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Okay, I have two companies, both LLCs. I don't pay myself as a w2 employee, but as a 1099 contractor. So basically, I pay myself out as I need it and keep the majority of the cash in the company. One company is a start up and for the past two years we have been doing Research and Development, meaning we haven't released a product and run at a loss using investment capital to pay the bills. I am trying to get approved for a mortgage loan to buy a house at some point. I got my taxes done and I am not sure I like how they are setup, or if they are even setup correctly. Below I will give you scenario and some fake numbers for illustration point.
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The LLC had a loss of lets say $40,000 this year- most all of that going to contractors working on the product (including myself). At this point, I am a 100% equity shareholder in the company.
On my tax return I have an income of say $50,000 from my two companies.
What my tax guy did is put the -$40,000 loss on my personal income statement as a business loss (on line 12 under income where it states "Business income or (loss). Attach Schedule C or C-EZ").
This gives me an adjusted gross income of $10,000. This looks great for tax purposes, but looks awful for mortgage reasons.
Since the company is a LLC with its own EIN, can't I pass the $40,000 in losses as a DEDUCTION and not as personal income loss? This way it will help with my tax liability, but not make my income look so low?
Yes, there are other ways you can do it to make it look like you made more money but the way your accountant did it saves you on the employee taxes (fica). Be reducing you down to 10k, you only pay Federal & Fica taxes on that 10k.
"Since the company is a LLC with its own EIN, can't I pass the $40,000 in losses as a DEDUCTION and not as personal income loss? This way it will help with my tax liability, but not make my income look so low?"
I'm not sure on that. Did you ask your accountant?
LLC taxation is different from that of a corporation or other business entities in a number of ways. First, the LLC does not pay federal taxes on its earnings through the year. Do not misconstrue that as reading “tax free” because that is not true. However, the way that the taxes are paid is different. A corporation is a separate tax entity and will pay taxes as a whole with the corporate members paying taxes on their individual earnings as well. A LLC is a pass through entity so there are no taxes levied on it.
Limited Liability Company taxation does not tax the company because the earnings do not technically stay with that company; they pass through to the business owners whether there is one, two or fifteen of them to deal with.
Corporate taxation is different from LLC taxation in other ways as well. For instance, once the corporate taxes have been assessed, the amounts that are levied against the corporate members might be very different as well. Each corporate member may pay a different amount of tax because their individual earning level will be different. For the LLC all of the owners will get a share that is equal to the amount they have invested in terms of both time and money and will be equally taxed for those amounts by the government. How those taxes are assessed and what forms will need to be filed is an individual thing and has many factors that must be figured before a definitive answer can be devised. It is best to consult a CPA who can explain these figures more clearly.
For more info visit: [url]http://llctaxes.com[/url]
I am starting two companies both LLC. Both are single owner managed at this time. I understand the pass through taxation and the benefit of being able to defer a portion of taxes to the partners. Both companies have low overhead, one being a consulting company and the other a insurance company. My question is what steps do I need to take to reduce taxes and retain as much profit as possible. Do I put myself on a payroll? If so how much and how does it benefit me? Also im in the state of Texas. Thanks
The LLC had a loss of lets say $40,000 this year- most all of that going to contractors working on the product (including myself). At this point, I am a 100% equity shareholder in the company.
On my tax return I have an income of say $50,000 from my two companies.
What my tax guy did is put the -$40,000 loss on my personal income statement as a business loss (on line 12 under income where it states "Business income or (loss). Attach Schedule C or C-EZ").
This gives me an adjusted gross income of $10,000. This looks great for tax purposes, but looks awful for mortgage reasons.
Since the company is a LLC with its own EIN, can't I pass the $40,000 in losses as a DEDUCTION and not as personal income loss? This way it will help with my tax liability, but not make my income look so low?
The $40,000 is not a personal income loss, it is a business loss. You don't have any personal income. Your income is derived from the 2 LLCs. The $40,000 is listed on the schedule C as business expenses aka losses, meaning your expenses were 80% of your income. Either way you cut it you will still have a net income of $10,000. The only way to avoid this is to list fewer expenses on your profit and loss sheet.
Okay, I have two companies, both LLCs. I don't pay myself as a w2 employee, but as a 1099 contractor. So basically, I pay myself out as I need it and keep the majority of the cash in the company. One company is a start up and for the past two years we have been doing Research and Development, meaning we haven't released a product and run at a loss using investment capital to pay the bills. I am trying to get approved for a mortgage loan to buy a house at some point. I got my taxes done and I am not sure I like how they are setup, or if they are even setup correctly. Below I will give you scenario and some fake numbers for illustration point.
================================================== =
The LLC had a loss of lets say $40,000 this year- most all of that going to contractors working on the product (including myself). At this point, I am a 100% equity shareholder in the company.
The owner of a single member LLC doesn't pay himself as a 1099 contractor. How much is the loss if you take out what you paid yourself?
Quote:
On my tax return I have an income of say $50,000 from my two companies.
Is that $50,000 all from your other profitable company?
Quote:
What my tax guy did is put the -$40,000 loss on my personal income statement as a business loss (on line 12 under income where it states "Business income or (loss). Attach Schedule C or C-EZ").
This is the appropriate treatment for a LLC loss.
Quote:
This gives me an adjusted gross income of $10,000. This looks great for tax purposes, but looks awful for mortgage reasons.
Since the company is a LLC with its own EIN, can't I pass the $40,000 in losses as a DEDUCTION and not as personal income loss? This way it will help with my tax liability, but not make my income look so low?
I don't understand what you are trying to do here. What do you see as the difference between a deduction and a loss?
Wow an old thread. I let me tax person handle it and moved on
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