mircpa

If the property is not deeded in LLC's name go with Sch E OR if it has to be under S corporation, rental income losses under 8825 and under both circumstances would be subject to passive activity loss limitations 8582.

Hello I have this question regarding HSA contribution by greater than 2% shareholder. I know these are reported under line 1 of W2 and box 12 code W for HSA contributions & code DD for health insurance premiums. Since HSA contribution code W amount is flowing thru to form 8889 and software is regarding as employer contributions and disallowing HSA contribution deduction. I searched online but this looks remain unanswered. Does anyone has idea how to get around and have software take deduction. I am posting from IRS notice 2005-8. For employment tax purposes, when contributions are made by an S corporation to an HSA of a 2-percent shareholder-employee, the 2-percent shareholder-employee is treated as an employee subject to Federal Insurance Contributions Act (FICA) tax and not as an individual subject to Self-Employment Contributions Act (SECA) tax. (See Announcement 92-16, 1992-5 I.R.B. 53, clarifying the FICA (Social Security and Medicare) tax treatment of accident and health premiums paid by an S corporation on behalf of a 2-percent shareholder-employee.) However, if the requirements for the exclusion under section 3121(a)(2)(B) are satisfied, the S corporation’s contributions to an HSA of a 2-percent shareholder-employee are not wages subject to FICA tax, even though the amounts must be included in wages for income tax withholding purposes on the 2-percent shareholder-employee’s Form W-2, Wage and Tax Statement. The 2- percent shareholder-employee, if an eligible individual as defined in section 223(c)(1), is entitled under sections 223(a) and 62(a)(19) to deduct the amount of the contributions made to the 2-percent shareholder-employee’s HSA during the taxable year as an adjustment to gross income on his or her federal income tax return.

I do know businesses entity has fiduciary duty to remit collected sales taxes BUT then if you see Max's post it says sales tax was included in gross sales. It is based on this premise I wrote whatever I wrote.

Assuming this is an S corporation. If sales taxes were included in gross sales then sales tax deduction can be taken in corporate tax returns AND this might reduce income so less amount of K1 (subject to basis limitation) . Since corporation is already closed therefore amended tax return is only solution.

I am curious why S's SS number was used where in fact this rental property was owned by M and it is located in mexico. I agree with Kcjenkins it is mexico source rental income. May be for TIN matching process you report rental income and expense in S's tax return and M would report rental income.

If indeed there was a 1031 exchange how could attorney float new LLC where in fact property was held in taxpayer's name. I believe Tax ID needs to remain same for 1031 exchange to be effective otherwise IRS might revert 1031 exchange OR report under 1040 file Sch E write LLC's name & tax ID

You need to fill W7 to get ITIN for shareholder/officer. Check option h under W7 and write Exception1.Third party withholding on passive income-Interest income & Foreign person's US Source Income. You also need to get letter from bank indicating Tax ID is required for a corporation to open bank account. Passport copy of shareholder/officer needs to be apostilled.

Hello Have a question regarding a client who own 6 rental properties under an S corporation. Has cumulative rental losses on these six properties totaling approx 194K. Do I have to make 6 different K1 entries onto 1040 so that losses flow appropriately to 8582 as suspended and recapture at time of sales. BUT since these properties are titled under S corporation I am wondering whether is this right approach. Can someone confirm me thanks

Looks like incorrect income tax withholding by employer in MO. You might have to request full refund of incorrect withholding from MO and include in income in VA & pay taxes.

Anybody else could provide me some guidance ? thanks to all who responds

I prepared and efiled 1040 for a couple who got married in Aug 2014. Received notice from IRS requesting 8962 Taxpayer's wife was claimed as dependent under her parents tax return and 1095-A was issued in her dad's name along with her mom. I read instructions it is suggesting me to complete shared policy allocation or alternative calculation for year of marriage. Under 1095-A Part 3 from April until Dec amount is $ 4,329.00. Looks like dad failed to inform marketplace about his daughter's marriage in Aug 2014. After her marriage she was included in her husband's private health insurance. I am guessing she might have to repay allocated excess credit from Sep until Dec 25% of Column C Which option is bettter shared policy allocation or alternative calculation for year of marriage. Can someone guide me thanks

$ 115,237.00 other income 1040 line 21, unless if he can file 982 fitting into any of the attributes. Check if he is eligible for 1d.

Are you going to knock off value of property bought by commission discount ? Realtor could include as commission discount in expense.

Naveen I am so sorry for your wife situation. You and your wife are definitely in my prayers.

Hello I got a question regarding HSA contribution paid by employer on behalf of 2% shareholder-employee. My understanding is contributions along with health insurance premiums paid by employer gets added up in officers compensation wages amount. Employee gets health insurance payment deduction on line 29 of 1040 AND HSA contribution deduction on line 25 (Even though paid by employer). I went thru IRS notice 2008-1 & 2005-8. Notice 2005-8 says "The 2-percent shareholder-employee, if an eligible individual as defined in section 223©(1), is entitled under sections 223(a) and 62(a)(19) to deduct the amount of the contributions made to the 2-percent shareholder-employee’s HSA during the taxable year as an adjustment to gross income on his or her federal income tax return. See Notice 2004-2, Q&A 19, 2004-2 I.R.B. 269, for employment tax rules for employer contributions to HSAs of employees other than 2-percent shareholder-employees. Can someone confirm me if employee is eligible to claim HSA contribution deduction.

