An S corporation is a pass-through entity and does not pay federal income tax. All profits, losses, and other pass through items are allocated according to each shareholder’s proportionate shares of stock.  Each stockholder will receive a “K-1″ tax form indicating the stockholder(s) pro-rata share of profits. The shareholder(s) report their share of profit on their individual income tax returns. Generally, an owner of an S corporation also performs services for the company. This makes him to be both a shareholder and an employee of the company. 

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Previously, a cell phone was considered by the IRS to be “listed property,” a special category for deductions. Listed property includes items that the IRS considers to have potential for personal use that might be inadvertently deducted. So it is required to keep records of both business and personal use. The Small Business Jobs Act of 2010, effective for tax years beginning after December 31, 2009, removed cell phones from the definition of listed property under Sec.

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