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i am a notary and owe for a little under $8000. I also had

i am a notary and...
i am a notary and owe for a little under $8000. I also had a failed S-Corporation with zero sales, only losses from expenditures (around $1000 personal loss). I am married, filing jointly. My income only comes from notary services, but my husband is employed and made $35,700. I had around $600 in medical bills. What is our best action plan (seek a tax professional)? How much will we owe (estimated)?
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Answered in 3 minutes by:
4/2/2011
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
Experience: Taxes, Immigration, Labor Relations
Verified

LEV :

Hi and welcome to Just Answer!

Customer:

Hi, thank you

LEV :

If your total with your spouse taxable income from your spouse's $35,700 wages - no dependents, no special deductions or credits - filing a joint tax return - your estimated tax liability for 2010 would be $910 minus whatever was withheld from paychecks.

LEV :

Medical bills may be deducted only if you itemize - if that is only your item to itemize - you better use standard deduction $11,400 that includes everything without going into details.

LEV :

S-corporation losses may be deductible only to extend of your contributions and loans to S-corporation. If your $1000 losses are deductible - that will save you about $100 in tax liability.

Customer:

total is 43634 with mine minus 1163.87 federal withheld, 2216.02 ss withheld, 518.26 medicare withheld and 756 state withheld...but nothing withheld from notary income

Customer:

so from the actual total, what will we owe?

LEV :

let me check...

LEV :

On $43,634 gross income with $1000 loses deduction - your estimated tax liability $1953 - so you will get a refund because of withholding.

LEV :

Please be sure when you file - notary income is not a subject of self-employment taxes.

LEV :

You also may deduct somenotary expenses - and that will reduce your tax liability. Please see this publication - http://wrightnotarypublicnews.com/documents/taxes-description.pdf

LEV :

Oh, sorry - you still will owe ~$800.

LEV :

Please verify if you had any expenses in connection with your notary activities.

LEV :

Are you or your spouse going to school? ar eyou paying student loans?

Customer:

so i can claim $1000 in personal losses for my out of pocket expenses on the S-corporation? Can i do this on a 1040 schedule sc? I spent roughly $150 in office supplies (ink for stamp, business cards, lock box, journal, etc.), $25 in national notary association membership fees, $25 in E&O insurance. I drove myself to different locations...if i can estimate the mileage can I include that? I did not keep receipts for the mileage. I am in an online certification program, but it is paid for, as well as our student loans.

LEV :

S-corporation losses may be deductible only to extend of your contributions and loans to S-corporation. you need to file S-corporation tax return and issue the form K-1 to yourself reporting losses - than you will use that deduction on your tax return.

LEV :

You need to have a log for your business travels to use standard mileage for deduction.

LEV :

All mentioned expenses are dedcutible - but you need to put them in order.

LEV :

I suggest to close your S-corporation - you do not need it - and report your notary activities on the schedule C - that is simple and easy.

LEV :

I will leave soon, but will address all your questions later. Please keep asking.

Customer:

my notarial record keeps a log of the address i am signing at...can that be an informal record?

Customer:

for travels i mean

Customer:

should i close my S-corporation before filing my taxes as an individual? I assume I will have to go to the accountant who helped set up the S-corp...I have a partner who is out of town (on the road), and I know she will need to participate. Is this something you suggest a professional for? Then the schedule c I can do myself?

Customer:

at the beginning of the year, from january to the end of june i notarized for a business and they did not give me a 1099 or anything (despite my request), but they paid me, not the people i notarized. now, i do it on my own. I recalculated exact amounts (mine were estimated before) and came up with my exact income of $7240, my husband's at $35742 and dividend income of $270. I spent $105 on notary supplies, $52 on insurance and $21 on E&O insurance.

LEV :

From tax prospective - I do not see any benefits for you to have S-corporation for your notary activity. To reduce your overhead for filing S-corporation tax returns - I suggest to close your S-corporation by filing a final tax return and report all your notary income and expenses on the schedule C that would be much simpler.


Because notary income is not a subject of self-employment taxes – there is no schedule SE needed. Please see the publication I referenced above for reporting notary income and expenses.


To deduct your business travel expenses - you need to keep a daily log of your trips - including how many miles you travel and business purpose of each trip. If your notarial records have this information - they may be used to support your expenses. You do not need to send these documents to the IRS with your tax return but should keep for your records.

Customer:

s-corporation was for a separate business. the laws changed and the business was abandoned, basically. no money ever made from the business. it is completely separate from notary income...just a failed business venture.

LEV :

Ok - so as long as you do not need S-corporation - it should be dissolved (unless you have different plans) because you are required to file S-corporation tax return even if there is no activities.

LEV :

For travel expenses - you may deduct 50 cents per mile for business miles driven - see for reference - http://www.irs.gov/newsroom/article/0,,id=216048,00.html

Customer:

okay, i will dissolve it. and i guess i will owe a little less than $800 for federal, plus state taxes. travel expenses for services is 14 cents though, right? thank you for your help :-)

LEV :

For travel expenses - you may deduct 50 cents per mile for business miles driven - if you own the car.

Customer:

great, thank you

Customer:

i see why you have such good feedback

LEV :

I am glad to be helpful. Take your time. If you have further questions - be sure to come back. I suggest bookmarking this page for your reference.

Customer:

have you already been paid or do i have to press accept?

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,146
Experience: Taxes, Immigration, Labor Relations
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