You might want your S corporation to own an S corporation of its own (QSub). Tax law treats the QSub as if it doesn’t exist for income tax purposes, but treats it as a separate entity for employment tax purposes. On the legal side of the equation, you have two separate corporations with two sets of legal protections.

You might justify a zero salary to the owner of an S corporation in the right circumstances. But there are some pitfalls, particularly if your purpose is to avoid payroll taxes. Further, and this is often overlooked, state law can come into play on the zero-salary game.

This article answers the question of what happens when you sell your home to your S corporation and then have your S corporation convert that home to a rental property.

Rental property managers report gross rental income to the property owners on a 1099-MISC. We have seen confusion about this reporting because new laws were enacted in 2010 and then repealed in 2011. This article eliminates that confusion and explains what the property manager needs to report and what the property owner can expect to receive.

To know if the S corporation is the best choice of entity for your business, first you need to consider three advantages and nine disadvantages. Next, you need to take the S corporation advantages and disadvantages that apply to you and get a bottom-line number comparison with your second choice for an operating entity. In this way, you can make a logical choice, knowing that your best choice will stay with you for a number of years and let you pocket more after-tax cash while you sleep better at night.

Do you operate your business as a corporation, an LLC, or a proprietorship? Your choice of entity impacts a variety of tax deductions, and now the cell phone creates a win for the corporate owner and a loss for the proprietorship and the single-member LLC.

When you and/or your spouse own more than one business, you must look at all businesses as one business when applying the Section 105 medical reimbursement plan discrimination rules. If you are blocked by the discrimination rules, consider discriminating in health insurance coverage to your benefit.

This article has 16 tax-deduction targets that you can use to increase your business car, SUV, truck, and van deductions. You don’t need to buy any new vehicles to get the benefits. You simply need the knowledge as laid out here.

If you incorporate your personal service business, you face the personal service corporation tax rates, where tax brackets do not exist and the 35 percent flat-tax rate applies.

Tax law makes it hard for the owner of an S corporation to win deductions for his health insurance. First, the corporate-provided health insurance is not a tax-free fringe benefit for the owner. Second, the S corporation has to pay for the health insurance or the owner will suffer a loss of tax deductions. Third, the S corporation payment for the health insurance will produce wages either exempt or nonexempt from FICA and Medicare taxes. This article shows you how to make the three tax deduction rules work for you.

Is your business entity the best tax-deduction business entity for you? Do you need liability protection? How do the different entities produce different tax deductions? If you are looking for answers to these questions, this article is for you. Also, the article contains one sure way to select the best business entity for you.

If you want to operate your business as an S corporation, you need to recognize that the S corporation is a separate legal entity and that you are an employee agent of that corporation. You also need to ensure that the S corporation is the earner of the income. You may not assign your income to your corporation.

Your business ownership creates an opportunity for a tax plan that can give you tax deductions for hiring your children and can give your children tax-free income. But your tax plan does not stop there. Your children might start Roth IRAs where they can invest their tax-free income in a college fund. Done right, as described in this article, the government pays you for your help with this plan.

How does the owner of a corporation claim a tax deduction for an office in the home? Rental is not the best method. Deducting employee business expenses as miscellaneous itemized deductions is not the best method. The best method is to use an accountable plan, as you will learn in this article.

Tax-deductible business expansion beats both capitalization and start-up expense classification. Capitalization basically means no tax deduction until you get out of the business. Start up means you can deduct up to $5,000 and then must amortize the remaining start-up expenses over 15 years.

If you are looking to buy a business individually, this article explains the tax deductions you achieve when you begin to think about the business you want to buy. If your corporation is going to buy the business, this article explains how to apply the process of thinking about it to the corporation. The rules for buying an existing business are different from those explained last month for creating a business from scratch.

The Roth IRA is tax advantaged. The foreign sales corporation also is tax advantaged. Imagine putting the tax-advantaged foreign sales corporation inside a tax-advantaged Roth IRA. That’s what happens in this article.

