S-Corp Checklist

I would have to say S-Corporations are my favorite entity.  Why?  Because the entity has many options and advantages.  Some of the advantages are that they have a liability protection, if the business operates legitimately, as well as no double taxation with distributions and losses typically reduce other personal income.  Here is a checklist that every S-corp owner needs to review and understand:


□  Must have a Board of Directors and Officers.  This can be 1 person.  The Officers are involved in the daily activity of running the business and MUST be on payroll.

□  The corporation MUST have annual minutes.Payroll Box

□  Shareholders are required to track their basis each year.  If you don’t know what this is, check with Admin Books.

Officer Payroll and Contractor Payments:

□  Payroll for the officers MUST be reasonable.  If line 7 of the tax return is small or zero, the IRS will dig further.

□  Separate out Officer Wages from employee wages on your financial statements.

□  Make sure you get tax identification numbers on all independent contractors.  Have each contractor fill out a W-9, sign an agreement, invoice you and they MUST have a business license.  Don’t forget the 1099 due every January for the previous year worked.


□  If the business pays for health insurance premiums for the owners, the amount MUST be included in box 1 of the W-2.  Make sure the payroll and insurance amount is reflected in the Officer Gross Wages line of your financial statements.

□  If you pay health insurance for your employees, there is a nice credit you can take on your business return if you qualify.  You must have less than 25 employees, making an average of $50,000 or less per year.

□  Life insurance IS NOT a deduction for the business when a shareholder owns more than 2% of the company.

Bank and Credit Card Accounts:

□  Have SEPARATE bank and credit card accounts for business transactions and personal transactions; DO NOT CO-MINGLE personal and business expenses.

□  If there are deposits in the bank account that did not come from customers/clients, make sure these loans are posted on the balance sheet and NOT in your income total.

□  Reconcile all bank and credit card accounts through the end of the year so there are no un-cleared transactions in the register.  If there are, your income or expenses can be overstated, meaning they are wrong!

Business Expenses:Cash House and Car

□  If the owners use their home exclusively and regularly for business, they can deduct expenses for a home office.  Add up what is paid in rent, utilities, HOA and insurance.  No deduction is taken for mortgage interest or property taxes – these are taken on the personal return.

□  Auto deductions are based upon the percentage used for business.  It is best to track your actual costs (gas, repairs, insurance) with the miles driven.

□  Charitable contributions are deducted at the personal level, not at the corporate level.

□  Review the travel expenses.   Make sure you separate out any personal travel.  Count every travel day that you worked more than 4 hours.  Save any books/handouts from conferences.

□  All meals are 50% deductible, even those meals that were eaten on a business trip.

□  You cannot claim a “bad debt” expense if you did not file a tax return showing it as income originally.

□  When you pull a Profit and Loss statement in QuickBooks, what amount shows on the “Net Ordinary Income” line?  If it is a large profit, you need to strategize.  Modify the report to compare with last year’s numbers to get an idea of what the current year will be.

Assets and Liabilities:

□  Know when to depreciate assets over a period of years (3, 5, 7) or when to take the deduction all in one year.  For 2013, the total amount that can be taken is $159,000.  The assets must be new, not used.

□  If the shareholder loans the company money, there must be a signed note showing this agreement.  If the note is over $10,000, interest must be paid and a 1099-INT document needs to be issued.

If you need bookkeeping assistance Admin Books can review and clean up your QuickBooks file so it’s ready for the tax return!

About Renee Daggett

Renee Daggett is the founder and President of Admin Books, Inc, a bookkeeping and tax firm. She is also the author of “Your Financial Flight Plan: Pilot Your Business To Profitability”. Renee lives her life with purpose and helps her clients find peace of mind as they achieve success in their businesses.

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