This question is for 2020 Tax Year: Since late 2019 I had a DBA with active income. In 2020 I created a California Corporation (owned by myself) and transferred my 2020 DBA business to it. Can my DBA charge a referral fee to my corporation? Can this payment be made now? If so, then it will help me in managing my tax liability efficiently.
how is the corporation taxed for income tax purposes S-corp or C-Corp? not that it matters for 2020 but it may matter for future tax planning. if the DBA is owned by the corporation the tax effect would be zero since the corporation would have a deduction for the referral fee and it would also have an equal amount of income from receiving the referral fee. so I don't understand how you would in any way affect your tax liability. if what you are trying to do is have 2020 Schedule C income while the Corp has a deduction it's too late to do this for 2020 since we are in 2021. there are tax laws governing related party transactions which is what this would be. then there is the possible tax issue of the Corp having to pay you a 2020 W-2 salary which is not possible if it wasn't done in 2020. Moving money from your right pocket to your left pocket doesn't save you any taxes. perhaps consult a tax pro before the end of 2021 so they can advise you on tax planning opportunities.
