Tax Basics for S Corporation Therapists

As a private practice therapist, you're constantly having to juggle between your caseload of clients and managing the financial health of your practice, whether that's handling bookkeeping or filing your taxes. During tax season in particular, there is often so much financial information to wrap your brain around that it can be hard to figure out where to start –– especially if you only have a few minutes between clients to dedicate to financial tasks.

At Heard, we strive to make tax season information easily digestible for you. If you're filing your taxes this year as an S corporation, here are your most important questions answered.

How do I file my taxes as an S corporation?

You will complete Form 1120 S, which is the U.S. Income Tax Return for an S Corporation. It is a five page form.  

In order to complete the form, you will need a few pieces of information:

• Your date of incorporation
• A list of your products or services
• Your business activity code and your Employer Identification Number (EIN)
• The date you elected S corp status: This will be January 1 if your business operates on a calendar-year basis. It will be on the first day of your fiscal year if you operate on a fiscal-year basis.
• Financial statements: A profit and loss statement and a balance sheet.
• Your accounting method: accrual or cash-basis
• Independent contract payments: Any payments to independent contractors totaling at least $600 for the year will need to be reported on the form. You also must provide contractors with 1099 forms.
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What is included in the Form 1120S?

Page one of Form 1120S is divided into four distinct sections.

1. The top section is where you input all of your contact information, incorporation date, S Corp election, assets, etc.
2. The income section will ask about your company’s earnings for the year, which can be found on the income statement.
3. The deductions section is where you include all of your business deductions and write-offs for the year, which can also be found on the income statement.

There are six schedules attached to the 1120S. The first three are mandatory to complete:

1. Schedule B, “Other Information,” refers to your accounting methods, stock ownerships, gross receipts, and a host of other questions.
2. Schedule D is for reporting any capital gains or losses.
3. Schedule K brings together information about your business income, deductions, and any tax credits your business qualifies for.

The three optional schedules on the 1120S include:

• Schedule L, which is your business’ balance sheet. If you have not had more than $250,000 in receipts this year, or held more than $250,000 in assets, you do not need to complete this. This will be designated on Schedule B.
• Schedule M-1 is where you report any adjustments and discrepancies between reported income (or losses) on your books, and what you are reporting on your taxes.
• Schedule M-2 is where you report retained earnings, or rather, what you invested back into your business.
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What is the filing deadline for my S corporation's taxes?

The 2021 filing deadline for Form 1120S is March 15, 2021. This filing can occur electronically or by mail. You can file a six month extension if need be.

Note: States elect different tax treatments of S corporations. While there are clear advantages that make S corporations attractive, there are differences at a state level, where some states follow the S corporation designation and others treat S corporations as C corporations or LLCs for tax purposes.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.