On Feb 2, 12:42*am, "Will" <westes-...[at]noemail.nospam> wrote:
- quote -

it were a C Corp.

Gene E. Utterback, EA, RFC, ABA

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"eagent" <gene[at]alliancetax.com> wrote in message
news:90203885-aceb-43ea-bdee-4b0c9be2c84a[at]i7g2000prf.googlegroups.com...
- quote -

So how are you recording distributions for an S Corporation on the balance
sheet? Are you allowing the distributions account to grow infinitely
over time and it never clears to zero at year end? If you keep a AAA
account on the financial balance sheet, that has the advantage that you can
clear out distributions each year and the value of the distributions account
at any time is for the current year.

Not saying one is better than the other. Just trying to understand how you
prefer to record distributions for S Corporations on the books rather than
tax return.

--
Will

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On Feb 1, 8:46*am, "Will" <westes-...[at]noemail.nospam> wrote:
- quote -

NOPE - I do NOT mix financial accounting and tax reporting.

- quote -

IMNHO - this borders on lazy at best.

- quote -

On the books of the company - I wouldn't. These are TAX ENTIRES, not
book entries - even with OCBOA is used for financial reporting.

And no, I cannot point you to a text book example. Remember, the tax
code is not nearly as straight forward as the OCBOA reporting rules
under SSARS. When working with the tax code you have to think and
work in a sort of three-dimensionaly matrix rather than lineally.

- quote -

I do NOT like QB, but I know many who use it effectively. I do NOT
use Lacerte, but I am familiar with it and Lacerte should easily
handle the AAA adjustments for reporting purposes. Though many
programs, like ProSeries (the one I use), require that you override
distributions in the M-2 and pick up an adjustment for distributions
in excess of AAA.

- quote -

You also have to make sure someone is tracking your basis correctly.
For example, it is possible for a stockholder to have basis even when
AAA is Zero or negative AND even when stockholder basis is ZERO there
may still be distributions that have to be accounted for. So when
there are distributions in excess of AAA you MUST make sure that your
software accounts for the distributions properly. One major failing
in ProSeries is that the program limits distributions to the AAA
balance. This means that distributions don't automatically come
through on the basis worksheets correctly. Unless you're sharp and
know what to look for it is easy to miss and you wind up with
incorrect info on the stockholder's basis worksheet with can have a
dramatic impact on the individual returns.

S Corp taxation is just one step down on the complexity scale from
partnership taxation. And about the only thing more complex than
partnership taxation - which includes conecpts like "inside and
outside" basis - is FUND ACCOUNTING and the associated restricted and
unrestricted fund balances.

These are advanced concepts and without a thorough working knowledge
of how the principles work, they should be left to the big guns.
Remember, just because one is generally licensed or certified does NOT
make them an expert in every specific area. One of the biggest
problems I see with out industry, and my brothers and sisters of the
ledgers, is that too few of us are willing to look a prospective
client in the eye and say WE DON"T KNOW AND YOU SHOULD SEE ANOTHER
ACCOUNTANT.

Lastly, every taxpayer should be aware that the more complex the
reporting issues the more the fee for the work will be. And the
amount of money that changed hands on the books of the compay is NOT
what drives the amount of work that needs to be done. I've had client
throw fits because they engaged in Section 1256 Straddles that
resulted in less than $10 being reported to them as income for which I
charged $50 to report on the return.

I'm not suggesting that one should pay any price asked by a
professional accountant, but when you shop for the lowest price the
likelihood exists that you'll get the lowest grade of work.

Good luck,
Gene E. Utterback, EA, RFC, ABA

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"eagent" <gene[at]alliancetax.com> wrote in message
news:5c414f99-9523-4bc6-ad1e-1fa25a4b0f57[at]k39g2000hsf.googlegroups.com...
- quote -

When you have distributions in excess of AAA, do you recommend creating a
separate distributions account on the balance sheet just to hold such
special-status distributions?


- quote -

Accountant wants to go into Quickbooks and rename the Retained Earnings as
the AAA account.

And I share your concern about this just from the standpoint that Retained
Earnings seems to be some very standard and well-defined concept, whereas
AAA is something very specialized to S Corporations and their taxation.
And without being able to clearly articulate why, the purist in me wants to
keep each concept - Retained Earnings and AAA - visible and separate. I
can't imagine showing a balance sheet to a banker and having them look at a
AAA account and having any real clue what that is and how to ascertain what
the retained earnings are from that. Sometimes they might be the same and
sometimes they wouldn't be, and almost all times the banker would be
confused by the difference.

Which leads me to the question: how would you maintain distributions and
any accounts related to AAA on the books of the company? Do you know of a
textbook example of the method of maintenance you prefer that would show the
required accounts and the required year end journal entries to maintain
them?

Books are done today in Quickbooks, and in about three years I see us moving
to Microsoft Dynamics. Taxes are being done in Lacerte.

--
Will

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On Jan 25, 9:59*am, "Will" <westes-...[at]noemail.nospam> wrote:
- quote -

treat it correctly and it is not for the uninitiated or weak of
heart. Here goes:

Retained earnings is the net accumulated effect of business operations
from day one.

AAA is a tax form only account and is only loosely tied to RE.

Items that can reduce RE may or may not be allowed to reduce AAA. For
example, it is entirely possible to have a negative retained earnings
balance because of distributions of profit - BUT distributions may not
EITHER create or increase a negative AAA balance.

Not only is not necessary for RE and AAA to match, frequently they are
different!

What you haven't told us WHERE your accountant likes to rename the
account. If its on the tax return you're fine. If he's doing it on
your financial statements, then I'd disagree. I always use RE on the
balance sheet (or Statement of Assets, Liabilites and Equities for
OCBOA statments that comply with SSARS) because most people who read
the balance sheet aren't interested in the net equity of the company
and RE will loosley correlate to that, while AAA will have no real
correlation.

Ask your accountant why he's doing it and see what his answer is. I
(and I'm sure a few others here) would be interested in his answer and
a bit more detail.

Gene E. Utterback, EA, RFC, ABA

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On Jan 25, 9:59 am, "Will" <westes-...[at]noemail.nospam> wrote:
- quote -


There are S corps & then there are S corps.
If it has a C corp past or not, will change the answers here.

If no C corp history....always an S corp from birth
& assuming its post 1982 (I could be a year or two off here) it only
has AAA & OAA
& no retained earnings

Retained earnings is much more of a C corp thing - also called
earnings & profits.
It has its own characteristics & needs to be maintained.
If these retained earnings are distributed, taxable dividends can
result-even if its and S corp.

If you want to issue financial statements, thats a whole different
animal species with its own rules.
(& I aint gonna touch that one in a tax forum)





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Will wrote:
- quote -

inception an "S" corporation, it's IRS which calls it AAA, not your
accountant. Of course practically speaking it's the same thing, so for
financial reporting purposes, my accounting systems still calls it that.

Now if your corporation started life not as an S corporation, but as a
"regular" one, then there is a difference in two accounts.

Get your accountant maybe to explain it better.

ChEAr$,
Harlan Lunsford, EA n LA

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

My accountant likes to rename the Retained Earnings account of an S
Corporation as the AAA account. What I am not understanding about this is
that most tax guides define AAA as Retained Earnings minus distributions to
the shareholder. So Retained Earnings maintains a distinct meaning and
value separate from the distributions. Is there a clean way to preserve
both Retained Earnings and AAA on the balance sheet, or is it just a
practical necessity to deal only with AAA?

--
Will

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >