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Jon Andrews
Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience:  I deal with all levels of tax planning and controversy - from the ordinary to the complex.
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S-Corp Taxes Conundrum

Customer Question

S-Corp Taxes Conundrum: I have a valid S corporation (elected in 2003).
I filed for an extension, am tackling my personal and S Corp taxes now,
and am trying to sort out how/where to claim business expenses. I am
using TaxCut software to do my personal taxes. I am familiar with the
IRS forms that pertain to the S Corp (1120S, 4562, and K-1) that I also
need to file. I understand that once I complete the S Corp forms, that
will generate a number (by way of the K-1) that I then enter into my
1040.
Background: The Company began in 2003. The company had $0 revenues in
2004 but money was spent on supplies, equipment, professional services,
separate phone line, etc. I own all shares of the company. I work out
of my home office, which meets all IRS Home Office requirements. I also
have a full time (paying) job.
So what I don’t understand is where these deductions should be entered.
All amounts I’m claiming are entirely for the business. All equipment
purchased is used 95% or more for the business. Do I get Home Office
deductions since it’s an S Corp? And if so, how and where are those
claimed? Do the expenses and equipment purchases get entered on the
1120S or on my 1040 (or schedule thereof)?
It seems like it should be straight forward enough once I understand
hoe to claim these things, but I’m stuck at this point and will very
much appreciate (and gladly compensate) the help. I will be able to
check email for the rest of this afternoon and tomorrow.
Very Best Regards,
Scott
Submitted: 11 years ago.
Category: Tax
Expert:  Jon Andrews replied 11 years ago.

Business expenses should be reported in the 1120S. If you have not been doing so previously, you should make sure that, in the future, all business expenses and equipment purchases, etc. are made through the corporation. If this was not done during 2004, you will need to account for them be showing a "payable" to you from the corporation. This is NOT the preferred course of action - it can lead to many significant issues both tax and non-tax.


The home office is a separate issue. Your best bet is to have the corporation reimburse you for the business portion each month - again, sloppy bookeeping in this area is an invitation to trouble. Since you most likely have not done that with respect to 2004, you may wish to disregard those expenses for 2004.


[email protected]

Customer: replied 11 years ago.
Reply to Jon Andrews's Post: Thank you, XXXXX XXXXX clarifying question, if I may.



On form 1120S, I imagine a lot of these expenses would go on line 19
"Other deductions (attach schedule)", is that right? And what schedule
is that? Or is that just another way of saying a separate piece of
paper with a list of the expenses and amount?




Expert:  Jon Andrews replied 11 years ago.

You are correct and it is just another way of saying "a separate piece of paper with a list of the expenses and amount".


jon

Jon Andrews, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 3118
Experience: I deal with all levels of tax planning and controversy - from the ordinary to the complex.
Jon Andrews and other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Jon Andrews's Post:

Thanks, XXXXX XXXXX



Best Regards,



Scott






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