Dallas, Texas. One desk, one phone number.

Does a decision you make in October change the return you file in March

Yes, and the useful version of that answer names the line it lands on. This is the one thing none of the pages ranking for this subject mentions at all.

One decision, traced to the line

Take the most common one in an owner run S corporation, what the owner is paid as salary versus what comes out as a distribution. It is a cash question, a payroll question and a tax question at the same time, and it is decided once a year whether anybody decides it or not.

Where that one decision lands
01 of 06The payroll providerThe salary figure, set before the last payroll of the year
02 of 06before decemberThe business returnOfficer compensation, as a deduction against profit
03 of 06The K-1The remaining profit, allocated to the owner
04 of 06The personal returnWages on one line, the K-1 profit on another
05 of 06Payroll taxesPaid on the salary portion, not on the distribution
06 of 06The year afterWhichever figure was set becomes the starting point
One decision traced from the payroll calendar to the filed return. Officer compensation is marked because it is the line that has to be decided before December and cannot be fixed in March.

The figure has to be reasonable for the work actually done, and it is the one number in an owner run business that gets looked at. The point of deciding it in October is that both the cash and the tax effect are still movable.

What happens when the three desks are different

The usual arrangement has a bookkeeper entering, a preparer filing, and nobody planning. Each one is doing their job. The gap is that the person who could have changed the number never saw it until the year was over, and by then the only available move is how it gets reported.

The alternative is not complicated. One desk closes the months, so the numbers are current in October. The same desk prices the decision, so the cash and tax effects are seen together. The same desk prepares the return, so nothing is discovered in February that could have been decided in November.

If somebody else already prepares your return

That works, and plenty of engagements run that way. It needs two things. The closed month has to reach them in a form they can file from, and the October decision has to be shared with them before it is made rather than after. Where a preparer has been with an owner for fifteen years, keeping them and fixing the timing is usually the better answer.

What people read next

Ask what this year's decisions do to this year's return

Owners arrive at this page thinking about a return and leave thinking about October. Most of them were looking for somebody to model a decision and what they actually wanted was one desk holding the books, the plan and the filing together.

What gets handed over is the closed month and the October number, and the return is prepared at the same desk. All of it happens on a screen you already open.

You will be talking to the Steven Palmieri practice.