Possible tax deductions
 

I was inspired to create this thread from another one about taxes.

I have a LLC in NJ.

Can someone(s) name some of the deductions I can list/file/do LEGALLY?

Hardware

software

domains

content

design

some of the footage of your home if it's a home based business and you own it. (the house I mean... versus renting) and a percentage of the electric....

business meals

any other expense that's related to the business.

subcontract work

office supplies & decor

anything really... as long as it's related to your biz, you can write it off. With certain exceptions and limitations of course... you'll have to get specifics for your area from a tax accountant on things like square footage percentages, entertainment, etc....

may I ask why you chose the LLC model?

I wish I could write off my college tuition but my acc't said it's not allowed.

It would also be nice to write off my car but I don't plan to use it for business -- maybe if you lived in Oahu I can drive back and forth to your house once a week and call it a business trip :P

My Acc't recommended me to go LLC over the other options (s-corp, personal, etc.)

Im not sure I understand.

ANYTHING that is used / spent in the pursuit of business, you can write off. Anything used in your business, write off.

Before the end of the year, I always dump a bunch of money on new computer equipment. Fuck it, if I cant have it, the IRS isnt gonna get it.

I am at a point where the more I spend on business expenses, the happier I am. If I dont spend it, the IRS will just take it. Fuck that. Nothing like being able to write off homosexual pornography on your taxes.

And I recently found out about municipal bonds. The returns are not more than 6%, but they never lose money, and the best part is I dont have to pay taxes on that money... yet. And given that I dont know how the business is gonna be doing in the very near future, I dont want to shell out a bunch to Uncle Sam if I dont have to. So the bulk of my money is going into municipal bonds before December. I am a schmuck, I dont pay quarterly, I pay yearly and just take the penalty. Taxes 4 times a year? What kind of sick hell is that?

in certain circumstances you can write off mileage and sometimes even the whole car if it's used for business only... but not if your business is in NJ and you are in O'ahu.... lol

and do you find it to be beneficial to you? And if so, how?

How much is the penalty for not paying quarterly?

Municipal bonds -- that's an idea.

He listed reasons why I should choose LLC over the other choices and they were good reasons however I can't really think clearly right now (long story -- bad day).

All I know is that he when I met with im last July, he strongly recomended me to form an LLC.

However, I don't like the thing about corporate profits being taxed twice. They should make a law that if you are the sole worker of a company, then you only get taxed once. Fuck the feds!

For me, I think it came out to a couple thousand last year. And considering how much I have to send them, it doesnt hurt a whole lot. Sucks, but still better than doing it 4 times a year.

And my business is so simple I am not gonna pay some asshole to do it for me 4 times a year. I have two expenses, content and hosting. Mix in a little travel and other misc expenses, its so basic.

And with the tax software out there, it doesnt take a brain surgeon to do basic taxes.

Paying quarterly is easy dude.

Figure out your expenses, deductions and subtract that from the amount you made that quarter and then send the feds a check for that amount.

The 1040-ES form you gotta send in is about 3 lines long.

I never understood the fascination that solo adult webmasters have with incorporating.... if you buy your content, the content is licensed. You have no workers, so there is no risk of personal bodily injury like say, a construction crew would have. What other possible extreme risk can there be for lawsuit that warrants incorporation?

I'll never understand.

Technically, thats only true in a c corp. In an S corp all incom flows through to you personally. So in an S corp you dont pay federal taxes.

In a C corp on the other hand The corporation is taxed as well as the indivdual. But say your corp turns a 100k profit. Well in that case, just pay yourself 100k in salary so the corp makes nothing and you are the only one taxed.

As far as education expenses, I do believe you could set up some type of tuition reimbursement plan to at least offset some of those expenses.

Whoa whoa whoa wait a sec.... I CAN DEDUCT SALARY?????

So if I made $1000 and I paid myself $1000 for the quarter as salary, then my LLC made $0 so 0 taxes?

I know nothing about llc's but under a c-corp that is what you would do.

Edit: you'd still pay taxes, but not twice. The corp makes nothing and you made the 1k as salary.

under an s-corp as I said all the income flows to the individual so you wouldnt pay any federal corporate tax.

I have both a c and an s corp and each has various advantages

I'm going to talk with my acc't about that. :)

salary is a cost to the corporation, yeah.

you'll still pay your personal taxes, tho.

will someone write a book on this shit already!

the demand to know is there. So is the demand to try and get every pennies worth off the dam IRS... fuck :ugone2far

Company wouldn't pay the taxes but you'd owe personal income taxes on that $1000. Much the same as how the S-corp net income passes through the the owner's personal return.

That's what I am talking about.

So if Acme LLC churned $10,000 in one quarter and there were 0 deductions but out of that $10,000, $8,000 went to salary, then would they only be taxed on the $2,000 or the full $10K?

