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I am reviewing last year S-Corp tax return of a client to prepare for this year return. This is a single member S-Corp, taxpayer own 100% of stock. Does this look right to you?
the owner was not on payroll of this S-Corp, thus no W-2, this business is in servicing industry, thus, no 1125A needed
Questionable items are listed below
1120S gross income —————- 800k
deduction on supplies only ————– 300kon 1120S line 14 Depreciation ———————– $0
on 1120S line 7 Compensation of officers ——– $20,000
this 20,000 flowed to 1040 personal tax line 17 Rental real estate,royalties,partnerships,S corporations. No schedule SE on 1040on 1120S line 21 Ordinary business income ———– $20861
this $20861 could not be found on 1040 personal tax return1120S schedule L balance sheet
Cash ————- Beginning balance $18000 Ending balance $ 15000
Loan from shareholders ——— Beginning balance $20000 Ending balance $20861
Retained earnings ————– Beginning balance $ -2000 Ending balance $ -5861Does this look right? It appears whoever prepared this return had no idea was going on and just fudge the number to make it work.
I have reasonable of tax knowledge but I do not have a lot of experience preparing Corporation tax returns. It seems like at least some depreciable assets were 100% deducted as supplies. Income on personal tax return was understated for $20861, and numbers were pulled from thin air to make 1120S schedule L balance…. Could someone confirm this?
I am new to tax preparation business, is this how it’s being done out there? just fudge the numbers to create lowest tax liability, and hope the IRS will not audit, even if they do, just pay penalty and interest or give the client “we will review and get back to you” until the clients tired of chasing after you and pay the IRS.
AUD - 86
BEC - 76
FAR - 75
REG - 83Forgot
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