Entity returns filed by a CPA who knows what your structure costs you.
Different types of business entities all have their own unique filing requirements. The type of entity you choose will impact how much you will pay on your taxes at the end of the year. Most entities require coordination between an entity return (which is filed with the state) and your individual 1040 (federal). Susan can prepare both to ensure that there are no gaps between the two filings.
- CA License #96754
- Entity and owner return coordination
- CA License #96754
- Entity and owner return coordination
- Serving shasta county since 1996
Before switching to Susan
Entity structure optimized: Working as intended
Your entity return doesn’t exist in isolation. Neither should your preparer.
There may be a close connection between your entity return and your personal return. Many preparers ignore this connection. The most frequent error made when preparing small business tax returns does not involve a mathematical calculation; instead, it is a failure of coordination between the two types of returns. For example the corporate return and the individual 1040 are tied together through the K-1. When they have been prepared by two separate individuals, items often fall through at the point of transfer.
- Two preparers, no one responsible for communication and reconciliation between the two returns. The K-1 received from your S-corporation or partnership ties directly into your 1040. If there has been no communication between these two preparers, many deductions may be missed and the calculations regarding your basis may vary significantly. This will result in two complete returns that do not ultimately reconcile properly.
- A preparer filing the correct forms yet not knowing the rules associated with those forms. Reasonable compensation on S-corporations, guaranteed payments vs. distributions on partnerships; built-in gains tax on converted C-corps; wage limitations on qualified business income deduction, are not exceptions to the rule. They are typical issues that determine what your tax liability may be.
- Basis not maintained year over year. Basis for shareholders of S-corporations determines if a loss can be claimed on schedule and if a distribution made by the entity is considered taxable. Outside basis for partnerships determines the same. Without maintaining this information year after year, the errors occur quietly until either a sale or liquidation requires attention to the problem.
Entity returns require continuity. Using a new preparer every year never builds the clear picture your return needs.
Licensed CPA since
CA and federal multi-state returns
prepared by Susan directly
Here’s what you can actually lose when your returns aren’t coordinated.
- S-corp owner not paying reasonable compensation to themselves. IRS re-classifies distribution as wages which includes adding back employment taxes plus penalties.
- Shareholder basis not tracked. Disallowing of losses, treating distributions as capital gains, absence of basis to absorb expected K-1 loss.
- QBI deduction missed on pass-through income. Up to 20% of qualified business income not claimed.
- California $800 franchise tax or LLC fee paid late. Penalties are added to each entity listed on California books regardless of size when paid late.
Every Business Tax Form and California Filing, Coordinated from Start to Finish
Should Susan prepare both the entity return (K-1) and the owners’ individual tax return, allowing the K-1s to flow properly, maintaining the basis for the owner.
- S-corporation form 1120-S: An income tax return that allocates net income (loss) and items of deduction/credit among its shareholders via Schedule K-1 and provides reasonable compensation analysis. Year-over-year shareholder basis is maintained.
- C-corporation form 1120: The income tax return for corporations taxed as entities. Accumulated earnings analysis, Section 199A coordination, and estimated tax planning are included.
- Partnership Form 1065: Multi-member LLC and general/limited partnerships. The partner K-1s are prepared with proper allocation of income, losses, and credits. Special allocations, outside basis tracking, and guaranteed payments are considered.
- LLC returns: As per tax election. Disregarded entity (schedule c of owners 1040), partnership (Form 1065), corporate (form 1120 or form 1120-s). Entity classification review is performed each year.
- Non-profit forms 990 / 990-EZ / 990-N: Annual information return for tax exempt organizations. Disclosures related to public charity status, compensation reporting and program activity narratives. When applicable, unrelated business income (form 990-t) are reported.
- California entity returns: Form 100s (S-corp.), 565 (partnership), 568 (LLC), or 100 (C-corp.). Additionally, the minimum franchise tax ($800) and annual LLC fee must be tracked & filed on-time.
- Owners of S-corporations that want to have their corporation and personal returns coordinated.
- Partnerships and multi-member LLCs that distribute K-1 forms to various parties.
- C-corporations wanting to plan or implement a retained earnings strategy or wishing to convert to an S-corporation.
- Nonprofit organizations requiring yearly filing of Form 990.
- Business owners moving away from a preparer that only prepares an entity return.
- Companies with multi-state operations or nexus questions
1120-S
1120
1065
990
100S
565
568
Susan Handles These Entity Types
This is the most common type of entity for owner-operator businesses. Common issues include reasonable compensation (reasonable compensation is the most frequent audit target for the IRS regarding S-corps), tracking shareholder basis, distribution-to-salary ratio, and the QBI deduction on the owner’s 1040. Net income or loss flows to the shareholders personal tax return and it taxed at thier current rate.
Treated as partnerships under general law. Limited liability companies (LLCs) having multiple members and multi-member LPs. Each partner receives a K-1 representing their share of income, losses, deductions, and credits. Issues come up concerning guaranteed payments, special allocations, at-risk rules, and outside basis tracking cause repeated complexities. Susan creates partner K-1s and communicates with each partner to ensure their personal return accurately reflects their shareholder status.
An LLC is a state law entity, and it is not classified by federal tax laws. It is taxed depending on the elections made during formation. A single member LLC defaults to Schedule C; a multi-member LLC defaults to partnership treatment. During formation they can elect to be treated as a partnership or corporation. Susan reviews whether there currently exists a classification that is correct.
What made sense when your business was first organized may not make sense today. Conversion from sole proprietor to an S-corp, from partnership to an S-corp, or from an S-corp, to a C-corp, all have timing requirements, tax impacts, and California-specific reporting steps that need to be evaluated before recommending. Susan determines if conversion makes fiscal sense prior to making recommendations for change.
