How S Corp Taxes Work

[@NaviMarajCPA]

💰 Ready to save THOUSANDS in taxes? Enroll in my course here 👉 navimarajcpa.teachable.com/p/smallbusinesstaxessale

[@XDVansKidXD]

I literally cannot thank you enough on how easy you made this to understand. I’ve watched dozens of videos about s corps and I’m so grateful you did this walkthrough here. I wish things like tax returns were taught in school but I’m grateful for platforms that allow creators like you to educate the masses. Thank you sir 🙏🏽

[@ericalouie4548]

the way you walked through from the S Corp tax return to 1040 makes everything clear. your video is very helpful. thanks so much!

[@TwoCommaPauper]

Wow, your video is so thorough. Thank you for walking me through the actual 1120s + the 1040 form. Probably because of our similar background in the financial services industry, everything you said clicked for me. Greatly appreciate you sharing this on KZbin!!!

[@NaviMarajCPA]

You're welcome! Thanks for the feedback. Looking to start your business? What caused you to watch the video?

[@murraymackenzie4313]

I appreciate this video. Using the actual IRS Forms makes it 'real', and not some wishy-washy whiteboard exercise in most videos. Thank you so much.

[@VictoryReverseMortgage]

Thank you ! It’s amazing to me that there’s so much content not produced by professionals who are licensed and giving financial legal advice that could be completely damaging and cause liability! Keep up the good work

[@lakland8603]

Great stuff, Navi! Thank you so much for sharing this info. It's so important to see "both sides of the equation" and see how the numbers flow from S Corp to personal returns.

[@dustinnitz9349]

You explained that so simply!!! Thank you! I'm over here doing Turbo Tax and becoming paralyzed about ALL the questions and ALL the details. You just laid it out very simply what the lines are for and how they should fall into the personal return. Thank you!

[@Otherthan338]

As a new loan originator, this was extremely helpful when understanding what docs are needed and what they mean to qualify clients. Thank you!!

[@wctw9919]

Thanks for the detailed walking through showing us exactly what it is on the tax form. I was so lost and overwhelmed

[@NaviMarajCPA]

Glad you found it helpful and are no longer lost!

[@fin5fin]

Hi Navi - great explanation - it would be great to see a comparison tax example of a non-S Corp to understand the tax savings or not

[@NaviMarajCPA]

I've got videos related to this. I think its called When does an S Corp make financial sense. Check out that video.

[@nadmeldev]

You are such a great instructor. THAN YOU SO MUCH for such a great instructional video. I am a fan!

[@mdca8773]

Navi... just found your channel and the information is really great... I've watched others on the same themes and yours is the best so, hopefully that is encouraging and motivates you to keep up the good work.

[@NaviMarajCPA]

Thank you so much for the feedback. With this comment alone, I should have enough motivation to produce a few more 😉.

[@seangoff9578]

Thank you. Well explained and easy to understand.

[@NaviMarajCPA]

Glad it was helpful!

[@keona7495]

Thank you for this explanation. As a new business owner taxes were very confusing .

[@JeanClaudeZidorAETJInc]

No better way to learn about S-corp. Thank you

[@blakejones4087]

Great video !! No selling online service good information precise and to the point !! 10/10 highly recommended!!

[@NaviMarajCPA]

Thanks for the feedback! Appreciate it.

[@MANONGERARDO]

WOW I'll say it in spanish and hopw you can transelate it. Mi amigo de verdad que le estoy muy agradecido po este video que es de los pocos videos que e visto que estan muy bien explicados, ya lo sigo y la verdad solo espero ver otros videos igual a este. Thank you very much!

[@adama2569]

Exactly what I was looking for. Thanks!

[@NaviMarajCPA]

You’re welcome! 👍🏼

[@RyanChann]

Thank you so much for demystifying such a daunting system! So well explained! Earned a subscriber,

[@BorselinoThadchack]

love your videos. Thank you thank you! I am no longer in the dark

[@jasonk305]

Such a helpful video! I’m a new EA and am gonna watch all ur videos.

