We incorporated our business nearly two years ago, although we didn’t start having insurance companies pay commissions to our corporate tax id number until January of 2007. So right now I’m working on our first real corporate tax return. Not the most fun I’ve ever had… Yesterday I met with our accountant for an hour, and she clarified just about all of the areas where it was still a bit fuzzy to me. And it turns out that there are two things that we were supposed to have done that we didn’t. When we incorporated and listed my husband and myself as the two shareholders, we were supposed to write personal checks to the corporation in order to buy shares. We never did that. So now we need to write those checks and buy our shares in the corporation. We’ll just end up with bigger paychecks and dividends in April, so it’s not like we’ll be losing any money, it’s just a hoop to jump through.
The other thing is that starting in 2007, we paid ourselves rent checks every month from the corporation. Instead of doing a deduction on the 1040 for business use of our home like we used to do when we were self-employed, now the corporation pays us rent to use a portion of our home. We did all that correctly, but we were supposed to issue a 1099MISC from the corporation to show the amount that we were paid in rent last year. I’ve already entered the amount on our 1040, but I didn’t issue a 1099MISC. And they were due last month. Oops. So I’m going to file it this week, and hope that it’s ok. My accountant said that the worst case scenario is a $50 late filing penalty, but she said that the IRS is usually very lenient with new corporations on stuff like that – basically I can play the “I’m new to this and had no idea” card and they will probably waive the fee.
Either way, we’ve got some catching up and correcting to do. Hopefully now we’re on the right path and a year from now our taxes will be much easier, since I’ll have the 2007 forms to reference. All in all, it feels good to be official and incorporated, but it sure is a lot of work.
I paid the accountant $125 for an hour of her time yesterday. I estimate that if I had just given her all of our forms and asked her to do our taxes, it would have cost at least $1000. Maybe someday that will be worth it to me, but for now I’ll do a lot to save $875.