Tax Essentials & Insights for Solopreneurs in 2024: Navigating Your S Corp and C Corp Obligations

by Opolis

This post is provided by our partner, Opolis. Get employment tools normally reserved for traditional “employees” like legitimately premium health coverage, high-quality retirement plans, semi-monthly paystubs, annual W2s, tax compliance, and more with Opolis: https://opolis.co/freelancers-union/

It is 2023 tax time! Opolis is here to help identify pertinent deadlines and help you stay informed about any alterations in legislative and tax codes that could impact both you and your company. As always, seeking advice from a qualified tax professional is recommended for assistance in preparing your taxes. 

Upcoming Tax Deadlines You Should Know

March 15, 2024

  • Deadline for S Corporation tax filings for tax year 2023 (Form 1120-S)
  • Deadline for existing entities to elect S Corporation status for tax year 2024 (Form 2553)

March 30, 2024

April 15, 2024

  • Deadline for C Corporation tax filings for tax year 2023 (Form 1120)

S Corporations

With S Corporations, business income passes through to its owners and is taxed at your individual rate while maintaining personal liability protection. It is a blend of the best of Sole Proprietorship and Corporations from a tax and liability perspective. 

Filing IRS Form 1120-S is due by Thursday, March 15, 2024, with an extended deadline of September 15, 2024. For non-calendar year S corporations, the deadline is the 15th day of the third month after the fiscal year ends.

If you are considering further professionalizing your LLC, to be treated as an S Corporation you must complete IRS Form 2553 within 75 days of the tax year’s start (March 15) or during the preceding tax year (Late election relief is possible using Rev. Proc. 2013-30).

New to S Corporations? Here’s the basics:

S Corporations are amazing tools to provide better taxation strategy opportunities while shielding Sole Proprietors from liability risk. However, understanding the concepts is essential for those contemplating this tax designation. 

An S Corporation is not a distinct business entity; rather, it represents a specific tax election sought by an LLC or C Corporation through the IRS. Electing S Corp status involves the submission of Form 2553 (instructions below). The unique feature of an S Corporation lies in how its corporate income, losses, deductions, and credits are distributed—they flow through to the shareholders, who are the company's owners. 

To qualify as an S Corporation for tax purposes in 2024, existing LLCs and C Corporations need to submit their election within a specific timeframe—two months and fifteen days, to be exact–after the commencement of their 2024 tax year. For instance, if a company’s tax year began on January 1, 2024, the deadline for filing IRS form 2553 is March 15, 2024. New entities created in 2024 have the same two months and fifteen days after formation to make their election for that tax year. 

Time is ticking! Consulting with a tax advisor or accountant is recommended to assess the suitability of an S Corporation election for your business. 

Form 2553: How to elect S Corp Taxation Status

The following elements are needed with the submission of Form 2553:

  • Contact information.
  • The desired commencement year for the S Corporation election.
  • Information on Corporation Shareholders/LLC Members.
  • An explanation, if applicable, for any delay in filing.
  • Pertinent details about your existing corporation.

C Corporations

C Corporation Taxes require separate legal entities from business owners, leading to individual tax returns for both the entity and the individual. For those following a calendar year, IRS Form 1120 (U.S. Corporation Income Tax Return) is due by April 15, 2024. Corporations seeking an extension must request this by the original due date of April 15, 2024, which grants an extended filing deadline to October 15, 2024. Entities with fiscal years deviating from the calendar must file by the 15th day of the fourth month after their fiscal year concludes. Estimated tax payments using Form 1120-W are typically required if the corporation anticipates owing over $500 in taxes.

Corporate income taxes face a flat 21% rate, with Form 1120 requiring essential details such as the corporation's name, address, Federal Tax ID Number (EIN), asset list, and profit/loss information. 

Other Reporting Information & Key Tax Changes

New filing requirement for all entities in 2024:

  • Effective Jan. 1, 2024, FinCEN is now requiring that all businesses comply with the CTA’s Beneficial Ownership Information Reporting Rule by adding your ownership information to a federal database.
  • Our friends at Freelancers Union put together THIS GUIDE to help you better understand your filing obligations to avoid hefty fines and penalties.
  • Entities that existed before January 1, 2024, will have until January 1, 2025, to comply
  • Those created on or after January 1, 2024, will have 90 days from the date of formation to provide this information to FinCEN.

Key Changes for 2024 Business Taxes:

  • Standard mileage rates: Increased to 67 cents for 2024 from 65.5 cents in 2023.
  • Payment apps and online marketplaces: The IRS delayed the requirement for 1099-K forms for digital payments over $600; the new reporting threshold phased in at $5,000 for 2024.
  • Meals and entertainment deduction: Reduced to 50% for the tax year 2023; entertainment expenses are no longer deductible.
  • Pass-through business owners: Eligible for a 20% deduction of qualified business income with increased income caps for 2024.
  • Bonus depreciation: Decreased to 80% for the tax year 2023, reducing by 20% each subsequent year.
  • Section 179 depreciation: Limit of $1,160,000 for 2023; note separate limits for vehicles.

Opolis Makes Taxes Simple for Solopreneurs

Thinking of becoming an Opolis Member?

When you’re a Member of the Opolis Employment Commons, you immediately gain access to our suite of legitimately premium benefits like Medical, Dental, Vision, Life & Disability, and many more. We also simplify your taxes as a solopreneur.

Automatic Tax Deductions: 

As a member, Opolis automatically calculates your payroll tax withholdings (Employer and Employee portions of FICA, FUTA, SUTA, State & Local taxes, etc.) and remits these amounts to the proper jurisdictions on your behalf. No payroll tax licenses are needed under your EIN with Federal, State, or Local jurisdictions.

We Make Tax Filing Easy: 

As your Employer of Record, we will send you a W2 as an Employee of Employment Commons LCA at the end of each calendar year. You will also receive the accounting information necessary to book your entity’s payroll expenses as business expenses.

For more information on how Opolis can help you navigate this tax season, visit https://freelancersunion.org/opolis/ or reach out to Membership@opolis.co mentioning Freelancers Union, and we’ll be happy to assist. Happy Filings!

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