Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I own a small business. The business have been losing money

I own a small business...
I own a small business. The business have been losing money almost every year but i have been paying myself a couple of thousand dollars a year in w2 in order to take advantage of the EITC. Since there is no other employee in my business but myself, and set up a payroll system just to pay myself once a year is expensive and troublesome. Is there other easier way to accomplish the same thing? Please be specific with your answer.
Show More
Show Less
Ask Your Own Tax Question
Answered in 9 minutes by:
6/3/2012
USTaxAdvising
Category: Tax
Satisfied Customers: 1,237
Experience: US Taxation specialist.
Verified

Hello,

 

I see a couple of good options. One being using QuickBooks and the payroll module/add on. You can buy QuickBooks for approximately $200-300 and the payroll module is around $200 as well. So total cost here is around $400-500. (estimated)

 

The QuickBooks payroll module is very easy to use and is very easy to prepare your annual/quarterly payroll tax returns as well as your annual W-2 and W-3. You can even prepare your 1099s in it if applicable. See the website here for more information - http://quickbooks.intuit.com/ - I believe this is the best accounting/payroll system out there for small business. (It is also probably the most popular)

 

You could also use an excel based calculator which will assist you in preparing your payroll checks and tax deposits. The downside of these calculators is that it does not assist in the preparation of your Payroll Tax Returns Form 941/940. These are the ones that most people find confusing and QuickBooks makes it a snap.

 

Payroll is one of the most complicating tasks for small business owners which really adds no value to their business. I recommend QuickBooks. It is easy to use and update. Once you run the process a few times it becomes routine and there is very little room for error.

 

I hope this helps you. Please let me know if you have any further questions.

 

Best regards,

 

 

Ask Your Own Tax Question
Customer reply replied 5 years ago

I wasn't really asking for payroll method advice. Giving my situation, I am more looking for a way to qualify for EITC without doing a formal paycheck and w2 for myself. Example: Can I still qualify for EITC if I just do a 1099 for myself in stead of a paycheck?

Oh I see what you were getting at.

 

Yes you can still qualify for the EITC without a W-2. What type of business do you have? a S-Corp, LLC, or C-Corporation?

Ask Your Own Tax Question
Customer reply replied 5 years ago
It's LLC. I am a real estate agent. all my income go into my LLC. In 2011, there was only about $10,000 income to the LLC. Minus all the expenses and tax deductions, it probably will not yield any net taxable income. Without doing a formal paycheck and the w2 for it, is there other ways to qualify for EITC? I do meet all other EITC qualification.

Since this is an LLC (I am assuming a single member LLC) you should not be issuing yourself a W-2.

 

The LLC would not issue you a W-2. Instead you would report the income and expenses from the activity on your Schedule C of Form 1040. If you drew money from the LLC that is completely okay as you are not taxed on distributions from the LLC, you are taxed on the earnings/profits. This would give rise to self-employment income and thus you would still qualify for the the EITC as you would still have earned income. You will still qualify for the EITC assuming you will meet all the other criteria which you state that you have met above.

 

One critical fact that you outline above is that the LLC is running continuous losses. Using the methodology above would not provide for earned income if the business did in fact have a loss, thus you would not qualify for the EITC.

 

Basically you will not qualify for the EITC if you do not have earned income. Merely issuing yourself a W-2 to from your single member LLC to "create" earned income would be breaking the rules. You will need a profit from your LLC before you will become eligible for the EITC.

 

I hope this helps, please let me know if you have any further questions.

 

Best regards,

Ask Your Own Tax Question
William Ellis, CPA
Category: Tax
Satisfied Customers: 296
Experience: Over 15 years of experience in public accounting
Verified
Hello and thank you for allowing us at Just Answer to assist you. You could have your LLC elect to be taxed as a corporation then elect S-Corp status early next year for 2013. Once this is done, you would report your income on Form 1120S. While showing the expense for Officer's salary, you could report it on your Form 1040, Line 21 Other Income. You'd also need to include it on Schedule SE to properly pick up the self-employment taxes. The remaining income would be reported on Sch K-1 to you and shown on Sch E, page 2. You can also continue to deduct self-employment health insurance doing this. It is too late to make the election for S-Corp status for 2012, so you should wait until January to do so.

Thanks,
Bill
Ask Your Own Tax Question
Customer reply replied 5 years ago

So for 2011 tax return which I am trying to do now, since I have not formally pay myself wages, I will not be able to find a way to qualify for EITC? If your answer is yes, then is it a way to retro a 1099 or pay check to myself. I did withdrawn cash from company account for personal use.

No. As a single-member LLC, you report your income and expenses on Sch C. You are not supposed to issue a W-2 or 1099 to yourself. If you were to try this, you could open the door to a review or audit by the IRS.
Ask Your Own Tax Question
Customer reply replied 5 years ago
So the owner of a single-member LLC, not elected to tax as a S corp, will not be able to get EITC at all?
That's not what I'm saying. I'm saying you should not issue yourself a W-2 or a 1099. I just looked at the directions for EIC, and there's no reason someone with Sch C income shouldn't qualify for EIC if your level of income permits it.
Ask Your Own Tax Question
Customer reply replied 5 years ago
So in my situation, filing with just schedule C, with just about $10,000 gross income, after expenses and standard tax deductions come to about minus 2,000 net income, I'll still qualify for the EITC?
I'm not sure. I'm not at home right now to check the equation.
Ask Your Own Tax Question
Customer reply replied 5 years ago
I'll appreciate your follow up later
With no adjusted gross income, you'll get no EIC. You should have a net operating loss, so if you had taxable income in the past two years, you can carry the NOL back. You would have to carry it back to 2009 first. If you didn't have taxable income those two years, you can elect to carry the NOL forward.

