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The IRS won't care either way, just file 1120S marked final and Form 966.

The state that the S-Corp is registered in might want you to be current in order to disolve. Or they may administratively disolve after a while if you aren't current. It varies by state.

If you're registered as a foreign corp in one of the two states you may be able to skip the fee if you are no longer doing business there.

FiveK wrote: ↑Wed Mar 29, 2023 11:59 am

MP123 wrote: ↑Wed Mar 29, 2023 10:17 am This creates an interesting situation where the itemized deduction for premiums decreases income which increases ACA subsidies which decreases the deduction and so on...

There is an IRS published way to resolve this for the self-employed (who have a similar situation) but I'm not sure about Schedule A filers who qualify for premium tax credits.

That applies to the Self-Employed Health Insurance (SEHI) subtraction because that reduces AGI, thus reducing the MAGI upon which the ACA credit is based.

It does not apply to itemized deductions, because they do not affect AGI.

That's an excellent point. Standard or itemized deductions come off after (M)AGI, so there wouldn't be a feedback loop for those with respect to ACA premiums.

FYI that was my situation for tax year 2022. Turbo Tax Deluxe handled it. It asked me to enter all my itemizable items except for health insurance in one part of the interview. Then in a later part it figured out the ACA credit and portion of premium I did pay and applied that (recursively I think) to my deductions. Assuming no further changes in tax law, would results from TT2022 be reasonably representative of 2023 results, for this purpose? If so, I can play with different IRA withdrawal inputs and plug the net taxes into a spreadsheet for comparison to interest costs. Yes, the 8.5% ACA ramp continues through 2025 along with the current tax brackets. But for 2026 we're back to the ACA "Cliff" and the old (pre-TC&JA) tax br...

Since health insurance premiums are tax-deductible, they may determine whether we itemize deductions or use the standard deduction. Since the ACA subsidy is a credit, does it reduce the ACA insurance premium I can claim? Or can I claim the entire premium, regardless of subsidy received? If you’re not self employed, ACA premiums aren’t deductible. Or, more specifically, they’re only deductible if you itemize, and your total health spending, including premiums, is >7.5% of your income. This creates an interesting situation where the itemized deduction for premiums decreases income which increases ACA subsidies which decreases the deduction and so on... There is an IRS published way to resolve this for the self-employed (who have a similar si...

Question: I’ll be on HDHP for 9 months in 2023, and I’m over 55. Can I put the additional $1000 into the HSA, or am I limited to 9/12 (75% or $750) in 2023. In other words, does the $1000 need to be prorated? Also, we’re on family coverage, so I contribute the max regular contribution, and DW is over 55. Can she open an HSA and contribute either the $1,000 or a prorated amount into her own HSA? Yes, the catchup contribution needs to be prorated for HSA eligibility. But it does not need to be prorated for months prior to your 55th birthday in the year that you turn 55. So in your case you could contribute 9/12 of $1000 as your catchup. Your spouse could do the same depending on eligibility, and their catchup contribution would need to go in...

Through the end of 2022 DH and I were each covered by a HDHP through our own separate employers and we maxed out our self-only HSA contributions. Due to a layoff, his HDHP coverage through his employer ended 12/31 so I added him to my employer’s HDHP for 3 months and increased my HSA contribution (“family coverage”) to $729/month. He is starting a new job on 4/1 and will have medical coverage that is not a HDHP. I will remove him from my employer’s plan effective 4/1. He still maintains his own HSA account from 2022. Neither one of us has or will have an FSA. We are both over 55 so may qualify for the $1,000 catch-up contribution. Could you help us think through the maximum that we can contribute to HSAs for 2023? Thanks. It sounds like yo...

In this situation you could consider the 90% safe harbor. If you pay at least 90% of the current year taxes there is no penalty.

Also, depending on your sources of income you could consider withholding on W2 or from Retirement plan distributions. Withholding from both is treated as having been done throughout the year. So withholding your entire last paycheck, for example, might let you true up (or close enough) at year end with no worry about penalties.

But, as mentioned above, you really need to just keep track and use your best estimate. Going for the 110% of last year's tax safe harbor doesn't make much sense here.

