December, 2009

W-2 Year-end Adjustments

Personal use of a company car?

Medical Insurance paid by Corp?

These are two of the important “add backs” to W-2 income if you’re a more than 2% owner of an S Corporation.

Generally I recommend that employees own their own cars when practical, and submit expense reports for business mileage, even when you’re the only employee of an S Corporation. Mileage reimbursements are deductible as an expense to the corporation, but not taxable income to the employee. If the corporation owns a vehicle and someone uses it for either personal or commuting expenses, this personal use is a taxable benefit and should be included in income (and taxed at the personal level). This might be a reason to have a home office, if you qualify.

If you want to deduct health insurance premiums “above the line” on your personal return (that is to say, don’t bury them on Schedule A, subject to 7.5% AGI floor), the corporation should pay for the medical insurance. If you own more than 2% of a corporation, this is not an ‘employee benefit’ deductible to the corporation. You’re supposed to include it as income on the W-2, and then deduct on your personal 1040.

Both of these benefits are not subject to SDI, Social Security nor Medicare tax, so these amounts should not be included in those “wage base” boxes on the W-2. But the amounts should be included in boxes 1 ‘wages’ and box 16 ‘state wages.’

If you’re using a payroll service, tell them you need to do this and have them help you. If you need help, please call—before your 4th Quarter, W-2’s and other year end payroll tax forms are completed and filed.

What’s the amount to adjust?

How much was the health insurance?

How many miles were driven personally? [On this one, I think it’s easier to use the standard mileage rate ($0.55/mile for ’09 business miles) instead of actual, but ask me if you’re already using actual expenses or your business has more than 5 company owned vehicles.]

The Eightfold Path to Pay Less Tax and Avoid an Audit

Eight basic things business owners want to know printed in booklet form. This is ten years of working with the IRS Tax Code distilled down so it doesn’t take YOU ten years.

Just another way we’re trying to simplify your life. And the purchase is tax deductible!

You can order from Here’s the link to Amazon:

The booklet also contains a sections on how returns are selected for audit, when to seek professional help, and how long to keep your tax records.

Classes – Intermediate S Corporation, Basic Payroll, Schedule C, and Household Employees

Intermediate S Corporation Class will be presented in Alameda to up to five participants. This is an intermediate class, so we won’t be discussing how to fill out the form. Rather, we’ll be looking at how to quickly solve the most common problems encountered with preparing an 1120S, and what to do now to reduce the likelihood of future problems. Class is limited to 5 participants, so you’ll be able to ask all your questions. I moved the time up by an hour because it was difficult to get to Alameda in morning traffic.

“This is the best class on S Corps I’ve ever been to, and I’ve been to a lot.”

There are three new dates:

This class will be held in the Law Office Conference Room, 1516 Oak Street, Suite 109 in Alameda CA. Fee to attend is $225, but reduced to $175 for NAEA/CSEA members. CPE credit of 4 hours available for Enrolled Agents who attend, no credit currently available for CTEC, but it’s a good class.

Send me an e-mail if you want to attend. Flyer is on the website at

In conjunction with the IRS and EDD, Andy's going to be doing some Basic Payroll seminars coming up in the near future.

Basic Payroll
Seminar runs 9 am – 3 pm with an hour for lunch

The next seminar will be
Basic Payroll in San Francisco at the SBA office 455 Market Street, 6th floor (I take BART to Embarcadero) 9 am – 3 pm.
December 16th.

Basic Payroll in Oakland at Elihu M. Harris State Building,1515 Clay Street, Room 2, Second Floor, 9 am – 3 pm.
December 2nd.

Register by going to and find your favorite location. We’re working on the 2010 schedule, and trying to figure out how I can present this in other states.

These seminars have proven to be very popular, plus they’re free.

How to Prepare your Own Schedule C
Prepare your business taxes for ’09 and get ready for ‘10. Review what the IRS wants to know from you and how to report it on the Schedule C for your business. This is a class for business owners who need a basic understanding of their 1040 Schedule C tax forms. We’ll also talk about what to do with the numbers once you have them. We can’t guarantee you won’t get audited, but this class will make it less likely.

This class will be presented for free in San Jose on Wednesday, February 3rd 10 am – 12:30 pm at the SBA Entrepreneur Center, downtown, 84 W Santa Clara St, Suite 100, San Jose.

Andy will be at the US Small Business Administration offices in San Francisco at 455 Market Street, 6th Floor on February 16th, 6-8:30 pm. This class will be free. To register, check out the SBA website, or just show up. Go to We’re working on having the handout available on with updated information for 2010, link available soon.

Household Employees class will be December 14th, 100 Lafayette Circle, in Lafayette, for a half day. If you or your clients want to be confirmed for senate, you may want to attend. The IRS rules for Household Employees are very different from commercial employers. We’ll review what needs to happen to properly close out ’09 and changes for 2010. This will be through the East Bay Association of Enrolled Agents, who will handle registration.

I went to a class on QuickBooks given by Kim Woodrum. If you’re in the market for QuickBooks training in a classroom setting, I recommend her. She teaches a two day QuickBooks seminar and travels a great deal. Her website is

For Relaxation and Clear Thinking: On The Spot

To carry you through the stressful tax season, we recommend meditation and that you check out On The Spot Massage at to help you relax. A relaxed mind is a clear thinking mind. We have some discount cards for $5 off at the Alameda Natural Grocery location on Park Street, open daily 11 am – 7 pm.

Classes Iíve been Taking

In November, I attended the East Bay Association of Enrolled Agent’s event “Tax Talk” and saw Vicki Mulak, E.A. speak for eight hours mostly on Corporations. It was a long day. Vicki went into more detail than I do in my S Corporation classes and covered some C corporation topics not relevant to my S Corporation class. There were also about 90 other people taking the same class. I did get the term “add backs” included in the first topic for this newsletter from Vicki.

Phone and Fax Numbers

Our northern California physical office is shared commercial space in Alameda. Phone numbers are:
Phone (510) 522-2300
Fax (510) 522-2307
Our mailing address:
3527 Mt. Diablo Blvd #366, Lafayette CA 94549

“The hardest thing in the world to understand is the income tax.” — Albert Einstein, physicist