Discussion:Shareholder L/R to Retained Earnings?
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| Revision as of 14:52, 28 August 2009 LJACPA (Talk | contribs) (I totally agree) ← Previous diff |
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| {{ForumReplyPost|UserID=Riley2|Date=28 August 2009|Text=Good luck with this one. Doubtful that IRS will buy into the dividend argument. Compensation -- maybe.}} | {{ForumReplyPost|UserID=Riley2|Date=28 August 2009|Text=Good luck with this one. Doubtful that IRS will buy into the dividend argument. Compensation -- maybe.}} | ||
| - | {{ForumReplyPost|UserID=LJACPA|Date=28 August 2009|Text=I totally agree that had this been done correctly, the amounts taken by the shareholder should have been compensation and if I were preparing the 2007 corporate return that's the direction I would go. However, that return is done and I'm just trying to figure out what to do with the 1040. This taxpayer will never, ever be able to pay all that's due and I felt like the best way to deal with this is to add the $70,000 to the $40,000 as dividends and at least include it on the 1040 that way. I'd also have to think about this treatment if this was qualified dividends instead of ordinary. I know that I make mistakes, but this return is disgraceful! I think my dog could have prepared it better than this. Virtually everything on the return is straight from QuickBooks, which was done by several different 'bookkeepers'. It would take too long to detail the flagrant erros on this return and I almost hope the IRS does look closely at it and maybe go after this preparer. I looked the [preparer] company up and their website shows that they handle corporate matters for over "30,000 corporations." However on the NV Secy of State's website they're shown as registered agent for less than 13,000 and well over half of those are either dissolved, in default or inactive. Another case of those of us who try our best under the shadow of preparers such as this.}} | + | {{ForumReplyPost|UserID=LJACPA|Date=28 August 2009|Text=I totally agree that had this been done correctly, the amounts taken by the shareholder should have been compensation and if I were preparing the 2007 corporate return that's the direction I would go. However, that return is done and I'm just trying to figure out what to do with the 1040. This taxpayer will never, ever be able to pay all that's due and I felt like the best way to deal with this is to add the $70,000 to the $40,000 as dividends and at least include it on the 1040 that way. I'd also have to think about this treatment if this was qualified dividends instead of ordinary. I know that I make mistakes, but this return is disgraceful! I think my dog could have prepared it better than this. Virtually everything on the return is straight from QuickBooks, which was done by several different 'bookkeepers'. It would take too long to detail the flagrant errors on this return and I almost hope the IRS does look closely at it and maybe go after this preparer. I looked the [preparer] company up and their website shows that they handle corporate matters for over "30,000 corporations." However on the NV Secy of State's website they're shown as registered agent for less than 13,000 and well over half of those are either dissolved, in default or inactive. Another case of those of us who try our best under the shadow of preparers such as this.}} |
Current revision
Discussion Forum Index --> Advanced Tax Questions --> Shareholder L/R to Retained Earnings?
Discussion Forum Index --> Tax Questions --> Shareholder L/R to Retained Earnings?
| 27 August 2009 | |
| Basic info: C corp set up using Nevada company. One shareholder. 05, 06 and 07 1120's all prepared by different tax preparers - I'm doing 08. I am also preparing the 2006-2008 1040's. SH used corp as his personal account and accumulated $150,000 SH L/R, which was handled by each preparer in different, sometimes bizarre ways. The IRS is meeting with this taxpayer regarding a significant amount of unpaid payroll taxes and provided account transcripts for the 941's and for the 05 and 06 1120's. From what I can tell, IRS has closed 05 and 06 corporate as no balance is due for either year. However, I have no idea about 2007, which is the main issue here. The preparer of 2007 1120 (the NV company that set this up) made an AJE to 'move L/R to available retained earnings', which actually created a negative RE of over $60,000. We now have over $70,000 of reclassified L/R, which to me is nothing but 'disguised' dividends and another $40,000 actually shown as dividends on M-2. Why would this AJE have been made (or is it simply that so many other things were done improperly as well on that return)? | |
| 27 August 2009 | |
| It could be the proliferation of incompetent buffoons doing tax and accounting work these days.
But, back to your question, if I had to guess, (which I have to do with so little info to work with) I would say that the AJE was to reclassify payments made to the shareholder as distributions since they were never really loans in the first place. This is a fairly common practice, post all of the payments to a balance sheet account during the year, see how much profit there is at year end and reclassify "loan" payments to the extent of income. You would not move it directly to RE though, you would show it as a distribution. But keep in mind, the foregoing is what would happen in an "S" corp, you have a "C" corp. Which brings us back to my first statement. Maybe the preparer thought it was an "S" corp. | |
| 28 August 2009 | |
| Good luck with this one. Doubtful that IRS will buy into the dividend argument. Compensation -- maybe. | |
| 28 August 2009 | |
| I totally agree that had this been done correctly, the amounts taken by the shareholder should have been compensation and if I were preparing the 2007 corporate return that's the direction I would go. However, that return is done and I'm just trying to figure out what to do with the 1040. This taxpayer will never, ever be able to pay all that's due and I felt like the best way to deal with this is to add the $70,000 to the $40,000 as dividends and at least include it on the 1040 that way. I'd also have to think about this treatment if this was qualified dividends instead of ordinary. I know that I make mistakes, but this return is disgraceful! I think my dog could have prepared it better than this. Virtually everything on the return is straight from QuickBooks, which was done by several different 'bookkeepers'. It would take too long to detail the flagrant errors on this return and I almost hope the IRS does look closely at it and maybe go after this preparer. I looked the [preparer] company up and their website shows that they handle corporate matters for over "30,000 corporations." However on the NV Secy of State's website they're shown as registered agent for less than 13,000 and well over half of those are either dissolved, in default or inactive. Another case of those of us who try our best under the shadow of preparers such as this. | |
