what Business tax software for one-person S-Corp

[BlueHouse]

Any recommendations for the business tax software for an S-corp? 
I will need to file an 1120-S and a D-20 for DC(state).  It will have to also generate a K-1. 

I used Turbotax a few years ago and found it completely inadequate back then.  (the help files simply repeated the question, so when I didn't understand, I had no help).   For the past few years, I've used a CPA. With those records and due to a few other reasons, I want to try by myself again.

I think my choices are Turbotax business and TaxAct business.  Can anybody recommend one over the other? 

Thanks for any help.

[SeattleCPA]

I'm a huge proponent of DIY tax return preparation when it comes to 1040s. See this blog post, for example:

http://evergreensmallbusiness.com/your-cpa-versus-turbotax/

However, I don't think an 1120S is a DIY project. Sorry. Gosh, lots of CPAs and EAs don't really know how to do this.

That doesn't really answer your question though, so here's my guess: I'd go with TurboTax because given Intuit makes real business tax prep software (like ProSeries and Lacerte) I'd guess their product is better.

[BlueHouse]

However, I don't think an 1120S is a DIY project. Sorry. Gosh, lots of CPAs and EAs don't really know how to do this.

I know what you mean. I was pretty overwhelmed with how little I understood when I tried it myself a few years ago. But now I have a template (last year should be similar to this year) and due to the current political and business climate, I happen to have the attitude that if I get it wrong, I shouldn't be penalized. After all, almost every cabinet nominee got something wrong on their taxes and it didn't seem to hurt them.
I want to give it a shot because I don't want to go back to my CPA and I don't want to try to find a new one.

[SeattleCPA]

However, I don't think an 1120S is a DIY project. Sorry. Gosh, lots of CPAs and EAs don't really know how to do this.

I know what you mean. I was pretty overwhelmed with how little I understood when I tried it myself a few years ago. But now I have a template (last year should be similar to this year) and due to the current political and business climate, I happen to have the attitude that if I get it wrong, I shouldn't be penalized. After all, almost every cabinet nominee got something wrong on their taxes and it didn't seem to hurt them.
I want to give it a shot because I don't want to go back to my CPA and I don't want to try to find a new one.

So here would be my perspective on this... you do have a big penalty risk with an S corporation... you have the risk that you do the return in a way that flags the return for an audit--which causes IRS to look at the reasonable wages issue for your situation. You probably don't want to have that discussion because it creates risk. And even if you prevail, the discussion costs money.

The audit rate is low for S corporations. There are about 4 million of them, and IRS audits only about 10,000 a year. But return errors or accounting oddities are in my experience one of the ways a return gets picked up for examination. I think small business owners should either not use the S corporation election or they should use a chunk of their savings to pay for a professional's help.

BTW if someone is going to take a DIY approach with an S corporation, I'd think you'd want to be more conservative in how you set your salary.

[BlueHouse]

However, I don't think an 1120S is a DIY project. Sorry. Gosh, lots of CPAs and EAs don't really know how to do this.

I know what you mean. I was pretty overwhelmed with how little I understood when I tried it myself a few years ago. But now I have a template (last year should be similar to this year) and due to the current political and business climate, I happen to have the attitude that if I get it wrong, I shouldn't be penalized. After all, almost every cabinet nominee got something wrong on their taxes and it didn't seem to hurt them.
I want to give it a shot because I don't want to go back to my CPA and I don't want to try to find a new one.

So here would be my perspective on this... you do have a big penalty risk with an S corporation... you have the risk that you do the return in a way that flags the return for an audit--which causes IRS to look at the reasonable wages issue for your situation. You probably don't want to have that discussion because it creates risk. And even if you prevail, the discussion costs money.

The audit rate is low for S corporations. There are about 4 million of them, and IRS audits only about 10,000 a year. But return errors or accounting oddities are in my experience one of the ways a return gets picked up for examination. I think small business owners should either not use the S corporation election or they should use a chunk of their savings to pay for a professional's help.

BTW if someone is going to take a DIY approach with an S corporation, I'd think you'd want to be more conservative in how you set your salary.

Thanks SeattleCPA.  I believe you and appreciate that you are trying to save me from myself.   I'm trying TaxACT now and I'll see how close I can get to last year's return which was done by a CPA.   Nothing substantial has changed, so I expect it to be rather close.   If I need to go back to having a CPA do the return, at least I'll have all of my documents gathered together. 

[SeattleCPA]

Three tips if you're going DIY... this stuff won't be apparent if you're simply comparing last year's return to this year...

1. Make sure that the Schedule L ending values on last year's return match the Schedule L beginning values on this year's return. If they don't match, redo your accounting because the mismatch means you've either double-counted deductions or income or let deductions or income slip between the cracks.

2. Use the M-1 schedule to confirm you got all your income and deductions into the return. M-1 reconciles the difference between your taxable income and your book income (from QuickBooks or wherever). You want your M-1 to show that it can come up with the same value as QuickBooks.

3. Use the M-2 schedule to confirm you're handling your distributions right. Your return will probably only and should probably only include an accumulated adjustments account. This value at end of year should match or be really close to your balance sheet's retained earnings.

If you do the above, the "accounting" part of your return will be right. As noted earlier, if you make sure you're paying a solid reasonable compensation value, your risks should be pretty low.

