Accounting News and Notes

Duluth/Gwinnett CPA: Determining Withholding for S Corporation Owners

Atlanta CPA Advises on How to Determine What Your Withholding Should be for S Corporation Owners

To preclude the responsibility for an S Corporation owner to also have to pay estimated tax payments to both the IRS & Georgia, it is prudent to work closely with your CPA to adjust/increase your withholdings accordingly.

A Georgia LLC, LLP, partnership or sole proprietorship, you are subject to the 15.3% Self Employment/FICA/Medicare tax on all of your net earnings. The S corporation, on the other hand, pays you a deductible salary (which is subject to FICA/Medicare), and then the profits flow through your personal return via a Schedule K-1. This K-1 income allows for permanent deferral of the FICA/Medicare tax. The Georgia S corporation allows small business owners to legally save taxes as long as they pay a fair and reasonable salary to themselves. To learn more about how different entities are taxed visit http://www.hiscpa.com/article6.html

There is no income tax paid by as S Corporation when the annual tax return is filed to the IRS. However, as a part of the corporate return which is prepared, a Form 1120S, there is an attached schedule which shows each owners respective ownership percentage and via a Form K-1 for which each shareholder should reflect on their personal return. K-1 profits, losses, and shareholder distributions are all required by tax law to be issued based upon the each shareholders ownership percentage. In order for losses to be deductible a shareholder has to have a positive tax basis, which is a component of past profits, losses, and loans to and from the business. If a shareholder 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.

An owner should report the K-1 profit, which is based upon their share of the business and not the amount of their shareholder distributions. This is a common misnomer about S Corporations and often leads to confusion for the new business owner. To that end it is best to remember that you pay taxes on the profits when you make them and not when you take them. For example generally speaking if your business nets $100,000 and you are the sole owner, you will pay taxes on $100,0000 whether you take zero dollar of shareholder distributions, a $100,000 or any number in between. Thus if you were to have a $100,000 profit in any given year and take no distributions then you would be able, absent any other issues, to take shareholder distributions in subsequent years with no additional tax responsibility as these monies would have already been taxed.

Converting Your LLC to an S Corporation for Tax Purposes

An LLC is legally allowed to convert over to an S Corporation for tax purposes which can legally allows the savings of thousands annually. Although being an LLC offers some flexibility (no Board of Directors/ease of formation), being an LLC will typically result in many businesses paying an higher tax bill on its earned income.

If an LLC converts to an S Corporation for tax purposes, it remains an LLC for all other issues thus maintaining the advantages initially desired. When a business converts over to an S Corporation all active employee/owners are required to take a fair and reasonable salary. The best test of a reasonable salary is what an owner would have to pay someone else to perform their position and it is a function of their position, responsibilities, and the business’s profit. If an LLC converts over to an S Corporation for tax purposes its federal and state income taxes will remain essentially the same. However, an LLC pays FICA & Medicaid taxes on all of its net earnings/earned income whereas an S Corporation will be obligated solely on its salary/W-2 wages.

John Dillard is an Christian Speaker/Author and an Atlanta CPA. 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!

Contact HIS CPA PC (A Christian Atlanta CPA Firm) today.

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.

Duluth/Lawrenceville/Johns Creek CPA  Assists Taxpayers with Converting Atlanta Business Taxpayers to an S Corporation

His CPA PC: Providing Bookkeeping & Accounting Services to Metro Atlanta

About S Corporations/What Entity is Best for Your Georgia Business

Subchapter S Corporations can have no more than one hundred shareholders and they all need to be U.S. citizens or resident aliens. This corporation type almost always has to have a calendar year as the fiscal year. S Corporation rules have been around since the 1950s and were set up to simplify the rules and regulations of being a business owner.

Liability Protection and Subchapter S Corporations

A subchapter S Corporation, like a C Corporation, affords the business owner personal liability protection from business risks. Some of the keys to maximizing that protection are to treat the corporation like one by doing all your business in the corporate name, signing all of your documents listing your corporate title, not co-mingling any personal issues/bills in the corporation, and by having your annual Board of Directors and Annual Shareholder Minutes Meeting.

