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#1 could be true if the S corp doesn't have anything that would flow to the Other Adjustments Account, usually tax-exempt income and related deductions. #2 - This is incorrect. S corp losses can result in AAA being a negative balance, but distributions can't reduce it below zero. Shareholder's basis that can't be reduced below zero. #3 - See #2 above. Well, ignoring the error related to #2 and that AAA can be negative, if this was an S corp since inception, always on the tax basis of reporting, no timing differences, and no other activity that would be in the OAA, it is a possibility that AAA and retained earnings could be the same.

It never really does anyway. I put my foot down years ago that I will NOT half-kill myself to accommodate clients who knew, back on Jan 1, what the deadline was (and this year, had extra time!). They know that, and frankly if they go PAST the deadline, that's their problem, not mine. Anyone who whines is very welcome to go elsewhere. That said, I'll do my best - within reasonable limits that *I* set.

I always had allergy problems and/or bronchitis between Apr 15 and Aug 15. So the excuse on the 2688 was always "Due to recent tax preparer illness, additional time is respectfully requested to complete this return." That was my story and I'm sticking to it. Always got that magic "Approved" reply. (Remember how we had to file it in duplicate?" ) I agree with Lion, too. Extensions meant more money in my bank account because I could prepare more returns in 10 months than I could in 4. Plus I could live a more normal life in the first 4 and stop trying to be a tax martyr working until all hours of the night & sacrificing weekends.

I can prepare a lot more tax returns until 15 October than I can to 15 April. This is my job. I WANT to work and make money all year! 15 October still gives me plenty of time to take classes and enjoy various holidays with family.

I always calculate extension payments for my clients to include both the balance due for the old year plus the new year's 1Q and 2Q ES payments, using the safe harbor and rounding up generously. Then, when we finally prepare their returns (maybe in September after that pesky K-1 finally arrives) we're not running behind for the current year. Paying the BD and 1Q and 2Q with the extension instead of separately means they're all dated 15 April (well, 15 July this year) and makes the balance due and 1Q on time and 2Q covered until we can prep the returns. If the payments flow into 2Q and 3Q and even 4Q, that's OK. But, most usually, we catch up (or reduce payments) in 3Q and 4Q. It's so much simpler than trying to calculate exactly how much to pay with the extension and exactly how much to pay with the 1Q voucher and then hustling to prep the returns or calculate exactly how much to pay with the 2Q voucher.

These mostly arise when the shareholder has zero basis and the preparer doesn't want the shareholder to pay capital gains tax on distributions. It's a ruse the would not pass IRS scrutiny, especially if there are no loan documents, interest rate or regular repayments, and they likely totally ignored imputed interest rules. You'll have to move those to distributions if the shareholder can't/won't repay the money.

Here's a good summary of some of these issues: https://www.thetaxadviser.com/issues/2014/jan/nitti-jan2014.html

WOW!!! Three of this board's heaviest hitters responding to my questions. As was often said on Wayne's World, "I'm not worthy!!!" All of the information and suggestions were excellent. First of all, with regard to negative AAA, my understanding now is that it CAN be negative, but can not be made negative or reduced below 0 by distributions, which would then be treated as capital gains to the shareholder--is that correct? All clients have copies of their returns which they have provided but 4562 forms just have depreciation from prior year assets or are simply not included. New assets are sometimes listed on the return as "new acquisitions" rather than increasing fixed assets. Even when the fixed assets rise from 2017 to 2018 on Sch L, they are not listed on the 4562 forms. The clients have bank reconciliations that they do and some receipts for recent fixed assets, but little else. The original accountant had both 1120-S corps set up with no compensation paid to shareholders but with other C corps. used to pay shareholders and other employees and then "lease" them back to S corp for an inflated price. Individuals own the vehicles used by the S corp (both Dental practices) and are being depreciated on the individual 1040 returns at 95% and 100% business use with no mileage figures give. Both shareholders say that the vehicles are used mostly for commuting and just occasionally for lab work. One client has at least part of the dental practice on QB and I am getting that as well as whatever information they can get me in terms of fixed assets. One of the dental clients, however, asked me "what is a balance sheet." Abby, the $110000 loan is a loan TO the shareholder which he has no idea how it got there! I Have given all of the taxpayers a detailed spreadsheet citing all of the missing items for each entity and asking for their help in reconstructing all of the inaccurate or incorrect items. Between two clients, we are talking about 2 1120-S, 2 1120-C employee leasing corporations, 1 1065 LLC owning one of the office buildings, and the 2 1040 returns (one with 2 schedule C's), all prepared by the same accountant whose wife, thus far, has not been able to find ANY written records. I am not trying to belittle the prior accountant. We have known each other a long time socially and both went to the same school in IN (the one with the leprechaun mascot). He is a CPA with a JD as an international tax attorney, but as I said it has been a struggle for him to prepare these clients' returns for the past 3 or 4 years due to declining health. The clients' responses to my queries have been "I trusted him to prepare my returns for the last 20 years." Unfortunately, they did not keep the records they supplied him and neither did he. I truly appreciate your combined help in this situation. Respectfully, Ringers

