How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask R. Klein, EA Your Own Question

R. Klein, EA
R. Klein, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 2882
Experience:  Over 20 Years experience
63817126
Type Your Tax Question Here...
R. Klein, EA is online now
A new question is answered every 9 seconds

I have a S Corp (Wyoming) and a LLC (Nevada). Both were

Customer Question

I have a S Corp (Wyoming) and a LLC (Nevada).

Both were paid by some clients residing in CA for services provided out of the state.

Please let me know what forms need to be filed, and links to substantiate to properly pay CA tax.
Submitted: 1 year ago.
Category: Tax
Expert:  R. Klein, EA replied 1 year ago.

Randalltax :

Thank you for your question.

Randalltax :

What state is this business physically located in? What type of business are you in?

Randalltax :

Are these businesses (LLC and S Corp) related in any way?

Randalltax :

How many owners of the LLC are there?

Customer :

The business is a web based sales company/marketing referring business to other companies (e.g. doing pre-sales, phone sales). It happens that there are no employees in the USA. All of the contractors are based outside the USA working as independent contractors.

Customer :

The S Corp has some clients that pay it.

Customer :

The LLC has other clients that pay it.

Customer :

The LLC has income from some websites too.

Customer :

I am the sole owner of LLC

Customer :

I also have a rental property in CA (personally owned)

Customer :

I also have some investments (personal) in Ameritrade.

Randalltax :

What state do you reside in please?

Customer :

I live outside the USA most of the year, so I do not claim a state as residency and have filed a non-resident CA return since 2003

Randalltax :

Based on this information, and assuming you are a US citizen non-resident in the USA, then you will need the following tax returns:

Randalltax :

S-Corp: Federal 1120-S covering all income. Wyoming does not have a state tax.

Randalltax :

LLC: Files a Schedule C attached to your 1040 unless you opted to be taxed as a corporation. Nevada has no state tax either.

Randalltax :

You personally: You will need a Form 1040 which includes all of your income and the K-1 generated from the S-Corp to pass that entity's income to you as shareholder.

Randalltax :

You will also need a CA Non-Resident state return. On it, you will pay tax on your net rental income and any other CA source income.

Randalltax :

Income not effectively to CA is not taxed by CA directly, so unless you have a business office for the S-Corp or LLC in CA or other ties to the state, these items are not taxed by CA.

Randalltax :

It does not matter what state the customers are in. Customers of a NV corporation with no nexus or ties to CA other than the customers living in CA is not taxed by CA.

Customer :

In 2011, CA extended their scope of taxation.

Customer :

Did you take into account these rules?

Randalltax :

Are you over the thresholds in which these rules apply? You gave me very little information to go by, so, no, I did not take the new CA rules into consideration because I don't know about your entity's gross income levels, and more importantly, you gave me no information about any nexus you have to CA. So I am assuming you do not live or work in CA or any other US state.

Randalltax :

This is why my answer specifically states that you don't owe CA unless there is nexus regarding the entities

Randalltax :

The new law affects out-of-state corporations and pass-through entities (partnerships, S corporations, LLCs treated as partnership) and their partners/shareholders/members that have property, payroll or sales in this state. They MAY be considered doing business starting in tax year 2011 if they meet any of the thresholds listed.

Customer :

I was looking for some exact information regarding the forms, and what I've been provided doesn't help me. If there are some specific questions I can answer to get a specific forms and a course of action, that would be helpful. I already knew what you had told me.

Expert:  R. Klein, EA replied 1 year ago.
There are literally hundreds of forms. There is no way to determine in advance exactly what forms or schedules you may need.

Your exact operations, transactions, and accounting all have a bearing on which forms to use. It's like asking a doctor "I'm sick, which medications do you prescribe?" or a car mechanic "My engine is in need of repair. Which parts will I need?"

It is this same reason that I cannot anticipate every potential question or scenario you may have regarding whether you are subject to CA rules on nexus and whether your income from its entities is taxable to CA.

When you hire a tax preparer, that person will look over all your documents and, and like a doctor, diagnose, the forms that are appropriate to your situation.

