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I'm filing my business taxes myself. I am a llc that elected…

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I'm filing my business...

I'm filing my business taxes myself. I am a llc that elected to be taxed as a scorp for tax purposes. i have a question about retained earnings and how that works for tax purposes.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

I'm filing my business taxes myself. I am a llc that elected to be taxed as a scorp for tax purposes. i have a question about retained earnings and how that works for tax purposes.

Accountant's Assistant: Is there anything else important you think the Accountant should know?

Just want to make sure that is the best structure for a 3 million dollar a year small business with 1 owner.

Submitted: 4 months ago.Category: Tax
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3/20/2018
Tax Professional: Barbara, Enrolled Agent replied 4 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,407
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

S corporations are pass through entities, which means any profit/loss is passed through to the shareholder (you). The S corporation files its own tax return (Form 1120S) and issues a K-1 to the shareholder. You then enter the K-1 information on your personal tax return.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 4 months ago
We have 800k income at the end of the year.
What would be the best structure for the company? Do you have any knowledge on being able to keep income in the company for future business capital.
Customer reply replied 4 months ago
Is the phone call charge in addition to the text charge?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

You can keep retained earnings, but you will pay tax on all profit.

A phone call is a premium service and is an additional charge. Offers of phone calls are site generated. You can ignore it.

We can continue here.

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Customer reply replied 4 months ago
how do I pay the tax on what's left in the business bank account if everything is supposed to be passed through. It is confusing.
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

The results should appear on your 1120S which flow to the K-1.

You enter the information from the K-1 into your personal tax return.

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Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Because the S corporation is a pass through entity, it files its own tax return, but does not pay any tax.

You pay the tax individually.

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Customer reply replied 4 months ago
Ok so just say there is 50k left in the bank account which shows on the balance sheet and then there is the shareholder amount on the K1. Was the shareholder amount supposed to show on the balance sheet also. If so, where?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Ending retained earnings appear in the second part of the balance sheet, under the equity heading.

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Customer reply replied 4 months ago
the K1 income should show there?
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

We are beyond the scope of your original question, and I am at a disadvantage because I cannot see what you're seeing.

As I mentioned, if you prepared the 1120S correctly, the net profit will flow through to the K-1.

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Customer reply replied 4 months ago
the K1 income should show as retained earnings??
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

It will be included in income.

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