The Small Business Tax Help Blog

Posts Tagged ‘taxes’

Question: How much penalty will I pay since I owe about $1800 in federal taxes this year?

My husband and I do not have any additional income other then our salaried jobs. He claims 0 while I claim 1. For some reason, there was an error throughout the year in the amount that should have been taken out from my paycheck for federal. Last year we owed 1181 and paid 14 dollars in underpayment penalties and we didn’t send in Estimated Tax Payments throughout the year for 2009, since we figured we would be okay. What kind of penalty am I looking at?

Answer: It looks like the IRS charged you interest on your underpayment last year of about 1.2%. Basically they are saying that the money should have been with them instead of with you and they charged you a fee for that privilege.

I would think that the same fee would be applied to this year’s underpayment, or about $22 on the $1800 shortfall.

Are Federal Workers Underpaid? (Part 2 of 2)

Question: Can an LLC pay another LLC?

My husband recently became an LLC (due to local tax law revisions), and his father, who owns the company that he used to be considered an independent contractor for, is paying him as an LLC himself. This is a family-owned masonry company. They have always been separate, paying for their own insurance, paying their own taxes, but now a new law states that they all have to be an LLC in order to work and get paid. The confusion lies in whether or not my father in law can still pay my husband what is owed for working hourly through him, or does he have to be paid directly from the homeowner? I hope this makes sense, please ask questions to help me clarify……

Answer: yes an llc can pay another llc

The Horse Business Hotline – Private Contractor vs Employee

Question: Small Business Taxes? I am thinking of starting a small business.. Our new president is talking of tax?

breaks for small businesses.. but right now I am forming a small business plan, and need to know about how much taxes are for small businesses. I am sure there is a tax for whatever the community charges, and then county taxes and then federal taxes.. it takes my breath away just thinking about it. Just wondering what a small business that makes say 50 grand a year to (wishful thinking 100,000) a year would overall pay out in taxes… I would really like someone to throw out some “tentative numbers”… if you can. If you know of a “quick” site that launches some numbers that would be nice too. thanks

Answer: There’s really no way to say with any accuracy. I’ve yet to see a good business plan that addressed income taxes. Income taxes are what they are and there’s not a lot that you can do about them. The only taxes that your business plan would address are those taxes that the business will have to pay regardless of what the profits are. Those would include property taxes, sales taxes on items used in course of the business, payroll taxes (as part of your employee costs), etc.

Assuming that you’re operating as a Sole Proprietor, the business income is reported on your personal income tax return and is taxed there. Only the net profit is subject to taxation. You’ll pay self-employment taxes at roughly 14.1% on the first $106,800 of net profit for 2009 and 2.7% beyond that. The income tax will depend upon the usual variables such as other taxable income, marital status, number of dependents, itemized deductions, credits, etc.

As far as what impact future legislation might have, ignore that until it becomes law and then adjust your business plan accordingly. A business plan is not a static document; it must be regularly updated as laws change and your business goals change.

As your business operates you need to stay on top of the finances on a regular basis. You’ll need to make quarterly estimated income tax payments but may well need to adjust those up or down as your profit picture changes.

I’d strongly urge a consultation with a CPA or EA who specializes in small business issues and taxation before you start. They will help you develop your business plan, set up a bookkeeping system that will pass the IRS muster, and project your required tax payments.

If you need a VERY rough “cocktail napkin” estimate, start with 30% of the net profit for Federal income and self-employment taxes, plus whatever your state’s income tax rate is. If you get lucky and your business really takes off that may rise significantly (up to a point; once you hit the Social Security earnings cap it will drop for a while) but you’ll have the profits to pay the taxes from as well as a lot more money for YOU at the end of the day.

There are 3 primary reasons why new small businesses fail. In order of importance:

1. Failure to plan. The cocktail napkin is a starting point only. The primary goal is to generate taxable income. NEVER lose sight of that!

2. Inadequate capitalization. You can replace a lot of liquid capital with “sweat equity” but be prepared to work upwards of 80 hours per week to get it off the ground.

3. Failure to manage the entire business. Fretting about taxes and forgetting to generate taxable income in the first place will kill you in a matter of months.

Rep. Fred Upton Fighting for Small Business, Calls for Repeal of Harmful 1099 Tax Provision

buffy sainte-marie – working for the government

Question: Corporation or LLC for RE Co & Why?

I’m opening up my own real estate company in Boston just me right now but might have a partner later on. Size will be considered fairly small probably 10 agents, couple of assistants and an office manager.

What should I do LLC or Corporation, and why?

On separate note, what do I do first file for EIN then LLC/Corp? or Vice Versa

Thanks in Advance for your Help.

Answer: Form an LLC. In most states its easier and has less regulation. It also gives you the same liability protection and allows you to file taxes easier.

The EIN comes after the LLC. You need to establish your LLC to ensure you can have the name you want, then get the EIN number and you might still need to provide your EIN to the sec of State

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