Tax Advantages of S Corporations/Incorporating in Georgia

No income taxes are paid with the corporate return. The profits of the business are reported on the personal tax return of the S corporation’s shareholders. As long as you pay yourself a reasonable salary, you may also take shareholder distributions out of the business that are devoid of FICA/Medicaid taxes.

Another advantage of S Corporations is that if you have corporate losses, and you fund (you put the money in the business) those losses personally, then you can deduct those losses on your personal return. Any losses that are funded by the bank (a direct loan from the bank to the corporation) or by trade creditors are not deductible. Below is a sample letter one might send to the IRS to ensure that the S election has been properly received and timely processed by the IRS.

Taxpayer Advocate Office

Atlanta GA  

Dear Sir/Madam, 

I am writing to follow up on your IRS Letter dated 1-16-10  (copy enclosed). Please note I have enclosed a copy of the S Corporation election and the signed S Corporation return as requested. Please fix your records accordingly to show that the client was an S Corporation for the tax year in question. 

Accordingly please refund any monies previously paid. 

I appreciate your attention to this matter and please do not hesitate to contact me should you have any questions. 

Very Sincerely Yours, John C. Dillard, CPA, President

www.HisCPA.com Duluth/Suwanee/Johns Creek/Lawrenceville CPA: Income Tax Preparation, Financial Statements & Bookkeeping, IRS Representation, Back Taxes & Offer in Compromise

Duluth/Suwanee/Johns Creek/Lawrenceville CPA: Incorporating in Georgia: Understanding Differences between a GA LLC vs. a GA LLP

-Georgia Incorporation: Choosing an Entity Type Which is best for your New Business Venture

It is often confusing for taxpayers to chose which entity type is best for their business when initially incorporating. This election is an all important first decision is critical to getting started off on the right foot. Understanding these differences and nuances will do much to give business owners and entrepreneur a “leg up” and the needed knowledge to help ensure that they make a wise and informed decision.

Limited Liability Company

LLC’s are unique in that there can both be a “flow through” entity in that their earnings flow down to their respective owners personal return, while they also, for tax purposes, can be converted either over to a C Corporation or an S Corporation. LLC’s offer the flexibility and tax efficiency of a partnership while offering legal protection as well.

Limited Liability Partnership

LLP’s are unique from a regular partnership in that they offer limited liability protection for its partners. In an LLP a partner is not responsible for the professional misconduct or negligence of other owners. Unlike in an regular C or S Corporation the partners of an LLP will manage the business directly whereas in a corporation, a Board of Directors as well as Officers would be elected.

Other Tax Entity Options

For the most part the basic rules of being an S Corporation have remain unchanged for almost fifty years. S Corporations are required to have a Board of Directors, and their attendant meetings and to elect elected Officers in order to run the business. In many small business’s these different capacities are held by the same individual, the owner. An S Corporations overall tax bill will most always over time be less than an LLC, LLP or Partnership. All of the net active earnings from an LLC, LLP  and Partnership are subject to FICA/Medicaid earnings whereas in an S Corporation only the earned wages or W-2 of the owner are subject to FICA/Medicaid taxes, as long as the S Corporation owner pays a fair and reasonable salary given position and profit. An S Corporation as well, is a flow through entity where all of the net earnings flow through the corporate return to the business respective shareholders.

Choosing the right entity type will have many other significant tax, legal, retirement and financial issues as well. Consulting with your trusted CPA and adviser is your best first step to making a wise and informed decision.

To learn about incorporating in Georgia visit http://www.hiscpa.com/article6.html

John Dillard is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (a Christian CPA firm) and for his latest book Overcoming Life’s 9/11′s: Job’s Journey.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporating in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

Duluth/Suwanee/Johns Creek/Lawrenceville CPA: Income Tax Preparation

Duluth/Suwanee/Johns Creek/Lawrenceville CPA: Financial Statements & Bookkeeping

Duluth/Suwanee/Johns Creek/Lawrencevile CPA: IRS Representation, Back Taxes, Offer in Compromise

Duluth/Gwinnett CPA: Should my New Gwinnett/Atlanta Business be an LLC or an S Corporation?

