Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 681 other followers

  • Blog Stats

    • 309,833 hits
  • Posts By Day

    March 2007
    M T W T F S S
     1234
    567891011
    12131415161718
    19202122232425
    262728293031  
  • Subscribe

  • Special Pages

Archive for March 3rd, 2007

Posted by taxguru on March 3, 2007

Posted in Uncategorized | Comments Off on

Ready for change in filing status?

Posted by taxguru on March 3, 2007

Posted in Uncategorized | Comments Off on Ready for change in filing status?

Payroll Info In QB

Posted by taxguru on March 3, 2007

Q:

As far as changing the payroll taxes from the payroll expense account, should I go into payroll item lists and edit each account and create one new account called “Payroll Taxes” for all the different taxes or create an account for each tax? Or create sub accounts for each tax under a payroll tax account?

 


A:

For the QB payroll set-up, it is completely customizable, starting from how the program comes, with all of the liabilities lumped together and all of the payroll related costs lumped together. 

At a minimum, we need to separate out the gross wages from the payroll taxes because one of the basic reviews IRS does is a match between the wages expense deducted on the corp tax return and the total from the W-2s for the year.

For reconciliation purposes, I like to have sub-accounts that tie into the tax forms.  On the expense side, I like to set up a sub-account called Payroll Taxes under the main Taxes expense account.  Then, under the Payroll Taxes account, there should be a sub-account for each payroll tax form:
941 (FICA + Medicare)  
940 (FUTA)
SUI (State Unemployment)

Then, those company expense items in the payroll item list should be edited to be mapped to their new sub-accounts.  Items reflecting withholdings from the employees’ checks, such as Fed and State income taxes and their share of FICA + Medicare, should not be mapped to the expense accounts. Those need to be mapped to the appropriate liability accounts.

Similar to the sub-accounts for the payroll tax expenses, I like to have sub-accounts under the Payroll Liabilities accounts that correspond to the various tax forms:
941 (FICA + Medicare + FITW)
940 (FUTA)
SUI
SITW

The balances in these accounts can then be reconciled at the end of each month to agree with the payments that need to be sent in.

I hope this isn’t too confusing.  Until a few years ago, I was actually able to make all of these changes in my QBX version of client files.  For some reason, the QB programmers removed that capability a few versions ago, and those changes can only be done on the master QBW file.

Assuming the program hasn’t been changed too much, if you make those edits to the payroll items now, they will be effective for all payroll entries in your data file, including all prior years.  This will make doing the 2006 1120S even easier.

Kerry

 

 

 

 

Posted in QB | Comments Off on Payroll Info In QB

Corp Assets

Posted by taxguru on March 3, 2007

Q:

Subject: S-Corp Timeshare purchase
 
I have a client who’s S-corp (family owned) purchased a timeshare for use as the location for the Corporate Annual meeting.  Would the S-corp be able to depreciate this assets…if so what type of Asset would this property be termed as?

A:

 I have seen a lot of small corps buy timeshares for purposes of their annual meetings. 

I have depreciated them over the standard 39 years for commercial real estate and expensed the annual maintenance fees.

Kerry Kerstetter

 

 

The best book on QuickBooks Premier Editions

 

 

Posted in Uncategorized | Comments Off on Corp Assets

Fiduciary Responsibility

Posted by taxguru on March 3, 2007

Q:

Subject: C corporation question

Hi, I’m enjoying your blog.  I have a question I’m having difficulty getting the answer to.  If a C corporation is doing something illegal, it can expose officers to personal liability, but does the corporation have an obligation to inform shareholders of the illegal activity?  I don’t know whether you might be familiar with this issue.  I’m guessing it might be covered by SEC rules?

Thanks for any info.

A:

Any time there is a financial element involved, there is a fiduciary responsibility to not harm or do things that would jeopardize the value of the assets entrusted by others. 

In a case such as you describe, officers of a corp have a definite legal responsibility to do everything possible to safeguard and protect the value of the shareholders’ equity in the company.  Any officer who uses corp assets and resources to conduct an illegal activity, which would obviously harm the value of the shareholders’ investment, would be civilly liable to those shareholders, in addition to any criminal prosecution for their acts.

Part of the fiduciary responsibility includes full disclosure of anything possibly relevant to the value of a shareholder’s investment in a corp.  If pertinent information were withheld from the shareholders that would have an effect on their decision to hold or sell their investment, that would also be actionable.

The laws for specific remedies available to shareholders vary by state; so an attorney in the applicable state should be consulted as to how to proceed to recover compensatory damages.

I hope this helps.  Good luck.

Kerry Kerstetter

 

 

 

Posted in Uncategorized | Comments Off on Fiduciary Responsibility

How to use Section 179

Posted by taxguru on March 3, 2007

Q:

Subject: Section 179

I read with interest your page on Section 179 deductions.  It doesn’t mention where to put the deduction found on line 12 of form 4562.  Many of us that expense simple items like computers need to know where to transfer the line 12 deduction.  Can you help please?  Thanks.

A:

The Section 179 amount is added to the regular depreciation expense and shown on the 1040 schedule where the particular asset is being used. This could be C, F, E, or A.

You really should be working with a professional tax preparer whose knowledge and software will ensure that the Section 179 is handled properly.

Good luck.

Kerry Kerstetter

 

Banner HPage_468x60

 

Posted in 179 | Comments Off on How to use Section 179

C or S Corp?

Posted by taxguru on March 3, 2007

Q:

Subject: HELPFUL ARTICLE

 YOUR ARTICLE WAS VERY HELPFUL (S VS C CORP)

 
I AM THE WIFE OF AN OWNER IN AN S CORP AND WE FILED OUR TAXES LAST NIGHT. I REALIZED THAT WE ARE DEFINITELY NOT BENEFITTING FROM THE ARRANGEMENT AS THERE ARE THREE PARTNERS IN THE COMPANY.
 
WE HAVE SIGNIFICANT MEDICAL EXPENSES BECAUSE OF A SON WITH DISABILTIES
 
YET LAST NIGHT , THE ACCOUNTANT TOLD MY HUSBAND THAT BECAUSE OF THE PROFIT THAT IS SPLIT OVER THE THREE OWNERS, WE PROBABLY WON’T SEE A REFUND THIS YEAR.
 
MY PROBLEM WITH THIS IS THAT THE OTHER TWO PARTNERS WILL HAVE A TAX BILL AND GET THE BENFIT OF THE COMPANY PAYING FOR THAT.  SHOULD WE ASK THAT THE COMPANY GIVE US SOME DIFFERENCE TO COMPENSATE FOR OUR REDUCING THE TAX BURDEN TO THE COMPANY YET NOT RECEIVING ANY BENEFIT OURSELVES>>> PLEASE HELP ME IF YOU CAN  I DON’T WANT TO SAY ANYTHING TO MY HUSBAND WITHOUT SOMETHING REAL TO SAY
 
THANKS

A:

I’m not really clear on what you are asking.  However, that isn’t as important as the fact that you need a good personal professional tax advisor who can help you tailor a strategy for your family’s specific needs better than the S corp’s accountant can do.  It’s really almost impossible for one multi-owner entity, such as your S corp, to be able to properly satisfy the particular needs of each owner.  For example, it may work out that you and your husband need to set up your own C corp to which you can shuffle your share of the S corp income. 

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.

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

Kerry Kerstetter

 

 

Posted in Uncategorized | Comments Off on C or S Corp?