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Megan C
Megan C , Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16539
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I have two companies company A And B Company A paid company

Customer Question

I have two companies company A And B Company A paid company B $70k in management fees which included payroll for the year. when I file my taxes I show 70k in mgmt exp coming out of company A. Then i show 70k going into company B as management income. I show 70K in payroll coming out of company B. My tax prepare says i cannot show that 70k as a expense twice he says that would be illegal I am confused why please explain
Submitted: 2 years ago.
Category: Finance
Expert:  Megan C replied 2 years ago.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

How are you today?

Megan C :

Do you have a consolidated tax return for company A & B, or does each company have a separate return?

Megan C :

If each company has a separate return, what you are doing makes sense. You're not deducting the expense twice, because you are also claiming it as income.

Megan C :

So A has a management expense, and b picks that up as income. B spent that money on salaries, so B deducts it. I'm not sure why your tax preparer said you cannot do this.

Megan C :

You could not do this if you didn't claim the amount as income in B

JACUSTOMER-ttjbct5l- :

Yes both companies have separate tax ID # and separate returns are being filed I am showing the management fee as income and its coming out of th company b in payroll expense

Megan C :

What you are doing is correct, I don't know why the preparer is telling you that you cannot do it.

JACUSTOMER-ttjbct5l- :

can i send you my 2007 p/l stmt to look at

Megan C :

This is posted online, so I would be uncomfortable doing that due to your privacy

Megan C :

If you remove your company name from it, you can attach it and I can take a look

Megan C :

Hello, are you going to send the file?

JACUSTOMER-ttjbct5l- :

Im sorry i got pulled away how can i send the docs

Expert:  Megan C replied 2 years ago.
Greg,

I see we were having trouble with live chat. I've switched to a different format. You can still reply below, as I am sure you were not done yet. Let me know how I can assist you!

Thanks!
Expert:  Megan C replied 2 years ago.
Hello,

I have switched the format of our chat, as I thought we were having technical difficulties. You can send the docs using the paperclip icon in the toolbar.

Thanks!

Megan