I'm bragging on TTB

[jimmcg]

If the owner is running everything through a personal checking account and not a separate account set up using the corporation EIN, then the IRS can disregard all transactions of the S corporation and say the S corporation never conducted any business. Then tax all transactions that were run through the personal checking account as though the business was a Schedule C.

Also if transactions are being run thruogh and paid from personal accounts certain state courts may "pierce the corporate vail" and determine that a true corporate entity does not exist and therefore neither does the corporate protection of limited ;liability.

[Bees Knees]

As a devil's advocate, it isn't all that unusual for one person S-Corporations to operate from their personal checking account. What's to be done in that situation?

If the owner is running everything through a personal checking account and not a separate account set up using the corporation EIN, then the IRS can disregard all transactions of the S corporation and say the S corporation never conducted any business. Then tax all transactions that were run through the personal checking account as though the business was a Schedule C.

[Zee]

As a devil's advocate, it isn't all that unusual for one person S-Corporations to operate from their personal checking account. What's to be done in that situation?

[JohnH]

Linda: So the RJ people cost him another 28% (plus the state rate) by not giving him good advice or suggesting that he talk with you. But you're right about TTB- it is a life saver.

[oceanlovin'ea]

Internal paperwork

They just made the adjustments internally. He can as in individual contribute to the IRA account but it is only a SEP contribution if the corporation makes it.

It turned out to be a non-deductible contribution to his IRA because their AGI was too high for it to be deductible.

I too was amazed that RJ people didn't know and allowed that to happen. Maybe if I hadn't had the cites available they might have given a harder time about chainging it. But I wasn't going to let it go. Maybe it was a new person.

Thanks to great info in the Tax Book.

Linda

[JohnH]

They probably handled it by just changing some paperwork internally. But they cost the client about 15% not giving her correct advice to begin with, or suggesting that the client check with Linda before doing anything. A SEP contribution through the corp wold have bypassed SeocSec/Med tax, whereas a contribution to an IRA is paid with personal funds which have already been subject to SocSec/Med tax.

[erchess]

Am Confuzzelled Royally

First of all it's amazing to me that a brokerage house that handles both individuals and corps would not know that only a corp can make a SEP contribution. Second, given that someone working for the broker didn't know that, it's amazing to me that they admitted their error without being contacted by a lawyer.

Let's just make sure I am right - a client who had a corp that could have been allowed to make a proper SEP contribution was instead allowed to make the contribution out of their individual account. When confronted with the error the brokerage fixed the problem. Is that about right? Mechanically how did they do this? Was it necessary to take the money out of the SEP, put it back in the individual account, and then move money from the Corp Account into the SEP? Or was it enough to have the corp reimburse the individual account and issue corrected tax statements? In particular did the SEP have to sell securities?

[oceanlovin'ea]

I had a client call me today to tell me that I had told her and Raymond James how to do something correctly. RJ didn't believe me in the beginning.

I have a client who has an s corp and wife is a nurse. When she brought all her paperwork to me, she had a statement from RJ showing a SEP contribution of $3000. I questioned her about it because I had finished the bookkeeping for the corp and there was not any payment to RJ for a SEP contribution. She said that they had sent the money in from their personal account.
So I explained that only the corp could make the SEP contribution and opened TTB and read her what it said.
She called RJ to have them change the 5498 to read a personal IRA contribution. The next day RJ called me and said that she had gone to the department that had to redo the 5498 and they wanted to know why and what backup I had for it. I opened TTB to paid 13-15 and gave her the references that are listed...IRS Pub 560, IRC, Form 5305-SEP.

Today they called my client and told her that I was right and they were going to issue a corrected 5498. She called me and said YOU told me right and even those financial wizards at RJ learned something new from you.
I have a very happy client that will be giving my name to all her contacts.

So THANK YOU TTB!!!!!!!!! You help us to know how to give our clients good advice and provide them with excellent service. Having the resources right there is so helpful. I have never looked up info like that in IRC so I don't know if I could find what I needed.

Love you guys, Linda