Maintaining S-Corp Status: Federal Compliance Essentials Every Owner Must Know
Electing S-Corporation status is just the beginning. To keep your tax and liability benefits, you must comply with ongoing federal rules. Missing even one requirement can jeopardize your S-Corp status, lead to penalties, or expose your personal assets.
👉 So what? S-Corp compliance is complex. That’s why having a professional accountant by your side helps with peace of mind and financial protection.
1. Pay Shareholder-Employees a Reasonable Salary
The IRS closely watches S-Corps to see if owners are paying themselves too little of a salary.
You must pay yourself a “reasonable” wage, similar to what someone in your role would earn elsewhere.
Wages must go through payroll, with taxes withheld and reported.
Need help setting a fair salary and running payroll? Book a consultation with YOLO today.
2. File Federal Tax Returns & Issue K-1s
Every year, your S-Corp must:
File Form 1120-S by March 15 (or request an extension).
Prepare and distribute K-1s to shareholders so they can file their personal returns.
Late filings = IRS penalties + potential loss of S-Corp status.
Don’t risk penalties. Let our team handle your S-Corp filings.
3. Maintain Eligibility Requirements
To remain an S-Corp, you must follow IRS rules:
100 or fewer shareholders
Only U.S. citizens/residents, estates, or certain trusts as shareholders
Only one class of stock (same economic rights for all shares)
One mistake here could end your S-Corp election.
Unsure if your S-Corp still qualifies? Schedule a compliance review with YOLO.
4. Be Prepared for IRS Scrutiny
The IRS often audits S-Corps, looking for low salaries or missing records. Proper documentation—minutes, resolutions, payroll reports—can protect you.
Work with YOLO to stay audit-ready and compliant.
Federal compliance is not optional—it’s the backbone of keeping your S-Corp alive. Instead of worrying about deadlines and IRS rules, let YOLO Accounting manage the details so you can focus on growing your business.