But since I already know the amount received from PayPal for 2022 transactions (above 25K), I wanted to enter that as other income in our tax forms. Are you sure it's other income and not Sch C, as mentioned above? I might be wrong, because I'm rookie :) I think what caught our eye is that you have over $25k in PayPal transactions, which suggests that you are doing something regularly with the intent of making a profit, which would mean you are a business and would need to file on Schedule C/SE. There are a relatively limited number of things that qualify as "other income". Although the income tax rate is the same, "other income" is not subject to self employment taxes and also doesn't qualify for retirement plan contri...

TT can deal with carry forward amounts from previous returns and that sort of thing, but I don't think it's smart enough to look at a prior return and figure out that you actually fixed the issue already, so it's probably just a default message.

johnpau wrote: ↑Mon Mar 27, 2023 1:47 pm But since I already know the amount received from PayPal for 2022 transactions (above 25K), I wanted to enter that as other income in our tax forms.

Are you sure it's other income and not Sch C, as mentioned above?

With a 401k one is an active participant for IRA deduction limitation purposes in a year when contibutions are made to the 401k. And note that this applies to the year in which the contributions are actually made, not the year that they are attributed to. Take a look at your W2 and see if Box 13 "Retirement plan" is checked. This. Some of the other answers are misleading. You are not an active participant just because you “could” participate. Box 13 is empty Then it sounds like your IRA deduction would not be limited since you were not an active participant in a workplace retirement plan for 2022. Your employer agrees that you were not an active participant, and shared that with the IRS. Just be sure that your spouse (if you have...

I believe the test is whether one is an active participant, not whether a plan is available. The authority for this is CFR 1.219-2 https://www.law.cornell.edu/cfr/text/26/1.219-2 In part: (d) Profit-sharing and stock-bonus plans - (1) In general. This paragraph applies to profit-sharing and stock bonus plans. An individual is an active participant in such plans in a taxable year if a forfeiture is allocated to his account as of a date in such taxable year. An individual is also an active participant in a taxable year in such plans if an employer contribution is added to the participant's account in such taxable year. A contribution is added to a participant's account as of the later of the following two dates: the date the contribution is m...

With a 401k one is an active participant for IRA deduction limitation purposes in a year when contibutions are made to the 401k.

And note that this applies to the year in which the contributions are actually made, not the year that they are attributed to.

Take a look at your W2 and see if Box 13 "Retirement plan" is checked.

mega317 wrote: ↑Fri Mar 24, 2023 1:53 pm Is this right? Doesn't seem like it.

Doesn't seem right. Is "material participation" checked on Sch C line G? Not sure if they cross reference that.

Caliscotsman wrote: ↑Mon Mar 20, 2023 12:30 pm My question. Does the profit share amount need to be contributed by tax day this year? (Tall order)

It needs to be made by the filing deadline for your business including extensions.

Note that large parts of CA as well as other states have an automatic FEMA extension this year for disaster relief because of flooding and so on. I believe (but am not certain) that this automatic extension also extends the deadline for qualified plan contributions in those areas.

Here's a more complete description in Pub 535 Business Expenses

https://www.irs.gov/publications/p535#e ... 1000208843

I doubt I should be adding it to line 17 schedule 1 since I am not paying for the health insurance. It is the partnering company that is making the payment and therefor is tax deductible to them...no? ... But I'm also not sure if you'd qualify to take it as a partner in the partnership since your S-Corp is really the partner here, not you, at least as I understand it. Can you please explain? Why would the expense not be a part of my corporation. The corporation paid $30k into the partnership and so far I received $15k back with $2k retained. $13k is gone buying a service. Doesn't that mean my share has a loss of $13k which should be a business expense? There are specific requirements for deducting self employed health insurance premiums fo...

EnjoyIt wrote: ↑Thu Mar 23, 2023 3:33 pm I doubt I should be adding it to line 17 schedule 1 since I am not paying for the health insurance. It is the partnering company that is making the payment and therefor is tax deductible to them...no?

Agreed it wouldn't qualify for SEHI for you as an S-Corp shareholder since it's not established or reimbursed by the S-Corp.

