[Harvey Specter]

(02-14-2015 12:34 PM)DVY Wrote:  

Let say you have a doctor who operates as a sole-prop ( medical/dental liability pierces the coporate veil)

Said doctor also owns the real estate that the office sits on.

Q1: You can not pay rent to yourself as a sole prop. Is that correct?

Q2: If the doctor sold a minimal share of business (say 5-10%) to a partner, can the business (partnership or other joint venture company aka LLC or S-corp) start writing rent checks to doctor?

^^^From my understanding, rent expenses will lower self-employment taxes, FICA and social security

Q3: Considering this is a minority share of the business (lack of control and liquidity), what discount can you apply to this minority share of business? What passes the bullshit smell test?

_____________________________________

Foreign national family member (grandfather) passes away.

Inheritance share is roughly 100k. From brief research, this shouldn't be a problem to bring into the country (Form 3250).

Q1: Any special precautions I should take?

Q2: I have family members who might occasionally want to give me gifts. From a brief read of the IRS form 3250, its roughly 15k/person but each family counts as 1 person (related persons). <--- I might be misunderstanding this

How far does one extend this family interaction? Say you have ten cousins? How about family of your cousin? This whole section is just riddled with holes

How much $ before a red flag gets set off? 50k? 100k?

You can pay rent to yourself, it is very common way to reduce SE taxes, just don't get too cute and pay around market rate.

I believe (not positive on this, I just don't do enough of this type of work) that foreign nationals are generally considered to be residents for estate tax purposes, so all normal US rules apply. Also, I believe you are correct in relation to gifts with the relation to the related party rules and it would extend to your first cousins, but past that I would need to check the tax code to give you a more definitive answer.

[Richiavelli]

(02-14-2015 02:48 PM)Harvey Specter Wrote:  

(02-14-2015 12:34 PM)DVY Wrote:  

Let say you have a doctor who operates as a sole-prop ( medical/dental liability pierces the coporate veil)

Said doctor also owns the real estate that the office sits on.

Q1: You can not pay rent to yourself as a sole prop. Is that correct?

Q2: If the doctor sold a minimal share of business (say 5-10%) to a partner, can the business (partnership or other joint venture company aka LLC or S-corp) start writing rent checks to doctor?

^^^From my understanding, rent expenses will lower self-employment taxes, FICA and social security

Q3: Considering this is a minority share of the business (lack of control and liquidity), what discount can you apply to this minority share of business? What passes the bullshit smell test?

_____________________________________

Foreign national family member (grandfather) passes away.

Inheritance share is roughly 100k. From brief research, this shouldn't be a problem to bring into the country (Form 3250).

Q1: Any special precautions I should take?

Q2: I have family members who might occasionally want to give me gifts. From a brief read of the IRS form 3250, its roughly 15k/person but each family counts as 1 person (related persons). <--- I might be misunderstanding this

How far does one extend this family interaction? Say you have ten cousins? How about family of your cousin? This whole section is just riddled with holes

How much $ before a red flag gets set off? 50k? 100k?

You can pay rent to yourself, it is very common way to reduce SE taxes, just don't get too cute and pay around market rate.

I believe (not positive on this, I just don't do enough of this type of work) that foreign nationals are generally considered to be residents for estate tax purposes, so all normal US rules apply. Also, I believe you are correct in relation to gifts with the relation to the related party rules and it would extend to your first cousins, but past that I would need to check the tax code to give you a more definitive answer.

I believe the rule for related parties is one level up, two levels down, two levels sideways. Don't quote me though, I feel like I would need to check the tax code as well.

Like Harvey said earlier, you do need to pay yourself market rate with adequate documentation. Being cute will hurt you, especially if the rental payment pushes your Schedule C income negative.

I've done some gift tax returns before. Just remember that if somebody is married and gives you a gift, it is double the gift tax exemption! This is something extremely common that rich people do - they give to each others kids' trusts all the time as sort of a "untold agreement." Not sure what type of families you are dealing with, but also keep in mind there is a bit of a high ceiling for the lifetime gift tax exemption. Most normal people will never reach this.

