I was laid off from a full-time position in NYC on Jun 14 2013, however the company asked if I could consult for 1 week in July and 1 week in August. Outside of these 2 weeks of consulting, I will be claiming NY unemployment benefits.

Would I be able to set up an S Corp for the consulting services? If so, can I deduct related education expenses? Please note that I do not qualify for education tax credits or refunds on my personal tax returns.

If I set up the S Corp in June, can I deduct education expenses that I had paid earlier in the year?

Thank you for your time!

#1: In general, employee/shareholder of s corp can get unemployment. However, if you still running your business, then you should call your state unemployment department. when you fill the application you need to tell self employed. they will going to have interview with you and based on there criteria they may or may not approve. So, depending upon the corporate structure, state law and the circumstances surrounding a business closure or etc, a business owner may be entitled to receive unemployment benefits. Some owners of an S corp are eligible to receive unemployment benefits, although only if they meet requirements. The IRS allows biz to organize as an S corp, which allows all income and debt incurred by the company to be spread among its EE/SH, where it’s taxed individually rather than on a corporate level. The IRS also allows S corp EE/SH whois materially involved ( taking a hands) on role in daily business to pay himself reasonable salary as any other EE. These wages are subject to all state and federal payroll taxes, including unemployment taxes. S corp owners who only took profit distributions, and didn’t receive wages, haven’t contributed to unemployment taxes, so they aren’t eligible for unemployment insurance. State law also determines eligibility for unemployment benefits, and some states place limits on corporate officers’ eligibility for benefits. Some states offer benefits to corporate officers who receive wages that are subject to federal unemployment taxes, while some refuse benefits to owners who own more than 50 % of the company’s stock. Additionally, many states don’t allow S corp owners to collect unemployment insurance benefits if they sold or leased the business against which they’re making unemployment claims. I guess you can contact the NYS for more info in detail.NOTE: because unemployment agency workers individually evaluate each claim, all S corp owner/workers’ claims may not be approved. Because federal regulations require claimants to be unemployed through no fault of their own, S corp owners may need to demonstrate that the company went out of business because of economic reasons and its closure wasn’t a personal decision. Unlike a NY c Corporation, a New York S Corporation does not itself pay any income taxes. While an S Corp with more than one shareholder does file tax returns, you,an EE/SH, must include your share of the corporation’s income or loss on your personal tax return, just as is done in sole proprietorships, partnerships and LLC. To qualify as an S Corp, an IRS Form 2553 must be filed with the Internal Revenue Service. In very few states, you will also be required to file a separate state election, as specified by that state, in order to qualify as a Sub S Corp. NYS requires state level filing in addition to IRS filing. NY S corps are normally audited less frequently than sole proprietorships and partnerships; NY S Corps enjoy pass-through taxation so shareholders avoid so-called double taxation; NYS S crop file informational tax returns but pays no income tax itself . As a NYS s corp shareholder, you need to report your share of both income and losses on their personal tax return.




#2:I don’t think so. There are two ways that an S corp can make educational benefits available to owner/EE/SH without tax consequence to you. An educational assistance program allows an S corp to provide up to $5,250 in educational benefits to you. The educational costs are deductible by the ER and excludable from income by the EE. However, to qualify, NO more than 5 percent of the educational assistance costs can benefit shareholders that own directly or indirectly more than 5 percent of the company's stock. Since you are the only EE(presumably you take salary from the S corp) and own all of the stock, you would not be eligible for this exclusion.The second option allows an S corp to pay certain educational expenses for its employees, including shareholders, if the education is in the nature of continuing education. However, no deduction for education expenses will be permitted if the education either is necessary to meet the initial minimum education requirements of a job or trade or business; or qualifies the individual for a new trade or business. Thus, in order to safely deduct these edu expenses for you for tax purposes, you must ensure that the course work would be both relevant to your job and will benefit your biz performance in the area which you contribute to the business. You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Edu expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. This is true even if the education maintains or improves skills presently required in your business

Thank you for such a detailed answer. This is extremely helpful given how other internet sources provide very watered down information.