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It’s called “pass-through” because the income (or loss, as the case may be) passes directly through the business entity and ends up in (or out of) the pockets of individual taxpayers, who then report it on their personal income tax forms. Businesses also submit a Schedule K-1 for each owner to the IRS, along with its annual information return, by March 15 (or on the next business day if March 15 falls on a weekend or holiday). Partnerships are required to complete a Schedule K-1 tax form to report each business partner’s share of taxable income, losses, credits, and deductions. The S corporation then files all the K-1s with the IRS, along with Form 1120S, the informational form S corporations much provide each year.

If you pay taxes, you likely know that the IRS deadline for filing your annual personal tax return is typically April 15. But if you pay quarterly estimated taxes, you may have forgotten that your first quarter estimated tax payments must be made by that same personal filing deadline. Quarterly estimated taxes are payments made to the IRS based on non-employee income you believe you will make in the coming year. The simple way to ensure that you pay what you owe is to submit at least 100% of the tax you paid the previous year, unless you’re reasonably sure that you are going to earn significantly less.

Businesses generally choose between the cash accounting method (also called cash basis accounting) and the accrual accounting method (also called accrual basis accounting). An outflowing transaction, such as an expense for a good or service received on credit, is recorded no later than the date the good or service was received, and the transaction is recorded as an account payable under the current liabilities section of the balance sheet The big advantage of accrual accounting is that, because it combines current and expected cash flows in and out of the business, it provides a more accurate picture of the actual financial condition of the business. So, for example, a business with inventory might use the accrual method for purchases and sales, while opting for the cash method for all other items of income and expenses.

You cannot, however, deduct the cost of pro bono services, though some expenses you incur in providing pro bono services may be deductible. If you claim a part of your home as an office, you can deduct the portion of your rent that corresponds to the square footage of your office space in relationship to your entire home, even if it’s an apartment. If you work out of your home, you can deduct the portion of these that corresponds to the square footage of your office space in relationship to your entire home. If you claim a home office, you can deduct the portion of the utilities that corresponds to the square footage of your office space in relationship to your entire home.