Corp
What’s a corporation?
A legal entity owned by shareholders. The Corporation itself and not the shareholders will be held liable for actions and debts the business incurs. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Corporations are required to pay federal and state taxes. Corporations are usually taxed twice when the company makes a profit and to shareholders when distributed as dividends. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.
Who must file a tax return?
All domestic corporations, including corporations in bankruptcy, must file an income tax return whether or not they have taxable income. Corporations must file Form 1120, unless they are required, exempt under section 501, or elect to file a special return.
If an entity with more than one owner was formed as a Limited Liability Company (LLC), it is generally treated as a partnership for tax purposes and files Form 1065. Otherwise, if it is a single-member LLC, it is disregarded as an entity separate from its owner and reports its income and deductions on its owner’s Federal Individual Income tax return. However, the LLC can file a Form 1120 if it has filed Form 8832 to elect to be treated as an association taxable as a corporation.
How to form a Corporation?
Decide on a corporate name. File Articles of Incorporation with the Secretary of State and pay the filing fee to incorporate. The Articles of incorporation is the document filed with the state agency to start the corporation. Apply for an Employer Identification Number with the Internal Revenue Service to receive a tax ID for tax returns and other government forms. Be sure to check with your state if they require corporation to establish directors and issue stock certificates to shareholders. If you decide to operate under a different name than the registered name, please remember to file a fictitious name (aka trade name or “doing business as” name).
When to file a Corporation?
A corporation must file the income tax return by the 15th of the 4th month after the end of its tax year. For example, a company with tax year ending December 31, 2016 must file the income tax return by April 15, 2017. A corporation that has dissolved must generally file by the 15th day of the 4th month after the date it dissolved.
However, for a corporation with a fiscal tax year ending June 30, they must file by the 15th of the 3rd month after the end of its tax year.
If the due date falls on a Saturday, Sunday, or federal holiday, the corporation can file on the next business day.
What’s a S Corporation?
S Corporations are corporations that elect to pass corporate income, losses, deductions and credits through their shareholders. The shareholders report the flow-through of income and losses on their individual income tax returns and are assessed tax at their income tax rates. S Corporations are responsible for tax on certain built-in gains and passive income at the entity level.
Shareholders will receive a Schedule K-1 to report their share of the corporation’s income, deductions, credits and other items. Shareholders may be liable for tax on their share of the corporation’s income, where or not it was distributed. Your share of S corporation income is not self-employment income and it is not subject to self-employment tax.
How to form a S Corporation?
The corporation must submit Form 2553 Election by a Small Business Corporation signed by all the shareholders. If it is not signed by all shareholders, the Internal Revenue Service will reject the election request. After filing Form 2553, you should have received confirmation that Form 2553 was accepted.
To be eligible for a S Corporation, the corporation must meet the following:
-Be a domestic corporation
-Have only allowable shareholders who are individuals, certain trusts, and estates
-Shareholders may NOT be partnerships, corporations or non-resident alien shareholders
-Have no more than 100 Shareholders
-Have only one class of Stock
-Must not be an ineligible corporation (example: financial institutions, insurance companies, and domestic international sales corporations)
Benefits of filing a S Corporation tax return?
Shareholders of S corporations report the income and losses on their personal tax returns and are assessed tax at their individual income tax rates. The business is not taxed on itself. This allows the S corporations to avoid double taxation on the corporate level.
Some expenses incurred by the shareholder can be written off as business expenses.
Another benefit is the owners personal assets are shielded from the claims of business creditors.
When to file a S Corporation?
An S Corporation must file Form 1120S by the 15th day of the 3rd month after the end of the tax year. For example, for calendar year corporations, the due date is March 15, 2017. If the due date falls on the weekend or federal holiday, the filing due date will be the following business day.
Who can sign off on the return?
The return must be signed and dated by the president, vice president or any other corporate officer authorized to sign. If a return is filed on behalf of the corporation by a trustee, the fiduciary must sign the return instead of the corporate officer. The return and forms signed by the receiver or trustee on behalf of the corporation must be accompanied by a copy of the court authorizing signature of the return.
