Money Twitter’s Tax Advisor 🏛️📈CPA with 15 Years of Tax Planning Experience🔑🪁💡Follow me for weekly threads that could save you $10k of tax per year! 💵💰
Rent your home to your business, no more than 14 days per year.
This one has some hoops to jump through, but doable...
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In general, renting your home creates taxable income to you.
In the US there is a 14-day exception:
Rent your home no more than 14 days in a tax year and you don't have to report the income.
If you have a business where you would occasionally rent out space for meetings/other reasons and your home is sufficient, you can charge your business (a deduction) and not pick up any income to yourself (if under 14 days).
If I'm freelancing, how much should I set aside for income tax?
What are quarterly payments?
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Find your estimated income in this table - include all sources of income: from your 9-5, PROFIT from freelancing or a business, and taxable investments:
So say you are single and your total taxable income is going to be $80k. You would be 22% above.
Then add in 15% for self-employment income tax on any profits from a business/freelancing. THIS DROPS TO 3% AFTER $131K.
Then add in your state tax - 0 to 7% for most of you.
Your tax advisor should help you find them (legally).
Ask these five questions when vetting your tax advisor - if their answers leave you feeling other than aligned, move on.
“Planner” below = tax advisor that does tax planning.
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1) Knowing what you know about my situation, where am I currently leaving tax on the table?
Judges their ability to see tax inefficiency in real time - indicating they naturally plan.
It’s okay for them to ask to come back later with an answer here, just as long as they do.
2) If I were location independent, what would be my ideal tax jurisdiction?
Judges their ability to make creative suggestions and their understanding of tax in other jurisdictions, which is important for a complete tax advisor.
At some point you may buy an income producing asset, a functioning ecom website, or even another small business.
How you do this can have significant tax consequences.
Here’s what to think about.
Let’s say you want to buy a functioning FBA business. The business has the following in a corporation:
-A couple of successful brands,
-Supplier contracts with favorable terms,
-Ungated for toys and health on Amazon
-A warehouse lease,
-An engage employee, and
-A website
You and the owner have agreed to a $150k purchase price, but what are you buying?
If you buy the EQUITY/stock of the corporation, you will get $150k of tax basis in the stock, meaning you will likely never recover the basis in the form of a deduction unless you sell the company.
Taxation of an Initial Coin Offering (“ICO”) or initial tokenization.
Want to tokenize some art, an piece of property, or even yourself??
How is the tokenization taxed?
Crypto is so new and unique that we don’t have full guidance on it for tax.
So in looking at an ICO, we have to think about how the token will behave.
Equity - if the feels like equity, long term participation and upside, it’s like an IPO and generally no tax to the issuer.
Debt - If it feels like debt, interest paid, and no upside, then it’s like a debt issuance and should not create tax to the issuer. Note if there is no interest, but determined to be debt, there could be deemed periodic taxable interest income to the investor.
If you are a US Citizen or resident and own a foreign company do you understand the US Foreign Controlled Corporation Rules?
Note there is more exceptions in this space than rules, but I'm going to try to give a basic example.
These rules are very complex so hire a tax pro.
Say you are an Irish citizen and have an Irish company.
A move takes you to the US for a few years.
Assume you become a US tax resident (not hard in this case).
A US tax resident is a tax "US person."
The US taxes the worldwide income of it's citizens and residents.
A foreign company that is owned at least 50% by US shareholders (US persons that own at least 10% of the company), is determined to be a controlled foreign corporation ("CFC").
Historically, a CFC was an exception to the US taxing worldwide income.
If I have multiple business, should I have them all in one LLC or each in their own LLC?
This is probably more of a legal question than a tax question.
A properly maintained LLC may limit the legal liability of one business from other, in they are separate LLCs.
That said...
As long as I'm not doing something risky (e.g., selling my own physical product that could be dangerous), I don't like to form a new entity until I've proven the business has some longevity.
That's not legal advice. Just my own view. I like to avoid hassle until necessary.
For tax, it doesn't matter unless you want S Corp treatment.
An LLC with one owner (single member LLC) defaults as disregarded by the IRS. They see right through it to you.
So you can have 12 and the IRS just sees 12 lines of business that are you, not the LLC.
If you want to continue to run a semi-directionless operation, not crush a three-year plan, make investment decisions that flip on what you ate that day, and ineffectively use cash...
What is a CFO
It's not the big corporate executive you see glamorized in the media.
It's someone that runs three processes for your company:
How many of you have received a tax notice from a state like California saying you owe back sales tax, even though you don’t have a presence there?
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I’ll skip the court history, but prior to the fall of 2018, a state couldn’t require you to collect and remit sales tax unless you had some physical presence there.
Like an office, a warehouse, employees, etc.
Basically if you were just selling from out of state, no problem.
The gray area in the law was if you had an independent contractor in a state that was acting more like an employee and doing significant things for your business.
Think a person devoting most of their work time to your business and basically reporting to you on operations.
How people do one thing, they do everything, whether it’s ordering take out, building a business, or monetizing a social media following.
This principle amps up the more successful someone is.
I’ve read enough tweets and had enough phone conversations to tell you this:
@oliviercantin does everything methodically and systematically. He’s precise and has a great idea where the bullseye is. If he misses, he’s got enough other calculated bets that will hit home.
@lawrencekingyo will not be controlled. He’s his own guy and while he loves making money, he’d die on a hill with two pesos in his pocket before he’d let anyone else call his shots. He’s also a nice guy and generous - genuinely likes helping others.
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