But I'm also not sure if you'd qualify to take it as a partner in the partnership since your S-Corp is really the partner here, not you, at least as I understand it.

kidmcgear wrote: ↑Thu Mar 23, 2023 1:40 pm

MP123 wrote: ↑Thu Mar 23, 2023 12:46 pm I don't think it's correct to treat the distribution as negative paid-in-capital rather than as a distribution. Where did the $100k distribution come from? Not from paid-in-capital I gather.

Wouldn't the paid-in-capital line stay the same even if the distribution was reported correctly? My understanding is that distributions are an owner's drawing, so any distribution would reduce shareholder's equity on the balance sheet.

Right. In your case paid-in-capital would likely be $7k (unless there were loans) and stay that way. It doesn't really make sense to have negative paid-in-capital.

I don't think it's correct to treat the distribution as negative paid-in-capital rather than as a distribution. Where did the $100k distribution come from? Not from paid-in-capital I gather.

You might want to check back with your accountant to be sure they prepared the 1120S/K1correctly, rather than trying to work around the issue.

If you don't show the distribution and resulting reduction in basis then you'll have basis in excess of the assets of the S-Corp until you try to adjust it by reporting the distribution next year. Maybe not a huge deal but it could be a problem depending on what else happens to the corp.

Searching through posts on this forum, my understanding is that I will owe the same amount in taxes regardless of whether I take a distribution or not. But do the distributions you report have to reflect actual transfers made in the calendar year? Can I combine this year's draws with next year's and report the total as distributions for next year and avoid amending the K-1? It's important for distributions to be reported correctly on the K1 because they reduce shareholder basis on Form 7203. Does 1120S Sch K line 16d show the distributions? Are they missing on your personal K1 too? It's probably best to amend the 1120S and K1 if needed. It shouldn't change your tax for this year, but you may run into basis issues in the future if you don't.

I have over contributed to my HSA in 2021 by 1.5K and in 2022 by 300. Each time I had opted not to remove the excess but pay the 6% penalty. I am paying that penalty as well in future tax years. Rather than try to remove previous year contributions I see based on https://dpath.com/hsa-excess-contributions/ there is the future year option. Is my understanding correct that I can simply say only contribute the limit minus say 2K and then the next tax year since I created the 2k buffer for the limit my over contributions/penalty from the previous years will be stopped? For reference I do my taxes using Turbo Tax each year. Also it would be difficult for me to go the route of removing contributions since it was multiple years and I already move...

No problem e-filing 1040 with 7203 using Turbo Tax.

I'm not sure why it wouldn't be in HRB. Do you have Schedule E, line 28, box e checked?

Is there nothing on Form 5329?

If he's filing his own return he may be under the standard deduction amount too.

fsrph wrote: ↑Mon Mar 20, 2023 11:17 am In 2022 I had access to a work retirement plan for the first few months. After April, I reduced my work hours and did not have access to the work plan. Do I qualify for a deductible IRA no matter my income level? Thanks.

Were you an "active participant" in this plan?

Either covered by a DB plan, or contributed to a DC plan, during the year?

As mentioned, the distributions themselves aren't taxable, it's the S-Corp's income that is.

The best/easiest approach is usually to get in a safe harbor in four equal payments based on the prior year's taxes.

You could also try Schedule AI on Form 2210 to match quarterly income to taxes paid/withheld. With this approach you can use the S-Corp income from each quarter to match against any payments you made that quarter, so they may not need to be equal.

Some people just run one payroll at the end of the year with enough W2 withholding to cover the S-Corp income for the year.

But it doesn't really matter whether you take a distribution or not, you still owe taxes on the income, and it's good to have a plan during the year.

2. The signing bonus was actually paid by the hospital foundation and was reported on a 1099-MISC. It seems to me that the best way to categorize this payment would be "non-employee compensation" (as opposed to rent, prizes and awards, fishing boat proceeds, payments to an attorney, etc). Perhaps they should have sent a 1099-NEC instead? And shouldn't this income be subject to FICA taxes? Yes, it doesn't sound like 1099-MISC is correct in this case. See: https://www.irs.gov/instructions/i1099mec#en_US_2022_publink1000276561 Do not include wages, any bonuses, prizes, and awards paid to your employees. Report these on Form W-2. Do not include in box 3 prizes and awards for services performed by nonemployees, such as an award for th...

