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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11143
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a S-corp that made around 140K, in 2012, after expenses.

Customer Question

I have a S-corp that made around 140K, in 2012, after expenses. I found my CPA had forgotten to file the tax returns (though the statements etc. were prepared). 2013/14/15 revenues will be zero.
is there any way to reduce the tax burden ? I get paid 60K salary and the rest in distributions. Can I somehow use the past 3 yrs to reduce the tax burden(get paid some small amount etc.)
Submitted: 1 year ago.
Category: Tax
Expert:  PDtax replied 1 year ago.
Welcome to the site. I'm PDtax, and will be helping you today.
There might be some way to smooth out the income timing, but I would need to know more about your business, your income, and any opportunities to defer income.
I might consider looking at soiling your S election, so you could use lower brackets.
Can we also discuss how you lived during 2013, 14, 15? If you had other income in '12 or other years, the tax rates might be substantial.
Typically, I would ask for a substantial premium to explore this kind of tax planning, simply because it is worth more than $32. I will ask for a price bump, but not the full value of what you are asking for.
Accept, and we can work on this tomorrow morning.
PDtax
Customer: replied 1 year ago.

I think for something that detailed, I would prefer someone local that I can meet.

Expert:  PDtax replied 1 year ago.
I will opt out.
Expert:  Lane replied 1 year ago.
Hi,
Yes, (and I don't believe that this requires something as "creative" as soiling your S-Corp election.
Have your CPA get them done (or honestly, look at someone different, if this person actually FORGOT to file).
If there was no revenue but costs still ensued, then you should have losses for each of those years.
As this flows to your personal return via the K-1, you (given the information you've provided) may have a Net Operating Loss (more loss than income).
If a taxpayer is taxed during profitable periods without receiving any tax relief (a refund, or lowered tax liability, for example) during periods of Net Operating Loss, an unbalanced tax burden results. So Congress allows taxpayers to use the losses in one year to offset the profits of other tax years.
The basic rules for using an NOL are as follows:
*Carry the amount back to the preceding two tax years and apply it against any taxable income, which can generate an immediate tax rebate. You can waive this action and instead proceed directly to the next step; if so, attached a statement to your tax return in the year in which the NOL was generated, documenting the waiver.
*Carry the amount forward for the next 20 years and apply it against any taxable income, which reduces the amount of taxable income in those years.
*After 20 years, any remaining NOL is canceled.
Working through that, and the detail it requires, as it relates to your specific situation is not reasonable in this venue.
But I would sit down with a CPA, EA or Tax attorney and ask whether applying the NOL back to previous years and then having the unusable amount in hand to apply to future profitable years might make some sense.
Even if it can't be carried back, if your are consinuing in business, these 2013/14/15 losses can reduce FUTURE tax liabilities.
There is a statute of limitations that applies to amending past returns for refund purposes, that starts with the due date for your return.
So for 2012, for example, your due date was Apr of 2013. That means you can still amend for refund purposes until April of 2016, so IF the numbers support this, you need to be aware of that time constraint.
I've covered a couple of things at a very high level (big picture, looking at the forest, not the trees) You need to sit down with someone and ask them to crunch the numbers are it relates to 2013 and 2014 creating NOLs that can be carried back to 2012, as a place to start.
Expert:  Lane replied 1 year ago.

P.S.

So sorry, I meant to provide this link:

http://www.investopedia.com/terms/n/netoperatingloss.asp

Again, only a conceptual (high level) overview.

Don't know enough about your expenses in those yeaars to know how well it applies.

...but a good place to start

Lane

Expert:  Lane replied 1 year ago.
Hi,
… just checking back in to see how things are going.
Did my answer help?
Let me know…
Lane