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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28084
Experience:  Taxes, Immigration, Labor Relations
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Just looking on the internet of what deductions are available

Customer Question

Just looking on the internet of what deductions are available for S Corp. I got some capital I'd like to use.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Hi and welcome to our site!There are same deduction rules for business expenses regardless how your business is organized.Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business operates to make a profit.o be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.Some Types of Business ExpensesEmployees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business.Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
Customer: replied 1 year ago.
Those are the deductions I saw on the internet; What about Life Insurance & Disability for >2% shareholder?
Expert:  Lev replied 1 year ago.
Some issues to consider -- Capital Expenses - You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.Business start-up costBusiness assetsImprovements-- Personal versus Business Expenses - Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.
Expert:  Lev replied 1 year ago.
For detailed list of business deduction - you may review IRS publication 535 that is specifically for Business expenses.www.irs.gov/pub/irs-pdf/p535.pdf
Customer: replied 1 year ago.
No thanks, ***** ***** review the pub again. So you charged me $16 for the one question right>?
Expert:  Lev replied 1 year ago.
Specifically for Group-Term Life Insurance Coverage - see IRS publication 15B page 12www.irs.gov/pub/irs-pdf/p15b.pdftreat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% share-holder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% share-holder.So far if S-corporation pays premiums for the life insurance for you personally - that woudl be treated as payment to you - and generally should be reported as wages,
Expert:  Lev replied 1 year ago.
Please be aware that experts do NOT have access to your account - and I honestly do not know how you are charged and what payment option you selected. If you are not sure - that issue should be directed to the customer service. Let me know if you need contact information.
Expert:  Lev replied 1 year ago.
publication 15B page 12www.irs.gov/pub/irs-pdf/p15b.pdfException for S corporation shareholders. Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% share-holder is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder.So far if S-corporation pays premiums for the life insurance for you personally - that would be treated as payment to you - and generally should be reported as wages.
Customer: replied 1 year ago.
Thank you!
Expert:  Lev replied 1 year ago.
Regarding Accident and Health Benefits - these are also reported as wages for S-corporation when paid to 2% shareholder of an S corporation - and may be deducted as wages.However such benefits are NOT subject to social security and Medicare taxes.As a shareholder - you might be able to deduct Accident and Health Benefits on your own tax return.See page 7 in the same publication - S corporation shareholders. Because you cannot treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wage
Expert:  Lev replied 1 year ago.
In general - for all fringe benefits purposes - 2% shareholders of an S corporations are NOT treated as an employee - and S-corporation must treat such benefits as wages.
Some other deduction items to consider
-- Business Use of Your Car - If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses
http://www.irs.gov/publications/p463/index.html
Current standard mileage rate is 57.5 cents per mile
http://www.irs.gov/Tax-Professionals/Standard-Mileage-Rates
.
-- Business Use of Your Home - If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Publication 587, Business Use of Your Home, for more information.
http://www.irs.gov/publications/p587/index.html
But as we already mentioned - basis rules for determination whether any specific expense may be deducted for business purposes - it must be both ordinary and necessary.
Let me know if that answered your question.
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