Since my first real-estate deal has completed, I’ve been starting to think heavily about my S-corporation’s first IRS filing. Especially with 4th quarter coming up in October. However, I finally calmed down and thought things out a bit. I started to think that I may actually never take out this first initial sales income. I might just leave it in and use it for the business functioning. If I do pay myself any W-2 wages, I can just wait until after October, thus, giving me more time to get things figured out.
Now, I’m obviously going to have to pay the capital gains taxes on the flip I did. It was a same-day closing, unquestionably short-term capital gains. So the bigger question, does that have to be paid on the quarterly filing? Or can I just wait and report it on the yearly 1120S?
Property flipping generates ordinary income, not capital gain income. Your flip profits are ordinary income, not capital gains.
At the end of the year, whatever income your S-Corp has made will “flow through” to your 1040 and be taxed accordingly. Does not matter whether you actually withdrew any money from the business, it still gets taxed as income.
Your other questions are best addressed by your CPA.
Grrr… My edit function doesn’t seem to be working.
My apologies, but I made a mistake on that last post. The flip is looked at as ordinary income and therefore taxed at your normal income tax bracket rate. Plus you have self employment tax to worry about. Therefore 45% is an estimate for the total taxes.