[Dr. Howard]

(02-14-2015 02:48 PM)Harvey Specter Wrote:  

(02-14-2015 12:34 PM)DVY Wrote:  

Let say you have a doctor who operates as a sole-prop ( medical/dental liability pierces the coporate veil)

Said doctor also owns the real estate that the office sits on.

Q1: You can not pay rent to yourself as a sole prop. Is that correct?

Q2: If the doctor sold a minimal share of business (say 5-10%) to a partner, can the business (partnership or other joint venture company aka LLC or S-corp) start writing rent checks to doctor?

^^^From my understanding, rent expenses will lower self-employment taxes, FICA and social security

Q3: Considering this is a minority share of the business (lack of control and liquidity), what discount can you apply to this minority share of business? What passes the bullshit smell test?

_____________________________________

Foreign national family member (grandfather) passes away.

Inheritance share is roughly 100k. From brief research, this shouldn't be a problem to bring into the country (Form 3250).

Q1: Any special precautions I should take?

Q2: I have family members who might occasionally want to give me gifts. From a brief read of the IRS form 3250, its roughly 15k/person but each family counts as 1 person (related persons). <--- I might be misunderstanding this

How far does one extend this family interaction? Say you have ten cousins? How about family of your cousin? This whole section is just riddled with holes

How much $ before a red flag gets set off? 50k? 100k?

You can pay rent to yourself, it is very common way to reduce SE taxes, just don't get too cute and pay around market rate.

I believe (not positive on this, I just don't do enough of this type of work) that foreign nationals are generally considered to be residents for estate tax purposes, so all normal US rules apply. Also, I believe you are correct in relation to gifts with the relation to the related party rules and it would extend to your first cousins, but past that I would need to check the tax code to give you a more definitive answer.

Rules for foreign source gifts are different. http://www.irs.gov/Businesses/Gifts-from-Foreign-Person The limits are actually much higher and I recommend disclosing them on the tax return even though they aren't taxed. This will protect you from the IRS getting a boner and thinking they can nab you for tens of thousands of unreported income.

* This advice isn't specific to any one situation, cannot be used for tax evasion purposes and is purely theoretical.

- I find it difficult to give general tax advice on forums, there is just way too much that I don't know about a specific situation. Kudos to Richiavelli to take it on. I think my advice would be limited to "here's the IRS guides/rules relevant to your situation" or "don't try doing this yourself or with turbotax"...also on "don't try doing this yourself" when seeking help from a tax professional (CPA or Enrolled Agent http://www.irs.gov/Tax-Professionals/Enr...nformation) ask them if they have experience with your type of business or tax situation. You wouldn't ask a family doctor to do your cancer surgery would you?

[Dr. Howard]

(02-06-2015 12:03 AM)Disco_Volante Wrote:  

What is the total list of documents I need to incorporate a business?

I started a small S corp and so far I have

-Article of incorporation in my state
-Federal EIN number
-Stockholders agreement

I still need corporate bylaws, and issue stock certificates, IRS form 2553 and what else?

Also what are the mechanics of creating stock certificates? Can I type and print them myself or is there some registration process?


I asked an attorney and he charges $1500 to incorporate so I said fuck that. Other than completeing corporate by-laws Im not sure what else I need to do.
All the information online is very fragmented I can't find a definitive guide on the exact documents I need.

thanks

Use http://www.northwestregisteredagent.com/ they will talk to you if you have questions. If you are setting up a corp with other partners or people that may be major influence I recommend using an attorney to draft the bylaws. Its like getting married, you don't "think" there will be any problems with partners/major shareholders until there are actually problems...then you are screwed.

In any situation with partners/multiple major shareholders for a startup I actually like Dave Ramsey's advice. Dont' have them, have one person in charge and have generous loan, bonus, or non voting stock options for everyone else.

[Richiavelli]

(02-22-2015 08:10 AM)Dr. Howard Wrote:  

(02-14-2015 02:48 PM)Harvey Specter Wrote:  

(02-14-2015 12:34 PM)DVY Wrote:  

Let say you have a doctor who operates as a sole-prop ( medical/dental liability pierces the coporate veil)

Said doctor also owns the real estate that the office sits on.

