How is my pass-through income from my S Corporation taxed on my personal tax return?
Generally speaking, S-Corporations have the benefit of having "Pass-Through" income or losses, (along with any credits and other special deductions) flow directly to the personal tax return without being subject to Self-Employment Taxes.
The K-1 that you will receive from the S-Corporation will have all the special items included with a specific code and a line number. Usually, your CPA will know what to do with these items, some the items are important as they have an impact on your tax return. I would let him or her sort out where and what to do with these items.
What you should be planning ahead of time, is whether or not the S-corporation has a material profit and impacts your tax liabililty substantially. If it does, than you should have your CPA perform year-end tax planning to ensure that you pay the proper tax liability in a timely manner, to avoid a larger tax liablity on April 15, 2008 and avoid any possible underpayment penalties and interest.