Fucking Taxes
- Thread starter efeezy
- Start date
Wesley Snipes is sitting in prison because of "creative accounting."
Obviously not creative enough
Well then if it were me I would stick with the normal scenario. The accountants that I have worked with over the years usually suggest sticking to the 10% rule. I have had years where my expenses were over that but I have had him back it off in those years for some of the reasons mentioned before.
More than likely you probably missed something in your expense report that you turned in to your Act. I'm guessing you have probably been self employed for a couple years, usually when that's the case you probably miss deductions that you don't even realize you should be deducting ie..millage to your accountants office, the lunch you had with your neighbor (sales meeting) or the magazine you buy at the grocery store, or the role of tape, ect. so he calls it normal because that's usually what happens people miss real deductions.
Being self employed is full of risk and hassle. Your likelihood of being audited goes up by being self employed and your chances of being audited are probably the same under all 3 of the scenarios he gave you, but even with that said its still very very slim. In that slim chance of being audited all the tax man is looking for is documentation. In today's day and age creating that documentation is easier than ever.
At the end of the day you have to live with your decisions, so if over paying on your taxes helps you sleep then you have to do what makes you comfortable.
Feez (and other Californians) - We should probably trade notes.
I met with an EXPENSIVE but very well-reputed tax attorney last week, and my head is still spinning. I have to prepare a bunch of work for tomorrow's meeting.
The #1 thing he wants me to do is move from LLC to S-Corp (which we're doing NOW so we can make it retroactive in 2010), and add someone like my mom as a 1% owner.
He said that single-member LLCs are being audited like CRAZY lately - way more than anything else. It's the easiest path to entry, so it's the easiest path to making mistakes and easiest thing for scamming. Also, the S-Corp has its tax advantages.
He also said that at my income lately, I need to buy a house and stop renting. This made me shit myself - I can list 50 things that could go wrong and make that revenue stream dry up and then I'm fucked with some crazy expensive house in CA. But he honestly has nowhere to "hide" my profits.
I can start a thread when I understand it better, but even though many of us compete on the web, we should help each other in the tax situation.
Bottom line - there is no legal way to reduce or eliminate your taxes in a meaningful way if you are an affiliate marketer or "small" company making bank (let's say mid 6 figures or higher for the purposes of this discussion).
Yeah you can write off a bunch of shit, but when you make real money it doesn't do jack shit to your overall tax bill like it does if you're only making 100-200k.
Yes you can do a bunch of shady shit, but you will get caught eventually and regret it. Trust me.
The only other thing you can do is defer paying some taxes by setting up things like defined benefit plans, and other shit that's tax deductible in the short term. This is like a forced savings plan and you can't spend the money now, so that doesn't solve much.
All you people saying otherwise, I challenge you to tell us about *1* legit way that someone making "real money" can legally reduce their taxes in a meaningful way and keep more of that cash in their pocket. Just one.
Yeah you can write off a bunch of shit, but when you make real money it doesn't do jack shit to your overall tax bill like it does if you're only making 100-200k.
Yes you can do a bunch of shady shit, but you will get caught eventually and regret it. Trust me.
The only other thing you can do is defer paying some taxes by setting up things like defined benefit plans, and other shit that's tax deductible in the short term. This is like a forced savings plan and you can't spend the money now, so that doesn't solve much.
All you people saying otherwise, I challenge you to tell us about *1* legit way that someone making "real money" can legally reduce their taxes in a meaningful way and keep more of that cash in their pocket. Just one.
I'm definitely interested in the move to an S-Corp. When you get some scoop on it, shoot me a PM or get a thread going. I know LegalZoom can do the switch easily. I just need to research the payroll aspect and any other issues I should be concerned with.
Yeah that's the problem. If you're making $300k a year as a single member LLC, how many durable goods can you realistically buy for your office? How many donations can you make to charities? Even after all this and writing off your office, car usage, cell phones, dry cleaning, etc. if you end up with $30k in deductions, that doesn't do shit to $300k, so you're fucked. I even had $40k in medical and $25k in home improvements that were deductible, yet I still owe $27k to the democrats, I mean government.
Will do. I JUST picked up this book:
[ame=http://www.amazon.com/gp/product/0917510313/ref=pd_lpo_k2_dp_sr_1?pf_rd_p=486539851&pf_rd_s=lpo-top-stripe-1&pf_rd_t=201&pf_rd_i=0917510194&pf_rd_m=ATVPDKIKX0DER&pf_rd_r=12QCCGGDSM3XSJT704T5]Amazon.com: 422 Tax Deductions 2010 Edition (For Businesses & Self Employed Individuals) (422 Tax Deductions for Businesses & Self-Employed Individuals) (9780917510311): Bernard Kamoroff C.P.A.: Books[/ame]
Reading it while my car gets fixed (2011 deduction woot woot), and I must say I'm very impressed so far.
Seriously. It seems like real estate is where to go - there is a cutoff point where tax-wise, it makes sense to buy over rent. I think it was around $3k, but I'll let you know tomorrow night.
But I don't think my tax attorney really understands my situation from our first meeting. I mean, once you get the SEO game rolling, you can make some SERIOUS profits without having to expense much or own assets. My empire not where yours is, but it's getting there.
For instance, he talked about a bigger house so I can entertain "clients". Dude - I don't even HAVE clients. Do I? I don't sell anything, and I'm not officially affiliated with any of the companies whose products I'm actually promoting!
I have a lot of questions still unanswered. For instance:
- ANYONE can technically be a "customer" of my website. But they aren't buying from me - they're buying from whoever I'm affiliated with. So if they're users of my sites (some of my friends are), can I expense stuff with them or do I need to do more official business activities with them?
