Setting up and maintaining your S Corp involves keeping track of a few important documents and dates. By staying organized and understanding these essentials, you can ensure smooth operations and compliance with IRS requirements.
Documents You'll Need
To confirm your S Corp status, you’ll typically need one or more of the following documents:
S Corp Application Form (2553 Box E): This shows when you applied to become an S Corp.
S Corp Approval Letter (CP261): This is your golden ticket, confirming the IRS has accepted your S Corp status.
S Corp Verification Letter (385C): Sometimes you need this as extra proof of your status.
S Corp Business Tax Return (1120-S Box A): This tax return also demonstrates your S Corp status.
Key Dates Explained
Understanding these dates will help you manage your S Corp’s financials more effectively:
S Corp Books Start Date
If Collective is preparing your first 1120-S Tax Return, your books start on the first of the month of your S Corp effective date.
If Collective isn’t filing your first 1120-S, then it starts on January 1st of that year.
Transactions and Financial Statements
All transactions from your business and personal accounts from the start date are imported into your S Corp's financial books.
These transactions are categorized to produce financial statements, which are crucial for everything from tax estimates to loan applications.
First Payroll Date
Within the first year of your S Corp effective date, you must set up payroll to provide reasonable compensation for any owner-employees through a payroll company.
First 1120-S Business Tax Return Year Start Date
This is essentially the first fiscal year for which you need to file an S Corp tax return, starting from the first of the month of your S Corp effective date.
Schedule C 1040 Individual Tax Return End Date
If your business was active before your S Corp status kicked in and your S Corp effective date is February 1st or later, you’ll need to gather and submit transactions from January 1 up to the month prior to your S Corp effective date.
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.