When to make estimated tax payments?
The corporation must pay any tax due in full no later than the due date for filing its tax return. Filing an extension will NOT extend the payment due date. The corporation can send a check or pay electronically with the Electronic Federal Tax Payment System (EFTPS). For any deposit made by EFTPS, the corporation must submit the deposit by 5PM PST the day before the deposit is due.
If the corporation expects the total tax for the year to be $500 or more, then the corporation must make installment payments of estimated tax. The installments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the year, if applicable.
Interest is charged on taxes paid late even if an extension of time to file is accepted. Interest is also charged on penalties imposed for failure to file or understating transactions and tax. A corporation that does not file its tax return by the due date, including extensions, may be penalized 5{0dbc760a9dfc4e3d205bd116e2385a09c3833b2f256cc77f7485397a9d5ecf63} of the unpaid tax for each month, up to a maximum of 25{0dbc760a9dfc4e3d205bd116e2385a09c3833b2f256cc77f7485397a9d5ecf63} of the unpaid tax. A corporation that does not pay the tax when due may be penalized 0.5{0dbc760a9dfc4e3d205bd116e2385a09c3833b2f256cc77f7485397a9d5ecf63} of the unpaid tax for each month the tax is not paid, up to a max of 25{0dbc760a9dfc4e3d205bd116e2385a09c3833b2f256cc77f7485397a9d5ecf63} of the unpaid tax.
What are the types of estate tax returns?
There are two kinds of taxes owed by an estate. The estate tax is the transfer of assets from the decedent to their beneficiaries and heirs. The other is the Income tax which is income generated by assets of the decedent’s estate. When someone dies, their assets become property of their estate. Any income the assets generate is part of the estate and may trigger the requirements to file an estate income tax returns.
What are some types of assets that would generate income to the decedent’s estate?
Savings accounts, CDs, stocks, mutual funds, rental property
Am I required to file an estate tax return?
If the estate generates more than $600.00 in annual gross income, then a Form 1041, U.S. Income tax return for Estates and Trusts is required to be filed for that tax year.
What’s an EIN? Can we use the decedent’s social security number?
The social security number of the decedent cannot be used as the EIN for the return. To file a tax return, you will need to apply for a tax ID number for the estate. An estate’s tax ID number is called an “employer Identification number” or EIN. To apply for the EIN, you can apply by mail, FAX, or fill out the form online via https://sa2.www4.irs.gov/modiein/individual/index.jsp
If the estate or trust has not received its EIN by the time the return is due, write “Applied for” and the date you applied in the space for the EIN.
https://www.irs.gov/businesses/small-businesses-self-employed/how-to-apply-for-an-ein
What is a Schedule K-1? Why does the beneficiary receive them?
All income distributions made to beneficiaries must be reported on a Schedule K-1. As the Trust or estate beneficiary, you must include the amounts reported on the Schedule K-1 on your individual income tax return. The Schedule K-1 will report each type of income received in various areas of the form.
When should we file by?
For Calendar year estates and trusts, file Form 1041 by April 15. For fiscal year estates and trusts, file Form 1041 by the 15th day of the 4th month following the close of the tax year. If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day.
If more time is needed to file the estate or trust return, use Form 7004 Application for Automatic Extension of Time to File Certain Business Income Tax to apply for an automatic 5 ½ month extension of time to file.
Who can sign off on the return?
The fiduciary, or an authorized representative, must sign Form 1041. If there are multiple fiduciaries, only one is required to sign the return. If this is an initial or final tax return, please include Form 56, Notice Concerning Fiduciary Relationship. You must notify the Internal Revenue Service of the creation or termination of a fiduciary relationship.
Consulting Services
Our responsibilities do not end with full-service accounting and tax planning. Teraoka & Company offers a wide range of consulting services designed to improve your business planning and operations, boost efficiency and strengthen your bottom line.
