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Ask Anne Your Own Question

Anne
Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1776
Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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I am starting a business right now, painting and contracting

Resolved Question:

I am starting a business right now, painting and contracting and supplies. I am about to buy a 6000GWR truck. My husband makes the salary in our house. Can we deduct the amount of this vehicle using 179 on our income tax and does the vehicle have to be in the name of the s corp. We have two other cars we use for our family, with low mpg ratings which we will continue to use for our personal use. Also if I buy any equipment for my business do I do it in the name of the business. My husband is going to be the cosigner but I am going to have the major interest in the company as I want to operate as a woman owned business. My husband is a writer.
Submitted: 11 months ago.
Category: Tax
Expert:  Anne replied 11 months ago.

Anne :

Hi

Anne :

Thank you very much for requesting me.

Customer:

You're welcome

Customer:

Are you still there

Anne :

I'm doing some quick "brush up" reading.........seeing if any IRS regs are, or will be changed re: this subject

Anne :

I'll be back in a few minutes.....please hang with me for just a few

Customer:

okay

Anne :

Yes, you may use your husband's income for the Section 179 qualifications

Anne :

You may use the Section 179 up to $25,000 for tx year 2013

Anne :

Please see below:

Anne :

Limits for SUVs or Crossover Vehicles with GVWR above 6,000lbs
Certain vehicles (with a gross vehicle weight rating above 6,000 lbs but no more than 14,000 lbs) qualify for expensing up to $25,000 if the vehicle is financed and placed in service prior to December 31 and meet other conditions.

Customer:

Does anything I purchase, car, computer equipment, have to be in the name of the business and have a license no. I wanted to purchase the car right away but I don't have the business license yet.

Anne :

Are you filing as a Sole Proprietor?"

Anne :

(Schedule C)

Customer:

No, as an S corp

Anne :

S Corp rules are a LITTLE different

Anne :

Let me explain how this would work, and then I have a question for you

Anne :

ok?

Customer:

okay

Anne :

You are free to put the truck in your name, but, since this is an S Corp, you have to move the asset from personal to business

Customer:

okay. Does that involve a transfer of title?

Anne :

One way to do this is to "lease" to the S Corp the vehicle, but then you have to report as income the lease payment

Anne :

putting the truck into the S Corp's name would be cleaner for thi

Anne :

this

Anne :

sorry, chat rooms are unforgiving for typing errors

Customer:

I just want to make sure I get the 25,000 deduction this year.

Anne :

I actually have a few questions for you, but I see you're typing, so I'

Customer:

okay

Anne :

Yes, you can do that

Anne :

Here's my question............why are you using the Section 179 means that you are depreciating this truck over 5 years, (at which point you would only be able to claim gas, maintenance, repairs, etc) as opposed to mileage that you can claim EVERY year

Customer:

I need the deduction for this year. We took money out of our ira for expenses and then was socked with a tuition bill for my son because they said that since we used the ira for expenses (even though it was due to bills, medical, my sister's bills, etc, etc) they counted our ira as income. So I am going to start this business to eventually be able to help our income but I need some big deductions now.

Customer:

This way we will have some of the income offset so maybe we can get money for his tuition. It's killing us and putting him into debt over his head.

Anne :
IRA distributions are always taxable.....but they are not subject to the 10% penalty if used for education
Anne :

please forgive the bold typing....it sort of does that all on its own

Anne :

but back to your business

Customer:

No. We are older and are not being penalized for that but we didn't realize the school would count this as income. They don't distinguish I guess but all of it was for emergencies, etc. No mercy.

Anne :

I think ANY entity (Sole Proprietorship, S Corp, Partnership, C Corp) is great, as long as you understand how it works

Anne :

are you aware that you will have to pay yourself a salary?

Anne :

that involves payroll taxes

Customer:

It's going to be the S Corp because it's the least expensive. Yes I am aware of that.

Anne :

I'm not trying in any shape way or form to change the entity you chose (S Corp) but Sole Proprietor costs nothing to start

Anne :

it doesn't have a separate "business" tax return

Anne :

you simply file a Schedule C along with your personal tax return

Anne :

I always fear that someone doesn't get all the information they need to make the proper choice for them

Anne :

If you feel you knew all the options, and chose S Corp, that's great

Anne :

By the way....I'm sorry I didn't mention this before, but Congrats for opening the new business

Customer:

Can I deduct the full $25,000 if the business has less than $25,000 income this year. Can the extra be deducted from my husbands income. We file jointly.

Anne :

Yes

Anne :

No problem

Customer:

Does it matter if I use a regular corporation or an LLC and then file as an S Corp?

Anne :

the "LLC" is sort of a "catch all phrase" meaning that it is not a tax entity in and of itself as an S Corp would be

Customer:

They both seem to cost money to start. Is one better than the other?

Anne :

however, If you file as a reg C Corp, you would have to file


Search Results


Form 3115, Application for Change in Accounting Method

Anne :

to change the C Corp to an S Corp

Anne :

Each entity has its own benefits and drawbacks

Anne :

here's a website that gives you some additional information

Customer:

My research indicates that I could get protection for my assets either way. So I would want to file my taxes as an S Corp. The fees to the state for the LLC seem to be higher than setting up a corporation. Is there a state tax advantage for the LLC versus an S Corp?

Anne :

http://www.bizfilings.com/learn/compare-company-types.aspx

Customer:

Thanks.

Anne :

Generally, states recoginize S corps once they're filed with the Feds

Anne :

A few states do have some adjustments, so you will want to check with your tax preparer

Customer:

Thank you for your help. you were great.

Anne :

You're most welcome

Anne :

Please ask for me again if I can help you in the future

Anne, Master Tax Preparer
Category: Tax
Satisfied Customers: 1776
Experience: Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
Anne and 9 other Tax Specialists are ready to help you

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