If you have a new business the first thing you will want to do is to review to see which type of entity works best for your corporation. Both the LLC (Limited Liability Company) and the S Corporation continue to lead the way in being the most popular choice of entity selection in the state of Georgia. There are many options to chose from when choosing the best entity for your business including:

S Corporations. Generally results in the lowest amount of tax for most businesses. Best suited for U.S. citizens or resident aliens who have less than one-hundred shareholders who do not need to be another entity type for operational or liability reasons.

-LLC. Limited Liability Company. Generally these are well suited to real estate development companies, for entities where owners are not U.S. citizens or resident aliens, you have multiple classes of stock, or have over one-hundred shareholders.

-LLP. Limited Liability Partnership. Frequently utilized by multi-practice physicians and dentists who are looking to limit their professional liability from other owners and practitioners.

-Partnerships. These entities can have general or limited liability partners and are also well suited for business whose predominant focus is the investment of real estate dollars or ventures.

-C Corporations. Typically results in the highest of all the tax entity choices as a result of owners having to pay taxes twice (first at the corporate level for any profits and then later for any dollars paid out to stockholder owners).

To review these choices in greater detail please visit our web site at http://www.hiscpa.com/article2.html  There on the site you will also find a mathematical example which will further illustrate the nuances and differences in taxes by entity selection.

For those who are just beginning a new business a checklist is often a great way to ensure that you have all of your bases covered. One is available for your use and review at http://www.hiscpa.com/checklist.htm  Whether you are an Atlanta business or one in Duluth, GA you will find these articles an invaluable source of information to utilize again and again.

Preparing and Reviewing Financial Statements
As your financial results of your business are like a doctor’s chart of their patient, this will help enable you to understand financials and their use.  See http://www.hiscpa.com/financial-statements.html

Managing the Heart Beat of your Business
Unlock the secrets of your business by learning to check its pulse by a review of your company’s internal financial information.  Visit http://www.hiscpa.com/managing-financials.html

Using the Profit and Loss Statement to Determine the Value of Your Business
The balance sheet shows what a business is worth, the profit and loss statement, properly analyzed, shows a company’s growth rate and rate of return, and points to its future viability. For more information http://www.hiscpa.com/profit-loss-statements.html

Corporate Returns
Discover what type of returns your corporation is required to file and its corresponding due dates ensuring that you do not miss an important deadline resulting in unnecessary penalties and interest.  See http://www.hiscpa.com/business-tax-returns.html

Duluth/Gwinnett CPA Teaches How to Prepare S Corporation Returns (Form 1120S)

A Beginner’s How to S Corporation Tax Preparation Guide by His CPA PC

Lifting the veil behind the confusion of tax returns is an important part of the relationship with your CPA. The more a business owner knows about preparing corporate income taxes the better suited they will be in providing what will be needed. The initial step, in any well-thought out preparation process is to first obtain all of the information that will be required to complete the returns. For example on our web site www.hiscpa.com/newclient.html  you will find a listing of all of the information that will be required to prepare the year-end corporate income taxes. The most critical part of this process is to obtain a Balance Sheet and Profit & Loss for the year being sure to include an adequate chart of accounts to properly reflect items on the tax return as well as to manage the financial decisions of the business. The tax form to be filed for an S Corporation is Form 1120S and the corresponding form to the state of Georgia is Form 600S. Corporate income tax returns are due March 15th of each year or seventy-five days after the end of the company’s tax year. This due date would relate to LLC’s who have filed a tax election to be taxed as an S Corporation as well.

To help illustrate how to properly prepare a Form 1120S, especially the Taxable Portion of the return, let’s assume an example we’ll call the ABC Company with the below Profit and Loss (prepared on a cash basis):

Sales                                                               $200,000

Purchases                                                          80,000

Independent Contractors                                   10,000

Total Cost of Goods Sold                                    90,000

Gross Profit/Margin                                          110,000

Salaries – Owner                                              70,000

Payroll Taxes                                                    7,000

Section 179 Depreciation                                  10,000

Meals & Entertainment                                      4,000

Contributions                                                   1,000

Office Supplies                                                10,000

Legal & Professional Fees                                  2,000

Net Income                                                    $6,000 *

*No provision for income taxes are to be recorded on an S Corporation Internal books as an S Corporation does not pay income taxes. Instead those earnings flow down to the owners of the company who pay taxes on accordingly on their respective Form 1040/their personal return.

