Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.
The botXXXXX XXXXXne is that unless you set yourself up as an S-Corp, or report the LLC as an S-Corp, put yourself on the payroll and go through a lot more formalized recordkeeping, you aren't going to be able to avoid self-employment taxes; and even if you were to do all those things, you would not be able to avoid all of the Social Security & Medicare tax; plus if your creditors have judgments against you, they could garnish your wages; so you would be much better off in the long run if you just continue to report your income on a Schedule C on your income tax return & either do business under a d/b/a or make sure you don't let money build up in your bank accounts.
yeah, pretty much what I have been doing all along. Was wondering if I had other options. What about dividends from his business?
You can't receive dividends unless you own stock in his business; then all the stock has to receive the same dividends; plus dividends are not deductible, so I doubt very much that is even a possibility.
So, assuming I continue Sched. C., do you think I would still have to pay TPT ("Sales Tax") to state and cities you think? My buddies business would pay those taxes for the jobs he runs. I am trying NOT to sell my business to him and trying also to keep this simple as possible for both of us. I think the way we are doing it is best for now, but the sales tax thing still lingers...that would be double taxation wouldn't it?
Sales taxes are paid by the customer, not the vendor.
Income & sales taxes are not the same type of tax, if that's what you mean by double taxation.
Federal tax & State tax that are both paid is not double taxation.
I'm not sure what you are referring to.
The sales tax is only paid once by the ultimate consumer of the service if services are taxed in the jurisdiction you are doing business in.
I am talking about Transaction Privilege Taxes (TPT). 65% of my bill is taxable at the State and Local rates (usually around 9% or so depending on which city job is performed). It's not exactly a "sales tax", but it's very similar. Contractor's get taxed approx. 9% on 65% of the job in Arizona.
There is a way to avoid this tax on my business's part similar to if I do work for another contractor as a sub-contractor I don't have to pay sales tax. I just need to figure that part out since I have never done before. I am sure each state is different in how they handle this tax.
I will figure it out on my end. Thank you for your advice on the other questions I had.
Arizona is the only state that has a ""TPT" tax. Other states have sales taxes.
oh wow didnt know that
AZ just likes to be different, but it's a beautiful state and we have been here for 9 years (I'm from Upstate NY - Poughkeepsie) and love it (except in July-August when it's 110-115 degrees out).