Hey Sharon, we're going to be talking about something today I know that's near and dear to your heart and you know I even made the slides the appropriate color and the somberness of the topic because I noticed that it's very well not that not that most people are going to be preparing their own escorporation return because I'd be shocked if there was even a half a percent or a quarter percent of CRNAs out there that did this but I think the idea is for one you to understand that there is a difference whenever you have an escorporation you're being taxed as an escorporation then to know a little bit about the terminology so that's kind of what we're going to do today I'm not going to get real in depth we're not going to dive down into this because I know that you'll be sleeping on me and probably everybody else would just fast forward so so we're just going to kind of hit the highlights here again the tax form for an escorp and remember you know a lot of PLLCs or LLCs are choosing to be taxed as escorts we've talked about this in our previous sessions and if you are then you do have to do a separate return that return is the 1120s and it's used by escorporations and on that form it reports your income okay such as you know if you have investments in your escorp it reports it there if you've made money 1099 it reports it there which will be the majority of CRNAs it all gets reported through the escorp if you've properly identified the escorp on the W-9 whenever you took the position everything should be flowing through that escorp any deductions that you might have for your business sharing your payroll your 401k match through your company be it a profit sharing match or whatever you know paying for your accounting services paying for your malpractice insurance all those deductions that you might have with a business owner will be laid out on this 1120s it also is going to show who the shareholders are if there are multiple and that's a partnership or if there's just one sharing you're the sole shareholder so it asks for information about you your social security number your ownership percentage and so forth if you have any realized capital gains or losses throughout the year that's going to be reported and then there's other things that are on this form such as tax credits tax payments any change in the corporate structure it's just kind of a basic for you to understand what all goes on this form it's not as complex sometimes as people make it it's your income less your expenses what you make so as part of that what happens is we get down to the bottom line this is what the corporation made now Sharon I know you've heard me talk about this before but as corporations do not pay taxes everybody thinks that the corporation pays the tax no you the owner of the corporation then the information flows through to you on what's called a k1 form so let's say you had sixty thousand dollars in profit it's going to go on that k1 form and that k1 is going to flow over to your personal return those k1s they are tracking forms to make sure that what you've got on the s-corp ends up on your 1040 you don't want to have errors there okay you want your k1s to be correct because those are reporting forms are going to go directly to the irs and that's what the irs is going to balance and if they don't balance guess what you're going to get a little letter in the mail remember s corporations don't pay taxes it flows through to you on your k1 to your personal tax return and that is where if you owe additional taxes that is where you pay the taxes you pay them personally the other thing that's reported on this k1 form that a lot of people don't realize is how much you took in distributions remember we've got a whole section on this as well the irs wants to know how much you took in distributions and did you take more distributions than salary and if you did that's not a good thing because they want to track those distributions could that those distributions be misconstrued as salary that you just didn't take and you skipped paying the self-employment tax on it so just remember these are reporting forms and the irs does take that into account the s corporation tax return is due typically by march 15th of every year sharon have you ever filed yours by march 15th never yeah and most people don't most accountants they file an extension for that s corp return let's think about it you probably don't even have your data ready until mid-february for most people and a lot of people it's late february and then that data you have to do the corporate return and then you've got to get that on the 1040 to do a personal return so most accountants are going to file an extension for you you're not going to have it done by march 15th that extension gives you until september 15th in most cases an additional six months to file the return some people utilize this to get their profit sharing piece in there so they file an extension for their corporation and they might file a personal extension because remember your profit sharing you've got to a tax filing deadline to put that in for the previous year i always say that's a relief valve so if you're going to put extra money in and it's going to save you taxes well now you can take what eight and a half months to get that additional money in there and if you do that you kind of know that if i do that i break even or maybe i get a little back most people are going to take that time to do that one thing to know sharon is that the extension does not grant you an extension on any taxes owed it just means they give you more time to file your return so you you still owe the tax if you don't pay it and you file an extension you're going to get hit with penalties and interest and so forth so again just kind of basics so you understand what type of tax return it can be a little more involved you know you do have to track certain things on the form and so forth this is where i kind of laid out the difference between the s corporation return and schedule c now if you are not incorporated and you're just running your 1099 business through your individual name you will file what's called c the schedule c is more simplistic not as much to it but you can potentially save taxes by doing the escort if you set it up correctly but there are different calculations that go into the escort so therefore there's more to it there's more expense to it as well remember the 1120s is the tax form you also have to track basis in an s corporation i had one this past week where we were reviewing the tax return and the previous accountant had actually had her take out shareholder loans and i asked her about it she said i had no idea and i said well let's go back and look and what had actually happened was she had taken out more distributions than she had basis and therefore when you do that in an s corporation you you can either take that as a loan a shareholder loan or you have to pay capital gains tax on that amount of money so in her case it was thirty thousand dollars and i said well eventually we got to deal with that you got to put thirty thousand dollars back in the business to repay this loan back or if you ever close this business then you're going to have to pay capital gains tax on that thirty thousand dollars she said what do you mean i've already been taxed on i was like yeah but you went over your basis on your distributions so again it is more complex health insurance premiums so one thing people don't understand is that if you're a shareholder and you own more than two percent of the s corporation you actually report your health insurance premiums on your personal return not on the business side sharon why do you think that is it's called the fika tax and that leads into the self-employment tax and remember the s corporation itself is not subjected to self-employment tax sharon but you the employee are subjected to self-employment tax and that's why you've got to pay yourself a reasonable salary which we've talked about ad nauseum throughout this this presentation and you've got to calculate what that self-employment tax is so and these are just kind of basics but this is the reason yes it's more expensive to run the s corporation than a straight schedule c yes you've got to jump through more hoops for the potential of saving additional money on taxes making sure that you're consulting somebody who understands this using the right tax software tracking your expenses and so forth make sure you're doing all the most accurate reporting these are keys to understanding this and again we're not trying to teach a class on doing your own taxes you know the idea behind this is that people understand the terminology and they understand the basics of it so they can help them to make better decisions moving forward

S-corporation tax returns

business structures

income flow

K1 form

tax return deadline