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Taxpayers Guide to LLCs and S Corps
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- Basic Business Entities
- Sole Proprietorship
- Single Member Limited Liability Company
- Multi-Member Limited Liability Company
- Partnerships
- Being Considered a Passive Business Owner
- Rental Partnerships
- C Corporations
- Personal Service Corporation
- Professional Corporations and LLCs
- S Corporations
- Section 199A Qualified Business Income Tax Deduction
- S Corp Versus LLC
- LLC Popularity (Hype)
- Formation of an LLC or S Corp
- Nevada Fallacy of an LLC (or Delaware or Wyoming!)
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- Your Spouse as a Partner (Happy Happy Joy Joy)
- Family Partners
- Real Estate Holding Company and Operating Company
- Parent-Child Arrangement (Income Flows "Up")
- Parent-Child Arrangement (Income Flows "Down")
- Multi-Member LLC That Issues Invoices
- Things to Work Through with Multiple Entities
- Recap of Benefits with Multiple Entities
- State Apportionment with Multiple Entities
- California Multi-Member LLC S Corp Twist
- C Corporation as Mothership
- Holding Company versus Management Company
- Pure LLC Holding Company
- Economic versus Equity Interests
- Structuring Deals with Angel Investors
- ESOPs and S Corporations
- Another Employee Ownership Situation
- Medical C Corp
- Fleischer Tax Court Case
- Joint Ventures
- Loans or Capital Injections
- Using a Trust in Your Formation Considerations
- Operating Agreements
- Exit Plans, Business Succession
- Liability Protection Fallacy of an LLC
- Charging Orders
- Using a Self-Directed IRA to Buy a Rental, Start A Business
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- Avoiding or Reducing Self-Employment SE Taxes
- Tax Savings with Health Insurance
- S Corp Hard Money Facts, Net Savings
- Ancillary Benefits with S Corporations
- Officer Compensation with Solo 401k Plan Deferral
- W-2 Converted to 1099
- Net Investment Income, Medicare Surtax and S Corps
- Being a Passive Business Owner
- Three Types of Income
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- Chapter 4 Introduction
- Additional Accounting Costs
- Additional Payroll Taxes
- SEP IRA Limitations
- Trapped Assets
- Distributing Profits, Multiple Owners
- Other W-2 Income
- State Business Taxes (Not Just Income Taxes)
- Deducting Losses, Trapped Cash
- Distributions in Excess of Shareholder Basis
- Stock Classes
- Vesting and Expanding Ownership
- Bad Loans to the S Corp
- Social Security Basis
- Payroll Taxes on Children
- C Corp to S Corp Problems
- Going Concern
- Recap of S Corp Downsides
- Growing Business, Debt Service
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- Chapter 5 Introduction
- Chapter 5 Disclaimer
- Wayfair Case Part 1
- Nexus Theory
- Constitutional and Legislative Standards
- Sales and Use Tax, Income Tax
- Physical and Economic Presence, Nexus Attached
- Wayfair Case Part 2
- Services and Tangible Personal Property (TPP)
- Costs of Performance, Market-Based Approach
- Allocation and Throwback
- FBA, Drop Shipments, Trailing Nexus Revisited
- Recap of State Tax Issues
- State Tax Issues and Nexus
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- Formation (Election) of an S-Corp
- Electing S-Corp Filing Status, Retroactive for 2023
- Another Option, Dormant S Corp
- Missing Payroll, Now What
- Mid-Year Payroll
- Nuts and Bolts of the S Corp Election
- Ineffective S Corp Elections
- S Corp Equity Section
- Terminating S Corp Election
- Distributed Assets
- 5 Year Rule
- Life Cycle of an S Corporation
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- Section 199A S Corp Considerations
- Calculating the Qualified Business Income Deduction
- Section 199A Defining Terms
- Specified Service Trade or Business (SSTB) Definitions
- Trade or Business of Performing Services as an Employee
- Services or Property Provided to an SSTB
- Section 199A Deduction Decision Tree
- Section 199A Reasonable Compensation
- Section 199A Pass-Thru Salary Optimization
- Cost of Increasing Shareholder Salary
- Section 199A Rental Property Deduction
- Negative Qualified Business Income
- Qualified Property Anti-Abuse
- Aggregation of Multiple Businesses
- Section 199A W-2 Safe Harbors
- Additional Section 199A Reporting on K-1
- Section 199A Frequently Asked Questions
