Idaho S Corporation Taxation
An Idaho S corporation is a type of business entity that offers tax benefits for small businesses. It is important to choose the right structure for your business. This will affect the way you pay taxes, as well as how you manage your company.
If your business is a C corporation or an S corporation, you must pay Idaho corporate income tax in addition to sales and use taxes. The State Tax Commission (STC) collects these taxes for the benefit of the public. You can pay these taxes online or by mail. You should also keep copies of all your tax returns and related documents for at least seven years.
S corporations are a popular choice for businesses seeking the formal structure of a corporation but with pass-through taxation of profits. While not all businesses qualify, those that do can elect special S corp status with the IRS using Form 2553. The IRS provides additional information on the eligibility requirements for an S corp election on its website.
Once an S corporation is elected, it must file its Idaho tax return each year. The company must include its federal taxable income and, if applicable, its net operating loss (NOL) carryback and carryforward on the Idaho tax return. The S corporation must also pay state withholding tax on its employees and report the withholding to the STC on a monthly, semimonthly, quarterly, or annual basis, depending on the payment frequency assigned to the entity by the STC.
Idaho levies a flat 5.8% state corporate income tax. This is different from the personal income tax rate of 6.925% for owners of other entities such as LLCs, partnerships, and sole proprietorships.
How to File Idaho S-corp Tax?
A business can become an S corporation by filing IRS Form 2553 with the Internal Revenue Service. Among other things, the company must have no more than 100 shareholders; shareholders cannot be other corporations, Limited Liability Companies (LLCs), certain trusts, or nonresident aliens; and it must issue only one class of stock.
The first step in filing Idaho S corporation taxes is to obtain an Employer Identification Number (EIN) from the IRS. Once you have an EIN, you must file both federal and Idaho income taxes. You can do this online using the Idaho/Federal Electronic Filing Program or mail your return to the state tax commission. It is important to consult an accountant or professional tax preparer when preparing Idaho S corporation returns.
Aside from paying state income taxes, you must also pay employment and sales taxes if applicable. If your Idaho S corporation earns more than $50,000, you must also pay self-employment tax. This is a 15.3 percent tax on all wages and salaries paid to shareholders, which is used for Social Security and Medicare benefits. You can find more information about Idaho corporate income taxes on the state’s website.
