Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

Hi, my medical practice, PLLC is owned by 2 medical PAs- myself

Hi, my medical practice, PLLC...
Hi, my medical practice, PLLC is owned by 2 medical PA's- myself and my partner. Last year we had to let one employee go in a middle his contract and paid a sum of money reflecting how much he would have made is he stayed till the end of his contract. It was messy and unpleasant situation and in the midst of it we did not think it through. We cut 2 bank checks, the money came from our personal accounts since we did not have enough cash in PLLC( it's a start up), checks were deposited to PLLC account and pay out check was made from PLLC. PLLC later paid taxes on the that amount. Now K-1 came back to our PA's stating that amount of money came to PLLC as personal contribution and not PA one as we should have done. Is it a major violation and what are the consequences? Do we have to redo K-1s?
Show More
Show Less
Ask Your Own Tax Question
Answered in 10 minutes by:
3/1/2012
USTaxAdvising
Category: Tax
Satisfied Customers: 1,237
Experience: US Taxation specialist.
Verified

Hello,

 

Based on my understanding of your facts it appears that everything was done correctly from a tax standpoint.

 

We cut 2 bank checks, the money came from our personal accounts since we did not have enough cash in PLLC( it's a start up), checks were deposited to PLLC account and pay out check was made from PLLC. - perfect, you contributed the cash to the company and the company paid the severance package. The members of the company would receive a credit to his/her capital account for the cash contribution. PLLC later paid taxes on the that amount. - yes, this makes sense the company would owe it's share of payroll taxes on the severance package. Now K-1 came back to our PA's stating that amount of money came to PLLC as personal contribution and not PA one as we should have done. - the contribution by the members to the company should be shown as a capital contribution. I am confused by your last statement "and not PA one as we should have done" - what do you mean by this? Is it a major violation and what are the consequences? Do we have to redo K-1s? - based on your facts I believe everything was recorded correctly, no violations here.

 

Let me know about my query above. I don't believe it will change the manner of reporting in any event but it is good for me to get a solid understanding of your facts. Based on the information above it appears all is in good order, no need to amend K1s.

 

Let me know if you have any further questions.

 

Best regards,

 

USTaxAdvising
Category: Tax
Satisfied Customers: 1,237
Experience: US Taxation specialist.
Verified
USTaxAdvising and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 5 years ago
Thank you. Just want to clarify my question. Since the two PA's are 50 %owners of the PLLC does the fact that contributions were made from personal accounts affect owenership %and tax reporting structure of PLLC ? In other words: who owns PLLC now : 2 individuals plus 2 PA's? and does it matter legally speaking? Am I looking to much into it?

Who are the members in PLLC? What does PA stand for?

 

I was under the impression that PLLC had two members yourself and your partner.

Ask Your Own Tax Question
Customer reply replied 5 years ago
PLLC has 2 owners-two professional associations: 1 medical doctor,PA and 2 medical doctor , PA, each 50 % shareholders. My partner and I are the 2 PA's but not as individuals.

Okay and you and your partner contributed to the PA's and the PA contributed to the PLLC?

 

Or

 

You and your partner bypassed the PA's and contributed directly to the PLLC?

Ask Your Own Tax Question
Customer reply replied 5 years ago
My partner and I bypassed the PA's and contributed directly to the PLLC

Got it. And you are your partner received a K1 from the PLLC? And the PLLC issued K1s to the PA's? (Total 4 K1s issued)

Ask Your Own Tax Question
Customer reply replied 5 years ago
Only 2 PA's received k-1s from PLLC, not my partner and I individually.

Got it.

 

Now K-1 came back to our PA's stating that amount of money came to PLLC as personal contribution and not PA one as we should have done. - was the contribution from yourself personally recorded as a loan by the PLLC? (i.e. due to Mr.Smith, etc.)

 

I am assuming the contribution was recorded as a loan by the PLLC, payable to you personally. How were the contributions recorded by PLLC? (Due from member? Capital contribution by PA?)

 

Sorry for my repeated questions but I need to understand your facts. There may be a chance that whomever prepared the K1s treated the cash received by you and your partner as a "capital contribution" by you and your partner and thus the PLLC would now have 4 members. (the 2 PA's and 2 individuals)

 

Ask Your Own Tax Question
Customer reply replied 5 years ago
Thank you. I think that is what I am saying. Looks like PLLC now has 4 members. I do not believe contribution was recorded as a loan . What is correct next step?

Well if it does have 4 members and K1s were issued then you would need to amend the 1065.

 

You have two options to amend:

1. Report the cash payments by you and your partners as loans at PLLC level, not capital contributions. (PLLC owes you these funds back) This is probably the simplest approach. If the cash payments were greater than 10K this would not be advisable as IRS will consider this a below market rate loan and require you to charge the PLLC interest on the loans.

