S corp. year end planning?

Technical topics regarding tax preparation.
#1
cl2018  
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Can anyone give some guidance what tax planning a s corp. need to make at this time of the year? The s corp. is in New Jersey. when should it pay the minimum tax? before or after year end? Thanks.
 

#2
Wiles  
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CA
Here’s a few ideas:
* Estimate pass through income so owner knows how much tax they will owe
* Confirm SH has enough basis to take advantage of deductions. Or create a basis issue to shift deductions into next year.
* Issue enough wages to owner to meet reasonable compensation. And also confirm the wages provide for full QBI deduction.
* Discuss retirement plans. Set up Solo-401k by 12/31
 

#3
cl2018  
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thank you for the suggestions!
 

#4
JR1  
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Western 'burbs of Chicago
Do they need a new truck? Is there health insurance to get onto the W2? Is there note interest to consider? The solo 401k is in play for a year end bonus. Simple had to be in place 10/1. SEP ok up to extended dates....
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#5
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Just last year a new client came to me first week of December with an S-Corp and personal tax return. He is on ACA and received about $15,000 of APTC. By reviewing his business and personal tax situation before 12/31 we discovered that he would have to pay back the full $15,000 if his income stayed the same. By purchasing a new vehicle by the end of the year (which he was thinking about doing this year anyway) we were able to take just enough depreciation to keep him below the 400% preserving the PTC.

ANY business owner with insurance through the exchange needs to do planning in December!
 

#6
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HAWAII
Can anyone help with a formula or direct me to a link where I can find a template for a reasonable compensation analysis? I was referred to RC Reports, but they only work on a subscription basis which is costly. I've read some articles that use a 60/40 ratio between compensation and distributions as a rule of thumb (not a rule of law). When I do that with my client, I think I can get close, but I'd rather have better documentation and logic behind the figure.

I also have a question about whether or not it would be an acceptable argument to include the spouse's wages in the overall calculation. This client is a single shareholder S corp, the spouse is an officer but not a shaeholder, Hawaii is not a community property state. Based on the 60/40 formula he needs to have about $215,000 in reasonable compensation. With regular wages, S-corp medical, a bonus check and a SEP contribution, he'll be at about $160,000, the wife will have $60,0000 to $65,0000 on her W-2 and a SEP contribution. Together they would exceed the formula for required compensation, and certainly the shareholder benefits from the wages paid to his wife. Would IRS feel the same?

An alternative I'm considering is to recommend offsetting some of the distributions taken as payroll to reduce the amount required to satisfy RC rules. This is a work in progress, so I'm open to suggestion. I don't usually have to worry about RC with my S corps, but this client, this year has a VERY different income situation and has had a very successful year which is throwing everything into a tizzy.
 

#7
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Farmington, Michigan
Can anyone help with a formula or direct me to a link where I can find a template for a reasonable compensation analysis?
60/40 ratio between compensation and distributions
A ratio has no relevance to rc.

https://www.recruiter.com/i/10-great-sa ... -you-time/

Google the job title & "average salary"

I've used http://www.careerbuilder.com & http://www.simplyhired.com/salaries in the past.

I also have a question about whether or not it would be an acceptable argument to include the spouse's wages in the overall calculation.
No
Dave

Taxation is the price we pay for failing to build a civilized society. ~ Mark Skousen
 

#8
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Thanks Slippery. I'll check those links. BTW, I did Google the job title and average salary as well as the DOL. Average salary for a dive boat captain falls well below what I think would be acceptable for reasonable compensation in this case. The SH has taken a large amount in distributions, and because the year has been so successful he has the basis to do so, but in relation to his salary and net income, it gets wacky.
 

#9
JR1  
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payscale.com and Salary.com are the two I've used most. Both have free sections by zip and job description. Stay humble as you pick the job! lol
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 


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