|
quote:If you did it right will be income to the LLC which will then be passed through to you. If you did it wrong it will just be income to you and not to the LLC. In either case it won't be taxed twice. If he's the sole member there will be no passing through at all since single member LLC's aren't recognized by the IRS. This smells like self employment income that will be reported on schedule C. edit: assuming he hasn't made an s-election, but he referred to himself as a member as opposed to a stockholder. And I'm betting by "taxed twice" he means being taxed for self employment and income taxes. Admiral101 fucked around with this message at 19:47 on May 30, 2012 |
#
?
May 30, 2012 19:44
|
|
|
|
| # ? May 10, 2024 08:06 |
|
|
Admiral101 posted:If he's the sole member there will be no passing through at all since single member LLC's aren't recognized by the IRS. po-tay-to/po-tah-to
|
|
#
?
May 30, 2012 20:04
|
|
|
Admiral101 posted:If he's the sole member there will be no passing through at all since single member LLC's aren't recognized by the IRS. This is correct. I did not make an S-Election and I am indeed the sole member of the LLC. You are also correct on my reference to being taxed twice. Basically I'm wondering the best way to minimize my tax exposure on this. I'm meeting with an accountant tomorrow too.
|
|
#
?
May 30, 2012 20:06
|
|
|
quote:This is correct. I did not make an S-Election and I am indeed the sole member of the LLC. You are also correct on my reference to being taxed twice. Basically I'm wondering the best way to minimize my tax exposure on this. I'm meeting with an accountant tomorrow too. There's a lot of variables in your situation, and it's not clear from what you've posted what the correct treatment for this income would be. That said, if you're in the business of software design, it's probably ordinary, and you should bring up whether you could be eligible for DPAD when you meet with your accountant tomorrow.
|
|
#
?
May 30, 2012 21:12
|
|
|
mintskoal posted:This is correct. I did not make an S-Election and I am indeed the sole member of the LLC. You are also correct on my reference to being taxed twice. Basically I'm wondering the best way to minimize my tax exposure on this. I'm meeting with an accountant tomorrow too. *cough* Late S election under rev proc 2003-43 *cough* Edit for clarity: The IRS has gotten very forgiving with S Elections and the filing deadline. You can retroactively claim an S Election back to January 1st months later than the Form 2553 deadline of 3/15. You lose: Office in home (sorry), no need to do payroll You gain: possible reduction of self-employment taxes LLCs are flexible under IRS rules (they're more of a state-derived construct than federal) and fall under the "check the box" rules to determine how you want them taxed. Used to be you had to send in two forms for an LLC to elect S status, the IRS simplified things a couple years ago to just the 2553. AbbiTheDog fucked around with this message at 21:42 on May 30, 2012 |
|
#
?
May 30, 2012 21:37
|
|
|
W-4 question! So, I'm currently shopping around for new jobs and the like. The problem is that for 3 months of this year my income was in the form of cash from the employer I had last year. I posted about this here earlier, but the gist is that I was an "independent contractor" so he didn't withhold for my taxes (or even pay into SocSec, etc. for me). This has hosed me for the 2011 year and I trying to avoid this for my 2012 tax year. So my question is, how much should I be withholding extra a week from this job (using Line...6? on the W-4)? I'll know how much I've been paid later today. And, just as a point, no. I'm not good with money and savings and the like and would rather withhold a little excess than to have organize a savings routine. Also, related, but not about W-4, when I get around to clearing up 2011's year, how do I know what my penalty is? The 1040 Instructions reminded me to add in the penalty when writing my check, but I couldn't find a chart or late fee rate around that line's instruction nor did it refer to some other page. In my case, would it just be better to pay for someone (not H&R obviously, juding from the hostility in this thread) to help me get this cleared up over doing it myself? I ask this especially if it's best that I resolve this now, even though I am completely unable to pay at present.
|
|
#
?
