lsowers Posted February 23, 2009 Report Share Posted February 23, 2009 I have my first client where I have to worry about the domestic production activities deduction. It is an S Corp whose activity is engineering with 1 shareholder. Looking at last year's return (not done by me), they provided the DPGR and W2 wages on Sch K and K-1. The instructions make me think that more should be provided to the shareholder (he self-prepares his personal). Am I supposed to provide the deductions directly allocable to DPGR? If so, since all of the S corp's receipts are from engineering, would the deductions include all of them (no pro-rata)? Do the W2 wages include the secretary or just the engineer? If anyone could help with this I would appreciation it. I have been trying to study this on my own, but I don't think the instructions for S Corps are too clear on this matter. Thanks, Lori Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted February 23, 2009 Report Share Posted February 23, 2009 Yes, you include the secretary's wages too. Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 24, 2009 Report Share Posted February 24, 2009 The real question here: Is there really an activity that qualifies for the domestic production activities deduction? Quote Link to comment Share on other sites More sharing options...
lsowers Posted February 24, 2009 Author Report Share Posted February 24, 2009 He is a civil engineer Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 24, 2009 Report Share Posted February 24, 2009 >>He is a civil engineer << So what.. that does not mean he automatically has activities that qualify. Read the requirements for a domestic production activities deduction real close. Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted February 24, 2009 Report Share Posted February 24, 2009 Amen to OldJack. The real trick is to make sure all the activities are qualified activities. I personally do this for my day job, and it is a pain in the @$$. The CPA firm actually prepares the return, but I do all the work to segregate the qualified activities and the non-qualified activities. Then I allocate all the overhead and payroll accordingly. The math is pretty simple, and I have developed a spreadsheet to do it for me. It is the analysis of the activities and breaking out the revenues, payroll, direct and overhead costs associated with the activities that is a pain. Tom Lodi, CA Quote Link to comment Share on other sites More sharing options...
lsowers Posted February 24, 2009 Author Report Share Posted February 24, 2009 All of the corp's income is derived from engineering services for real property construction projects in FL. I understand that much about the deduction. I am asking for assistance in what gets reported on the K-1 to the shareholder. Since the S-Corp averages less than 5 million, do they qualify for the small business simplified overall method, which means I calculate the QPAI? There is other wording that makes me think I just pass through the DPGR, costs, and W2 wages since it is a closely-held S Corp. The preparer last year only reported the DPGR and the engineer's wages (not the secretary's). I don't think that is correct, so I don't have a good example to follow. If someone with experience with dealing with this deduction for a small, closely-held S Corp, I would appreciate some direction. I don't think my reference materials do a good job of explaining it for pass-through entities. Thanks Quote Link to comment Share on other sites More sharing options...
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