Taxes and being 1099

[midwestbroker]

Now that I am back to 1099 status, I was wondering what to do...

I am looking to do either a LLC or a S corp.

My reason would be to lower my possible taxes for next season. I was told by a friend who is a CPA (she does corp audits) that it would lower my taxes. I am going to talk to my tax man to see what he thinks.

I am looking at legalzoom.com to do all this. It will cost from 139-369 + state fees depending on what package I pick.

How have you structured yourselves?

 

[michellea]

I am trying to figure out the best way for me as well. I have decided after all research that I just need to hire someone. I was originally thinking of an LLC, but since it is my fiance and I (we will be married in October) we need to do something else, since we both would have the SE tax due that way.

I did talk to another agent the other day and he has a S Corp. Now mind you this guy regularly sells between 50 and 60 advantage plans a month and he dabbles in selling real estate. He said that was the best for his taxes. He referred me to his accountant, but I think I will pass on that since I probably could not afford the consultation.

 

[padthaiforlunch]

SE tax is what you get with llc taxation. The benes of an s-corp include not taking your all of you income as wages. So let's say you make $80k /yr. Instead of paying the 15.3% fica and medicare on all of it, you take a salary of $40k - have 7.65% withheld, along with fed and state withholding, and the s-corp matches the 7.65 as an expense.

The other $40k pass through without any fica or medicare. In this sample you have tax savings of about $6k.


That said, you will have quarterly tax filings with the state/fed; you will need to pay unemployment on yourself, and you will have to file a corp. tax return. All told, the additional costs will run $900-$1500/yr. Any more than that and your overpaying your accountant.

You should be earning at least $40k/yr. before you consider a s-corp. Below that and the tax savings wash out next to the added paperwork and costs.

An llc can elect s-corp taxation. You can likely set up an llc or corp. online with your home state. No need to pay more than filing fees. Don't fall for buying corporate books and articles if you are a one man shop. I haven't looked at the packages form legalzoom, but I see no reason to spend the extra money when you can do the filing yourself.

If you want to elect s-corp tax treatment, go to the irs website and get form 2553. Just fill out the first page. You can elect that the tax treatment be retroactive to Jan 1. if you get the form in by March 15.

Don't forget to get an EIN first!

 

[midwestbroker]

I am going to talk to anther agent who has an S Corp and see how he set it up. Legalzoom has a basic set up for 139.00. EIN numbers for 79.00.

However, the IRS does it over the internet here...

Apply for an EIN (Employer Identification Number) Online

Thanks for your help!

 

[Crabcake Johnny]

I sat down with an accountant over 2 years ago and he ran all the numbers - said I'd save nothing after all the dust settled by going S-corp.

Yes, with an S-corp you can pay yourself a wage and the rest goes into the corp account. Problem is you can't take the money out of the corp account - except for biz expenses since when you do it's taxed as income.

 

[moonlightandmargaritas]

Yes, with an S-corp you can pay yourself a wage and the rest goes into the corp account. Problem is you can't take the money out of the corp account - except for biz expenses since when you do it's taxed as income.

Not exactly correct.

You pay taxes on it anyway. "S" corp "profits" are passed through to you to pay tax on. No SS though...

In addition, there are many legitimate expenses that can be "run through your business..."

 

[Crabcake Johnny]

Paul - I don't recognize your avatar

 

[moonlightandmargaritas]

I am continuing my series featuring "favorite sons & daughters" of our fair city, "Tampa - Cigar Capitol of the World".

These noted locals are lovingly referred to as "Tampons".

It is Tony LaRussa, Tampa native and manager of the St Louis Cardinals. That's his mugshot after a DUI arrest last Spring in Palm Beach County...

Last was Hulk Hogan. Next is ????

 

[CHUMPS FROM OXFORD]

 

[moonlightandmargaritas]

Reminds me of Kid 'N Play?