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Started By
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Starting LLC to collect bonus
Posted on 8/5/23 at 6:56 pm
Posted on 8/5/23 at 6:56 pm
I’m in sales. I get a modest salary and a quarterly bonus if I meet/exceed my goals. I do well. Outside of 3 kids, I have NO deductions. Wife stays at home, kids aren’t in school yet, and I get hammered by taxes. Can I open an LLC and have my company make the bonus out to my LLC and pay myself out of that? Trying to think outside the box.
10
Posted on 8/5/23 at 6:58 pm to FishinTygah84
Yes. Then pay the same taxes at the end of the year when you file as S-Corp. End thread
Posted on 8/5/23 at 7:01 pm to FishinTygah84
Rosy finch boys LLC
Get rosy get it done
Get rosy get it done
Posted on 8/5/23 at 7:02 pm to Cooler
quote:
Yes. Then pay the same taxes at the end of the year when you file as S-Corp. End thread
Yeah except he can write off expenses through his LLC. There’s always something to squeeze through the LLC to reduce income. Vs w-2 where you have no shot.
So it’s not going to be the same payment.
Thread’s not over.
Posted on 8/5/23 at 7:06 pm to Im4datigers
Who is paying him and are they willing to contract with his LLC
What expenses are realistic going to claim
What expenses are realistic going to claim
Posted on 8/5/23 at 7:28 pm to Im4datigers
quote:
Thread’s not over
Oh. Sorry. Let's hear about all these deductions. Portion of cell phone, home office? mileage? Not sure he can actually claim any of that...but maybe?
This post was edited on 8/5/23 at 7:30 pm
Posted on 8/5/23 at 8:08 pm to FishinTygah84
Many companies have a policy that you can’t be an employee and contractor/1099.
Yes, more deductions with contractors
Yes, more deductions with contractors
Posted on 8/5/23 at 8:13 pm to Im4datigers
quote:
There’s always something to squeeze through the LLC to reduce income.
Yay! Tax Fraud.
Posted on 8/5/23 at 8:18 pm to FishinTygah84
quote:
have my company make the bonus out to my LLC and pay myself out of that?
Wouldn't the self employment taxes from the LLC income be higher taxes than your paying now
This post was edited on 8/5/23 at 8:19 pm
Posted on 8/5/23 at 8:22 pm to weadjust
Possibly. Just was seeing if there were any “yes that’s what I do” or “no way, you’re crazy” type of answers
Posted on 8/6/23 at 2:05 am to FishinTygah84
You can’t be both an employee and a contractor to the same company, unless it is two completely distinct roles.
Not to mention, what ever paltry income tax savings you can find based on likely BS “business deductions” will get overshadowed by having to pay both halves of Medicare tax, at a minimum.
Wage earners get hosed on taxes. Max out 401(k), HSA, and see if your company offer’s non qualified deferred compensation
Not to mention, what ever paltry income tax savings you can find based on likely BS “business deductions” will get overshadowed by having to pay both halves of Medicare tax, at a minimum.
Wage earners get hosed on taxes. Max out 401(k), HSA, and see if your company offer’s non qualified deferred compensation
Posted on 8/6/23 at 3:57 am to FishinTygah84
If taxes are a concern, you probably need a comprehensive tax strategy. Maybe a tax pro would be worth the expense.
Posted on 8/6/23 at 7:02 am to FishinTygah84
Probably not, as stated earlier you can't really be a w2 AND 1099 for the same entity.
However, for argument sake if you were a 1099 then you could deduct your expenses.
Also, if you filed as an S-corp you could take part of your income as salary and part as a distribution. The distribution portion saves you on Medicare taxes.
However, the less you take as salary the less you put in retirement.
Again, this is purely hypothetical because you probably can't do it anyway.
Ultimately, there's really no magic way to avoid taxes. IRS is going to get theirs at some point or another.
However, for argument sake if you were a 1099 then you could deduct your expenses.
Also, if you filed as an S-corp you could take part of your income as salary and part as a distribution. The distribution portion saves you on Medicare taxes.
However, the less you take as salary the less you put in retirement.
Again, this is purely hypothetical because you probably can't do it anyway.
Ultimately, there's really no magic way to avoid taxes. IRS is going to get theirs at some point or another.
Posted on 8/6/23 at 7:19 am to GEAUXT
Thanks. This is kinda what I needed to hear. Looks like I’m gonna buy a rental or two…
Posted on 8/6/23 at 7:39 am to FishinTygah84
quote:
Looks like I’m gonna buy a rental or two…
Assuming you mean for tax purposes...
Another "not so fast my friend"
Rental income is considered passive. Therefore, deductions can only be made against the passive rental income and not your w2 income.
The exception to this is if you achieve real estate professional status (which takes 750 hours a year or more in participation). The other is with short term rentals. If you do the MAJORITY of the work and dedicate (I think) ~100 hours your income is now considered active and can be deducted against your other W2 income. The only pitfall here is not to provide too many services because then you end up having to pay payroll taxes on your rental income.
Long story short, like I said above, the IRS will get theirs.
Posted on 8/6/23 at 12:12 pm to GEAUXT
quote:
Also, if you filed as an S-corp you could take part of your income as salary and part as a distribution. The distribution portion saves you on Medicare taxes.
that is what i do.
saves you on SS/medicare taxes. I only pay that on the W2 i write myself. also gives me a ton of deductions to the business side/k1 dividend distribution which in effect lowers the actual income tax you normally pay on that distribution.
multiple benefits to it
being he is already a W2 for somebody else he is in a different situation. he could 1099 for another entity on the side. i have done that before also back when i was an employee elsewhere but as you stated not for the same entity.
This post was edited on 8/6/23 at 12:16 pm
Posted on 8/6/23 at 12:14 pm to GEAUXT
quote:
Rental income is considered passive. Therefore, deductions can only be made against the passive rental income and not your w2 income.
correct. i do this as well.
Posted on 8/6/23 at 10:36 pm to FishinTygah84
To be honest the most $ I’ve ever saved on taxes has been related to real estate but at the end of the day you have to spend money to save money. We just developed a new commercial building and currently working on a cost segregation study that’s going to be a large tax savings. Commercial real estate is hard to beat. You should get serious about becoming an investor/owner if you have a large income that would support it.
Posted on 8/7/23 at 2:05 pm to GEAUXT
quote:
However, for argument sake if you were a 1099 then you could deduct your expenses.
Also, if you filed as an S-corp you could take part of your income as salary and part as a distribution. The distribution portion saves you on Medicare taxes.
Of course, you are also risking the kick in the teeth that IRS could review your file and decide you actually are an employee and not a contractor; therefore, you lose your tax deductions & S-Corp status, and now owe back taxes with interest and penalties.
Posted on 8/7/23 at 3:13 pm to FishinTygah84
Not near enough juice for the squeeze
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