Welcome Guest. Register Now!  


CPA Forums CPA related topics.


Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 04-04-2017, 10:32 PM
Junior Member
 
Join Date: Apr 2017
Posts: 3
LLC Returns

I have a new client who owns a 7-Eleven franchised store (through an LLC). The client and his wife are the only 2 members of the LLC and each one of them has a W-2 issued from the LLC. Their previous tax preparer had always included the income from the LLC on Schedule C. Client has no idea whether they made an election to be taxed as an s-corp.

1. The client doesn't recall if they made an election to be taxed as an s-corp. Is there a quick way for me to find out from the IRS?

2. If the client should have been filing either a 1065 or 1120s, but has only been reporting income from the business via Sch C, do they change now and if so, do they need to go back and amend the last 5 years?



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 04-05-2017, 08:19 PM
Moderator
 
Join Date: Oct 2010
Posts: 4,835
? I have a new client who owns a 7-Eleven franchised store (through an LLC). The client and his wife are the only 2 members of the LLC and each one of them has a W-2 issued from the LLC. Their previous tax preparer had always included the income from the LLC on Schedule C. Client has no idea whether they made an election to be taxed as an s-corp. =======>MMLLC owned by married couples COMPLEX ANSWER covering both community property and not. As you can see MMLLC never issues W2 to members UNLESS they are W2 regular EEs. In general, in this case they need to file either 1065 as an MMLLC or 1120S as an MMLLC elected to be taxed as an S corp; they can NOT file Sch C of 1040 UNLESS the entity is a QJV;aslongas the entity is a QJV then each of the couple needs to file Sch C of 1040i mena Both spouses file a separate Sch C, showing that person's share of the income, deductions, and any profits/losses.Both spouses also file a separate Sch SE, showing that person's self-employment income
Or another option is that to file SCh C of 1040 either the husband or a wife needs to be an W2 EE ad the other spouse needs to own the biz as a sole proprietorship. UNLESS they filed Form 8832 and they are both listed as owners of thebiz , then, the IRS will automatically treat the LLC as a partnership. Form 8832 is to tell the IRS how you want your LLC to be classified.

1. The client doesn't recall if they made an election to be taxed as an s-corp. Is there a quick way for me to find out from the IRS?=====>I gess you need to check it with the IRS yu may check if they filed a form 8832; By filing Form 8832 with the IRS, theycan choose a tax status for their entity besides the default status. they can elect to have their LLC taxed as a sole proprietorship, partnership, c corp or s corp. OR you need to check if they filed form 2553. A LLC can elect to be taxed as a C or an S corp. A C corp is taxed on its profits and has to pay federal income taxes. Form 2553 allows a LLC to stop paying corporate income taxes and convert to an S corp. An LLC files Form 2553 to switch from filing as a C corp to filing as an S corp. Like a partnership, an S corp can be a pass-through entity.

2. If the client should have been filing either a 1065 or 1120s, but has only been reporting income from the business via Sch C, do they change now and if so, do they need to go back and amend the last 5 years?===>yes in principle they need to file amended returns for the last five years; A subchapter S corp is a corp that elects for a special S tax status under the IRS. These corpos have to pay severe fines if they file late tax returns. When no tax is due, the S corp is charged $195 for each month it is late, multiplied by the number of people who were shareholders in the corporation at any time in the last year. So, if an S corp has 2shareholders at the end of the year, the S corp will have to pay 2 x 195 for each month the tax return is late, or $390 a month. They need to pay penalties and interes t on FICA taxes not paid for the past five years. An LLC must elect for corporation status on its tax return or, by default, it is taxed as a partnership. If it elected for corporate status, it will be taxed as a C corp and won't owe any fines for late filing. However, if it elects to be taxed as a partnership or if it makes no election at all, it will receive a stiff fine for a late tax return even if it doesn't owe any taxes. In that situation, the LLC will be fined $195 a month for every month the return is late, multiplied by the total number of people who were partners in the LLC at any point in time during the tax year.
In addition to a yearly tax return, I guess many states require corps to pay state franchise taxes and will charge fees if the corp files the franchise form late, even if it owes no taxes. Arizona, however, does not have a state franchise tax for corps.



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 04-05-2017, 08:36 PM
Moderator
 
Join Date: Oct 2010
Posts: 4,835
Quote:
Originally Posted by mynCPA View Post

2. If the client should have been filing either a 1065 or 1120s, but has only been reporting income from the business via Sch C, do they change now and if so, do they need to go back and amend the last 5 years?
Once elected, these can't be undone until the next tax year.yu may contact terh IRS for more info in detail (if you undo the election)




Form 8832 is used by a LLC to choose to be classified for tax purposes (and to be taxed) as other than the default classification. For example, if no election is made a SMLLC is disregarded and a multimember LLC is treated as a partnership. In either of those cases if the LLC wants to elect to be taxed as a corp the Form 8832 is used.Form 8832 can also be used to change a prior election.
*
Form 2553 is used by a corp to elect to be treated as a pass-through entity (Subchapter S corp) and to indicate the tax year elected. Similar to partners in a partnership, income of an S corp generally is taxed to the shareholders of the corp rather than to the corp itself.



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 04-06-2017, 10:38 AM
Junior Member
 
Join Date: Apr 2017
Posts: 3
Thank you for taking the time to explain the scenarios. This is really very helpful. Thank you!



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
Old Business, Returns hpubet93 Limited Liability Company 1 10-01-2015 12:52 AM
Old Tax Returns/Transcripts Golddust1957 Income 1 11-12-2014 10:44 AM
Effective 2011, all paid tax practitioners who prepare returns for partnerships are required to file all partnership returns Form NJ-1065 by electronic means. TaxGuru New Jersey 0 01-31-2012 05:08 PM
tax returns dagbeamer Itemized Deductions 1 09-12-2011 05:01 PM
How to file to get the best returns? devans Filing Requirements 0 02-02-2010 04:14 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