Do you NEED an S Corp?!

You might!

Have you ever wondered what an S Corp actually does for you?

***Thread***
2) First, Self-Employment Tax (“SE Tax”)

If you are self employed - entity or not - and have no other sources of income, you will be taxed 15.3% of your profits to $137,700 of profit and 2.9% profits after $137,700.

It approximates payroll tax.
3) For example, let's say your business profits $150k, either as a sole proprietor or single member LLC.

In this example your SE Tax would be approx. $21,425.

Here’s how having a S Corp could save you tax...
In this example, let's say that a business like yours would pay a manager like you $50k in a salary.

In an S Corp you can pay yourself a reasonable salary shifting profit to salary, BUT only the salary would have SE Tax, not any of the profit.
No S Corp:

-$150k profit in the business and
-$21,245 SE Tax

With S Corp:
- $7,650 of SE Tax on your $50k salary and
-the remaining $100k of profit has $0 SE Tax.

Thus, the S Corp saves $13k+ SE tax...
The key is to pay yourself a reasonable salary that you can document.

Doing this is both a science and an art, but should save you tax, especially in certain types of business.
So how do you "get" an S Corp.

You really don't. You just file a form to have your current entity (LLC or Corporation, usually), to be taxed as an S Corp.

An S Corp is not a legal entity, but a tax election.
This election is made by filing a Form 2553.

What isn’t easy is keeping up with all the S Corp rules to make sure you keep your election.

I definitely recommend having a CPA if you want to make an maintain an S election.
Please like or RT to save and build our tax-saving community.

If learning how to save this $13k was helpful to you, think of all the other ways you could learn to save tax from my guide containing 60 more THREADS in 121 pages on topics like this.
Buy it TODAY before the price goes up!

gumroad.com/l/MbBbDf

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More from @AskForTaxAdvice

20 Jan
Want to know the biggest loophole in the US Tax Code?

This might be it.

If you think you make too much income to contribute to a ROTH IRA, you might be right.

It just doesn’t matter...

There’s another way to get that tax-free goodness.

***Thread***
2) A ROTH Conversion

Some people all it a "backdoor ROTH," but let’s not! It sounds wrong and a ROTH conversion is soooo NOT WRONG.

There is no income limit on converting a traditional IRA to a ROTH IRA.
3) There is no income limit to contributing to an a traditional IRA (just a limit on getting a deduction for it).

If you want a ROTH IRA, tax free growth, and no tax on withdrawals at 59.5; but you make too much money, here are three easy steps:
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Get PAID to go on VACATION using the tax code!!!

Two transactions at the same time: one generates a tax DEDUCTION and one generates TAX-FREE INCOME.

This might be my second favorite thread I’ve ever written!

Let’s bounce this ***THREAD**** to all of our friends via like/RT!!
1) First, the DEDUCTION:

Vacations might have airfare, lodging, and food costs in the $1,000s or more.

In general, vacations are NOT deductible.

BUT!!!

When I'm on vacation, I like to be on vacation, but I know how most of us on MoneyTwit are...
2) You are going to spend a couple hours per day working, even while away.

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You might even be there looking at property to buy and rent out.
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When do I NEED to form and LLC for my business or side hustle?

***Thread***
1) Upfront, you have to ask this question from multiple perspectives.

There is an answer for legal purposes.

There is an answer for tax purposes.

There may be an answer for commercial purposes.

I'm going to address the tax aspect directly.
2) From a tax perspective, if you are the only owner (called a "Member" in an LLC), the IRS does not see the LLC as separate and distinct from you. It is "disregarded" from you for tax so it doesn't matter.

(You can elect to regard it, but that's another topic.)
Read 13 tweets
19 Jan
How Lawrence King pays ZERO income tax.

You’ve seen him tweet about it.

Have you ever wondered how he does it?

…or maybe if you could, too?

***Thread***

@lawrencekingyo
First Hurdle – Citizenship Country

Your country of citizenship may tax you on worldwide income, income earned in country, or a both.

Lawrence is a UK citizen, a Uruguay resident, and a “nonresident” for UK tax.

The UK only taxes income earned in the UK for nonresidents.
First Hurdle – Citizenship Country

As long as @lawrencekingyo stays out of the UK for all but 46 days a year, he should keep his UK tax nonresident status and not owe any income tax on any income he earns outside of the UK (presumably all of his income).

Hurdle cleared!
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How to hire someone GREAT to do your taxes.

Someone that will not only do a nice job on filing your taxes, but will find you all the LOOPHOLES.

***Thread***
Ask people similar to you who they use and if they are happy with the service.

If that doesn't work, google "[your city] + CPA.

While it's not necessary to have a local accountant you can meet with in person, it has it's benefits.

Visit some websites and get a feel.
Pick a few that you think you want to work with and call them.

Here's a script,

"I am in the business of [your operations], making about [your expected revenue] this year, and am looking for someone to help me with my books and taxes. Are you taking new clients?"
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FACT: You LOSE at least 1/3 of your income to TAX! ...and if you are making a lot of money, it's over 1/2!!!

Think what you could do with that money, even just some of it?

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If invested properly, could you retire 10 years earlier and enjoy more of the good life? What would you do if you could stop working 10 years earlier?

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