Roseville + Sacramento Accountant/CPA for S Corps
Cook CPA Group
Every successful corporation must keep meticulous records regarding various financial issues. S corporations need to account for company income and expenses, shareholder capital, company assets, and many other factors. A corporation that does not maintain adequate accounting records puts itself at risk of violating tax regulations and invite the possibility of being audited. If you need assistance managing the financial situation of your company, you should consult with an experienced Roseville accountant for S corporations.
Cook CPA Group is prepared to offer your business the accounting services it needs to ensure the business operates as efficiently as possible. Our firm acknowledges the intricacy of properly maintaining company finances and staying compliant with various tax regulation, and we are here to help you streamline the process. To schedule a free consultation to discuss your corporation’s accounting practices, contact Cook CPA Group at (916) 259-5496, or contact us online.
Accounting Tips for S Corporations
S corporations are legal entities that operate practically the same as C corporations with a few exceptions. One of these exceptions is that the federal income taxes for S corps are taxed on its individual shareholders’ tax forms. The reason for this is because S corps are entities that operate on a pass-through tax system.
Pass-through tax systems mean that federal income taxes are passed through the corporation to the owners of the corporation. This is just one aspect of ensuring your corporation remains compliant with the Internal Revenue Service and other state agencies. The following is a list of accounting tips that should be utilized by S corps.
Selecting an Accounting Method
As mentioned, S corps and C corps operate in substantially the same manner, meaning that corporate income and expenses must be reported at the corporate level of the business.
There are multiple accounting methods that an S corp can utilize when handling income and expense reports. Many S corps use the accrual method of accounting. Accrual basis accounting is when revenue is reported on an income statement when it is earned but not yet received. For example, if you enter into a business agreement with a client, the accrual method of accounting would include the revenue generated from that agreement before the money for services is provided.
Alternatively, an S corp could use the cash accounting method. Using the cash accounting method, revenue is reported on the income statement once the money for service is received. There are other methods of accounting not listed here.
Shareholder Capital Accounts
It is necessary for every S corp to have an accounting plan that efficiently handles the capital accounts for all shareholders. This means that the business must maintain thorough records that detail the investments of each shareholder from money, loans, and property. Shareholder capital accounts need to accurately detail the shareholder’s equity investments and liabilities to the S corporation.
Capital accounts are important when managing the corporation’s tax liability and other financial issues. Once capital accounts are documented on the S corp’s balance sheets, they should be reported on IRS Form 1120S Schedule K-1.
If a corporation does not have an adequate amount of capital investments, this can have various impacts on the business. For example, if an S corp has not secured an adequate amount of capital investments, this can affect whether certain business losses can be claimed as deductible on an income tax return.
Choosing a Compensation Method
S corporations provide a variety of liberties when it comes to taxation and compensation for business owners. One important aspect of S corps is that shareholder income is not categorized as self-employment income for federal income tax purposes. This exempts owners of an S corp from having to pay quarterly taxes for Social Security and Medicare taxes.
The way to accomplish this would be to accept a distribution of income instead of receiving a steady salary from the corporation. However, the IRS has implemented tax laws that aim to prevent the owners of S corps from taking advantage of this benefit.
There are various other factors that must be considered when dealing with accounting issues for an S corporation. The Cook CPA Group accountants are ready to work with your business to identify and resolve any financial issues that your business needs help with.
Work with Our Experienced Sacramento CPAs for S Corporations
If you need accounting services for your corporation, you should contact an experienced Sacramento CPA for S corp. At Cook CPA Group, our team of accountants possesses decades of combined accounting experience, and we would be proud to use this experience to represent your corporation. Our firm has worked with businesses in Roseville, Sacramento, and across California and we are ready to work with your company. To schedule a free consultation, call Cook CPA Group at (916) 259-5496, or contact us online.