An S corporation is generally required to make quarterly estimated tax payments if it is liable for certain taxes. Specifically, an S corporation must make installment payments of estimated tax for the following taxes if the total of these taxes is $500 or more:
- Tax on built-in gains (Section 1374(a)).
- Excess net passive-income tax (Section 1375(a)).
- Investment credit recapture tax.
- Any tax for which the S corporation is liable by reason of Section 1371(d)(2).
For purposes of Section 6655, which deals with the failure by a corporation to pay estimated income tax, several modifications apply to S corporations:
- The taxes imposed by Sections 1374(a), 1375(a), and any tax under Section 1371(d)(2) are treated as imposed by Section 11.
- Paragraph (2) of subsection (d) does not apply.
- Clause (ii) of subsection (d)(1)(B) is modified to include specific references to the taxes mentioned above.
- The requirement that the return for the preceding taxable year show a liability for tax does not apply.
- Subsection (b)(2)(A) is applied by substituting “3rd month” for “4th month.”
- Any reference in subsection (e) to taxable income includes a reference to the net recognized built-in gain or the excess passive income.
Therefore, while an S corporation itself does not pay income tax in the same manner as a C corporation, it is required to pay estimated taxes on specific types of income and gains if the total of these taxes is $500 or more.
Sources:
Rev. Rul. 92-54
§ 6655. Failure by corporation to pay estimated income tax
Rev. Rul. 72-388
Rev. Rul. 87-121
LTR 8735014
