Excellent Opportunities To Expand A WA Business In 2018!

byCCRider77

1.2K followers

6 years ago

Hello everyone,

Important 2018 News

If you reside in the U.S. and use the WA platform to make your living please note that 2018 would be an excellent year to expand your business.

"Why?"

Tax Cuts And Jobs Act!

Did you know the IRS does not care how much money you make, they don't really care. They only care about what 'type' of money it is.

• Is it Wages?
• Is it Interest Earned On A Account?
• Is It Distributions?
• Is It Qualified Business Income?
• is it Dividends?

"Why Is That Important?"

Wages are subject to 2 mandatory taxes [Federal Income Tax (FIT)& Federal Income Contributions Act (FICA aka Social Security & Medicare)] A 3rd tax is levied if you live in state that has a 'State Income Tax'.

Distributions are subject to only FIT and SIT (State income tax) no need to pay SS & Medicare.

Dividends are subject to the Capital Gains Tax of 10 & 15%, (plus either FIT or ATM depending on income bracket).

"Why Does This Matter To Me?"

Self Employed People pay up to 3 taxes on all INCOME 100% (FIT, SIT, [FICA 15.3%]

C-Corps Pay Corporate Taxes (21% starting in 2018) and shareholders pay Capital Gains, FIT/ATM.

S-Corps pay NO Corporate taxes because it's a pass through entity with the income being given to the shareholders and taxed at INDIVIDUAL rates.

LLCs pay no corporate taxes and are pass through as well.

LLC Don't Exist In IRS Eyes

However the IRS doesn't acknowledge LLCs exist because LLCs are a state invention not a fed invention.

The IRS looks at an LLC as 1 of three entities

• Disregarded Entity (separate from individual tax payer still PAY 3 taxes ouch!)
• C-Corp (Double Taxation at corporate & shareholder level.
• S-Corp (passed on to shareholders as 'ordinary income' not 'wages' VERY IMPORTANT to know the difference!

Reduce Your Tax Burden Beginning In The 2018 Tax Year!

A person who forms an LLC and classifies it as an S-Corp for federal and state tax purposes can do the following in 2018

• Deduct wages (your S-Corp pays you) from 'net income'
• Deduct Employer FICA contributions (7.65%) $1 for $1
  
• Deduct 20% of your distribution tax bill if you're the owner (what is 20% of 157,500??)
• Make up to 157,500 (Single) 315,000 Joint and be taxed at individual rates of 10, 12, 22, 24%
• After the amounts above it's a flat 29.6% instead of 39.6%!

Same applies to establishing a regular S-Corp (however that can be legally confusing to do).

The Tax Law Benefits Companies Form ONE!

The new law benefits corporations & pass-through entities the most, take advantage by researching 'pass through entities' like LLCs, & S-Corps.

Many people use WA to support a 'business', but unless it's a S-Corp you'll pay at least 15.3% more, you wanna do that??

Besides being able to deduct wages, FICA, & a 20% flat tax cut is what's best for business.

(I employ 3 people so I know what's best for business)

I know because I already have an LLC classified as an S-Corp (Federal & State) and I will pay LESS next year then I will this year.

Research This For Yourself, See If You Can 'Benefit' In 2018

Bottom line, research this for yourself & see if forming an LLC, S-Corp, C-Corp would be good for your 2018 tax burden.

Many People say this law sucks because they don't go out and FORM a business to take advantage of these deals.

No one is forcing an American business owner to be classified as a sole proprietor (BAD FOR TAX PURPOSES).

MANY JUST DON'T KNOW YOU CAN LEGALLY REDUCE YOUR TAXES BY SIMPLY TELLING THE IRS WHAT 'TYPE' OF INCOME THE INCOME IS..

Certain business entity structures allow to do that (LLC as an S-Corp/C-Corp) and others don't (Sole, LLC with disregarded entity classification,or an employee)

One Final Show Of Proof

Let's compare the Top 3 Most Popular Tax Situations In The U.S.

Worker (30k 51% workers earn less then that Social Security Stats)

• 7.65% to SS/Medicare (NO Deduction/refund allowed) $2295
  
• 10%-12% FIT $1969.50 (SD of 12k is included)
  
• State Income Not Used

==> $4,264.50 by April 2019 (estimate using SD) <==

LLC Disregarded (30k) Pass Through To 1040

• 15.3% to SS/Med $4590
• 10-12% FIT $1969
• SIT not used

==> $6559.00 by April 2019 (SD used OUCH!) <==

LLC Classified As An S-Corp 30k total

You can select the % of income you want to wages or distributions (Reasonable compensation rule IRS (look that up before thinking you can pay no salary)!!!!)

So I will choose to have 14k as wages and 16k as distributions as this tax status ALLOWS you to do, look it up at the IRS (S-Corp)!

14k Salary (Deductible As Well as it's Considered a Business 'Loss' For An S-Corp)

• 15.3% FICA (7.65 Employer Side Deductible)
• 2,142 total ($1071 deduction for 1040 Form)
• 10-12% FIT
• $200 (After 12k SD 2k left at 10% FIT rate)

16k Distributions

• 10-12% FIT (1,729.50) before the 20% Deduction!!
• 1,383.60

==> 3,725.60 By April 2019 (SD used For Wages, 20% D) <==

Those numbers will change once you include the SIT (if you live a state like that), but as you can see THOSE who want to succeed in 2018 using WA had better consider changing or creating new tax classifications.

Go to the IRS site and look up all of this yourself. Those who don't and comment that this blog 'sucks' or is 'political' will PAY MORE IN TAXES in 2018 than those who 'research'.

Sorry Canadians this doesn't apply to you, sorry Kyle, Carson & Jay!

HERE'S TO YOU RESEARCHING AND SAVING IN TAXES IN 2018!