pass-through entity tax, which can add to the benefit.
How do I elect S corporation status?
By filing Form 2553 with the IRS, signed by every shareholder. To take effect for the current year it must be filed no more than two months and 15 days after the start of that tax year; otherwise it takes effect the following year. Relief for a late election is available in many cases.
What is reasonable compensation?
The salary the S corporation pays an owner who works in the business. It should be what the business would pay someone else for the same work, based on duties, hours and market pay. We set it from data, document how it was reached, and revisit it each year. A salary that is too low is the most common S corporation audit issue.
Do I have to run payroll as an S corporation owner?
Yes, if you work in the business. Your salary goes through payroll with federal and state withholding, quarterly payroll returns and a year-end W-2. Distributions are paid separately and do not go through payroll.
How should my S corporation reimburse my home office, mileage and phone?
Through an accountable plan: a written policy under which the company reimburses business costs you document. The reimbursement is deductible to the company and not taxable to you. Without a plan, those costs often end up not deductible at all.
How is health insurance handled for S corporation owners?
For an owner of more than 2% of the company, premiums the company pays are included in the owner’s W-2 wages, and the owner usually deducts them on their personal return as self-employed health insurance. Done that way, the premiums end up deductible; done otherwise, they often do not.
What is shareholder basis and why does it matter?
Basis is your investment in the company, adjusted each year for income, losses and distributions. It limits the losses you can deduct and decides whether a distribution is tax-free. It has to be tracked year by year, and the IRS now asks for the calculation with the return in many cases.
When is an S corporation tax return due?
Form 1120-S is due March 15 for a calendar-year company, or September 15 with an extension, and each shareholder needs a K-1 to file their own return. Late filing brings a penalty for each shareholder for each month the return is late, which is why we start the business return early.
Become a client
Tell us about the business: what it does, its rough profit, and whether you have already elected. We read every inquiry ourselves and reply within two business days to set up a 30-minute intro call.
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This page is general information, not tax advice for your situation. Rules change, and the right answer depends on your numbers; that is what the intro call is for.