Discussion:C Corp not witholding do I now do a 1099
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Discussion Forum Index --> Tax Questions --> C Corp not witholding do I now do a 1099
| 14 April 2006 | |
| TP is a 49% shareholder of a C Corp. Mortgages and other expenses were paid by ccorp through loan account. No witholdings were taken out. No salary was paid. Amount is $49K. I am thinking of doing 1099 and file a new 1096 rather than doing a W2 at this point since all recons are done and filed. Any suggestions will be appreciated. | |
| 14 April 2006 | |
| If the Shareholder took any money out of Ccorp show it as dividends on schedule B and flie the return. I had one client last year who didn't do salaries and just took money out of the ccorp for any personal reason and I called the IRS and was told to put it aS DIVIDENDS. | |
| 14 April 2006 | |
| Hold on. You're not conforming to the reporting of the corp. The corp didn't declare divs. The corp didn't write off any comp, whether W2 or 1099. Think carefully before you act...maybe you do nothing for 05 and insist that it get fixed for 06. | |
| 14 April 2006 | |
| If you are doing corporate return, you can record these as dividends and then issue a 1099 div to the s/h. But if the corporate return is filed, you can't do anything with it other than to let the client know that in the current year, they need to show it on the corpoarate level. | |
| 14 April 2006 | |
| What about reporting it as an advance for 2005 and then taking the salary in 2006? At least you wouldn't have penalties for late filing that way. | |
| 14 April 2006 | |
| Problem is you need income to show dividends, corp shows a loss. Issue here is TP did not show any income, IRS may ask, how then did you live, so we have to find some way of showing a source of income, the amount is not expensed in the corporate books, it is reflected as shareholder loan with the credit going to bank. | |
| 15 April 2006 | |
| C Corp does not need current year income to declare dividends. Can even declare dividends in excess of retained earnings. | |
| 15 April 2006 | |
| Dividends not a solution in this case, the 51% stockholder did draw a salary and paid witholdings.
I think the advance sounds like the best bet and then declaring it as salary in '06, in that way it is expensed. | |
| 15 April 2006 | |
| Can we call something a constructive dividend or is that an IRS perogative? | |
| 15 April 2006 | |
| Diego, why are you trying to make trouble for yourself? Do what you said the post before. Salary in 06. | |
Chautauqua (talk|edits) said: | 15 April 2006 |
| Calling it a dividend can be risky. The other 51% shareholder(s) could sue for payment of preferential dividends, unless you want to dividend the 51%, also. And calling it a dividend denies the deduction to the corporation, triggering more tax at the corporate level? | |
| 15 April 2006 | |
| I think you guys may be right since I did it for a 100% shareholder, c corp and C corp return not filed. | |
| 16 April 2006 | |
| Do you do his bookkeeping? If not why would you do the 1099 or W-2? | |
| 16 April 2006 | |
| Taxea, I don't but why do you ask. I do the corp and pers. taxes.
Personally I feel probably best solution is to classify as a loan, accrue interest in corp since corp is not cash basis, make sure client has note in place for repayment and get things straightened out this year with a salary. I see spouse made a fair amount of money to cover expenses. He is also being bought out in 06 for 30K so may be able to do something there with the settlement agreement and forgive the loan. Any contrary opinions? | |
| 17 April 2006 | |
| Hi Diego I ask because I can't figure out why you are getting involved in the accounting aspect of his business. I make it very clear to my clients that I prepare taxes. I don't do books because I don't want to. Other than explaining to the client that W-2's and 1099's are the responsibility of his payroll person, not his tax person. I do have the knowledge but don't have the time. The handling of this type of item is not the tax preparer's venue. | |
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