Fall is around the corner! It’s time for sweater weather, football, and Halloween! But before getting ready to indulge in haunted houses, hot chocolate, and corn mazes, don’t forget some of these important reminders!
As shareholder-employees of your S corporation, you need to determine a reasonable salary for yourself. Shareholder-employees earn wages and therefore, are subject to employment taxes. Distributions can be re-characterized by the IRS as salary if distributions are paid in lieu of reasonable compensation (RR 74-44).
It is important as a shareholder, you track stock and debt basis in your corporation. The list below tells you what you should know about your stock and debt basis:
1. When the S corporation allocates a loss and/or deduction item to you. To claim this loss or deduction, you need to show you have adequate stock and/or debt basis.
2. When the S corporation makes a non-dividend distribution to the shareholder. You need to demonstrate you have adequate stock basis to determine if the distribution is non-taxable.
3. When the S corporation repays a reduced basis loan to you. You must know your debt basis to determine if there is a gain on loan payment.
4. When you dispose of your S corporation stock, you must know your stock basis to determine the gain or loss upon disposition of your stock.
On a separate note, the deadline for individual taxpayers to file their personal tax return for 2014 is fast approaching! The extension due date is October 15th so make sure your tax returns are completed.
Have a warm and cozy start of fall and en-joy the beautiful festivities with your loved ones!
You can call Jaya Naiken CPA to answer your tax questions.
