Can you file Form 1120S for my S-corp and how much would it cost?
We can file the tax documents for all types of small businesses including an S-corp. Specifically for an S-corp, you would file using Form 1120S and then report the income on a K-1 along with your personal tax return. In this case, we would charge $585 to complete Small Business Tax Returns (Forms 1065, 1120, 1120-F, 1120-S) and $585 to complete your 1040 and the associated forms, including the K-1.
How long should I keep IRS records?
In general, tax returns and all the supporting documentation must be kept at least seven years. The IRS can audit your return for up to six years from your filing date. However, the six-year limit only applies to good-faith errors.
The IRS has more information here.
What business structure should I use for my property investment?
For the purposes of residential real estate, we recommend setting up a US domestic LLC. This is the optimum structure for small-scale foreign investors. Individual ownership is the easiest from a tax perspective but provides you no protection from legal responsibility – and your personal information will be on public record – which could prompt additional investigation into foreign transactions.
A limited liability company (LLC) is affordable to establish, easy to maintain and generally recommended to foreign investors. The best features of the LLC are the individual protection of liability, and it is also treated as a “disregarded entity” for tax purposes. Basically, this means the IRS doesn’t see it as a separate entity, and everything is taxed and reported at an individual level.
US domestic corporations are not recommended due to the double taxation that results. While foreign trusts have become popular options in recent years, trusts are being scrutinized more heavily by the IRS. If they get re-characterized by the IRS, they could end up being taxed as a corporation and that is not ideal!
What is the best property ownership structure for my rental property or real estate investment?
That really depends on your ultimate goal. The most straightforward structure is individual ownership, where you simply report the activity of the property on your 1040 (or 1040NR). However, this structure doesn’t provide you with any legal protection.
The most popular choice is the Limited Liability Company (LLC). This property type is disregarded for tax purposes, which means the activity of the property simply flows through the individual owner’s tax return while providing a reasonable level of legal protection. Reporting is slightly more involved if the LLC has more than one owner.
C-corporations offer the highest level of liability protection but also come with the most involved reporting requirements. This article goes into more detail on each property ownership structure.