This is so dumb I can’t believe people aren’t getting audited left and right.
A single member LLC is simply you. All the income becomes your income. It doesn’t matter if you pay yourself through a draw or not. If you’re finding ways to get your write offs over the standard deduction without spending a bunch on actual business related expenses, you’re probably doing it wrong and committing tax evasion, plain and simple.
One of the law’s changes allowed owners of pass-through businesses—partnerships, sole proprietorships, and S corporations—to deduct 20 percent of their qualified business income (QBI) when calculating their taxes.
There are still benefits to an LLC if you’re alone. Suggesting that everyone is committing tax fraud is speculative at best. Fun fact, she actually was audited for 2017-2019 because of shit her ex husband did, and no tax fraud (on her part, he was definitely guilty and we successfully argued for Innocent Spouse Relief). You can also pay yourself dividends which are taxed at a lower rate, though the IRS checks this income to make sure you aren’t using this stupidly.
Generally, you’re protected with your assets, piercing the veil can only occur if there’s egregious fraud and clearly no separation between yourself and the business. Just keep your business and personal accounts separate and you’ll have the legal protections.
Edit: I went back and asked her and there’s definitely tax benefits, she files as an s corp and it saves a bunch on taxes. It’s more expensive to file so the income must be over like $70k-$80k to really make it worth it.
It doesn’t have to be egregious. I seriously doubt she has legitimate business expenses above $29,200, assuming you’re filing jointly.
Sorry, a bit frustrated as someone who does everything above board but sees all these pavement princess 4x4 lifted trucks running around with commercial bumper stickers who clearly aren’t running a real business.
She does exceed that in cost of goods sold actually, we have whole ass pallets of wood slices in the garage. She makes a $15k order alone every year for Christmas.
If it helps, we don’t deduct anything for our vehicles. We technically could do miles or gas for travel to shows but it’s relatively little.
This is so dumb I can’t believe people aren’t getting audited left and right.
A single member LLC is simply you. All the income becomes your income. It doesn’t matter if you pay yourself through a draw or not. If you’re finding ways to get your write offs over the standard deduction without spending a bunch on actual business related expenses, you’re probably doing it wrong and committing tax evasion, plain and simple.
Look into piercing the veil.
2017 tax law changed this
One of the law’s changes allowed owners of pass-through businesses—partnerships, sole proprietorships, and S corporations—to deduct 20 percent of their qualified business income (QBI) when calculating their taxes.
Edit: Better source https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs
~~https://www.americanprogress.org/article/the-2017-tax-bills-pass-through-deduction-largely-favors-the-wealthy-and-encourages-gaming-of-the-tax-code/~~
That 20% is not in addition to the standard deduction. It only comes into play if your total deductions exceed the standard deduction.
Correct.
There are still benefits to an LLC if you’re alone. Suggesting that everyone is committing tax fraud is speculative at best. Fun fact, she actually was audited for 2017-2019 because of shit her ex husband did, and no tax fraud (on her part, he was definitely guilty and we successfully argued for Innocent Spouse Relief). You can also pay yourself dividends which are taxed at a lower rate, though the IRS checks this income to make sure you aren’t using this stupidly.
Generally, you’re protected with your assets, piercing the veil can only occur if there’s egregious fraud and clearly no separation between yourself and the business. Just keep your business and personal accounts separate and you’ll have the legal protections.
Edit: I went back and asked her and there’s definitely tax benefits, she files as an s corp and it saves a bunch on taxes. It’s more expensive to file so the income must be over like $70k-$80k to really make it worth it.
It doesn’t have to be egregious. I seriously doubt she has legitimate business expenses above $29,200, assuming you’re filing jointly.
Sorry, a bit frustrated as someone who does everything above board but sees all these pavement princess 4x4 lifted trucks running around with commercial bumper stickers who clearly aren’t running a real business.
She does exceed that in cost of goods sold actually, we have whole ass pallets of wood slices in the garage. She makes a $15k order alone every year for Christmas.
If it helps, we don’t deduct anything for our vehicles. We technically could do miles or gas for travel to shows but it’s relatively little.