S corp shareholders 1040

[oceanlovin'ea]

I have a family with 4 children. He has an s corp. Let's say he paid himself $1000 a month wages and his income from his K-1 is about $25000.

When you do the personal return, his child tax credit and EIC are both figured on his wages only. So he doesn't get CTC for all 4 of his children.

Is that right? There is no where to adjust for the income from his s corp is there?

My brain is totally fried right now. I have been sitting at my desk working on returns for 3 days straight. So I am questioning everything I do right now.

Thanks

Linda

[BHoffman]

Hi Linda:

I've researched this and am 90% convinced that SCorp regular passthrough income is basically ignored for EIC, not sure about CTC.

See this discussion:

http://www.thetaxbook.com/forums/showthread.php?t=14770&highlight=rich

and see this one:

http://www.taxalmanac.org/index.php/Discussion:INCOME_FROM_S_CORP_FOR_EIC_PURPOSE

Riley2 is very reliable. He says "The $2,700 in K-1 income from the S corporation will not be treated as disqualified income unless it is interest, dividends, capital gain income, rents or royalties, or passive income. See Sec. 32(i)(2)."

I take that to mean box 1 K-1 SCorp passthrough income isn't taken into account for EIC purposes as either qualifying earned income or disqualifying passive income. I am not 100% sure.

I'm not sure at all about how it might affect CTC.

[SFBOB]

K-1 Income Not Subject To S/E

The reason the dividend or income passing through other than wages is not considered for EIC; is because it has not been considered earned income. If you do the S Corp, I would up the wages to at least 75% of the total profits in 2010.The new admistration is going to really crack down on this pass through incpme not subject to FICA taxes.Have A good Day.

[joanmcq]

Isn't the passthrough considered investment income, therefore disqualifying them due to too much investment income?

[ChEAr$]

The reason the dividend or income passing through other than wages is not considered for EIC; is because it has not been considered earned income. If you do the S Corp, I would up the wages to at least 75% of the total profits in 2010.The new admistration is going to really crack down on this pass through incpme not subject to FICA taxes.Have A good Day.

The new administration is going to crack down? I hadn't heard that.

what I HAVE heard though is that in congress is a bill, which started out as HR 4213
which contains a provision to fully se tax S corp profits for psc's though.
Not the same thing as "the new administration."

[ChEAr$]

Isn't the passthrough considered investment income, therefore disqualifying them due to too much investment income?

Nope.

(message body lengthened here for conformity with bbs rules)

[BHoffman]

Harlan - would you happen to have a cite or anything that says SCorp pass through income isn't investment income for EIC purposes?

I ask because I was looking for something specific last year and could not find it.

[ChEAr$]

Harlan - would you happen to have a cite or anything that says SCorp pass through income isn't investment income for EIC purposes?

I ask because I was looking for something specific last year and could not find it.

Simplest way is to access instructions form schedule eic. Otherwise trust your software to do the math for you.

[BHoffman]

Well, I guess when all else fails then read the instructions. Right there in a tidy worksheet. SCorp passthrough K1 box 1 is not considered to be disqualifying passive income. I have exactly what I need now.

Thank you very much

[ChEAr$]

Well, I guess when all else fails then read the instructions. Right there in a tidy worksheet. SCorp passthrough K1 box 1 is not considered to be disqualifying passive income. I have exactly what I need now.

Thank you very much

My bill is in the mail.

Ka CHING! (grin

Of course I may never actually come through Phoenix again, so I'll never get that
drink after all.

[BHoffman]

Well, if you ever do make it to Phoenix let me know and the Glenlivet is on me

[Lion]

?

Well, if you ever do make it to Phoenix let me know and the Glenlivet is on me

So, B, have you ever met Harlan? I'm thinking I could knock on your door saying "Chears!" and get your Glenlivet.... I'm not headed anyplace close to Phoenix either, so your bottle is probably safe!

[BHoffman]

http://www.youtube.com/watch?v=lkt9TIdpvrY

[ChEAr$]

So, B, have you ever met Harlan? I'm thinking I could knock on your door saying "Chears!" and get your Glenlivet.... I'm not headed anyplace close to Phoenix either, so your bottle is probably safe!

LET THE RECORD SHOW:

That I in no way resemble my EA associate up in Connecticut on many counts which I
shall not name here (grin)
.

[Lion]

Alike?

LET THE RECORD SHOW:

That I in no way resemble my EA associate up in Connecticut on many counts which I
shall not name here (grin)
.

But, Harlan, sometimes we think alike!