How Does an S Corporation Pay Income Tax?
An S corporation is a special kind of corporation that pays income taxes at the personal tax rate of the owners. Answer: An S corporation pays taxes in the following process: 1. The corporation files its taxes on Form 1120S, showing income and deductible expenses and including Schedule K, which lists the items which are distributed among shareholders. 2. A Schedule K-1 is prepared for each shareholder showing that person’s pro rata share of the profits/losses of the business for that year. 3. The Form 1120S and all K-1s are filed with the IRS as an information return. 4. The shareholder reports s corporation income on Line 17 of his/her Form 1040. How Does a Corporation Pay Income Tax? A corporation is a separate entity from its owners and shareholders. As a separate entity, the corporation’s owners do not pay the taxes for the corporation. Answer: A corporation pays income tax by filing a corporate tax return on Form 1120 and paying the taxes as indicated by this return. Corporate inc
