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Old 02-14-2015, 02:58 PM
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Accounting question

Hi,
I use an online accounting software for book keeping.
I have a small business and I paid my home rent $11000 from my business account and categorized it as miscellaneous expenses.. Now in the taxes returns I only claim a portion of the money $2400 as business expense for home office rent and rest I show as part of pass through. So in the books it still shows as $11000 miscellaneous. Is it OK or the books also need to match... if the books match with what I show on taxes then the bank transactions won't match with the books.
Please advise, thank you.
Sam.



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Old 02-14-2015, 06:16 PM
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Quote:
Originally Posted by samnyc View Post
Hi,



#1;I use an online accounting software for book keeping.
I have a small business and I paid my home rent $11000 from my business account and categorized it as miscellaneous expenses.. Now in the taxes returns I only claim a portion of the money $2400 as business expense for home office rent and rest I show as part of pass through. So in the books it still shows as $11000 miscellaneous.



#2;Is it OK or the books also need to match... if the books match with what I show on taxes then the bank transactions won't match with the books.
Please advise, thank you.
Sam.
#1;Correct even if you can deduct only $2,400 on your Sch C of 1040 on line 30, yes your book still shows that you deducted $11K as misc expenses as u said(as you recorded $11K as misc exp on your book).so difference is $8,600 since actually only $2400 is deductible on your return.






#2;it is OK unless you deduct the whole of $11K on your return in this case, you can deduct totally $13,400;$11K+$2,400



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Old 02-14-2015, 07:57 PM
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Thanks Wnhough. Do the books need to match what I enter on tax returns..
Do I have to split the 11k in the books into 2400k home office rent and 8600 as pass through income.


Sam



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Old 02-15-2015, 01:39 AM
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[quote=Wnhough;19772[/QUOTE]

Do the books need to match what I enter on tax returns..=====>>>>>>>>>your book, as you can see, shows $11K subtracted from it ; however. as we know only $2,400 of $11K is deductible on your Sch C , the rest of the amount of $8,600 is non-deductible for tax purposes, however, your bank account regardless of deductibility needs to show $11K subtracted from the account.
Do I have to split the 11k in the books into 2400k home office rent and 8600 as pass through income.=====>>On your book you need to report $2.4K as tax deductible home office expenses that’d be automatically re[ported on your Sch C as part of biz operating expenses. Aslongas the reaming $8, 600 is your pass thru income then it needs to be reported on your Sch K1 of 1120S or 1065.You never subtract your pass thru income from your bank account.

Note; pass through business entity is a partnership, multi member limited liability company, or an S-Corp; These entities are pass through entities because they do not pay any income taxes themselves. They "pass-through" the items of income and expense from their activities while maintaining their character.pass through entities still must prepare their own federal income tax returns, they just do not pay any tax. These entities prepare what is known as a Sch K-1. This form is prepared for each individual owner of the entity and allocates the amount of income and expenses that each particular owner will report on their individual income tax return.



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Old 02-15-2015, 04:09 AM
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Thanks Wnhough.. I prepared all my taxes using turbotax business and turbo tax premium.. Just had this question, looks like I need to adjust the books to match what I claim on taxes...



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