I don’t know if I’m an S-corp, how do I find out?
Not sure if your business is an S-corp? Well, Halon is here to help!
Knowing which type of corporation your business is classified as is very important during certain instances, particularly during tax season. A C corporation pays tax on its net income, while an S corporation itself does not. Instead, the net income of an S corporation is passed through to its shareholders and each shareholder pays income tax on the company’s earnings based on his individual income tax rate and the percentage of the company he owns. Determining your classification can take as little as a few minutes.
- Check your files for IRS correspondence. To be classified as an S corporation, you must make an election to be treated as such. An election is made by completing IRS Form 2553. After the IRS processes the form, you’ll receive a letter confirming the election.
- Review previously filed tax returns. All corporations must file an annual income tax return. C corporations file IRS Form 1120 and S corporations file Form 1120S, and partnerships file Form 1065. The form number your business uses is displayed in the upper right corner of the first page of your company’s income tax return. If you are a single-member LLC or sole proprietor, your business return will be included on schedule C in your personal return, and will not have its own tax return.
- Call the IRS Business Assistance Line at 800-829-4933. The IRS can review your business file to see if your company is a C corporation, S corporation, partnership, single-member LLC, or sole proprietor based on any elections you may have made and the type of income tax returns you file. Any officer of the corporation can receive information about the business. You must provide your company’s EIN when you call, and may be asked to provide other information to confirm your standing with the business, such as the mailing address on record, your name and your corporate title. The IRS Business Assistance line is open from Monday through Friday from 7am to 7pm local time.
Contact a small business specialist to discuss if an S-corporation is right for you.