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

(Click on image for full size)

From Nolo Press:

Deductions Your Small Business Shouldn’t Miss – Whenever someone asks me to list out all of the possible tax deductions for a small business, I explain that it’s easier to approach it from a different angle. Look at each kind of thing you spent money on and if you can connect it to the operation of your business, directly or indirectly, it’s deductible.  Every business operation is unique, so no list can possibly cover every conceivable possible deduction one would come across.

Courtesy of The Late Show

These would also apply to tax pros.

Top Ten Signs You Have A Bad Stockbroker

10:   When stocks go up, his pants go down

 9:   He’s unavailable whenever “General Hospital” is on

 8:   Invested your entire portfolio in JetBlue

7:    Instead of Wall Street, he works at Wal-Mart

6:    He shaves his head and goes into rehab

5:    Hot stock tips, no — nude photos of Alan Greenspan, yes

4:    Keeps using the word Ga-zillion

3:    No number 3 — writer depressed after losing everything in stock market

2:    A few years back told Martha, “Sure it’s legal”

1:    Claims he once had a three-way with Morgan Stanley and Merrill Lynch

 

 

(Click on image for full size)

From the free WSJ

From Fidelity Research Institute

Bill Clinton’s AMT Bomb. Why millions in the middle class may see their tax bill explode. – Hopefully, we will soon reach the critical mass in terms of the number of people forced to pay this insane tax and our rulers in DC will get off their butts and do something about it; such as repeal it completely.

Barkeep, Give Me a Beer, a 1040 and a Schedule D – What could be more conducive to getting accurate information from tax clients than working on their returns while they and/or the preparer are drunk at a bar?  How long until those tax returns come bouncing back from IRS?

Better ways to crunch retirement numbers – Just another reminder of how impossible a task it is to predict exactly how much money is needed for retirement. There are too many unknown variables to enable any real precision. 

The Shifting Calculus Of Workplace Benefits – You may have to shop for your own insurance.

Starting a Biz Expands Deduction Possibilities – It’s absolutely true that the number of legitimate types of deductions is exponentially larger for small business owners than for W-2 wage slaves.

Q:

Subject: Joint returns after death of spouse

 

I ran across <http://www.taxguru.org/re/TaxCoachHomeSales.htm> while searching for something else; this line – “Since you can file jointly for two years following their death, you can exclude up to $500,000, on top of the new basis, during that two-year period.” jumped out at me.

 

I think it is perhaps overstated – I don’t know if the author is thinking of the qualifying widower filing status, or the case where one taxpayer passes away after the end of a tax year, but before a return is filed, meaning that two additional tax returns will be filed for the decedent.

 

(e.g., one spouse passes away on Jan 10, 2007 – the surviving spouse will be able to file a 2006 joint return, and a 2007 joint return, assuming other tests are met.)

 

Of course, two tax returns are not two years, so I’m still not clear how to get the “two year period” for filing joint returns after death.

 

I am also a Tax Coach subscriber but can’t seem to get to their website at the moment; I saved a copy of a plan I produced with their system a few days ago and it does seem to include the above text.

 

Do you have any insight?

A:

That was a good spot on your part.  I can also only assume that they are referring to the qualifying widow(er) status, which should be better explained in such a way as “some people can file jointly…”

I’m passing this along to Ed & Keith at TaxCoach in case they want to elaborate on that text.  Their system was down yesterday, but they are back up today.

Thanks for spotting that and passing it along to me.

Kerry Kerstetter

From Keith at TaxCoach:

Hi Kerry –

 

Thanks for copying us on your email.  The piece you quoted out of TaxCoach is referring to qualifying widow(er) status, but Ed has done some further investigation.  QW status does apply for the two years after the spouse dies, but at issue is whether the surviving spouse can still exclude gain during that time.  What Ed’s dug up thus far is inconclusive.  For now we’ve updated the module to clarify that section and remove the reference to the two following years.  Depending on what else Ed is able to find out about it, we’ll revise it further.

 

Thanks for bringing that to our attention.  Also, sorry about the day we were down – our host had a major issue with the shared server that affected nearly 1000 of their customers!   We’ve since migrated to a dedicated server, so we should have uptime percentages a lot closer to 100.

 

Best regards,

 

   Keith