How to work with S corps...
Hi Kerry,I'm confused. My accountant advised me to form an S-corporation citing dividend payments would lower my taxes. I'm confused about federal tax returns. As an S-corporation I have to declare all earnings on my 1040 and won't be able to deduct the corporation expenses? The way I presently have it structured is I'm paying myself 60% of the corporations earnings, and an additional 40% as nontaxable dividends.If you have a moment would you please clarify. Can I write off meals, uniforms, etc. as a sole owner LLC electing s-corp tax filing statues?Thank you,
You need to be working with your accountant on this matter; not a stranger on the internet.
Your accountant should have explained all of the pros, cons and logistical details when s/he helped you come to the conclusion that an S corp was the proper format for your busyness. S/he should then be available to help you handle the finances properly for your situation, as well as help you maintain the books and prepare the tax returns.
It sounds like either your accountant abandoned you or you chose the insane path of going it alone. I'm not sure how you got the idea that business expenses are no longer deductible, but that is not the case, nor is it necessary to bleed out all of the profits from an S corp in the manner which you described. You are operating under some seriously misguided concepts that no decent professional tax person could possibly have told you; so it appears that you are trying the extremely dangerous task of navigating the tax waters on your own.
You need to either reconnect with your previous accountant and get all of the logistical details worked out or find yourself a new one ASAP before you do any more damage.