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- S Corp Section 199A Deduction Examples
- Section 199A Side by Side Comparisons
- Section 199A Basic Comparisons
- Section 199A Health Insurance Comparison
- Section 199A 200k Comparison
- Section 199A 250k Comparison
- Section 199A Specified Service Business Comparison Part 1
- Section 199A Specified Service Business Comparison Part 2
- Section 199A Phaseout
- Section 199A Recap
- Section 199A Actual Tax Returns Comparison
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- Chapter 9 Introduction
- IRS S Corp Stats
- Reasonable S Corp Salary Theory
- IRS Revenue Rulings and Fact Sheet 2008-25
- Tax Court Cases for Reasonable Salary
- Risk Analysis to Reasonable Shareholder Salary
- Reasonable Salary Labor Data
- Assembled Workforce or Developed Process Effect
- RCReports
- W-2 Converted to 1099 Reasonable Salary
- S Corp Salary Starting Point
- Multiple Shareholders Payroll Split
- Additional S Corp Salary Considerations
- Reasonable Salary Recap
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- Chapter 10 Introduction
- Costs of Operating an S Corp
- New S Corp Puppy, What Do I Do Now
- Accounting Method
- 1099-NEC Issued to Your SSN
- Take Money Out of the S Corp
- Processing S Corp Payroll
- Minimum Payroll with December Bonus
- Taking Shareholder Distributions
- Reclassify Shareholder Distributions
- Accountable Plan Expense Reimbursements
- Accountable Plan Requirements
- Shareholder Distributions as Reimbursements
- S Corp Tax Return Preparation
- Distributions in Excess of Basis
- Minimize Tax or Maximize Value (Economic Benefit)
- Tracking Fringe Benefits
- Other Tricks of the Trade with S Corps
- Adding Your Spouse to Payroll
- Chap 10 - Comingling of Money
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- Chapter 11 Introduction
- Four Basics to Warm Up To
- Section 199A Deductions – Pass Through Tax Breaks
- 185 Business Deductions You Cannot Take
- Depreciation
- Small Business Tax Deductions Themes
- Value of a Business Tax Deduction
- Deductions the IRS Cannot Stand
- Automobiles and LLCs, S Corps
- Business Owned Automobile
- Section 179 and Bonus Depreciation
- You Own the Automobile, Get Reimbursed By The Mile
- You Own the Automobile, Take Mileage Deduction
- You Own the Automobile, Lease Back to Your Company
- Automobile Decision Tree
- Home Office Deduction
- Tax-Free Rental of Your Home
- Tax Home
- Business Travel Deduction
- Deducting Business Meals
- Sutter Rule
- Cohan Rule
- Capital Leases versus Operating Leases
- Putting Your Kids on the Payroll
- Educational Assistance with an S-Corp - Section 127
- Summary of Small Business Tax Deductions
- Business Tax Return Preparation
- Comingling of Money
- Reducing Taxes
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- Retirement Planning Within Your Small Business
- Self Employed Retirement Plan Basics
- Retirement Questions to Ask
- Tax Savings and Tax Deferrals
- Using a 401k in Your Small Business Retirement Options
- The Owners-Only 401k Plan
- Having Staff with a Solo 401k Plan
- Self-Directed 401k Plans
- Company-Sponsored 401k Plan
- 401k Plan Safe Harbor Provision
- Roth 401k Plans
- Roth 401k Versus Traditional 401k Considerations
- Two 401k Plans
- Rolling Old 401k Plans or IRAs into Your Small Business 401k Plan
- 401k Loans and Life Insurance
- 401k Plans and Roth IRA Conversions
- Turbo Charged 401k Plans
- SIMPLE 401k
- SEP IRA
- SEP IRA, Roth IRAs and the Roth Conversion
- Controlled Groups
- Owner Only 401k Plans in MMLLC Environment
- Spousal Attribution and Controlled Groups
- Non-Qualified Deferred Compensation Plan
- Exotic Stuff
- Expatriates or Expat Tax Deferral Planning
- Small Business Retirement Planning Recap
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- Disclosure and Updates
- Gaming the HSA System
- Health Care Summary
- Health Savings Accounts (HSAs)
- Long-Term Care
- Multiple Employees
- One Person Show or Husband-Wife Team, S Corporation
- Section 105 Health Reimbursement Arrangement (HRA)
- Section 125 Cafeteria Plans and Flex Spending (FSA)
- Sole Proprietors and Single Member LLCs
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Expat and Expatriate KB
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- Are there any downsides to claiming the foreign earned income exclusion?