- If I have a website about XYZ, can I write off anything that has to do with XYZ? Like my HangoverCures website... can I write off alcohol expenses?
- Nearly all of my expenses are SEO service related, which I assume will go in the "Advertising" category*. PayPal is often used. Do I need to send DFB a 1099?? I spend more than $600 with them, as do all of us using them... do I send PayPal forms? What about writers who do contract work? They're not employees, and I don't even send them a check. I do PayPal or Odesk. How the hell does that get reported?
Crap like that I really need to figure out. I have like 20 other questions still not understood.
Nervously excited for this meeting tomorrow.
* (I don't think category matters a whole lot, but you don't want too many things in Misc/Entertainment or else that could trigger alarms)
Will do. I JUST picked up this book:
Amazon.com: 422 Tax Deductions 2010 Edition (For Businesses & Self Employed Individuals) (422 Tax Deductions for Businesses & Self-Employed Individuals) (9780917510311): Bernard Kamoroff C.P.A.: Books
Reading it while my car gets fixed (2011 deduction woot woot), and I must say I'm very impressed so far.
Seriously. It seems like real estate is where to go - there is a cutoff point where tax-wise, it makes sense to buy over rent. I think it was around $3k, but I'll let you know tomorrow night.
But I don't think my tax attorney really understands my situation from our first meeting. I mean, once you get the SEO game rolling, you can make some SERIOUS profits without having to expense much or own assets. My empire not where yours is, but it's getting there.
For instance, he talked about a bigger house so I can entertain "clients". Dude - I don't even HAVE clients. Do I? I don't sell anything, and I'm not officially affiliated with any of the companies whose products I'm actually promoting!
I have a lot of questions still unanswered. For instance:
- ANYONE can technically be a "customer" of my website. But they aren't buying from me - they're buying from whoever I'm affiliated with. So if they're users of my sites (some of my friends are), can I expense stuff with them or do I need to do more official business activities with them?
- If I have a website about XYZ, can I write off anything that has to do with XYZ? Like my HangoverCures website... can I write off alcohol expenses?
- Nearly all of my expenses are SEO service related, which I assume will go in the "Advertising" category*. PayPal is often used. Do I need to send DFB a 1099?? I spend more than $600 with them, as do all of us using them... do I send PayPal forms? What about writers who do contract work? They're not employees, and I don't even send them a check. I do PayPal or Odesk. How the hell does that get reported?
Crap like that I really need to figure out. I have like 20 other questions still not understood.
Nervously excited for this meeting tomorrow.
* (I don't think category matters a whole lot, but you don't want too many things in Misc/Entertainment or else that could trigger alarms)
I went with an S-corp this year. After speaking with a handful of lawyers locally, I looked at the documentation they provided me and then from Legal Zoom and noticed there really wasn't much of a difference. The paperwork is actually not that complicated, I think the biggest thing with a lawyer is deciding what kind of entity you want to be. But if you already know that, I didn't see the justification in difference of cost. But then again, I doubt anyone ever regrets using a lawyer in this situations just to stay on the safe side.
Regarding some of the payment stuff, take my advice with a grain of salt and check with your attorney, but my accountant had me use anything business related as an expense. Dinners, drinks, Affiliate Summit, anything that was done which I can prove to be business related.
Regarding Odesk, these are all independent contractors so you don't have to fill out any forms. Same with Paypal, as long as they aren't W-2 employees. But obviously double check with your guy.
My accountant keeps telling me to buy property as well since the tax benefits are enormous. But to live in the desirable places around here you have to pay out of your nose. You don't have to pay city taxes where your at right? Maybe we just invest in a nice beach house out your way lol
Briefly:
*Section 179 business asset purchases (accelerated deprec. recognition)
*Self-managed 401k/SEPs (you'd be amazed what you can get away with "investing" in)
*Leasebacks of your co's tangible property from a 2nd company also owned by you (tax shifting to get better tax treatment, slightly complicated, but legit).
*Leasebacks/licensing of intangible prop (trademarks, copyright, etc) between wholly owned subsidiaries
*Sub-S "reasonable" division of your profits between income vs. wages
*Usage of any "Urban Renewal/Economic Development/Gov't do-gooder Handout" programs designed to give great tax breaks for locating your biz in a certain section of town, hiring "disadvantaged/economically sensitive" employee, etc (varies by state/municipality, but lots have them)
my financial planner has software for all of this... but yes i do most of this on the list
Thanks Capo, I was hoping for those answers and hope to confirm tomorrow. I'm cool with getting "pretty aggressive" for 2011. Whatever happened in 2010, minus a few things I can retroactively fix from the past three years, is a wash and that's fine.
I'm down in the South Bay (Hermosa), which is LA county but isn't the city of Los Angeles - that's where people are getting screwed even harder - Talk to BluAffiliate about that one. I'm not sure what he's doing. He talked about moving the business to Santa Monica.
I love living alone, but living with other entrepreneurs would probably not be a horrible idea.
Also happy Mont stopped in, was hoping that would happen. :updown: I'm doing NONE of that stuff, and have basically none of the 422 possible deductions in the book I linked above. Yikes
My CPA is a libertarian, so he's not afraid to be aggressive. He has a ton of experience with tax law, and has gotten many clients of mine out of some deep shit with the IRS.
This kind of thing only lowers your corporate taxes - which are already easy to get as low as you want (until you're talking 10s of millions+. The trick is how to get the money into your hands via salary, dividends etc. so you can spend it without paying a shit ton of taxes. So this type of thing only really applies to huge multi-national corporations that accrue and retain millions/billions in earnings and doesn't really apply to us guys.