Accountant Suggests S-Corp

[Lucky]

For 2003 and 2004, I filed as a rec player; Tax preparers knew little more than me.

Now I have an accountant and he suggests an S-Corp. He seems very solid and comes recommended but has no gamblers amongst his clients. Thus I will probably go with his idea, but would like to hear from pros out there who have good accountants/attorneys and have gone thru process, etc.

1. What incorporation method, if any, do you use?

2. When the S-Corp form says 'Primary purpose of corporation' what did you put? I don't know if i want "gambler" stated on the form as there arent a lot professional gambling corporations in the arkansas/oklahoma area. Maybe 'Gaming' or ???

3. Have you been audited since doing this?

4. Any thing else???

[astroglide]

search the archives

[Lucky]

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search the archives

[/ QUOTE ]

God, you're worthless. Do you see why?

[CPA]

I think you should understand the reasons he is recommending an S Corporation. Why not an LLC?

He might be thinking about the Self Employment taxes (i.e. S Corp earnings are not subject to self employment taxes). However, there are several problems with this line of thought.

Bottom line, I can't help you unless you know why he wants an S Corp.

[Lucky]

[ QUOTE ]
I think you should understand the reasons he is recommending an S Corporation. Why not an LLC?

He might be thinking about the Self Employment taxes (i.e. S Corp earnings are not subject to self employment taxes). However, there are several problems with this line of thought.

Bottom line, I can't help you unless you know why he wants an S Corp.

[/ QUOTE ]


Yep, the self employment tax. He mentioned paying myself a salary (only paying self employment tax on that, not the rest). In this way, he's saying, if the corporation makes 200k and loses 100k, (100k net) and I pay myself a salary of 20k, I've just saved 12k in self employment taxes.

Is this possible?

[brazilio]

I don't see how that's different than the LLC's wages. However, I'm sure you're subject to the same requirements that an LLC has, where the wages you provide yourself have to be reasonable to an auditor. I have no idea how an auditor would look at your own wages, but I think it's going to be pretty unreasonable for you to expect to keep that portion untaxed. I run a construction business as an LLC, and if we're not in relative proximity to working wages, any auditor is going to poop in my face.

[PsYcHo-ScHnAuZeR]

Hire a new accountant.

[sfwusc]

What business purpose does the S Corp serve?

Are you sure these transactions wont be broken down? There was a court case back in the 1930s about someone setting up a corp to avoid paying taxes....they lost in court.

I would get a 2nd opinion.
SFWUSC

[CPA]

Unfortunatly, the S Corp rules are not designed to save you on Self Employment Taxes.

There is a "Fair Wage" concept. What should a pro poker player of your skill make? While I don't know the answer, it is likely more than $20k if the S Corp has income of $50k. The IRS will probably look at the gross margin of the S Corp and make a determination from there.

If you do this S corp with low wages, you really need to understand the risk. The accountant should have explained this to you.

[Guthrie]

As far as what to put on the form for purpose of corporation: I've set up several corporations, and somewhere along the line someone told me to always go with the broadest purpose allowable under applicable law. Often this means putting "for any lawful purpose" on the form. While the IRS will happily accept taxes from an individual on all manner of illegal income, setting up a corporation for Internet gambling (which is probably illegal in the US) may open up a whole new can of worms. Check with a lawyer in addition to an accountant. And I'm not too sure about your current accountant.