Taxes

The Difference Between an S-Corp and C-Corp

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When filing taxes as a business corporation, it is important to know the difference between an S-Corporation and C-Corporation. Your corporation will automatically be taxed as a C-Corp unless you qualify for and elect to be taxed as an S-Corp. Let’s outline the differences so you can be clear.

Who Pays The Taxes

The main difference between S-Corporations and C-Corporations comes into play when filing a federal tax return, as explained by bizfilings.com. In a C-corp, the corporation pays income taxes. In an S-Corp, the shareholders pay taxes on their share of the corporation’s income. This makes an S-Corp a pass-through tax entity. The profits or losses of the business are passed through to the business and reported to the owners’ personal tax returns.

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When You Pay Taxes

The TaxAct blog explains, “An S corp shareholder will pay taxes in the year their money is earned, but a C corp shareholder will only pay taxes on their business income when the business distributes dividends or when shareholders realize a capital gain, so there can be flexibility on when you pay your taxes, and when you get paid.”

C-Corps can be subject to double-taxation wherein the company pays corporate income tax and the owners of the company are also taxed on the income they make.

Shareholder Differences

A major difference that separates S-Corps and C-Corps is shareholder regulations. Whereas a C-Corp can have multiple levels of shareholders and the stock they own in the company, S-Corps can no more than 100 shareholders all owning one class of stock. In an S-Corporation, shareholders must also be US Citizens.

These differences can make handling taxes for your small business especially confusing. If you recently started a business or are considering filing as an S-Corp instead of a C-Corp, let Schlenner Wenner help.


For more information, e-mail Pat Plamann at pplamann@swcocpas.com or Ryan Finberg at rfinberg@swcocpas.com. Or give Schlenner Wenner a call at (320) 251-0286.


Best Practices for Tax Seaon 2017

Don’t let the sound of tax season scare you. It can sometimes be overwhelming and confusing, so Schlenner & Wenner Co. wants to help ease your worries during this hectic time. While some individuals calculate their own tax returns, many miss out on new law changes, discounts they weren’t aware of, or simply make mistakes. It is reassuring to file with a professional to guarantee the paperwork is filed correctly.

We’ve gathered the top tax tips and information to get you through this tax season effortlessly:

Stay Organized. Get rid of that junk drawer filled with old receipts and paperwork. Have one designated place to store all of your tax documents and earning statements. Keep a spreadsheet of your charitable donations for easy access. Being organized is the first step to a successful tax season and makes the rest a breeze.

Protect Your Identity. Identity theft is a common concern during tax season. Use a security software and always double check where you’re entering personal information online. Create strong passwords using random letters, numbers and special characters to prevent hackers. And stay on the lookout for tax season scams; remember, the IRS will never contact you directly via email, phone, or social media. They will only contact you via letter, and will not ask for specific payment instructions, like a prepaid credit or debit card.

Don’t Forget Your Earned Income Tax Credit. According to the IRS, one out of every 5 workers fails to claim their earned income tax credit. An income tax credit is a refundable tax credit for low to moderate income working individuals and couples. The amount of income tax credit benefit depends on the recipient’s income.

Make the Most of Your Educational Expenses. The IRS offers tax breaks to individuals who are furthering their education. If you, your spouse or your dependents had higher education costs this year, there may be some tax savings in your future. Learn what tax benefits for education you qualify for.

How you handle your taxes is up to you. Avoid common mistakes and create a stress-free tax season; work with Schlenner Wenner & Co. for assurance that your paperwork will be filed correctly and that you receive your maximum refund. We want to make this time of year a breeze for our clients and tax professionals.

 

We are happy to be voted central MN’s best accountant.

 

 

You Just Received Your Tax Refund, Now What?

Maintaining a healthy relationship with your money is important. That’s why strategically spending or saving your tax refund becomes crucial. Many people view their refund as money to spend on frivolous things, however, this is a perfect starting point for travel savings or taking a chunk out of your debt. Here are some of the best ways to use your tax return to make the smartest investments:

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Pay Off Debt

Pay off your credit card with the highest interest rates first. It is always best to pay down your debt than to try and build unneeded savings. With that said, make sure you have emergency savings before paying off your debt.

Upgrade Your Car

Trade in your old car for a newer version. In order to get the most for your money, don’t buy a brand new car. Instead, purchase one that is a few years older. Also, be sure to weigh all the pros and cons of the car you intend to purchase. Don’t pick the first thing you see on the lot.

