S Corp Earnings

Hi! It’s TaxQuips time from TaxMama.com.

Today TaxMama hears from Sam in the Tax Parlor who tells us. “I have been looking over the instructions for 1120S and I am still confused. My wife and I started an S Corp this year, though we are not bringing in any profits yet. We do have expenses, such as start-up costs, etc. Do we still need to complete 1120S, regardless of the situation? We cannot assign ourselves salaries, since we are not generating profits, right? Also, will we need to complete schedule C to document our expenses? If not, how do we report the expenses incurred?”


Dear Sam,

You say you’re not brining in any profits. But are you generating any sales?

That’s important when it comes to deciding how to file the tax return – the 1120S.

Regardless, you must file – the corporate tax return – the 1120S. If you were running a business before you started the corporation, you may still have to file a Schedule C for the previous business.

As to your start up costs, they are only deductible if the company has opened for business (i.e. you are selling something – products or services or…). If you haven’t started, you can’t deduct the costs you incur before the company opens for business. You’d have to wait until next year.

See more about Start-Up Costs here:

Even if you don’t have any deductible expenses, or income, you must file the tax return every year.

Frankly, my friend, when it comes to corporate tax returns, it is my opinion that you should never do them yourself. Please take this to a good local tax professional who understands your business and your industry.

And remember, you’ll find answers to lots of questions about dependents and other tax information, free. Where? At TaxMama.com

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