Can I use TurboTax as my personal accountant?
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dnabrillhart
New Member

Can I use TurboTax as my personal accountant?

I am starting an LLC and will be purchasing a local business. I would like to know if TurboTax can help me get this set up and help me make the best tax decisions going forward.
5 Replies
VolvoGirl
Level 15

Can I use TurboTax as my personal accountant?

No.  Turbo Tax is for doing a self prepared tax return.  You should go to a local accountant in person.

tagteam
Level 15

Can I use TurboTax as my personal accountant?


@dnabrillhart wrote:
I am starting an LLC and will be purchasing a local business. I would like to know if TurboTax can help me get this set up and help me make the best tax decisions going forward.

No, not really since TurboTax is consumer-level income tax preparation software.

 

You should seek local legal counsel, tax counsel, and a financial/business advisor at this point in time.

Carl
Level 15

Can I use TurboTax as my personal accountant?

I believe the smartest move a first time business owner can make, is to seek tax help (and other legal business help) before they dive into the endeavor.

TurboTax is a consumer level tax preparation software program. They do not offer "personalized" services for this. It would be best to seek the services of a qualified and experienced tax professional in your local jurisdiction for at least the first year of doing business. Then after that first year if you feel comfortable with it, continue doing your business taxes yourself.

For an LLC, be it a single member LLC or Multi-Member LLC, taxes for this business type is not all that difficult really - though for a multi-member LLC that initial learning curve (on the tax front) can be steep.

To help you get started on the education side as it pertains to taxes only, I offer you the below information which is "extremely" basic and nowhere near all inclusive. But it's a start.

 

Sole Proprietorship – This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported on SCH C as a physical part of the owner’s personal tax return. Again, a sole proprietorship has only own owner. Depending on what state the business is in, registration is not required at the state level. But it may be required at the county, town, or other level of government below the state. For example, your county may require you to register and obtain a county issued Occupational License, which authorizes you to conduct business only within the jurisdiction of the authority that issued the Occupational License. This is most often required when the county, city or other authority below the state taxes personal income or imposes a tangible property tax on business assets utilized to produce business income.

Single Member LLC - This is a business with one owner, and only own owner. There are no other investors or share holders. This type of business is considered a “disregarded entity” by the IRS. All income and expenses for the business are reported  on SCH C as a physical part of the owner’s personal tax return. Again, a single member LLC has only own owner. This type of business is required to be registered at the state level, weather that state taxes personal income or not.  Additionally, this type of business may also be required to obtain an Occupational License for the county(s), city(s) or other more localized jurisdictions within that state, in which the business will be operating in.

Multi-Member LLC – This is a business with more than one owner.  It’s also the exact same as a Partnership (for tax purposes) This type of business also has to register at the state level, and may also be required to obtain an Occupational License from more localized jurisdictions within the state, in which that business will operate.  This type of business will file its own physically separate tax return with the IRS (and state if applicable) referred to as a Partnership Return, on IRS Form 1065. When completing the 1065 (using TurboTax Business) the business will issue each individual owner a K-1 reporting the income (or loss) of each owner. Each owner will use this K-1 to complete their personal return. So an owner can’t even start their personal return, until after the 1065 Partnership Return has been complete, filed, and all K-1’s issued to all owners.

In the community property states of Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin if you have a multi-member LLC where there are only two owners, those two owners are legally married to each other, and those two owners will be filing a joint 1040 tax return, they have the option of splitting all business income and expenses down the middle and each partner reporting their share of the business income/expenses on a separate SCH C for each tax filer on the joint return. That means your joint 1040 return will have two SCH C’s included with it – one for each owner. But this can present its own problems in the event of divorce, separation. The issues can become even more compounded upon the death of one of the owners. If that deceased owner’s will does not pass all assets to the surviving partner, then that surviving partner can find themselves in a tax hell, not to mention the problems that can arise with the “new” owner or owners.

LLC “Like an S-Corp” – For tax purposes only (and I reiterate: FOR TAX PURPOSES ONLY!!!!!) one can elect to have the IRS treat their single member LLC or multi-member LLC “like an S-Corp” ****FOR TAX PURPOSES ONLY!!!!!****  This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 2553 – Election by Small Business Corporation. This allows you to act as if your single member LLC or multi-member LLC is an S-Corp. But understand that if you want the IRS to treat your LLC like an S-Corp, then the business “must” act like an S-Corp, and follow all the laws, rules and regulations required of an S-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corporation. The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return.  Unlike a single member LLC which is considered a disregarded entity for tax purposes, an LLC that has filed form 2553  “is” considered and treated like a separately taxable entity.

LLC “Like a C-Corp” – For tax purposes only (and I reintereate: FOR TAX PURPOSES ONLY!!!!!) one can elect to the the IRS treat their single member LLC or multi-member LLC “like a C-Corp” ****FOR TAX PURPOSES ONLY!!!!!**** This means your business is treated like and considered to be a physically separate taxable entity. This is accomplished by filing IRS Form 8832 – Entity Classification Election. This allows you to act as if your single member LLC or multi-member LLC is a Corp. But understand that if you want the IRS to treat your LLC like a C-Corp, then the business “must” act like a C-Corp and follow all the laws, reules and reguations required of a C-Corp by whichever state your LLC is registered in. All business income and expenses is reported on IRS Form 1120 – IU.S. Corporation Income Tax Return.

S-Corp – This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to an S-Corp. All business income and expenses is reported on IRS Form 1120-S – Income Tax Return For An S-Corp.  The S-Corp will then issue each owner, investor and/or shareholder a K-1 which they will need before they can even start their personal tax return.  Unlike an LLC which is considered a disregarded entity for tax purposes, an S-Corp  “is” a separately taxable entity, and therefore files its own physically separate tax return and issues K-1’s to all owners, officers, investors and shareholders.

C-Corp - This type of business is registered at the state level and must conform to the laws, rules, regulations and ordinances of that state which apply to a C-Corp. All business income and expenses is reported on IRS Form 1120 – Income Tax Return For A C-Corp.   A C-Corp  “is” a separately taxable entity, and therefore files its own physically separate tax return.

tagteam
Level 15

Can I use TurboTax as my personal accountant?


@Carl wrote:

For an LLC, be it a single member LLC or Multi-Member LLC, taxes for this business type is not all that difficult really - though for a multi-member LLC that initial learning curve (on the tax front) can be steep.


I have to disagree with @Carl with respect to taxes for a multi-member LLC; the learning curve is steep, no doubt, but the return can also be extremely challenging, particularly if there is a balance sheet involved, on a number of levels.

 

Further, since you mentioned purchasing a local business, @dnabrillhart, you will most likely have to file Form 8594 (link below) which only adds to the complexity of your scenario.

 

See https://www.irs.gov/instructions/i8594

Critter-3
Level 15

Can I use TurboTax as my personal accountant?

What you will need is a bookkeeper and/or a bookkeeping/accounting program ...  Intuit puts out Quickbooks which is a wonderful program however if you don't know what you are doing you can get deep into the weeds fast.   I suggest you seek local professional guidance at first at least to be educated. 

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