C Corporation & S Corporation Income

C Corporations

Standard corporations, also referred to as C Corporations, are businesses that have elected to incorporate and become their own separate legal entity. This means that a person does not own a corporation; instead they can own shares and/or be an employee of the corporation.

Wages earned by an employee of a corporation are entered as an earned income record. This is not a self-employment income source.

Shareholders of a corporation typically earn dividend or other miscellaneous sources of income from the shares they own. These sources may be reported as income on several different IRS forms, the most common being the 1099 DIV and the 1099 MISC.

The 1120 U.S. Corporation Income Tax Return IRS form is used by the corporation to report the corporation’s profit and loss. This form does not verify the client’s individual income.

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S Corporations

Like the C Corporation, an S Corporation is not considered self-employment income. An S Corporation is a small business that elects to incorporate.

The 1120S U.S. Income Tax Return for an S Corporation IRS form is used by the S Corporation to report the Corporation’s profit and loss. This form does not verify the client’s individual income.

For DTA purposes, procedures on how to process S Corporation income are the same as the C Corporation procedures above.

Note: Earned income from both C and S Corporations is entered as wages into BEACON. Any additional income that may be received from this income source must be entered as a separate record and under the source it is received from (e.g. dividend income is entered separately as a dividends from securities record).

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Last Update: June 29, 2018