The major tenants of the form are and how the Profit and Loss of ABC Company would be reflected on the Form 1120S are predicated on the above assumptions following:

Corporate Name and Identifying Information.

This will include the company’s full physical address (not a P.O. Box), the Federal ID # or EIN, date of incorporation and date that the IRS accepted the company’s S Corporation election (which is obtained by filing of Form 2553 within seventy-five days of the tax year to which the election relates). Also noted at the beginning of the return is a notation of whether the return is the first or final return filed, if the return has been amended and acknowledgment of any address change. Here ABC Company would lists its name, address, ID#, date the company was incorporated as well as the date S Corporation status was formally accepted by the IRS.

Reporting of Income

Gross Receipts of the business are listed on page one of the return with any corresponding reduction reflected for any returns and allowances. If your corporation is located solely within one state, doing business in several states or worldwide all of the corporate income is listed on Line 1a of the return. Here ABC Company would lists its Sales of $100,000.

Cost of Goods Sold

Cost of Goods Sold are detailed on Schedule A of Form 1120S detailing the opening and ending inventory for the year, purchases, cost of labor, other direct costs, and Section 263A (which is an allocation, if required, of any applicable overhead costs). Here ABC Company would lists its Purchases of $80,000 and Contract Labor of $10,000 detailing a $90,000 Total Cost of Goods Sold per the return.

Gross Profit

Perhaps the most significant indicator of the likelihood of corporate profits is the amount of gross profit or margin that a company reflects for the year. Care should be taken at all levels of management and personnel alike to ensure that an adequate gross profit in terms of both dollars and percent is achieved on each and every single billing done during the year. Managing this percentage is critical to influencing what the final profit for the year will be. Here ABC Company would lists its Gross Profit Margin of $110,000 which is calculated by subtracting their Cost of Goods Sold of $90,000 from their Sales of $200,000.

Salaries

Salaries are broken down between on the return between Officers, Other salaried personnel, and payroll taxes thereon. Usually apart from Cost of Goods Sold these are the second largest dollars listed on the return. Care should be exercised to ensure that these accounts are similarly reflected on a company’s internal profit and loss as well. Here ABC Company would lists its Salaries to its owner of $70,000.

Repairs & Maintenance, Rents, Taxes & Licenses, Interest, Depreciation, Advertising, Pension Cost, Employee Benefit Plans and Meals & Entertainment.

Repairs & Maintenance, Rents, Taxes & Licenses, Interest, Depreciation, Advertising, Pension Cost, and Employee Benefit Plans are listed as separate line items on the first page of the return. Here ABC Company would lists its Payroll Taxes of $7,000. Section 179 Depreciation of $10,000 would not be listed here as it is a tax preference item which will be reflected on the K-1 schedule which will be attached to the Form 1102S indicating to all owners their respective share of tax preference items. Meals & Entertainment of $4,000 would also be listed here but, per tax law, this amount would be reduced to $2,000 as only one-half of Meals & Entertainment are tax deductible.

Other Deductions

As an attachment to the return, Other Deductions are listed detailing other substantive expense items such as Office Supplies, Insurance, Travel, Telephone & Utilities and Legal & Professional Fees. Here ABC Company would lists its Office Supplies of $10,000 and Legal & Professional Fees of $2,000. On the return the company will reflect Total Other Deductions of $12,000.

