We’re happy to respond online to questions of general interest, so please enter your question below under “Leave a Reply”. Of course, please do not take information we publish as professional advice for your specific circumstances (see our Terms of Use).
Because we’re responding in a public forum, our answers will focus on the most common cases. This page continues the Q&A dialog which started on our website in 2005. Please check the Ask A CPA page on the web site there for additional issues that were there posted prior to September, 2011.
If you’re considering engaging a Certified Public Accountant for professional assistance with your finances, please contact us!
Pingback: San Francisco Accountants Launch the Interactive Accounting Educator | The Accounting Educator
I am now in my second month delivering pizza part-time. I just read online that the deadline to report the tips you receive to your employer is the 10th day after each month in which you have earned them if they are above $20. It is now the 19th and I had no idea that I was required to do so. I just thought that I would include all the tips I earned as income on my 1040 when doing my tax return. My employer did not mention anything about it either, although it does report the credit card and check tips, as shown on my pay-stub.
From the start of my part-time delivery job, I have kept a daily log of the tips I received and intend to use the official IRS Form-4070 in the future to report everything.
What penalty is there for missing the 10-day deadline? Thanks.
Hi, E!
We are happy to provide general information about tax and financial issues. However, we cannot give advice on what to do in a specific situation based on an email inquiry. For specific advice, you should engage a Certified Public Accountant or other financial professional.
It looks like you’re on the right track with the Form 4070. The IRS has additional information the reporting requirement online.
The CPA I spoke with said that the possible penalty you would have to pay is 50% of FICA and Medicare tax you would have to pay on the tip income. However, the penalty may be waived by the IRS for good reason. You ask for a waiver and provide the justification when you file your 1040.
If you were a client of ours we would recommend that you submit a statement asking for a waiver because you were unaware of the requirement, discovered it in your second month of employment, and began giving your employer the forms as soon as you learned of the requirement. The requirement for Form 4070 is meant to stop people from intentionally not reporting tip income, and we think it is very possible that the IRS will waive the penalty. In any event, the size of the penalty for one month’s mistake is not likely to be a lot of money.
Hi
I am about to start a new business , have found a capital to star and have alreado some orders, I come for working on a LLC as a memeber with my borther. I also have an S cor for a music recording business i have as a side job.
The question is weather to use an LLC ( i used w my borther ) or an S corp ( my music buiness sie thing)
I will purchase goods, in the USA and overseas and export to south america where i have clients .
I understand most of the limitations of both , i am an american ccitizen probably and the only shareholder ( i will put my wife is a partnership is required)
However , I haver read a lot about this , and havernot found information that helps me mak the choice. Here are the main concerns.
S corp :
Looks like i need to have more paper work ( which paperwork ?)
Looks like i need to a “reasonable salary to my self” ( when do i need to start dooing this?) i see that this is only required if i pay my self distribiution , of course i need either distribution or salary , but is there a break to star paying salary ? and see how much the corp makes? its hard to star paying salary not knowing how much you ll make.
LLC:
They say that all distribution and payments made to a member are subject to self employment tax which is kidn of the same as paying my self thru the salary , federal income plus self enploy.
I also read that memebers ( iam a managing member) can not haver salary on a llc ( i do have 1% on another llc and have a salary ) my accountant have not mention anything, is this true?
Ideally i like the for of an S corp , but starting i dont want to add the burden of a salary , because i have salary tru another company i am part of , and rather use that moeny as working capital . Also i am distracted and the less papers i need to deal to start with while i hire real employees that take care of some of those , the better.
Any advise?
Here is my structure
I ll be a distrinutor of industrial products that will be exported , my cleints are , other export company ” from business partners “, and some international corporations , mainly in south america. Sometimes i will buy in the USA and sometimes i will buy somehwere else… like china , mexico , India etc etc
Thanks
JD
Hi, JD! Thanks for posting your question.
Unfortunately, there is no general answer for your situation. The choice of an entity depends partly on your overall financial situation, operational details of the endeavor, and your expansion plans for the business, among other variables.
In your case, you also already have both an S-Corp and an LLC and you are knowledgeable about the general requirements for the types of companies. If you were a client of ours, we would want to talk with you more about your expected income and profits and we would also discuss why you are setting up a new business rather than operating as part of an existing entity (there’s like a good and simple reason for this decision, but we’d want to understand it). We would walk through the various options and how that would affect your reporting requirements, taxes, and other financial aspects. We would also help you gather a list of any legal questions which you would ask a business attorney.
You mention that you already have an accountant. I recommend calling them!
We invite our clients to talk with us throughout the year, and do not charge them for over-the-phone advice that does not require research on our part. Your accountant may have a similar policy. At the very least, since you already have a relationship with an accounting professional, they are already familiar with your finances. They would not have to spend the time (which costs you dollars!) coming up to speed on your circumstances.
I understand that the rules about S-Corps, LLCs, and other structures can be confusing. Spending a bit of time and money with a professional who is able to give you advice on your specific situation seems cost effective to me.
I sold a rental condominium at a lost, I owned over 2 years. I sold it this year, I am planing to sell another rental property that I own for over 20 years and I will have a capital gain, my question is, can I substract the loss of one from the gain of the other at the end of the year when I do my taxes?
thanks for your response
Albert
The partner I spoke to about your situation said that generally someone in your situation would be able to deduct the loss from the gain. He said that factors that help you are that the sales occur in the same year/the loss is recorded first.
What is the best entity to set up (LLC, S-Corp, Sole Proprietor, etc.) ? My wife and I will be the owners. The business will be dealing with real estate (buying, selling, renting) and a nutritional company and a farm that sells hay, fruits and vegetables. The business will be in Nevada, Texas, Wyoming and Utah. How do the taxes work when the business operates in these 4 states? Do we draw a salary or put the profits in the bank?
Thank You,
Jim
Your question about the type of entity to establish is a very common one. Unfortunately, there is no one right answer. Each type of business has its own strengths and is the best one in different circumstances.
First, there may be a financial best and a legal best. An accountant can help you analyze the fees, retirement planning, and tax advantages of each choice. They would look at your entire financial picture and talk with you about the flexibility, protections, and requirements of each type of entity from a money prospective. A business attorney would cover many of the same issues but from a perspective of liability and other potential legal ramifications.
In the end, you will have to make the decision. You might have to decide whether you want extra shielding from potential lawsuits even though you’ll have to work to avoid the corporation have any taxable paper profits at the end of every year. Or, you may decide a lawsuit is very unlikely and you want to take advantage of a particular self-employment retirement savings benefit.
In other words, accountants and lawyers can give you advice tailored to your specific financial situation and business set up. But, you will have to decide what course you are most comfortable with.
As far as your tax question, in general states tax income generated from the operations within their border. From a tax viewpoint it rarely, if ever, makes sense to incorporate a business or claim a headquarters in a state without an income tax on businesses. If you have operations in a state that does tax its businesses, you will have to pay taxes on the income generated in that state.
We, and many Certified Public Accountants, have sophisticated software that allows us to calculate the revenue and taxes due in every jurisdiction in the United States. You will likely work with your accountant to identify the money earned and costs on a state-by-state basis, and you will file in each state that taxes its businesses.