May 31, 2012 21:50
|
|
|
I'm trying to file my self employment taxes myself this year. I'm looking at the IRS form now http://www.irs.gov/pub/irs-pdf/f1040es.pdf and I'm confused about the adjusted gross income you expect in 2012 section. I can make an educated guess how much money I'll make, but since I'm making this money publishing books, my income could be way over or under what I put down there. Should I just make a guess based on what I made this quarter? Or is there a way to figure this out? I'm also employed full time so I don't know if that would need to be calculated as well.
|
|
#
?
Jun 1, 2012 12:42
|
|
|
quote:So my question is, how much should I be withholding extra a week from this job (using Line...6? on the W-4)? I'll know how much I've been paid later today. And, just as a point, no. I'm not good with money and savings and the like and would rather withhold a little excess than to have organize a savings routine. It depends. quote:I'm trying to file my self employment taxes myself this year. Assuming your 2011 AGI was under 150,000: You have two ways to avoid an underpayment penalty on your tax return. 1. Pay in 100% of your tax liability for the prior (in this case, 2011) tax year, less any W-2 federal withholdings you have. 2. Owe less than $1,000 when you file your 2012 tax return. Note that these payments must be made (roughly) equally and quarterly to avoid penalty. Don't mail the IRS a huge check in December to cover the year's taxes and expect to not get a penalty notice. At my firm, we generally just tell clients to make payments to cover exception 1 (the paying of 100% of the prior year tax liability). So if you paid 12,000 in taxes for 2011, with $2,000 in federal W-2 withholding, you would make a $2,500 payment every quarter. It's also viable to make a guess based on what you earn every quarter, but this can vary a lot depending on your individual tax situation. Admiral101 fucked around with this message at 13:46 on Jun 1, 2012 |
|
#
?
Jun 1, 2012 13:31
|
|
|
At what level of income does it make sense to consult a tax professional? I'll be making something in the mid-100's for the next few years, but my parents are pulling at least mid-400's together and still use TurboTax. I know they could sure benefit from a tax guy: they pay the AMT--no one, especially at that very much middle-class level, pays the loving AMT. But they also have complexities like multiple tuitions, mortgages, a half-dozen investment vehicles with various tax implications, etc., that I don't. My situation is a lot simpler, because I rent and have no qualifying expenses. But between federal, state, and local taxes, most of my income falls in a 40% marginal bracket. I can't think of any deductions/credits I'd be eligible for, but is it likely that a pro could scrounge up a few and potentially save me some coinage? I recently found out about a perfectly-legal shenanigan--forgoing the dependent deduction on my parents return in exchange for me claiming the education credit they're ineligible for--which would have saved me around $5k during my college years, even if I'd paid them the value of the lost deduction. Since I just graduated and am only working half the year, I'm wondering if it's possible for us to give this a shot. The only issue is that the $27kish of tuition from my Spring '12 semester was paid in a lump payment in December '11. I know the IRS lets companies use cash or accrual accounting, is it the same for individuals? IE, can we claim the credit because the tuition expense was accrued during 2012?
|
|
#
?
Jun 4, 2012 03:47
|
|
|
Consulting a tax pro has less to do with how much you make and more to do with whether you feel that you are able to prepare a complete and accurate return and whether or not you feel like taking the time to do so. I have no idea where you got the ridiculous idea that people making $400k a year don't pay AMT. Every return is different but most people who report more than $150k of taxable income pay at least a little AMT in CA due to our relatively hgh income ad property taxes, and there are few if any legal ways around it other than "make less money".
|
|
#
?
Jun 4, 2012 04:28
|
|
|
tolerabletariff posted:At what level of income does it make sense to consult a tax professional? 95% of my clients in that income range pays AMT. For MFJ, if AGI is around $180k - $550k they're hit by AMT here in Oregon.
|
|
#
?
Jun 4, 2012 16:53
|
|
|
tolerabletariff posted:my parents are pulling at least mid-400's together I don't get it
|
|
#
?
