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    S corp shareholders 1040

    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

    #2
    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:

    Primary Forum for posting questions regarding tax issues. Message Board participants can then respond to your questions. You can also respond to questions posted by others. Please use the Contact Us link above for customer support questions.


    and see this one:



    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.

    Comment


      #3
      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.

      Comment


        #4
        Isn't the passthrough considered investment income, therefore disqualifying them due to too much investment income?

        Comment


          #5
          Originally posted by SFBOB View Post
          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$,
          Harlan Lunsford, EA n LA

          Comment


            #6
            Originally posted by joanmcq View Post
            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)
            ChEAr$,
            Harlan Lunsford, EA n LA

            Comment


              #7
              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.

              Comment


                #8
                Originally posted by BHoffman View Post
                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.
                ChEAr$,
                Harlan Lunsford, EA n LA

                Comment


                  #9
                  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

                  Comment


                    #10
                    Originally posted by BHoffman View Post
                    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.
                    ChEAr$,
                    Harlan Lunsford, EA n LA

                    Comment


                      #11
                      Well, if you ever do make it to Phoenix let me know and the Glenlivet is on me

                      Comment


                        #12
                        ?

                        Originally posted by BHoffman View Post
                        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!

                        Comment


                          #13

                          Comment


                            #14
                            Originally posted by Lion View Post
                            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)
                            .
                            ChEAr$,
                            Harlan Lunsford, EA n LA

                            Comment


                              #15
                              Alike?

                              Originally posted by ChEAr$ View Post
                              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!

                              Comment

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