Subchapter S Corporation Facts
Subchapter S Corporation Filing Requirements: Every corporation (except exempt) must file, regardless of the amount of income or loss. It must file even if it stops conducting business. Filing ends when totally dissolved.
Subchapter S Corporation Filing Deadline: By the 15th day of the 3rd month following the close of its tax year.
Subchapter S Corporation Extension Deadline & Form Number: Form 7004 automatically extends the deadline 6 months. A second extension is not available.
Subchapter S Corporation Penalties:
• $50 penalty per shareholder for Subchapter S corporation's failure to provide K-1's to the shareholders.
• If Subchapter S corporation taxes are due, a late filing penalty may be imposed equal to 5% of tax owed per month up to 25%.
• A late payment of tax penalty may also be imposed equal to one-half of 1% per month up to 25%.
Letter Ruling 9627004: Unlike a partnership, the IRS Code does not impose a penalty for late filing of a Subchapter S corporation tax return. Penalties for late payment or late issuance of K-1s still apply.
Subchapter S Corporation Tax Rates: S corporation profit or loss is passed through to shareholders and reported on the shareholders’ tax returns. A Subchapter S corporation generally does not pay tax at the corporate level.
Exception: If the Subchapter S corporation was previously a C corporation, the Subchapter S corporation may be liable for tax on excess net passive income, certain capital gains, or built-in gains.
Subchapter S Corporation Estimated Tax Requirements: Shareholders are responsible for payment of estimated tax on their personal returns. The Subchapter S corporation must pay estimated tax payments if corporate level taxes apply.
No Double Tax On Profits: A Subchapter S corporation conducts business as a corporation, but is taxed in the same manner as a partnership. A major advantage of a Subchapter S corporation is that income passed through to shareholders avoids the double taxation that occurs with a C corporation.