Jun 4, 2012 17:06
|
|
|
Mandalay posted:I don't get it Ha! Missed that part. Maybe it's this guy. http://www.thefiscaltimes.com/Articles/2010/12/07/Down-and-Out-on-250000-a-Year.aspx#page1
|
|
#
?
Jun 4, 2012 20:15
|
|
|
Yeah that article explains exactly what I'm talking about, actually. We've been closer to the $300k area anyway but earlier this year saw a ~50% increase so I might have to reform my "lower upper middle class" mindset. But tuition for two kids at Ivy/private schools still eats up $100k out of that annually, obviously we don't get a cent in aid. So wait. Are you telling me tax pros don't have like... Magic money sticks they can shake to save clients tax bills? I don't meant HR block types, but like tax attorney/financial planner guys. I guess it's useless for me to get one because there's pretty much nothing I can do to bring my agi down.
|
|
#
?
Jun 5, 2012 15:47
|
|
|
tolerabletariff posted:Yeah that article explains exactly what I'm talking about, actually. We've been closer to the $300k area anyway but earlier this year saw a ~50% increase so I might have to reform my "lower upper middle class" mindset. But tuition for two kids at Ivy/private schools still eats up $100k out of that annually, obviously we don't get a cent in aid. (I'll warn you, people generally see people like those in that article as horrifically snobbish out-of-touch upperclass-people, not middle class struggling to get by)
|
|
#
?
Jun 5, 2012 15:53
|
|
|
quote:Yeah that article explains exactly what I'm talking about, actually. We've been closer to the $300k area anyway but earlier this year saw a ~50% increase so I might have to reform my "lower upper middle class" mindset. But tuition for two kids at Ivy/private schools still eats up $100k out of that annually, obviously we don't get a cent in aid. Your parents, maybe, depending on your definition of "investment vehicles with various tax implications". But likely not much. But if you're just a W-2 guy, there's no reason to see a tax professional. Turbotax is more than enough to handle whatever you have. Most of the value that tax professionals add is at the business-level. Or in special situations such as estate planning.
|
|
#
?
Jun 5, 2012 16:10
|
|
|
silvergoose posted:(I'll warn you, people generally see people like those in that article as horrifically snobbish out-of-touch upperclass-people, not middle class struggling to get by) Hey, those private schools are expensive! And no student aid! I barely have enough to make payments on my BMW and the wife's lexus.
|
|
#
?
Jun 5, 2012 17:04
|
|
|
AbbiTheDog posted:Hey, those private schools are expensive! And no student aid! I barely have enough to make payments on my BMW and the wife's lexus. You are my hero. e: content time I noticed that there are vast swaths of Enterprise Zones in Los Angeles that provide for, among other things, "Up to $37,440 over a 5-year period per each qualified employee can be claimed by an Enterprise Zone business as a tax credit. An employee can qualify under any one of 13 different categories." http://cdd.lacity.org/bus_statecred.html Do these kinds of schemes typically exclude small two-person LLCs? My gf lives in one of said zones so I wonder if she could start a small architectural consulting biz on the side and claim some credits.
|
|
#
?
Jun 5, 2012 18:48
|
|
|
quote:I noticed that there are vast swaths of Enterprise Zones in Los Angeles that provide for, among other things, "Up to $37,440 over a 5-year period per each qualified employee can be claimed by an Enterprise Zone business as a tax credit. An employee can qualify under any one of 13 different categories." http://cdd.lacity.org/bus_statecred.html Without researching the specific credit, I can say that those types of hiring credits specifically exclude owners and the relatives of owners. I can't imagine this credit being any different.
|
|
#
?
