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What you need to do for US taxes broken down simply.

Discussion in 'Business & Tax Advice' started by MrPenguin, Jul 14, 2017.

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  1. MrPenguin

    MrPenguin Jr. VIP Jr. VIP

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    This will be short, but it will give you exactly what you need to do to setup properly to pay the lowest amount of tax. If you're making more than $50k/year in IM I'd say this would help you.

    - Create an LLC in your state
    - Elect to file as an Scorp
    - Setup a payroll for yourself (I'm assuming you dont have any employees). Ask your tax guy what the lowest amount you paying yourself he is comfortable with. I use BofA payroll b/c it's free
    - Use quickbooks online. Hire a bookkeeper on upwork to setup things initially. You dont need more than just the initial setup after that expenses will automatically be categorized according to what they setup.

    That's all. When you do your tax, any profit left over from what you paid yourself will be "distributions" given to yourself which is taxed at 20% instead of the outrageous personal income rate.

    Hope this helps
     
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  2. kboxer7

    kboxer7 Senior Member

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    Almost.

    The distributions are not at a flat 20%, but rather are your personal income bracket tax percentage WITHOUT that nasty self-employment tax added on. So you end up saving about 15.5% or whatever on the distributions. S-corps do require more paperwork and corporate meetings etc that need to be documented and filed each year on time so keep that in mind. They also cost a bit more for a CPA to do your taxes than with an LLC or example.

    The distribution to salary ratio is typically 60/40 in favor of salary. But again, as mentioned, consult with a CPA/attorney on all tax matters.

    I'm a big fan of S-Corps.
     
  3. MrPenguin

    MrPenguin Jr. VIP Jr. VIP

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    Almost as well.

    Create as an LLC, file as an Scorp. Then you dont need the documentation and meetings.

    It does cost more, that's why I said ~$50k+

    Good point about the distributions not a flat 20% I'll have to see what it comes out to this year after filing
     
  4. Ben Gold

    Ben Gold Junior Member

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    Thanks :)