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I had a CPA do my corporate taxes last year. I did not have a good experience, so I am doing them myself this year. In the course of working through my return via TurboTax Business, I discovered a problem with my 2013 return.

Last year, I ran a balance sheet from my accounting software for the CPA. I still have the email attachment, and the report saved in my accounting software, so I know what I sent him.

(the following are made up numbers, just for illustration)

The balance sheet I supplied shows Assets of $10,000, and Liability of $0.

On my 2013 Schedule L, he has the $10,000 listed under Cash (Line 1) and under Total assets (Line 15). Then he has $1,000 listed under Capital Stock (Line 22), and $2,582 listed under Loans from Shareholders (Line 19).

I don't know if it's common or necessary to include capital stock as a liability? He never indicated he was adding this to my balance sheet.

Edit: just to clarify (I don't think it affects the answers I have received). We never talked about Capital stock, and he never said he was going to put this on the balance sheet (it's not on mine). What I don't know is if this is something my corp is required to have, and thus it needs to appear on the balance sheet, or if he just confused me with another client and threw it in.

In any case, the $2,582 came literally out of nowhere. I did lend my corporation $5,000 to get things started, but I paid that back in full two months later (in 2013). I've looked through all of my correspondence with him and there is no mention of any loan other than the $5,000.

So I clearly have a mistake on my 2013 return. I contacted the CPA and he does not have supporting documentation for those numbers (just the final return). He also says that the amount does not affect my taxes and that we can update it to the correct amount on this year's return.

Is he correct? Do I just need to enter the correct values for the balance sheet this year, and all will be well?

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"I don't know if it's common or necessary to include capital stock as a liability?"

Yes, if you look at the title of the nonasset part of the balance sheet it actually is titled "Liabilities and Shareholders' Equity". Your capital stock is a component of Equity. This sounds like it was reported in a reasonable manner.

"$2,582 listed under Loans from Shareholders (Line 19)."

Did you have a basis issue with your distributions? That is did you take shareholder distributions more than your adjusted basis that you have been taxed on? I have seen the practice of considering distributions in excess of basis as short term loans to prevent the additional taxation of the excess distribution.

Be careful when you adjust this entry, your balance sheet had to roll from one year to the next. You must have a reasonable transaction to substantiate the removal of the shareholder loan.

  • I edited my answer to explain the capital stock bit. Thanks for your response. – Phil Sandler Jan 29 '15 at 20:44
  • And that's why I always suggest talking to a professional. Good catch with distributions in excess of basis, that would probably explain the numbers in the OP's case. However this is definitely not something a tax preparer can decide to add on his own without talking to the client and explaining what it is and why. – littleadv Jan 29 '15 at 22:06
  • I agree the preparer shouldn't take these modifications on himself. That is why you should consult with a "Good Professional" - many people hold themselves out as a professional. – Jeff_CPA Jan 30 '15 at 14:40
  • Yes, he made a number of mistakes on my 2013 personal return as well (that I did catch). Thanks again for your responses. – Phil Sandler Jan 30 '15 at 21:44

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