Jun 5, 2012 19:10
|
|
|
Mandalay posted:I noticed that there are vast swaths of Enterprise Zones in Los Angeles that provide for, among other things, "Up to $37,440 over a 5-year period per each qualified employee can be claimed by an Enterprise Zone business as a tax credit. An employee can qualify under any one of 13 different categories." http://cdd.lacity.org/bus_statecred.html The EZ hiring tax credit can be claimed by "individuals, sole proprietors, corporations, estates, trusts, and partnerships operating or investing in a trade or business located within a designated EZ." So a two-person LLC could claim it. However, you only get the hiring credit for hiring a "qualified employee" - which has to be someone who is basically poor, receiving government benefits, disabled, a Native American, an ex-con, or a veteran. Additionally, the employee also has to spend 90% of work time on activities for the business, and 50% of the work has to be performed in the EZ. So while your GF could create an LLC and do architectural consulting work, she would only get the tax credit for hiring someone that fits the "qualified employee" category. Also, this a tax credit against the business's income - it's not a "refundable" tax credit, if you know what that means. Your gf wouldn't get any actual money from the state government, but she would conceivably lower her business's tax bill. If your gf made no money with her business, she'd be unable to use the credit (although she can carry it forward to the next year). So there is no point in "claiming some tax credits" unless she has taxable income from the business. The amount of the credit is tied to the amount of wages paid to the qualified employee - so she can't just hire someone who is a "qualified employee" and then take the credit without paying them. If she takes the credit, she can't take a business deduction for those same wages. I didn't see anything excluding relatives of the owner but I'm sure that restriction exists somewhere. Besides, even if it didn't, your gf would have to form the LLC, hire a relative/friend who is a "qualified employee", and pay that person actual wages. The relative/friend would thus have taxable income coming in - and if s/he is a "qualified employee" who is qualified because s/he is receiving income-dependent government benefits, that extra taxable income from your gf could screw up their benefits eligibility. All in all, forget about these credits unless she is legitimately starting up a new business and she expects to make money doing it. It makes no sense to form a new business just for the credits. Source: https://www.ftb.ca.gov/forms/2011/11_3805zbk.pdf
|
|
#
?
Jun 5, 2012 20:07
|
|
|
We have a mutual friend who's been unemployed for a while, and there seems to be no shortage of underemployed recent grads, but I agree with your assessment. Thanks for indulging me! e: though this seems like it would be good for a food truck biz
|
|
#
?
Jun 5, 2012 21:12
|
|
|
I think the main problem with these sort of "hiring" credits is that they are really only useful for established businesses. Most new businesses fail in the first year or two, and many businesses take a few years to really get out of the red - so a tax credit, while useful, isn't that valuable because such businesses usually don't have much taxable income to offset.
|
|
#
?
Jun 5, 2012 21:44
|
|
|
entris posted:I think the main problem with these sort of "hiring" credits is that they are really only useful for established businesses. Most new businesses fail in the first year or two, and many businesses take a few years to really get out of the red - so a tax credit, while useful, isn't that valuable because such businesses usually don't have much taxable income to offset. In an ideal world, I'd hope that redevelopment zones encourage residents to start their own mom and pop businesses in some kind of self-bootstrapping action for the blighted region. But I guess that's (1) hard to do and (2) easily exploitable.
|
|
#
?
Jun 5, 2012 22:13
|
|
|
entris posted:I think the main problem with these sort of "hiring" credits is that they are really only useful for established businesses. Most new businesses fail in the first year or two, and many businesses take a few years to really get out of the red - so a tax credit, while useful, isn't that valuable because such businesses usually don't have much taxable income to offset. However, the unused enterprise zone credit carries forward. But that only helps if they stay in business long enough to be profitable.
|
|
#
?
Jun 6, 2012 00:28
|
|
|
Admiral101 posted:It depends. Ok, does it depend on more than knowing how much I will owe based on the 13.3% self-employment tax? Also, from this: quote:You have two ways to avoid an underpayment penalty on your tax return. As long as I don't owe more than $1,000 in SE taxes, I'm okay with not making quarterly payments and, instead, taking care of this all at the end of the year, correct?
|
|
#
?
