Q:

Subject: Great S vs C article

 

Hi,

 

This is a very good article.  But I still don’t know if I should covert to S corp or not.  I work full time.  And I also have a C corporation.  I have been doing very little business since I got my full time job, this year the business made about 5300 and I actually had to put in 3500 from my pocket into it.  I just finished doing the Turbo Tax Business for it, and it turned out to be 1300 loss.

 

So if I understand this correctly, and this was an S corp, I could somehow show that loss on my personal return? 

 

Do you think it would be best for me to convert to S corp?  Would it make any difference at such a small level and I’m the only owner.

 

Also is there anywhere I need to say on my personal or corporate return that I loaned my business 3500 last year?

 

Thanks,

A:

If you are serious about operating a business, you absolutely need to be working with a tax professional who can properly guide you.  No information on the internet or from strangers like me can do the proper job for what you need.  Neither can a tax prep program like TurboTax substitute for competent professional guidance.  This is especially true with corporations, about which you obviously don’t understand the fundamental basics.

As I’ve explained on my website, C corps pay taxes, while the net income or loss from S corps is passed through to the 1040s of the shareholders. 

The other thing you need to do ASAP is get your corporation properly set up on a double entry accounting system, such as QuickBooks.  Corporations are required to include balance sheet info as well as a P&L with their annual income tax returns.  Loans from shareholders will be disclosed in the Liabilities section of the Balance Sheet.

Good luck.

Kerry Kerstetter

 

Q:

Subject: Help.  I am lost.

HELP!!!

 

The following is taken directly from this page address on your web site.  

 

“{The following information is not intended to replace the services of a professional qualified income tax consultant who can better understand how these issues fit into your particular circumstances.  Trying to set up and/or operate a corporation of any kind without competent  professional guidance is asking for serious trouble.}

 

“I continue to hear attorneys and other allegedly knowledgeable authorities recommending the use of Subchapter S corporations, when that ends up costing the clients a lot more in tax dollars.”

 

In the first paragraph, you are telling me (an owner of a C corp.) to operate without competent professional guidance is asking for serious trouble.  Then, in the next paragraph, you tell me about “allegedly” competent professional guidance that could end up causing me serious trouble.

 

How in the world do I discern between the competent professional guidance and the alleged knowledgeable professionals?!

 

I have been in business for just over a year.  I need a competent attorney and accountant who understands C corporations…particularly a C corporation that is just me…who is an artist.  So how do I find that COMPETENT attorney and accountant?  The phone book???  Referral by someone who does not really know if the attorney or accountant is competent or competent in regard to C corps???  Utilization of the VLAA (Volunteer Lawyers and Accountants for Artists) who may or may not be competent…at least in regard to C corps or my particular situation???

 

Like the characters on the hit ABC tv show…I am lost.

A:

That has always been a dilemma. 

Unfortunately, we don’t have anyone 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

Follow-Up:

Kerry, thank you for the reply — much appreciated!  I checked out the link you sent — good stuff.

All the best,

 

Q:

Subject: nice to have found you

Kerry,

I have  a rather unusual background. I am a CA CPA who left the field about six years ago after getting my audit hours from KPMG and then went to work as a Longshoremen  at the Port of LA. I still work at the docks but my very flexible schedule allows me to pursue other interests. I am currently working for a small tax firm 35 hours a week helping prepare all types of tax returns. I am pretty rusty and was wondering if you had any suggestions of tax courses you can recommend that will help me improve my tax & acct skills.

God Bless America

Thanks

A:

While the H&R Block class does a good job of covering the basics, there is no training of any kind that can beat hands-on real life experience.  Your best bet would be to work with a tax prep office that does a wide variety of different kinds of tax returns.

My current favorite reference book is The Tax Book.  Having a copy of that with you will speed up your learning process tremendously.

Good luck.

Kerry Kerstetter