Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 03-07-2009, 10:53 PM
Junior Member
 
Join Date: Mar 2009
Posts: 2
No wages or distributions tax question

I just started a Pest Control business in April of 2008. I am waiting for a non-compete agreement to end before I do business in a specific area. The business gross income for 2008 was very small because I've been waiting for the non-compete to end <$15,000. My expenses were over $15,000. I didn't pay myself a wage or give myself any distribution because the <$15,000 was going out to build infrastructure. I also used money for the business from my personal credit cards in the form of cash advances then depositing the cash in the business account. I did pull cash out of the business account using an ATM to pay some expenses but I did a very poor job keeping records. My questions are: 1. Is it a rule that I must pay myself a wage? 2. What should I do with the cash withdraws? 3. The cash advanced deposits from my credit card; are they considered income to the business? or can I somehow make them a loan to the business? 4. Do I owe any Taxes to the State/Fed Gov?

I would really appreciate any advice.. thanks.

Dan



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 03-08-2009, 12:50 PM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,413
Blog Entries: 3
With respect to your questions,

1) "is it a rule that I must pay myself a wage?", the answer is no, assuming you had no profits and you are an unincorporated entity.

2) "what should I do with the cash withdraws?", well since you used these to pay for business expenses, you should deduct the cash expenses as business expenses and take a deduction on your schedule C according to the business category it belongs.

3)"the cash advanced deposits from my credit card; are they considered income to the business?", no they are not, and as such if you deposit these into your business account, they are really considered as either additional paid in capital or a loan from the owner and not considered as income on the tax return.

4) "do I owe any Taxes to the State/Fed Gov?", it all depends according to whether or not you are a corporation or not, if you are a corporation, you would be liable for the minimum franchise tax applicable to that state which you are operating. For example, if you were a New Jersey Corporation, irrespective of whether or not you have made a profit or not, you would be liable for the minimum NJ Franchise Taxes of $520.

On the other hand, if you are a sole proprietership you would not generally be responsible for any Federal or State business taxes as such!

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 03-09-2009, 10:35 AM
Junior Member
 
Join Date: Mar 2009
Posts: 2
I am an S-Corp in Maryland. How does that effect me?

Thanks again
Ken



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 03-09-2009, 10:46 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,413
Blog Entries: 3
As an S Corporation based in Maryland, if you have no profits, there is no need to take a salary as your business did not have the cash flow to sustain any Wages or Salary to its principal officers or shareholders, which is you!

Also, any additional investments that you have provided to the Corporations are not considered income to your S Corporations, rather they are considered as loans from the shareholders. But, you still will have to file both a Federal 1120 S corporation tax return along with the Maryland S corporation tax return.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Proportional S Corporation distributions pbernardi S-Corporation 3 12-23-2008 02:55 AM
How and why does the IRS garnish a taxpayers wages? TaxGuru General 0 09-20-2008 12:16 PM
How much does payroll tax cost as percentage of total wages paid out? Tertard Sole-Proprietorship 1 01-14-2008 12:49 PM
S Corporation Distributions maverick S-Corporation 1 01-04-2008 11:25 PM
What are the maximum wages subject to Social Security Taxes (FICA) in 2007? bookkeeping Miscellaneous 1 06-30-2007 01:36 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.