Schedule C to S corp

[ChEAr$]

We got back yesterday to very cool weather. Today the high will not even reach 50. I can't believe it. Cruise was great, except for rough seas we didn't get to stop at Cococay. Were really disappointed about that.

Linda

That is today maybe, but if you like it today, you'll just LOVE it tomorrow!!

[oceanlovin'ea]

I was thinking that I should do 941's for each of the first 3 quarters and send them in with payments. I know that they will get penalties and interest on them, but it would show that they were trying to correct the mistake made by other accountant and report accurately.

But I am not sure how to figure how much the penalties will be. I think that will be a determination for him. Years ago with another business, s corp, he had I think IRS must have recharacterized draws as wages and he said he paid a lot of money in penalties and interest. Haven't seen any of that actual information and that business is closed. So he is gun shy about this issue.

Does anyone know how to figure the penalties and interest?

Linda

PS: Harlan, did you get snow there?

[S T]

Deposit Penalties for Payroll Form 941

Linda,
Maybe this link will assist you

http://www.irs.gov/publications/p15/ar02.html#en_US_publink1000202484

Given your circumstances, you could try to calculate, however, it might be that IRS will Assess differently than what you are calculating -

Sandy

[ChEAr$]

.

PS: Harlan, did you get snow there?

Linda, no snow; yet. However.......... if we do get some, I'll be sure to bring it down with me next Monday to Tampa and nearby towns.

[oceanlovin'ea]

Please NO!!!!!!!!

Although my grandchildren would love it. Actually they are going to go up to Tennessee somewhere so the kids can play in the snow and make snowmen and snowballs. But I'm not going with them.

Linda

[oceanlovin'ea]

not a lot of difference

Client came in today. When you figure payroll taxes on the draws he has taken and the taxes for the return (with estimated figures) filing as an s corp and the taxes with the schedule C there is about a $2000 difference.
Figure cost of me doing all the returns and any penalties he would have on the payroll taxes being paid late and he will only save maybe $1000.

He doesn't really want to be taxed as an S corp so he thinks he will just do the schedule C and pay the taxes.

He will come in the first week of January with his book finished for me and we will figure it all out.

Linda

[equinecpa]

OK...I'm curious here. I have many clients that take draws throughout the year and then come the end of year figure their reasonable wage and recalculate some of those draws as wages. In fact, I do it myself. (gasp).

Has anyone had this challenged? I seem to remember a case from this year where it was, but I also believe there were other issues in that case...

Is there anything wrong with paying an annual wage?

[ChEAr$]

OK...I'm curious here. I have many clients that take draws throughout the year and then come the end of year figure their reasonable wage and recalculate some of those draws as wages. In fact, I do it myself. (gasp).

Has anyone had this challenged? I seem to remember a case from this year where it was, but I also believe there were other issues in that case...

Is there anything wrong with paying an annual wage?

Actually no problem with that. English army officers back in the 18th and 19th century were paid that way.

However...... If we're still talking about an S corporation, bear in mind that our business has some seasonality in it. For example the bulk of my revenue comes in Jan - April. Rest of the year the accounting fees cover overhead plus give me am little.
Therefore my salary is set at a certain percentage of tax revenues plus a minimal amount per month for administrative duties. I'm conscious of the reasonable salary requirement for S corporation stockholder/employee, but still desire to have some return on my investment and reward for many years of goodwill.

Merry Christmas ChEAr$!