Tax Question

[Tiger Wench]

If he would just log in here, all his tax troubles would disappear.  He'd find out that he can deduct every penny he ever spent, even on sharp brims and playa threads.  All deductible.  Everything spent can be written off.

By the time he got through being educated on this board, the IRS would owe HIM money.  Tons of it.

Considering what any of us have paid in dollar value for the advice we receive on this board, it is pretty much a wash.

[Kaos]

You can. No business owner ever has had to pay income tax on their employee's wages.  It wouldn't make sense to be in business.  Also, it would be double taxation.  If you think that you have to pay income tax on your employees wages AND they pay income taxes on their wages as well, then you need to read a book.  It's not income to you. 

You just don't like to be called out for being wrong, so you get butt sore. Troll Kaos likes to troll.

Don't recall saying you couldn't deduct payroll.  I know you can deduct payroll in most circumstances.

Was more making snide reference to the entire "deduct everything" scenario which -- despite protestations -- is complete and utter bullshit. 

If it were that simple you wouldn't have a job. 

And yes, that drum will be banged until my banger is numb. 

[AWK]

Don't recall saying you couldn't deduct payroll.  I know you can deduct payroll in most circumstances.

Was more making snide reference to the entire "deduct everything" scenario which -- despite protestations -- is complete and utter bullshit. 

If it were that simple you wouldn't have a job. 

And yes, that drum will be banged until my banger is numb.

That's what started your entire fit in the other thread.  And what you actually said in this thread too (a reminder for the memory impaired):

Not every dime, but you can deduct wages you pay out.

Unless you can't.

I never said you could deduct every penny you spend.  That's not true.

Bang that cool metaphorical drum all you want, just makes you look childish/dumb/trollish.

[Townhallsavoy]

Hey remember me?  The guy that needed this thread?

Another question -

Anyone know of any restaurants or country clubs in Birmingham that could use a solo jazz guitarist?  I'm going around this afternoon and tomorrow to hand out demos and promotional folders, so any suggestions would be appreciated. 

[Kaos]

Deductible Compensation and Benefits

As a general rule, a business can claim a tax deduction for the salary, wages, commissions, bonuses, and other compensation it pays to its employees. In fact, if you have employees, it's likely that your deductions for employee compensation will be one of your largest deductible expenses.

To be deductible, the compensation must be ordinary and necessary, reasonable in amount, based on services rendered, and actually paid or incurred in the year for which the deduction is claimed (as shown by your payroll records).

Unless you can't. 

[AUTiger1]

Hey remember me?  The guy that needed this thread?

Another question -

Anyone know of any restaurants or country clubs in Birmingham that could use a solo jazz guitarist?  I'm going around this afternoon and tomorrow to hand out demos and promotional folders, so any suggestions would be appreciated.

Welcome and post often!

[Vandy Vol]

If I'm making $20/hour on a side job and a 1099 is involved, how much can I expect to deposit into my bank account?

As has been mentioned, it depends on what tax bracket you're in for the most part.

What I can tell you is that as an individual receiving a 1099, you will be viewed as self-employed, at least in regard to the income received via 1099.  This means that you will have to withhold the employer and employee's portion of Social Security and Medicare taxes, which is 13.3% for the remainder of 2012.  If they don't extend the self-employment rate cut, it will go back to 15.3% in 2013.  You can complete Schedule SE to calculate your self-employment tax as well.

So, you will have to withhold at least 13.3% for Social Security and Medicare.  You'll need to figure out what tax bracket you're in for federal income tax to determine how much to withhold for that, but an additional 15% is a rough guesstimate for most income earners.  Alabama's income tax rate tops out at 5% for taxable income above $3,000 ($6,00 for joint filers).

Essentially, one-third is relatively close to what you will need to put away.  It will probably end up being less due to deductions, exemptions, and credits, but at least you'll have what you need to pay when the time comes.

[AWK]

Unless you can't.

Here is the test.  It applies to 99.999999999999999999% of the businesses in the world.  I'm sure you will still bitch because you don't like being wrong. 

Tests for Deducting Pay

To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it. These and other requirements that apply to all business expenses are explained in chapter 1.

In addition, the pay must meet both of the following tests.

    *

      Test 1. It must be reasonable.
    *

      Test 2. It must be for services performed.

The form or method of figuring the pay does not affect its deductibility. For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible.
Test 1—Reasonableness

You must be able to prove that the pay is reasonable. Base this determination on the circumstances that exist when you contract for the services, not those that exist when the reasonableness is questioned. If the pay is excessive, the excess is disallowed for deduction.
Factors to consider.   Determine the reasonableness of pay by the facts and circumstances. Generally, reasonable pay is the amount that like enterprises pay for the same or similar services.

  To determine if pay is reasonable, also consider the following items and any other pertinent facts.