2. The signing bonus was actually paid by the hospital foundation and was reported on a 1099-MISC. It seems to me that the best way to categorize this payment would be "non-employee compensation" (as opposed to rent, prizes and awards, fishing boat proceeds, payments to an attorney, etc). Perhaps they should have sent a 1099-NEC instead? And shouldn't this income be subject to FICA taxes? Yes, it doesn't sound like 1099-MISC is correct in this case. See: https://www.irs.gov/instructions/i1099mec#en_US_2022_publink1000276561 Do not include wages, any bonuses, prizes, and awards paid to your employees. Report these on Form W-2. Do not include in box 3 prizes and awards for services performed by nonemployees, such as an award for th...

I have to ask: is a signing bonus from your current employer really self-employment income? And did you not defer any amount to that employer’s 401k after you started working there or to a prior employer’s 401k? Any employee deferral to a Solo 401k would be reduced by amounts deferred to other 401ks for that FP tax year. I think so? From everything I've read on this forum and others, if it is paid out as a 1099-MISC it is considered earned income and I will have to pay self-employment tax on it. So I think I should be eligible to contribute to a 401k. If you (or anybody else!) disagrees I would love to hear why. My previous employer only offered a 457b and my current employer does not allow me to contribute to the company 401k for the firs...

Houdini563 wrote: ↑Thu Mar 16, 2023 2:22 pm If the market value of my holdings in VWIAX is $1,000,000 January 1 and I receive $58,000 in dividends during 2023 that $58,000 will not contribute a single dollar of additional growth to that $1,000,000 no matter the stock price into the future, correct or am I missing something?

It would if you reinvested the $58k by buying more VWIAX. Then you would have $1,0058,000, which would throw off more dividends next year, which you could reinvest, and so on...

Or maybe I'm misunderstanding your misunderstanding?

worthit wrote: ↑Wed Mar 15, 2023 12:18 pm

MP123 wrote: ↑Wed Mar 15, 2023 12:01 pm

worthit wrote: ↑Wed Mar 15, 2023 11:35 am At this point, I had $33,505 total capital loss to carry over in future years.

2021 capital loss = $462
capital gains = $66834

So, for 2021 you would have $66834-$462-$33,505 = $32867 in remaining taxable capital gains. There would be no remaining loss to carry forward to 2022.

You would find the $33,505 carry forward loss applied on 2021 1040 Sch D line 6 or 14 depending on short or long term.

Thanks MP123.

Now, if have a cpaital loss of $5000 in 2022, I can deduct $3000 towards this, right?

Yes, you could use $3000 of the loss against your ordinary income in 2022, and carry forward the remaining $2000 to use in 2023.

worthit wrote: ↑Wed Mar 15, 2023 11:35 am At this point, I had $33,505 total capital loss to carry over in future years.

2021 capital loss = $462
capital gains = $66834

So, for 2021 you would have $66834-$462-$33,505 = $32867 in remaining taxable capital gains. There would be no remaining loss to carry forward to 2022.

You would find the $33,505 carry forward loss applied on 2021 1040 Sch D line 6 or 14 depending on short or long term.

jco wrote: ↑Wed Mar 15, 2023 8:44 am Anyway, so you believe that the S-Corp itself will have a tentative tax of 0 for the 2022 year because it's in its initial year? That would be fine my me.

It's very likely the S-Corp itself will never be taxed. An exception might be if it was previously a C-Corp. But you will need the K1 from the S-Corp to complete your own personal taxes, that's where the income will be taxed.

So, you would need to extend both the 1120S and your 1040 until you get the numbers straight. Be sure to take your best estimate and pay the 1040 taxes before April 15th.

After taking to several other customers for that accountant, it seems to be how she serves more customers, it seems she had a large majority of her customers file an extension so she doesn't have to do everyone by tax day, but takes care of them over the summer. I don't know how big a deal it is, my wife never understood this would be the arrangement though. Is the accountant also going to charge for doing payroll returns and all the state filing requirements? If so that gets to be a significant expense for what I understand is a $30k business (gross) at best. At this stage I think you would be better off with a simple Sch C sole proprietorship. Maintaining the S-Corp is almost certainly net loss, especially when factoring in the reduced Q...

ps2me11 wrote: ↑Mon Mar 13, 2023 3:06 pm I have medical insurance from my employer which has 0 deductible. I assume that I am not eligible for HSA as you need HIgh deductible plan to be enrolled in. But my Tax provider said that there is some change in consolidation appropriation act 2022 which allows me to contribute to HSA account. Please advise.