Giving money to and taking it from your corporation needs an audit trail and paperwork to ensure proper treatment. If you operate without the formal paperwork and without the proper logging of entries, you can have unexpected and unwelcome experiences with the IRS and the courts.

The self-directed IRA is not a common sight, but it is even more uncommon, almost rare in fact, for the self-directed IRA to have an interest in a tax-advantaged domestic international sales corporation. This article gives insight into what’s possible with a self-directed IRA.

New law retroactively repeals, as if never enacted, the 2010 law that required three new types of 1099 reporting: (1) 1099 reporting by owners of rental real estate, (2) 1099s for payments to corporations, and (3) 1099s for purchases of property.

Setting the owner of an S corporation’s salary so that the owner saves money on self-employment taxes requires attention to some details. This article shows how a CPA with S corporation earnings of $246,000 had a reasonable salary of $91,000 according to the IRS. If you follow the principles used by the IRS to identify the $91,000 salary, you build audit-proof support for the salary.

When you operate your business as a corporation, you need to pay attention to the details if you want the corporation respected by the IRS. If you fail in the details, your corporation could lose its status as a corporation and cause you big trouble.

This is the first in a series of articles on retirement plans for small-business owners. In this first article, you learn the basics. Why should you have a retirement plan? When should you start contributing to your plan? What types of plans are available to you? Regardless of the type of business entity—proprietorship, LLC, S corporation, or C corporation—this article gives you the basics you need for a quality retirement plan.

Learn why it is important to get the independent contractor classification correct. If your supposed contractor status is in reality employee status, you suffer major penalties.

Tax law creates trouble for selected fringe benefits that the S corporation gives to a more than 2 percent shareholder. The loss of benefits and accompanying complications are factors to consider in the selection of the S corporation as your choice of business entity.

You might think that you are entitled to your Social Security benefits. In fact, that would be logical. Unfortunately, however, it’s not true. You need to plan your benefit collections, or you could lose a huge chunk to taxes.

Revenue Procedure 2010-13 requires disclosure of the business and rental groups you form to avoid the disallowance of losses under the passive-loss rules. At first glance, you might think, “Oh, no, not more disclosures.” But further examination shows an audit-proofing aspect to this disclosure that is most appealing.

Do you provide supper or other meal money when you require your employees to work overtime? If so, is the meal money a tax-free fringe benefit or is it additional W-2 compensation to the employees?

Under the right circumstances, you can provide tax-free lunches to your employees. That’s nice. But what about you? How do you, the business owner, qualify for this tax-free fringe benefit?

Follow the nine steps in this article to ensure that tax law treats your loan gone bad as a real loan rather than as a fake loan. Real loans give you tax-favored bad-debt deductions when uncollectible. Uncollectible fake loans give you undesirable capital contributions and nondeductible business gifts.

This issue contains 21 last-minute tax tips that you can use for 2010. We broke the tips into two articles: one for vehicles and one not related to vehicles. This article contains 12 last-minute tax tips that are not related to vehicles.

When the S corporation makes HSA contributions on behalf of its more than 2 percent shareholder-employee, the S corporation treats the contributions as compensation to the shareholder-employee. In turn, the shareholder-employee has a deductible HSA on his or her personal tax return.

Renting to your corporation can produce tax advantages. Even failing to collect the corporate rent, as the individual did in this court case, can produce tax advantages.

Tax law grants tax-free income status to the proceeds from income replacement disability insurance policies. You pay a price for this tax-free income: You may not deduct the premiums. Special treatment applies to overhead disability and also S corporation payments on behalf of “more than 2 percent” shareholders.

When you are up against the two-out-of-five-year rule for enabling the $250,000 home-sale exclusion ($500,000 if you are married), your strategy might include creating an S corporation to which you would sell your home.

The IRS is in the midst of its largest hiring initiative in years. Therefore, the increase in IRS audits seen during the last few years is expected to continue at an even greater rate.