With the combined resources of our accountants, we not only deliver fiscal expertise but also offer sound, practical business advice. Our firm has provided business consulting services to businesses of all sizes and we understand the unique challenges many companies face. Through our industry experience and customized consulting services, we strive to bolster your financial position so you can focus on your core business.
The following is just a few of the areas in which we provide consulting services:
- Accounting software selection and implementation
- Type of entity selection
- Business valuations
- Buying/selling a business
- Computer systems
- Financial & retirement decisions
- Estate, trust & gift planning
- Create a realistic business plan, and help choose a structure that meets your needs
- Identify financing and negotiate financing terms and conditions
- Manage finances and accounting processes:
- Balance budgets
- Oversee taxes
- Determine sales tax liability
- Track performance
- Develop pricing strategies
- Advise on day-to-day operations
- Salaries and benefits
- Internal controls
- Risk management
Estate Planning
Effective estate planning facilitates the orderly transfer of assets to your beneficiaries, provides security for your surviving spouse, and can reduce or eliminate the tax due on the transfer of your business and other assets. For business owners, providing for business continuity and succession of ownership is essential. We can guide you through the complex process of getting your financial affairs in order.
Management Advisory Services
Even the most qualified managers can benefit from competent, objective feedback. We can help your company’s management team develop long-term objectives and specific strategies to facilitate your business’ future growth and success.
Business Consulting
We gauge our worth by the personal and business successes of our clients. We can help your business identify areas negatively affecting profitability and growth and develop solutions that are practical and technically sound. In addition to acting as a sounding board for management, we provide comprehensive, flexible strategies that address the issues affecting your business.
Debt & Financing Services
Debt management and the evaluation of financing options are issues that an experienced professional deals with every day. Let us use our experience to assist you in securing financing for your personal or business needs or consolidating your current debt to a more manageable level.
Business Entity Selection
Choosing the form of entity of your business (e.g. “S” corporation, sole proprietor, limited liability company…) is a crucial decision that can have longstanding tax implications, positive or negative. We can assist you in evaluating the pros and cons of each entity type to help you determine the most advantageous form of business for your company.
IRS Representation
During our years of experience dealing with many taxing authorities, we have achieved a level of competence that can ensure our clients they are being properly represented before the various federal and state tax agencies.
Having Problems with the IRS?
We are here to help you resolve your tax problems and put an end to the misery that the IRS can put you through. We pride ourselves on being very efficient, affordable, and extremely discreet.
Nothing strikes fear in the hearts of people more than receiving an IRS audit letter in the mail. Audits take significant time away from your business and family, requiring you to gather mounds of records substantiating each and every item reported on your tax return and develop a comprehensive understanding of tax law.
The IRS leaves no stone unturned in its mission to determine the accuracy of your tax return. If you do not comply with the auditor, the IRS will recalculate your tax and send you home with a hefty tax bill as your parting gift.
Many taxpayers decide to handle a tax audit themselves, and discover they may have been “penny wise,” avoiding a representative’s fee, but “pound foolish,” because they received a substantial bill for a significant tax deficiency.
You see, IRS Auditors are trained to extract more information from you than you have a legal obligation to provide. IRS Auditors know that most people fear them and are ignorant of their rights. As a result, they know they can use that fear and ignorance to their advantage.
Rarely do our clients even have to talk with the IRS. We handle it all for you so that you need not take time off of your business or job to handle the bureaucracy and paperwork of the IRS. No lost wages or business. You simply forward notification of an audit to us and we handle it from A to Z
IRS Levies
Levies can really do a lot of damage and even ruin your life. A levy is the IRS’s way of getting your immediate attention. What they are saying is, we have tried to communicate with you but you have ignored us. Levies are used to seize your wages and whatever other assets you have. If you own it, they can take it. That includes checking accounts, vehicles, stocks, bonds, boats, paychecks, and even Social Security checks!