You still need an HDHP to be HSA eligible. CAA 2023 just extended a Covid-era provision that HDHP plans could provide telehealth benefits starting at zero dollar and still be HSA qualifying. I believe this runs through 2025, although I'm not sure how many plans have actually implemented it.

But if you don't have an HDHP then it wouldn't apply to you.

rvlife wrote: ↑Mon Mar 13, 2023 1:09 pm I had a rental property that I sold in 2022 for a profit. I rented it for 4 years 4 months and lived in it the last 5 years and 11 months.

Because you rented the property prior to living in it you have a period of non-qualifed use and need to prorate the Section 121 exclusion accordingly.

You'd figure the amount of gain (up to $500k) and then mulitply that by the percentage of days that were qualified vs non-qualified. This would reduce your exclusion amount, not the gain itself.

See Pub 523 in general, and Worksheet 3:
https://www.irs.gov/publications/p523#e ... k100072923

Also, Section 121:
https://www.law.cornell.edu/uscode/text/26/121

Cicero123 wrote: ↑Sun Mar 12, 2023 2:55 pm Medicare will start on the *first of the month*, not the following month? So it is unlike things like ObamaCare, where a 26 year old on his parents’ plan loses that coverage at the *end* of the month he turns 26? Medicare will actually start when I am 64 and 11 months old?

Medicare starts on the first of the month in which you turn 65, unless you turn 65 on the 1st of the month. In that case it starts on the first of the preceeding month.

This means you would not be HSA eligible for the month in which you turn 65 or the preceeding month if your birthday is on the first.

SARSEPs are a pre-1997 SEP that allowed employee deferrals as well as employer contributions. In this way it's similar to a 401k, except that both both sides of the contribution are made into a SEP-IRA. As far as I know they would be treated as any other SEP-IRA.

I think you would need to amend at least the last three years 1040s with corrected Form 8606 for each year. Hopefully the balance in the SARSEP is relatively small.

I agree with the above that an S-Corp probably doesn't make much sense here.

You might go to your state's Secretary of State website and see if the corporation was ever registered. Most states have a lookup function. If it was never registered then there no entity to file the 2553.

Was an EIN obtained? Were any payments made to it? Who got paid? her or the corp?

Perhaps this was a Sch C business for last year after all?

dorster wrote: ↑Fri Mar 10, 2023 2:12 pm As far as I can tell if you are offered insurance through a workplace and don't accept it you should expect a 1095-C which on line 14 lists whether or not the offered plan meets the MEC (minimal essential coverage) test for each month; and then line 15 shows how much you would have been charged again for each month. It is only once you have your MAGI for the entire year that it can be calculated whether or not it was affordable to you.

This is one of the reasons you're supposed to keep the healthcare exchange updated throughout the year.

If you get a 1095-C at the end of the year showing you were offered insurance that was MEC and affordable based on your income, and you took PTC, you might have an issue.

I think the premiums need to be included in your guaranteed payments to be considered established under the business. See Pub 535: https://www.irs.gov/publications/p535#en_US_2022_publink1000208843 For partners, a policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or the partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan won...

Even if you maxed the 401k at your main job you could still make the employer contribution to a solo 401k for your 1099 self employment income, just not another employee deferral. Each employer has a separate limit for their contribution, so both could contribute. The employer contribution is the same amount for either a SEP or a solo 401k, but the soloK would let you roll in your main 401k without concern for the pro-rata rule, which might be advantageous. Hmm. My tax guy did not pick up on that possibility, and as I read the rules, a solo 401k has to be set up by 12/31/22 to make a 2022 contribution. Yes, this is correct, too late for 2022. But starting this year (2023) you have until April 15th of next year rather than Dec 31st to open ...

