Did you miss the S Corp tax deadline?
The S corporation is a popular business structure only available to privately-owned businesses. An S Corp is actually a special pass-through tax entity that an LLC or C Corp requests from the IRS.
The S Corp is popular with small business owners because they can retain the limited liability of a corporation while, at the same time, are able to pass corporate income, losses, deductions, and credit to shareholders for federal tax purposes.
Having an understanding of how to file S Corp taxes ensures that your business remains in compliance with IRS regulations. You are required to submit certain tax forms as well as adhere to specific filing deadlines.
Unfortunately, if this is your first year in business or you have a new accountant, you may have missed the deadline for filing your taxes. If that’s the case, discover quickly what to do if you missed the S Corp tax deadline because there may be steep penalties for failure to file on time.
Choosing an S Corp business structure requires you, as the business owner, be aware of S Corp tax filing dates and pass-through taxation. Pass-through tax status means that an S Corp’s business income, losses, deductions and credits flow through their shareholders for federal tax purposes. Being taxed as an individual vs. a business means the money can later be directed to the owners with no further tax consequences.
The S Corp tax deadline is officially the 15th day of the third month after the end of the tax year which typically falls on March 15. To be considered an S corporation for tax purposes, you have to submit IRS Form 2553 by March 15, 2023. If you miss the deadline, you can still file Form 2553 on May 1, 2023.
If you have an S Corp and have missed a tax filing deadline, it’s important to act quickly and to file your return ASAP. You will also pay any overdue taxes and may be subject to penalties and/or a finance charge.
Other things you need to know about S Corps
What are some of the advantages and disadvantages of an S Corp? The advantages for business owners are that an S Corp business structure may help to lower their personal tax burden, they can be treated as an employee and earn a salary, and avoid the double taxation issue to which C corps are subject.
Some of the potential disadvantages:
- IRS restrictions on who may own an LLC
- Filing taxes is more complex
- S corp balance sheet requirements for businesses with more than $250,000 in net receipts and assets during a given tax year
- IRS rules to qualify as a pass-through entity
Financial and tax issues associated with an S Corp can be complicated for businesses, especially start-ups. Consider hiring a team of professionals to ensure that you’re on top of tax and other financial obligations. GYL, CPA firm in San Diego and Ontario, is a full-service accounting and business consulting firm.