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It sounds like you could do with some tax planning! Unfortunately, these are too many unknowns for a specific answer here.

First - setting up an LLC (or perhaps taking an S-Corp election?) would depend on a variety of factors. How high is your 1099 compensation? Would you prefer the "hands off" route and possibly ask for a W-2 instead of a 1099 from your second job (if possible, and if I understood that part of your question correctly), or would you like to set up an LLC and expense various things yourself, in addition to any other tax savings that come with having an LLC? Usually, the LLC route can offer more tax savings, but a more "hands on" approach from you - e.g. a possible additional S-Corp tax return + putting yourself on payroll (if the S-Corp route makes sense); accounting for your LLC (with or without an S-Corp election), etc.

If you'd like to schedule a (no-strings/complimentary) consultation with my firm (we work predominantly with medical service providers and specialize in tax planning), let me know. You can email my business partner, Paulina S., for more information or to set up a call - her email address is paulina (at) ratio.cpa - she handles all initial client inquiries and can help steer you through your options. We do our best to have the consultations be as transparent and informative as possible.

Apologies that I could not help more - but taxes are never straightforward, more information is needed, and making mistakes now can cost you in the future.

Yes and no.

Technically, I would code it to a contra-revenue account, something like Sales Returns and Allowances (that would be a general ledger account for a business that sells products). So you would debit or increase that account on the income statement and credit or decrease your bank balance on the balance sheet.

The effect would be that it would lower your profit (bottom line). So in that sense, it’s like a business expense, but it’s not actually an expense, it’s a reduction to overall revenue.

Seeing that there was no paperwork to document the loan, I assume no interest was ever paid. While the intention may have been for it to be treated as a loan, neither party behaved like it was a loan (by having a written promissory note, periodic payments, interest to be paid, etc.).

If your father every got audited and this issue arose in audit, he would first have to prove that the receipt of the $30,000 was not income to him. Again, it’s difficult for your father to assert it was a loan when it was never treated as such. Assuming that you could prove it was not income, then the IRS might argue that it was a loan (if that was in the IRS’ best interest). If the IRS could win on that front, they’d go after your father’s friend for imputed interest income, as you can’t have a loan with no interest. However, if it ended up being treated as a gift, I recommend the following.

To keep things simple, your father should repay the $30,000 in two pieces, making sure not to exceed the annual exclusion (presently $15,000) by giving no more than $15,000 each calendar year. So it would take two payments – one for $15,000 this year (2021) and the second for $15,000 next year (2022). By doing it this way, your father would not need to file a gift tax return for the total transfer of $30,000 back to his friend. Also, your father would not need to pay any tax.

To summarize, I would assume it was a gift all along and take the aforementioned steps to do damage control. Of course, it would have been better to simply have done things right from the beginning, rather than try to find a legal way out of the mess later.

First, congratulations on your decision to form your own practice!

To answer your question, I will make a few comments.

First, a PLLC and an LLC are both creatures (creations) of state law. I practice as a CPA in Texas, so I cannot speak to Washington state law. From my experience in Texas, if you have a license (such as a CPA license), you are required to form a PLLC instead of an LLC (if you choose to operate through a limited liability company).

Second, from a federal income tax perspective, there is no difference in federal income tax treatment between a PLLC and an LLC. Why? Because for federal income tax purposes, there are generally only four (4) ways to get taxed – as a disregarded entity, partnership, C corporation, or S corporation. If you will be the sole owner of the company, your choices are really disregarded entity, C corporation, or S corporation. You can’t have a partnership with just one partner.

Third, I think you’re asking which is better (a PLLC or an LLC) in terms of federal income tax treatment. If that is your question, then they are treated the same. Again, the actual federal income tax treatment depends on how to choose to treat it – going back to the four choices I listed above. So the treatment doesn’t depend on whether it’s a PLLC or LLC.

I hope that answers your question. Feel free to contact me if you wish to engage me to help.

I don’t think this is a reason to panic. On the other hand, I do think this is a reason to take proactive steps, which you have already been doing.

If you have not already done so, I recommend you prepare and file your return showing just the one Form W-2. You should not show the duplicate Form W-2. Hopefully, you’ve been documenting (writing down dates, times, names, phone numbers called, etc.) for all your contacts (with your employer, Social Security Administration, and Internal Revenue Service). Because you’re in a panic and quite motivated now (and the details are fresh in your mind), you should compose a letter to the Internal Revenue Service right now, to explain why you reported just one Form W-2 and to document all your efforts (even though unfruitful) to make things right.

