Single owner of S-Corp, how do her personal income taxes get filed?

[FTS13]

I have a client who opened up a salon last year and she paid herself a small salary, she already filed her corporate return and now came to me to file her personal. On her personal return do I just include her W7? Or does the ordinary loss from her corporation get transferred to her personal income taxes? She was hoping for a refund since she has dependents but if I need to include the ordinary business loss, than she will be at a loss with no earned income.

I appreciate your help!

[grandmabee]

Is it an s-corp or full corp. If full corp then all taxes should have been paid on the 1120. If a S-corp then she would have a K-1 that would go on her personal return but depending on basis wether loss is deductable. But the w-2 would go on the 1040 WHo did the Corp return?

[BulldogTom]

A W7 is the form to apply for an ITIN number if I am not mistaken. Did you mean W2?

Tom

Hollister, CA

[jainen]

>>if I need to include the ordinary business loss, than she will be at a loss with no earned income<<

Use the EIC worksheet in the Instructions for Form 1040 or 1040A. The pass-through loss will reduce AGI, but not earned income.

[Arche306]

Sounds like you should be doing a lot of studying for such an elementry question!

[jainen]

>>such an elementry question<<

It was a good question--nothing about pass-through entities is elementary (except spelling). Earned income means different things under different provisions of tax law, and with more IRS scrutiny of EIC it is prudent to ask for advice.

[FedupCPA]

It is an elementary question because partners/members of 1065s and owners of 1120S corps get K-1s. That is how the information flows to their personal return.

[kcjenkins]

It is a question that clearly shows a level of confusion. BUT that just means the poster has the sense to ask questions rather than just blindly charge ahead. That should be encouraged, not criticized. Offering direction to the right sources is a proper [and kind] response. Please, that is how we should strive to react.

[jainen]

>>the information flows to their personal return<<

Sure--just type in the numbers and the computer will put 'em in all the right spots! That's exactly why this was not an elementary question. It's not about math, which the software takes care of (after the fact). It's a tax theory question, for tax planning.

There are lots of ways to structure business income. For example, this taxpayer takes a salary in spite of her overall loss. None of us could explain all the tax implications of that off the top of our head. Even if we could, not in terms the client could readily understand. That's why IRS gives us tools like the worksheet.

Because, hey--EIC has an AGI phaseout, and that's something a taxpayer needs to know about.