[@papasmurfao1]

Helpful example and detail. Thank you.

[@NaviMarajCPA]

That's great. Glad you it was helpful for you!

[@shaileshwaniya2581]

Really good explanation, appreciated🙏

[@NaviMarajCPA]

Thank you! 👍🏼

[@luisasipple9315]

Thank you very much. This was Avery helpful. This year has been so stressful and I was very concerned about my taxes. This clarifies the cobwebs

[@humand0gz]

got a sub from me. how is this not more popular

[@NaviMarajCPA]

Thanks for the sub! Feel free to "share" it as well. Spread the word - appreciate you.

[@Lissa0105]

Great video. Thanks for walking through the forms and simplifying it.

[@igordasilva7073]

Very insightful. Thank you!

[@sammyofwesttexas6925]

Awesome you broke it down perfectly.

[@NaviMarajCPA]

Thanks for the feedback! 👍🏼

[@WQQKIE]

Great explanation

[@NaviMarajCPA]

Thank you for the feedback!

[@magicthaienglish]

Thank you so much. Very informative and to the point.

[@CarlosRamos-ru6fd]

Fantastic video! Thank you very much for explaining a complex topic in a simple way.

[@jacgamache]

This is amazing! Thank you, Navi

[@midwestlivin7029]

Best video I’ve seen on this

[@NissaCas]

Also do you have a video on form 1120-S Schedule K-1?

[@OfficerJohn31]

Very informative and easy to understand...thank you for this!

[@AI4uUzOvhvOFnEGSAOoe2Q]

This is the best channel I have found. Thank you so much for sharing your knowledge! By the way, form-1120s comes with a bunch of other forms like schedule-B, K, L, M1, M2, when do these need to be filled?

[@anaswarraich6231]

Exactly what i wanted to know. thankyou for very good content.

[@dianabarris3145]

Thank you so much, this was so helpful.

[@enissejdija8736]

While S-corp is not subject to federal income tax, in some states (like California) it is subject to corporation’s income tax in a form of franchise tax at 1.5%.

[@babakhanyile8854]

Fantastic job understood you 💯👏🏾🙌🏾👍🏾

[@NaviMarajCPA]

Thanks Baba - glad you understand it now!

[@lauraq1342]

This is so helpful. Thank you.

[@Simonjose7258]

They file an informational federal return (Form 1120S), but no income tax is paid at the corporate level. The profits/losses of the business are instead “passed-through” to the business and reported on the owners' personal tax returns. You still have to pay Taxes you just don't have to Pay Corporate Taxes. But you do have to take a reasonable salary and the dividends/Profits are only taxed as Income with no FICA payroll Tax.

[@Lizzyb1]

This was very helpful thank you

[@NaviMarajCPA]

You're welcome. Glad you found it helpful!

[@CryptoGod79]

Great video bro❤❤❤

[@bmjmanagementllc]

New to the channel awesome info!

[@brandonk6370]

Incredibly helpful video, thank you

[@brodyllc]

Clear and concise, Thank you sir.

[@NaviMarajCPA]

You are welcome! Thanks for the feedback.

[@jaygonzalez8315]

Hi! Great video! looking for some info on taxes for my small trucking company (Owner operator of 1 truck) and ran into your video. Loved it because of your ability to educate... I was able to understand in less than 20 minutes! 👍💪💯... I have LLC and looking to see if S-corp or C-corp would benefit me so I can stay in business during hard times and be able to grow the business with pre-tax dollars... Thanks

[@NaviMarajCPA]

Thanks so much for the feedback, Jay! This is a general statement, and not specific tax advice, but most of the time, the S Corp is more appropriate than a C Corp but you really need to consult with someone (doesn't have to be me) to ensure it is appropriate for you.

