Have a Tax Question? Ask a Tax Expert
Hello and welcome. My name is XXXXX XXXXX I would be happy to assist you today
It is not too late to file form 8832 - you can do so for any year you wish to change how you are taxed.
I would say, though if you are in business on your own, it's easier to file as a sole proprietor than it is to file as a corporation
also with a corporation you are taxed on the profit, then taxed again when you draw funds from the business
This is known as "double taxation"
Ok. For my first year in business since 0 was collected I tried it on my own. 2013 was my first year for profit and I am an auto dealer so I am deff hiring an accountant.
I see ... you will want some sort of business organization at least for liability protection
I would at least become an LLC
I did file as an LLC in DE this year
I am just wondering going forward what would be better to file as a 1040 or 1120
Okay ... that's good. You can pay tax on your own return or become taxed as a corporation
When you are a corporation, you're taxed on your profit when you earn the profit, and then again when you take the profit out of the business\
I see. So lets says I take money out of the business as a corporation to pay my mortgage, can I be taxed on that?
Yes, that's a dividend, It would be fully taxable to you
But if you are not a corporation, you are not taxed - you're only taxed when you make money
Hmmm I see. So being a small company a new it sounds the 1040 filing may be easier to start.
and new i should say
If you are staying small, yes. If you take on more owners then you would need to look at being a partnership vs a corporation
You might even looking to be an LLC taxed as an S Corp. With the S Corp, you are taxed only on your profits and your self employment taxes are minimized as you pay yourself a salary from the business
Oh Ok. One last question. If I elect to stay as a 1040 corp I wont have the same protections against lawsuits or losing my personal assets. This was one reason why I chose the single llc.
You still have liability protection. Paying tax on your 1040 is just how you are taxed. It does not impact your liability protection
So, a single member LLC is fully protected even though tax is paid on the 1040
Do you have any more questions?
Yea. Sorry I will give you a tip for all this. Is it tough to change corp types if I go to an S corp
All you have to do to be taxed like an s corp is file form 8832 and then form 2553 with the IRS. You don't have to change anything else with your LLC
it's a simple process - if you hire an accountant they could do it in less than 30 minutes
Ok sounds good. Helps me on the right path. Thanks for all your help!
Oh it's no problem. And come back and see me if you have further questions
I think you may be hearing from me. Thanks!
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okay great...thanks so much
I have a few deduction questions for you as I am compiling my 2013 business taxes. I will gladly pay for you answers.
Am I able to deduct items purchased at the end of 2012 but used in 2013 in my 2013 taxes? For example I purchased a book of title reassignments in 12/12. I did not use the reassignments until 2013 nor did I write them off in 2012.
Next.: I purchased a truck and trailer for my business which adds up to a good amount of a deduction. From what I understand I can deduct these a little over the next 5 years instead of using the deduction all in the same year as purchased? Is this true and how would I record that?