First time doing tax. I'm doing something wrong. REVISED

[fuzzybabybunny]

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LLC TAX

I have an LLC in California.

Say that the LLC has a yearly revenue of $50,000.

Business Expenses (non-taxable, right?):

- $1,500 is spent on gas.

- $4,000 is spent on business equipment (computer, camera, etc)

- $800 is spent as a yearly fee for having an LLC.

- $43,700 is spent "paying" me. The LLC does not keep any money because of pass-through taxation, right?

There are no additional LLC taxes because CA only starts taxing LLCs on top of the mandatory $800 if their revenue is over $250K, which I will in no way attain. In addition, the IRS does not further tax LLCs since it is a pass through entity - they'll just tax my income. But I have to estimate my quarterly tax payments and report them to the IRS.

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Personal Income Tax

- $43,700 was automatically passed through to me. So taxes would be:

- $6686.10 which is 15.3% for self employment tax (for my single owner/operator situation, would self employment taxes be the same as payroll taxes)?

- $5,288 which is federal income tax (just used an online income tax calculator)

- $1,883.95 state income tax - income from $35,460 to $44,814 is taxed at $1,224.75 + 8% of the remaining after $35,460. So $1,224.75 + 0.08($43,700 - $35,460) = $1883.95

Other Expenses:

- $6,600 Rent + utilities:
- $2,750 Food: (@ ~$7.50/day)
- $1,200 Health Insurance:
- $1,800 Car Insurance:

$43,700 - 6,600 - 2,750 - 1,200 - 1,800 - 6,686.10 - 5,288 - 1,883.95 = $17,491.95 as money left over

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Conclusion

Looks like my after tax income is $29,841.92 when my salary is $43,700.

$43,700 - 6,686.10 - 5,288 - 1,883.95 = $29,841.92

 

[guyver01]

Originally posted by: fuzzybabybunny
I have an LLC in California.

- $18,000 is spent paying me.

SO:
I paid myself $18,000.


So my question is: WHAT'S WRONG?

your boss is an asshole for paying you so little.

i'd demand a raise.

 

[fuzzybabybunny]

Originally posted by: guyver01

Originally posted by: fuzzybabybunny
I have an LLC in California.

- $18,000 is spent paying me.

SO:
I paid myself $18,000.


So my question is: WHAT'S WRONG?

your boss is an asshole for paying you so little.

i'd demand a raise.

I'm just paying myself enough to sustain myself to avoid high taxes. I picked this number arbitrarily. This was before I realized that taxes would already be so low.

 

[Epic Fail]

You forgot Uncle Sam's cut.

 

[axelfox]

For businesses, I would seriously employ the services of a tax professional so you don't have to mess around with stuff like this. If you're filing tax returns, it should cost you around $200-300, including personal.

 

[fuzzybabybunny]

Originally posted by: axelfox
For businesses, I would seriously employ the services of a tax professional so you don't have to mess around with stuff like this. If you're filing tax returns, it should cost you around $200-300, including personal.

Right now I'm just trying to get a ballpark figure of the amount of taxes I'm looking at since my business is just starting and these ballpark figures would be valuable for overall planning. I'll think about hiring a professional once tax season comes around.

I'm currently living paycheck to paycheck, and I realized that if I keep on doing this, with the previous paycheck being completely used up by the next month, come tax season I won't have enough money to pay these taxes.

 

[a123456]

In short, you're doing it wrong. I'm not a tax pro by any means and as recommended above, you should see one to be safe(r). For one, you forgot to include federal taxes, which are usually lots higher than just state tax.

LLCs, in general, will pass through their income to be taxed at the individual tax rate assuming you're a sole proprietor or partnership, which I'm assuming you are. The short of it means that anything you didn't spend as the business will pass through to you as the individual and all that income is taxed at the normal individual rate (the usual 0-about 40% at the federal level depending on how much you make and whatever % at the state/local level depending on your city and state).

You also have to pay the self-employment tax of X% (~15%), whatever that is this year, if you're an "active" member. There are exceptions to get out of those but I'm not up to date on the current loopholes. Since the income is passed through, it's kind of pointless to differentiate a salary since it's all you anyway.

When most people form corporations, it's mainly to benefit from the expense order of the taxes since businesses subtract expenses first and then pay tax on the rest versus individuals pay tax first and then subtract expenses. The typical case where this matters the most is in real estate, which you probably aren't engaged in. At the very least, you probably want to make sure your business is spending enough in expenses to pay off your 800$ in corporation fees by saving at least that much in taxes. The 250k threshold you were talking about is extra tax that California adds on as an LLC fee in addition to all the "normal" taxes. There are other advantages, like the shielding benefits to LLCs so you might have formed an LLC for that purpose.

In additional to all that, you're supposed to estimate your tax and pay the IRS every quarter (similar but not quite the same to the regular withholding that you would see if you earned a regular salary from a bigger corporation). Otherwise, there will be consequences.

