Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for October, 2006

Posted by taxguru on October 31, 2006

What’s the cost of your 401(k)? Hint: not free – from Lynn O’Shaughnessy

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Wesley Snipes’ Message Machine?

Posted by taxguru on October 31, 2006

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Funny Money?

Posted by taxguru on October 31, 2006

Would you accept this as a valid hundred dollar bill?

This was actually used by a bonehead here in Arkansas.

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QB 2007 Features

Posted by taxguru on October 31, 2006

 

The Sleeter Group has some good info on the new features of the latest version of QuickBooks.

New Features of QuickBooks 2007

Awesome QuickBooks Add-ons for 2007

 

 

 

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More Corporate Confusion

Posted by taxguru on October 30, 2006

 

Q:

Subject: C corporations
 
Kelly
 
I read your artical on the tax benefits of having a C corporation Versus an corporation. My son set up an S corp. about three years ago herein California. He paid a lot of money to set it up with a lawyer. We knew nothing about the difference between the two and less about the tax ramifications. I would like to know if we can still change to a C corporation? what would need to do? 
 
He set up the business as an entertainment business ( record label and other types of entertainment), can he change this to some other type of business? Thank you

 

A:

The attorney should have explained the tax implications to the S corp election before it was done, or at least advised your son to seek advice from a tax pro if s/he wasn’t knowledgeable on the points I cover in my article, as is the case for many attorneys.

Your son should consult with a professional tax advisor ASAP as to the best setup for his unique situation.  The S corp may be a fine arrangement, or a C corp may be better.  As I mentioned in my article, converting an S corp to C doesn’t give you as much flexibility as starting up a new C corp, especially in the area of the fiscal year.  A new C corp can select any month end; while a converted S corp is required to stick with the December 31 year end. 

There may also be a good case for leaving the S corp as is and also having a C corp.  Too many people think everything has to be operated through one entity, when there are in fact many benefits to having multiple different kinds of entities.  There is obviously more bookkeeping involved, but the benefits often outweigh those extra costs.  An experienced tax pro can help decide which structure or structures makes the most sense.

Once a corp is established, it is not required to limit itself to its original type of business.  It can operate any kind of legal business enterprise.  That is another common misconception, that each type of business has to have its own separate corp.  The reporting for each type of business may be handled a little differently; but they can all be run through one corporation, if that makes the most sense.  Using QuickBooks with a Class for each type of business makes keeping track of these an easy task.  An experienced tax pro can assist with this.

I hope this helps.  Good luck.

Kerry Kerstetter

 

 

 

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Diversified investments?

Posted by taxguru on October 30, 2006

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Posted by taxguru on October 30, 2006

IRS offers solid — but cheap — tax advice to bootstrapped bizs – And worth every penny.  While you can get plenty of basic info for free from the IRS, that can in no way substitute for the advice of an experienced tax pro, who can work with your unique circumstances.    

 

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Scary Halloween Costumes

Posted by taxguru on October 30, 2006

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Special service for special people?

Posted by taxguru on October 30, 2006

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Get professional assistance for corporations

Posted by taxguru on October 29, 2006

 

Q:

Subject: Question about s-corp vs c-corp

I have a simple question regarding a s-corp vs. c-corp. I am partners with two other investors in commercial real estate that we rent. Currently we are an s-corp. The property is showing a profit of over $250,000 per year so each partner is reporting $83,333 income. We are not taking any money out and are not planning to for 5 years. We want to expand the business in the future so that is why we don’t take any profits. As you know we are getting hammered on taxes. We all have other jobs to provide income to live on so we don’t need the money right now. After 5 years or so we might sell out. My questions are:

1. Would a c-corp be to our advantage?
2. Should we switch back to an s-corp in the future?
3. Can we switch to a c-corp this year to cover any profits for 2006?

Can you give me any other suggestions or places to look for information about this subject?

A:

There are far too many options to consider and possible scenarios that can be used to achieve your goals for me to even begin giving you specific advice via this medium.

You will need to work directly with an experienced tax pro who can analyze your unique circumstances. I wish I could help; but I already have too many clients to take care of properly; so we are still trimming back on the difficult clients and are not accepting any new ones at this time. 

Unfortunately, we don’t have anyone specific to whom we could refer you. I did recently post some names and links for some like-minded tax pros around the country.

If you haven’t already done so, you should check out my tips on how to select the right tax preparer for you at. 

One aspect to your situation on which I can advise is for you to stop thinking of an all or nothing approach.  You don’t need to limit yourselves to one single corporation to run your business projects.  There are many benefits to using multiple entities for tax saving as well as liability protection reasons.  A good tax advisor should be able to explain how these would work for your unique circumstances.

I wish I could be of more assistance; and I wish you the best of luck.  

Kerry Kerstetter

 

 

 

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