Plan a Vacation

No debt? Congratulations, statistics show you’re in the minority of American consumers! Plan a vacation and enjoy a break from the hectic everyday life. There are plenty of low-cost destinations available. Cruises are a great option with great deals and the option to travel the world.

Start a Tuition Fund for the Kids

Start a savings account for your kids’ college education. Start early so that you can help them start their own path with little or no debt once they graduate college. Talk with your financial provider about your options - many parents tend to make costly mistakes while maintaining the best intentions for their kids.

Create Investment Account

Visit with a financial advisor and start investing your money. If you find a compounding interest investment, you can grow your investment rapidly over the next ten to twenty years. It’s always good to start early.

Renovate your Home

Use your tax refund to upgrade your kitchen or make another home upgrade. Put your money to good use and invest in something that will benefit you in the future.

Emergency Savings

Set aside money for an “in case of an emergency” fund. If something happens with your job, a medical complication or another unexpected costs turn up, you should be able to coast for a couple of months without going to your credit card or line of credit.

Whatever you choose to do with your tax refund, make sure you analyze the pros and cons and make the best choice. Remember, your tax refund might seem like an opportunity to splurge, but making a smart decision and investing in something appropriate to your needs will allow you to splurge much more in the future.

 

 

 

Spring Cleaning for Your Finances

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The first day of Spring - March 20th - is almost here. This means that we need to account for Spring cleaning. Organization and cleaning help us purge the old and make room for the new. Most people think of spring cleaning as a time to clean the house and garden, but it’s also a perfect time to clean your finances. After all, you’re already looking through your financials to do your taxes!

Review your business structure

Are your personal assets separate from your business? If not, you can set up an LLC or incorporate your company to mitigate the risk of your personal finances.

Set up a plan with a CPA

You are digging through documents, receipts, and files for tax season, why not spend a little extra time with a CPA. Meeting with a CPA and setting up a plan can help alleviate the stresses of tax season in the future. They can help you identify what is necessary to keep and where to keep it.

Dig deeper into your finances

Look into your labor expenses. This is often times the most expensive part of your finances. Looking deeper into your labor costs can help you create extra incentive goals for your employees or help limit your spending if you end up short.

Pay yourself

Remember to pay yourself. Keep track of invoices and customer payments. Are you considered an employee, a partner, a corporate officer, or something else? Learn the different legal forms of business and how you should be paying yourself at irs.gov.

Maintain your newly organized system

Set aside 10-15 minutes at the end of each week to file, trash, and organize your files and documents. This includes physical and digital documents. Backup what needs to be saved digitally, shred sensitive document that are no longer needed, and maintain the system you put into place.

Speaking of CPA’s… we know a few. With a foundation of knowledge dating back to 1964, Schlenner Wenner can supply you with the highest knowledge and professional ability. If you would like to organize your business but don’t have the time or you feel overwhelmed, bring your receipts, documents, questions, and computer screens to us. Clean up your finances now and look forward to your company’s growing in the future.

 

Tax Tips for the Small Business Owner

Small business owners can feel added frustration and worry going into every new year. Once the busy holiday season is over, it’s time for business owners (and everyone else) to begin to think about the upcoming tax season. We can help solve your problems as a small business owner and trying to navigate the tax rules and regulations that come along with owning a small business. Here are four tips to help you through the 2016 tax season:

 

Explore All Possible Deductions

There are many common deductions that can be overlooked. Some of the most overlooked deductions for small businesses are company-related mileage on vehicles, asset deductions, charitable giving, specialty deductions, bad debt, and loan interest. All of these deductions can be found in the 1065 Form.

 

Avoid Getting Caught Up in Personal Expenses

 

One of the major concerns of the IRS is that small businesses are writing off personal expenses as business expenses. Keeping these expenses separate will be key in avoiding stress when it is time to sort them during tax season.

 

Continually Track your Assets

 

If you keep a record of expenses throughout the year and an organized record of assets and liabilities, you will greatly reduce your stresses come tax season and have a better grip on your finances all year.

 

Ask for Advice

 

Especially for a new small business, completing taxes can be a daunting task. Don’t be afraid to ask for advice from professionals or other small business owners. You might not realize which expenses qualify for a deduction. If taxes are not your forte, a good accountant will be the best investment you can make for your business.

 

Properly tracking finances can make or break a small business. Schlenner Wenner & Co. helps small businesses understand and take control of their taxes and finances (we can help with payroll, too). If you have any questions or concerns about the upcoming tax season, visit our website at swcocpas.com.