How does being a partner (shareholder) in an S Corporation effect an individuals tax return?
Posted on April 1, 2009 by admin
Mrs S asked:
My husband started a small construction business (an S Corporation) with his father and cousin and the accountant said we need to wait to file our personal taxes until we get some paper back from the gov’t (from the businesses taxes). We’ve already gotten the W-2′s (they pay themselves hourly like they’re employees), what else are we getting and what’s it for. I’m confused and it *****.
My husband started a small construction business (an S Corporation) with his father and cousin and the accountant said we need to wait to file our personal taxes until we get some paper back from the gov’t (from the businesses taxes). We’ve already gotten the W-2′s (they pay themselves hourly like they’re employees), what else are we getting and what’s it for. I’m confused and it *****.
The S-Corp return has a due date of 3/15. If you are lucky, they won’t need an extension.
That return will include “schedule K-1″ forms that will show what each shareholder in the S-corp had for income. You need the schedule K-1 information to do your taxes correctly.
You will need to wait every year for this information.
VB is correct. I would add that the K1 does not come from the government. Rather, it is part of the corporate tax return which will be prepared by the accountant.
Under normal circumstances (there are some exceptions) S corporations pay no tax, even though they must file a return. Rather, the profit or loss is reported on the shareholders’ 1040s. The K-1 will tell that amount, plus any other details which may affect your 1040.