Taxes, taxes, and more taxes.

[gallito89]

I am currently doing the sales taxes for my family business, and while doing this I realized that next year around this time I'm going to have some issues to work out. For every source that I make more than $600 from yearly I need to report it to the IRS.. I have absolutely no idea how to go about filing my taxes for this as I have not filed for an LLC as of yet.. anyone know how to go about the process of getting forms from companies, sending them out, doing whatever it is with the IRS?

I don't want to have to pay an accountant to do it for, that's the reason I do the taxes for my parents because otherwise they would waste money paying somebody else to do it. I just don't even know where to start with this one. Any help will be greatly appreciated.

[Linda Buquet]

"For every source that I make more than $600 from yearly I need to report it to the IRS."

Even if you didn't earn $600 and therefore didn't receive a 1099,
you are still legally obligated to report all income.

[gallito89]

Well I've worked for governmental institutions (IE: school districts) and they've told me anything under $600 not to worry about reporting to the IRS in the past and they have the most uptight finance departments you've ever seen. I won't argue the fact that it may be what people are supposed to do though.

[kevin7890]

From the employer's perspective, 1099-MISC must be issued if an employee/contractor earns more than $600 USD (company may decide to issue one regardless of the income threshold, however).

From the employee/contractor's perspective, he needs to self-declare ALL income (usually schedule D), whether he received a W2/1099MISC or not.

Hope this helps...

[Larwee]

gallito89, those individuals at the school district didn't know what they were talking about and the Internal Revenue Service has an entirely different viewpoint on it and their viewpoint is the one that counts.

Let us assume for a moment that you made $500 from each of 20 different sources during the year. You didn't make $600 for any of them, but you made a total of $10,000 for the year. Those school district employees or employee is saying that the Internal Revenue Service doesn't care about that $10,000 you made because none of the sources paid you more than $600 during the year.

What if there were even more sources. None of them paid you more than $600 a year, but the total was $20,000? What if it was $50,000. How about $100,000? What about one million dollars?

That school district employee or those school district employees should be taking some classes about taxes since the information given is absolutely wrong.

As Linda and Kevin said, the Internal Revenue Service wants to know about all of it.

You can find a lot of useful and reliable information at the Internal Revenue Service site. Here is a link to their site Internal Revenue Service

[gallito89]

Hmm by the looks of it I would be a lot better off if I just apply for an LLC, that way I can deduct expenditures from my taxes (and there have been a lot of them as I've bought all the resources I need suh as autoresponders, webhosting with 15TB bandwidth for the new few years, domains, PPC, etc.).

Thanks for your input guys, it turns out that you don't need to report it if you make less than $600 self-employed (so if I only have 1 source and it was $599, then I wouldn't need to file for it).

[Linda Buquet]

Nope not true either that you need an LLC. You can be joe blow sole proprietor and deduct all your biz expenses. I'm still a sole proprietor and have a much bigger business than many affiliates do. You still do a schedule C for all biz income and expenses just like any other business.

The main tax bene of incorporating is that you only pay tax on the salary you take out - not all the income that comes into the biz. (That's very simplified).

Even at my level of income my accountant recommends against me doing an Inc or LLC for tax purposes. He's super conservative though.

So I'm not saying don't do an LLC am only saying carefully review your options. The added paperwork and regulations may not be worth it.

[Larwee]

gallito89, you said:

Thanks for your input guys, it turns out that you don't need to report it if you make less than $600 self-employed (so if I only have 1 source and it was $599, then I wouldn't need to file for it).

The Internal Revenue Service site states you need to file a Federal Income Tax return if you:

Were self-employed with earnings of more than $400.00

[gallito89]

Originally Posted by Linda Buquet

Nope not true either that you need an LLC. You can be joe blow sole proprietor and deduct all your biz expenses. I'm still a sole proprietor and have a much bigger business than many affiliates do. You still do a schedule C for all biz income and expenses just like any other business.

The main tax bene of incorporating is that you only pay tax on the salary you take out - not all the income that comes into the biz. (That's very simplified).

Even at my level of income my accountant recommends against me doing an Inc or LLC for tax purposes. He's super conservative though.

So I'm not saying don't do an LLC am only saying carefully review your options. The added paperwork and regulations may not be worth it.

Well yes but I am also looking at it from the perspective that I am currently on a fast-tracked MBA program, and if I have already started my own LLC it will also look great for my future employers. I'll do plenty of research before I actually do it, I was just thinking that it would be good experience. The more I do while I'm young the better my knowledge base for the future.

[999affiliates]

Linda,
I think you need to find a new accountant.....
Ignoring the liabilities issues his tax advice is wrong.

Originally Posted by Linda Buquet

Nope not true either that you need an LLC. You can be joe blow sole proprietor and deduct all your biz expenses. I'm still a sole proprietor and have a much bigger business than many affiliates do. You still do a schedule C for all biz income and expenses just like any other business.

This is true to a point. For tax purposes you can deduct most expenses but not as many as a business could (mainly eating out and vehicular.

Originally Posted by Linda Buquet

The main tax bene of incorporating is that you only pay tax on the salary you take out - not all the income that comes into the biz. (That's very simplified).

If you pay yourself a salary out of an company then yes you will have to pay income taxes, ss, and Medicare as a company and individual. However, the IRS treats a sole-owner LLC as a sole-proprietor. An LLC offer pass through taxation, which means each year you can elect to be taxed as either an incorporation or on your personal income taxes.
So yes you would need to pay income axes on all "taxable" profits in a business. i.e Revenues - Expenses = Net income is "taxable" with a few exceptions.