Thanks again,

Bill
Ask Your Own Tax Question
Customer reply replied 5 years ago
In my situation, just with one qualified dependent filing as head of household, what is the minimum AGI in order to qualify for EIC?
$1 of income nets a $9 credit, but, if you are considering backing off some of your deductions, you may still find yourself subject to self-employment tax.
William Ellis, CPA
Category: Tax
Satisfied Customers: 296
Experience: Over 15 years of experience in public accounting
Verified
William Ellis, CPA and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask William Ellis, CPA Your Own Question
William Ellis, CPA
William Ellis, CPA
William Ellis, CPA, CPA
Category: Tax
Satisfied Customers: 296
296 Satisfied Customers
Experience: Over 15 years of experience in public accounting

William Ellis, CPA is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,338 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,980 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Ministers Housing/Self-Employment After form 4361 is
Ministers Housing/Self-Employment After form 4361 is approved by IRS, I need to go back and file form 1040X to amend my return, where I paid self-employment tax.Let's say form SE showed $5,000 in self… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
A CPA prepared a filed a personal return last april. There
A CPA prepared a filed a personal return last april. There was a NYS and NYC refund due. The check never was received. The CPA is not helping procure a replacement check, whom should the person call o… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I would like to open a business:to prepare tax returns for
Hello! I would like to open a business:to prepare tax returns for non resident,more exactly for students who come on a J1 -Visa ("Summer Work and travel" programme=where they work for aprox 3 months i… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
On a NJ W-3 form, is line 3 the NJ Gross income tax withheld
On a NJ W-3 form, is line 3 the NJ Gross income tax withheld or is that supposed to include unemployment tax, FLI, SDI, etc... as well… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,980 satisfied customers
Under the new tax plan if my federal adjusted gross income
Under the new tax plan if my federal adjusted gross income is $77,230.00 how much are my federal taxes? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
I am preparing 6 years of tax returns, I have an IRS Notice
I am preparing 6 years of tax returns, I have an IRS Notice 2014-7 that states that states "IHSS wages received by IHSS providers who live in the same home with the recipient of those services are als… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
On line 37 my 2015 Form 1040 I had an adjusted gross income
On line 37 my 2015 Form 1040 I had an adjusted gross income of $291,546. on my Amended 1040X for 2015 I have taxable income of $179,542. How do I get proof of this to get an adjusted MAGI to give to M… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
A law firm (which is a Schedule C filer) has gross income of
A law firm (which is a Schedule C filer) has gross income of 1,000,000 & Net Income 0f 280,000. In the tax reform just passed, there is a 20% deduction for law firms that have income less than 315,000… read more
Chad EA, CFP ®
Chad EA, CFP ®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
1,083 satisfied customers
If my gross income is 30000, not married and no dependents,
If my gross income is 30000, not married and no dependents, can you tell me approximately how much I would expect to pay in federal tax, state tax and SS? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I used to work for Hewitt as a tax preparer and figured
I used to work for Jackson Hewitt as a tax preparer and figured while I carried a simple insurance for "error and omissions" they had a larger umbrella insurance to cover me for larger million dollar … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Tax law.FICA Tax law. W-4 and W-2 payroll tax withholding
tax law.FICA Tax law. W-4 and W-2 payroll tax withholding from wages and salaries.gross pay and take home pay. number of hours measured direct work assigned by W-4 and W-2 forms. for Medicare eligibil… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Self employed, Im wondering if inmigration uses gross income
Self employed, Im wondering if inmigration uses gross income or net income for their figures... I make about 70,000 gross income on 1099 but after deductions net income is about 32,000.. we are a fami… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
I am preparing a form 8802 for an LLC that will be filing as
Good morning. I am preparing a form 8802 for an LLC that will be filing as a Partnership on Form 1065. For 2016 this entity was a Single Member LLC and two Partners were admitted October 1, 2017. … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
Is a tax return less likely to be audited if it's prepared
Is a tax return less likely to be audited if it's prepared by a CPA or simply a tax person? Secondly, our Rotary Club is a 401 C for we have a 401 c 3 Foundation the question is can individual members… read more
socrateaser
socrateaser
1,031 satisfied customers
I filed my Form 1040, prepared on TurboTax and filed
I filed my Form 1040, prepared on TurboTax and filed electronically via TurboTax. I got nothing back and was told by the IRS that the refund was sent to a different bank transit number than the one sh… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
Can i file head of household on my 2016 tax return if my
Can i file head of household on my 2016 tax return if my husband and I were going through a divorce proceeding but he passed away before the divorce was finalized in mid 2016?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,798 satisfied customers
A taxpayer, Form 1040 Schedule C, is on the cash basis. The
A taxpayer, Form 1040 Schedule C, is on the cash basis. The average revenue for the last 5 years is $5,100,000. There is no inventory. The NAICS is 423600Can he remain on the cash basis?… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Dependent Children. 1. Taxpayer's adjusted gross income is
Dependent Children.1. Taxpayer's adjusted gross income is over $ 800K so personal exemptions are phased out. 2. Taxpayer's children are between ages 12 - 17. 3. All three children have earned income o… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x