Selling a business creates some of the most important tax decisions an owner will ever make. Asset sale vs. stock sale; installment note treatment; Section 338(h)(10) election; allocation of purchase price between asset classes; goodwill treatment under California law.
One CPA for the Entity and the Owner
Quite often small business owners have different preparers for their entity and personal returns. This could create a problem because the two returns are connected at the K-1. When there is no coordination between personal and business filings, information can get lost, resulting in filing errors or missed deductions.
S-corporation shareholder and partnerships basis are running calculations that need to be updated annually. Without accurate data, loss deductibility & distribution taxation will be incorrect. She creates and keeps track of the schedules as part of her annual engagements.
The K-1 from the entity return becomes the information used to complete the owner's personal return. Susan prepares both returns, calculates the QBI deduction properly, treats the K-1 income appropriately on the 1040, and makes sure both returns match before either one is filed. She helps eliminate the possibility of two preparers having to communicate with each other regarding a discrepancy with respect to how to apply something at the very end of the process.
Reasonable compensation is by far the most common audit area for S-corps. Susan reviews reasonable compensation each year and, when necessary, provides notice to clients when their structure has drifted into audit risk areas.
Business entities get notices too. If the IRS opens an examination of your business entity or FTB questions a deduction on your return, that she prepared, she responds as your licensed representative. Non-CPA preparers cannot represent clients at the examination level.
Form 1120-s or Form 1065 with K-1 preparation; CA return included. Flat fee based upon the shareholders and complexity of return.
Form 1120 or Form 990. Fee will depend upon complexity, size and the number of schedules required. Pricing determined after a short review of documents submitted.
Susan can prepare both your entity return and your personal 1040 return.
Briefly explain your entity type, number of owners and past return situation. She can provide an estimated fee prior to deciding.
How Business Tax Prep Works from Start to Finish
Entity returns require a longer runway than personal returns. Here’s the sequence that keeps yours filed correctly and on time.
You tell Susan about your entity type, ownership structure, and what your prior year(s) returns look like. She will identify whether basis schedule items need to be inherited, if there are elections to review or coordination issues from past years, and give you a straight cost & timeline estimate.
Prior to working on the current-year return, she does a review of last-year's entity return. This catches inherited basis errors, lapses in elections, classification errors that should be fixed before another year goes by, and provides other potential surprises at later dates.
Entity return is prepared & reviewed, including all schedules, all K-1's, and any California attachments. Multi-state apportionment schedules prepared where required. Reasonable compensation analysis documented for S-corps.
Once the entity return has been completed, K-1s flow into each owner's individual return prepared by Susan (if also doing their personal returns) or delivered with summary of meaning of K-1 items on the owners' personal 1040 to the owners personal preparer. All returns prepared by Susan are filed electronically.
Common Questions About Business Tax Prep with Susan
This is a very common way to do things and they will generally work as long as the separate preparers have good communication. The income, distributions, and basis (for each return) all flow through to your personal return. When you have two different preparers, no one person is accountable for possible errors. Common failures include the QBI deduction being missed, shareholder’s basis differing from entity’s records, or distributions are taxed twice. When Susan prepares both, the flow through becomes more accurate and efficient.
What is reasonable compensation and why does it matter for my S-corp?
As a result of operating their S-corps, owners are required to receive a reasonable salary prior to receiving distributions. S-corps are targeted by the IRS when owners receive little to no salary and significant distributions because salary is subject to payroll taxes while distributions are not. What constitutes “reasonable” is dependent upon the owner’s role, the industry, and comparable market compensation. Susan reviews the ratio annually and provides guidance; this is the first item an examiner requests if the return is selected for examination.
Does my LLC need to file a separate tax return?
The requirement to file its own tax return for an LLC depends on how many members and what entity structure was elected during formation.A single-member formation is treated as a disregarded entity. All income and expenses associated with the LLC are reported on the owner’s Schedule C and the entity itself does not file a federal tax return (although California requires form 568 and the $800 minimum franchise tax). A multi-member LLC files a return based on entity selection. The correct response depends on the specifics of your situation and should be reviewed periodically.
What annual filings does a nonprofit have to do?
Most exempt organizations must submit an annual return to the IRS (Form 990). Depending on gross receipts, which version of Form 990 must be filed is determined as follows: For organizations reporting less than $50,000 in gross receipts; Form 990-N. For organizations reporting between $50,001 and $200,000 in gross receipts; Form 990-EZ. For larger organizations; full Form 990. The 990 return is publicly accessible. If an organization generates unrelated business income (UBI), then an additional return (Form 990-T) must also be submitted. Failure to submit three consecutive returns automatically revokes tax exempt status. This requires an application for reinstatement.
Should I convert my LLC to an S-corp to save on self-employment taxes?
At times, yes. However, "an S-corp saves on taxes" is one of the most overly simplified statements regarding small business finance. You pay yourself a salary that is liable for payroll taxes and distributions that are not subject to self employment taxes. The savings will only materialize once net profit is high enough that the payroll tax savings exceeds added costs like payroll processing, increased accounting, two returns instead of one, and California's 1.5% S-corp tax. Susan can estimate numbers for your business before you make an election decision.
Can you handle my return if I'm based outside of Redding?
Yes. Susan is licensed in California and serves business clients throughout California and across the country. Secure exchange of documents will be handled accordingly; returns will be reviewed over phone or video; electronic signature will be used for e-filing authorization. Susan can help regardless of where you are located.
Your entity filed correctly. Your structure working for you.
Schedule a complimentary meeting with Susan.