Corp Tax Return...

[taxguy057]

Got a question and all help from all the pro out there will be greatly appreciated.... I have a client who I've been doing their individual return for sometime now. The husband started a biz last year and has incorporated it. How hard will it be for me to do his return this year? I know its separate from their individual tax return, but don't want to lose them as a client all together if its too much for this other part. Its nothing major like Exxon Mobile, but just a small home biz that they have incorp to keep personal assets separate. I know there are different forms like 1120s and so forth (I think???)

Please any help or input will really keep me a lot. Hope I'm not making more out of this than it is...when you say corporate tax it gives me the willies....... :(

[Catherine]

Well, if you're ever going to do them, starting with a small, new business run by people you already know is a good way to go. Have you dealt with K-1's from S-corps? Then you know what the return will be heading for. Take a look at the forms and see how similar in many ways to the 1040. Ask if it's a c-corp or s-corp, take a look at the books if they'll let you before committing. For s-corps look carefully at the OAA and AAA accounts and get them right; losses are limited to capital invested but many times this isn't tracked properly.

The other thing is, if you try and figure later it's too much for you, you can back out gracefully. People respect you more when you tell them, "I'm not comfortable anymore and think you need someone who does more of these returns than I do." Especially folks you already know.

Catherine

[Margaret CPA in OH]

If you are in a good professional relationship with a CPA or EA who is experienced, you may engage that person to review the returns and supporting calculations and documents for it. I did this for the first complicated S-Corp and partnership returns I did. It was well worth the small amount that was charged. If you were in a larger firm, another practitioner would do the same function. Just make sure your engagement letter covers this.

I also agree with everything Catherine has stated. We all had to start somewhere!

[michaelmars]

new rules, you need a written consent to disclose letter!

[Margaret CPA in OH]

Correct, Section 7216 would likely apply and I expect this to be not a problem. In my reading of the mandatory language, however, it does state, "Unless authorized by law, we cannot disclose, without your consent, your tax return information to third parties for purposes other than the preparation and filing of your tax return and, in certain limited circumstances, for purposes involving tax return preparation. It goes on to discuss the ability to disclose to another preparer and how it affects the provided service. I still think he should go for it with openness with the client and following Catherine's suggestions.

[BulldogTom]

Have you thought about using this board as a reviewing tool? You could start the return and then ask questions as you get to certain parts. You could use generic numbers so you don't reveal anything about the taxpayer.

There are a lot of smart and helpful people on this board. If you already have intimate knowledge of the taxpayer situation, I would think you could manage the return. They are not that hard if you have the books and the balance sheet is clean. Start with the bookkeeping, and if you are comfortable with the books and especially the balance sheet, you should be most of the way there.

It is only a tax return. You already have most of the knowledge you need, and for a small home based business, you should be able to figure out the rest (assuming of course that your client load allows you time to research pubs and instructions as you go).

Good luck.

Tom

Lodi, CA

[tilt]

It's quite important to know if they filed for "S" corporation status and if it was accepted.

[taxguy057]

@everyone

Thx for the vote on confidence. I'll give client call tomorrow to get specifics on what exactly it is he got going on. so most important question to know is type of incorp established and get consent to disclose? We'll start with that and see what kind of monster you guys feeding me too!

You all have truly been great help!

[OldJack]

I would think that your first corporate tax return should be one that has filed a previous tax return so you can see how it was done before.

[taxguy057]

I would think that your first corporate tax return should be one that has filed a previous tax return so you can see how it was done before.

@oldjack

Come on...that would be o too easy!!! LOL!

[Catherine]

I would think that your first corporate tax return should be one that has filed a previous tax return so you can see how it was done before.

@OldJack: There are pluses and minuses to that. Done well, a prior-year return can be a huge help. That said, there are two big problems with beginning your first-ever corporate return for a pre-existing corporation.

First one is I have _never_ seen adjustment accounts on an 1120-S prior-year return done by someone else on that were correct (frequently they are left _blank_). Not fun to have to go back and fix (if it can even be done with an older corporation).

Second one is that those prior-year returns _rarely_ come with full depreciation schedules including assets, date in service, prior year depreciation, choices made on asset life (and there sure are assets where the wrong schedule has been chosen), fully depreciated assets still owned... again, not fun to have to excavate and re-create. Easier to do it right the first time, without an incorrect "cheat sheet" as a template.

Catherine

[OldJack]

First one is I have _never_ seen adjustment accounts on an 1120-S prior-year return done by someone else on that were correct (frequently they are left _blank_). Not fun to have to go back and fix (if it can even be done with an older corporation).

And a first-time preparer probably has no idea how to properly prepare page 4 of the corporate tax return let alone the adjustment accounts. Page 4 balance sheet should be required for any size corporation and I'll bet a first-time preparer may not even know what a balance sheet is when instructions say they don't have to do one.

Second one is that those prior-year returns _rarely_ come with full depreciation schedules including assets, date in service, prior year depreciation, choices made on asset life (and there sure are assets where the wrong schedule has been chosen), fully depreciated assets still owned... again, not fun to have to excavate and re-create. Easier to do it right the first time, without an incorrect "cheat sheet" as a template.

