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Posted by Brew1 on July 18, 2009, 10:19 am
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I have a client with an S-Corp (she owns 100% of the stock); her
spouse appears to do most of the work and I have told him that he
needs to receive some type of compensation from the company. Most of
the expenses (the company is not profitable yet) are incurred by him.
As a Circular 230 practitioner, should I continue to prepare this
return if they do not make any changes? Or, to put it another way,
are the expenses he incurs allowable to the business?
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Posted by Seth on July 19, 2009, 1:38 am
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>I have a client with an S-Corp (she owns 100% of the stock); her
>spouse appears to do most of the work and I have told him that he
>needs to receive some type of compensation from the company.
Why? Many people work for companies without pay (e.g. interns).
> Most of
>the expenses (the company is not profitable yet) are incurred by him.
>As a Circular 230 practitioner, should I continue to prepare this
>return if they do not make any changes? Or, to put it another way,
>are the expenses he incurs allowable to the business?
Do they file a joint return?
Seth
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<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
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<< The Charter and the Guidelines for submitting posts >>
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Posted by Mark Bole on July 19, 2009, 1:54 pm
Please log in for more thread options Seth wrote:
>> I have a client with an S-Corp (she owns 100% of the stock); her
>> spouse appears to do most of the work and I have told him that he
>> needs to receive some type of compensation from the company.
>
> Why? Many people work for companies without pay (e.g. interns).
But then is there a true employer-employee relationship? If he is a
wage worker, then I'm pretty sure there would be some minimum wage laws
being violated. If he is "salaried" (exempt), I would still think there
needs to be some evidence of an employer-employee relationship (meeting
the 20 common-law rules, and so on).
He can't deduct unreimbursed employee expenses if he is not an employee.
By far the simplest thing would be for the company to reimburse him
under an accountable plan.
Brew1, if you do prepare the return, perhaps you should include a Form
8275 disclosure. The absence of a W-2 coupled with a claim of
unreimbursed employee expenses is definitely an unusual situation, to
say the least.
-Mark Bole
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Bill Brown on July 19, 2009, 9:14 am
Please log in for more thread options > I have a client with an S-Corp (she owns 100% of the stock); her
> spouse appears to do most of the work and I have told him that he
> needs to receive some type of compensation from the company. Most of
> the expenses (the company is not profitable yet) are incurred by him.
> As a Circular 230 practitioner, should I continue to prepare this
> return if they do not make any changes? Or, to put it another way,
> are the expenses he incurs allowable to the business?
>
The expenses are allowable to the business only if the business is
paying them. You appear to describe a situation in which the wife of
the owner is paying the expenses out of pocket without reimbursement
from his employer (the S-corp). If so, he will deduct those
unreimbursed job related costs on Form 2106 and Schedule A.
I'm sure you've noticed I refer to he husband as an employee. That's
because you described an employer-employee relationship.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Brew1 on July 19, 2009, 1:08 pm
Please log in for more thread options an S-Corp (she owns 100% of the stock); her
> > spouse appears to do most of the work and I have told him that he
> > needs to receive some type of compensation from the company. Most of
> > the expenses (the company is not profitable yet) are incurred by him.
> > As a Circular 230 practitioner, should I continue to prepare this
> > return if they do not make any changes? Or, to put it another way,
> > are the expenses he incurs allowable to the business?
>
> The expenses are allowable to the business only if the business is
> paying them. You appear to describe a situation in which the wife of
> the owner is paying the expenses out of pocket without reimbursement
> from his employer (the S-corp). If so, he will deduct those
> unreimbursed job related costs on Form 2106 and Schedule A.
>
For clarity, the wife is the owner of the company. The husband is
generating almost 100% of the expenses, most of which involve travel.
So, come audit time, his name is going to be on all the airline
tickets, hotel bills, etc., yet he is not an owner nor is he receiving
compensation (as an employee or independent contractor). Right now,
no one is receiving any compensation, including the owner (but they
have yet to show a profit).
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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