Hey amp...the reasons our company was advised to go LLC when incorporating in Nevada were some of these:

#1 It is now a 2 step process to get sued..it used to be more difficult to sue someone with an llc...but now it's just semi-difficult.

let's say I am driving the company car and ram someone in the rear end and it is clearly my fault.

The person can sue me and all I have to do is give them stock options...then I cost everything out to myself and my business partner hiding it under things like "consulting," "design" etc...and we don't make a profit so the guy doesn't really ever see a dime.

#2 My partner is protected from stupid shit I may do...and vice versa.

#3 We didn't qualify for an S-Corp..don't recall why..

#4 C corp higher taxes.

#5 With an LLC I was able to deduct start up costs that were incurred before incorporating...I was informed I would not be able to do that with S or C corp.

I don't recall what all else was involved for us...but it was what was suggested for our company...based upon size and income.


Edited to add:
we were also advised when our paysites go live that each domain should be incorporated in and of itself...and then fall under an umbrella company.
Why?
Let's say I owned 2 domains and they were owned by the same corporation.
Domain 1 is brought up under investigation in Alabaman for "obscenity."
My company is served a restraining order and this shuts the entire operation down.
However if domain 2 is owned by another one of my corps...then only 1 is shut down while the others continue to make money.

the main point here is to have it appear you have nothing left over at the end of the year. If you have a corp for example, you can buy real estate... and aside from the obvious tax benefits, you can actually depreciate the value of the property at years end, even when the value of it actually increases...

Here's what you do.

Get Enron's FEIN, and use that.
Checks payable to you, at a maildrop.

Nothing to it.

But when you incorporate you get to deduct so much more stuff :)

The reason to be anything other than a sole proprietorship or partnership is to protect your own personal assets. If you owe a business-related debt, your personal assets, bank accounts, etc, can be liened or seized. If you're business is sued your house, car, etc can be taken, frozen, etc.

An LLC is somewhat like an S-Corp with the pass through income, but an S-Corp requires that all 'stockholders' be US citizens.

but you are not a solo webmaster if you have a partner. I was curious why so many solo webmasters think it's beneficial to them..... not many solo webmasters have those types of issues. Certainly not partner concerns, and rarely a company car.

I can deduct everything you can. What can you deduct that I can't as a sole proprietor?

I posted other reasons above...mainly protection for any webmaster whether it be solo or more.

precisely my point PK.... as I said earlier, if you buy your content, there is no worries there... and there are no workers in any high risk injury situations.... so what other risk is there for an adult webmaster that warrants incorporation to protect your personal assets? Who is going to sue you? Your neighbor the bible thumper that doesn't like porn?

Lets not forget the corporate card:thumbsup

:winkwink: :thumbsup :winkwink:

There's always someone else in THIS business who will be happy to find a reason to sue you. Take Norm Zadeh and Perfect10 for example. You can never be sure.

Amp... I've been sued.. or rather my company "thankfully I'm an S-corp" has been named in two complete insane lawsuits related to school shootings. One of those took 3 years from initial filing to dismissal to appeal.. to the appeal reaffirming the initial decision. At any point in time any of us can be named in a lawsuit, some people sue just for the hell of it. At any point during the suit I just came out of (for over $130million) the courts could of easily decided to freeze assets pending a decision. I kinda like to sleep at night knowing that I don't have to worry about some crackpot with a penchant for lawsuits trying to take away my house, etc..

Besided lawsuits, assets can be liened by anyone who you owe money to. Say there was a content provided that you decided wasn't giving you what you paid for.... they could go to court, file a claim against you, win, and have your assets liened until the debt is paid.

well, as it pertains to individual adult webmasters....

I don't necessarily see alot of risk of lawsuit for the average individual webmaster. Certainly not in the 'defective product' category.

bleh... whatever. If it makes someone feel more important to put Inc. after their name, and they're willing to pay the fees for that, then whatever makes them happy I guess.
Sure, you can issue stock to raise capital for your biz.... but if your stock is worthless because it's a paper corp, you're not gonna raise more than beer money.

This is true, but I'm willing to bet not many individual guys are worried about their TGP surviving for decades and being passed on through the family.

providing you're doing well enough to have employees AND give them bonuses.... at that stage you SHOULD be incorporated.

This looks appealing, however, if we are going to do the pass-through to the individual to avoid getting double taxed, then the corp doesn't pay tax and the individual pays personal income tax.... at the individual rate, not the corporate rate.... so for a solo guy, I still don't see this as a benefit.

Amp...you are asking the wrong people here.

I'm not an accountant and I'm not going to have whatever answer needed to make you happy tonight.

I just thought I'd share a bit of info.

hehe.... it's cool bro.... I'm not sure what answer I'm looking for either.... just fishing for some sort of new revelation I guess....

