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  1. #1
    Join Date
    Jan 2016

    Default How to File a Business Tax Return, IRS Form 1120, for a Business That Made No Money

    My LLC S-Corp has 2 shareholders, myself and my husband. All the income that came in to the business in 2015 went right back out to the independent contractors, myself and another individual. On the 1120S do I enter all the income ( let's just say $10,000) in 1a and do I enter the same amount $10,000 in box 8 (deductions- salaries and wages)? I'm really confused how to do this correctly so that I won't get in trouble with IRS, and I have no money to hire a CPA to help.
    I was thinking that I need to fill out a 1099-MISC for myself and the other individual so that we can pay for our own taxes as independent contractors. Is this correct? And I still need to file Schedule K-1 for myself and my husband since we are both shareholders right? And on those forms do I just enter $0? since I will be filing my own personal taxes from the 1099?

  2. #2
    Join Date
    Oct 2014

    Default Re: How to File a Business Tax Return, IRS Form 1120, for a Business That Made No Mon

    First of all, it is unlikely, I think, that you were truly an independent contractor of the corporation. You are a shareholder and likely were acting in the role of an officer of the corporation. If you were properly classified as an employee then the amounts you were paid should have been treated as wages and the corporation should have withheld and paid employment taxes and unemployment tax. In that case you would be issued a W-2, not a 1099. See the IRS discussion on shareholders and officers of S-corporations. The corporation would in that case deduct the wages paid to you as an officer on line 7 for compensation paid to officers and would deduct the employment taxes it paid (not the part withheld from employee pay, which is part of the wages) on the line for taxes paid.

    For amounts paid to true independent contractors, those are reported on Line 19 for other deductions and you attach a statement that lists all the deductions that are included. On the attachment you would have a line for payments to contractors. The corporation would have to issue those contractors a Form 1099-MISC.

    The gross income of the corporation is, of course, reported on Line 1a.

    Frankly, if you are going to operate as a S-corporation, then you need to ensure it is properly run as a corporation and this includes making sure the taxes are handled correctly. You ought to find the money to consult a tax professional about whether you are (as is very likely) and employee of the corporation and whether that other person is an employee and then how to handle the taxes based on that. If you get it wrong it can be costly to the corporation and you, more that it will cost you to get good advice and do it right. If all the money is going for personal services provided by you and the other person anyway, why did you elect S-corporation status in the first place?

  3. #3

    Default Re: How to File a Business Tax Return, IRS Form 1120, for a Business That Made No Mon

    With regard to the question about the business making no money, you should be aware that the filing requirements for corporations do not work they way they do for individuals. A corporation must file regardless of whether it made money or not, unlike an individual. This is particularly true for an S corporation. Even if it has no economic activity at all in a given year, as long as it is legally in existence it needs to file.

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