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S Corp tax guide for small business owners
April 2, 2026
Introduction
S Corp election is one of the most-discussed tax strategies for small business owners — and one of the most-misunderstood. This guide explains when it actually helps.
How S Corps are taxed
S Corps pass income through to shareholders, who pay tax at their individual rate. The corporation itself files Form 1120-S but generally does not pay federal income tax.
The big benefit: only the salary portion of owner compensation is subject to self-employment tax. Distributions are not.
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