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ketanco
06-04-2012, 03:14 PM
Hi everyone,
My business is a small, very small, just including myself, LLC business based on a few websites. My main website is an online news magazine about hi tech stuff. I basically update those sites as necessary and look to get some ad revenue. I am also going to activate an ecommerce site soon.

My question is, doing this kind of work, duirng tax time, all I do is to attach a schedule C to my personal tax return. Am I missing anything here? Am I considered an employee with this LLC business now? Are there any paperwork to do?

Also what is the self employment tax and am I considered self employed with this?

ArcSine
06-04-2012, 03:52 PM
My question is, doing this kind of work, duirng tax time, all I do is to attach a schedule C to my personal tax return. Am I missing anything here?

No, you've basically got it right there, provided that you're the sole owner of the LLC (no percentage of the ownership held by another party). Enter the LLC's revenues and expenses on a Schedule C just as if you were a sole proprietor, and include the Sch C with your personal return.

You're not considered an employee of the LLC for tax purposes, so no W-2, no payroll reports, and so on.

You will owe self-employment tax in addition to income tax, if the net earnings are sufficient. Prepare Schedule SE and include that with your personal return, just as with the Sch C. Your self-emp tax will be computed on this particular form. Also note that you're allowed a deduction on Page 1 of your personal return for ½ of your self-emp tax. This deduction amount will also be figured on Sch SE.

MazumaBen
06-04-2012, 06:31 PM
ketanco: As ArcSine mentioned, it looks like you are inline with what the IRS expects of you as a single member LLC.

I know of some small businesses like yours that choose to be taxed as an S-Corp, and therefore are treated as employees of the company. This means you have to manage the payroll aspects of the business, but you can also save a significant amount of money in minimizing self-employment tax paid. We help out a lot of small businesses with questions like this.

ketanco
06-05-2012, 07:41 AM
You will owe self-employment tax in addition to income tax, if the net earnings are sufficient. Prepare Schedule SE and include that with your personal return, just as with the Sch C. Your self-emp tax will be computed on this particular form. Also note that you're allowed a deduction on Page 1 of your personal return for ½ of your self-emp tax. This deduction amount will also be figured on Sch SE.

Thanks, and when you say treshold, what is that treshold when the earnings become sufficient? Is there a dollar amount? So when I exceed that treshold with my LLC business income, I pay SE tax?

Also, this LLC thing is like a side income for me. I have also another thing going on, as my first income source. I mainly work as an independent contractor full time somewhere. Does that count as SE though? I am getting my paychecks trhough a staffing firm, but I work at a big company full time and the supervisor there approves my timesheet which I send to staffing firm every week and they send my checks. I have no employee benefits whatsoever. The staffing firm witholds my taxes and gives me w2 every year. How about this one? Does this count as SE tax requirement? or combined with my LLC business - which is totally ierrelevant subject than this contracting? Or, this contractor position does not count for SE because the staffing firm is already witholding my taxes?

ArcSine
06-05-2012, 08:36 AM
MazumaBen makes a noteworthy point about a certain exception to the general rules I mentioned earlier: IF you've made the election to have your LLC taxed as an S Corp, then you'd be considered an 'employee' of the entity. This would in turn invoke various payroll reporting issues.

Generally you compute SE tax on 92.35% of your total self-employment earnings for the year. The exemption I mentioned is that if your total SE earnings are $433 or less, you don't owe any SE tax at all. (Yeah, I know: the only way to be exempt is to have a lemonade stand that lasts no more than two weeks, and no other source of SE income.)

As to classifying your other income, generally if your compensation is reported to you by the payer on a 1099, it's self-employment income. If instead it's reported on a W-2, and you have tax withholdings, it's not considered SE income.

ketanco
06-05-2012, 08:56 AM
ok so as for my working as contractor I dont deal with SE tax.

but for my LLC business, (I am the 100% owner and no it is not classified as S corp), if my earnings are above $433 I owe SE tax on it? By earnings do you mean the gross revenue or net profit that you calculate on schedule C after deducting expenses? I only did schedule C on it so far - which I think doesnt matter as I was at a loss. So you are saying on top of the schedule C, I also do a SE form if my net profit that I calculate on schedule C exceeds $433?

ArcSine
06-05-2012, 12:43 PM
"Earnings" for this SE tax purpose means the Schedule C bottom line after all deductible expenses, NOT your gross revenues.

If your Sch C nets to a loss, and you have no other SE type income from other sources, you'd owe zero SE tax and you're exempt from even completing and attaching Schedule SE.

That said, though, I see in the instructions (http://www.irs.gov/pub/irs-pdf/i1040sse.pdf)to Sch SE (see the Note beginning at the bottom of the left-most column on the first page) that there may be some bene to filing anyway. Have a look at those instructions and see if there's anything applicable to your situation.

ketanco
06-05-2012, 02:10 PM
ok thank you.

i will look at it...

Evan
06-05-2012, 09:56 PM
Does your LLC have an EIN? Did you indicate you wanted corporate status on the SS-4, as the IRS may expect to see an 1120 instead of a Schedule C. Generally single member LLC's are disregarded and treated as a sole proprietorship for tax purposes, therefore the comments people mentioned above are spot on.

Generally, I'd say if your net income is below $50K, I wouldn't really recommend an S-Corp as there isn't going much tax benefits... though it depends on a lot of factors such as whether this is your only employment, whether you're married, etc. Further, while there are "tax" savings, you will have additional expenses to incur, such as payroll processing costs and other insurance requirements. Also, your state may consider you an employee for unemployment or workers compensation purposes regardless, so you may wish to check out those laws anyways. While sole proprietors and partners of a GP are often exempt from workers compensation insurance laws, often partners of LP's or LLP's, or (a) member(s) of an LLC are not excluded and therefore are expected to comply.

ketanco
06-06-2012, 09:40 AM
yes my LLC has EIN. I am the only owner. No I didnt want any S corp status.

I found this at Nj dept of labor and workforce development website:

Partnerships/LLC's – All partnerships and limited liability companies (LLC's) operating in New Jersey must maintain workers' compensation insurance or be approved for self-insurance so long as any one or more individuals, excluding partners or members of the LLC, perform services for the partnership or LLC, for prior, current or anticipated financial consideration*.

Evan
06-06-2012, 08:47 PM
Many states are now including the members/partners of LLCs/partnerships.

ketanco
06-06-2012, 10:44 PM
ok. apparently not NJ. I also check on the phone today just to make sure...
thanks for the help