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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 444
Experience:  Former IRS Revenue Agent
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I am reviewing the personal tax returns of a self employed

Customer Question

I am reviewing the personal tax returns of a self employed individual who owns a farming business under an LLC. The tax returns for the LLC company were not provided to me. I see from the personal tax returns that the individual has filed a Schedule F. He lists all his income from agricultural programs, crop insurance payouts, and cooperative distributions along with a small amount of "other income". He then lists a number of expenses such as gas, custom hire, rent, repairs, taxes, utilities, and nominee distribution. My questions are as follows:
Can he list a nominee distribution as an expense if its a payment to the business he owns? How can he have a Schedule F with some income that his farm produces but not all? This Schedule F does not include the million dollars of income he made through milk and crop sales. Also, he states that he paid himself $16k in in-kind payments from his LLC. Would this be on his personal tax returns somewhere?
Submitted: 4 months ago.
Category: Tax
Expert:  Dr. Fiona Chen replied 4 months ago.

Dear Customer,

Your question reads similar to a divorcing spouse reading the court documents. You need professional help more than the answer/question service here. It seems that there are much complicate matters here beyond just a Form 1040.

Schedule F is a business by itself. If you say that there is more, larger scope business than this much, it is possible those business belongs to a business tax return such as Form 1120 and 1120S. If he by-passes the LLC and reports the entire business here on his Schedule F, then, the in-kind payment is on this Form 1040.

If you have specific questions on his tax return(s), write it down, your attorney can make questions to him ask what he means by the in-kind payment. Also, you can ask him (through your legal representative) where is the "the million dollars of income he made through milk and crop sales". Show your evidence and request the Court to compel him to present all documents. It does not have to be on tax returns.

Think it differently between "financial statement" and "tax return information". Ask for books and records, bank statements, financial institution statements (including investment and retirement accounts and any annuity retirement accounts), life insurance policies, accounting records (in software format such as Quickbook) back up copy for all years in business, all tax returns including payroll tax returns and payroll information tax returns (W-2 and W-3, Form 1099, 1096 filed).

Your legal representative will have to depose him with the documents, as well.

You need professional, CPA help. What you are reading is a good effort, a good starting point.

Please feel free to follow up.

Regards,

Fiona

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP