Filing reports and taxes as an s-corp

Discussion in 'Accounting and Taxes' started by roxics, Dec 13, 2010.

  1. roxics

    roxics
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    Hey everyone I'm new here and I really need some advice.
    This is my first company and I'm kind of lost. My partner and I started an s-corporation for our new company several months back. Our official start date for the company was October 10th, 2010. We are registered in Michigan. I got a letter from the government saying we need to file a report. We also have to file company taxes coming up shortly after the new year.

    We haven't made any money yet. In fact our first product, which is a website doesn't launch until February. It's not even done yet, we're still building it. So we don't have any income yet.

    How do I file our report, what do we say on the report and how do we file our taxes? Are we going to have to pay anything out in taxes even though we haven't made anything yet?
     
  2. ArcSine

    ArcSine
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    Assuming you've elected Dec 31 as your fiscal year end (almost always the case, esp. with S corps), you'll be filing an S Corp income tax return---Form 1120S---with the IRS covering the period Oct 10 2010 to Dec 31 2010. This initial return is due by Mar 15 2011, unless you file for an extension by such date.

    You'll then file an 1120S for each year thereafter. E.g., your 1120S for year 2011 will be due by Mar 15 2012; etc.

    Since you have no revenue to report on this first return, there shouldn't be any income tax owed. Nevertheless, you certainly want to file this return, as there may be some start-up deductions or "pre-revenue" expenses that can be claimed on this return. If so, these deductions will "pass through" the S corp and be available for you and your fellow shareholder to deduct on your personal returns. This should either reduce what you owe on other income, or increase the refund you'd otherwise be receiving.

    All the foregoing relates to federal income tax. You'll need to research what reporting and filing requirements you have from Michigan (and in some cases, at the local level).

    I strongly urge you to chat with an accountant at this point. First, what I've described above is a very high-level overview, just to give you an idea of the situation. But there are a number of details that must be addressed in sniffing out those allowable deductions, in the proper preparation and filing of the tax return, and in complying with state and local requirements. General overview advice from a forum can't take the place of the detailed handholding from a little face-to-face time with your accountant / tax advisor.

    At the same time, your accountant can show you how to get your books set up properly. Not only is this important for income-tax reporting purposes, but it's also very important in any situation where profits are being shared among multiple parties (even two), thereby making it imperative that revenues, expenses, and profits are tracked and determined accurately.

    An advisor local to your area will also be familiar with the state and local regulations that apply to your biz. Best of luck with your new venture!
     
  3. roxics

    roxics
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    Thank you very much for your reply. I had planned to call my accountant that set up our s-corp to begin with. I have many questions for him. Such as, how do I fill out my quarterly tax report that is due on the 25 of this month and how do I fill our taxes for this upcoming year. I know they are due in January which is when employers usually hand out W2's. I have no idea how to do that. Especially with myself and my partner being our only two employees at the moment and having earned nothing yet.
     
  4. ArcSine

    ArcSine
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    If neither you nor your partner have taken any paychecks from the company this year, and can avoid doing so until after Dec 31, then you probably won't have any W-2s to worry about preparing this time around.

    I said "probably" because there are certain transactions that a shareholder might have with a corporation that, while not appearing to be "payroll" at first glance, might nevertheless be deemed (by the IRS) to consititute "compensation" from the corp to the shareholder. These are kinda rare, though....just have your accountant look at the records and give his blessing that for 2010 you indeed have NO W-2 preparation to worry about.

    If you find yourself needing a paycheck from the corp during the next two weeks, though, and the company does in fact have the cash to pay it, you might consider instead just taking a short-term loan from the corp in lieu of a "paycheck". Doing so might let you avoid dealing with W-2 hassles just for the sake of one or two 11th hour payouts from the corp to yourselves.
     
  5. roxics

    roxics
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    No it's nothing like that. We're just two guys building a website right now. Working for free in our spare time off from our regular day jobs. We haven't even set up a bank account yet. Our website doesn't launch until February. Even then it could be months (if ever) that we make any money off of it.
     

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