I've been incorporated before... and I find that since I dissolved it and went SP, that life is much better. So, I guess I'm looking for a reason why I should try it again, because I DO need to make some adjustments soon in some way.... what that way will be, I don't know yet.... :winkwink:

As an individual wm...I had intended to incorporate...but I got hooked up with a partner out of Germany and that moved things forward a bit more quickly...and now as I recall because PK reminded me..that is why we didn't qualify for an S-Corp...partner was not american.

Amp... as a sole proprietorship.. all income gets taxes as personal income along with payroll taxes on 100% of it. That's over 13% in social security and medicare taxes via self-employment taxes. Also you can't deduct a fullblown retirement plan or costs of a healthcare plan. As an S-corp (so that I can speak from experience), I first off pay myself a salary..that caps my liability for social security and medicare taxes (remember the medicare portion has no upper limit while the social security tax does). The rest of the net income that passes through to me is not subject to employment taxes, just personal income tax.

Say for round numbers your sole proprietership nets $1,000,000. You would owe 12.4% of $84,900 and 2.9% of the full $1,000,000. That's medicare taxes of $29,000.00 and social security taxes of $10,527.60 on Schedule 1040SE. Now as an S-Corp, say you show a gross salary (for round numbers again) of $100,000. The corp takes a hit on net income for the employer portion of the Federal employment taxes (6.2% of $84,900 and 1.45% of $100,000 or $5263.80 and $1,450.00 respectively). The other half comes from the net of your 'salary check' but the big difference is that instead of paying 2.9% on the entire 'net income' of the sole proprietorship ($29,000) for Medicare, you're paying 2.9% total on the $100,000 salary you paid yourself ($2,900). Effectively saving yourself $26,100.

Also in the above example, the net income passed through to the individual from the corp would be $1,000,000 - $100,000 - $6,713.80 or $893,286.20. You still catch the $100,000 salary on your personal return, but not the $6,713.80 or all of the dang self-employment taxes.

No one can tell I'm wired tonight can they? Took my boys to see Aerosmith and Kid Rock.. I have no voice and I can't hear.

thanks PK... yeah, you seem a little wired.... hehehe.... :winkwink:

it's been a few years, but I found a site that broke it all down for me very nicely... I think if I make this move again, it'll be to an LLC... looks much more promising (and gives me far greater peace of mind than what I've been getting from this board on the subject) after doing some reading here: http://www.legalzoom.com/law_library...roduction.html

check it out if you (or any of you reading this) got a few minutes and if you see something that doesn't look right, I'd be interested in hearing your thoughts on what they have written there on it.....

(I won't do a general or an S corp again though.... not an option I'm willing to consider again.)

From the url you cited..
"However, member-employees of an LLC are required to pay social security and medicare taxes on the profits of an LLC over and above the member's salary. Stockholder-employees are not required to pay these taxes on profits over and above the stockholder's salary."

That sounds like to me that LLCs member employees still get the same medicare tax hit as a sole proprietorship versus the break given S-Corp or General Corp stockholder employees.

true.... definately a downside. Nothing is perfect. :winkwink:

definately something to discuss with the tax man next season....

Just a side note about this one... Be very careful with this. If the IRS decides to audit, and they examine your home office, if there is anything in there that is not business related, they can deny your claim, and charge you a penalty. It doesn't happen often, but, it is a possibility.

:2 cents:

claiming a percentage of your residence as a home office is only suggestable if you A) Rent or B) have no plans to sell your home ...

If you claim a home office, when you go to sell your home, you are responsible to repay the amount you wrote off each year ...

more of a nuisance than anything .... :(

renters are the only exemptees to this

PK, will you be my tax advisor ? purty please :)

haha.. I spent the first 20 years or so of my working life (even before I was out of high school) as a bookkeeper, accounting clerk, accounting manager, and so forth. I don't even do my own taxes anymore just so there's that buffer between myself and the IRS, but I try to keep informed of what's going one and not that much has changed since 1995 when I stopped doing accounting in the private sector. The college degree (Bachelor of Accounting) is good for something.

What tax software do you recommend? I'm like you, I don't pay it quarterly either. I just paid the penalty. But, I am thinking of changing it this go around. Figured there was some tax program that could help me do it and keep track of everything for the quarter.

Exactly!! This topic always gets me irritated, because of all of the misinformation. As an LLC and SP you can claim the exact same things for deductions.. not much is different, except you are more portected from lawsuits..kinda. For tax reasons, there is no purpose to an LLC. We paid the same taxes with our LLC as we did before we had the LLC. With our S Corp, much better. Yes, an S Corp takes more to get set up, but basically, when we formed our LLC, we just wasted $1100, because it's getting disolved at the end of this year.

Talk to a corporate accountant before doing anything... get the full story and ask questions!