Dont pay taxes

[electrofelon]

Well its almost tax time again and I wanted to make a comment. I am a great electrician, but not a very good business person: I probably dont charge enough, dont say no enough, and go out of my too much to help people out. However, I am very good at cutting my costs and overhead. Along those lines I wanted to offer a bit of advice to the forum. You NEED to establish an LLC or an S corp and find the right accountant. I am surprised how many people I meet in the trades who work as a sole proprietor. You are throwing money away if you do this. Many people seem to accept that you pay about 10-12% to uncle sam, but if you set your business structure up right, you will not pay anything. Like it or not, the tax rules favor corporations so take advantage of it. Having the right accountant is important too. One thing you can ask your accountant or a perspective accountant is if they will set up most of your income as rents. What this means is that you can receive some of your income as "salary" but most as "rent" for your tools, office, garage, etc. The rental portion will not be subject to self employment taxes. My accountant knows this figure (if I recall its around $4500) that the IRS wants to see as salary and the rest can be "rent". So that is one strategy your accountant should be using. I didnt make a ton by any means last year, about $32000 that "the company" paid me, plus some fringe benefits of some tools, equipment, and materials, that "the company" paid for, and I am not paying any taxes this year. Last year was similar and I paid $4 . So pay $450 a year and save $3000 a year and form that LLC if you havent yet. If you want my account's information (he is a lawyer too, which I think is partly why he is so good) PM me.

"In america, there are two tax systems: one for the informed and one for the uninformed. Both are legal"

"Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands."

? Learned Hand, US Judge

 

[infinity]

A lot of this also depends on the State that you're in. Here in NJ even if you're the only employee once you open an S corp. you will be required to shell out about $2500 per year for workers compensation insurance. Not to mention an annual $500 corporate filing fee. Then your accountant may want to charge you more for the extra paper work. Some business arrangements are better than others. I would opt for a corporation just for the limited liability.

 

[renosteinke]

Such topics really can't be discussed without specifics! Let's see some numbers ....

More to the point ... gee, maybe it's worth the $$$ to hire an accountant and follow his advice. Only someone familiar with you specific situation can give you accurate advice.

 

[ptonsparky]

We have an S Corp. I missed the boat on renting to it. I knew it was possible, just was to busy for the details. :dunce:

Workers Comp is required for the S here and Yes, the price for the accountant does go up. $ to $ comparison of before and after would be tough but I did notice the wild swings in Income Tax from year to year disappeared. I also decided at that time to pay myself a living wage instead of feast or famine dependant on who had paid that quarter.

 

[Fulthrotl]

A lot of this also depends on the State that you're in. Here in NJ even if you're the only employee once you open an S corp. you will be required to shell out about $2500 per year for workers compensation insurance. Not to mention an annual $500 corporate filing fee. Then your accountant may want to charge you more for the extra paper work. Some business arrangements are better than others. I would opt for a corporation just for the limited liability.

calif. prohibits a LLC from working a contracting license, so that dog doesn't hunt here.
besides, the only reason i'd bother with a LLC is to protect me personally from any
claims resulting from my work, and as i do all my own work, having no employees,
i'm personally responsible for the work that i do anyway, and no LLC shields me from
that.

a full corporation isn't warranted with the gross volume i do, and i do a 100% tally of
all money that goes thru my hands. i've been pretty careful of keeping an eye on
spending that isn't business deductible, and keeping records on spending that is.

i ended up with about $30,000 worth of deductions i didn't even bother with reporting,
as i didn't need them.... i've never been audited, ever, but should that happen, it'll
probably go in my favor. :happyyes:

when i spend money that isn't deductible, i put 25% of it into an impound account for
my quarterlies. so when i hit the ATM for $400 pocket money, i move $100 into my
impound account with the iphone app so i don't come up short on the quarterlies.

shame you can't sell deductions on ebay.... but then you'd have to record the money
you made selling the deductions as income..... that seems very wrong somehow.....

i'd love a flat 10% tax. no deductions, no write offs. you get money from any source,
move the decimal point, and send it in. and that would be all the tax you'd pay on
that money, period. the entire government would have to figure out how to live on
that.

it'd be enough to retire the national debt in about 25 years.... and it'll never happen,
of course, 'cause taxes aren't about revenue, they are about power and control.

and the top 1%, who'd have to pay their fair share, would scream like a mashed cat.

