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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13605
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am working for a company as a sole proprietor and had to

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I am working for a company as a sole proprietor and had to deal with a 1099 for taxes. My boss help me set up an LLC so that I can be paid through my own company but I never opened a bank account because the person that does my taxes said that I will still have tax problems. My boss recently gave me the opportunity to go on payroll and I am just trying to decided if I would be better off doing that or if I can save a little money by getting paid through my LLC and taking out my own taxes.

Robin D :

Hello and thank you for using Just Answer,
If your LLC is a single member then you are taxed as a sole proprietor. This means you will pay all tax on your earnings and self employment tax too. You may not pay yourself as an employee from the single member LLC either.

Robin D :

If you were an emplyee then your employer will pay half the social security and medicare tax instead of you paying all.

Customer:

So in the end it is going to be better to be on payroll then to try and do my own taxes and do right offs?

Robin D :

Yes

Robin D :

You can still claim your expenses but as an employee and not on the schedule C

Customer:

Is there any other option that will help me? I know the person that did my taxes mentioned something about changing my LLC to an E Corp or something like that. Is that a good idea?

Robin D :

That was probably an S corp

Robin D :

An Scorp would allow you to be paid wages as an employee of the Scorp

Customer:

That sounds better. haha sorry it was a couple months ago. I was taking a shot in the dark on the name

Robin D :

The S corp will pay half the SS and medicare (still you really) but then you can be paid dividends from teh S corp

Robin D :

I would suggest you speak with the tax advisor again as there are forms to file to do this

Customer:

Well with that option on the table, do you still recommend just going on payroll? I guess the only reason I am hesitant is I am trying to save money anywhere possible. I honestly have never had to deal with anything like this before and with what I had to pay in taxes this year after working as a sole proprietor for only 6 months, I have to do something else because I can't afford to do that again.

Robin D :

Then you need to get your tax person to file to switch to S corp

Robin D :

You still have to take a salary

Robin D :

but like I said you can be paid dividend that is not subject to self employment

Robin D :

it will be taxed but not the extra SE tax

Customer:

Do you know if it costs money to change an LLC to an S Corp?

Robin D :

You have to file form 2553 with the IRS

Robin D :

Then the S corp files the 1120 S tax form

Robin D :

The S corp issues you a K1 and W2

Robin D :

The S corp files teh 941 (employment reporting)

Robin D :

So it will cost you to have someone do all of thoise

Robin D :

unless you prepare them all

Robin D :

but it does not cost initially to the IRS

Robin D :

that is

Customer:

Yeah that's not gonna happen. Well I guess my question just opened up more questions. haha as far as the easy road would just be to go on payroll correct?

Robin D :

Yes, especially if you do not want or have the means to have someone else do the additional paper work

Customer:

Ok that answers that question. I appreciate all your help with this.

Robin D :

You are most welcome

Robin D :

Your positive rating is always thanks enough.

Customer:

Well although the majority of info given flew completely over my head, you did answer my original question. I will make sure you get a positive rating. :)

Robin D :

Thank you

Customer:

Have a wonderful weekend. Thanks again!

Robin D. and 2 other Tax Specialists are ready to help you