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Jacy
Jacy, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 568
Experience:  Nine years individual income tax preparation and consulting
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I run a corporation and I am the only one on the payroll.

Customer Question

I run a corporation and I am the only one on the payroll. I pay taxes on the 15th of every month. For the last couple of years I have had my services used by one company who had me choose to get paid either personally or send the checks in the name of my corporation. I chose to have them send it to my corporation so I could pay myself out of the corporation and just pay the taxes on that each month. Since I have been home near the end of December, I had gotten several checks that I have not gotten a chance to deposit yet. Is it alright for me to deposit them after the first of the year? How does that effect my taxes?
Submitted: 3 years ago.
Category: Tax
Expert:  Jacy replied 3 years ago.

Hello,

 

Technically, if you received the checks they should be included as revenue to the corporation, even if the deposits are "in transit" and have not yet made it to the bank. If you do not count them as income in 2010, but still paid yourself your normal salary, then your company will show less net income for 2010. It is fine to deposit them in early January, just don't wait too long.

 

Thank you for your question. Please Reply if you need further assistance.

 

Jacy

Customer: replied 3 years ago.

I think I remember someone saying that whatever is in the company account at the end of the year(profit) is taxed like it was personal income. Since I am not depositing the money until 2011, can it just go towards my taxes in 2011?

Expert:  Jacy replied 3 years ago.

Hello,

 

Then you must have an S-corporation. Even if you use the cash method of accounting, you still need to recognize the income in the year received. Per IRS pub. 538:

 

You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. You must report the income in the year the property is received or made available to you without restriction.

 

Here is a link to the Pub: http://www.irs.gov/publications/p538/ar02.html#d0e1136

 

Thanks again,

 

Jacy

Customer: replied 3 years ago.
Does that mean I have to pay taxes on it twice? Because I still pay taxes the 15th of every month on what I pay myself out of the corporation. I would not be trying to avoid paying the taxes, I just would deposit the checks in to the corporation whenever I deposit them , but still pay the taxes the 15 th of every month on what I paid myself the previous month.
Expert:  Jacy replied 3 years ago.

Hi,

 

No, you will not pay tax twice, you will just have a timing difference. When the checks are received they are income to the corporation, and when you pay yourself a salary you take a deduction. If the company has profit at the end of the year, then if you are an S-Corp, you will get a form K-1 with that amount for you to report on your income tax. This amount will then be available for you to withdraw later with no tax consequence.

 

Hope this helps,

 

Jacy

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