USA How to calculate tax on S-corp profit distribution.

Mar 3, 2014
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I am not accountant and having very basic understanding of account.
I am running s-corp in CA,USA. My self and my wife both are partner (50%) and both are also employee.
I have question about tax which we need to pay on our profit which we receive through schedule K-1.

Suppose I received total income before any expense is 150 K last year.
I run payroll of total 100 K for my self and for my wife.
Now from remaining 50 K, I bought car(On company name)+laptop (For my S-corp) of 22 K and 10 K I spend in other expense like travel.

I am filing my taxes on cash base.
My CPA told me that your goal income is 150K and expense is 100K + 10K towards travel = 110K my CPA also calculate depreciation suppose 5K for my car. So finally He is saying that you S-corp make total gross income is 150K

Expense is 100K Salary + 10K Travel + 5K Depreciation = 115K
Profit is 150 K - 115K = 35K so it will be distribute between 2 partner .

My question is my CPA is not calculation expense of 22K which I have done towards my S-corp car and laptop. CPA is saying it is your company asset.

I am filing tax as joined with my wife so our total income is 100K + 35K = 135K. But actually we are not getting that much income. 35K is virtual income as CPA is not calculating 22K as expense. it is asset of the company.

My question is that "My CPA is right?" do I have to pay tax on 135K? Is 35K is correct profit as CPA is not calculating 22K of my purchase and showing as S-copr asset?

I thought that I will get 35K-22K = 7K as profit sharing.

I am thinking that I am paying tax on the income 35K which I have not actually make.

Can any one explain me how it is working and how I should understand this situation.

Thanks in advance for your input.


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