I elected as an S-Corp in July of this year. Before then I was a sole-proprietor LLC. I run a small business. My questions are below.
1. Which Turbo Tax products should I use for my filing this year? I'm assuming I'll need an S-Corp and Personal Filing? Can you link them below?
2. I don't have payroll set up. I'm the only "employee" but have just been transferring $5k to myself each month. Does that count as payroll if I have records of it? I'm going to get a payroll system in place for 2020.
3. In the S-Corp Turbo Tax product I'm assuming it will take into account my quarterly taxes?
You will need 2 programs. The Business program and a personal program.
You need Turbo Tax Business.
The small business program (TT Business) is for 1120 Corporation, 1120S Corp, 1065 Partnership or 1041 Estate/Trust returns and will not do your personal 1040 return. It is a separate program from the Desktop Home & Business program or the Online Self Employed version.
Home & Business Desktop program or the Online Self Employed version is for personal returns that include a schedule C for self employment or sole proprietor. A single owner LLC would be reported on Schedule C unless the LLC elected to be treated as an S corp or C corp.
You will get a schedule K-1 (or a W2) from the business return to manually enter into your personal 1040 return.
Turbo Tax Business is not available to do online or on a Mac. You can buy the Window's version here. And you can have both TT Business and TT Home & Business (or any personal version) installed on your computer at the same time.
Then for your personal return you can buy the Desktop CD/Download program now here,
Or use the Online versions here,
1. Which Turbo Tax products should I use for my filing this year? I'm assuming I'll need an S-Corp and Personal Filing? Can you link them below? You need 2 programs ... one for the corp and one for the personal return that includes the Sch C ... You can access the TurboTax Business software here
For the personal return you will need the Self Employed version if you use the ONLINE version > https://turbotax.intuit.com/personal-taxes/online/
OR you can use ANY of the downloaded versions >https://turbotax.intuit.com/personal-taxes/cd-download/
2. I don't have payroll set up. I'm the only "employee" but have just been transferring $5k to myself each month. Does that count as payroll if I have records of it? I'm going to get a payroll system in place for 2020. No ... that is not considered payroll ... you have one more chance to reclassify the "draws" as wages by filing the correct payroll tax reports for the last quarter of the year ... seek assistance with this from a local payroll company if you cannot figure this out yourself.
3. In the S-Corp Turbo Tax product I'm assuming it will take into account my quarterly taxes? Not sure what you mean by "quarterly taxes" since an S-corp doesn't pay income taxes only payroll taxes. I highly recommend you seek local professional guidance to get the first corp return filed correctly and get educated on the bookkeeping and filing requirements needed for this entity. The penalties for doing this wrong are far more than a paid professional would be ... an education is worth every cent.
1. Yes. An S-Corp has a separate filing from the personal return, Form 1120-S. This can be prepared and filed through TurboTax Business (which is only available in Desktop). The Form 1120-S will generate Schedule K-1, which will be used on your personal return. You can choose to use online software for your personal return, but may find features of desktop more advantageous for your tax situation.
2. No, what you describe is not payroll. Payroll is paying employees (including yourself), wages and or salary that will be reported on Form W2. Because S-Corp pass-through income is not subject to Social Security/Medicare taxes, the IRS has established a standard that shareholders (in this case, you) in an S-Corp must be getting paid reasonable compensation from the S-Corp. Otherwise, all of the earnings can be recategorized as wages and subject to appropriate Federal taxes. This requirement is even more strictly enforced now because S-Corp (pass-through) can also qualify for the Section 199A (QBI) deduction. You may wish to consult with a CPA to determine what reasonable compensation is related to your business.
What you are describing actually represents distributions. You pay tax on the company earnings when they are "passed-through" to your personal tax return. However, when you take distributions from corporate earnings, these are tax-free as long as you have sufficient basis in your corporation.
3. TurboTax itself does not track your business quarterlies. (If you have made personal estimated payments, TurboTax will have a record of what you set up during tax preparation last year). Quickbooks can track business expenses and employer-related tax payments. Depending on the subscription puchased, this information can potentially be imported into TurboTax.
**Mark the post that answers your question by clicking on "Mark as Best Answer"
Thank you for replying.
If I started the S-Corp in July I'm assuming I would need to reclassify the draws as payroll from July on? What would I do with the income before July?
You had 2 business last year ... what you were reporting on the Sch C and now the Scorp... the income goes on the correct returns ... and a sole proprietor reporting on a Sch C never draws a paycheck.
we can not say what reasonable compensation is. there is no benefit to taking too much salary. Too little and the IRS could assert penalties. you need to consult a tax pro immediately to go over the first year's operation. Not only salary, but payroll tax returns 941, 940 and usually state Unemployment Compensation returns. If your state has income taxes probably a state 941. do you have workmen's compensation insurance? your state may require it. did the S=Corp pay your health insurance? more payroll issues. did you have a company car that you used personally? again more payroll issues. you probably had start-up costs - a tax issue.
What turbo tax product do i need for subs corporation, personal? and state forms for both. I want to electronically file.
You will need two separate TurboTax products. For the S Corp, the TurboTax Business Edition. The Business Edition can only be installed on a Windows based personal computer, not on a Mac or online. The Business Edition cannot be used for a personal tax return, Form 1040 - https://turbotax.intuit.com/small-business-taxes/
State programs for the Business Edition can be purchased from within the edition by clicking on the Online tab and then Download State. The state programs for the Business Edition are currently $49.99 each
For your personal tax return, use any of the TurboTax desktop CD/Download editions - https://turbotax.intuit.com/personal-taxes/cd-download/
You receive one free state program download using the TurboTax desktop CD/Download personal editions (except the Basic edition). Additional state programs are currently $39.99 each
you have payroll issues and just reclassifying the draws as payroll doesn't cut it. there are payroll tax returns that should have been filed. most likely withholding taxes should have been taken and remitted timely to the IRS and state if your state has an income tax. then there would be payroll tax return requirements, too. Even though your thinking of changing the previous draws to payroll in the last quarter, that's not how it supposed to work. technically you failed to file payroll tax returns for September and pay the taxes due.. You probably would also have to register with the state to file state returns and possibly a separate registration for state unemployment compensation tax returns. Maybe not all your of the $5K you took each month needs to be classified as payroll. An S-Corp is much more complicated the filing a schedule C. there are many rules. some at the federal level some at the state. for example you are an employee of the S_Corp. Does your state require you to carry workmen's compensation insurance? Do you pay health insurance premiums. With an S-Corp the rules are completely different to get a deduction that reduces adjusted gross income. it is no longer - self employed health insurance. done wrong and the deduction for it becomes a schedule A medical expense it seems apparent you are unfamiliar with the tax and other rules affecting as S-Corp. seek professional help immediately especially on the payroll issue.