Can an S corporation owner pay zero salary in a loss year?
Determine why the business reports a loss and whether the owner still received cash or personal benefits.
Tax Strategy Blog: Page 15
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Can a house bought primarily to flip qualify for a 1031 exchange?
Review acquisition plans, renovation activity, marketing, frequency of sales and actual use.
Can a full-time W-2 employee qualify as a real estate professional?
Start with the actual outside-job schedule, including overtime and other personal services.
Can a cost segregation report write off the entire rental purchase price?
Start with supported acquisition basis, remove nondepreciable land and identify later improvements or separately purchased assets.
Can a bookkeeping loan entry cure an excess S corporation distribution?
Examine the original payment, contemporaneous intent and enforceable repayment arrangement.
Are investor research hours the same as rental participation hours?
Separate studying markets, monitoring investments and reviewing reports from substantive day-to-day operations.
How does vacation rental personal-use allocation work?
Personal and rental use can require expense allocation and trigger special vacation-home limitations.
How does travel advances and expense reconciliation work?
Substantiated qualifying costs under an accountable arrangement can receive different treatment from a nonaccountable allowance.
How does the transition from C corporation to S taxation work?
An S election changes the federal framework if eligibility and procedure requirements are met, but prior C corporation history can still matter.
How does the split from gross wages to net pay work?
Gross wages are reduced by applicable employee taxes and other authorized deductions to arrive at net pay. The employer remits withheld amounts under deposit rules.
How does the employer share of payroll taxes work?
The employer can owe payroll taxes in addition to the employee amounts withheld from wages. Rates, wage bases and special rules depend on the tax and year.
How does the business meal deduction review work?
The business purpose and substantiation must support the underlying expense, and applicable deduction limits still apply.
How does tax payments during a filing extension work?
An extension generally changes the filing timeline without automatically extending the tax payment deadline.
How does stock basis versus company bank cash work?
Stock basis reflects owner investment and prescribed tax adjustments. Company cash from borrowing, earnings or other events does not establish that basis.
How does spouse withholding for joint business income work?
On a joint return, household withholding can help cover combined tax. Review withholding, annual rules and other income before reducing estimated payments.
How does shareholder loan interest reporting work?
Interest is separate from principal and can create income to the lender, with payer deduction treatment subject to applicable rules.
How does shareholder funding for business expenses work?
Owner capital or a bona fide direct loan can fund S corporation operations. Funding is not itself an expense; classify what the business buys.
How does shared payroll cost allocation between entities work?
Actual employees, services and cost allocation must be documented. Employment, benefit-plan, agency and related-employer rules need review before centralizing payroll.
How does separating property ownership from operations work?
Separate ownership can distinguish operating activity from property ownership, but tax classification and related-party use still matter.
How does S corporation salary for retirement contributions work?
Eligible compensation, generally W-2 wages, supports S corporation retirement plan calculations. Distributions do not create compensation for this purpose.
How does S corporation profit on an owner return work?
S corporation items pass to owners on Schedule K-1, subject to applicable limitations. Retaining corporate cash does not generally stop pass-through income.
How does S corporation payroll versus distributions work?
S corporation payroll pays for shareholder services. Distributions have separate basis rules; working shareholders must address reasonable compensation.
How does S corporation loss limitation review work?
Allocated losses must pass through stock and debt basis, at-risk, passive activity and excess business loss rules as applicable.
How does S corporation health insurance reimbursement work?
More-than-2% shareholder premiums paid or reimbursed by the corporation have special wage and deduction treatment.
How does retirement funding alongside business expansion work?
Funding moves cash out of business liquidity and into the plan, even when a deduction lowers current tax.
How does retirement coverage after hiring employees work?
Eligible common-law employees can change an owner-only plan's participation and testing requirements.
How does retirement coverage across two companies work?
Controlled-group and affiliated-service-group rules can require businesses to be considered together.
How does retaining earnings in a C corporation work?
Retaining cash leaves it inside the company for company purposes. Corporate tax can still apply to taxable profit; cash retention does not make the earnings untaxed.
How does repayment of a loan with reduced debt basis work?
An S corporation loss deduction can reduce basis in qualifying shareholder debt. Loan repayment can then be taxable; reconcile any basis restoration.
How does rental security deposit accounting work?
A refundable deposit is generally tracked as a liability until returned or applied under the lease. Advance rent is different.
How does rental sale gain versus net closing cash work?
Tax gain generally uses amount realized and adjusted basis, while closing cash also reflects mortgage payoff and settlement items.
How does rental income reporting from tenant to owner work?
Reconcile gross rent and other rental receipts with property expenses and depreciation, then apply applicable limitations on the owner return.
How does remitting payroll withholding to the IRS work?
Amounts withheld must be deposited and reported according to the employer's applicable schedule.
How does related-party pricing in a two-entity arrangement work?
Controlled transactions must be supportable under applicable pricing and allocation rules.
How does reimbursing a partner business expense work?
A reimbursement accounts for actual partnership business costs paid by a partner, while a guaranteed payment compensates under its own rules.
How does reconciling Form 941 and W-2 totals work?
Quarterly payroll reporting and annual employee reporting should connect to the payroll records, with differences investigated and corrected appropriately.