DIY S Corp Taxes: Can You Handle the Heat?

Filing business taxes yourself is a bold move that can save on accounting fees, but for an S Corp, it’s a major step up in complexity from a standard Schedule C. If you’re a single-member LLC that has made the S-election, you’ve moved into the world of separate entity reporting.

The Main Event: Form 1120-S

Unlike a "disregarded" LLC, an S Corp must file its own annual return: Form 1120-S. This form reports the business’s income, deductions, and credits. Even if you are the only owner, you must still issue yourself a Schedule K-1. This document "passes through" the profits to your personal Form 1040, where you finally pay the tax.

The "Reasonable Salary" Trap

The biggest DIY pitfall is the payroll requirement. To enjoy the tax savings of an S Corp, you must pay yourself a "reasonable salary" via W-2. If you just take "draws" like a sole proprietor, the IRS can reclassify those payments, potentially leading to back taxes, penalties, and interest.

Don't Forget the Deadlines

Mark your calendar: S Corp returns (Form 1120-S) are generally due March 15th—a full month before personal returns. Missing this can result in steep per-month, per-shareholder penalties.

The Bottom Line

Self-filing is possible with robust accounting software, but it requires meticulous bookkeeping and an understanding of payroll taxes. If your books aren't reconciled or you aren't comfortable with W-2 filings, the "savings" of DIY might be erased by a single IRS notice.

Disclaimer: This post is for informational purposes only and does not constitute tax or legal advice.