I do not believe in scare tactics in helping clients see the truth it is often the only way to help someone make a wise a prudent decisions. My goal is not to be THE CPA for all of Atlanta but just the share that God allows me to have. Recently I was able to work with a new client to whom the prior accountant had made several tax elections that in hind sight cannot be reversed resulting in the taxpayer substantially overpaying their taxes. I am constantly reminded that failing to plan, is preparing to fail.
When an S Corporation owner has no basis to cover losses reported on a K-1, they are by tax law considered to be “suspended losses” and can be rolled forward to future years when the shareholder has positive basis, which can be created by future years profits or the shareholder loaning money to the business. Below is a sample response to a taxpayer whose prior accountant did not properly consider and evaluate tax nuances, tax elections and suspended loss issues of an S Corporation.
After studying your Corporate Income Tax Return, the strategy plan we only is applicable if:
-You did not do the $60K of salaries to owners.
-You Personally funded the loss.
Since we are stuck with both of those facts amending the 2010 return will not help us but to the tune of eliminating 10K of income on that return which we in turn would have to add back to 2010. However, if I had been able to be there and plan for 2010 we could have legally avoid both of these issues as well as marking your tax return as cash rather than accrual basis.
Accordingly, you should go ahead and file the corporate return I forwarded for 2010 and I will complete the personal and get it out your way. ASAP after you get the 2010 financial current, please send them to me along with year to date wages by employee so that we might discuss.
It is just that I do now want to see any business owner save $1500 now and wind up costing you $10,000 by the time the returns are done, the IRS notices arrive or you later realize the tax options or deductions that are now too late to avail yourself of. To see how a CPA can save you thousands visit http://www.hiscpa.com/testimonials.htm
To learn more about tax entities and the taxation thereof visit http://www.hiscpa.com/article2.html There you will also discover a wide host of resources for American Entrepreneurs.
John Dillard is an Christian Speaker/Author and Certified Public Accountant in Duluth, GA. To See how he takes Christ along with him to work visit http://www.hiscpa.com/ and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and a Voice of One: Nehemiah’s Prayer or call John Dillard CPA today at 770.814.9304 (All Rights Reserved) Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!
We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Offer in Compromise, Back Taxes, Bookkeeping