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Wages for S Corp Officers

2016-06-13 by Eva Rosenberg

IRS_1461001834-1170x250 Today TaxMama® hears from ASquare in the TaxQuips Forum with this question. “I work as a full time employee for a company on W2. I own S-CORP that i get income for the services provided in my free time. Do I need to run the payroll for that money earned on S-CORP or can I claim it as distribution at the end of the year?”

 

tmreplies

 

 

Dear ASquare,

This is a very common issue that people really should think about before forming S corps or LLCs – but often don’t consider.

Hmmm…is your S Corporation showing a profit?

If so, you need to be on payroll if you want to avoid an audit.
These days, the IRS is not wasting time on unprofitable audits.

They are focusing their energy on audits they know will generate revenue.

And when it comes to profitable S corporations, the IRS knows that the probability of generating additional taxes is 100%.

So, in short, yes, if you want an S Corp – run it properly.

If you don’t want to bother with the inconvenient technicalities, dissolve the S Corp and run a sole proprietorship. Get business liability insurance if you’re concerned about lawsuits.

And remember, you can find answers to all kinds of questions about S Corporations and other tax and business issues, free. Where? Where else? At www.TaxMama.com.
[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link - it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum

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Divorce Home Sale

2016-05-24 by Eva Rosenberg

Alexas_Fotos / Pixabay[/caption]

Today TaxMama® hears from Greg in the TaxQuips Forum with a very common divorce issue. Let me paraphrase. “We got divorced. My wife and child stayed in our home. I made the payments. Now, when we want to sell it 7 years later, is there any way at all that I can get the personal residence exclusion?”

tmreplies


Hi Greg

Well, I have good news for you.

1) Yes, you are entitled to claim the $250,000 personal residence exclusion
on your share of the profit when the house is sold.

There’s only one glitch here – the exclusion works if there is a divorce or separation agreement allowing this arrangement. Your agreement limited the arrangement to 5 years – not “5 years or until our son leaves home.” If you are audited, that could cause you a problem.

2) Personally, I would not have claimed those additional payments as alimony expenses. I would have used them to deduct the mortgage interest and property tax. But you survived audit…and you have proof of two successful audits, so the IRS may not audit this same issue again – IF you had a “no change” determination.

I hope you two can work this out amicably and reasonably.

CPE LinkFor more great tips on how to save taxes during a divorce, please view our special resource – Tax Checklist for Knotty Divorces . This two hour course can help couples resolve issues fairly – and save thousands of dollars – in taxes and legal fees.

 

And remember, you can find answers to all kinds of questions about divorce and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Tax Day Deadline - and Extensions

2016-04-18 by Eva Rosenberg

stevepb / Pixabay[/caption]

Good news! This year we get a few extra days to file our tax returns – until April 18th (19th in MA and MN).

But what’s if you’re just not ready?

Relax. File an extension – no excuses needed.
You get an extra six months to file.
Use From 4868 for personal extensions

Check with your state for their forms and filing requirements. William Perez at About.com has a good list of the state info. When you expect to owe money, some states, like CA, OK, DE and some others, will only give you an extension if you pay some or most of the balance due.

Don’t worry, going on extension won’t increase your chances of audit.

Oh, you heard it’s an extension to file, not an extension to pay?
That’s true. But they will grant you the extension even if you don’t pay the whole balance due.
By filing the extension, you avoid the non-filing penalty of 5% per month up to 25%.
AND if you really have a hardship when it comes to paying, there’s a special form to give you more time to pay – Form 1127.

For business, like partnerships, estates and gift taxes, use Form 7004 to get the extension – and the corresponding state form.

Whatever your tax problem – TaxMama has an answer – free – at www.taxmama.com click on Ask a Question.

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Wasted Refunds

2016-04-04 by Eva Rosenberg


stevepb / Pixabay

Today TaxMama® wants to bring wasted refunds to your attention. The IRS keeps sending out announcements that refunds are expiring. People keep ignoring those announcements, thinking that this doesn’t apply to them.

tmreplies
Last week’s TaxWatch column at MarketWatch.com tells some stories of people who lost their refunds because…shrug, I just can’t be bothered to file right now.
Please – read that column and pass it on to your friends or family members who aren’t filing.

Let me tell you another story – about someone making close to minimum wage, who also just didn’t bother. One day, this fellow got disabled. He wasn’t in a position to collect either disability or unemployment (OK…through sheer stupidity.) But we were able to persuade him to catch up on his previously un-filed returns (there were at least 7 years unfiled). For the years that were still open, we were able to get him quick refunds of over $3000 . But…for the other years…all gone. And let me tell you, when you are unemployed, sick and have no income coming in, that lost $4000 can make a big difference! It took another 2-3 years before he was able to resolve his medical issues and start getting SSI and VA help. (Don’t ask.)

Every tax professional I know has more stories. So do I…like the doctor living in his car with his two children; or the dementia victim whose bank moved and he couldn’t pay his mortgage or file his taxes, or…folks who will break your heart.

Please, don’t be one of those statistics. Please, FILE YOUR UNFILED RETURNS! Or help someone you love catch up.

Remember, you can find answers to all kinds of questions about tax refunds and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

And Remember, if YOU have questions, please post them into the TaxQuips Forum – just click on Ask A Question. (Family members – use this.)

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

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TaxMama's Tax Quips 2016 Mileage

2016-03-21 by Eva Rosenberg

TaxMama® and Ken Jeffries interview:

Keeping good recordsLISTEN TO PODCAST

Ken: It’s TaxQuips Time from TaxMama.com . Today TaxMama covers deductible mileage.
What kinds of mileage are deductible by individuals and businesses?

TaxMama: Actually, there are four ways to take advantage of vehicle-related deductions:


  1. Medical mileage

  2. Moving Mileage

  3. Job or business mileage

  4. Charitable mileage


Ken: What are the mileage rates for 2016?

TaxMama:


  1. Medical mileage and Moving Mileage – 19 cents (down from 23 in 2015)

  2. Job or business mileage – 54 cents (down from 57.5 in 2015)

  3. Charitable mileage – it’s always 14 cents – it literally takes an Act of Congress to change it


Make sure you keep track of all your miles for the year – not just the deductible miles. Keep good records.

Ken: There’s a lot more to learn about vehicle deductions and mileage. We’ll talk about that in future TaxQuips.

Ken: Meanwhile remember, you can find answers to all kinds of questions about mileage and other tax issues, free.
Where? Where else? At www.TaxMama.com.

Download the MP3 (0:00min, 2MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
The #1 Free Tax Podcast Online
TaxQuips Forum
Where you can you ask your tax questions
TaxMama's TaxQuips
Where you can you can add your comments



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