Q1: You can not pay rent to yourself as a sole prop. Is that correct?

Q2: If the doctor sold a minimal share of business (say 5-10%) to a partner, can the business (partnership or other joint venture company aka LLC or S-corp) start writing rent checks to doctor?

^^^From my understanding, rent expenses will lower self-employment taxes, FICA and social security

Q3: Considering this is a minority share of the business (lack of control and liquidity), what discount can you apply to this minority share of business? What passes the bullshit smell test?

_____________________________________

Foreign national family member (grandfather) passes away.

Inheritance share is roughly 100k. From brief research, this shouldn't be a problem to bring into the country (Form 3250).

Q1: Any special precautions I should take?

Q2: I have family members who might occasionally want to give me gifts. From a brief read of the IRS form 3250, its roughly 15k/person but each family counts as 1 person (related persons). <--- I might be misunderstanding this

How far does one extend this family interaction? Say you have ten cousins? How about family of your cousin? This whole section is just riddled with holes

How much $ before a red flag gets set off? 50k? 100k?

You can pay rent to yourself, it is very common way to reduce SE taxes, just don't get too cute and pay around market rate.

I believe (not positive on this, I just don't do enough of this type of work) that foreign nationals are generally considered to be residents for estate tax purposes, so all normal US rules apply. Also, I believe you are correct in relation to gifts with the relation to the related party rules and it would extend to your first cousins, but past that I would need to check the tax code to give you a more definitive answer.

Rules for foreign source gifts are different. http://www.irs.gov/Businesses/Gifts-from-Foreign-Person The limits are actually much higher and I recommend disclosing them on the tax return even though they aren't taxed. This will protect you from the IRS getting a boner and thinking they can nab you for tens of thousands of unreported income.

* This advice isn't specific to any one situation, cannot be used for tax evasion purposes and is purely theoretical.

- I find it difficult to give general tax advice on forums, there is just way too much that I don't know about a specific situation. Kudos to Richiavelli to take it on. I think my advice would be limited to "here's the IRS guides/rules relevant to your situation" or "don't try doing this yourself or with turbotax"...also on "don't try doing this yourself" when seeking help from a tax professional (CPA or Enrolled Agent http://www.irs.gov/Tax-Professionals/Enr...nformation) ask them if they have experience with your type of business or tax situation. You wouldn't ask a family doctor to do your cancer surgery would you?

Turbotax is perfect if you only have W-2 income. Anything else outside of that? Hire a CPA and hire them now.

[Dr. Howard]

(02-22-2015 05:08 PM)Richiavelli Wrote:  

....

Turbotax is perfect if you only have W-2 income. Anything else outside of that? Hire a CPA and hire them now.

Added +1 rep for putting advice out there, I would agree that Turbotax is fine for W2/straight forward solutions. I'd also reccomend VITA tax assistance centers where they will do your taxes for free if you make less than 50k and its somewhat simple.

I would change "Hire a CPA" to "Hire a tax expert" though. There are CPA's that don't specialize in taxes and tax specialists that aren't CPAs. Enrolled Agents and Tax Attorneys come to mind.

[Richiavelli]

Just want to say that all my "personal" clients are fucking lazy and not getting me their material. I am going to start charging extra depending on when information comes in.

[polar]

Great thread.

In what cases are one's conversations with their accountant specifically protected by power of attorney?

Risk factors and process of being selected for an audit? Is it different for W2 wage slaves vs. small businesses?

[Richiavelli]

If I blow the whistle on you, I would have my cpa license revoked. It works how you think it would.

[samsamsam]

I am using this stupid HR Block program to handle an LLC. The LLC had no revenues and a 1000 in expenses. My accountant last year charged 850 to do it so I want to do it myself.

Anyway, I am trying to efile and the program sucks and it is doing some annoying things and the tech support it useless.

Also, somehow it is asking for Schedule O and P for foreign stuff and yet we don't have a foreign investor.

I can just print it and mail it in right?

I mean it has 0 revenue and of the 1000 in expenses the biggest one was paying CA for the LLC fee for 800.

I mean is this really a big deal?

My normal personal return will be handled by my CPA.

