Capital Gains and Net Income

[TSchramer88]

1. When filing a previous year return (2015), with only 1000$ capital gains, do I just file a Sched D? How do I do this?

2. When proof of Net income is needed, will it be determined by AGI, Total taxable income, or with a business, will it be determined after losses?

[BobKamman · Accepted solution]

Another post suggests that you are a tax professional, but those are awfully vague questions.  Are you preparing an individual, corporation or trust return? For whom are you trying to provide proof of net income? 

[TSchramer88]

I am currently an accounting student who has done my own taxes and a few family members' and friends' taxes for years. I am trying to repair my husband's IRS mess. If I can handle his missing tax returns then I will become a tax preparer. This is becoming a bit more confusing now that I am using the software. The net income is for a home loan application due to him being self-employed. The Capital Gains question is for 2015 when he was not working but received gains from a TRust set up by his father.

Sorry, I didn't mean to imply I was A CPA, I am doing late taxes for a friend and my husband.

We began an S-Corp and I don't want to pay anyone to do a bit of math. He was Sole Prop until May of this year when we incorporated. But due to the pandemic, we almost had to throw it away. We suffered a huge loss.

[Just-Lisa-Now-]

Your husband should have received a K-1 from the trust for any capital gains and only the net gain or loss from that would be included on that K-1.


Preparing an SCorp return and preparing individual returns for friends and family isn't just different by "a bit of math". Corps have so many different rules and requirements...this is a no brainer to hire out for if you have no corp experience.

[TaxGuyBill]

I agree with Lisa.  Preparing taxes isn't much about math, it is about knowing Tax Law and the rules.  Corporations have a bunch of extra stuff, and it is foolish for a business owner to do the corporate taxes themselves (and even more foolish to start a corporation without first sitting down with an experienced tax professional to determine if that is the best way to do things).

As for your question of "Proof of Net Income", that depends on who is asking.  The "proof" is generally the tax return itself (along with Schedule C).  But what "Net Income" numbers they look at depends on who is asking.   It might not be any of those possibilities you listed (they might start with one, but then make adjustments to it based on other things).  That is something that only the one asking for it can answer for you.

[abctax55]

and I don't want to pay anyone to do a bit of math

Yet you would like us, folks that make OUR living by doing that *bit of math*, to help you for free.

I'll pass - I do my pro-bono work locally.

[qbteachmt]

"and I don't want to pay anyone to do a bit of math. He was Sole Prop until May of this year when we incorporated."

As has been pointed out, the formation of an S Corp really needs to be examined for why this was done now. You already describe that operations were on the edge of surviving; you realize S corp requires Payroll? Of all the times to stay a SP, this would be the era.

And the other point being made, just to clarify, if you really are catching up all the way back to 2015 tax year, is how the tax rules have changed what is probably the most dramatically in 30 years. From the major tax code overhaul in 1986, things were relatively stable. From the financial crisis years of 2008-2012, things got a bit crazier. For the years you are working on, there were a lot of "Extenders" and late retro-active provisions (which I suppose makes that easier to work on now, 5 years later, come to think of it). For instance, right now there is a Carry Back that can result in amending from 2018-forward. Knowing all those details and what applies to your scenarios, is what makes the difference between being in compliance, or over-under-paying. Right now, then, you don't want to pay someone else to "do the math", but you need all the different years of program and you need to specifically research for Each Tax Year, for what applies as of now, to that historic year.

Whew. Good luck.

[BobKamman]

@qbteachmt  " you realize S corp requires Payroll?"

Well, not if it's losing money and can't pay any wages.  

[qbteachmt]

"Well, not if it's losing money and can't pay any wages"

Exactly. Now would not be the time to make a corporation out of that operation, then.

[TSchramer88]

Really? Thanks anyway, I will be leaving this forum! I didn't realize this forum was run by CPA Nazis with nothing better to do than puff their chests. I can get answers elsewhere Thanks for all of your replies and time.

[qbteachmt]

"I didn't realize this forum was run by CPA Nazis with nothing better to do than puff their chests."

Whoa, what? A bunch of professionals offer you help and express some concern over what you got yourself into, and then get labeled Nazis?

Take a look around this place, to see how lots of questions are Vague, and we ask for more info, better details, and some perspective. That's not Personal; that's Professional.

"The net income is for a home loan application"

And no one here can tell you what that specific Bank will consider is the Net Income from all of your personal financial info you will be providing. Again, take a look at the topics where the "math" is being done just for the Medical Coverage qualifications.

If you are going to take offense when someone asks for more info from you while you are learning, you are going into the wrong profession. Just wait until you see what it is like to ask your clients to provide all the info you need from them.

[IRonMaN]

CPA Nazis?

Oh crap, I haven't earned that badge yet.  I didn't even realize Intuit had added it.  What do I need to do to get one of those?

[abctax55]

@TSchramer88 

Yet I'd bet my Thanksgiving dinner that YOU fully expect to be compensated when YOU provide a service.

Why, when we follow that same path, we are considered Nazis *puffing up our chest*  ????

[BobKamman]

@qbteachmt 

There are often very good reasons, tax and non-tax, to elect S Corp status for a business that is losing money.  

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"One Size Fits All" is a mask function, not a professional strategy.