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We prepare most type of tax returns:

Individual. 

S Corporation.

C Corporation.

Partnership.

Payroll.

Amended.

Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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avatar"We first selected Gary Bode because of his familiarity with a creative financing scheme for our new small business.  During our time with Gary, his insights have helped us better structure our small businesses, save money, and learn to be better small business managers.  When it comes to small business accounting, a little hand-holding goes a long way."—Justin and Joelle LeBlanc

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Form 1120-S CPA comments on IRS intent to Audit more S Corporations

Form 1120-S CPA S Corporation 2013

Our firm operates as a S Corporation, so you know I stay current on Form 1120-S issues. (910) 399-2705.

S Corporations CPAs expect to see more audits of Form 1120-S starting in 2013. The IRS announced it would increase S Corporation audits for a three-year period. According a report by Beyond 415, the IRS audited 18,519 S Corporations last year, of the 44.4 Million Form 1120-S(s) filed.

TIGTA (Tax Inspector General for Tax Administration) states that when discrepancies were found on a Form 1120-S tax audit, the average adjustment was $105,534. The IRS data book notes that the “no change” rate in S Corporation audits is 39%. The implication? The IRS intends to tighten up how it selects Form 1120-S(s) to audit.

I’m an S Corporation CPA that functions as an S Corporation. So here’s what I’d expect a Form 1120-S audit to concentrate on. Plus here’s a prior post on Form 1120-S tax audits.

  • Unreported Income. Even though Corporations don’t have to 1099 other Corporations, the IRS still collects Income data from Form 1099-K (credit card payments) and Form 1099-MISC from non corporate customers. Rumour has it that when they find large payments, to your S Corporation when they audit a customer, the IRS cross correlates that to your Form 1120-S.
  • S Corporation officer payroll. Here’s a earlier post on reasonable compensation for S Corporation officers. Shareholder employee wages have been a gray area for decades. Why? The IRS want you to pay employment taxes. Remember distributions from a S Corporation to a shareholder escape self employment tax. How much wage  is enough? It depends. We recommend documenting how the S Corporation established shareholder compensation and distributions in the Corporate minutes.
  • Miss-classification of employees as subcontractors. The IRS is currently running a “Special.” The New Voluntary Worker Classification Settlement Program allows S Corporations that are paying employees incorrectly as subcontractors (to save on employment and unemployment taxes) to come clean for a small penalty and a promise of future compliance. Worker classification is another gray area; the IRS lists 20 determination factors!
  • Shareholder basis for losses.

I’m an S Corporation CPA with a virtual office to provide your S Corporation service and convenience regardless of where you live. I offer a free phone consult (910) 399-2705.

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