 

[kwired]

i'd love a flat 10% tax. no deductions, no write offs. you get money from any source,
move the decimal point, and send it in. and that would be all the tax you'd pay on
that money, period. the entire government would have to figure out how to live on
that.

it'd be enough to retire the national debt in about 25 years.... and it'll never happen,
of course, 'cause taxes aren't about revenue, they are about power and control.

and the top 1%, who'd have to pay their fair share, would scream like a mashed cat.

Would probably work and be simple, but how many tax professionals - in any aspect including IRS employees, attorneys that specialize in tax cases, etc. would be out of a job if we got rid of the complicated system in place - then they would have to get other jobs - like become electricians:roll:

 

[Fulthrotl]

Would probably work and be simple, but how many tax professionals - in any aspect including IRS employees, attorneys that specialize in tax cases, etc. would be out of a job if we got rid of the complicated system in place - then they would have to get other jobs - like become electricians:roll:

that would be cool. i'd love to hire an out of work tax attorney as an apprentice.
especially as i have another large underground project looming for early june.

you know, i could make a website showing a tax attorney digging a ditch with
a shovel, and make more on the website than i'd pay the attorney. admit it....
wouldn't you bay $9 a month to watch streaming video feeds of attorneys,
irs auditors, and tax professionals digging ditches with shovels?

 

[kwired]

that would be cool. i'd love to hire an out of work tax attorney as an apprentice.
especially as i have another large underground project looming for early june.

you know, i could make a website showing a tax attorney digging a ditch with
a shovel, and make more on the website than i'd pay the attorney. admit it....
wouldn't you bay $9 a month to watch streaming video feeds of attorneys,
irs auditors, and tax professionals digging ditches with shovels?

No, but I may pay more to be able to sit there with a beer while watching live in person

 

[electrofelon]

calif. prohibits a LLC from working a contracting license, so that dog doesn't hunt here.

I think they changed that:

"LLCs Can Finally Become Licensed California Contractors
Authors: Robert A. James, Amy L. Pierce

10/10/2011

California law directs the Contractors? State License Board, no later than January 1, 2012, to begin processing applications by limited liability companies for contractors? licenses....."

besides, the only reason i'd bother with a LLC is to protect me personally from any
claims resulting from my work, and as i do all my own work, having no employees,
i'm personally responsible for the work that i do anyway, and no LLC shields me from
that.

I would not agree with that statement. My somewhat limited understanding is that an LLC offers outstanding isolation between the entity and the member(s) Someone attempting to "pierce the corporate veil" may have slightly less difficulty doing so to a single member LLC. but if set up properly it is still unlikely. One could always form the LLC as a partnership with a friend or family member too. The great thing about LLC's is the flexibility they offer in shareholding, decision making, and profits - the a members salary doesnt have to be proportional to his take on profits. One of the prominent GC's in this area is maybe a 10 man crew. They are an LLC and all members so they have no workers comp, payroll, etc. Presumable they have it set up so that founder and head guy gets most of the profits and majority of decision making while the other guys get lesser profits based on their time served, etc. They could hire a laborer and bring him on with 0 profits and no decision making.

i'd love a flat 10% tax. no deductions, no write offs. you get money from any source,
move the decimal point, and send it in. and that would be all the tax you'd pay on
that money, period. the entire government would have to figure out how to live on
that.