To operate successfully as a corporation, you need to be good at paperwork. Also, you may not treat the advance account on the corporate books as your personal slush fund.

Here are your only two tax-saving choices when you operate your business as a corporation but personally own the car you use for business.

The CPA in this court case operated as an S corporation with a low salary. The low salary got the IRS’s attention. To salvage bigger things, the CPA had to take the IRS to court

If you operate your business as a corporation but own the business car personally, your best result comes about when you have your corporation use an accountable plan to reimburse you for actual expenses, including depreciation and Section 179 expensing.

When your S corporation employs a relative, you need to be aware of the stock attribution rules that can wreak havoc on the health insurance fringe benefit.

Renting equipment to your corporation requires knowledge of the tax laws. Three special rules apply to the individual taxpayer who rents equipment to others.

Poor planning for the S corporation owner’s business expenses can cost the owner every penny of his deductions.

The new health care law grants a nice tax credit to business owners who cover their employees. How about the owners themselves? Lawmakers did them no favors, but one group of proprietors might catch a break.

Should you or your corporation be unlucky enough to face an IRS audit, there is one record that stands out as critical to your audit health. If you are missing this one record, the IRS audit can quickly expand to other areas of your tax return.

Learn how the government pays you to get educated. The basic rule: you may deduct education that maintains or improves the skills you need in your business, providing the education does not qualify you for a new business.

The zero salary strategy is getting hammered by the IRS and the courts. You need to take a reasonable salary. If your purpose in having the S corporation is to save self-employment taxes, you want that reasonable salary to be audit-proof low.

Good tax planning can avoid ordinary income treatment on the subdivision of land. The planning involves avoiding the partnership entity and using an S corp. for development.

Credit cards are valuable time-saving assets when used correctly by the business taxpayer. Incorrect use damages both your wallet and your time management.

The U.S. government taxes your profits and subsidizes your losses. That’s nice. Not all governments share in the losses.

Computers and programs like Quicken make it easier to track business and personal activities. Even so, there are rules of the road that you should follow to ensure the best results.

Show me the proof that I can have an office in my home when I have an office downtown! Have you ever wanted that proof? This article gives you the law, legislative history, and IRS authorization for the office in the home deduction.

If your corporation is not going to pass the “it earns the income” test, then it’s time to take the steps to dissolve this useless corporation. The secretary of state for the state of incorporation has guideposts for you to follow.

You may not claim a home office deduction when you rent your home office to your S corporation employer. Therefore, redo this arrangement by taking advantage of your employee status.

The Heineman case gives a roadmap to how a husband and wife might deduct the cost of attending a board of directors meeting where they are the only participants. Using the principles enunciated in Heineman, husband-and-wife corporate owners will find deducting the out-of-town board meeting easier than deducting board meetings that occur in town.

The most recent hot entity for real estate ownership is the LLC. The fact that it’s hot does not necessarily make it the best option for you. When considering your choice of entity, examine qualification for single-member LLC status, extra state income taxes, and how this compares with the S or C corporation possibilities.

The S corporation owner is an employee of his or her corporation. Thus, his or her personal payment of health insurance does not qualify for deduction on page 1 of the Form 1040. To get this page 1 deduction, the IRS says that the health insurance must be paid by the corporation and come to the owner on a W-2.

If you draw Social Security retirement benefits before full retirement age, you face the loss of $1 in benefits for each $2 of earnings over $14,160. Further, when the provisional income on your tax return exceeds $25,000 (single) or $32,000 (married), you must include at least 50 and not more than 85 percent of your Social Security benefits in taxable income. Thus, your receipt of Social Security benefits triggers the need for planning.

Use this Section 105 medical reimbursement plan template to make sure you provide maximum medical benefits to you and your family while legally discriminating under both tax law and ERISA rules.

The law gives you no choice but to keep the proper tax records on a timely basis. This is pretty easy when you know what to do. One easy rule to follow is to never commingle your activities in your bank accounts. Both the rule that requires a mileage log and the rule that requires a time log are more difficult, but absolutely essential to proving your deductions.