I have always (40+years) attached a depreciation schedule to any business tax return (1120,1120S,1040,1041,etc) even though the IRS does not want one. Such depreciation schedule showing all assets owned including fully depreciated assets and all factors that determined how the depreciation was calculated. It should be a requirement.

I also attach details such as other asset account information so that if I drop dead the next preparer does not have to call me to ask any questions. I want to rest in peace. :)

[Mike D]

Imagine yourself as this potential client! I would certainly not want someone who is filing a corporate return for the first time working on my initial tax submission.

Elections, methods of depreciation, capitalization vs expense, tax credits, startup costs, etc. as just a few of the issues to be dealt with on an initial return.

I suggest that you work with a professional in order to learn the ropes before you endeavor to provide services that you are not at this time preared for. That is exactly what most of us did in our forative years. Take college courses, become an enrolled agent and/ot CPA.

In addition after 30 plus years of practice my mantra has always been to not file anything nor provide any information that was not statuatory and/or requested by taxpayer in writing. This could be potentially create a dangerous situation for the taxpayer.

Good luck

Mike Dubin CPA

[kcjenkins]

Elections, methods of depreciation, capitalization vs expense, tax credits, startup costs, etc. as just a few of the issues to be dealt with on an initial return.

Basically, all those things you mention are also common to Sch C, D, and F as well. So starting off with a new corp, with a single owner, is ideal for the first return, IMHO. Everyone starts somewhere, and I'm of the group who thinks it's better to start with a brand new corp, than to take over one that may have been messed up by others, before. As long as he's going into it with care, and getting good advice along the way, [which is why he's posting here], I think he will do fine. It's the folks who charge blindly in without even thinking about it that scare me, not the ones who ask for advice and council at the start.

By the way, Taxguy, where are you located? Might be some state issues that could come up, so knowing will help us help you.

[taxguy057]

@kc

Im in NC. The business is a mobile locksmith. He has only had part time jobs here and there over the past year. Incorporated last Jan so first time filing for it. He's suppose to bring me the books this weekend to show me what he's got going on. Guess I'll know then if worth taking on. Hell i wouldnt even know what to charge for such a return....

[Catherine]

Basically, all those things you mention are also common to Sch C, D, and F as well. So starting off with a new corp, with a single owner, is ideal for the first return, IMHO. Everyone starts somewhere, and I'm of the group who thinks it's better to start with a brand new corp, than to take over one that may have been messed up by others, before. As long as he's going into it with care, and getting good advice along the way, [which is why he's posting here], I think he will do fine. It's the folks who charge blindly in without even thinking about it that scare me, not the ones who ask for advice and council at the start.

By the way, Taxguy, where are you located? Might be some state issues that could come up, so knowing will help us help you.

Bingo, KC!! All those things Taxguy has probably seen. And if you've had Sch C clients with anything but tiny businesses, you've seen balance sheets, too. This sounds like it could be a great way for Taxguy to "get his feet wet" with clients whose situation he already knows well and whose business is not particularly complicated.

I would _not_, however, recommend to Taxguy that he start specializing in corporate returns for multi-state entities with subsidiaries -- YET.

Catherine

[taxguy057]

@Cat

Oh ur ooo so right! Not ready to jump off that cliff yet! I have done sch C returns so not truly green to the biz side of the tax world. When i see the books this weekend, I'll have an idea of how bad it will be...like i said before i may be making more of it than it is. If i get the right forms with the correct info from client, i should be able to get it....of course the right guidance from the great ones on this board will play a big factor too!! :blush:

[ed_accountant]

This board is a great tool.

The best way to learn to prepare corporate income tax returns is to work with someone who prepares them. I suggest that you find someone who would be willing to review your returns and assist you on corporate income tax issues. There are probably many Tax preparers in your area. However, the middle of tax season is probably the wrong time to approach a tax preparer for training or assistance..

Preparing returns and not knowing what you are doing is scary business. You definitely will need insurance. The ATX software is good for individuals but in my opinion very weak with business returns.

Maybe someone on this board will offer to assist you.

Good luck

[Lion EA]

Maybe as an ATX customer you can get ProSystem fx as pay per return to prepare this corporation. Definitely look for a mentor. Extend if you have to to be able to be unrushed, as well as not rushing your mentor. Start with things you might have around, like TTB Deluxe or your old accounting book. You already understand the P&L and depreciation and lots of issues, as well as know the client and how he works. The biggy is the balance sheet. Read up on it in an old accounting book or Accounting for Dummies. Don't trust his QB to produce an accurate BS. Build it yourself by asking him questions and researching his ending bank balances, loans in and out, capital assets and corresponding depreciation, etc. Just go down the lines on the BS to see what applies to him. I think starting from scratch is the way to learn with a single shareholder corporation. The starting balance sheet will be all zeros. I actually think C-corporations are the easiest since they stand alone. Either they balance or they don't. If you're lucky, you client has treated it like a corp, like a separate entity, and there won't be undocumented back and forth with his personal accounts like you see with your small Schedule Cs and partnerships. Get his payroll documents. You may have to do or redo his bookkeeping, but you will really know the flow of his company if you do his bookkeeping too. Post here as you have questions. Keep us posted.

[taxguy057]

@lion

Ok i will....thx!