[@jaygonzalez8315]

@@NaviMarajCPA Hi and thank you for your reply!🙏 I appreciate you taking the time 👍💪💯

[@Biztalkcontrolcenter]

This video is priceless man

[@jonathantruong1170]

Amazing Explanation. Thank you! Question you mention Qualify and Standard Deduction for form 1040. How do we find out what this amount should be and do all s-corp have deduction for these two feilds?

[@ElJerry]

One of the best vídeos.

[@NaviMarajCPA]

Thanks so much @ElJerry!

[@ElJerry]

@@NaviMarajCPA do you have a videos about LLC. ? can you send me the link thanks

[@dorotakizewski4782]

Extremely great video

[@MrFabian714]

This is such an amazing video. Thank you. I understand S-Corp don’t pay taxes, but what about the quarterly payroll reports? What are those all about? Seems like to much work! Any links to a video? Thank you

[@CIRIHawaiiLLC]

Great info Navi. Really helps clear up the confusion on this process! Question regarding the form 941 and the 1040. As an SMLLC S-corp, would I still file 941 for the Information but pay the payroll taxes via my 1040 every quarter? I've been exploring the EFTPS platform but I am unable to submit the 941 form without paying the taxes I've written down as withheld. This is where I am getting confused between the information purposes of filing form 941 and actually paying the withheld payroll and federal taxes. I just e-filed my 1120s and am getting back a return for the same amount I've been paying every quarter via the 941 form. I know late fees are coming for not paying via my 1040 every quarter in 2023 but want to understand this for a better 2024 tax season. Thank you Navi.

[@babowantedgaming]

bro you explain it like a 5 years old. Your helping alot man, i really appericate these videos. Sub + Like!!

[@homesteadingdiy4100]

Thumbs up for showing this on actual tax forms! Very helpful for sure but I still haven't been able to find a concrete answer on when you have to take distributions...even from my CPA. I see many descriptions of S-corp distributions tax-free up to your stock basis and then after that being taxed as long-term capital gains. How do you actually do this? My CPA describes something complete different, my initial investment is a sunken cost (not taken back through a tax-free distribution) and my distributions will be taxed as regular income. Anybody know why the discrepancy? I was planning on living off my regular income and keeping the capital in my S-corp and only be taxed when it "passes-through" to me but seems like it will be taxed whether it passes through or not.

[@vasilestana9754]

I wish I could find that out too, I wasn't planning on taking distribution until I'll retire because my SocialSecurity will be very small. Please let us know here if you find out. Thanks

[@homesteadingdiy4100]

@@vasilestana9754 From my understanding E&P that accumulates (i.e. not distributed in the short-term) as accumulated adjusted accounts (AAA). Distributions from AAA can be taxed as a long-term capital gain and not as earn income. There are more specifics on how that works but I believe that is the basics of what is possible.

[@OdilaLopez-k1x]

Hi Navi! How would the owner get the $60K that the K1 was for? Since they are paying income tax on it how did the S-Corp actually send it to them?

[@NissaCas]

I'm lost at the employer taxes. Can you make a video breaking down the forms and type of taxes for the employer

[@prajnair8714]

What if the owner-employee decided to start a SeP account for the balance 10k? They’d owe nothing in taxes correct?

[@mytubeforme]

amazing info! thank you so much.

[@valerienewton6581]

Excellent video, thank you! I have started an S Corp. Using your example in the video: If my LLC paid me an income of the $40,000 but the "ordinary business oncome" being $60,000 and S Corps odon't pay income tax (and is a pass through tax reported on my 1040 from my W-2) what am I allowed to do (legally) with the $60,000 ordinary business income? Thank you

[@RVI123]

Neat presentation.

[@sha-nelletolentino4920]

Great video however is the return missing self employment tax on the ordinary business income?

[@NaviMarajCPA]

Hi there! You may need to restate your question but there is no self employment tax (FICA) taxes assessed on the business income. FICA is only for the reasonable compensation paid to the owner (shareholder). I entered $5,000 on line 12 of the 1120s to represent employer portion of the payroll taxes. I just made up the number but that’s where it goes.