You may not deduct any home expenses when you rent office space to your employer. This is the law. However, you can avoid this law and get additional tax benefits by following our outline on how to deduct a home office for your corporation. Do it right and avoid a red flag.

Which is better: paying medical insurance out of your pocket, or forming a C corporation to deduct the insurance costs? The extra tax on the corporation might outweigh the insurance deduction. Or, it might not.

Traps set by a 1986 tax law still haunt taxpayers today. We can help you avoid some “reforms,” like huge taxes on personal-corporate loans. Instead, make an additional contribution to capital.

We answer one taxpayer’s question about S corporation medical benefits. We also help him decide which is better for his wife’s business: S corporation, C corporation, or single-member LLC.

Learn from one doctor’s situation. You can deduct passive losses of real estate every year, despite a high income. Forming a C corporation also might provide welcome relief.

The AMT taxes the deductions you claim on your regular tax return. No, you are not in the Twilight Zone, you are right here in the good ol’ U.S.A. Learn the details of this outrageous act.

Douglas Bynum lent his corporation money before it went bankrupt. He filed to deduct this bad debt, but did it incorrectly. Learn from his mistakes and know the details to do it right.

The major tax benefit to operating your business as an S corporation is the possible savings on self-employment taxes. As a single-owner or husband-and-wife-owned business, an S corporation might be right for you.

Taking a cruise ship to Mexico for a business meeting is an acceptable, and deductible, form of travel.

The IRS applies a recapture tax, even when no depreciation is claimed.

Take it from Richard Cotler: if you operate as a corporation, make sure to keep your personal and corporate expenses separate. Asking a court of law to separate your personal and business expenses is an expensive and time-consuming task. And you absolutely should keep the personal expenses clearly identified or, better yet, not on the corporate books at all.

Tax law contains specific rules on the recognition of S corporations. Make it easy on yourself: if you are thinking of operating as an S corporation, know the rules before you start.

As owners of an S corporation, you probably are allowed to forego the stockholders’ and directors’ meetings. However, you may not want to. By skipping these meetings and other “corporate” activities, you appear less like a corporation in the eyes of the law.

If you own your own S corporation, make sure you look like a corporation in the eyes of the law. The IRS is cracking down on S corporations using this status to save self-employment taxes.

The best strategy for this subscriber: do nothing. He is considering forming a corporation, but we think that will not help him with what he wants to do. Sometimes the best solutions are the easiest.

The best strategy for this subscriber: do nothing. He is considering forming a corporation, but we think that will not help him with what he wants to do. Sometimes the best solutions are the easiest.

Section 280A(c)(6) forbids the home-office deduction when you rent home-office space to your corporation. Whenever you have transactions with or your owned corporations, partnerships, and other entities, you face rules in the tax . As Gary and Delores Beecher recently , of the related-party rules produce harsh results.

You have probably read that the home office increases your chances of IRS audit. We’ve read that, too, but we don’t believe it. Regardless, there are a few things you can do to make your home-office audit-proof.

If you operate your business as a corporation and claim the home-office deduction, you need to prove that you use the home office for the convenience of the employer, your corporation. You must pass the convenience-of-the-employer test whether or not you are having the corporation reimburse you for home-office expenses.

If you are an owner-employee of your corporation, be careful loaning money to your corporation. If it goes under, you might not be able to deduct your bad loans. One solution is to make an additional contribution to capital, but that still doesn’t fully solve the problem.

One subscriber asks about making a corporation for his rental houses, and then using a proprietorship to do the management. He would charge a fee to the rentals. We don’t think this is a good idea because it will increase his taxes.

Many people, through keen knowledge of the tax law, have been able to use the law to their advantage and buy personal aircraft. Unfortunately, lawmakers changed the rules for deducting personal aircraft. We summarized the new rules for you.

A personal-service corporation, like that of an accountant, is taxed at the maximum corporate tax of 35%. Instead, consider the S corporation strategy for saving on Social Security.

