Tax Guru – Ker$tetter Letter

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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

 

 

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