Tax Filings for Corporate Transperency Act

[Bolandjohn]

Will the tax forms required to be filed to comply with CTA be part of the program even as an add-on

[Just-Lisa-Now-]

Are you referring to the new BOI filings?   

I doubt that will be built into ProSeries as a separate filing like the 114 FinCen, at least not very quickly.

[BobKamman]

Because, for one thing, they are not "tax forms."

[jeffmcpa2010]

I agree the BOI information filing is not tax forms.

I am of the opinion that Attorney's who are/have formed LLC's or corporations should  be informing their clients of the new reporting requirement. But we all probably have guesses about the likly hood of that occurring.

Since the filing is not a tax form, or tax related, I do not plan on providing that filing service (disclosure - I am mostly retired and not looking for or accepting more work. Those in full time practice may be in a different position.)

I will attempt to provide information to clients whom I know it affects, as a common courtesy.

[BobKamman]

I'm an attorney who seldom sees LLC's or corporations formed by lawyers.  Mostly the paperwork is prepared by CPA's or people who call themselves "paralegals," if not by DIYers with an Internet connection and printer.  I have filed a few in the last 40 years, but I don't consider myself as having an ongoing client relationship if that was the last work I did for someone.  So that's my take on your guess about likelihood.  

[PATAX]

@jeffmcpa2010@@BobKamman Jeff, attorneys may do that, but will all entities be informed? Especially if the business was formed many years ago.... Bob, When the do-it-yourselfers do try to form their own entity by themselves, they often screw it up. Better to have an attorney take care of that.

[BobKamman]

I once had clients who started a small construction business.  The wife kept her job with substantial W-2 income and the husband made $50,000 the first year, all of which was used to buy equipment.  They went to a community-college class on business and tax planning, taught by a CPA.  He told everyone in the class to incorporate and elect S status.  They did it themselves (this was before they met me).  The $50K profit, none of it distributed, ended up being taxed at a rate of 35% or so, because of the wife's income.  Had they elected C status, it would have been taxed at 15%.  So they paid $10,000 more tax, except they didn't, because they had no cash.  One thing led to another -- bankruptcy and divorce -- when the construction industry cooled.  They still owed me money, which they elected not to reaffirm.  But one of their kids is still a good client.  

When people denigrate lawyers, it just reminds me of all the CPA stories I could tell.  

[PATAX]

@BobKamman I agree. Off the top of my head, I can think of at least two times when do it yourselfers created problems. Clients have gone to local attorneys and they have done a great job.

[JimClarkCPA]

If they spent the $50,000 on equipment why would they owe so much tax?  And, why didn't you do a late S Corp election?  Also, I routinely see attorneys screw up entity formations.  No advice to the client re S Corp elections, set up husband and wife LLC's in community property states to file on Form 1065, etc.  And, I see them charge outrageous fees... up to $3500.  It's a boilerplate form.  Unless the client is in a business that makes it likely they will need legal counsel or defense often, Legalzoom, Incfile, etc., are much better options, with the recommendation that they send the charter to us immediately and let us do the S Corp election, SS-4, etc.

But, we digress.  Has Intuit said anything about the CTA filing requirement?

[BobKamman]

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@JimClarkCPA wrote:

If they spent the $50,000 on equipment why would they owe so much tax?  And, why didn't you do a late S Corp election?  

I know this might be difficult for a CPA to understand.  They had already made the S Corp election, and filed the 1120-S by the time they came to me to do the personal returns.  The corporation made a $50,000 profit, but did not distribute any of it because it was invested in equipment.  Of course the Schedule K-1 still showed the profit flowing through to them, to be taxed on their 1040.  Where the wife had a six-figure W-2, back when that meant something.  

[PATAX]

In the membership composition of every profession there is a variation in terms of competency and character. Some are above average and great. Many are average and do the best that they can. A small minority are not the brightest stars in the midnight sky.

[JimClarkCPA]

Well I certainly didn't come here to be insulted by a couple of jerks.  This is one of my first times posting here.  Most of my discussions are within CPA Connect, an invitation-only, highly respected organization made up of some of the best CPAs in the country.  I've been in practice for 32 years, and have been a member of that organization for over 20.  I have never had a Board complaint, been sued, or been assessed a preparer penalty.  I now see what this discussion group is like, and I will not be posting here again.  Shame on me for thinking I might find something useful about whether or not Proseries is going to offer the CTA forms.

If you think it's better to pay C Corp tax on undistributed profit, just to have it paid out later as wages at 35% plus FICA...double-tax... okay, sure, go ahead and go that route.  I say you're wrong.  

At least with the S Corp election he had an opportunity to reduce the FICA tax, which he will ultimately have to pay on everything that comes out of the C Corp, unless he pays it out as a nondeductible dividend.

And, my point was that unless this took place a VERY long time ago, the 100% of the equipment cost could have been deducted as bonus depreciation or Sec 179, and there would have been no tax at all.  Again, if he didn't do that on the 1120S, it could have been amended.  

Did I dumb it down enough for you?

[PATAX]

@JimClarkCPA Jim, my comments were not directed against you personally or Bob personally. So I'm not sure if you are referring to me as a jerk or not.

[BobKamman]

@JimClarkCPA Where did I say that they did not claim Section 179? That’s just a red herring you dragged across the thread to cover the odor of your initial failure to understand the problem. So let’s walk through the facts, very slowly, so even a CPA can understand them.

1) Taxpayers start a new business. With rented equipment, they can make an annual profit of $50,000. As revenue grows, so does the amount needed for operating capital. Employees are hired and paid before customers pay for completed work.

2) Taxpayers realize that they can increase profits if they buy the equipment, rather than lease it. So they find a deal for $50,000.

3) At end of year they have $100,000 profit – half in the bank because they need that much to stay in business, and half in the equipment they bought.

4) Schedule K-1 shows a $50,000 profit ($100K less $50K Section 179 deduction). A C corporation would have paid $7,500 tax on this. However, as owners of an S corporation they pay more than $15,000 in federal tax on the same amount.

As it turned out, there was a downturn in their business and a loss the following year. With a C corporation, this could have been carried back to wipe out the $7,500 liability. Even had profits continued, IRS would have had fewer ways to immediately collect the initial balance due.

[JimClarkCPA]

When you said they had a $50,000 profit, but had no money in the bank because they spent $50,000 on equipment, my assumption was that the section 179 expense election was not claimed. If there was $100,000 profit, and $50,000 was invested in equipment, with no distributions, there would’ve been $50,000 in the bank. Your facts don’t line up. But who cares? This was not the poster’s question anyway. And I have no intention of continuing conversation with pompous jerk like you. Your comments have been reported. If this is the way professionals deal with each other in this group, I will have no part of it. If someone has a difference of opinion, it is possible to handle that difference of opinion without insults. We have all been wrong before, and we will all be wrong again.