Thanks!

[Richiavelli]

(03-09-2015 03:01 PM)samsamsam Wrote:  

I am using this stupid HR Block program to handle an LLC. The LLC had no revenues and a 1000 in expenses. My accountant last year charged 850 to do it so I want to do it myself.

Anyway, I am trying to efile and the program sucks and it is doing some annoying things and the tech support it useless.

Also, somehow it is asking for Schedule O and P for foreign stuff and yet we don't have a foreign investor.

I can just print it and mail it in right?

I mean it has 0 revenue and of the 1000 in expenses the biggest one was paying CA for the LLC fee for 800.

I mean is this really a big deal?

My normal personal return will be handled by my CPA.

Thanks!

Yes. There is no mandate to efile a federal 1065. Please note that some states DO have mandatory efile. New York is one of them.

Foreign issues are huge this year. Schedule 0 and P are probably populating because you did not suppress form 926, 8886, or 8865, which are foreign transactions. Typically you would file this if you made a cash contribution to a foreign corporation (PFIC) or gained more than 10% ownership.

Are you a purely domesetic LLC?

[samsamsam]

^^, yep purely domestic. I deleted the foreign forms and was able to attach to square it away. Thanks!

[Richiavelli]

Bump. Anyone notice that tax companies are thirsty for your business? Too many bowl commercials.

[Dr. Howard]

(03-08-2015 03:56 AM)Richiavelli Wrote:  

Just want to say that all my "personal" clients are fucking lazy and not getting me their material. I am going to start charging extra depending on when information comes in.

Its tax season again, so I wanted to bump this thread up the list.

[fortysix]

Hey guys -

Can anyone shine in on how property tax deductions work?

I was always hesitant to own an expensive home because I figured that paying property tax would be akin to paying rent - however, I just learned that you can take a deduction - does this mean that property taxes are just a wash?

Thanks

[frozen-ace]

@ se7en

Do you itemize your deductions or take the standard deduction. If you have high income and pay a ton of mortgage interest, you might itemize, otherwise none of that matters as you will probably be taking the standard deduction.

If you do indeed itemize, actual cash paid for property taxes is an itemized deduction, going on schedule A. You cannot include assessments (street improvements, sidewalks, sewer lines).

No, property taxes are not just a wash. You are paying a local authority (city or state) and the Feds are giving you a break for it. But it doesn't come out exactly even.

Very overly simplified example- say you paid $10,000 to the city in property taxes and itemize, and your tax rate is 25%. This reduced your tax owed to the IRS by $2,500.

You paid city $10,000
Savings on federal taxes- $2,500
Net impact of property tax bill = $7,500

Of course, if you don't itemize then there is no deduction.

Some years ago there used to be an additional standard deduction of up to $500 for people who couldn't itemize but paid property taxes, but it was only around for a short period and those days are gone.

[fortysix]

(05-16-2016 07:59 PM)frozen-ace Wrote:  

@ se7en

Do you itemize your deductions or take the standard deduction. If you have high income and pay a ton of mortgage interest, you might itemize, otherwise none of that matters as you will probably be taking the standard deduction.

If you do indeed itemize, actual cash paid for property taxes is an itemized deduction, going on schedule A. You cannot include assessments (street improvements, sidewalks, sewer lines).

No, property taxes are not just a wash. You are paying a local authority (city or state) and the Feds are giving you a break for it. But it doesn't come out exactly even.

Very overly simplified example- say you paid $10,000 to the city in property taxes and itemize, and your tax rate is 25%. This reduced your tax owed to the IRS by $2,500.

You paid city $10,000
Savings on federal taxes- $2,500
Net impact of property tax bill = $7,500

Of course, if you don't itemize then there is no deduction.

Some years ago there used to be an additional standard deduction of up to $500 for people who couldn't itemize but paid property taxes, but it was only around for a short period and those days are gone.

ah I see, thank you for the clear explanation.

[TheFinalEpic]

Anyone cut residential ties with a country and moved to a tax haven to build and operate online businesses?