Jun 6, 2012 08:56
|
|
|
quote:As long as I don't owe more than $1,000 in SE taxes, I'm okay with not making quarterly payments and, instead, taking care of this all at the end of the year, correct? Not just SE taxes. Income and SE taxes. Remember that SE tax is on top of income tax. But yes, that is correct. As long as you owe less than $1,000 at the end of the year, and the estimated payments you made were made evenly and quarterly, you'll be fine (sending a check to the IRS for all the year's estimates on 12/30 doesn't count). The other way to avoid underpayment penalty is to just cover the excess liability that you owed in your prior year. So, let's pretend your SE and income tax totaled to 5,000 in 2011. Your federal income tax withholdings were 1,000. That means you owed a remainder of 4,000. If you pay 1,000 quarterly (1,000 * 4 = 4,000) you will not be subject to penalty for the 2012 tax year. The reason I said "it depends" is no one can possibly tell you how much you should be mailing in for estimated tax payments without knowing how much you're earning, whether you itemize, how many dependents you may or may not have, etc. Note: Filling out a W-4 form isn't going to do anything for you as an independent contractor. It's only for W-2 employees (unless I am misunderstanding and you still have that W-2 job going on). You will have to estimate your liability and pay it quarterly through the year. As for knowing what your penalty will be: I, personally, would not bother attempting to calculate penalties, as the IRS will inevitably adjust your calculation anyway. Just send in your tax return as normal, and the IRS will send you a bill for any penalties they may assess for underpayment. Admiral101 fucked around with this message at 12:29 on Jun 6, 2012 |
|
#
?
Jun 6, 2012 12:26
|
|
|
I am currently looking to buy a house and move in with my girlfriend. We have talked about it for various reason makes sense for me to own the house and she will help out with payments. Im not "renting" a room to her or anything spicific. But what do I need to report taxes wise? do I report it as rent income, but also deduct other house expenses with it later? What if we setup a join bank account and pay the mortgage from there? We have allready talked about drafting a domestic-partner agreement.. but what are the tax rules on this?
|
|
#
?
Jun 7, 2012 01:45
|
|
|
tolerabletariff posted:I'll be making something in the mid-100's for the next few years, but my parents are pulling at least mid-400's together and still use TurboTax. I know they could sure benefit from a tax guy: they pay the AMT--no one, especially at that very much middle-class level, pays the loving AMT. But they also have complexities like multiple tuitions, mortgages, a half-dozen investment vehicles with various tax implications, etc., that I don't. http://en.wikipedia.org/wiki/Household_income_in_the_United_States The middle quintile of households earn about $35,000 to $55,000. The next highest quintile of households earns between $55,000 and $88,000. That's right: if your household makes $88,000, your income is better than 80% of the country. Your parents spend more in college tuition each year than the vast majority of the country earns in a year. Your parents aren't middle class; they're not even upper middle class. They're squarely upper class. Rich. Wealthy. Whatever synonym you want to use. I'm not trying to nag you about this but it's incredibly frustrating to see this behavior. It reflects a total lack of understanding or concern for the reality that most of the country lives in.
|
|
#
?
