September 15 was the extended deadline for calendar-year Forms 1065 and 1120-S. The penalty for missing it is one of the more expensive per-day costs in the tax code — and it applies even when no tax is owed.

A former C corporation may owe corporate-level tax when it recognizes gain that existed on the first day of S corporation status. The five-year recognition period, NUBIG limit, taxable-income limit, and asset records all matter.

The default advice for most small business owners who want to reduce self-employment taxes is to elect S-Corp status. And for the right situation, that's correct. But the reflexive assumption that an S-Corp is always better than a C-Corp ignores scenarios where the corporate flat tax rate—21% under TCJA and maintained under the OBBBA—produces meaningfully better after-tax outcomes. Understanding when a C-Corp wins requires looking at effective tax rates, retained earnings str

S-Corp owners often pay for business expenses out of pocket—mileage, home office, phone, supplies—and then either forget to reimburse themselves or run expenses through the S-Corp account in ways that create tax problems. An accountable plan solves this. It's not complicated, but getting it wrong costs money, and most S-Corp owners either don't have one at all or have one that doesn't actually work. Why This Matters for S-Corp Owners Specifically Unlike a sole proprietor, an

Making the S-Corp election is theoretically straightforward: file Form 2553, get confirmation, done. In practice, Form 2553 has a surprising number of failure points, and many business owners don't discover the problem until they're mid-audit or trying to prepare returns years after the fact. Here's where the election goes wrong. Missing the Filing Deadline For a calendar-year entity, the S-Corp election is generally due no more than 2 months and 15 days after the beginning o

S-corps are one of the IRS's most consistent examination targets in the small business space. The reason is straightforward: owner compensation is the primary mechanism through which S-corp owners avoid self-employment tax on business income, and the IRS knows it's frequently abused. Here's what triggers scrutiny, what agents look at during an S-corp payroll examination, and what makes a defensible position. How S-Corp Owners Get Selected The IRS uses automated scoring system

Running an S-corp isn't just a tax strategy — it's a compliance structure. And compliance structures require maintenance. Most S-corp owners do two things consistently: run payroll and file the return. That's not enough. Here are seven things that should happen every year inside an S-corp, and why each one matters. 1. Document Your Reasonable Compensation Basis The IRS expects S-corp owners who perform services for the company to pay themselves a reasonable salary before taki

If you run an S-Corp, you’ve probably heard that you can save on self-employment taxes by paying yourself a “reasonable salary” and taking the rest as distributions. That’s true in concept. But the execution is where most S-Corp owners get into trouble — and it’s one of the most common issues flagged in S-Corp examinations. Having been on the IRS side of these examinations, I can tell you: the issue isn’t usually that an owner is paying themselves too little. The issue is tha

Setting a reasonable salary for S-Corporation owners is one of the most critical tax issues these businesses face. Reasonable compensation is a recurring focus area in S-Corporation examinations because it directly affects employment tax reporting. Getting this wrong can lead to costly audits and penalties. This post breaks down what the IRS looks for, how to document your salary decisions, and why guessing a number can cause serious problems. IRS review of S-Corp salary docu

When tax season arrives, many small business owners face a crucial question: how does filing as a Schedule C sole proprietor differ from filing as an S-Corporation? Understanding these differences can save time, reduce stress, and potentially lower your tax bill. This post breaks down what changes and what stays the same at tax time when you move from Schedule C to an S-Corp. The goal is to give you clear, practical information so you can make informed decisions based on fact