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I am an hourly consultant My company wants to pay me on 1099…

Customer Question
I am an hourly...

I am an hourly consultant My company wants to pay me on 1099 in my name

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Not to an LLC

Accountant's Assistant: Is there anything else the Accountant should be aware of?

Previously, the other company I worked for paid me to my LLC but this new company still pays on 1099 but directly to me

Submitted: 4 months ago.Category: Tax
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12/23/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 4,583
Experience: 3+ decades of varied tax industry exp. Tax Biz owner
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Hello. Happy Holidays!! Thank you for choosing this Q&A service for assistance. My name is***** will be assisting you. What is your question or concern?

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Customer reply replied 4 months ago
Hi,
Can we hve a call?
It might be easier that way
Customer reply replied 4 months ago
I already paid $38. Will it be $52 more?
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

That is correct. In some case, we, the experts can set the cost for a call, but in this case, the cost is being generated by the site. I should be able to address your coincern through this thread.

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Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

MY apologies...concern

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Customer reply replied 4 months ago
I cannot pay $52 more in addition to $38. Let's continue to type. Ok?
Customer reply replied 4 months ago
Are you there?
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

If you are wanting to know if it makes a difference whether or not you are paid through the LLC or to yourself, it doesn't make a difference, because a single member LLC is a pass thru entity, still typing...

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Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

As a pass thru entity, income or losses from the LLC passes through to your form 1040. SEE BELOW:

------------------------------------

As the owner of a single-member limited liability company (SMLLC) (with the default tax classification of disregarded entity), you are not considered an employee and income you receive from your company is not considered a salary. Instead, just like a sole proprietor, the IRS considers you to be self-employed, and the income you receive is considered earnings from self-employment. As such, income you receive from your SMLLC is subject to federal self-employment tax.

-----------------------------------

https://www.nolo.com/legal-encyclopedia/self-employment-taxes-owners-single-member-llcs.html

Is the information provided what you wanted to know?

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Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

In closing, my goal is to provide you with the best experience possible! Hopefully, the service that I have provided has earned a 5-star rating! Please remember to rate my service by selecting the 5 stars at the top of the screen before you leave today. Thank you in advance. If you require further assistance, use the reply box and let me know.

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Customer reply replied 4 months ago
Can I still deduct my business expenses, contribute to solo 401k even though I get paid on 1099 in my name (not in my LLC name). Previously, I got paid to my LLC so I was able to do all of that. So I am not sure if there is any downside at all receiving the 1099 directly in my name
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

You can deduct your business expenses. I will check on the Solo 401k matter and get back to you shortly.

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Customer reply replied 4 months ago
My current solo 401k is setup with my LLC name. So should I create a new solo 401k associated with my name? I am confused
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

I will check on this and get back to you.

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Customer reply replied 4 months ago
I am trying to develop a consulting business in India. Can I deduct expenses for setting up an office there with the payment received here on 1099 in my name?
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

Yes, a taxpayer can deduct reasonable and necessary business expenses. Keep in mind that some of the expenses may have to be capitalized. SEE BELOW:

----------------------------------

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

----------------------------------------------

  • The expenses used to figure the cost of goods sold,

  • Capital Expenses, and

  • Personal Expenses.

Capital Expenses

You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. In general, there are three types of costs you capitalize.

REFERENCE SOURCE:

https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses

  • Business start-up costs (See the note below)

  • Business assets

  • Improvements

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Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

As for the Solo 401k. SEE BELOW:

---------------------------------

Although the term salary deferral is used, a sole proprietorship, partnership or an LLC taxed as a sole proprietorship do not provide a W-2 salary to the business owner. For businesses of this type, the salary deferral contribution is based on net adjusted business profit. Net adjusted business profit is calculated by taking gross self employment income and then subtracting business expenses and then 1/2 of the self employment tax. In 2017, 100% of net adjusted business profits income up to the maximum of $18,000 or $24,000 if age 50 or older can be contributed in salary deferrals to the Solo 401k (2016 limits are $18,000 and $24,000 if age 50 or older).

REFERENCE SOURCE:

http://www.bcmadvisors.com/solo-401k-limits-sole-proprietor

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Customer reply replied 4 months ago
But my current solo 401k is setup with my LLC. If I receive payment directly in my name, can I still contribute to the same 401k plan? Or should I create a new 401k plan? The last I heard there can only be one solo 401k so I am confused it will all work out
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

Based on the following information, you should not have to set up another solo 401k. Ask the 401k plan administrator to update the plan and show you as a sole proprietor instead of the LLC. SEE BELOW:

--------------------------------------

Change in Business Name Affect on Contributions QUESTION:

For 2018 I plan on getting paid through an LLC, does this have an effect on my solo 401k if established this year? For 2017 I am an independent contractor with no LLC or corp set up.

ANSWER:

You can still setup the solo 401k in 2017 under your sole proprietor business. Next year, we can update the plan to list the new self-employed business. All else would remain the same (e.g., same plan name, same bank account for the solo 401k, etc.). The 2018 annual solo 401k contributions would be based on your new self-employment income and you would have until 2019 to make those contributions.

----------------------------------------------

I have to step away from the computer for half hour or so. If you require further assistance, I will respond upon my return.

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Customer reply replied 4 months ago
I heard for an LLC, 20% of net profit can be made as an employer as a "match" in addition to the standard $18,000 in regular contributions as an employee to the solo 401k. Can I still do the same if I get the payment in my name?
Customer reply replied 4 months ago
I am still waiting for an answer
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

Hello again. I am just returning to the computer. At this point I am going to opt out and release the question back into the question queue so that someone may be able to assist you.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,025
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi My name's Lane... I am a different expert

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice to clients on three continents since 1986.

If you’ll please bear with me for a minute I’ll type up my initial response, and then we can go from there if you have further questions on this.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 4 months ago

Sorry took me a minute to try to read through everything.

...

Because a single member LLC is what IRS calls a disregarded entity, you can be paid with checks to your company OR to your personally.

...

Your LLC is what provides the corporate liability protection at the state level, but from a TAX perspective, everything flows through the schedule C - You file just as a contractor would.

...

(Note that the schedule C has a place for both your social security number and your EIN)

...

And on the numbers, you're correct. You can deduct 18000 as a "salary deferral" (even though you don't get a salary, that's still what this is called for qualified plan purposes) and then an additional 20% of net self employment income (which is essentially your business' profit, adjusted for the fact that you already get to deduct 1/2 of hour self=employment tax (which is how self-employed individuals pay their Social Security and Medicare taxes)

...

Net earnings from self-employment is figured by multiplying net profit carried from Schedule C, by a fixed percentage of 92.35% (.9235).

...

So you can contribute and deduct 18000 plus 92.35% OF 20% of your profit.

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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