Q:

Dear Mr Kerstetter,

                  if I change from an S corp to a C corp and also change from fiscal to calendar tax returns, is there a time period that I have to wait till I can  exercise all the benifets of a C corp,

                  sincerely, and thanks,

A:

There are far too many variables involved with a conversion from an S to C corp for me to be able to give any advice.  You need to work with a professional tax advisor who can help you accommodate your special circumstances.

For clarification, S corps are only allowed to use calendar tax years, ending December 31; while C corps can end their years at the end of any month.  As I have mentioned on my website, after converting from an S to a C, IRS will not allow you to change the tax year because they know how easy it is to reduce taxes with a non-December fiscal year.

What I have found on several occasions working with clients who had first considered converting from S to C, was that it turned out to be a whole lot easier to just set up a brand new C corp, where we didn’t have any of the restrictions that a conversion requires.  That could very well be what your personal tax advisor will recommend for your satiation.

I hope this helps.  Good luck.

Kerry Kerstetter

 

Q:

Subject: Laws

Can I hide child support through a corporation regardless of  a S or C. Can the state of PA look at my records for child support? How about if I have someone else as my Director? Can they track this? Thank you K

A:

I’m assuming that you are referring to hiding your income from child support requirements.  Those laws are state specific; so you will need to consult with a PA attorney who is familiar with your state’s requirements for disclosure of income related to child support.

I do know that it is a common technique to use corporations to hide income and appear more impoverished.  Back in California, one of the CPAs who I used for tax prep assistance during tax seasons had me pay his corporation for that very reason.

If the court only requires you to present a copy of your 1040 each year for the determination of the child support amount, it does make a big difference whether you have an S or C corp.  As with the real life case from here in Arkansas that I described on my website, a profitable S corp’s earnings will show up on your 1040, inflating the gross income, even when the actual cash you may have received was much less, or even nothing.

As I always warn everyone, the establishment and use of a corporation of any kind is not the kind of thing you should be doing without the aid of a competent professional tax advisor.

Good luck.

Kerry Kerstetter