S-Corporate Tax Questions and Answers

As the sole owner of an S corporation, you are required to travel overnight on business. The corporation reimburses your expenses for meals and lodging. Is the corporation allowed to reimburse you using the Federal per diem rates?
When you own 10% or more of the corporation, your corporation must reimburse you using the actual costs you incur for lodging. The corporation can reimburse...
Sun, 5 Feb, 2017 at 8:43 PM
Can an S corporation or a partnership pass through a §179 deduction on its Schedule K-1 if it has a loss on Line 1, Ordinary Income/Loss?
In some instances. Both an S corporation and a partnership are subject to the taxable income limitation when computing the amount of §179 which can be p...
Sun, 5 Feb, 2017 at 8:44 PM
If an S corporation shareholder dies before the end of the S corporation's tax year, is the shareholder's pro rata share of the corporation's income, loss, credits, and deductions reported on the shareholder's final income tax return?
Yes. An S corporation's items of income, loss, deduction, and credit are passed through to, and taken into account by, the shareholders in computing th...
Sun, 5 Feb, 2017 at 8:45 PM
Is an S Corporation required to pay quarterly estimated tax?
No, unless the corporation is subject to one of the following taxes and if the total of these taxes is $500 or more [§6655(f) and (g)(4)]:    The tax on ...
Sun, 5 Feb, 2017 at 8:46 PM
Does Rev. Proc. 84-35 (late filing relief for partnerships with 10 or fewer individual partners who file their returns on time) apply to S corporations?​
No. Penalty relief under Rev. Proc. 84–35 does NOT apply to S corporations (IRM 20.1.2.5.3.7). An S corporation may qualify for first-time abatement (FT...
Sun, 5 Feb, 2017 at 8:47 PM
​How does an S corporation treat health insurance paid on behalf of a greater than 2% shareholder?​
The amount of health insurance is includable in the shareholder's compensation (Box 1 of Form W-2)(Rev. Rul. 91-26, Situation 2), but not subject to ...
Sun, 5 Feb, 2017 at 8:48 PM
When is a corporation considered liquidated? In other words, when is a corporation considered closed for tax return purposes, such as filing a final income tax return?​
The IRS addresses this directly in IRM 4.11.7.4. Definition of "Complete Liquidation" "Complete liquidation" is a term not defined by...
Sun, 5 Feb, 2017 at 8:49 PM
​I originally contributed $10,000 for stock in my new corporation. Years later, I contributed another $2,000 as additional paid-in-capital. I sold the stock for a $3,000 loss; can I take an ordinary loss for the full $3,000?
No. Any increase in stock basis subsequent to the issuance of stock is not §1244 stock [Reg. §1.244(d)-2].  Example: For $10,000 a corporation issues 100 s...
Sun, 5 Feb, 2017 at 8:50 PM
Taxpayer would like to switch from the cash accounting method to the accrual accounting method. The taxpayer is not required to use the accrual method, but would like to by choice. Is this an automatic accounting method change?​
Yes (Section 14.01 of Rev. Proc. 2015-14). If not required to switch because of §448 (i.e., gross receipts are too high), the taxpayer uses change number #1...
Sun, 5 Feb, 2017 at 8:50 PM
Can a §401(k) plan be an eligible shareholder of an S corporation?
Yes. 401(k) plans can be eligible shareholders of an S corporation because they are exempt under §401(a) [§1361(c)(6)]. IRAs cannot be eligible shareholde...
Sun, 5 Feb, 2017 at 8:51 PM