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.
If you were an emplyee then your employer will pay half the social security and medicare tax instead of you paying all.
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?
You can still claim your expenses but as an employee and not on the schedule C
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?
That was probably an S corp
An Scorp would allow you to be paid wages as an employee of the Scorp
That sounds better. haha sorry it was a couple months ago. I was taking a shot in the dark on the name
The S corp will pay half the SS and medicare (still you really) but then you can be paid dividends from teh S corp
I would suggest you speak with the tax advisor again as there are forms to file to do this
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.
Then you need to get your tax person to file to switch to S corp
You still have to take a salary
but like I said you can be paid dividend that is not subject to self employment
it will be taxed but not the extra SE tax
Do you know if it costs money to change an LLC to an S Corp?
You have to file form 2553 with the IRS
Then the S corp files the 1120 S tax form
The S corp issues you a K1 and W2
The S corp files teh 941 (employment reporting)
So it will cost you to have someone do all of thoise
unless you prepare them all
but it does not cost initially to the IRS
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?
Yes, especially if you do not want or have the means to have someone else do the additional paper work
Ok that answers that question. I appreciate all your help with this.
You are most welcome
Your positive rating is always thanks enough.
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. :)
Have a wonderful weekend. Thanks again!