If you personally own the vehicle that your corporation uses, the IRS authorizes the reimbursement of the vehicle expenses. To make this work, you must submit an expense report and mileage log to your corporation.

You get no business benefit from the section 105 plan at the S corporation level. However, you do get a big personal benefit when you steer the medical insurance through the S corporation to give yourself the medical insurance as a guaranteed payment.

Many S corporation owners are improperly deducting their health insurance on page 1 of the 1040. The American Institute of CPAs submitted a proposed revenue ruling that it would like the IRS to issue concerning health insurance for the S corporation owner. The proposed revenue ruling does nothing to alleviate the problem in the headliner; instead, it would formalize the problem.

Tax court and the IRS establish that child care is not an ordinary and necessary expense and, thus, is not deductible. This ruling, though sloppy (we show you why), establishes a precedent. However, under section 129 in the tax law, the employer may provide child care benefits.

Hiring your children can be a really good move. If you have a sole proprietorship or a husband and wife partnership, you can save a lot of money in taxes. Be careful, though, with corporations, LLCs, estates, and partnerships.

Assigning your personal commissions to your corporation does not work. In this court case, this insurance agent had unfiled tax returns and unpaid taxes for the years he assigned his 1099 income to his corporation.

The more than 2 percent owner of an S corporation may not benefit from a fringe benefit like corporate paid health insurance. Further, this owner-employee is not “self employed” for purposes of deducting self-employed health insurance on page 1 of IRS Form 1040. This leaves the more than 2 percent owner with only one IRS approved method for gaining the maximum deduction from health insurance.

At a meeting of landlords, the guest lawyer stated that the S corporation terminates with too much passive income. Many attendees heard this comment incorrectly. The too much passive income termination problem applies to S corporations which were previously C corporations.

The IRS fulfilled its promise and audited twice as many Form 1040-Schedule C taxpayers and S corporation returns. Your odds of audit vary by both choice of entity and gross receipts in that entity.

When you operate your business as a corporation, you claim the office-in-the-home deduction as an employee. The law requires that this employee use be for the convenience of the employer. Generally, you want the convenience of the employer reason in writing.

When you have your corporation reimburse your home office as an employee business expense, you treat the home as if you had claimed the office-in-the-home deduction personally.

The corporate reimbursement of the owner-employee for office-in-the-home expenses includes condo fees and mortgage payments.

The one-person corporation is a separate legal entity from the owner. This means separate books for the corporation and expense reports from the owner-employee to prove business expenses. When you fail to document your golf or other expenses, two bad things happen.

The properly used business condo does not run up against the vacation-home, passive-loss, or entertainment-facility rules.

Making a lot of money is no excuse for keeping bad records. Top off the bad records with failing to give adequate documentation to your CPA and you add to your misery index with negligence penalties. The taxpayer in this court case had to shell out about $5 million in taxes and over $1 million in penalties.

When you take early retirement and your income is greater than the thresholds, your Social Security benefits are subject to (1) recapture by the Social Security Administration and (2) taxation by the IRS. Tax planning to avoid both benefit recapture and taxation of benefits involves the possible use of an S or C corporation.

In 1935, the self-employment tax topped out at $60. In 2006, the first part of the self-employment tax tops out at $14,413, but the 2.9 percent Medicare part continues after that without limits. Good tax planning for the self-employment tax is like an annuity. It gives you monetary returns—year after year—every year you are in business. So, plan now and consider everything from choice of entity to hiring your children.

To make sure that the IRS will treat the C corporation’s advances to the employee-owner as tax-favored loans rather than tax-penalized dividends, make sure you can answer “yes” to the seven questions.

The IRS audit manual states: “If you rent all or part of your residence to your employer and use the rented portion when performing services for the employer, you cannot deduct home-office expenses attributable to the rental.” Thus, forget the rental to the corporation and use the corporate-reimbursement-to-the-employee strategy for maximum benefits.