Alright I have looked online still cant find the answer made some phone calls but had to leave messages so I figured why not ask the guys. I will Try to make this fast and simple - I own a S- Corp. I own 90% of the "stock". I paid myself a salary which does not come close to the profit on the K-1. So the issue is when I enter my salary on my personal tax forms and then it ask for any K1 information it is adding the net profit from the corp. and salary and saying I made much more then I did. So can I simply just not enter the K1 info? And just keep my salary in?
Your salary should be on a W-2 issued by the S-Corp. Your share of profits is on the K-1. Two different things. See your accountant.
I do not take my share of the profits I fold it back into the company for growth and expansion. With the W2 I entered my salary and that is fine. But with Turbo tax it ask if you have anything with a K1 which I do and then it asks to enter x number in from the K1. So when I do that it adds the corp profits assuming im taking a share.......which im not. So do i just not claim it? also I did call the cpa and is with clients and will return a call when he gets a chance...meaning tonight or sometime tommorow.
S-corp is a pass through entity. All business profit flows to the bottom line. You need a c-corp possibly to avoid taxes at a personal level but your company will make up the difference.
Jay look for the PM So the end result is that I have to claim the corp. profits and pay the tax on them? There is no way I can just claim my salary and be done with it.
The tax program sounds like it is operating correctly. You owe tax on the profit without regard to what you do with the remainder of the money. You also owe[presumably] tax on your salary which is why the program is adding the two.You need help with the concept, then the details are straightforward. The purpose of the K-1 is to notify the IRS how much profit there was, you do not have the option of "not claiming it". If that were an option, some people might possibly chose to not pay tax on profits. I am not any kind of legitimate advisor, but have operated an S-Corp for twenty years. Like everything, there are plusses and minuses but it seems especially good in the early years. Finally, I bet there is an "s-corp"advisory site which would be more useful than fchat for tax advice.
S corp is definitely pass thru. Doesn't matter if they are losses or gains. Time to enter in your K-1 info and pay up. I would recommend finding a good accountant to help you plan out your strategy with this.
Thanks everyone every bit is helping. I think my biggest worry was the fact I had to add the companies profit to my personal. I just was not sure if that was correct or not. So right now I have my salary and the profits from the K1 added together for the total at the end now. Which I do not know if that is a good thing or not haha.
