title>Tax Guru-Ker$tetter Letter Wizard Animation

                 

Tax Guru-Ker$tetter Letter
Saturday, March 25, 2006
 
Corporate Accounting

 

Q:

Subject: Corp Tax Question

Can / Are principle payments made to shareholders who have loaned money to an S Corp considered / accepted by the IRS as a "cost of doing business" and therefore included along with other cost (material, wages etc.)?

Thanks for your insight

A:

The fact that you would ask a stranger such a question is a perfect illustration of how dangerous it is for anyone to try to run a corporation without competent accounting assistance. 

This is basic accounting and nothing tricky.  Principal payments on loans are balance sheet entries, which do not affect the profit and loss.  Interest payments are deductible as an expense.

Another issue that you need to consider is that all payments being expensed on the corporate books will need to be reported as income by the recipients. 

Get with an accountant ASAP before you go any further down the wrong road with your corporation.

Good luck.

Kerry Kerstetter

 


- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/25/2006 11:40:00 AM Send this post:

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