- Are there exceptions to the bona fide residence or physical presence tests?
- As an ExPat, do I need to file a State tax return?
- Can I deduct mortgage interest paid on my foreign home?
- Do I have to pass the same test each year?
- Does voting through an absentee ballot mess up my bona fide foreign residency?
- How do fluctuating currency values affect my taxes?
- How do I handle my foreign rental property?
- How do I qualify for the foreign earned income exclusion?
- How do moving expenses affect my exclusion?
- How do partial years work with the foreign earned income exclusion?
- How do tax treaties affect my ExPat situation?
- How does the foreign housing exclusion or deduction work?
- If I am a self-employed ExPat, what taxes am I responsible for?
- If I don't qualify for the housing deduction, can I still deduct expenses?
- May I still make contributions to my IRA as an ExPat?
- What amount can I deduct for foreign earned income exclusion?
- What happens if my host country has a form of social security?
- What is a tax home or abode, and how do they relate to each other?
- What is considered foreign earned income?
- What is foreign earned income exclusion?
- What is the bona fide residence test?
- What is the difference between foreign tax credit and deduction?
- What is the physical presence test?
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Rental Property KB
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- Can I claim my residence as a rental, sell it for a loss and deduct the loss?
- Can I deduct internet expenses?
- Can I deduct my cell phone charges?
- Can I deduct the taxes associated with public improvements?
- Can I rent out half a duplex or a room in my house?
- Do I need receipts for my rental expenses?
- Do rental properties offer good tax sheltering?
- How are repairs and improvements different?
- How do I handle my foreign rental property?
- How do passive loss limitations affect me?
- I purchased a rental property last year. What closing costs can I deduct?
- If I don't have any rental income can I still claim a loss?
- If I move back into my rental, how does that work?
- If my employer provides a cell phone, is that income?
- Is depreciating my rental a good thing?
- My rental sale was a huge loss. What can I do?
- Rentals Owned by an LLC Fallacy
- What are tax issues with an LLC owning a rental property?
- What are the exceptions to rental activities?
- What are the rules on a home office deduction?
- What is active participation versus material participation?
- What is considered rental income?
- What rental property expenses can I deduct?
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- Are rental activities always passive activities?
- Are there downsides to the real estate professional designation?
- Are there specific material participation tests for real estate professionals?
- Do I need to group my rental activities together?
- How do I record the hours spent as a real estate professional?
- If I meet the 750-hour test, do I also meet the 500-hour material participation test?
- What activities count and don't count?
- What are some of the IRS tricks to deny my real estate professional designation?
- What are some of the tax court cases for real estate professionals?
- What are the general tests for material participation?
- What is active participation versus material participation?
- What is the definition of real estate professional?
- Why designate myself as a real estate professional?
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Other Tax Information KB
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- Can I ignore an IRS notice or claim I never received it?
- How can I pay my taxes or my notice of deficiency?
- How can I prepare for my face to face or interview field audit?
- How do I appeal the collections of unpaid taxes?
- How does a joint return get handled during an audit?
- How does bankruptcy affect my unpaid taxes?
- How much is interest and penalty on taxes owed?
- How should I respond to an IRS notice or letter?
- What are my chances of being audited?
- What are some of the types of IRS notices and letters?
- What can the IRS do if I don't pay my taxes- what is the collections process?
- What causes or triggers an IRS audit?
- What if I cannot pay my taxes?
- What IRS publications deal with audits?
- What is the appeals process?
- What is the period of limitations for an audit?
- What types of audits could I face?
