Lesson: Characteristics of S Corporations

In this engaging lesson, Nick Palazzolo, CPA, breaks down the filing requirements and tax implications for S Corporations, emphasizing the importance of understanding Form 1120-S and the calendar deadlines for filing. Nick makes sense of why S Corporations don't calculate net operating losses at the entity level, focusing instead on how these losses affect shareholders individually. He clarifies the automatic categorization of new entities as C Corporations and the steps required to achieve S Corporation status. Moreover, Nick delves into the intricacies of shareholder basis in S Corporations, noting the crucial differences from partnerships, particularly with regard to how debt impacts basis calculation. Through practical examples, this lesson becomes an invaluable guide on managing the flow-through of income, gains, losses, and deductions from S Corporations to the individual shareholders’ tax situations.