Once you file your return, the Internal Revenue Service will process it. You can expect that they will send you a notice for what they perceive is unreported income. Don’t be surprised if they also assess penalties and interest. However, if you write your letter now, you will have most of the details on hand for when you get the IRS notice. Then, you’ll just need to tweak your letter to directly address the points raised in the IRS notice. If you choose, you could even include a copy of your letter when you file the return (if you paper file it). However, I don’t recommend it. The letter will probably be ignored. Also, if you paper file, the processing of the return will definitely be delayed.

So, I wouldn’t panic. You haven’t done anything wrong. Unfortunately, know that you have a long road ahead of you. There is light at the end of the tunnel, but it’s a long tunnel ahead of you.

Daniel, good question. To answer your question, I will make two comments.

First, because your son is underage, you should put just your information as the responsible party on the Form SS-4 (Application for Employer Identification Number) or its online equivalent on the IRS’ website.

Second, I think your question reveals some confusion. On the Form SS-4 (or its online equivalent on the IRS’ website), you should indicate that there will be two LLC members (you and your son). After filing the Form SS-4, if you take no further action to elect to treat the LLC differently for federal income tax purposes, then the LLC will be treated as a partnership for federal income tax purposes (because you told the IRS on the Form SS-4 or its equivalent that there will be 2 LLC members). If you want to treat the LLC as something other than a partnership (such as a C corporation or an S corporation), you cannot accomplish that goal just by filing the Form SS-4 or its equivalent. That would take a second step with a different form.

I hope that helps. Feel free to contact me if you wish to engage me to help. Even though I practice as a CPA in Texas, I have clients in other states.

Good question. It sounds like you already have a buyer and sales price in mind, so it sounds like a like-kind exchange isn’t an option for you.

You are right that a sale after only 9 months would force short-term capital gains tax on you. However, I you could hold the property for more than one year, you would get long-term capital gain tax treatment. Perhaps you could work out a deal with the buyer to rent it to him/her long enough to get you well over the one year holding period. Perhaps you could come to an agreement that would be beneficial for both of you.

Feel free to contact me if you wish to engage me to help. Even though I practice as a CPA in Texas, I have clients in other states.

First, congratulations on being a first-time LLC owner!

To answer your question, yes, you can pay tax on the net profit each quarter via Form 1040-ES instead of trying to estimate what your profit will be for the entire year. Your approach is perfectly reasonable and acceptable. To answer your other question, you can pay unequal quarterly payments for estimated income taxes.

Feel free to contact me if you wish to engage me to help with anything. Even though I practice as a CPA in Texas, I have clients in other states, as I do multi-state returns.

If we are going to use exact terminology, an LLC taxed for federal income tax purposes cannot have “retained earnings.” Retained earnings is a term used in the context of a C corporation or S corporation.

You are correct that an LLC is a pass-through entity (assuming that it’s taxed for federal income tax purposes as a disregarded entity, partnership, or S corporation). If the LLC is taxed for federal income tax purposes as a pass-through entity, then, yes, owners will pay tax on their percentage, regardless of whether it’s reinvested, left untouched in members’ capital, or distributed to owners.

Feel free to contact me if you wish to engage me to help with anything. Even though I practice as a CPA in Texas, I have clients in other states, as I do multi-state returns.

Good question.

First, to make sure I understand the facts, I’ll summarize the background. You’re saying that as a minor, you earned money in the past. Because you were a minor, your mother set up multiple bank accounts (in your name – not hers) at her bank and deposited your earnings in those accounts. Presumably, if there were any taxes to file and pay on your earnings, that was addressed annually, along the way. Now, you are an adult and wish to transfer money to a new bank account.

Based on the facts you stated, the money being transferred to a new bank account would not count as income. I imagine that you should have no trouble getting access to the funds in the old bank to transfer to the new bank because the multiple accounts at the old bank are all titled in your name. Even if it was the case that your mother was a joint owner on those accounts, you’d still full access because each of you is a joint owner (in my hypothetical).

Keep in mind, your fact pattern doesn’t specify what type of account is involved, so I assuming they’re just plain bank accounts, such as checking, savings, money market, or certificates of deposit. Depending on the type of account involved (such as a traditional IRA or Roth IRA), they answer might change.

I hope that helps.