What do you need to know about "S-Corporations" and how do they differ from the "C-Corporations" explained in the previous blog? TheFamily Law News periodical sums it up as follows:
"S-Corporation tax returns also include a line for compensation to the officers; however it is Line 7 instead of Line 12 as it is on the C-Corporation returns. Unlike the C-Corporation, the compensation by officer is not reflected on Schedule E, so the Form W-2s or other payroll data for the officers must be requested in order to identify each officer's compensation in situations when there is more than one office on payroll. In addition, shareholder distributions are reflected on the Schedule K-1, Line 16 and marked with a 'D.' These distributions represent cash distriubutions received by each shareholder in the year under investigation, which are in addition to any salary received by the officers as previously discussed. This amount does not always reflect the amount on Line 1 of the Schedule K-1 (ordinary business income or loss). Accordingly, when using DissoMaster or other support calculation software, adjustments may need to be made in order for the computer program to calculate the taxes correctly."