S Corp & Sole Proprietor

[Brian EA]

My client worked as a sole prop for half of the year .In june he formed an S corp.

He has three 1099 misc. Two has his ss # and the other the scorp EIN. His accountant filed the scorp return and included all three 1099's.
I have been doing the personal return for quite a few years and my client did not want to change , so he brought his info with the K1 from the S corp. Included was a note from his accountant saying I should back out the 2 1099's on the sch c.It is too late to get in touch wth him, so before I call him tomorrow I will just throw this out on the board for some feedback.

I think he should not have included all three 1099's. The IRS wii definitely look forward for his ss and medicare taxes.

Any suggestions

[Safire]

Maybe they plan on getting corrected 1099's. Possible that all the 1099 work was done latter part of the year, not probable, but possible.

[Brian EA]

Maybe they plan on getting corrected 1099's. Possible that all the 1099 work was done latter part of the year, not probable, but possible.

The 1099 for the sole prop was earned at the beginning of the year. No plans on getting corrected 1099's.

my client is a Realtor

[geekgirldany]

I don't understand why he included them in the S-corp when they were earned at the beginning of the year under sole prop. Should they not have been reported under the Schedule C? I assume he showed all three as income. Don't know what he means for you to "back them out" onto a schedule C. Would this not be taxing it twice? Once on K-1 and then on Schedule C?

[JG EA]

What he meant

was to put them on the Schedule C as income and then include them on the expense line as reported on the corporate return so they zero out.

However, since he made this money before he was a corp - he has to pay SE tax on that part.

So, if the accountant doesn't have any bright ideas I'd go ahead and include them on the C, and "back out" the extra income that is included on the corporation. But, how? Perhaps put in a deduction line on the E2 like you would 179 deduction?

[Unregistered]

Re 1099's

The reason to report 1099's on a schedule c when they have already been reported in a sub-s is to give IRS a cross reference to them. On the sch c you show the 1099's as income, but on the 2nd page of the same sch c, in other expenses - you expense the same 1099's out and make a line item statement saying something like
"to back out 1099 income already reported on XYZ, Inc, 12-3456789, form 1120-s"
This tells IRS that revenue is reported on the 1120-s. You are not double reporting since you're putting it on and taking it off the sch C. The reason you're doing it is simply clarification. If the 1099's are to the individual rather than the corp, you know IRS will come a looking for them. So, doing it this way nips that search in the bud.

[geekgirldany]

okay I get it now. I just always have them contact the person issuing the 1099 for it to be corrected. I mean if it is under their name SS# that not only will the IRS will be looking for it on Schedule C but also SE Tax should be paid. Like JG said.

I guess I couldn't understand the backing out when SE Tax is suppose to be paid.

[Brian EA]

I do understand the logic behind backing it out. It's a cross reference; however the income was earned befor the SCorp was set up.As a matter of fact I set up the Corp Then the
Scorp.

The realtor will not correct the 1099's.That's out of the question.

And to add insult to injury, the accountant said that I should back out only one 1099. I keep on wondering if this guy knows what he is doing.

MORE COMMENTS ! PLEAAAAAAAASE.

i AM GOING TO CALL HIM TODAY

Thanks .

[Matt Sova]

S-Corp

When was the S-Corp formed. Was the start date 1/1/05 under Rev Proc 2003-43 even though the paperwork was not filed until the middle of the year? If so, then you would back out the 1099's. In fact, if that was the case, all income and expenses should be on the S-Corp return and nothing on the Schedule C.

[Brian EA]

In february they contemplated on forming the Corp but it was not done until the first week of june

[outwest]

Let's get the facts straight..

Sounds like a we need to make sure everyone is on the same page. Accountant may have understood that "I do all this through the corporation but I've got some 1099 in my personal name. But this one should be personal, but this one yada yada yada." Easy for a lot of confusion.

Get together and coordinate with the accountant. If the 1099 was for the whole year, you may indeed take the suggestion above to back off the S Corp portion. In turn, you want to make sure the corporation doesn't pick up what you have on the C.

Not helpful to take the attitude that the other guy is an idiot or liar. Better to take the attitude that you need to put your heads together and properly coordinate this between you for the benefit of the client.

Doug

[Brian EA]

As a mtter of fact I just spoke to the accountant who said he was not sure but he thought the income was received after the Scorp was set up.

He will call the client and confirm. I think we will be able to work it out.

Thanks all

[Brian EA]

The accountant just called and agreed with what I was saying .
We have solved another one.

Thanks for all the advice and comments.

Also I am now a Senior Member.