[frozen-ace]

@ se7en-

If you do itemize and paid property tax you didn't claim on schedule A, you can file an amended return and get some money back. Not sure how many years you can go back, maybe 5? Anyway, happens all the time, people find something they missed and file an amended return.

[Diop]

(05-16-2016 09:08 PM)frozen-ace Wrote:  

@ se7en-

If you do itemize and paid property tax you didn't claim on schedule A, you can file an amended return and get some money back. Not sure how many years you can go back, maybe 5? Anyway, happens all the time, people find something they missed and file an amended return.

You can file a Form 1040X (Amended Return) within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later. So for instance, if you forgot to include mortgage interest and/or property tax deductions on your Schedule A for several years, you can go back as far as Tax Year 2012 if you filed for that year on or after May 17, 2013 (three years ago today).

(I'm a CPA)

[Diop]

(02-12-2015 07:43 PM)tarquin Wrote:  

I just wanted to point out that the "audit protection" that companies like "turbo tax" sell usually only go so far as the offers in compromise part of the audit process. If you have a disagreement on the law or the facts that necessitates going to Tax Court, you will be paying for lawyers on yourself. I've seen a few people get burned.

This is an older post but I wanted to bump it up for emphasis (I just discovered this thread). That "Audit Guarantee Protection" TurboTax offers is essentially worthless. All it does is provide you access to a call center where you MIGHT get to chat with an EA or a CPA, who will listen to your issue and simply instruct you to either dispute the amount owed and/or file a Tax Court petition or submit an offer in compromise if you feel you owe less (which the IRS will ultimately reject). Once that happens, you'll end up....filing a Tax Court petition.

Any EA/CPA assisting you with this "defense" via TurboTax isn't permitted to view your return because it puts them into a preparer role, and since TurboTax is a self-prep program it's explicitly prohibited for a licensed tax professional to modify your return as if you were one of their clients. You don't need to pay TurboTax an extra $69.99 (or whatever it is) for the sequence of the above to play out.

I did some consulting for Intuit (TurboTax) throughout this year's filing season and I couldn't believe the amount of dishonesty they duped their customers with regarding this "benefit" as well as a host of others. One more tip - if you are a returning TurboTax customer and expect to file your taxes for "Free", it's not possible because they will charge you $29.99 for simply rolling over your name and address from the prior year onto your current year's tax return. Lots of pissed off people about that one. If you are using their online program and only have a W2, you're better off creating a new account with a new e-mail address and starting over.

[Cruisen_Chubby]

(02-11-2015 06:01 PM)Harvey Specter Wrote:  

If you take section 179 depreciation on an asset then remove it from the corporation by any means (sale, dividend, compensation, whatever) you need to then recapture the depreciation as ordinary income. So basically there is no benefit for doing it.

It is true that you would have to claim back to depreciation, but you are missing one component... and that is skirting S/E (FICA) taxes.

When you 179 (or deduct) and asset that you will most likely dispose of in a taxable event, you are reducing your income subject to S/E in that year--- When you claim back the income from disposition, you do so on the form 4797, which is not subject to S/E taxes. For example.

Net income = $50,000
179 deduction for SUV used for business = $(25,000)

New net income = $25,000.

That deduction alone, assuming you are in the 25% tax bracket would save you= $10,075 ($25,000 x .403) --- the .403 comes from 25% income tax +15.3 FICA (Medicare + Social Security).

Ok, so it saves you $10,075 the first year, but next year you dispose of that asset and it's time to pay the piper.

For posterity's sakes, let's say you sell it for what you bought it for...$25,000 (this usually never happens by the way but I want to be as conservative as possible in this example).

On your tax return, you would enter in the sale of the asset as $25,000 sales price with a $0 basis because you 179'd the shit out of it the previous year.

This sale would NOT be subject to self employment as it is NOT business income, it is a sale of business property, therefore only subject to your income tax rate of 25%.

So you'd pay $6,250 ($25,000 x .25).

For a total tax savings of... $3,825 (10,075 Section 179 savings - $6,250 tax on disposition).

Chances are the savings are a bit higher as the asset depreciated and was not worth as much as before.But you'd need to consider you took a bath on a double declining asset such as an automobile, but that is a calculation for another day.