- Who can be with me at my IRS audit or conference?
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- Are there ways to earmark money for an individual?
- Do I need receipts for my donations?
- Does deducting charitable contributions cause an audit?
- How do I determine the value of my donation?
- What are some of the donations I can deduct?
- What are some other charitable deductions?
- What are the limits of my donations?
- Who qualifies as a charity?
- Why give to charities?
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- Are Educational Savings Accounts Worth It
- Are There Tax Breaks for Going to College
- Are There Tax Savings When My Employer Pays for My Education
- Can I deduct the cost of sports, games or hobbies while in college?
- IRAs and Savings Bonds To Help With Higher Education Costs
- What College Expenses Can I Deduct From My Income
- What constitutes a full-time student for tax purposes?
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- Can I deduct the loss on my primary residence?
- Can I deduct the taxes associated with public improvements?
- Can I exclude the gain on my home sale?
- How does a Federal Disaster affect my casualty loss?
- My home was destroyed- what deduction can I take? How do casualty losses work?
- The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
- What are the rules on a home office deduction?
- What is Cancellation of Debt? Is it taxable income?
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Small Business KB
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- Behavioral Control
- Colorado's Criteria for Contractor Status
- Employee or Independent Contractor
- Employee or Independent Contractor Status
- Financial Control
- IRS Determination, Form SS-8
- Misclassified Workers Can File Social Security Tax Form
- Salespeople As Contractors
- Sample Response to CO Unemployment Claim
- Statutory Employee and NonEmployees
- Tax Court's Checklist
- Type of Relationship
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- As a one-person show, should I still form an LLC? An S-Corp?
- Automobiles and LLCs, S Corps (superseded)
- Can I call my 1099 other income which avoids employment taxes?
- Determining the S-Corp Payroll Amount
- Estimated Tax Payments, Withholdings Issues for an S-Corp
- How do I convert my LLC to an S-Corp?
- How does an LLC or S-Corp's income affect my taxes?
- If the S-Corp taxation is what I ultimately want, should I form an LLC or C-Corp?
- Is there a way to avoid Self-Employment tax?
- Should I convert my LLC to an S-Corp (Sub-S Election)?
- Should I form an LLC with my spouse?
- The S-Corp Grind, Operational Hassles
- The Zero Dollar Paycheck
- What are the operational hassles of an S-Corp LLC?
- What is an Accountable Plan?
- The Money Trail for S-Corp Elections
- 185 Reasons NOT to S-Corp, Downsides to S-Corp Election
- Can I call my 1099 other income which avoids employment taxes?
- Can I deduct country club dues as a business expense?
- Can I deduct internet expenses?
- Can I deduct my cell phone charges?
- Health Care Expenses, Premiums, HRAs, HSAs - Section 105
- Hobby Versus Business Article
- How can I avoid or reduce Self-Employment (SE) taxes?
- If I am a self-employed ExPat, what taxes am I responsible for?
- If my employer provides a cell phone, is that income?
- LLCs and S-Corps
- Retirement Planning within an S-Corp
- S-Corp Hard Money Facts, Net Savings
- Turn Your Vacation Into a Tax Write Off
- What are tax issues with an LLC owning a rental property?
- What are the rules on a home office deduction?
- What business or corporate expenses can I deduct?
- What do I do with a 1099-K?
- What is the difference between a hobby and a business?
- What is the difference between an LLC, S-Corp and a C-Corp?
- Why can't I deduct health insurance premiums?
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Can I call my 1099 other income which avoids employment taxes?
By Jason Watson (Google+)
This KB article has been updated. Please see our new 1099 as other income article.
Maybe. The IRS defines a trade or business as an activity carried on for a livelihood or in good faith to make a profit. IRS Revenue Ruling 58-112 further characterizes a trade or business activity as one that is regular, frequent and continuous. So, if you earn income either through your business or received a 1099-MISC from a company who you worked for, you will be responsible for self-employment taxes if the activity is regular, frequent and continuous.
Some taxpayers who were able to able to claim their income as ‘other income’ and avoid self-employment taxes had to demonstrate that the activity was a one and done event (giving a speech for example) or was sporadically done.