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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
- C Corporations
- 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
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- Your Spouse as a Partner (Happy Happy Joy Joy)
- Family Partners
- 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
- 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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- 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
- 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 2022
- 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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- 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
- 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
- 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
- Traditional 401k (A Company Sponsored Plan)
- 401k Plan Safe Harbor Provision
- 401k Plans with Roth Option (Roth 401k)
- 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
- Non-Qualified Deferred Compensation Plan
- Exotic Stuff
- Expatriates or Expat Tax Deferral Planning
- Small Business Retirement Planning Recap
- Personal Defined Benefit Plan
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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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Section 199A Side by Side Comparisons
Created On
Updated
byJason Watson, CPA
By Jason Watson, CPA
Posted Wednesday, October 20, 2021
We created a handful of examples on the follow pages with two intentions. One, to demonstrate how the Section 199A deduction is calculated and Two, to show that an S Corp remains a critical tax reduction vehicle. Brace yourself for nauseating spreadsheets that are only meaningful to the spreadsheet designer. We hope our commentary and explanations make sense, and that the logic of the step-by-step iteration becomes clear. We might be dreaming…
Side By Side Comparisons of Section 199A
If you are reading this in a bound book, we have intentionally made it so the explanation is on the right side and the ridiculous explosion of numbers is on the left. If you are reading the PDF version you might have to print the pages or arrange for side-by-side viewing.
Jason Watson, CPA, is a Senior Partner of WCG, Inc., a boutique yet progressive tax and
consultation firm located in Colorado and South Dakota serving clients worldwide.
Taxpayer's Comprehensive Guide to LLCs and S Corps 2021-2022 Edition
This KB article is an excerpt from our 430-page book (some picture pages, but no scatch and sniff) which is available in paperback from Amazon, as an eBook for Kindle and as a PDF from ClickBank. We used to publish with iTunes and Nook, but keeping up with two different formats was brutal. You can cruise through these KB articles online, click on the fancy buttons below or visit our webpage which provides more information at-
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Taxpayer's Comprehensive Guide to LLCs and S Corps 2021-2022 Edition