I'm sorry if this is what you were looking for and we cannot provide it, but this is not a tax preparation service. We are here to answer general information questions and provide you some idea of how to resolve your issue.I believe I have done that based on the broad scope of your question.
Customer: replied 1 year ago.

I was looking for guidance as to whether the LLC or S corp or personally I had to file in CA. There are only about 4 forms (a CA return for a LLC, S corp or personal non-resident) I am asking about.


 


You started out good asking about my situation and was hoping you could at least ask a few more questions to give a specific answer instead of what I knew prior - that there is a new rule in 2012.


 


It just appears you are not familiar with the CA rules.

Customer: replied 1 year ago.
Relist: Incomplete answer.
I need an answer that answers the question with more than just the general information that is available online (that I'm already familiar with)
Expert:  R. Klein, EA replied 1 year ago.
Your question has wholly changed since the original question.

You do not file a CA LLC tax form with FTB if the LLC is a single member treated as an ignored entity if the entity is not organized in CA. An LLC does not file a separate federal tax return.

An S Corporation only files in CA to the FTB if its sales exceed $500K or 25% or more of all sales come from CA. The S-Corp files Form 1120-S. You may need Form 4562 or other forms depending on what accounting items you have. You will need CA 100S if you need to file.

As for your personal liability, you stated for the record that you do not live in CA. Therefore, only CA source income is taxed on your CA 540NR return. You need a Form 1040, a Schedule E, and any other forms based on your personal income and expense situation.

I am familiar with CA rules and tax law.

I am not familiar with your personal circumstances, so I cannot determine from your question or follow ups whether or not you have a CA liability other than what you described. If you wish to share more information, I or another expert can give more detailed advice.




Customer: replied 1 year ago.

To provide more information:


 


NV LLC:


$300k in CA source income (e.g. from CA clients paying)


$2,700k from non CA source


 


I personally:


Have income flowing through the LLC


Ameritrade investment income (is this subject to CA tax?)


Own a rental property in CA. Value of property is over $50k


 


Here is where the confusion arises:


1) I have been told that because I own a rental property that I am technically doing business in CA; hence the full amount of $300k should be taxed in CA, aprox at 10%


2) Others have told me that the income from the LLC is unrelated to the personal property I own, and that I fall under the threshold


 


Any help in figuring this out?


 


Thank you.


 

Expert:  R. Klein, EA replied 1 year ago.
The new law affects out-of-state corporations and pass-through entities (partnerships, S corporations, LLCs treated as partnership) and their partners/shareholders/members that have property, payroll or sales in this state. Currently, they may not be considered to be doing business in this state, but may be considered doing business starting in tax year 2011 if they meet any of the thresholds listed above.

Notice that ONLY your S-Corporation falls into this definition. Your LLC does NOT.

As a CA NON-resident, because you own RENTAL property in CA does not have any effect on whether CA taxes your LLC income. These are independent. The only time your ownership of more than $50K of property in CA affects you is if you were an owner of an AFFECTED entity of the above rule.

Your situation falls into a loophole when you apply the new rule in the correct order.

As a result, it is an opinion that the LLC does not need to follow the "doing business in CA" rule since it is not an affected entity. It is treated as a sole proprietorship only.

Customer: replied 1 year ago.

When you write 'The only time your ownership of more than $50K of property in CA affects you is if you were an owner of an AFFECTED entity of the above rule.' it means that it would affect me only if the LLC with the income had property in CA?


 


When you write, 'Your situation falls into a loophole when you apply the new rule in the correct order.', this is for the tax year of 2011, right?


 


Any other case law or examples other than the link I provided to support this loophole? When I call CA, their phone says they are too busy to answer my call and it disconnects.


 


Thanks.

Expert:  R. Klein, EA replied 1 year ago.
The ownership of property rule affects you if you have an entity that needs to be concerned with CA nexus on sales. Only your S-Corp meets this rule and if you had more than 25% of its income from CA sources. You did not mention any sales figures for the S Corp.

The "new rule" applies to all tax returns 2011 and after. Not just 2011. The LLC does not meet this rule's definitions. It is a sole proprietorship for federal and CA purposes.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
 
 
 
Chat Now With A Tax Professional
R. Klein, EA
R. Klein, EA
Tax Professional
2882 Satisfied Customers
Over 20 Years experience