Hi everybody, my friend and i started c corp lawncare business in 2024c this is our first year for tax my questions are ;
we made 107.000$ in revenue, we bought truck, mowers, equipments etc , spent on gas and marketing, let say we spent approximately 40k for all of these, so we bank transferred our salaries to our own individual bank accounts 33.5k and 33.5k, so there was 0 money at the end of the year in business bank account,
as i understood, we aren’t gonna pay anything for tax for business right, because the money we transferred to our bank accounts + all other deductions for business spent.
Theoretically the corp will not pay tax in that scenario, but the equipment will have to be capitalized and depreciated. If it all qualifies for 100% section 179 expense, then congrats you wrote it all off. If not, you can still get bonus depreciation but it is much less. In that case, you will have a profit taxable at the corporate rate of 21%. Additionally, if your salaries were not paid via payroll and no quarterly returns were filed or tax deposits made, congratulations you did not have a salary, you have a $33.5k dividend that is taxable at your ordinary rates and also did not reduce your corporate net income.
Quinn said: @Quinn
it should be all qualified because all related to business, truck, mower, trimmers, etc
I agree it all sounds like it should be 100%, it it possible that the truck will be limited due to the rules on certain autos, though, so be aware of that.
Did you register as an employer in our state? Did you withhold and submit required payroll taxes?
I’m guessing from your question that you really issued dividends, rather than payroll due to your transfers to your individual bank accounts. In which case you C corp will owe taxes.
@Rin
idk what i did, i used intuit quickbooks, it was such a mess dor first year , i will let the accountant to fix everything for this year, my business partner moved out of state, i will change the c corp , what should i change it to
@Quinn
In this case you have 3 options, consult a CPA for all of them. 1. elect to be taxed as an S corp for 2025 and set up payroll asap. 2024 will still be a c corp. 2. dissolve the entity and start an LLC, this can be taxed as a partnership or elect S corp. 3, and really work with a CPA on this to see if you qualify for relief, extend the return and try to submit a form 2553 to elect S corp under rev proc 2013-30 stating you intended to elect S in 2024. It is very late and may be denied, however.
Edit: spelling
but isn’t s corp only for one person business? i will hire guys
there are many false informations on internet unfortunately and it is so complicated. i did not pay attention to tax stuff , my bad. tryna get some opinion now, i will go see cpa end of march thank you