Ordinary Income (Loss)

Ordinary income (loss) reflects the Gross Margin less all of the subsequently listed expenses. Here ABC Company would lists its Ordinary Income (per the tax return) of $19,000 (calculated by taking the Gross Profit Margin of $110,000 and subtracting from it $70,000 of Salaries to the Owner, $7,000 of Payroll Taxes, the deductible portion of Meals & Entertainment of $2,000, and total Other Deductions (described above) of $12,000). All of us, upon first glance would initially ask the question, why is the cash based profit of $6,000 above now increased to the $19,000 as listed on the return? To help clarify this difference please see the below reconciliation:

Cash Based Net Income Per the Company P & L                     $ 6,000

Add Meals and Entertainment (fifty percent deductible)            2,000

Add Section 179 Depreciation (a tax preference item)**          10,000

Add Contributions, which are also tax preference item              1,000

Taxable Income Per the Return                                             $19,000         

**For Fixed Assets that qualify (up to certain statutory tax limits and further limited by the amount of profit of the business) ABC Company can write off in full, in the year purchased, qualifying fixed assets. In this example the $10,000 is below the IRS allowable limits and the company still has a profit after considering the Section 179 deduction. Section 179 Depreciation is a tax preference item and therefore not listed on the face of the Form 1120S. However it is reflected on the K-1 schedule attached to the return for the owner to accordingly reflect as a tax deduction on their personal return (assuming the individual taxpayer meets qualifying parameters that are applicable).

Income Taxes

As an S Corporation is a “flow through entity” all of the earnings from the corporation flow down to the returns of the shareholders who own the company stock. It is there on the personal returns that the S Corporation shareholders reflect the operating results and pay the income taxes that are owed on S Corporation earnings. As these monies flow down to the individual owners/taxpayers return (Form 1040), there are no income taxes due to the IRS on the filing of the Form 1120S/the corporate income tax return for S Corporations. When the GA S Corporation return (Form 600S) is filed there are no income taxes due GA, as well, as the earnings are reported on the GA owners return (regardless of whether you are a resident of GA or a non-resident). However there is a modest net worth tax due the State of GA, which is based upon a company’s net worth (per the Balance Sheet) at the end of the year. Here ABC Company would lists no income taxes as the corporation is a “flow through entity” on the Form 1120S and all profits and tax preference items will appear on the appropriate forms and sections of the shareholders personal income tax return (Form 1040).

Tax Method & Business Activity

A company’s method of the filing of its income tax returns, whether cash, accrual, percentage-of-completion or completed contract are reflected on the return. Generally all companies with inventory would file on an accrual basis to ensure that cost of purchases of items still in inventory are not unduly expensed. Otherwise, typically it is tax advantageous to file your tax return on a cash basis, assuming you qualify. Also in this section of the return the Business Activity of the return is shown as to whether the items sold of the company are a product or a service. Here ABC Company would list that it is a cash basis taxpayer detailing the business that it does.

Tax Preference Items

As all of the earnings flow down to the respective owners of an S Corporation to their individual returns so do any tax preference items such as interest income, contributions and Section 179 depreciation so that owners may reflect in the correct locations of their personal returns these respective items. Here ABC Company would delineate the Section 179 Depreciation of $10,000 and Contributions of $1,000.

Balance Sheet

On Form 1120S there is a section of the return to reflect the Balance Sheet for the current and the prior year. Here all of a company’s current assets, long term assets (such as fixed assets), current and long term liabilities, common stock, additional paid-in-capital, and retained earnings are reflected. Supporting schedules, if needed, to substantiate the balance listed are also frequently shown. Here ABC Company would detail and list its Balance Sheet accounts as of the close of the last two taxable years.

Reconciliation of Income (Loss) per Books With Income (Loss) per Return

Here a schedule is performed which details and reconciles book income to taxable income as delineated on the return detailing any timing or permanent tax differences. Here ABC Company would detail (as per the above reconciliation) how the company’s internal Profit & Loss reconciles to the Taxable Income as reflected on the return (Form 1120S).

Analysis of Accumulated Adjustments Account & Shareholder’s Undistributed Taxable Income

This schedule is on the page of the Form 1120S and reconciles all adjustments to the retained earnings account including the amount of taxable income (loss) and netting those against shareholder distributions. S Corporation owners pay taxes on all the company’s earnings “when they make the profit, rather than when the profit is distributed.” For example if a company has in a given year $100,000 of taxable profit, then the owners would pay tax on the $100,000 in the year the money is made, rather than the year when a shareholder distribution for these monies are made to the company’s owners. Here ABC Company would detail the roll forward of the prior year retained earnings account to the current year balances reflecting the taxable income of $19,000, tax preference items, any non-deductible (for tax purposes) business expenses and shareholder distributions.

