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Answer Tax QuestionsDBA or LLC
Asked Saturday, May 29, 2021 by Andrea B.As a CPA, I came across this website and joined just last week, and I just came across your question.
If you are limiting your choices to either a dba or an LLC, then I would recommend an LLC, for three reasons.
First, an LLC gives you some legal liability protection if you are ever sued. A dba does not give you any legal liability protection.
Second, from a tax perspective, both a dba and an LLC would be taxed the same (for federal income tax purposes), assuming that you did not make any election to treat the LLC differently. However, having an LLC gives you the option to elect to treat the company as an S corporation. You don’t have that optionality with a dba. Keep in mind that making the S election for the LLC would require that you file a separate federal income tax return for the business each year. However, the tax savings that an S corporation election can afford could make it worthwhile, especially because it sounds like you intend to grow the business.
Finally, the LLC probably gives your business a little more legitimacy and professionalism, in the public’s eye.
Consider that you could choose the LLC and have the LLC get the dba – the best of both worlds. So you don’t necessarily have to treat this decision as one where you must choose one or the other.
I congratulate you on planning for the future. If you wish to engage me to help, please feel free to reach out to me.
Can I Increase My Full-Time Withholding to Offset My Freelance Income?
Asked Thursday, May 20, 2021 by Matthew M.As a CPA, I came across this website and joined just last week, and I just came across your question.
Good question. I commend you for planning ahead so that you don’t end up owing a large balance or incurring the estimated income tax penalty (Form 2210) come tax-time next year.
Both of your suggestions are acceptable. You are right that there is still a lot of time left in the year, so increasing your federal income tax withholding is an option. Alternatively, you could start making estimated income tax payments via Form 1040-ES for 2021.
S corp questiob
Asked Monday, March 15, 2021 by Anne S.As a CPA, I came across this website and joined just last week, and I just came across your question.
Unfortunately, yes, you need to file a Form 1120S, which will include the Schedules K and K-1 for 2020. S corporations must file a return every year, whether or not there is any activity. Don’t forget about any state return, such as a state income tax return, franchise return, or annual report. Feel free to contact me if you wish to engage me to help.
2019 - Itemized deductions-State Property & Income tax Limitation
Asked Monday, December 24, 2018 by an anonymous userProperty taxes remain fully deductible for taxpayers in a business or for-profit activity, so taxes paid on rental realty can be taken in full on Schedule E.
2019 - Alternative minimum tax (AMT) exemption amounts
Asked Monday, December 24, 2018 by an anonymous userIndividual = $71,700
Married Filing Jointly = $111,700
Married Filg Separately = $55,850
Estates and Trusts = $25000
2019 - Standard deduction
Asked Monday, December 24, 2018 by an anonymous userFor 2019, the additional standard deduction amount for the aged or the blind is $1,300. The additional standard deduction amount increases to $1,650 for unmarried taxpayers.
For 2019, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed the greater of $1,100 or the sum of $350 and the individual’s earned income.
2019 - Ordinary Income Tax Rates
Asked Monday, December 24, 2018 by an anonymous userFor tax years beginning after December 31, 2017 and before January 1, 2026, seven brackets will apply to individuals: 10%, 12%, 22%, 24%, 32%, 35% and 37%.
No change has been made to the filing statuses that apply to individuals.
2019 - Itemized deductions - Miscellaneous Itemized Deductions
Asked Monday, December 24, 2018 by an anonymous userAmong the items included in this elimination are:
All unreimbursed employee business expenses;
Union dues
Brokerage fees
All expenses related to tax return preparation;
Appraisal fees for charitable contributions;
Investment expenses.
2019 - Itemized deductions-Charitable Contributions
Asked Monday, December 24, 2018 by an anonymous userFor any contribution made in a tax year beginning after December 31, 2016, the requirement of a charity to provide contemporaneous written acknowledgement as substantiation for any contribution of $250 or more is repealed.
Beginning in 2018, no charitable deduction is allowed for any payment to an institution of higher learning in exchange for which the contributor is given a right to purchase seats at an athletic event.
Prior to the enactment of the new law, charitable contributions were deductible with certain ceilings based upon a percentage of AGI. A 50% of AGI limit applied to cash contributions to public charities and certain private foundations.
2019 - Itemized deductions - Residence Interest
Asked Monday, December 24, 2018 by an anonymous userIn addition, the Act reduces the amount of eligible Acquisition Indebtedness borrowing to $750,000 for any debt incurred on or after December 15, 2017.
A taxpayer who entered into a binding contract before December 15, 2017 to close on the purchase of a residence before January 1, 2018, and who actually closes on the acquisition before April 1, 2018, shall be considered to have incurred the Acquisition Indebtedness before December 15, 2017.
ii. The old Acquisition Indebtedness limits continue to apply to taxpayers who refinance existing Acquisition Indebtedness as long as the indebtedness resulting from the refinancing does not exceed the amount of the original debt.
For 2017, the deduction for Qualified Residence Interest was limited to interest paid on up to $1,000,000 of borrowing that qualified as “Acquisition Indebtedness” and up to $100,000 of borrowing that qualifies as “Home Equity Indebtedness”.
Acquisition Indebtedness being defined as debt incurred to acquire, construct or substantially improve a principal residence or a second home, with no restriction on the use of Home Equity Indebtedness.