    *

      The duties performed by the employee.
    *

      The volume of business handled.
    *

      The character and amount of responsibility.
    *

      The complexities of your business.
    *

      The amount of time required.
    *

      The cost of living in the locality.
    *

      The ability and achievements of the individual employee performing the service.
    *

      The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation.
    *

      Your policy regarding pay for all your employees.
    *

      The history of pay for each employee.

Test 2—For Services Performed

You must be able to prove the payment was made for services actually performed.
Employee-shareholder salaries.   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive distribution to the employee-shareholder. For more information on corporate distributions to shareholders, see Publication 542, Corporations.

Kinds of Pay

Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B.
Awards

You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. If you give property to an employee as an employee achievement award, your deduction may be limited.
Achievement awards.   An achievement award is an item of tangible personal property that meets all the following requirements.

    *

      It is given to an employee for length of service or safety achievement.
    *

      It is awarded as part of a meaningful presentation.
    *

      It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay.

Length-of-service award.    An award will qualify as a length-of-service award only if either of the following applies.

    *

      The employee receives the award after his or her first 5 years of employment.
    *

      The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years.

http://www.irs.gov/publications/p535/ch02.html

[Kaos]

"As a general rule" 

Means there are exceptions. 

Unless there aren't.  Except there are. 

Unless you can't stands.  Verdict in favor of K.

[Tiger Wench]

"As a general rule" 

Means there are exceptions. 

Unless there aren't.  Except there are. 

Unless you can't stands.  Verdict in favor of K.

Don't you have some movie to bash?

[Kaos]

Don't you have some movie to bash?

Not yet.  Might later. 

[AWK]

"As a general rule" 

Means there are exceptions. 

Unless there aren't.  Except there are. 

Unless you can't stands.  Verdict in favor of K.

There are exceptions to everything.  For example, you are the exception to a rational adult who understands how to admit they are wrong. 

Regardless, you made a broad statement claiming you can't deduct wages and that "everything is deductible." (in an attempt to troll and cover for you being wrong)  I proved you wrong, stated that you can deduct employees wages and also said that not everything is deductible.  You got butt hurt for being called out and being wrong.  You change your argument, mid-argument, after realizing you are outright wrong.  You clamp onto a minor thing like the exemptions I listed for you, that do not apply to your situation, or really any situation for that matter.  You blindly claim victory over an argument that never would have existed but for your stubbornness and being wrong... 

I just listed your M.O. in paragraph.   Wait, I forgot to add that you must hate everything that anyone else likes, unless you found it first. 

There.  The definition of troll Kaos.  Everyone enjoy, and feel free to refer to this post anytime Kaos starts an argument or voices his opinion.  It will save a lot of time.   Just post: Troll Kaos likes to troll.

[Kaos]

There are exceptions to everything.  For example, you are the exception to a rational adult who understands how to admit they are wrong. 

Regardless, you made a broad statement claiming you can't deduct wages and that "everything is deductible." (in an attempt to troll and cover for you being wrong)  I proved you wrong, stated that you can deduct employees wages and also said that not everything is deductible.  You got butt hurt for being called out and being wrong.  You change your argument, mid-argument, after realizing you are outright wrong.  You clamp onto a minor thing like the exemptions I listed for you, that do not apply to your situation, or really any situation for that matter.  You blindly claim victory over an argument that never would have existed but for your stubbornness and being wrong... 

I just listed your M.O. in paragraph.   Wait, I forgot to add that you must hate everything that anyone else likes, unless you found it first. 

There.  The definition of troll Kaos.  Everyone enjoy, and feel free to refer to this post anytime Kaos starts an argument or voices his opinion.  It will save a lot of time.   Just post: Troll Kaos likes to troll.

Since time is money I tried to deduct the time spent in this thread.  My accountant laughed. 

I made no "broad statement."  I said "unless you can't."  By definition "as a general rule" means there are exceptions (things you can't do).  Therefore "unless you can't"  applies. 

I'm not and never have been wrong in relation to the simplistic examples set forth in this thread and others.  As stated numerous times if money in - money out = money in bank (for tax P&L purposes) there would be no need for accountants, tax lawyers, fee mongers or the IRS.  Since those things (except fee mongers, perhaps) are all realities it just isn't that simple. 

If you have a business that requires a great deal of travel you should know that there are myriad rules and regulations that impact what is allowable and what isn't.  There are percentages, etc.  So while in the course of travel my employee might spend $180 on travel expenses the IRS may only allow me to deduct $140 based on the regulations (this is a GD example, don't get your calculator out and explain the percentages because that's irrelevant, the fact that the exist is enough).  If I am being reimbursed for expenses (as the owner I generally don't reimburse myself) what I might be reimbursed for may be a different amount than the IRS allows to be claimed. 