[thoughtgypsy]

I posted this earlier in the Stock Market thread, though it's probably more appropriate here:

What is your guys experience with loss carry forwards to reduce taxable income?

I bought some shares of SDRL at $22.2 when the oil correction first occurred in Oct 2014. It is now at $3.6.

I bought roughly the same position of UWTI in January this year at the equivalent of $22.9/share, and closed it out yesterday at $35.1/share.

I don't see SDRL making a comeback any time soon, and I'm hoping to lower my exposure and reduce my taxable income at the same time. My thought is to sell off enough shares of SDRL to produce a capital loss almost equal to the gain from my UWTI sale.

Does anyone have experience doing something like this? Would the positions be treated differently for tax purposes because they are different durations? (i.e. SDRL position duration is 19 months, UWTI position is 5 months)

From what I've read, the 5 month UWTI capital gain counts as a short term capital gain and would be counted at my marginal annual tax rate.

Were I to sell my 19 month SDRL position, it would be considered a long term capital loss, so long as I do it within 7 years of its purchase.

My interpretation is yes, I can offset my short term capital gains by selling stocks that would produce an equivalent long term capital loss. Further, I can choose to carry forward that loss up to 7 years in the future should I choose to do. Is this correct?

[Harvey Specter]

(05-17-2016 11:05 AM)Cruisen_Chubby Wrote:  

(02-11-2015 06:01 PM)Harvey Specter Wrote:  

If you take section 179 depreciation on an asset then remove it from the corporation by any means (sale, dividend, compensation, whatever) you need to then recapture the depreciation as ordinary income. So basically there is no benefit for doing it.

It is true that you would have to claim back to depreciation, but you are missing one component... and that is skirting S/E (FICA) taxes.

When you 179 (or deduct) and asset that you will most likely dispose of in a taxable event, you are reducing your income subject to S/E in that year--- When you claim back the income from disposition, you do so on the form 4797, which is not subject to S/E taxes. For example.

Net income = $50,000
179 deduction for SUV used for business = $(25,000)

New net income = $25,000.

That deduction alone, assuming you are in the 25% tax bracket would save you= $10,075 ($25,000 x .403) --- the .403 comes from 25% income tax +15.3 FICA (Medicare + Social Security).

Ok, so it saves you $10,075 the first year, but next year you dispose of that asset and it's time to pay the piper.

For posterity's sakes, let's say you sell it for what you bought it for...$25,000 (this usually never happens by the way but I want to be as conservative as possible in this example).

On your tax return, you would enter in the sale of the asset as $25,000 sales price with a $0 basis because you 179'd the shit out of it the previous year.

This sale would NOT be subject to self employment as it is NOT business income, it is a sale of business property, therefore only subject to your income tax rate of 25%.

So you'd pay $6,250 ($25,000 x .25).

For a total tax savings of... $3,825 (10,075 Section 179 savings - $6,250 tax on disposition).

Chances are the savings are a bit higher as the asset depreciated and was not worth as much as before.But you'd need to consider you took a bath on a double declining asset such as an automobile, but that is a calculation for another day.

I understand what you are saying, but I the question was asked about a corporation, so the net income wouldn't be subject to SE.

In your example though if it is was a SP or partnership, you could probably get away with doing it a couple times, but if you are ever audited the IRS could make the argument that you are treating the vehicles as inventory(which essentially you are) and it would then disallow your 179. I wouldn't recommend it as a tax planning strategy.

[Plus Oultre]

Section 179 should only be used strategically within the context a long term strategy. Each business and set of circumstances are different. It is a huge topic. I just leave a couple of quick opinions here.

Taking a deduction the current year might reduce your taxable income for the current year and/or put you in a lower tax bracket; but what is the point of doing it if in a future year you expect higher income. It will be OK to take regular depreciation and even out your deduction throughout the life of the asset. Depends on the circumstances.

Also, to minimize the depreciation recapture effect of Section 179 election, use the election for assets you are most likely to keep for the duration of the life of the asset. Have in mind that depreciation recapture is accounted for on all assets sales; so you will be getting hit with it on any asset that appreciates; most commonly on rental real estate property.