Florida S Corporation Tax: Everything You Need to Know
Florida S corporation taxes include federal payroll taxes and federal unemployment tax. Shareholders of Florida S corporations are required to pay federal personal income tax, and some of them might qualify for net investment income tax.3 min read
Updated October 28, 2020:
Florida S corporation taxes include federal payroll taxes and federal unemployment tax. Shareholders of Florida S corporations are required to pay federal personal income tax, and some of them might qualify for net investment income tax. In the state of Florida, both the S corporation and its shareholders are exempt from state income taxes. The S corporation might still need to pay state sales tax and excise tax.
Federal Taxes That Florida S Corporations Must Pay
Florida S corporations, like all S corporations in the U.S., are not subject to federal corporate tax. This is because they are flow-through entities. However, depending on its structure and line of business, an S corporation might be called upon to pay the following taxes:
These taxes include Medicare and Social Security taxes. They were established by the FICA Act and they are typically equal to about 15.3 percent of an employee's wages. The S corporation must withhold about half of this amount from the employee and contribute the other half.
Federal Unemployment Tax Act (FUTA) tax is levied on corporations that spend at least $1,500 on wages in any quarter or hire at least one employee for part of a day for 20 weeks or more in any quarter. For S corporations that have farmworkers, if they spend $20,000 on farmworker wages in any quarter or hire 10 workers for part of a day for at least 20 weeks in any quarter, they are eligible. The rate for this tax is about 6 percent of the wages, but the S corporation can get deductions for any money it has contributed to a Florida unemployment fund.
Personal Income Tax
Florida S corporation shareholders are required to pay income tax for their share of the earnings from the corporation. They must pay these taxes even if the earnings were not actually distributed in a certain year. The rates range from 10 percent to 37 percent depending on the income of the shareholder.
Net Investment Tax
Nonactive shareholders who earn at least $200,000 individually, or $250,000 if they file jointly as a couple, are subject to the Net Investment Income tax.
Florida S Corporation Taxes: State Taxes
S corporations that have just filed for S corporation treatment must file the Informational part of the F-1120, the Florida Corporate Income/Franchise Tax Return, in the first year after filing for S corporation treatment. In subsequent years, the S corporation does not need to file this return. Florida S corporations do not pay the 5.5 percent corporate tax that is levied on C corporations.
There are a few rare scenarios that would necessitate a Florida S corporation to file returns with the state. This could happen if the corporation has a taxable income. Such scenarios play out when the following occurs:
- The corporation has shareholders with excess net passive income.
- The corporation used LIFO method for valuing its inventory before it filed as an S corporation. It is then liable for a recapture.
- The corporation made gains under Schedule D of Form 1120S.
The state of Florida does not levy personal income taxes on shareholders of an S corporation. Florida is one of the few U.S. states that do not charge any income tax on the S corporations or their shareholders. This has made the S corporation an especially popular entity type with small business owners in Florida.
Of course, if the Florida S corporation also conducts business in other states, it might be required to pay taxes in those states. Florida S corporation owners whose corporation does business in other states need to consult with tax lawyers in the other states to avoid surprises.
State Taxes a Florida S corporation Might Need to Pay
In addition to fees for business permits or licenses, a Florida S corporation might need to pay the following taxes:
- Sales tax
- Excise tax
- Unemployment insurance
- Workers' compensation insurance
Florida S corporations do not pay federal corporate tax. The corporations might be eligible to pay FICA and FUTA taxes. Florida S corporation shareholders also qualify for federal personal income taxes. High-earning inactive shareholders might qualify for net investment income tax. The state of Florida is very lenient with S corporations on taxes and does not require S corporations to pay corporate tax. Neither does the state levy any personal income taxes on S corporation shareholders.
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