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Tax Chat Today
- Thread starter Andre
- Start date
Hi Joey:
I'm not sure I fully understand your question, but let me take this stab: The tax rules, including deductions, are the same for a proprietary trader who is a member of a LLC as for one who is trading either in his own name (as a sole proprietor, filing a Schedule C) or for a trader who is trading in his own LLC. The same tax items of profit, loss, deduction, credit and so forth will be reported by the taxpayer, albeit on a different schedule (Schedule C) if the trader is a sole proprietor
Same rules any way you go, and no tax advantage or disadvantage to a proprietary trader in a LLC vs. the other ways mentioned.
I'm not sure I fully understand your question, but let me take this stab: The tax rules, including deductions, are the same for a proprietary trader who is a member of a LLC as for one who is trading either in his own name (as a sole proprietor, filing a Schedule C) or for a trader who is trading in his own LLC. The same tax items of profit, loss, deduction, credit and so forth will be reported by the taxpayer, albeit on a different schedule (Schedule C) if the trader is a sole proprietor
Same rules any way you go, and no tax advantage or disadvantage to a proprietary trader in a LLC vs. the other ways mentioned.
One half hour after the close today, Traders Accounting will be joining us for their third monthly chat in a series designed to help you prepare for the coming tax year, and minimize your burden for the 2003 tax year as well. This month's chat will explain the basic tax operation of a flow-thru entity and compare the different types of flow-thru entities that are available. Please join us.
Just a reminder that we put up the log from the Traders Accounting chat today on Flow-Thru Tax Entities.
After the presentation, Traders Accounting had Joe Wishcamper, Esq., Jim Forrester, CPA, and Jim Crimmins, the President of Traders Accounting... all responding to questions. We tried some new host tools that allowed them to work on questions alot more effectively. They answered 40 questions in about an hour, double what we've covered in the past chats!
Remember, they're doing this every month, through March.
Next chat, Thursday, January 22nd at 4:30pm EST.
André
After the presentation, Traders Accounting had Joe Wishcamper, Esq., Jim Forrester, CPA, and Jim Crimmins, the President of Traders Accounting... all responding to questions. We tried some new host tools that allowed them to work on questions alot more effectively. They answered 40 questions in about an hour, double what we've covered in the past chats!
Remember, they're doing this every month, through March.
Next chat, Thursday, January 22nd at 4:30pm EST.
André
You say "Finally, as an added benefit, the LLC provides you with the vehicle to pay yourself a management fee, thus creating earned income. With earned income, you may set up retirement plans such as a 401(k) , which are deductible to the business and are not taxed at the individual level. The deduction limits for 2003 are $40,000! That figure goes up to $41,000 for 2004."
Isn't the management fee earned income subject to the 15.3% soc.sec. tax?
Could you give an example of how the management fee plays out assuming my tax at 25% of adjusted gross income? Do you pay tax on one side and benefit on the other?
Isn't the management fee earned income subject to the 15.3% soc.sec. tax?
Could you give an example of how the management fee plays out assuming my tax at 25% of adjusted gross income? Do you pay tax on one side and benefit on the other?
Hi Larryb:
Yes, you are basically correct. The management fee is indeed subject to the 15.3% self-employment tax. That's the whole idea; the effort in this case is to produce "earned income," and earned income by definition requires the 15.3% payment of either the S.E. tax or the FICA/FUTA withholdings on a salary. So the tradeoff is that you pay the 15.3% SE tax, but you are then entitled to make the employer + employee contributions allowed by the pension laws.
I will let the CPA discuss with you the specific mechanisms and computations since the CPAs are the number-crunchers!
Yes, you are basically correct. The management fee is indeed subject to the 15.3% self-employment tax. That's the whole idea; the effort in this case is to produce "earned income," and earned income by definition requires the 15.3% payment of either the S.E. tax or the FICA/FUTA withholdings on a salary. So the tradeoff is that you pay the 15.3% SE tax, but you are then entitled to make the employer + employee contributions allowed by the pension laws.
I will let the CPA discuss with you the specific mechanisms and computations since the CPAs are the number-crunchers!
CHAT REMINDER: One half hour after the close today, Traders Accounting will be joining us for their fourth monthly chat in a series designed to help you prepare for the coming tax year, and minimize your burden for the 2003 tax year as well. This month's chat will focus on how to make your Tax Return preparation painless and possibly even profitable. Please join us.
André
André
CHAT REMINDER: One half hour after the close today, Traders Accounting will be joining us for their fifth monthly chat in a series designed to help you prepare for the coming tax year, and minimize your burden for the 2003 tax year as well. This month's chat will focus on the Wash Sale Rule. Please join us.
André
André