Yes, I made broad statements previously.  But my contention remains that the paper "profit" used by the IRS to calculate your taxes does not necessarily correlate with the actual amount of cash on hand.  I've had years early on where I "showed" a loss but had plenty of available cash.  I've had other years where I "showed" a substantial profit but had nowhere near that amount of available funds.  It's a fucking shell game.  You roll this to there, defer that to here, amortize that to whereever, blah blah fucking blah. 

And you know it. 

You proved nothing except an inability to take a joke.  The "everything is deductible" shit is no different to me than Kirby vaccuums, tomatoes or face painting.  The rest is just wind twisting

[AWK]

Since time is money I tried to deduct the time spent in this thread.  My accountant laughed. 

I made no "broad statement."  I said "unless you can't."  By definition "as a general rule" means there are exceptions (things you can't do).  Therefore "unless you can't"  applies. 

I'm not and never have been wrong in relation to the simplistic examples set forth in this thread and others.  As stated numerous times if money in - money out = money in bank (for tax P&L purposes) there would be no need for accountants, tax lawyers, fee mongers or the IRS.  Since those things (except fee mongers, perhaps) are all realities it just isn't that simple. 

If you have a business that requires a great deal of travel you should know that there are myriad rules and regulations that impact what is allowable and what isn't.  There are percentages, etc.  So while in the course of travel my employee might spend $180 on travel expenses the IRS may only allow me to deduct $140 based on the regulations (this is a GD example, don't get your calculator out and explain the percentages because that's irrelevant, the fact that the exist is enough).  If I am being reimbursed for expenses (as the owner I generally don't reimburse myself) what I might be reimbursed for may be a different amount than the IRS allows to be claimed. 

Yes, I made broad statements previously.  But my contention remains that the paper "profit" used by the IRS to calculate your taxes does not necessarily correlate with the actual amount of cash on hand.  I've had years early on where I "showed" a loss but had plenty of available cash.  I've had other years where I "showed" a substantial profit but had nowhere near that amount of available funds.  It's a fucking shell game.  You roll this to there, defer that to here, amortize that to whereever, blah blah fucking blah. 

And you know it. 

You proved nothing except an inability to take a joke.  The "everything is deductible" shit is no different to me than Kirby vaccuums, tomatoes or face painting.  The rest is just wind twisting

Your "Unless you can't" post came before I posted the "as a general rule."  Broad Statement.

[Kaos]

Your "Unless you can't" post came before I posted the "as a general rule."  Broad Statement.

"Unless you can't" was clearly a joke and one that's been played out numerous times in other threads and relating to other issues and other people. 

You then wadded your panties and proved that "unless you can't" is an ACTUAL reality instead of just a goof. 

BTW, THS?  If you're getting a 1099 for the work the advice to put aside about 1/3 of whatever you're paid to cover the taxes that will apply is a good idea. 

Unless you don't. 

[AWK]

and by the way, I can take at least 8 inches of any joke.

[AWK]

"Unless you can't" was clearly a joke and one that's been played out numerous times in other threads and relating to other issues and other people. 

You then wadded your panties and proved that "unless you can't" is an ACTUAL reality instead of just a goof. 

BTW, THS?  If you're getting a 1099 for the work the advice to put aside about 1/3 of whatever you're paid to cover the taxes that will apply is a good idea. 

Unless you don't.

[Vandy Vol]

As an LLC or a S-Corp, the amount your company "earned" appears as your personal income.  So while someone like me might fit Obama's definition of whatever, that's certainly not disposable income.  It's money I put back in the company, it's money I use for development, it's money I use to pay salararies etc.

                                                     

[GH2001]

                                                     

Sorry K, but that's pretty funny.

[Kaos]

                                                   

You fail to comprehend. 

Obama's definition of "the rich" includes people who show an income of $xxx,xxx.  As the owner of an S-Corp there is a paper figure that shows the "profit" for the company (which depends on a number of factors including what's rolled over from previous years, whether you use the cash or accrual method -- and when you fuck yourself by changing from one to the other on the advice of fired accountants -- and allowable expenses).  Precisely because this isn't a simple "money in - money out = money on hand relationship that paper number of profit that falls to my personal taxes often isn't the same as the actual cash I have on hand.  Over a five or ten year period it might average out, but when you look at each year as a individual entity it may not. 

That was always my point and no matter how much you argue I've been doing this for a lot of years and use two sets of accountants to check it. 

The point -- which you lost -- is that at the end of the year when it shows a "profit" of $850,000 for instance, that money may have already gone to things I normally pay for -- like salaries.  Will i be able to deduct those things in some future tax filing?  Yeah.  But when the K1 I get in April says I had XXXXXXX profit it's not an accurate reflection of cash flow. 

In a business world like mine where I have travel, entertainment, salaries, bonuses, commissions, development, hardware, software, blah blah blah every dime is NOT (and probably never will be) 100% deductible. 

Capice?