Solo Agent: Sole Propietor, Corporation, or LLC?

[scagnt83]

To answer your questions:

1. My children are too young to put on payroll yet. However, yes, it would be a W-2. No FICA if under 18 (as a sole proprietor), no FUTA if under age 21. Not so with an S-Corp. Kiddie tax does not apply to earned income, so it allows you to get a good chunck of change to the kid tax free up to the standard deduction. Add in a full IRA contribution beyond it, and it's even better.

2. The same applies to an LLC taxed as a sole proprietor. That was not clear at one point, it is as of now.

Gotcha. I wasnt aware of the under 21/18 exemptions. That makes perfect sense. You deduct it and the kid owes no taxes on it.

And setting up the Custodial IRA for the kid is a great idea too. Basically you can get a little over $11k to the kid tax free each year.

 

[OttoGraf]

Looks like we have a consensus lol.

Two cpa's I spoke w told me that all the money you use to live on needs to be reported as the reasonable income. Example: you made 85k and lived on 85k you report 85k (expenses notwithstanding).

They also said that reporting a lower reasonable income than what actually came in is really only appropriate if you are leaving a large chunk in your account to grow the biz, have employees, etc.

Anyways, seems to be a lot of different opinions and a considerable gray area with this.

 

[SPUR CITY]

My uncle OWNED a CPA firm. Just retired and moved to Costa Rica but he had a good amount of CPA's working for him. I had him read this thread and tell me his thoughts. He simply laughed at all the bad advice that has been given in this thread.


Scary world out there. Hope all are prepared

 

[HoosierLife]

My uncle OWNED a CPA firm. Just retired and moved to Costa Rica but he had a good amount of CPA's working for him. I had him read this thread and tell me his thoughts. He simply laughed at all the bad advice that has been given in this thread. Scary world out there. Hope all are prepared

Come on man! I get all my accounting advice from this thread. Have him post in here what we really need to do.

 

[OttoGraf]

Also, how does filing quarterly payroll taxes factor into this discussion and do you really coming out ahead after that?

 

[WCMason]

Also, how does filing quarterly payroll taxes factor into this discussion and do you really coming out ahead after that?

You come out ahead paying taxes quarterly because you avoid the IRS penalties for not paying quarterly.

 

[MW Agent]

Also, how does filing quarterly payroll taxes factor into this discussion and do you really coming out ahead after that?

Whether you file payroll taxes or estimated taxes, it still works out the exact same. The only difference is paying FUTA (federal unemployment), which for most will be $420 annually. Most outsource the payroll so they don't have to file the returns or worry about it, a service like Gusto is $36/m. Do you still come out ahead? It depends on the numbers. I just posted an example on my blog in my signature of someone I met with last week and how the numbers worked for her.