FAQ
1I do not understand how my salary works?
Remember there are two of you. One being the entrepreneur the other being the employee of corporation. The salary is not the only amount of money that you receive from the corporation just the amount to be claimed as such. The other money you receive is your profit distributions. The reason why your net salary is so low is for the fact that most of the federal income taxes that you are required to pay are withheld from your paycheck via payments to the Financial Agent (Federal Reserve). Your paycheck is virtually bookkeeping entry. This is what accountants do, nothing you need to do special other than to pay your taxes every month.
2I pay for my car personally, and I still want to write it off?
Whether you pay for any item personally or not, you are allowed to get reimbursed by the corporation for the business usage of that item. This will be done as a bookkeeping entry at the end of the year. This is again what accountants do for a living nothing needs to be done by you, except to summarize and total all the expenses by the year-end.
3Does the S corporation pay taxes?
By definition the S corporation do not pay income taxes, it is a pass through entity. The net profits and your salary combined flow onto your personal return and we pay personal income taxes on the combination less our deductions such as mortgage interest, real estate taxes and charity.
4Can I pay for my car from my business account?
For tax reasons you should pay for all corporate expenses whether titled in your corporate name or not with any corporate payment means. (Corporate credit cards, checks, etc.) For limited liability reasons you should pay only those items corporately tilted with a corporate means. Consult your attorney.
5Am I paying for all my taxes?
When you pay your taxes during the year it is on an estimated basis. It is impossible to figure out to the penny how much we should pay exactly. It is not until that fat lady sings that we know the show is over. We must complete the tax return to figure out exactly. We are just paying an educated guess for now and we fine-tune it through out the year. If you over pay they will refund you if we under payment then we will owe taxes with a penalty. We of course try to avoid paying them with a penalty; therefore we make safe estimated payments through out the year. This is why you are advised to send me a profit and loss statement periodically through out the year.
6Where and when do I pay my Federal Taxes?
There are two separate and distinct types of federal tax payments. The first is payroll taxes and the federal reserve needs to receive this payment by the 15th of every month. You may either bring the payment directly to any commercial bank, Process through the IRS EFTPS Website, or mail the payment to the Financial Agent, Federal Tax Deposit Processing, and PO Box 970030, St. Louis, Missouri 63197. Remember to put your federal identification number on your check and to attach the 8109 coupon. There are no excuses for being late.
The other method of payment is to the Internal Revenue Service, Atlanta Georgia, 39901. Payments mailed to Atlanta are for your personal estimated tax payments. They are due to be received by 4/15, 6/15, 9/15, and 1/15. These payments are for any amounts do above the estimates that we pay via the payroll system.
Many taxpayers pay via the estimated system. However they either are not in business for themselves (have S corporations) or they have very high taxable incomes. WE can pay this online now as well.
7Can I collect unemployment, since I am paying for it?
One major drawback of the S corporation is that we must pay both Federal and Florida State unemployment taxes. The most that this tax gets is 245 per year. (56 Federal, 189 State) per person on the payroll. The advantages of being on payroll more than out weigh the disadvantages. You just see the disadvantage spelled out this way at this time. Corporate officers (you) can not collect unemployment benefits unless possibly if your corporation goes bankrupt, and certain other extreme circumstances. In a nutshell, do not count on.
8When are my taxes due?
Federal 941 payroll taxes are due each month to be received by the Federal Reserve Bank by the 15th of each and every month. Unemployment taxes are due every three months 4/30, 7/31, 10/31, and 1/31 The Florida Business Report is (150) is due on April 30. Personal Income tax estimates are due on 4/15, 6/15, 9/15, and 1/15. Tangible taxes are due on 4/1 and intangible taxes are due 6/30. No extensions for payments.
9What can I write off?
The items that can be written off depend on whether or not they were used for business or not. If you keep in mind that if the expense was used in the production of income or that could lead to the production of income then it is most likely that it is deductible. I have a list of the more common expenses on my Website MYTAXGURU.COM.
10How can I write off my office in my house?
If you truly use a room in the house we first must consider whether we want to write off this room. After you hear the tax concerns you will see why. First as we break it down we write off the interest and the taxes in full anyway. Secondly we can deduct the insurance, water, utilities, repairs and maintenance, depreciation etc. in the percentage of the square footage used Vs the total of the house. As you find out the peanuts that this becomes and that then you must pay income taxes on that portion of the house when you sell it when otherwise you would not have. We suggest most of the time to forget it. However if you rent then all of these drawbacks are of course mute, and we of course deduct the business percentage of the rent.
11Should I buy or lease my auto?
Buying or leasing a car is first an economic question based on how do you treat automobiles? I know nothing about maintaining a car (law school graduate) I abuse automobiles. By the time the car is up for trade, usually within three years (for me) the car is so abused that I would not get really anything on trade, therefore leasing is better for me. If for all other things being equal, then the golden rule is 15000. If the car is worth more than $15000 then you should lease or if you travel less that 15000 miles you should lease otherwise you should buy the automobile.