AboutRichard Fritzler Expertise Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.
Experience I have been in the business of assisting business owners in reducing their taxes and liability since 1986. The company is Owelesstax, incorporated, at www.owelesstax.com
Organizations National Small Business Owners Association. Publications Contributing author to "The Corporate Standard Newsletter".
Publications Contributing author to "The Corporate Standard Newsletter".
Question Dear Richard - I have a client that incorporated as of 1/1/06. At that time, he did not start a new QuickBooks file, so his previous preparer did not have a good balance sheet to start with showing assets transferred into the corp, etc. I have gone back through his QB file for the last 3 years and determined what the beginning balance sheet should have been (as well as determining that income was understated all three years due to inappropriate postings in QB). However, a building was included on his 2006 and 2007 returns as well as corresponding depreciation on that building. Question #1 - Is it possible to amend his prior year returns and take the building off of the depreciation schedule, and rather have the building be a personal asset? Question #2 - If the client decides not to amend, at least not right now, do I simply make an M-1 adjustment for a prior period mistake in order to report the corrected 2008 balance sheet on the Sch L? I appreciate any guidance you can provide.
Answer Q1:
You could file amended tax returns. Were you going to have him hold the property personally and then amend his personal returns to show the depreciation? If so, what was the advantage? Or were you going to not depreciate the property? The IRS can and does "Impute" depreciation, which would have a bad tax effect. opening all of those tax returns to an extended window for audit can be bad. I'm not saying there "one correct" way to handle a poorly executed previous tax return.
Q2:
You said there was under reported in come, that cannot be addressed by an adjustment to the balance sheet.
If you are applying the Strip Mall Accounting Dogma that "you shouldn't put assets in a corporation because you can't get them out". Then we have some talking to do.