Further, I'm becoming more unhappy with the 401(k) servicer. (Decent fund choices, but minor service annoyances.) I could convert the 401(k) to an TIRA -- but that too would kick in the pro-rata rule -- so my "avoid complexity" reflex is to wait until 2024 for that. Have I got the basics right? Did I miss some clever alternative, or impose a limit somewhere that doesn't actually apply? How do I calculate the optimum choice? You could open a solo 401k instead of a SEP and roll everything into it. That would clear the decks for the Backdoor Roth and (potentially) give you a better 401k than you have now. I don't think I can for 2022, though, since I already maxed the employer 401(k). Even if you maxed the 401k at your main job you ...

lairdb wrote: ↑Thu Mar 09, 2023 4:18 pm Further, I'm becoming more unhappy with the 401(k) servicer. (Decent fund choices, but minor service annoyances.) I could convert the 401(k) to an TIRA -- but that too would kick in the pro-rata rule -- so my "avoid complexity" reflex is to wait until 2024 for that.

Have I got the basics right? Did I miss some clever alternative, or impose a limit somewhere that doesn't actually apply? How do I calculate the optimum choice?

You could open a solo 401k instead of a SEP and roll everything into it. That would clear the decks for the Backdoor Roth and (potentially) give you a better 401k than you have now.

it's my first year filling 1120 S, what do I enter for Capital Stock ? It would probably be whatever you had in your LLC capital account when you elected S-Corp taxation. Did you contribute any money or equipment when you started the LLC? But, be sure you need to complete Sch L and M in the first place. Depending on your answers to question 11 on 1120-S Sch B you may be able to skip them if your income and assets are both below $250k. Many people tend to struggle with the balance sheet and reconciliation, so it's good to have the option to skip. For K1 item H ..what do I enter for no of shares ? can I just put 100% since it is an LLC and no shares Yes, I'd use 100 for both line H and line D on the K1, although it probably doesn't matter wh...

Usually one would either:

Remove the excess and it's earnings and then be sure they were included on either W2 or Sch 2.

Or, put the excess on 5329 and pay the 6% excise tax, year after year potentially, until it's absorbed by an under-contribution in a future year.

But not both.

So, if Fidelity will remove it for free, that would be best. But if they charge then it might possibly be cheaper to pay the 6% (which might be less than they charge) and then contribute $40 under the max next year, and file 5329 again to absorb the excess.

But, since we're talking about spare change basically, I'd just remove it before April 15. They'll have a form you need to use, don't just take it out as a distribution.

With cash accounting you need to recognize the expense when it's incurred, so that sounds like it was in 2023. If you hadn't paid the EIDL loan off you'd still be making payments, so it wouldn't be correct to take the whole interest expense when it was posted.

There was special treatment for the PPP loans including interest since they were forgiven, I'm really not sure about EIDL but you might look into it.

investor_power wrote: ↑Wed Mar 08, 2023 11:12 am I'm a single owner of an S-corp whose company lost money last year. However, I did give myself a salary last year. Can I put money in my SEP-IRA despite the corporation having a net negative income last year?

Thanks!

For an S-Corp your contribution is based on your W2 compensation, so you could theoretically make it even if you had negative business income. But it probably wouldn't make sense to do so because you would have to use previously taxed retained earnings, debt, or a shareholder loan, rather than current income.

You'd be putting post-tax money into a SEP where it would be taxed again when you took it out.

I don't know of anything that goes to that level of detail, but take a look at Portfolio Visualizer if you haven't already:

https://www.portfoliovisualizer.com/backtest-portfolio

You can adjust the contributions for inflation for each year which isn't exactly the 401k limit increase but might be sort of close for some purposes.

Ideally the plan would have it's own EIN. Some people use the EIN of the sponsoring business which, although not technically correct, seems to be acceptable. But an SSN can't be used on the Form 5500-EZ return for the plan, it requires an EIN. You'll need to file this once plan assets are over $250k or when you close the plan regardless of assets . So there really needs to be an EIN of some sort for the plan, not an SSN. Form 5500-EZ and the various adoption agreements all ask for the employer's EIN. I've never seen anywhere to even enter a plan EIN. What would you even use that for? My best guess is that it might be used to report UBIT/UBTI if it was received in the 401k. This would keep the UBTI taxable to the solo 401k itself rather tha...