CPA for S Corporation Owners in Los Angeles
MangoBooks, a Los Angeles CPA firm, provides payroll, bookkeeping, tax planning and tax returns for S corporations and their shareholder-employees. We set the owner's salary with the owner and run it through payroll, keep the company's books, prepare Form 1120-S and California Form 100S with a Schedule K-1 for each shareholder, and prepare the owner's personal return from the same figures. A business tax return typically costs $2,000–$3,500 per year, payroll $175–$400 per month, and the owner's individual return with K-1s $2,500–$4,500.
Every S corporation engagement is led by Felix Park, CPA, MBA, a licensed California CPA. The rules an S corporation owner deals with every year, reasonable compensation, California's 1.5 percent tax, the Form 2553 deadline, the pass-through entity election and the owner's estimated payments, are set out below.
Situations We Handle
Owner salary and payroll. S corporations must pay reasonable compensation to a shareholder-employee in return for services before non-wage distributions may be made to that shareholder, and the IRS may reclassify distributions as wages. The factors the IRS lists include training and experience, duties and responsibilities, and the time and effort devoted to the business. We set the salary with the owner and run it through payroll: withholding each pay period, Form 941 each quarter, the DE 9 and DE 9C with the EDD, and Form W-2 by January 31, which for 2026 wages is February 1, 2027. See Payroll and Reasonable Salary for S Corporation Owners.
The company's return and the owner's return together. Form 1120-S and Form 100S are due on the 15th day of the 3rd month after the tax year ends, March 15 for a calendar year, with an extension to the 15th day of the 9th month; the tax is still due on the original date. We prepare the company's return and each shareholder's Schedule K-1, then the owner's Form 1040 and Form 540 from the same year-end figures, so the wages on the W-2, the K-1 and the personal return all come from one set of records. See Business Tax Preparation.
An LLC considering the S election. An LLC that files Form 2553 no more than 2 months and 15 days after the beginning of the tax year, or at any time during the preceding tax year, is treated as a corporation from the election's effective date; a late election can be accepted under Rev. Proc. 2013-30 within 3 years and 75 days of the intended effective date. After the election the company runs payroll for its owner, keeps a separate bank account and separate records, and pays California 1.5 percent of its income instead of the LLC fee. We compare the tax under each structure with the owner's figures first; the election itself is part of LLC or S corporation setup, from $950 plus state fees. See Business Formation.
The pass-through entity election. For tax years through 2030, an S corporation can elect each year, on a timely filed original return, to pay California 9.3 percent of its qualified net income at the entity level; the consenting shareholders claim a credit for their share on their own California returns. The first payment, $1,000 or 50 percent of the prior year's elective tax, whichever is greater, is due June 15 of the tax year, and from 2026 a missed or short June payment reduces the credit by 12.5 percent of the unpaid share rather than ruling out the election. We review the election each spring with the owner's figures. See Tax Planning.
The shareholder's estimated payments. A shareholder who expects to owe $1,000 or more of federal tax generally makes estimated payments, due April 15, June 15, September 15 and January 15. California requires estimates when at least $500 ($250 if married filing separately) is expected, paid 30, 40, 0 and 30 percent on the same four dates, and once the current year's California adjusted gross income reaches $1,000,000 ($500,000 if married filing separately) they must cover 90 percent of the current year's tax. When we keep the books, the year-to-date profit and loss statement feeds each payment. See Bookkeeping.
California Specifics
- The 1.5 percent tax. California taxes an S corporation's net income at 1.5 percent, with an $800 minimum franchise tax. The minimum is waived for a new S corporation's first taxable year, though first-year income is still taxed at 1.5 percent.
- Separate account and records. California requires an S corporation to keep a separate bank account and separate records.
- Form 100S. Due on the 15th day of the 3rd month after the tax year ends, with an extension to the 15th day of the 9th month; payment is due on the original date.
- Late Form 100S. The late-filing penalty for an S corporation is $18 per shareholder for each month or part of a month the return is late, up to 12 months.
- The federal election carries over. A corporation that elects federal S corporation status and has a California filing requirement is treated as having made the California S election on the same date.
- Pass-through entity elective tax. 9.3 percent of qualified net income, elected each year on a timely filed original return, available for tax years through 2030, with the first payment due June 15.
Federal Rules
- Reasonable compensation. Before non-wage distributions may be made, the S corporation pays a shareholder-employee reasonable compensation for services, judged on factors such as training and experience, duties and responsibilities, time and effort devoted to the business, and what comparable businesses pay for similar services. Distributions can be reclassified as wages.
- What an S corporation is. Income, losses, deductions and credits pass through to the shareholders. The corporation may have no more than 100 shareholders and only one class of stock, and Form 2553 must be signed by all of the shareholders.
