is there an accountant in the house?

Submitted by Brian on February 17th, 2010 at 1:13 AM

so... I created an S-corp this year for the blog and I am attempting to pay taxes. I am going insane. Turbotax is telling me that I owe *zero* on my revenue despite not paying any estimated taxes this year, which is obviously not right.

I have always relied upon the kindness of strangers... anyone out there who can help me? Please email: [email protected].

Comments

formerlyanonymous

February 17th, 2010 at 1:35 AM ^

There was a non-scientific study that places Swedes as the 5th hottest people as voted by travelers. Americans somehow beat out Brazil.

TOP 20 BEST LOOKING NATIONS
1. America
2. Brazil
3. Italy
4. Australia
5. Sweden
6. England
7. Spain
8. India
9. France
10. Canada
11. Mexico
12. Portugal
13. Wales
14. Russia
15. Japan
16. Ireland
17. Argentina
18. Netherlands
19. Scotland
20. Germany

But in all seriousness, someone help Brian out. Swede or not.

pdxwolve

February 17th, 2010 at 2:03 AM ^

When I was a freelance writer, I used Turbo Tax, but decided to fork a few hundred bucks over to my CPA friend. He saved me probably $3,000 that first year that I would have missed otherwise. Obviously, this was the friend discount, but I never have done my taxes again.

spumich

February 17th, 2010 at 1:46 AM ^

If there is a legit accountant that uses mgoblog they should do it for free. We should all be donating money to Brian. It sure beats paying monthly fees to rivals or scout.

Don

February 17th, 2010 at 4:01 AM ^

Maybe it's because you actually didn't have any revenue from this blogging thing. Your feelings of insanity stem from the inner knowledge that you should have listened to your Mom and gotten a real job in engineering.

WolverineBoston

February 17th, 2010 at 8:00 AM ^

If TurboTax can screw things up for people like Tim Geithner, then don't worry about it!

Brian, you can just tell the IRS that it was the software's fault in 10 years when they finally figure it out and pay the fine then as the undisputed and supreme overlord of the internet*

*Or the Michigan blogosphere... Either one really...

mgowake

February 17th, 2010 at 9:39 AM ^

S-Corps do not require corporate level taxes. Instead, the taxes are passed through to the owner(s) of the company. This is similar to the popular LLC. S-Corps are becoming rarer because the LLC offers better protection and access to foreign investors. I doubt though that MGoBlog is picking up any foreign investment money anytime soon, though :-)

BTW, I'm an MBA, not an accountant, but this is a pretty standard question.

Still in AA

February 17th, 2010 at 9:45 AM ^

Why did you set it up as an S corp instead of an LLC? One of the few advantages to an S corp is that you will only be subject to self-employment tax on Company income to the extent that such earnings are characterized as compensation for services rendered.

Are you working on an 1120-S? Federal tax applies only at the shareholder level for S corps. Perhaps this is causing part of the issue?

Robo Henne

February 17th, 2010 at 10:05 AM ^

I think Brian could prove that blogger's don't make much in wages and pass it all through and pay himself a distribution. Remember it is all what you can prove to the IRS. If he just pays himself to pay the rent for his mom's basement then he should be covered.

Robo Henne

February 17th, 2010 at 1:54 PM ^

I'd also like to add that the main problem with Brian forming an LLC is that a one member LLC is a diregarded entity for income tax purposes and flows through directly to the individuals schedule C. Therefore, he wouldn't have any membership basis to take distributions all willy nilly. He would have to pay additional expenses to lower his businesses income ( a lot like farmers due). And like already stated he would get hit with SE tax.

BBA1994

February 17th, 2010 at 9:55 AM ^

Definitely hire a professional. I'm a CPA (although I don't specialize in tax) and I hired someone to prepare my taxes for the last 5 years and have easily saved at least $25,000 over that time. It's not expensive to hire someone good, my guy charges me $440. Make sure he has plenty of experience in handling small business, S-Corp, LLC's and the like and make sure he keeps up with the ever changing tax laws. This will be the best money you ever spent.

Maximinus Thrax

February 17th, 2010 at 10:14 AM ^

Very rarely will there ever be an amount due on an 1120-S. You will pay the tax on your personal return when you input your K-1. But, definitely hire an accountant. I am a CPA, and I was not even comfortable with the bookkeeping and tax prep. on an S-Corp until my third year in the biz.

Mattinboots

February 17th, 2010 at 11:11 AM ^

I thought with S-Corps that the income or loss that flows through to the shareholders only altered their basis and was not actually taxable income and that was one of the advantages over an LLC? In other words, taxable income isn't realized until shares are disposed of or a distribution is made in excess of AAA? I guess anything reported as a salary would have current tax consequences. I work in international taxes so don't see S-Corps that much.

[Edit: Nope, I am wrong. What is the benefit between an S-Corp and an LLC then?]

RayIsaac91

February 17th, 2010 at 11:31 AM ^

The S Corp tax rules are much more structured than that of the LLC. The S Corp, for example, has to follow specific rules for distributions; distribution must be in the exact proportion of the shareholder's ownership. The S Corp must also, theoretically anyway, follow the rules of the state in which it is incorporated with respect to shareholder meetings, corporate resolutions etc.The LLC structure allows the taxpayer to elect to be taxed as a partnership. This allows more freedom in dealing with distributions, allocation of income and expenses etc. subject to the partnership agreement and "economic" considerations.

S.G. Rice

February 17th, 2010 at 10:42 AM ^

As mentioned ITT, there should almost never be tax due on a Form 1120S.

Assuming there was income you should have paid yourself a salary, issued yourself a W-2 and deducted the payroll items on the 1120S.

Any net income or loss remaining should flow through onto a Schedule K-1 which, like your W-2, is reported on your personal 1040.

Tax season is fun.

the fume

February 17th, 2010 at 1:54 PM ^

I hired an accountant to do it my first year and then pretty much copied what he did the last 3 years. I tried TurboTax and it's solid, the only thing it (I) screwed up on was somehow it was trying to write off withholding and social security taxes. Otherwise got the same results.

Anyways, here are the basics:

Yearly:
State annual return (Sales, Use, Withholding tax, summary of what you should be paying monthly or quarterly (see below))
Federal unemployment (940)
W2/W3
Local property taxes
State annual reports
1096/1099 (maybe not necessary for you, I only use for rent) non-paying
1120S (line 21 gets transferred to personal 1040, non-paying as a corp.)

Monthly or Quarterly
State witholding (160)
Federal witholding (941)
State unemployment
Sales Tax

Personal:
1040 obviously, estimated (basically only S-corp income (line 21) and capital gains, salary is covered by withholding). Both state and federal.

allansrule

February 19th, 2010 at 12:34 AM ^

I e-mailed you from my work account.
I do a lot of planning and compliance work with single shareholder S-Corps who don't have professional accounting staff on the payroll. I can turn just about any mess/stack of papers into a trial balance (as can probably some of the other CPAs here).

Mattinboots comment is spot-on.
"And the IRS is requiring more and more that you characterize a reasonable amount of the income as compensation and pay self-employment tax."

As others mentioned, it is of utmost importance that you understand stock basis and debt basis. You don't want to deduct losses or take distributions in excess of basis.