Helping to remove the mystique of income tax return preparation and helping to educate our client base is our watchword. A well-informed client is our goal so that we might closely work together to do what we legally might to keep your tax bill as low as legally possible. For articles relating to the above issues and to learn more please see:

Preparing and Reviewing Financial Statements
As your financial results of your business are like a doctor’s chart of their patient, this will help enable you to understand financials and their use.  See http://www.hiscpa.com/financial-statements.html

Managing the Heart Beat of your Business
Unlock the secrets of your business by learning to check its pulse by a review of your company’s internal financial information.  Visit http://www.hiscpa.com/managing-financials.html

Using the Profit and Loss Statement to Determine the Value of Your Business
The balance sheet shows what a business is worth, the profit and loss statement, properly analyzed, shows a company’s growth rate and rate of return, and points to its future viability. For more information http://www.hiscpa.com/profit-loss-statements.html

Corporate Returns
Discover what type of returns your corporation is required to file and its corresponding due dates ensuring that you do not miss an important deadline resulting in unnecessary penalties and interest.  See http://www.hiscpa.com/business-tax-returns.html

Duluth/Gwinnett CPA…Should You Incorporate Your New Georgia Business?

Being a Georgia S Corporation Can Save You Thousands of Tax Dollars Annually

If you have either already just started a business or in the process of beginning one, the decision on whether or not to incorporate and its related variables will be one of the most important financial decisions you ever reach.

Although many financial pundits will encourage a one size fits all approach encouraging one entity type over another, it is wise to carefully consider and evaluate this decision as both your mode of operation, the availability of certain financial transactions, retirement plans, etc. will be greatly impacted.

As not all transaction types are well suited for every entity type knowing what your business short term and long term plans are is the first step in a careful determination of your entity/incorporation type. For example many real estate developers, for a myriad of reasons, are well suited to be an LLC, LLP or partnership due to the flexibility of profit allocations and the movement/transfer of real estate from and to the business.

However, as many of these variables/options will not be even a blip on the radar screen for a service, manufacturing, distribution, or wholesale business they may want to consider if an S Corporation might be the best course to pursue due to its profits only being taxed once as opposed to the double taxation of a C Corporation.

To read more and see which entity type is best for you visit http://www.hiscpa.com/article2.html

www.HisCPA.com  A Christian CPA Firm in Duluth GA Proudly Serving Suwanee, Lawrenceville, Snellville, Lilburn, Duluth, Norcross, Peachtree Corners, Atlanta, Gwinnett, Fulton, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Cumming,  Alpharetta, Dunwoody, Sandy Springs and Tucker as a Faith Based CPA Firm

Gwinnett/Duluth CPA Advises Gwinnett Entrepreneurs on Filing Taxes for LLC’s

The below is a sample letter we might send one of new clients to make sure that all of the issues are covered when filing tax returns for an LLC (Limited Liability Company).

This is to confirm your advice.

-That you have filed all of your personal returns and that we will have to amend them all as they have not yet reflected your LLC activity.

 -That you began your LLC in 2010.

-That you are forwarding me copies (you keep the originals) of your personal income tax returns from 2010 to 2012. -That you are getting me a copy of where the IRS gave you the EIN/ID# of your LLC.

-That you are calling the IRS to see if your LLC is an S Corporation for tax purposes and the effective date. Please mail me a copy of the letter if they have accepted it and a written e mail from you confirming what they say. If you are an S Corporation be sure to have them mail and follow up with them to receive the written confirmation from the IRS.

 -That we went over the way to recap your 2010 LLC data so that you might use it as a guide to prepare your future years.

-For 2010 and after you finish with the suggested changes please send sure to send me the Standard Balance Sheet and Standard Profit and Loss off of QuickBooks along with the W-2′s the company issued and the W-3. Please note for 2010 I already have a copy of the W-3 but still need the W-2.

-This will confirm our conversation that as your have already filed the personal returns that we will have to amend all of them from the date the LLC started in 2010 forward whether you are an LLC or S Corporation for tax purposes.

