Different kind of porch pirate…

I’m neither an attorney nor a licensed CPA or financial adviser and this shouldn’t be taken as professional advice.

I recommend that people not take blind advice from random people on the internet. While you can incorporate, wages from a W-2 day job are still personal wages and get taxed as personal income, they don’t become part of the corporation just because you incorporated.

In the case of an LLC (sole proprietorship), your business income is also your personal income for the purposes of income tax, but you can mitigate a lot of your tax burden on anything earned through the business. For the most part, it works if you are actually self-employed and run a legitimate business. You can NOT take your personal W-2 wages from your job and say they are profits of the business.

Your business can pay for dinner hosting / parties for employees, internet & TV services, computers, home office, really anything that is used for the business and can be shown/demonstrated its used for the business, is a business expense. Employee salaries / payroll / bonuses are also an expense, however, the person that receives that money must now pay income taxes on it. It is also more paperwork for the business.

I.E: You can pay yourself a wage and the business can claim it as an expense, but your business must now keep track of federal withholding, FICA, etc.

Personal expenses need to be kept separate from business expenses, this is the primary reason for separate bank accounts, to keep it orderly and readable. If you are in a tax exempt field and use tax exempt purchases outside of the scope of their intended tax-exempt use, you can get into some hot water for it.

Sales tax is collected from your sales in states you have nexus in and that money should be put aside to cover your quarterly burden. The business income is indeed what is left over after expenses, your business income is tacked on with your 1020/EZ form as a schedule C form, likewise you must also file self-employment taxes / FICA from it on Schedule SE

Even in a small business, there is A LOT to keep track of. Having a binder for your documents is imperative, likewise having folders for each and every quarter with print outs of every transaction.

Please follow and like us:

Leave a Reply

Your email address will not be published.


Please help truthPeep spread the word :)