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This week on Facebook Live I answered the following questions:
1. I am self-employed (single-member LLC) and I know that I will, of course, have to pay taxes. My husband (employee for a company, not self-employed) is concerned that if we file together he will not get a return. Should we file together or separately? What are some pros/cons for this? - submitted by Bristol E
If we are married and filing jointly then our taxes are based on our household income. For example, if you did not pay your quarterly taxes then what you owe would "come out" of your husband's refund. If you file separately this would not be the case however filing jointly also comes with a bit of a tax break so when you understand the intricacies it can make it a bit easier.
2. I just switched my biz from a sole proprietor to a single member LLC when I file my income taxes next year, do I need to complete 2 Schedule Cs? One for the sole prop business and one for the LLC? Both businesses are identical in every way except name. - submitted by Kate L
No. LLCs are disregarded entities so you file in the exact same manner you have before.
3. My company is currently a single-member LLC. I now know that I’m missing important tax benefits because of this. How do a add a 2nd member - my husband? - submitted by Khalia W
I wouldn't say you're missing important tax benefits. A single member LLC is taxed the same as a sole proprietorship. Check out my blog on S Corps.
I don't typically recommend you add a second member unless you want to be equal members in the business with your spouse meaning you need to make your single member LLC a multi-member LLC.
4. If I am a sole proprietary owner of a brand new business but didn't actually make money last year and didn't pay myself do I have to file quarterly income taxes? - submitted by Kate G
We don't file quarterly taxes, we just pay quarterly taxes which is based on our net income so if you didn't profit any money then you don't need to worry about quarterly taxes.
5. What’s the maximum dollar amount you can make before you have to file taxes?
Double check with a Google search to stay up-to-date but currently it is $600 in self-employment income. I tell people you want to file taxes no matter what. If you only made that much money you might actually qualify for tax credits that you wouldn't get if you didn't file.
6. A friend and I want to start a business together. We want to create a partnership agreement as well as (or maybe in addition to) creating a business structure. I'm thinking an S-Corp, she's thinking multi partner LLC. Two part question - is a partnership agreement separate from a business structure? To make things easy at tax time is a multi partner LLC or S-Corp easier to file? - submitted by Brandy B
Either way you want to form a multi-member LLC, I don't recommend general partnerships.
You form the LLC first then you make a tax election for an S-Corp. When you have an S-Corp you have to put yourself on payroll. When you have a partner you also need to put them on payroll so an S-Corp election will not typically make sense for a new business.
7. How do you write off your home internet? My husband spends 5 days a week 8-5pm on it for work since Covid has forced him to work from home, while I tend to use about 30 hours a week for work purposes. Obviously, we also use it for pleasure when not working. - submitted by Brittany G
Utility section underneath home office deduction. It will ask what percentage of your house (based on square footage) ad If not, put it under "Other expenses"
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