-Per tax law if you are an S Corporation for tax purposes you should pay all active employee owners a fair and reasonable salary given position and profit whereas if you are an LLC for tax purposes you should not be a W-2 employee.

www.HisCPA.com  A Christian CPA Firm in Duluth GA Proudly Serving Suwanee, Lawrenceville, Snellville, Lilburn, Duluth, Norcross, Peachtree Corners, Atlanta, Gwinnett, Fulton, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Cumming, Dunwoody, Alpharetta, Dunwoody, Sandy Springs and Tucker as a Faith Based CPA Firm

Gwinnett/Duluth CPA: Don’t Miss the Final Due Date for Your 2011 Corporate Income Tax Return

Final Due Date for Your 2011 Corporate Income Tax Returns is September 15, 2012

The final due date for your 2011 Corporate Income Tax Returns is September 15, 2012. If you are either a C Corporation or an S Corporation this is the final due date.

If you are a C Corporation please be reminded that:

If you owe any income taxes that there should have already been paid either as an Estimated Tax or with your Federal Extension Form 7004. The Estimated Tax Payment Forms would be paid by IRS Tax Form 1040ES and the Estimated Tax Payment Forms to the State of Georgia by GA Tax Form 500ES.

That the IRS & the state will assess penalties and interest for any late payment, so care should be taken with CPA to ensure appropriate tax planning is done so that you do not unnecessarily incur undue penalties and interest.

The tax form that you will file with the IRS for your C Corporation Income Tax Return is IRS Tax Form 1120.

That ASAP that you work with you accountant/CPA to evaluate converting your C Corporation or LLC  to an S Corporation for tax purposes by filing IRS Form 2553: Election by a Small Business Corporation.

If you are an S Corporation please be reminded that:

That your S Corporation does not pay income taxes and that the profits “flow through” to an individual shareholders personal return.

An S Corporation Owner will want to ensure that they have paid sufficient taxes against their federal and state income taxes, which will be reflected on their Personal Income Tax Return/IRS Form 1040, to ensure that all of their individual taxes will be paid as due.

That the IRS & the state will assess penalties and interest for any late payment, so care should be taken with CPA to ensure appropriate tax planning is done so that you do not unnecessarily incur undue penalties and interest.

The tax form that you will file with the IRS for your S Corporation Income Tax Return is IRS Tax Form 1120S.

Please be reminded that Congress has recently considered legislation that may change the way S Corporations have been taxes for the last five plus decades. Write your Congressman and the President today to ensure that Small Business of America/The Backbone of the U.S. Economy is not unduly hampered. Stay tuned for more details.

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, Back Taxes, Business Acquisitions/Sales, Forensic Accounting, Business Valuations and Bookkeeping.

www.HisCPA.com  A Christian CPA Firm in Duluth GA Proudly Serving Suwanee, Lawrenceville, Snellville, Lilburn, Duluth, Norcross, Peachtree Corners, Atlanta, Gwinnett, Fulton, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Cumming, Dunwoody, Alpharetta, Dunwoody, Sandy Springs and Tucker as a Faith Based CPA Firm

Duluth/Gwinnett CPA: We Believe All of Our Clients Are Valuable! And we work hard to make that none at every step. The below is a sample letter we might receive from a business owner looking for a new CPA. Is it time to upgrade your firms CPA/tax services today?

John, Your persistence has paid off. You are the only CPA I’ve reached out to who actually behaves like they would like my business. I’ve tried to use someone more local to me, and tried to use a referral, but neither had enough time to actually follow up with me. You on the other hand were diligent in reaching out to me and trying to get my business. I need someone that has time to help me proactively. I’d like to get together in person, but allow me to summarize my situation.

I’m the sole employee of my contracting business. I incorporated as an S Corp in 2011, and I didn’t generate revenue or pay myself a salary until this year, so that is the first and only year I need to file for. I’ve been using QuickBooks to run my payroll and pay my taxes. I’ve switched myself over to withholding monthly, and as of this month I’m fully caught up with my tax payments. I run my business as simply as possible, with limited expenses past my salary. I have already filed my 2011 Federal taxes for my corporation and for my individual (using TurboTax for business). However, I was unable to get my 2011 GA State taxes done, and I also didn’t file an extension. Yikes! What I need is an initial review of where I am, and help getting my State taxes completed (and/or extended to limit my penalties). Then once my current situation is under control, we can work out how to move forward with our relationship. I imagine this week is busy for you, but I’d appreciate you making time for me as soon as your schedule allows.

