What is my tax classification and what does it mean?

 Form 1040: U.S. Individual Income Tax Return

Who Files It?
- All U.S. residents with U.S. and (or) Foreign income 
- Certain non-residents with U.S.-sourced income

What It Reports?
- Income: Wages (Box 1 of W-2), investments, business or self employed income, rental income etc
- Adjustments: IRA contributions, student loan interest, medical expenses and other qualified deductions
- Tax Credits: Child tax credit, earned income credit, education credits
- Payments: Withholding, estimated tax payments

Key Sections:
1. Filing Status: Single, Married Filing Jointly, Head of Household, etc.
2. Dependents: Claiming children or relatives
3. Income: Lines 1-9 for various income sources
4. Deductions: Standard vs. itemized (Schedule A)
5. Tax and Credits: Tax calculation and applicable credits
6. Refund/Balance Due: Final settlement with IRS

Deadlines & Extensions
- Due: April 15 (October 15 with extension)
- Extension Form: Form 4868 (automatic 6-month extension)

⚠️ Common Mistakes
- Incorrect filing status selection
- Incorrect deductions
- Missing investment income (1099-INT/DIV)
- Forgetting to sign the return (if paper filling)

 Form 1120: U.S. Corporation Income Tax Return

Who Files It?
- Traditional Corporations.
- Incorporated businesses electing C-corp status by filling 8832 form.

Key Features
- Corporate Tax: Entity pays taxes on profits (21% flat rate)
- Double Taxation: Profits taxed at corporate level and again when distributed as dividends
- Shareholder Impact: Dividends reported on personal returns (Form 1040)

What It Reports?
- Income: Gross sales, rents and other income
- Deductions: Cost of goods sold, salaries, rent, advertising, depreciation
- Tax Computation: Taxable income × 21%

Deadlines & Extensions
- Due: April 15 (October 15 with extension)
- Extension Form: Form 7004 (6-month extension)

When to Choose C-Corp Status
- Seeking venture capital funding
- Planning to reinvest profits
- High-income owners
- Offering multiple classes of stock

Compliance Requirements
- Reasonable Salary: Shareholder-employees must receive W-2 wages
- Basis Tracking: Shareholders must track stock and debt basis
- Annual Meetings: Required corporate formalities

Form 1120S: U.S. Income Tax Return for an S Corporation

Who Files It?
- S Corporations (election made with Form 2553)
- Limited Liability Companies (LLCs) electing S-corp status by filling 2553 form

Key Features
- Pass-Through Taxation: Profits/losses flow to shareholders
- No Corporate Tax: Avoids double taxation
- Shareholder Requirements: Max 100 shareholders, all must be U.S. citizens/residents

What It Reports?
- Business Income: Similar to Form 1120
- Shareholder Allocations: Profits divided based on ownership %
- Schedule K-1: Issued to each shareholder showing their portion

Deadlines & Extensions
- Due: March 15 (September 15 with extension)
- Extension Form: Form 7004 (6-month extension)

Compliance Requirements
- Reasonable Salary: Shareholder-employees must receive W-2 wages
- Basis Tracking: Shareholders must track stock and debt basis
- Annual Meetings: Required corporate formalities

Form 1065: U.S. Return of Partnership Income

Who Files It?
- General partnerships
- Limited partnerships
- Multi-member LLCs (by default)
- Some joint ventures

Key Features
- Pass-Through Entity: Files informational return only
- No Income Tax: Partners pay tax on personal returns
- Flexible Allocations: Profit-sharing doesn't need to match ownership %

What It Reports?
- Business Income/Expenses: Similar to corporate forms
- Partner Capital Accounts: Tracks contributions/distributions
- Schedule K-1: Issued to each partner showing allocated income

Deadlines & Extensions
- Due: March 15 (September 15 with extension)
- Extension Form: Form 7004 (6-month extension)

 Partnership vs. S-Corp Comparison

Decision Factors:

1. Liability Protection: Corps and LLCs provide asset protection.

2. Tax Savings: S-Corps can reduce self-employment taxes.

3. Growth Plans: C-Corps better for raising capital.

4. Administrative Burden: Partnerships simplest, C-Corps most complex.

❓ Frequently Asked Questions

Q: Can I switch from a partnership to an S-Corp later?
A: Yes! File Form 2553 (with shareholder consent) by March 15 for that tax year.

Q: What's the penalty for filing Form 1120S late?
A: $220 per month per shareholder (up to 12 months), plus interest.

Q: Do single-member LLCs file Form 1065?
A: No - they report on Schedule C of Form 1040.

Q: Can an S-Corp have non-U.S. shareholders?
A: No - all shareholders must be U.S. citizens or residents.

Q: What's the main advantage of a C-Corp?
A: Ability to retain earnings at corporate tax rate (21%) vs. individual rates (up to 37%).

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