I hear you. This, however many tens of thousands of pages tax code, and cat and mouse game of attorneys and accountants is the most ridiculous thing created by man. But until it changes, its cheaper to play the game than pay. I dont really think its fair. In my case, like I said I earned $32K - and thats all gambling money - every business expense already paid, cell phone laptop, $4k in fuel, vehicle - Its seems thats all fair game to pay taxes on, but no not a dime. I must charge the company real expensive rent for half of the garage :roll: (but even that would be income, just not self employment income so I dont know how my accountant does it)

 

[Fulthrotl]

I think they changed that:

"LLCs Can Finally Become Licensed California Contractors
Authors: Robert A. James, Amy L. Pierce

10/10/2011

California law directs the Contractors? State License Board, no later than January 1, 2012, to begin processing applications by limited liability companies for contractors? licenses....."

hm. thank you very much for this. i will look further.
it may be something worth having, as you have pointed out.

the hook in this state is that i can be sued personally for any
install i do with my own hands, and i don't know how a LLC
would get around that, but i'm willing to take the time to find
out...

thanks again.

 

[GoldDigger]

The LLC is responsible for your actions, but you are not personally responsible for its actions, so it might work.
At least it might alter the insurance and deep pockets positions.

Tapatalk!

 

[kwired]

hm. thank you very much for this. i will look further.
it may be something worth having, as you have pointed out.

the hook in this state is that i can be sued personally for any
install i do with my own hands, and i don't know how a LLC
would get around that, but i'm willing to take the time to find
out...

thanks again.

Time to get a hand transplant, then you can claim they are not "your" hands:lol:

 

[HackElectric]

A lot of this also depends on the State that you're in. Here in NJ even if you're the only employee once you open an S corp. you will be required to shell out about $2500 per year for workers compensation insurance. Not to mention an annual $500 corporate filing fee. Then your accountant may want to charge you more for the extra paper work. Some business arrangements are better than others. I would opt for a corporation just for the limited liability.

Why do you need WC? Most people exempt themselves. Same with unemployment.

 

[HackElectric]

calif. prohibits a LLC from working a contracting license, so that dog doesn't hunt here.
besides, the only reason i'd bother with a LLC is to protect me personally from any
claims resulting from my work, and as i do all my own work, having no employees,
i'm personally responsible for the work that i do anyway, and no LLC shields me from
that.

An LLC helps shield your personal assets. It's not perfect, but it can help stop someone suing your company from taking your house, your children's college savings, your retirement, etc.

 

[kwired]

An LLC helps shield your personal assets. It's not perfect, but it can help stop someone suing your company from taking your house, your children's college savings, your retirement, etc.

Apparently California is terrified by contractors and doesn't want them to put up any such shield.:happysad:

 

[JES2727]

Why do you need WC? Most people exempt themselves. Same with unemployment.

It's a NJ requirement for corporations. Does not apply to LLCs.

 

[HackElectric]

It's a NJ requirement for corporations. Does not apply to LLCs.

I see, thanks. I've never heard of that, but I'm an LLC so it doesn't apply to me.

Now here is the million dollar question: What if an LLC decides to file as a corp?

 

[petersonra]

I see, thanks. I've never heard of that, but I'm an LLC so it doesn't apply to me.

Now here is the million dollar question: What if an LLC decides to file as a corp?

file what?

most people have a basic misunderstanding of the provisions of the federal tax code about such things.

The form your business takes does not matter all that much to the IRS.

If you are eligible to do so, you can elect to be taxed as a subchapter S entity. Rather than summarize it here, I will just copy from the IRS site.

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporations

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.
To qualify for S corporation status, the corporation must meet the following requirements:
Be a domestic corporation
Have only allowable shareholders
...

It has nothing do with the form of the corporation you elect to use. You can be an LLC or a regular corporation.

 

[HackElectric]

petersonra, You're the one with the misunderstanding.

The discussion was about corporations in NJ and the owner being required to carry WC on himself.

My question was whether the owner of an LLC who filed as an S-Corp would be require by the state to carry WC.

 

[petersonra]

petersonra, You're the one with the misunderstanding.

The discussion was about corporations in NJ and the owner being required to carry WC on himself.

My question was whether the owner of an LLC who filed as an S-Corp would be require by the state to carry WC.

The point is that there is a basic misunderstanding about what an S-Corp is. It has nothing to do with anything on the state level or what type of corporation it is. it is only about an election a business owner is allowed to make on how the profits are taxed for federal income tax purposes. Has nothing whatsoever to do with anything else.