Q:

Subject: Tax question about vehicle

 

 I have my own business and I want to be able to write off mileage and my cost for he vehicle.  If I have advertising signs on my vehicle are my mileage allowances still subject to percentage use rulings?  That is the primary use of the vehicle is to advertise my business and get to and from appointments.

A:

If you are serious about running your business properly, you will engage the services of a tax professional who can give you guidance. 

Any competent tax pro will tell you that just placing a sign on a vehicle doesn’t make the vehicle’s costs deductible.  Any deductions for that vehicle will be based on the business miles driven, either via the IRS’s standard per mile allowance or based on a pro-rata percentage of actual costs. 

Good luck.

Kerry Kerstetter

Q:

Subject: Preparing 1065 & K1’s the Year of Partners Death

Kerry, I came across your website and Blogs while I was doing research regarding the preparation of this Partnerships 1065 & K1’s.

 I work for a partnership founded in 1946.  The percentage of ownership was as follows:

Founder – 10%

Partner 1 (Son) – 20%

Partner 2 (Son-in-law) – 20%

Partner 3 – 16.667%

Partner 4 – 16.667%

Partner 5 – 16.667%

As of June 28^th 2005, our founder passed away.  He held 10% of the ownership at the time of his passing.  His percentage was absorbed by his son and son-in-law who now own 25% each of the company.  How do you suggest I set up Turbo Tax?  Am I required to do the first half 2005, second half 2005, and then a final combined return?  If you could please advise I would greatly appreciate it “oh Grand TaxGuru of ours”.

Best Regards,

A:

I don’t use TurboTax, so I can’t give any specific data entry advice on it.

However, it sounds as if you may need to make manual allocations of the 2005 K-1 info between the various partners, including the deceased one, to account for the proper split.  The actual computation of the allocation can be done various ways. 

In similar cases that I have worked on, I have figured the P&L for the time with the old ownership (1/1 to 6/28 in your case) and figured that split.  Then, I did the same for the rest of the year with the new ownership percentages and then totaled the two figures to get the full allocations for the year.   The method used should be designed with the input of all of the surviving partners, the deceased partner’s survivors, as well as all of their personal tax and legal advisors.

You only need to do one 1065 for the entire year of 2005, with proper notation on the K-1s of the beginning and ending ownership percentages of each partner.

Good luck.

Kerry Kerstetter

Q:

Subject: THANKS FOR THE S VS C ARTICLE

HERE IN FL. MOST SMALL CONTRACTORS WORKING ALONE HAD TO REVERT TO CORP. STATUS TO BE ABLE TO CONTINUE IN BUSINESS DUE TO WC.

WE CHOSE S CORP.  HOPE WE MADE THE RIGHT DECISION. 

THANKS AGAIN  

A:

If you made that decision based solely on what you read on the web, I would have no faith in your conclusion.  You absolutely must work with a competent tax professional who can take all of the particular factors into consideration.

Good luck.

Kerry Kerstetter

Q:

Subject: Quickbooks

 

I am using Quickbooks Basic.  It is my understanding that this program is no longer available.  My question to you is, do I need to upgrade to Quickbooks Pro or can I continue to use this program for now?

Thanks

A:

It is true that, starting with the 2006 QB programs, they have dropped the least expensive Basic version.  It’s an obvious scheme to squeeze more money out of people.

It doesn’t matter to me which year’s version of the program you use.  I have a dozen different ones installed on my computer to enable me to work with everyone’s data files.

You should upgrade to newer versions whenever you feel that you want the newer features or the official Intuit support, which they drop after three years.  If you are using QB to process a company payroll, you will need to upgrade more frequently in order to keep the withholding tables accurate.  However, for basic bookkeeping tasks, which is really all that most people need, you can stay with your current program for as long as you want.

Kerry

Q:

Hi Kerry,

I have a quick question, I hope you have time to help me out.  My brother and I started a s-corp in the state of Washington last year, we do not have any employees.  It’s year end and we have around 60k in the bank, I’ve taken about 5k out of the corp and he has taken $0.00.    What would you recommend we do with the 60k?  I’m married and my wife and I made about 35K last year, my brother has made about 30k outside of the corp.  I know this is so last minute, but any insight would be so helpful.

Thanks in advance!!

A:

You really should be discussing this with your own personal tax advisor.  If you are actually trying to operate an S corp without a tax advisor, you are asking for big trouble. 

A tax pro will inform you that paying S corp money out to the shareholders will have no tax effect, and is something that should have been evaluated when you decided to become an S corp in the first place.

Good luck.

Kerry Kerstetter

(Click on image for full size)

Q:

Subject: S-Corp-Vs C-Corp

 

Hi,

I was on your site and I would love to speak with you. Not one accountant or attorney In spoke with out here has said a C-corp is good  and that an S-corp is mandatory.

Why are these so-called educated minds not in alignment with your thinking?

Is it so hard to miss?

Sincerely,

A:

There are far too many variables involved for me to be able to advise the best entity and jurisdiction to use for your particular situation via this medium.  There is no such things a one size fits all. 

You must be misunderstanding something because there is no such thing as a mandatory S corp status.  In fact, shareholders have to sign and submit a formal election on Form 2553 to IRS to be treated as an S corp.  If it were mandatory, it would be the other way around.

To work out the best solution for your particular circumstances, you really need to work with a tax pro who can help you set up a strategy that will work for you.

There are plenty of other tax pros who properly understand the differences between C and S corps.  Nothing on my web sites is unique to me.  It is all very common knowledge.

I wish I could be of more help to you; but I already have too many clients to take care of; so we are not accepting any new ones at this time and are still trimming back on the client load that we currently have.

Unfortunately, we don’t have anyone else to whom we could refer you. If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you.

Good luck.

Kerry Kerstetter