 

2. Report the payments as capital contributions from the PA's. On the PA books record the cash contribution as:

DR to due from member (a receivable) $12345

CR capital contribution $12345

 

Next you need to reverse the due from member to account for the contribution to the PLLC:

DR investment in PLLC $12345

CR due to from member (receivable) $12345

Now you would have zeroed out the member receivable account, recorded the capital contribution, and also recorded the investment in the PLLC.

 

On the PLLC's books record the payments received by you and your partner as capital contributions from the PA's, not yourselves personally. (the is the DR investment in PLLC $12345 transaction)

 

I hope this makes sense.

 

Let me know if you have any further questions.

Ask Your Own Tax Question
Customer reply replied 5 years ago
Yes,it does! Thank you very much for your help!

Glad I could help. If you ever have any questions in the future please feel free to ask me directly here, if I am not online I will be shortly - http://www.justanswer.com/finance/expert-ustaxadvising/

 

Best regards,

Ask Your Own Tax Question
Ask USTaxAdvising Your Own Question
USTaxAdvising
USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1,237
1,237 Satisfied Customers
Experience: US Taxation specialist.

USTaxAdvising is online now

A new question is answered every 9 seconds

How JustAnswer works:

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

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.WMatteson, 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.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, 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.

OrvilleHesperia, 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!!!!

AlexLos 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.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Form 8300. We are doing a business to business transaction.
We are doing a business to business transaction. The form is not clear on how to compete. Do we complete Part I f … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I owe the IRS $2340, for late reporting on form 1065, can I
I owe the IRS $2340, for late reporting on form 1065, can I just send them a partial payment and ask for installments if possible. thanks: Luis v Olivares Lodi, Ca … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
What is the effect of the latest tax changes on individual
what is the effect of the latest tax changes on individual income taxes for individuals in the $60-70,000 range with no special deductins? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
On october 30th I mailed form dt individual to the IRS in
on october 30th I mailed form dt individual to the IRS in Connecticut Certified mail showed it had been delivered on Nov 2 I have heard nothing … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
What are the payroll tax needed for Nevada I have EIN number
What are the payroll tax needed for Nevada I have EIN number so what is still needed? t's for a tribe business opening in Las Vegas… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,490 satisfied customers
How do I get a State Tax Lien off my credit report!!! My
How do I get a State Tax Lien off my credit report!!! … read more
abci168
abci168
Principal
27 satisfied customers
If an individual has 2 separate S Corp's and wanted to
If an individual has 2 separate S Corp's and wanted to transfer money from one to the other using the funds withdrawn from their joint line of credit, would it be more beneficial to write a check from… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Want to see on irs website the correct way to report
want to see on irs website the correct way to report personal items i sold that show on my 1099k … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
If a shareholder of an S-Corp, 100% shareholder, who did not
If a shareholder of an S-Corp, 100% shareholder, who did not pay himself a salary in 2016 and owes in excess of 48K when the K-1 comes over to personal tax and all the shareholder's monies are in the … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I recently started my business, I used my personal credit
I recently started my business, I used my personal credit card to pay for payroll and labor service. Is it best to pay my credit card bill with a company check or have my company pay me then I pay the… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
Where do you report loans to and from shareholders on the
Where do you report loans to and from shareholders on the tax return for a business (C-Corp)? Where on the tax return do you report interest on a corporate loan to shareholders?… read more
abci168
abci168
Principal
27 satisfied customers
Small business here. We did get behind on our payroll taxes.
Hello Small business here. We did get behind on our payroll taxes. We have made a payment plan for 3k per month to repay. On the Personal Trust Fund Recovery and Penalty ...... which is 70k We are at … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,230 satisfied customers
IRS - If an individual raises money through Go Fund Me and
IRS - If an individual raises money through Go Fund Me and has it contributed directly to the company that he is majority shareholder of, what are the tax implications? The amount exceeds $500,000.… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have a question regarding capital accounts, distributions,
I have a question regarding capital accounts, distributions, and proceeds of a portion of shares of a K1. … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
This is the question: for IRS tax reporting purposes on 2017
This is the question: for IRS tax reporting purposes on 2017 tax returns, what is this relationship between items donated to a qualified charity like Goodwill? Say I have a menu from a restaurant and … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
If a taxpayer never filed any payroll tax returns since the
If a taxpayer never filed any payroll tax returns since the incorporation of his single shareholder S-Corp in 2014 but has made distributions to the shareholder every year, how does he come in complia… read more
Brian Michels
Brian Michels
Partner, CPA
Bachelors of Business Administration
154 satisfied customers
Can an individual person that has a property in their
can an individual person that has a property in their business (sole proprietorship) name execute a quit claim deed to a relative. Or does it need to be transferred to the individuals name first and t… read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
Irs Taxes If an individual withdraws from a 401K for medical
Irs TaxesIf an individual withdraws from a 401K for medical emergency surgery, will they have to pay the 10% penalty tax? What about to pay for a new home?… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x