Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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Archive for September 15th, 2007

No one size fits all…

Posted by taxguru on September 15, 2007

Q:

Subject:  S vs. C orp

Do you still reccommend an S corp for a 1099 contact sales rep for surgical device sales .I am starting out fresh and will recieve $75k first year and scale up to 200 K by end of year 3.

 

Thanks,

 

A:

You must have me mistaken with someone else because I have never made any kind of blanket endorsement of the use of S corps.  I always warn that there is no such thing as a one size fits all approach and that you must work with an experienced tax professional in order to determine what is best for your unique circumstances. 

I do have some comparisons of C and S corps on my website, but these are no substitute for the experience and judgment of a tax professional.  Start working with one right away before you head any further in the wrong direction.

Good luck.

Kerry Kerstetter

 

  

 

Posted in corp | Comments Off on No one size fits all…

No Homework Questions Accepted…

Posted by taxguru on September 15, 2007

Q:

Subject: questions

Saw your website and have a few questions.  I have gone back to school and have an assignment on the various types of businesses and their associated negative or positive ramifications on each one.  Do you have a second to chat?

A:

I’m sorry, but it has always been my policy to not answer homework questions.

I barely have any time to answer real world questions.

Good luck.

Kerry Kerstetter

 

 

Posted in Uncategorized | Comments Off on No Homework Questions Accepted…

State tax home is critical…

Posted by taxguru on September 15, 2007

Q:

Subject: State tax question

Hello KMK,

Tax Guru is a neat website.  Compliments!

 

I am an Illinois accountant with a client with an Illinois S-corporation, but who lives in California.  With the lower Illinois individual income tax rate, I would like to have Illinois tax the S-corporation income, and leave it off of the California individual return.  Do you know how to do this in the California return?

 

If you do “out-sourced” tax research for others, please let’s discuss your charges for the service.  Thoughtful research is appreciated.

A:

It will all depend on which state is your client’s official tax home.  If it’s California, he will have to report all income from all sources (including the IL 1120S) on his Calif. 540.  Of course, he will also need to file a nonresident IL return.  He will be able to claim a credit against his CA taxes for part or all of the IL tax on that income.  As you know, the net effect of the out of state tax credit is that he ends up paying the higher of the two states’ taxes.

If your client can establish his official tax home in IL or another state, he can file a 540-NR as a CA part year or nonresident and then only allocate his CA source income to that state.  Many people use tax free states, such as Washington, Nevada, Texas, or Florida, as their official tax home for just this reason.

I hope this helps.  I’m still not caught up enough with the workload with my current paying clients to be able to accept any new ones.  General questions that should be of interest to my blog readers are always welcome however.

Good luck.

Kerry Kerstetter


Follow-Up:

Thank you for your prompt reply, and good advice.

 

TaxCoach Software: Finally! Plain-English Tax Planing That Builds Your Business!

 

Posted in StateTaxes | Comments Off on State tax home is critical…