Operational Compliance Overview

S Corporations face a unique set of strict compliance requirements. Unlike sole proprietorships, S Corps must navigate complex payroll mandates, rigid filing deadlines (Form 1120-S), and strict eligibility rules. This dashboard provides a high-level operational summary. Use the navigation to drill down into specific filing dates, compensation strategies, and penalty calculations.

Next Major Deadline

⚠

March 15

Form 1120-S & Schedule K-1

Top Audit Risk

🔍

Reasonable Compensation

Underpaying officer salaries to avoid payroll tax is a primary IRS target.

Penalty Risk

💲

$220+

Per shareholder, per month late.

Interactive Status Check: Is Your Election Safe?

S Corporation status is fragile. An entity can inadvertently lose its S election by violating specific IRS rules. Toggle the scenarios below to see if your status is at risk.

Shareholders > 100?
Issued Preferred Stock (2nd Class)?
Shareholder is Non-Resident Alien?
Shareholder is C-Corp or Partnership?
✓

Status: Secure

Based on current inputs, the corporation meets standard eligibility requirements.

The Annual Compliance Lifecycle

S Corp compliance is a year-round operational task, not just a tax-time event. The timeline below breaks down the fiscal year. Select a Quarter or Month to view specific filing obligations. Missing these dates triggers the penalties analyzed in the "Risks" section.

Select Period

Primary Filing

1120-S

U.S. Income Tax Return for an S Corporation.

Due March 15

Strategic Analysis: Reasonable Compensation

One of the greatest advantages of an S Corp is the ability to split income between Salary (subject to FICA/Payroll taxes) and Distributions (not subject to FICA). However, the IRS requires shareholders working in the business to pay themselves a "Reasonable Compensation."

The Trap: Taking $0 salary and 100% distribution to avoid payroll taxes is a major red flag. The simulator below demonstrates how adjusting your salary impacts your total tax liability and your estimated audit risk.

Compensation Simulator

$100,000

Fixed for this simulation to demonstrate ratios.

0% (High Risk) 100% (High Tax)
Estimated SE/Payroll Tax: $6,120
Estimated Audit Risk: High

Tax Liability Composition

*Figures are estimates for educational purposes only. Assumes approx 15.3% SE/Payroll tax rate. Income tax excluded for simplicity.

Risk Quantification: Penalties & Compliance

Failing to file Form 1120-S on time is expensive. The penalty is calculated based on the number of shareholders multiplied by the number of months late. This multiplier effect can result in massive fines for relatively small delays.

Penalty Calculator

Estimated Late Filing Penalty

$1,320

(Based on approx $220/shareholder/month)

Cost Accumulation Over Time

Other Critical Compliance Mistakes

1

Basis Issues

Shareholders taking losses that exceed their stock and debt basis. This triggers disallowed losses and potential taxes.

2

Disproportionate Distributions

Distributing cash strictly by ownership % is mandatory. Varying this creates a "second class of stock," terminating the S election.

3

Passive Income Sting

S Corps with prior C Corp earnings can face a 21% tax and loss of status if passive income exceeds 25% of gross receipts for 3 years.