[@conquerunderstanding7517]

Great information, thank you! No mention of quarterly filing deadline or is it only once per year?

[@NaviMarajCPA]

The 1120S is filed once per year. Quarterly tax returns relate to payroll tax reports such as Form 941 (and your state's equivalent of the Federal Form 941).

[@rocksare_epik]

Thank you, this video is very informational, following…..

[@NaviMarajCPA]

You're welcome Christine!

[@jessipizza]

Very helpful video, thanks! If the owner were to contribute $10,000 into a solo 401k (25% of the $40,000), that would decrease what the individual would owe, correct?

[@HazyJay]

Where/when do payroll taxes get accounted for?

[@NaviMarajCPA]

Employer portion of payroll taxes are reported on line 12 of the 1120s. They are paid as you issue payroll…usually monthly or quarterly.

[@HazyJay]

@@NaviMarajCPA OK, so the 7.65% withheld from the Salary and 7.65% paid by corp is filed on the 941 quarterly and 1120S annually?

[@ammaryameenmba4106]

Well said!

[@kaywawak2416]

So to extend the scenario to actually paying the taxes.. How does the owner pay the 10 grand from the companies pockets without it looking like a distribution for the next tax year? This is assuming that business finances and personal are separated, as they should be. And distributions, outside of classified wage income, is still considered taxable income for the individual. Can the tax payments be made directly from the business account despite the business not technically owing without affecting the owners personal liability?

[@nickaffronti8859]

If you are paying quarterly and estimating taxes, how can you factor in the standard deduction ($12,550)? Or should you always just pay full estimation and use this at year's end to help possibly get some money back?

[@Roadsiderevelationsnyc]

Navi thank you. You have throughly explained everything in detail. Can i hire you in the future as my CPA?

[@Christ_is_King951]

very informative

[@freedeworld]

How would you choose between an online service like Zenbusiness/ rocketlawyer vs a real lawyer when setting up your S corp? There’s usually 10x price difference

[@NaviMarajCPA]

Me personally, I would make that decision based on the amount of risk my business is exposed to and if there are any other owners/partners. As soon as there is another human involved in ownership/partnership, I'd use a competent business attorney to draft a proper operating agreement or bylaws, etc. In terms of risk, compare a dentist (high risk) with a KZbinr (relatively low risk). If you have the money, go the attorney route. You can email me and I will refer you to one that I trust.

[@headlibrarian1996]

Neither 1120s nor 1120 seem particularly difficult. Looks a lot less annoying than Schedule C. How finely should the “other deductions” be broken down? Can you use broad categories like “office expense” and “telecommunications”?

[@andrewcowan10]

Hi Navi, great video. I think you should clarify this is informational for Federal purposes only though. S Corps still get taxed in most states, have to pay estimates to the state, etc

[@NaviMarajCPA]

Hi Andrew....you're right this is the case for federal. I could be mistaken but, in my experience, not many states tax S Corps too heavily.....perhaps NYC, TN, NH are the worst offenders. Anything specifically you had in mind that I may not be aware of?

[@mikecochran1759]

Like for instance a question on line 21 of the 1120-s that is the pass through amount but who does it get passed to? Just the ceo? or does it somehow get chopped up and given to the other officers? How does it get chopped up if it does?

[@leeoday9076]

Great content just subscribed to your channel. So are you saying S Corp act as a pass through to the individual or to an LLC? You have the entity but you're working on a 1040. Or is there another video explaining? TY

[@NaviMarajCPA]

Can you rephrase your question? The S corp is a pass through entity and the profits pass through to the individuals that are shareholders. In the video I show both the 1120s and 1040 tax returns. Hope that helps.

[@thadiesel7655]

Very helpful. Thank you. Question. What If the business operated at a loss. Trucking company. This is my first year and if I write off the full amount of the truck, I'll be at a loss. Should I depreciate the equipment?

[@hccproadvisors]

How do you transfer profits from an S corp, would it be okay if it was done through a K1? How do you enter a personal statement for the business owner?