Jun 7, 2012 13:36
|
|
|
I only posted that to illustrate the fact that I don't want to be in my parents situation where they're throwing money away because Pops (who has no finance or accounting background) thinks he can do it himself with TurboTax. As for the BMW/Lexus comment--our cars are an '03 Accord and an '09 Focus, which was only bought used because the '99 Corolla we were planning on keeping indefinitely got totalled. Nationally, we're squarely upper-class, no doubt, but we're definitely middle-of-the-road for our area, where the median household income is around $120k (in a country of 1 million + including a large working-class minority population). After deductions for insurance, transportation, and savings, pre-tax AGI was in the mid-200s last year, after federal/state/local taxes the midish-100s, then back out ~$80k in tuition and ~$40,000 in mortgage payments, you're left with under $45k to pay all other expenses for a family of four and save for large purchases. That may seem like a lot, but in a high CoL area ($40k in annual payments sounds like it buys a helluva place, but around here, it gets you 1,800 sqft and a small backyard) it doesn't get you particularly far. I'm not saying we're poor or underwater like the example in the article posted, but that amount affords a decidedly middle-class lifestyle with very little excess. I'm not complaining, because I know I have it better than most, but class distinctions are so relative that it's pointless to make that judgement based on income alone. I also understand that our situation is atypical due to consumption preferences slanted heavily towards saving, debt-free education and avoidance of leverage on non-housing purchases. tolerabletariff fucked around with this message at 19:33 on Jun 7, 2012 |
|
#
?
Jun 7, 2012 19:31
|
|
|
Nah, you're still out of touch if you think grossing 400k is "middle-of-the-road" and "doesn't get you particularly far". And I'm saying that as someone whose high school was the basis of "The O.C." I imagine that Pops has something better to do with his time than use Turbotax. The opportunity cost must be staggering.
|
|
#
?
Jun 7, 2012 19:48
|
|
|
tolerabletariff posted:then back out ~$80k in tuition and ~$40,000 in mortgage payments, Hmmm.....seeing where some of your money could be better spent.....
|
|
#
?
Jun 7, 2012 20:06
|
|
|
Class warfare ITT. How about them taxes?
|
|
#
?
Jun 7, 2012 21:00
|
|
|
This tax planning article made me roll my eyes once or twice: http://www.forbes.com/sites/kellyphillipserb/2012/06/06/15-ways-to-turn-your-bucket-list-into-a-tax-deduction/quote:5. Win a race (or run a marathon). If you run a race just for fun—and you win—you must report your winnings as “other income” on your federal Form 1040. Luckily, you can also claim related running expenses as “miscellaneous itemized deductions” on your Schedule A. These could include entry fees, running shoes and any other expenses that are directly related to running. Keep in mind that your deductions are limited to the amount of your winnings and you can’t carry excess deductions forward or backward.
|
|
#
?
Jun 7, 2012 21:15
|
|
|
furushotakeru posted:Class warfare ITT. I have no problem with wealthy people (God knows I would like to be one). But to have someone say they're "middle class" for making $400k and then complaining about paying the bills is stupid. You have no idea what poor is until you can only buy bread or milk in the grocery store, but not both.
|
|
#
?
Jun 7, 2012 21:22
|
|
|
AbbiTheDog posted:You have no idea what poor is until you can only buy bread or milk in the grocery store, but not both.
|
|
#
?
Jun 8, 2012 06:19
|
|
|
Small White Dragon posted:Isn't this more of a lower-class problem? I'm not worried about the very poor, because they have a safety net.
|
|
#
?
Jun 8, 2012 07:48
|
|
|
This thread is going places.
|
|
#
?
Jun 8, 2012 12:04
|
|
|
tolerabletariff posted:then back out ~$80k in tuition and ~$40,000 in mortgage payments, you're left with under $45k to pay all other expenses for a family of four and save for large purchases. Don't act like 45K for a family of four to eat, be clothed, and have large purchases is somehow low. That's what's left over after housing, transportation, and tuition! What do you think are the largest costs in life?
|
|
#
?
Jun 8, 2012 15:43
|
|
|
furushotakeru posted:I'm not worried about the very poor, because they have a safety net. This is where I'm rolling my eyes. Have you seen the income guidelines for Medicaid? (Differ from state to state, but ridiculously low everywhere)
|
|
#
?
Jun 8, 2012 22:24
|
|
|
|
| # ? May 10, 2024 08:06 |
|
|
Just in case it wasn't obvious I was channeling Mitt Romney there, and I wasn't serious.
|
|
#
?
Jun 8, 2012 22:27
|
|