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Tax Law (Questions About Taxes)/K1 v.s. 1099
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Question
John,
Hope your doing well. I have a general question. I work for a company for 14 years as a consultant, the previous owner sold the company to a investment group and in the process I was awarded 5 percent ownership and a title of CEO. All the years in dealing with 10-99 now I have received a K-1 and was told that I have no deductions as a owner. Is this true? If not what kind of deductions can I take. I provide my own vehicle and cell phone and dinner expenses for customers. I am looking at over 40k in taxes which is over double from the past. Can you give me any suggestions?
Regards,
Brian
Brian,
Thanks for your question.
You don't state whether the organization is a partnership or an S Corporation. If an S Corporation, you should be on salary and receiving a W-2, making you an owner/employee. You can take certain employee business expenses as miscellaneous itemized deductions on Schedule A. IRS Publication 17 has a list of deductible employee business expenses that are available - the list is rather extensive and too long to reproduce here. Mileage other than commuting and entertainment would be included as deductible expenses.
If it is a partnership, you don't get any deductions. Any expenses should be borne by the partnership.
What has happened is that you have gone from being self-employed (which was probably a misclassification) to owner/employee.
Hope this helps.
John Stancil, CPA
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John Stancil, CPA
Expertise
I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I teach tax and accounting at a small church-related college. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a part time tax practice for over 35 years. I am a member of the AICPA, National Association of Tax Professionals, and the Institute of Management Accountants. Visit my website at www.johnstancilcpa.com. Also visit my blog, www.thetaxdocspot.com. Prepare and file your own taxes at www.1040stancilcpa.com
Experience
I hold a doctorate in Accounting, and four professional certifications: CPA, CMA, CGMA, and CFM. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 30 years and have taught accounting and tax at the college level for over 30 years.
Organizations
AICPA, FICPA, IMA, NATP
Publications
The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly.
Education/Credentials
DBA University of Memphis
MBA University of Georgia
BS in Accounting Mars Hill College
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