TaxLady EA, Inc. is a year-round tax & bookkeeping service.
We are unusual as we can prepare every type of tax return required to be filed at both the federal and state level
i.e., individual (and all attachments) corporate (C & S), partnerships, estate, trusts, gift, non-profit, payroll, sales, meals, etc).
We have been a registered e-filer since 1992.
We offer Hands-On OR After-the-Fact Bookkeeping (including payroll); QuickBooks Review and Trou
and I cannot stress this enough... If not done properly... you stand a high risk of losing under audit.
As it is `home office deductions` are more highly scrutenized by both the IRS and the various states... claiming it can make you more susceptible to an audit.. BUT.. done correctly.. you will walk through (hopefully) with a `no change` audit.
You have a right to take all deductions LEGALLY allowed.
Number one rule? Good recordkeeping and documentation!!
kywomanjt... sad to read that you worked for the IRS.. not to sure what you did.
Your statement "If you have $2 of taxable income, you have to pay $1 in federal taxes." is so false it is ... Sounds more like you are receiving Social Security (due to your early retirement) and found out that if you work above a certain dollar amount.. you have to pay back $1 for every $2 earned over $13,560 in 2008 to Social Security !!
I have a much better idea than the Flat Tax... How about taxing Social Security !!
Once the receipient receives all the money that was paid into the system plus a % interest based on their cumulative contributions by quarter......
Let`s see after 4-5 years of receiving Social Security... than all that money.. which everyone
else is putting into the system.. and you are taking out of the system... gets taxed !!
CORRECTION: A single person who has wages of $25,000 for 2008 has an `ordinary tax` of $1,605 which works out to 8.04% ..
No one.. neither the poor nor the rich.. is allowed or does the following.. unless they are unscrupulus.. because it is illegal !! and the rich are not that stupied !!
" The poor can`t deduct their gas expenses driving back and forth to work or their car
insurance, they can`t deduct a clothing allowance for clothes they need to wear to work
when employer dictates "business like attire", or their work shoes, or their vehicle to get
them to work, or their lunch money. But, by golly, the wealthy sure does this. They call
them "business expenses", so why can`t the low income people be allowed to claim "just
trying to survive" expenses."
As to attrition within the IRS.. technology reduces the amount of manpower needed for certain jobs... that has been going on for over 25 years across the board in all large businesses.
SIDE NOTE: the IRS is looking to hire at least 600 people just to do audits to close that $290 billion dollar tax gap...
By the way... our greatest problem remains... mismanagement !!
If you are doing this on your own.. without talking to a tax professional.. you are more than likely going to mess up.
Home Office done correctly.. not a problem.
Home Office done incorrectly.. a major audit area.
It doesn`t save money to keep you out of a hole.. it costs to get you out...
Yeah.. we do that too :o) :o)
My opinion... My CFO on the GO! gave the correct answer..
You gave more than enough info for someone to be able to state
Startup expenses are amortized starting in the 1st year the business is open and doing business.
I found the best answer was SherylCPA.
It is `statutory` law that all employees of an S-Corporation (including the officers) receive wages.... if there is money..... a `reasonable salary`.
As a shareholder. if you are doing anything for the business.. to try and avoid this and take payments in distribution or loans.. means you want to be audited.
Since the IRS is looking to hire over 600 more auditors... your decision.
As to taking a paycheck or not.. The only shareholder that won in a court case that I have read about was the one where the IRS took shareholder to court stating distribution was payroll in disguise. The court found in favor of the shareholder as he had absolutely no involvement with the company.
Meanwhile, it`s funny as heck to read about the lawyers and accountants that play this game and get caught by the IRS, go to court over and loss every single time...(Okay.. I have a weird sense of humor).
By the way, switching to an LLC gives you the same legal protection from creditors, etc. as a corporation BUT it`s not cost effective to go switching back and forth AND as an LLC you have the privilege of having to pay `self employment tax` on the net income (plus a few other items too numerous to write about)..
What should be your true deciding factor?
FIRST, I assume you are keeping good business records..
>>> Are you more the type that wants a paycheck and will have those payroll liabilities paid weekly or biweekly or monthly?
>>> Are you able to make those Quarterly Estimated Tax Payments..
Paycheck = Corporation
Estimated Taxes = LLC (either as partnership or sole proprietor)
Hope the above information helps you.