Imagine waking up one morning and finding all your bank accounts have been cleaned out. They will take every dime. If this amount did not cover what is owed, they’ll keep taking your money until you cover your tax liability. They know that levying your bank account will cause checks to bounce, alerting many people that you have tax problems. But they don’t care! Their sole objective is to collect the taxes owed.
As bad as that is, a worse method is a wage levy (or garnishment). That’s when most of your pay check goes to the IRS, they don’t leave you enough to pay the bills, and most of your check goes to the IRS each and every week until the debt is paid.
If that doesn’t accomplish what they want, they’ll pull out all the stops. They’ll seize your assets, and sell them at auction. That includes everything you own; home, cars, boats, jewelry, motorcycles, insurance policies, retirement funds, anything of value.
We are often able to get those levies released and help you get out of this terrible situation. Our goal is to get you even with the IRS, with what you can afford, and let you start life anew.
IRS Seizures
Unlike the levy which involves intangible assets such as your bank account, a seizure is the taking of physical assets, such as your home or car. Seizures usually happen in aggravated cases when someone ignores many requests by the IRS over a long period of time to pay their outstanding taxes.
A Seizure should not be taken lightly. The IRS will ultimately pursue seizure of your physical assets. Don’t think they won’t. Many a newspaper or television show has reported citizens being forced out of their homes after it was sold at an IRS auction, often for as little as half its value.
When the IRS seizes your assets they want to quickly sell them at auction. They often get less than half your assets value, so they often seize everything you own including your home, cars, boats, jewelry, motorcycles, insurance policies, and even your retirement funds.
IRS Offer in Compromise
Did you know that you can settle your debt with the IRS for just pennies on the dollar with their Offer in Compromise program? The program allows taxpayers to settle with the IRS on tax debt that has been incorrectly assessed or for liabilities they cannot afford to pay.
The IRS Code states: “We will accept an Offer in Compromise when it is unlikely that we can collect the full amount owed and the amount you offer reasonably reflects the collection potential…” (Internal Revenue Code section 7122).
Often it is possible to fully and completely eliminate the taxes you owe – including all penalties and interest – at an enormous discount. There is no preset bottom limit that the IRS will accept to settle your debt especially if your offer is done “right.”
If done correctly your debt may be settled for only 5-15{0dbc760a9dfc4e3d205bd116e2385a09c3833b2f256cc77f7485397a9d5ecf63} of what you presently owe. The key is to determine the least amount that the IRS will accept from you before you make the offer.
IRS Payment Plan
If you don’t qualify for the IRS Offer In Compromise program, a Payment Plan may be the way to resolve your problem. Setting up a payment plan with the IRS gives you a little more time to pay off your tax debts.
Unfortunately, penalties and interest will continue to be charged on your outstanding balance as you pay the debt off. You are required by law to pay the interest on your tax debt.
Bankruptcy
Your back taxes, interest and penalties can be wiped out by filing bankruptcy. If you qualify, bankruptcy can be the best solution to resolve your crushing tax problems.
Unfortunately, not everyone qualifies to wipe out their tax debt in bankruptcy. Certain rules have to be met first. If you file bankruptcy and don’t meet the rules, the IRS will still be in hot pursuit after your bankruptcy is over. Proper pre-bankruptcy planning is key to determining if bankruptcy is or can be a viable solution.
Tax Preparation Services
We prefer to take a proactive vs. reactive approach to tax services. By keeping current on new tax laws and legislation, we are in a position to identify key tax planning opportunities that minimize both your current and future tax liabilities. We provide our individual and business clients with the taxation expertise and knowledge that they deserve throughout the year. We are devoted to income tax planning to minimize income tax obligations.
Tax services offered include but are not limited to:
*Tax planning & return preparation
– Individuals
– Corporations
– Partnerships
– Sole proprietorships
– LLCs/LLPs
– Estates, trusts & gift
– Not-for-profit organizations
*Taxing authority representation
*Divorce and support issues
*Tax effects of buying/selling a business
Tax Planning & Preparation
Tax planning and preparation form a winning combination for our successful individual and business clients. Whether you are an individual or a multi-tiered partnership, our experienced staff can develop tax strategies that take advantage of new tax laws and legislation.
