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Capital, Income, and Expenses- S Corporation Accounting

October 12, 2018

When you run an S Corporation, you know that tax season can get a little more complicated for you than it does for a lot of other people. As much as you love running your business, tax season can have you thinking wistfully about the old days. The good news is that there are services available to help you. In the meantime, when it comes to S Corporation Accounting, here are a few things you should think about.

S-Corporation Accounting - Capital or Income?

One thing that owners of S Corporations have to consider is which profits count as income and which ones count as capital gains. For most businesses, profits fall under the category of "income," which may get expensive during tax season, but at least it's fairly straightforward. In an S Corporation, however, income is designated as a "capital gain" instead. Usually, capital gains result from the sale of a capital asset or from certain types of passive income. In an S Corporation, however, proceeds from sales fall under the capital gains umbrella. What does this mean for S Corporation accounting? A lot, when it comes to your taxes. In fact, it may have been a major part of the reason you chose to classify your business as an S Corporation in the first place. Capital gains often hold more value than ordinary income, in part because they are not taxed as heavily. This means, of course, that you get to save a lot of money when tax season arrives. However, it also means that you probably spend a lot more time working on your taxes than most of your friends do.

Expenses for Tax Purposes

Another thing you'll have to consider in your S Corporation accounting is your business expenses, which, like your income, will work differently for your business than it will for other types of businesses. Once again, your S Corporation status will save you money in this department. And once again, it might also cause you a few headaches. Unlike people who run other sorts of corporations, you won't be able to consider your expenses in and of themselves. You'll also have to consider how your expenses add up after you have accounted for your shareholders.

Clients of Halon Tax Grow Their Revenue by 18%/yr on Average

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Let Us Help With the Extra Work

As the owner of an S Corporation, you have to go through a lot of extra steps when it comes to accounting. And tax season can be an absolute nightmare. The good news is that we can take a lot of that extra work off your shoulders for you.  Our tax software service is uniquely suited to S Corporations and other companies that have to deal with a few added complications during tax time. Most tax software is designed for people who only have to deal with a single W2 form. If you don't fall into that category, you often have to do some finagling to make the software work for you. That's not true with Halon Tax. With us, even S Corporation owners can take care of their tax needs with just a few clicks. Even better, we also provide backup from real CPAs who will double check and make sure that you get the refund that you deserve. Are you ready to simplify your taxes? Contact us today to get started.

Christopher Ragain, CPA

Christopher Ragain, CPA is the founder of Halon Tax and one of the industries top authorities on micro-business taxation and tax planning.

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