Lately IL might have started what most of other states are doing, they are enquiring with respective state's tax authorities to figure out if these corporations are still doing business. I dont know if you can retroactively file annual reports and reinstatement at this point. Probably based on answers from this interogatory they might judgment against this corporation to stop doing business.

Jklcpa This corporation is an S corporation ever since. It was never a C corporation therefore there is no A&E. Why do you think it will not have technical termination ? My uderstanding if an S corporation has passive income for 3 years it terminates. As per PLR 200527013 if corporation's rental income is only income it derives I think it is income pursuant to conduct of active trade and business "In PLR 200527013, the IRS described how an S corporation that owned rental farmland would avoid these tax penalties. Based on several factors, the IRS determined that the business activities amounted to the conduct of an active trade or business and, therefore, the rents would not be classified as passive investment income. The same analysis has also been applied to an S corporation that owns a rental building. In PLR 200339042, the IRS concluded that rental income from commercial buildings was not passive investment income. Therefore I think owner needs to paid payroll showing officers compensation and show rental income as ordinary business income. So I need to move assets from 8825 and link to 1120S ? Because after 1031 exchange when replacement property was bought I included under 8825

Michaelmars Rental activity is passive activity regardless of anything unless taxpayer is real estate professional, besides all this presently this corporation owns ONLY commercial rental properties deriving rental income. Taxpayer gets decent amount W2 from other business I cannot take position of material participation, this argument will be kicked out should his case be audited. Jklcpa The case you cited is for an S corporation that lost election subsequent to 3 years passive income reporting, in my client's case I want to take premptive step avoiding termination in future. I hope same set of rules should apply. Looks like this is fairly new case, do you think I should take advance ruling from IRS so that S election does not automatically gets revoked in future after 3 years ? Richcpaman Right now my main concern is Bank, these rental properties do have debt I dont know how bank would react if they see property being transferred from a corporation for LLC. I understand your concern not to keep property under corporation but keep in mind this corporation recently flipped properties under 1031 exchange. Hopefully as advised by Jklcpa I think there should be some way out waiving termination of S election. Again I am very much thankful to all who shared their thoughts.

Look at this 26 U.S. Code § 1362 - Election; revocation; termination (3) Where passive investment income exceeds 25 percent of gross receipts for 3 consecutive taxable years and corporation has accumulated earnings and profits (A) Termination (i) In general An election under subsection (a) shall be terminated whenever the corporation— (I) has accumulated earnings and profits at the close of each of 3 consecutive taxable years, and (II) has gross receipts for each of such taxable years more than 25 percent of which are passive investment income. Wikipedia If more than 25% of a S-corporation's gross receipts consists of passive income for three consecutive years when the corporation has accumulated earnings and profits, the S corporation will automatically lose its subchapter S status and revert to being a regular C corporation.[1]

Thanks to all who responded. Based on my research so far, looks like if S corporation has passive income for three consecutive years or 25% or more of corporation's income is passive income, S election automatically terminates therefore so I have decided to float new LLC and move those assets to this newly floated LLC filing Schedule E. The reason for this move is after three years when S election terminates corporation needs to file 1120, net rental income will be taxable at corporate level Thanks Richcpaman I am going to follow your advise. Oh by the way what box are you referring to "file the check the box ? I plan to shut down S corporation and move assets to LLC

Hello A client of mine who has an S corporation owned business and real estate, sold business and real estate did 1031 exchange bought rental income generating real estate which was properly reported in previous year. For all previous years officers compensation was paid. Now going forward this corporation owns ONLY real estate reporting rental income on 8825. Does this corporation still needs to show and pay officers compensation Line 7 of 1120S ? thanks

May be that have the position when we use to traditionally paper file but ever since e-filing, there is no way we can attach other state's tax return in IN's tax return. Probably state of IN needs to revise sentence.

Jack I do file tax returns for IL & IN and I spoke to ATX on this matter. Based on what I heard from them IN do not want copy of tax return to be attached BUT they might ask for one in future therefore your answer is "If e-filed, save the copy in case IN asks for it. This is from IN tax department"

Pacun As I said in my previous post his basis of eligibility for social security number is employment authorization document (EAD). If he is granted EAD card and walk in a SS office, SS number will be assigned to him. Keep in mind again his basis of EAD card is filing of I-485, the underlying application.

Margaret Ask your client if his son-in-law has filed I-485 application to register permanent residence or adjust status (this is part of green card process). If he in fact has filed I-485 then he can become eligible to file employment authorization document I-765, approval of this document would make him eligible for SS number.