Estate & Trust Tax Preparation
Effective estate and gift planning facilitates the orderly transfer of assets to your beneficiaries, provides security for your surviving spouse, and can reduce or eliminate the tax due on the transfer of your business and other assets. For business owners, providing for business continuity and succession of ownership is essential. We can guide you through the complex process of getting your financial affairs in order.
Non-filed tax returns
Every day the massive computer center at the IRS is getting more sophisticated, it’s just a matter of time before they catch up with you.
This is not a situation to take lightly. Failing to file your tax returns is a criminal offense. If you do not file, you can be prosecuted and punished with potential jail time, one year for each year not filed. Why risk potentially losing your freedom for failing to file your tax returns?
Let us give you the peace of mind you deserve by helping you get in compliance with the law. If you voluntarily file your delinquent returns you’ll likely avoid further problems other than having to pay the interest and penalties.
If you wait for the IRS to file your returns for you, they are filed in the best interest of the government, usually with little or none of the deductions you are entitled to.
Before anything can be done to extract you from this predicament all the returns must be filed. You must be current. In most cases, you will likely owe taxes, interest, and penalties after the returns are filed. Once we see how much is owed, we’ll set a course of action to get you off the hook!
Accounting Services
Providing financial information to our clients in a timely and accurate manner is a commitment that we feel cannot be compromised. Meaningful, well-organized financial records ensure that your business operations will run more efficiently on a daily basis. Our firm provides a full range of cost effective accounting services including the following:
*General ledger & financial statement preparation
*Bookkeeping (Monthly/Quarterly/Annual)
*Accounting system setup for new businesses
*Computerized payroll services
*Business tax return preparation (Sales & Use/Business Property)
*Personal financial statements
*Litigation support
Reviews & Compilations
We view our role in the financial reporting process as an opportunity to provide constructive solutions for maximizing your company’s profitability and efficiency. We provide financial reporting on two levels of assurance:
*Review – some analytical procedures conducted with limited assurance
*Compilation – based upon client information provided and used primarily for internal use.
Bookkeeping/Write-Up
If you own a small business and have not kept up your bookkeeping, no worries! We will prepare your bookkeeping for the year, prepare a full Schedule C, as well as your personal income tax return. Meaningful, well-organized financial records ensure that your business operations will run more efficiently on a daily basis and are the foundation of a successful business. Our qualified staff can assist you with the day-to-day tasks associated with bookkeeping.
Financial Statements
We can assist you in the preparation of your financial statements in accordance with professional standards, but express no opinion or any other form of assurance on the underlying information included in them. The financial statements produced can be a useful tool for management for making financial decisions.
Financial Forecasts & Projections
Forecasting is a necessity when trying to effectively manage and lead a business to profitability. From simple projections to complex financial modeling, our experienced staff can assist you in achieving your company’s financial goals.
Cash Flow & Budgeting Analysis
A business can be profitable and still run into trouble due to cash flow issues. We can forecast and evaluate your company’s financial condition, estimate financing requirements, and track cash-flow sources and uses.
Here’s how it works:
Once the tax documents are received by our office, it will be logged into our system. When we receive the signed engagement letter and all tax documentation and paperwork, an accountant will begin working on the return. The normal turnaround time is two weeks during early and mid-tax season. As the filing due date approaches, our turnaround time will be longer than the usual two weeks. The tax information must be submitted to us by the last week of March to allow enough time to properly complete the returns.
Our firm offers a hardbound copy or pdf copy of the tax returns when completed. There will be e-file authorization forms which needs to be signed and dated. Our firm requires receipt of signed forms via mail, fax or email before we can electronically file the returns.
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Certified Public Accountants
16872 Bolsa Chica Street Suite 202 Huntington Beach, CA 92649
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714-840-4712