Obviously, if this was money going out TO the officers and is shown as an asset, it can't be add'l pd in capital as Abby Normal suggested. Also, I know Abby has an adversion to debt basis in an S corp, but the transactions should be recorded based on the actual facts, clients' actions, and their intentions, not what we want them to be. Either way, this is a big mess! Clients have convenient memories when it comes to money they've taken out of their corporations or have used the company checkbook as their own, and those amounts can easily result in large sums if this has occurred over many years. It's also possible that the accountant didn't know how to handle distributions in excess of AAA and was creative. This reminds me to mention reasonable compensation, if the owners are on payroll, and the status of quarterly and year end payroll reporting.

Talk to the clients about prior-year K-1's. Perhaps someone has *something* that will give you a clue where to start digging. They may not know anything about those booked loans (for example) but the K-1's may have information that will help you to nudge their memories.

Julie, if you like ProSystem fx, talk to your rep. Do you do any pay-per-return, for example? I prepare only 100 returns or so, so Pro fx has bent over backwards to keep me. They priced out the best way to buy the entities, states, etc., and they've made a couple of concessions to their usual pricing. I pay only a fraction of your price. Put your rep to work to get you the lowest price. If that doesn't work, ProSystem fx is included in CCH's US Small Firms division that might have more discretion re pricing. These contacts are a couple years old, so might not be current: Jennifer Cozier, VP Product Management, US Small Firms, TAA North America Office 770-857-5092 Mobile 470-261-3456 [email protected] Julie Peck [email protected]

Sometimes I think it's best to skip a first-quarter estimate and just add that amount to the extension request. For example, I never know what I'm going to owe either. I guess $1k and usually pay $2k or so each estimate. So I pay $3k with the extension. At least I don't underpay for the year, and what's left over gets rolled to the next year (hopefully close to what the first estimate should have been). I know a CPA who pays all four quarter estimates with his extension request. He says that's when his bank account is full with tax season receipts so he might as well. If he's under a bit, he has time to make it up in a later quarter.

Abby, NO! We had automatic extensions this year to July 15, and we saw what happened. The April 1st folks all came in July 1st. If they thought they had an automatic extension until October 15, they'll show up Oct 1. They will overlap with the usual extension folks who wait until October 10. Tax season will never end!

I charge by the hour as some forms take a very long time, some, not so much. Over 20+ years I have explained to clients that the better organized their data and documents, the less time it takes. I provide organizers to those who request them and to returning folks with rentals or Schedule C, the organizer pages showing the prior year figures. This helps prompt them to find that insurance figure or remember to list the new equipment that wasn't there last year. And if I have to email more than 2-3 times with questions or clarifications, I add on some time for that. Because every time I have to stop to get some reply and go back to the return often a day or more later, it takes a tad bit at least to reorient and is unproductive. Over the years returning clients either get better organized to reduce the bill, acknowledge and understand that 'I'm billing time,' or move along which is just fine with me. I want clients to be satisfied with my work and understand that I really care to do the best work I can taking the time necessary. I'm at about 50-60 long time clients, maybe one or two new ones annually, and we understand each other. I harbor no hard feelings for those who leave and have even pointed out to some that they have reached a point that going to the free help for elderly would be in their best interest. Others have told me that I am not allowed to retire. Well, I'll be 75 next year. My license is good for 2 more years. We shall see....

Taxpayer Karen, you can avoid interest and penalties [maybe not entirely if you've not paid quarterly] by paying what you owe now, before July 15, and here's a Form 1040-ES. I will get you an extension today, and prepare your return as soon as I am able. I will complete your return even before my own, provided I have everything needed to prepare yours. I understand you don't know what you owe; I don't know what I owe either. That's why I estimate as closely as possible, and pay in quarterly what I think is a little too much.

"I can e-file an extension for you or you can take your information back and look for another preparer."

Or they will be coming for you, and it was nice knowing you. Enjoy your stay at the crossbar motel. Just kidding. I forgot to file a 4868, remembered at the crack of 9:00 am Thursday the 16th. I had read that IRS computers had some problems on Wednesday, so I thought what’s the worst that can happen if I send it today? It was accepted. If I have to go away for a while, y’all know why.