Thanks,

Below is my response: Sounds great. I would be honored to take care of you and your CPA needs. How about meeting later today at 2 p.m….please note our address is below. Please bring along with you a copy of the last corporate and personal returns filed along with your initial questions and we’ll get started. I look forward to serving as your CPA for many years to come!

John Dillard, CPA of His CPA, PC, 1940 Woods River Lane, Duluth, GA 30097 Phone 770-814-9304 www.HisCPA.com A Christian CPA Firm Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!

www.HisCPA.com A Christian CPA Firm in Duluth GA Proudly Serving Alpharetta, Suwanee, Lawrenceville, Norcross, Atlanta, Gwinnett, North Fulton, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Dunwoody, Snellville, Lilburn & Grayson as an Award Winning CPA

Duluth/Suwanee CPA Advises Gwinnett Business Owners: Should I Convert My Business to an S Corporation?

S Corporations, as defined by the IRS, is a corporation that chooses to pass income, losses, deductions and credit to their shareholders as detailed and specified by federal tax rules. The shareholders that the corporation passes their items to must record their information of items that pass through on the individual taxpayers personal income tax return.  This lets the S Corporation avoid the double taxation associated with being a C Corporation. S Corporations are still responsible for built-in gains and passive income which are predominantly represented by the accumulated assets of a C Corporation that have not yet been taxed at the shareholder level that had been retained by a C Corporation as of the date that a C Corporation elects to be an S Corporation. Though this is certainly something to be well considered in the planning process of converting your LLC or C Corporation to an S Corporation but would not generally a disadvantage substantive enough to preclude the long term tax advantages of an S Corporation over either an LLC or a C Corporation.

To qualify as an S Corporation the entity must meet the requirements below:

• Be a domestic corporation

• Have only allowable shareholders o Including individuals, certain trust, and estates o Can’t include partnerships, corporations or non-resident alien shareholders

• Have no more than 100 shareholders

• Have one class of stock

• Not be an ineligible corporation such financial institutions, insurance companies, and domestic international sales corporations To attain S Corporation status the corporation must apply under a Form 2553 Election by a Small Business Corporation that is signed by all the shareholders.

When corporations form, the shareholders trade money, property, or both, for the betterment of the corporation for ownership in the business. Corporations, in most cases, take the same income tax deductions as a sole proprietorship to determine the income taxed. Under federal law, a C Corporation is a separate taxpaying entity. A corporation is a separate and distinct legal entity that conducts business and accepts income and loss and pays taxes and distributes to its shareholders.

As an Atlanta/Suwanee/Alpharetta CPA for decades I have learned that perhaps the most important tax decision you will ever reach in your business life is the initial entity selection; to read more about how individual entities are taxed see http://www.hiscpa.com/article6.html

Choosing an Entity Type for Your New Georgia Business Your initial choice of entity is perhaps the most important tax, financial and legal decision you might ever reach. Being well versed in these areas is essential to a wise and prudent decision. Visit http://www.hiscpa.com/article2.html

Tax Effects of Entity Choice when Incorporating Your New Georgia Business Carefully considering the tax effects of your entity choice is essential to getting your business off on the right foot. Being careful to avoid, if at all possible, the double taxation of C Corporations and then selecting the right entity for your business from both a tax and legal perspective is critical. See http://www.hiscpa.com/article6.html

Contact HIS CPA PC (A Christian CPA Firm) today.

www.HisCPA.com A Christian CPA Firm in Duluth GA Proudly Serving Suwanee, Lawrenceville, Snellville, Lilburn, Duluth, Norcross, Peachtree Corners, Atlanta, Gwinnett, Fulton, Johns Creek, Roswell, Forsyth, Flowery Branch, Buford, Cumming, Dunwoody, Alpharetta, Dunwoody, Sandy Springs and Tucker as a Faith Based CPA Firm