- Form 2553. Due no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year; late-election relief under Rev. Proc. 2013-30 is available when the form is filed within 3 years and 75 days of the intended effective date.
- Late Form 1120-S. When no tax is due, the penalty is $255 for each month or part of a month the return is late, up to 12 months, multiplied by the number of shareholders; when tax is due, 5 percent of the unpaid tax for each month is added, up to 25 percent of the unpaid tax.
- Payroll filings. Form 941 each quarter, the DE 9 and DE 9C with the EDD, and Forms W-2 by January 31 (February 1, 2027 for 2026 wages). A business registers with the EDD as an employer within 15 days after paying more than $100 in wages in a calendar quarter.
- Estimated payments. Shareholders who expect to owe $1,000 or more generally pay estimated tax in four installments, due April 15, June 15, September 15 and January 15.
Where We Work
Our S corporation work covers Los Angeles, including the San Fernando Valley communities around our office in Woodland Hills and the Conejo Valley. Meetings are scheduled in advance, and documents are exchanged electronically. An S corporation in the City of Los Angeles also files the city's business tax renewal by the last day of February, or the following Monday when that day is a Sunday, and a registered business with gross receipts of $100,000 or less pays no city tax when it renews on time; see City of Los Angeles Business Tax: Registration and Renewal, CPA in the San Fernando Valley and CPA for the Conejo Valley.
Services Involved
- Payroll: the owner's salary, withholding, Forms 941 and W-2
- Business Tax Preparation: Form 1120-S, Form 100S and each shareholder's K-1
- Individual Tax Preparation: the shareholder's Form 1040 and Form 540
- Tax Planning: the salary review, estimated payments and the pass-through entity election
- Bookkeeping: monthly books that separate wages, distributions and expenses
- Business Formation: Form 2553 for an LLC or corporation electing S status
- Financial Statements: statements for the shareholders or a lender
Fees
| Service | Typical range |
|---|---|
| Business tax return (1120-S, 1065 or 1120 with the California return) | $2,000–$3,500 per year |
| Payroll | $175–$400 per month |
| Owner's individual return with K-1s | $2,500–$4,500 |
| Monthly bookkeeping | $650–$1,400 per month |
| LLC or S corporation setup, including the S election for an existing LLC | From $950 plus state fees |
Tax planning is quoted after a consultation. Fees depend on the scope of work and are set out in a written engagement letter before work begins. See the Fee Guide.
Frequently Asked Questions
Do I have to be on payroll as an S corporation owner?
Yes, if you work in the business. An S corporation must pay reasonable compensation to a shareholder-employee in return for services before non-wage distributions may be made to that shareholder, and the IRS may reclassify distributions as wages when it is not. We set the salary with you, run it through payroll with the required withholding and filings, and report it on Form W-2. See Payroll.
How is an S corporation owner's salary set?
From the IRS factors for reasonable compensation: training and experience, duties and responsibilities, time and effort devoted to the business, and what comparable businesses pay for similar services. We review the salary with the owner when payroll is set up and again during tax planning as the year's income becomes clear. See Tax Planning and Reasonable Salary for S Corporation Owners.
What California tax does an S corporation pay?
California taxes an S corporation's net income at 1.5 percent, with an $800 minimum franchise tax. The minimum is waived for a new S corporation's first taxable year, though first-year income is still taxed at 1.5 percent, and California requires the corporation to keep a separate bank account and separate records.
When are Forms 1120-S and 100S due, and what are the penalties for filing late?
Both are due on the 15th day of the 3rd month after the tax year ends, March 15 for a calendar year. An extension runs to the 15th day of the 9th month, but tax owed is still due on the original date. A late Form 1120-S costs $255 for each month or part of a month, up to 12 months, multiplied by the number of shareholders when no tax is due, plus 5 percent of any unpaid tax per month when tax is due, up to 25 percent of the unpaid tax. California charges $18 per shareholder for each month the Form 100S is late, up to 12 months.
Can MangoBooks prepare the company's return and my personal return together, and what does it cost?
Yes. The business return, Form 1120-S with Form 100S and a Schedule K-1 for each shareholder, typically costs $2,000–$3,500 per year, and the owner's individual return with K-1s $2,500–$4,500. Payroll for the owner's salary is $175–$400 per month. Each fee is set out in a written engagement letter before work begins. See the Fee Guide.
Should my LLC elect S corporation status, and by when?
It depends on the numbers: after the election the company pays its owner reasonable compensation through payroll before distributions and pays California 1.5 percent of its income with an $800 minimum, while an LLC pays the $800 annual tax and, from $250,000 of total California income, the LLC fee. Form 2553 is due no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the preceding tax year, and a late election can be accepted under Rev. Proc. 2013-30 within 3 years and 75 days of the intended effective date. We compare the tax under each structure with your figures before anything is filed. See Business Formation.
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