[Reynold]

That doesn't really answer your question though, so here's my guess: I'd go with TurboTax because given Intuit makes real business tax prep software (like ProSeries and Lacerte) I'd guess their product is better.

I can also say from a conversation I had with a customer service rep that the H&R Block Business tax software is actually written for them by a third party, unlike their "main" personal software which is in-house.  I still use it because of long familiarity, but there is certainly less hand holding than in the personal software.  I will say I very much see SeattleCPA's point that doing your own business taxes is a very different kettle of fish from personal, I feel much less confident that I'm right in my results there.  I continue because my side gig business is (1) small (best year ever ~$10k revenue), (2) extremely simple, no physical stuff, and (3) I'm pretty comfortable reading and interpreting legal documents. 

[SeattleCPA]

This is sort of going off on a tangent, but one reason I really like LLCs as the "platform" for a small business is that they can keep your accounting so simple.

With a single member LLC that operates an active trade or business, by default the income and deductions get reported on a Schedule C form which goes inside your 1040. So no payroll tax returns are automatically required... and you don't have a 1120S or 1120 tax return you're doing.

This means you can form an LLC to run your business and let the LLC be treated as a Schedule C sole proprietorship for years and years...

If at some point, you want to step up to the complexity of a corporation, you can make an election to have your LLC treated as S corporation.

And then there are some rules about "undoing" your S election but you might even at the end of a small business's life again run the operation as a Schedule C sole proprietorship...

You can't save self-employment taxes with an LLC, but you limit your liability, keep open the option of electing S corp status, and you keep things easy enough to DIY.

[DavidAnnArbor]

How do I become an LLC ?

[katsiki]

How do I become an LLC ?

It should be pretty easy but I have never lived in MI.  This should get you started:

http://www.michigan.gov/som/0,4669,7-192-41009-2213--,00.html

[SeattleCPA]

How do I become an LLC ?

You fill out this simple form:

http://www.michigan.gov/documents/lara/700_08-15_528193_7.pdf

BTW, we're in Washington state so we don't provide a free step-by-step recipe for Michigan, but we do for Washington state. And you might be interested to look at it because it'll show you how easy the process is:

http://evergreensmallbusiness.com/forming-a-washington-state-llc/

[BlueHouse]

This is sort of going off on a tangent, but one reason I really like LLCs as the "platform" for a small business is that they can keep your accounting so simple.

If I knew then what I know now... 

[SeattleCPA]

This is sort of going off on a tangent, but one reason I really like LLCs as the "platform" for a small business is that they can keep your accounting so simple.

If I knew then what I know now...

You and me both... you and me both...

[BlueHouse]

However, I don't think an 1120S is a DIY project. Sorry. Gosh, lots of CPAs and EAs don't really know how to do this.

Well, I gave it shot.  I think I could have muddled through and probably not been too far off (although I'm sure I would have made some errors)

I tried Tax ACT because it's free to try and the business software portions get better reviews that TurboTax.  Well the instructions are still abysmal.  I constantly had to look things up on the paper forms to determine what on earth they were asking!   It is a challenge just to figure out what I'm required to fill out and what I'm not! 

Anyway, it did help me get all of my tax info together and my accountant now has it in time to finish before the March 15 deadline.

Thanks for the advice SeattleCPA! (and others)

[Reynold]

With a single member LLC that operates an active trade or business, by default the income and deductions get reported on a Schedule C form which goes inside your 1040. So no payroll tax returns are automatically required... and you don't have a 1120S or 1120 tax return you're doing.

Yes, I think a single member LLC would be easier, we did ours as a partnership LLC so my DW could also be a member.  The thinking at the time, pre ACA, was that private health insurance could be refused to an individual or a family based on pre-existing conditions, but not to a company in many states.  That required a minimum of 2 people.  My SIL took advantage of that to get insurance, and we set ours up that way as well in case we needed it.  The cost was extra tax complexity for the partnership K-1s and such, but paying an accountant a few times until I got the hang of how it worked was still a lot cheaper than being without health insurance. 

[cadillacmike]

That doesn't really answer your question though, so here's my guess: I'd go with TurboTax because given Intuit makes real business tax prep software (like ProSeries and Lacerte) I'd guess their product is better.

I can also say from a conversation I had with a customer service rep that the H&R Block Business tax software is actually written for them by a third party, unlike their "main" personal software which is in-house.  I still use it because of long familiarity, but there is certainly less hand holding than in the personal software.  I will say I very much see SeattleCPA's point that doing your own business taxes is a very different kettle of fish from personal, I feel much less confident that I'm right in my results there.  I continue because my side gig business is (1) small (best year ever ~$10k revenue), (2) extremely simple, no physical stuff, and (3) I'm pretty comfortable reading and interpreting legal documents. 

I've used HR block personal tax program for many years. It works fine.

However, the Business tax program, in a word, SUCKS!.

I had to get it for last years' LLC (2 member LLC treated as an S-corp) and it was terrible. Absolutely NO integration with the personal tax program side. I'm seriously considering changing to turbo tax for both personal and business programs for 2017 TY.

The LLC is still in its initial stages, so the 1120S form isn't that terrible, but man that HRB program sure made it worse.