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Need Tax Advice

Discussion in 'Business & Tax Advice' started by gbmack, Apr 19, 2010.

  1. gbmack

    gbmack Power Member

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    If you're a sole proprietor, don't you have to pay like 40-50% in taxes?

    But if you get an LLC, can it really reduce your taxes to about 20-30%?

    Any tips?
     
  2. thomansfel

    thomansfel Jr. VIP Jr. VIP

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    depends on your business, best thing is individual, if you`re from US you can find info on wikipedia and IRS site
     
  3. heffe

    heffe Junior Member

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    I had a bunch of tax questions too but didn't want to pay a CPA a ridiculous amount of money to find out the answers. After some searching I found a site called justanswer.com. Ask your question(s) there, a CPA will answer you, and you pay him $15 if the answer was to your satisfaction.
     
  4. StutlerEx

    StutlerEx Newbie

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    A single owner LLC is viewed as a pass-through entity by the IRS so you would be taxed the same as if you filed as a sole proprietor. Either way, you're paying self employment tax. In reality, you should only end up paying around 25%-35% in taxes with deductions.
     
  5. Delboy2424

    Delboy2424 Regular Member

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    Key area to remember - if you also have a "full time" job then you can "offset" any loss in your self employment against any taxes paid in your full time source deducted - thus reducing your liability of course if you are being legit about it ;)
     
  6. mattjay

    mattjay Junior Member

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    i didn't make a ton of money last year online, but agree with above post. i believe the minimum self employment tax is 25% BEFORE deductions. i ended up paying much less last tax time with internet, phone, office space write off, hosting, domains, other expesnes etc. however if you do outsoucring and this is an expesne, you have to tax form your outsourcers to be able to safely write that off. i personally don't worry about it. but i paid my CPA about $300 when it was all said and done and saved about 2.5 k or so from what we originally estimated. however like i said, i really didn't make a ton online last year. I know the more money you make the more you pay after certain levels.
    hope that helps somone :D
     
  7. dias_161

    dias_161 Newbie

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    25% MINIMUM? that's a hefty sum......but are you saying that by putting all ur expenses with expenses u pay less?....would "Avertising" be considered an expense?
     
  8. Delboy2424

    Delboy2424 Regular Member

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    Depending on income tax brackets and what country you are in depends on the levels of tax you pay over on your "PROFIT" (Income less expenditure)

    You can take any associated expenditure that has helped you acheive your income as an expense so in answer to your question - advertising costs are an allowable expense, trips to disneyland with the family are not!!

    If after you have totalled your income and taken off your expenditure you have a profit, then in essence you will pay a % over to the taxman, roughly 25% for self employed.

    You have not said which country you are in, if you were UK based then you would pay about 23% tax (assuming your profit was over the lower limit tax free threshold - presently around £6K), if your profit in the UK was less than this then assuming you dont pay tax elsewhere ie full time job, then you will not be liable to pay anything over.

    If you are tasked at source in a full time job already, then any profit from self employment would be taxable (assuming the two combined take you over the Lower tax free limit)- if you make a loss on self employment, then you can offset this loss against tax paid in your full time job and reduce your tax liability - thus get a rebate back.

    Remember if you are in the UK you are also liable for Class 2 National Insurance contributions which are payable irrespective of wether you:

    Have an existing full time job paying Class 1 NI
    Make a profit or not on your self employment

    The only exception to this is a low limit income exception which if you expect to earn less than £5k in your self employment, you can ask for exception from paying Class 2.

    Hope this helps.
     
  9. teeniegenie

    teeniegenie Supreme Member

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    This all depends on how much you gross, what expenses you have, where you live, and other factors. A LLC in and of itself will not magically reduce any taxes unless you are in the right situation. Here in Nevada I get that all the time from people in Calif who think if they have a NV LLC they are good to go with avoiding Calif state income taxes. Not true!
     
  10. BorisTipsIt

    BorisTipsIt Regular Member

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    Single owner LLC is disregarded by the IRS. You file just like a sole proprietor. Helps you with liability protection, but no tax advantage. Spending an hour with a CPA is well worth the expense. For a couple hundred bucks, you can save thousands. You can even write-off their fee.