Frequently Asked Questions

Business entities are organizations formed to conduct business or engage in a trade. There are multiple business entity types, including corporations (C-Corporations and S-Corporations), limited liability companies (LLCs), partnerships (general partnerships, limited liability limited partnerships, and limited partnerships), and sole proprietorships.

Medical bills are tax-deductible if the taxpayer itemizes and does not elect to take the standard the deduction. In 2019, the IRS allowed all taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross income. Beginning in 2020, the threshold amount increases to 10% of Adjusted Gross Income (AGI).

Officers of corporations can receive payment in the form of a salary. Shareholders that are employees can also receive a salary for their work.

Like officers in C-Corps, the salary received must be reasonable and not disguised as other forms of assets or dividends.

In either case, wages paid as a salary can’t exceed the amount that someone outside of the C-Corp will receive as a wage. If so, there can be problems that violate reasonable compensation.

If the IRS determines that you receive an excessive amount of income, it can administer a reasonable compensation test. This can result in the excess salary paid to officers and shareholders converted to dividends that will experience double taxation.

Accountants assist clients in the process of setting up the payroll with the respective states. Once completed, there are specific quarterly and yearly forms that need to be filed in order to stay compliant. The accountant will assess the client of any changes and timely file all required forms on a timely basis.

Corporations must file a tax return each year, regardless of whether their taxable income is zero or $1 million. A corporation may face penalties for not filing, even if it doesn’t have a single transaction to report. A regular corporation, referred to as a C corporation, would file Form 1120.

An entity that is taxed as an S corporation must always file its initial tax return with the IRS, even if it had no business activity to report.

An entity that is taxed as an S-Corporation files its Federal return on Form 1120S.

Whether an LLC has no activity and has to file depends on the tax return being filed. If the LLC is a single-member filing a Schedule C or, has elected to file as a partnership, if there is no activity then no Federal return would be required to be filed. You would only file a return if you claiming tax deductions on a return, even if there was no income to report. Certain states may require an LLC return filing, even if there was no activity. The state of California would be an example of a state that would require the filing of a return and the payment of the LLC fee.