[@jeanien102]

How do I schedule 30 minutes of your time? I am a business owner of LLC taxed as S-corp. I am single employee/officer paid by payroll company who process payroll and payroll taxes. I need clarity on preparing my personal tax return since the business operates out of my home. Not sure what expenses are allowed to be deduction on Business Use of Home since my LLC business operates from a former bedroom now exclusively used for the business. And I use my personal vehicle for the business (meetings & etc).

[@aoleusa]

Great video, Navi! What do I do if we became an LLC 4 years ago and never elected S Corp status? Should we start a new LLC?

[@janetf9888]

Excellent… !

[@NaviMarajCPA]

Many thanks!

[@Calvin1247]

Great informational video. As the business owner, I'm paying myself with 1099. Do I file a Schedule C first so then it generates to 1040 form?

[@NaviMarajCPA]

I don't have enough information to answer your question. A business owner should never pay themselves with a 1099. I did post a video about how to pay yourself if you didn't run payroll that mentions issuing yourself a 1099 but that would be a one-time exception.

[@jonathantruong1170]

Do you have a video on how to change my partnership to a s-crop? It is currently running and I am afraid to switch and miss some forms, docs, and permits that will result in this switch

[@CapricomLLC]

Great video. Is the owner required to take the $60,000 distribution from ABC LLC as a dividend, or can that money stay with the LLC for the following tax year?

[@CapricomLLC]

Greta video, thank you. Is the owner of the S-Corp required to take the $60,000 distribution from ABC LLC or can that stay with the business for the following tax year?

[@lnkinc6823]

So do you put the flow through income on a K1

[@rosaruiz3513]

I love your videos but what if they have a loss. How do you put that in your 1040

[@NaviMarajCPA]

If the S corp has a loss, then that loss will flow over into your Form 1040 and offset any other earned income you might have.

[@markbeere2898]

The salary paid to the working owner I suppose has to be in cash (unless there’s some kind of weird IOU). But are the distributions just paper / informational or does something dictate there must be a flow of money to go with?

[@dandeejay1]

Very helpful

[@ExquisiteBossin]

Great Video Navi! I just have a quick question. Is one able to also take deductions from a Sch. C on form 1040 personal tax return that is separate from deductions received through the K1 pass through.

[@jonathanmadden637]

Are taxes not taken out of the W2 wages throughout the year?

[@NaviMarajCPA]

Federal Income (and State if applicable) Taxes as well as the employEE portion of Social Security and Medicare taxes should be withheld from the employee's paychecks (and noted on the W2). Those taxes are paid at the individual tax return level. The S Corporation typically does not pay any income taxes. However, the S Corporation will pay the employER portion of Social Security & Medicare as well as Federal and State Unemployment insurance aka taxes.

[@mac_vegas7026]

What about half the Self Employment tax? Isn’t that a deduction? Would it be a deduction for the business or over on your personal?

[@dmcrabby]

if you don't take a distribution, does the K-1 still pass thru the ordinary business income/loss to the personal return? so they pay taxes on it whether or not they take it from their business account?

[@OrlandoSimikians]

Well that certainly did help - but I did not see the self employment tax on the form

[@joseperez-ih7hi]

Great Video, I am just graduating with an accounting degree and still have not learned tax prep. Do you offer a tax prep course for people who want to take on clients for themselves? I have a basis of knowledge but no real life experience to get me through intermediate or complex returns.

[@Crittek]

If I have an s corp with a corporate escrow bank account how would that money be taxed? From what I’m understanding the s corp is only not being taxed because technically it made no profit because it’s all being passed through to shareholders.

[@dfailsthemost]

That 2,347 is not included in that $5,000 taxes and licenses amount, correct? Trying to make sure I'm using the right figure for QBI.

[@tonymedrano40able]

Great video I will subscribe. What happens if you decide to take money out , withdraw money from the profit (the 60k) ? Do you have to pay taxes from that? Thank you for the lesson

[@Diesel4242]

That’s what I’m wanting to know