C Corp to S corp?

[tracyb]

The prior tax preparer filed a C-Corp initial return for the taxpayer-2005. I'm am not sure the reasoning behind it but I think a S-Corp would have been more appropriate--also it was file, on accrual. What are your thoughts on amending the return and changing to a cash basis S-Corp at this point?

Also, business will be leasing a vehicle from the shareholder-which is used solely for the business. Would it be best to run it through payroll as a reimbursed expense?

Tracy

[jainen]

serious steps

>>I'm am not sure the reasoning behind it<<

Neither are we. Maybe you should find out. Making a late S-corp election and changing the accounting method are pretty serious steps.

[OldJack]

Also, business will be leasing a vehicle from the shareholder-which is used solely for the business. Would it be best to run it through payroll as a reimbursed expense?

Maybe it is best to be a C-corp with tax-free benefits and tax bracket splitting. Not all small businesses should be S-corps.

If it is a lease it is not a reimbursement of expense it is rent expense and rent income. If it is reimbursement of expense it requires an accounting for the expenses with receipts, mileage, and etc. Reimbursement without proper documentation is taxable income to the owner. Paying with a vendor check or payroll check does not make any difference from an accounting or tax purpose. If it is used solely for the business why is the shareholder driving it to work from his home? Your answers may be in pub 463.