California S-Corp owners should handle tax preparation carefully to avoid penalties and comply with federal and state tax rules. Here’s a simple guide to help you with S-Corp tax preparation.

Filing Deadlines and Penalties

S-Corporations must file their federal tax returns by March 15 each year. If you need more time, you can request an extension, which gives you until September 15 to file. Remember, this extension only applies to filing, not to paying any taxes owed. If you don't extend your return and file your tax returns later, you will be subject to the late filing penalty.

For 2023 tax year, the federal penalty for late filing is $235 per month per shareholder, up to 12 months. This means that if the S-Corp has two shareholders, the penalties will double, if it has three - the penalties will triple. Of course, the IRS offers First time penalty abatement option, but the abatement is not always granted. California also has its own penalties for late filing. Staying on top of these deadlines helps you avoid extra costs.

Key Forms and Documents

1. Federal Forms:

   • Form 1120S: Use this form to report the S-Corp’s income, deductions, and credits to the IRS. If your S-Corp business had less than $250,000 in gross receipts and/or you had less than $250,000 in assets, you are not required to fill out the schedule L on form 1120-S, which in essence is a balance sheet of your S Corporation. This sort of implies, that you don't really need to take care of your bookkeeping. However, you would still need to do some sort of reconciliation of your records since even though Schedule L is not required, the IRS wants to know the shareholder distributions and those are the balance sheet items.

   • Schedule K-1: Each shareholder gets a K-1, which shows their share of the S-Corp’s income, deductions, and distributions. Shareholders use this form to report their share on their individual tax returns.

2. California Forms:

   • Form 100S: This is the state equivalent of Form 1120S, used to report income and calculate state tax liability.
   • Estimated Tax Payments: Since S-Corps get double taxed on California level, California requires estimated tax payments for the next year. The tax preparer will provide you estimated vouchers (at least for $800), which you should be paying throughout the next year.

Professional Tax Preparation Services

Tax preparation for an S-Corp can be complicated. At our CPA firm, we specialize in S-Corp tax returns for California business owners. Our skilled team ensures accurate and timely filing, helping you stay compliant with both federal and state tax regulations.

Conclusion

Handling S-Corp tax preparation involves meeting filing deadlines, completing necessary forms, and managing estimated tax payments. By staying informed and seeking expert help, you can avoid penalties and ensure smooth compliance with tax rules.

If you need assistance with S-Corp tax preparation, our firm is here to help. Contact us to benefit from our expertise and keep your tax filings in order.