Business & farm

I agree with @VolvoGirl in that we need to STOP and re-summarize a few things as the responses on this thread are all over the board and some not even consistent within the response.

• You indicate that you have a single member LLC that has elected S corporation status.
  • This means that you should have made a separate election to no longer be a disregarded entity (which is the default for a single member LLC).
  • You should have also received a confirmation letter from the IRS indicating that you are in fact to be filing as an S corporation.
• As an S corporation, you must file a form 1120-S.  This form is available in TT Business which is a separate software package. You do not prepare a Schedule C.
  • As part of the 1120-S, you will receive a Schedule K-1.
  • You will then use the information on the K-1 to complete your personal tax return; which is done in a separate software package.
• S corporations are highly scrutinized by the IRS.  As an employee, you must pay yourself a reasonable wage (W-2).  There is no definition of reasonable as it depends on the facts and circumstances of your business.
  • Paying yourself a wage, means that the S corporation will need to complete the necessary payroll tax forms and remit the respective entity taxes withheld to the appropriate governmental entity.
  • A draw is not the same as a wage.  A draw is nothing more than just a distribution of cash to the shareholder.  The taxation of a distribution is determined at the end of the year and is based on the shareholder's tax basis; which you are required to maintain.  This draw / distribution is reported on the K-1.
  • There is a newer form (form 7203) that will be completed along with the form 1120-S.
• Since you are not preparing a Schedule C, you should not have any SE Tax.
• When you input the information from the K-1 into your personal tax return, you will pay tax on the net figures from the K-1; ordinary income, etc.
  • TT will put the K-1 amounts in the correct area of your personal tax return
• As you can see, preparing an S corporation tax return can be difficult.  Based on the type of questions being asked, I believe it is in your best interest to meet with a tax professional to provide guidance and get you started in the right direction.