S-Corp Catch-22

April 14, 2009 10:37 PM

If you help me with my freelance S-Corp tax question I will hug you.

I am a freelancer. I have an S-Corp.
I had a bad year and my S-Corp operated at a loss last year.
I'm doing my own taxes this year to save money. A tax professional did them last year, so I'm using that as a guide.

On form 1120S from the previous year (done by the accountant) the total assets of my corporation don't appear to match exactly what I had in the bank at the time. I have 2 bank accounts for the S-Corp and I think the accountant only used the checking, not the total of both.

Should I put the accurate amount this year or will that look like I'm laundering money? Since the money "appeared" in a year I operated at a loss.

This is money from a previous year, so corporate taxes have been paid on it (and personal taxes will be applied when it's salaried to myself), it just wasn't properly totaled on the 1120S balance sheet last year.

I neither want to lie nor appear like a money launderer so I'm confused what to do.

You are not my tax accountant. I will only use your advice for further research.

posted by sharkfu to work & money (3 comments total)

I can't answer your question directly, but an independent consultant I know swears by this book:

http://www.amazon.com/How-Start-Your-Corporation-S-Corporations/dp/0967162440

One of things he specifically likes about it is that it's very conservative, and it tries to show you how do everything explicitly legally without cutting any corners.

Hope that helps!
posted by zeek321 at 3:08 AM on April 15

Write a letter to your accountant of last year detailing the error that you think was made, send it via US mail certified-return receipt. Keep a copy.

If you are quite certain that this years accountancy is correct, file the correct information. The IRS in my limited experience is "understanding" of honest errors; your letter will stand as pretty firm evidence that you intended no malfeasance. You may find last year's accountant offering to verify your current return as a matter of professional courtesy as errors may be professionally or personally embarrassing.
posted by fydfyd at 7:14 AM on April 15

I forgot to mention: if there really was an innocent but significant error in last year's return, you can and probably should submit a revised return for the prior year. If the error was clearly the accountant's error he may be professionally required to prepare that amended return for you.
posted by fydfyd at 7:51 AM on April 15