Discussion:Schedule E - S corp
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Revision as of 14:22, 3 November 2009
Discussion Forum Index --> Consumer Questions --> Schedule E - S corp
Accountingwiz (talk|edits) said: | 2 November 2009 |
| If I form a S Corp and have a loss on it after paying myself wages through payroll, will the S Corp loss offset the taxes I paid on the salary taxes? Or will the S Corp loss offset ONLY S Corp income in the future? I will participate in the business 100%. Thank you. | |
| 2 November 2009 | |
| 1) It won't offset the FICA, FUTA or SUTA on the salary. Most of us woult think it ill-advised to do as you are planning on doing. You should sit down with your tax professional and ask why.
2) You should learn (or go to a tax professional who knows about) the loss limitation rules of basis, passive activities, and at-risk that apply to S corporations. Your question cannot be answered yes or no adequately without that information. Because you aren't even asking the correct question. 3) This isn't a do-it-yourself project. You need professional help or you will possibly pay quite a lot more in penalties and interest than you would have on professional fees. | |
Accountingwiz (talk|edits) said: | 2 November 2009 |
| Kevin, Thanks for the reply. I am a CPA but don't have experience in this area of accounting. Secondly, this is what the tax professional did on the tax return for the existing S corp I want to buy. If you read my question, you would see that I would participate in the business 100% so I am not sure why you even mentioned passive loss limitations. Furthermore, I will start the business using my money with no loans. I know about the basis and at risk rules. These wont apply at least during the first year because my losses won't be more than what I invested. however, I will have a loss most likely due to section 179 expense, amortization of franchise, start up expenses, etc.. You said the S Corp losses wont offset FICA and FUTA, thanks for that. Will they offset ordinary income tax from the wages I pay to myself as business expense? I know you can offset ordinary income up to 3000 from schedule D. Will Schedule E losses also offset ordinary income?
If you think this is a bad method, do you think organizing as a SMLLC is better? I thought of it but then I cant deduct my salary. Thanks for the help. | |
| 2 November 2009 | |
| You haven't filled out your profile so we can't tell what your professional status is.
Obviously you don't know much about S Corp operations or no way you'd consider a scenario where your wages throw you into a bottom line loss that wastes tax dollars. That is one of the things an accounting professional that knows S Corps would advise their client to avoid like the plague. You haven't made it clear if you are purchasing the stock of an existing S Corp or purchasing the assets which also makes a difference in treatment of your initial costs. | |
Accountingwiz (talk|edits) said: | 2 November 2009 |
| KathiJud, are you not making enough money that you come on these boards and try to ridicule others? I said I am a CPA but dont have experience in this type of accounting, don't you think I wouldn't be asking this question if I had known more about S Corp operations? Please, if you wont answer my question, waste your time elsewhere instead of trying to bring others down.
If I form as SMLLC, I will have to pay the full 15.3% federal payroll tax in SE taxes whereas if I form a S Corp, pass-through income is not subject to SE tax. The rest will be distributions and not subject to that tax. However, my initial question is if my S Corp has a loss, will that loss offset ordinary income i received from the salary? I will be buying the assets of the company and not stock. Thanks! | |
| 2 November 2009 | |
| You really need to not let replies get under your skin. Yes the S Corp loss (with active participation) offsets other ordinary income. It could affect the amount of the 179 deduction allowed. It will also waste some payroll tax dollars, both the amount withheld and the employer taxes. You must walk a thin line to reasonably balance amounts for salary VS amounts for distributions. That is a hot item with IRS. | |
Death&Taxes (talk|edits) said: | 3 November 2009 |
| We really don't bite, and as a CPA I am sure you have something to offer on topics many of us are not familiar with, so fill in a profile. This recent discussion also gives some idea of the cost of payroll in the S Corp | |