Seriously, if your basic understanding is just the above, go see a tax pro to get yourself sorted out. You're missing a lot of details.

 

[alkemyst]

there is a thing called self-employment tax last I checked.

Better call H&R son.

 

[fuzzybabybunny]

Revised! Does it look more right now? Note that it is simplified because I know that I could deduct things like partial rent/utilities due to a home office and cell phone bill. All the deductions aren't there.

 

[Ns1]

Nm failure to readr

 

[Capt Caveman]

$7.50/day for food? Based on all of your food threads, I find that very low.

 

[fuzzybabybunny]

Originally posted by: Capt Caveman
$7.50/day for food? Based on all of your food threads, I find that very low.

It's actually lower than that at $5/day according to the spend tracking I have with Quicken for groceries. I increased it to $7.50/day for the very rare times I go out to eat.

 

[GoodRevrnd]

Looks like you didn't deduct enough snorgles.

 

[ViviTheMage]

Talk to a CPA ... this is too complicated for me. Plus they will REALLY help you out....In MN, you keep track of mileage (I think it's roughly 52 cents per mile, so that is money you will want to tax), not how much you physically spent on gas.

 

[zinfamous]

First time doing tax

you only have one?

 

[AccruedExpenditure]

Looks about right ballpark-wise. Use quickbooks/turbotax in the future
-AE

 

[nerp]

Hire an accountant at least to get through the first couple of years until you know wtf you're doing. Do you really want to trust yourself with this? Most people underestimate the amount of taxes they owe, especially for small businesses. If you hire an accountant, you can feel secure that you're not going to get a bill for $50,000 from the IRS because you forgot one of the myriad nuances in the tax law. Accountants are insured and some will give you written guarentees that this type of thing won't happen.

I'd be careful, zorgle.

 

[Orsorum]

Talk to a California CPA with experience preparing personal and small-business returns. This might seem simple but a few $100 in professional advice and counsel early on can save some time and heartache later.

 

[fuzzybabybunny]

Originally posted by: Orsorum
Talk to a California CPA with experience preparing personal and small-business returns. This might seem simple but a few $100 in professional advice and counsel early on can save some time and heartache later.

Kinda wished I had money to hire people

I don't even have enough money to get a new camera body if my current one broke really badly.

But this is really not something that I can just teach myself?

 

[rasczak]

FBB,

step 1.) open favorite web browser
step 2.) type www.google.com in address bar
step 3.) type CPA in california for CPA's in california. Hit enter.
step 4.) contact anyone of the CPA's on the google list
step 5.) logout of anandtech
step 6.) lose password until you get this resolved.
step 7.) good luck

 

[shortylickens]

Dude, seriously. If we were any damn good at accounting we wouldnt be giving away free advice.
Go find an accountant. Ideally one who specializes in small business. Get some help. If you fuck this up you'll be paying a hell of a lot more than 300 bucks, I promise.

 

[Orsorum]

Originally posted by: fuzzybabybunny

Originally posted by: Orsorum
Talk to a California CPA with experience preparing personal and small-business returns. This might seem simple but a few $100 in professional advice and counsel early on can save some time and heartache later.

Kinda wished I had money to hire people

I don't even have enough money to get a new camera body if my current one broke really badly.

But this is really not something that I can just teach myself?

I'd offer to do it myself and send you an engagement letter if I were a CA CPA and had experience with small businesses. Unfortunately for me I'm a CPA in a different state and have no experience with personal or small business issues.

There's a lot to learn and a lot of interlocking issues. Without the requisite background and experience it's hard to know what to consider. I highly recommend you find a way to find the money.

 

[MixMasterTang]

Originally posted by: ViviTheMage
Talk to a CPA ... this is too complicated for me. Plus they will REALLY help you out....In MN, you keep track of mileage (I think it's roughly 52 cents per mile, so that is money you will want to tax), not how much you physically spent on gas.

Yeah, I think keeping track of mileage is a federal thing so it should apply. You can choose "actual expenses", which include gas but also other things, or the standard 52 cents a mile.

Fuzzy - if you are spending $1500 on gas, that is probably at least 10,000 miles which would be a $5200 deduction, that should save you quite a bit, and that is also why you should have someone do your taxes because they know these things, usually you'll come out ahead even after paying them their fees.

 

[ViviTheMage]

EXPENSE everything, seriously...if it's related to 'work' or your business, it's expansible.

 

[alkemyst]

Originally posted by: ViviTheMage
EXPENSE everything, seriously...if it's related to 'work' or your business, it's expansible.

This gets many into trouble...esp. in home-businesses.

If you don't have an actual OFFICE you go to (not home office) then you have to be really careful...same thing with a non-dedicated vehicle, computer, camera, phone, etc.

There is a lot to punch list...