general business tax question

[08rookie]

i want to sell my expertise. i am a consultant to friends and family within a specific industry and i think i could reach a larger market if advertised correctly.

i understand that an LLC would be more appropriate in certain business where conditions may deem the business high risk and the owner's assets vulnerable...im not looking for legal advice/opinion...just on the tax issue...if you were paid an extra 45k a year for selling information (whether it is gardening tips or business advice) when it comes time for taxes, i would just list the income generated through this home based business as misc income and pay a standard percentage?!....what percentage?...

[TENCHI]

why would it be misc income? wouldn't it be treated as the same?

[08rookie]

my brother and i own our family restaurant...small thing but very fun lol...i want to get involved with something on the side i can do at my own pace....when i file my taxes, my employer is my family business...my yearly earnings are reflected through 52 weeks of paychecks along with taxes taken out are the same every week....if i declare an additional 5k or 45k (high hopes i kno) that would not be listed as yearly earnings through my full time employer, rather misc income?!

like....if you were a landscaper by day and a bartender at night would you report your bartender earnings on ur taxes as misc income?!

[TENCHI]

Originally Posted by 08rookie

my brother and i own our family restaurant...small thing but very fun lol...i want to get involved with something on the side i can do at my own pace....when i file my taxes, my employer is my family business...my yearly earnings are reflected through 52 weeks of paychecks along with taxes taken out are the same every week....if i declare an additional 5k or 45k (high hopes i kno) that would not be listed as yearly earnings through my full time employer, rather misc income?!

like....if you were a landscaper by day and a bartender at night would you report your bartender earnings on ur taxes as misc income?!

good question.


my parents own several businesses. One being a restaurant. On the restaurant land there are also bungalows that they rent out. The cpa just includes the rental income as normal income.

[kyleb350]

I'm a noob at taxes, but each employer should provide you with a W-2, right? I believe income outside of that could be considered miscellaneous (if it doesn't have a seperate form for that particular type of income)

[Seminole]

In a partnership, all income generated is taxed on each partner's tax return (the income is split depending on the arrangements for income sharing). Your side job would be considered self-employment. So your income from the partnership would be regular income and will be added when you calculate your AGI. It will increase your taxable income, and be taxed at whatever tax bracket you happen to be in. You will also have to pay self employment taxes on the money earned.

[MadDog]

Originally Posted by kyleb350

I'm a noob at taxes, but each employer should provide you with a W-2, right? I believe income outside of that could be considered miscellaneous (if it doesn't have a seperate form for that particular type of income)

Definitely not misc. income. You're considered "self-employed". Go here: IRS.gov

[08rookie]

Originally Posted by MadDog

Definitely not misc. income. You're considered "self-employed". Go here: IRS.gov

so if you work for somebody and work on the side for yourself you are considered self employed i get that...does that mean 2 different w-2s?! one for your 9-5 and one for your side gig?!

and what if your side gig happened to be with another company and you were an independent contractor? then you would just get a 1099?!

[Seminole]

Originally Posted by 08rookie

so if you work for somebody and work on the side for yourself you are considered self employed i get that...does that mean 2 different w-2s?! one for your 9-5 and one for your side gig?!

and what if your side gig happened to be with another company and you were an independent contractor? then you would just get a 1099?!

You can have multiple W-2's. You get a W-2 for each job you work for. If you are self employed you obviously don't give yourself a W-2, you fill out a self employment form, a 1040 C (http://www.irs.gov/pub/irs-pdf/f1040sc.pdf). If you have a partnership, you fill out a 1065 (http://www.irs.gov/pub/irs-pdf/f1065.pdf)

If you work for another company as an independent contractor through a LLC, you would count it as self-employment income. Straight off the IRS website:

All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040.

[TENCHI]

Originally Posted by Seminole

You can have multiple W-2's. You get a W-2 for each job you work for. If you are self employed you obviously don't give yourself a W-2, you fill out a self employment form, a 1040 C (http://www.irs.gov/pub/irs-pdf/f1040sc.pdf). If you have a partnership, you fill out a 1065 (http://www.irs.gov/pub/irs-pdf/f1065.pdf)

If you work for another company as an independent contractor through a LLC, you would count it as self-employment income. Straight off the IRS website:

what he said.

[Feyd]

Start seeing it as a real business and get all the correct paperwork in order for your state so that it can be completely legit.

You can start writing off just about everything you purchase daily as a busienss expense.

Even if you make 90k at your main job and your "side business" operates at a loss every year, or you only make a few thousand dollars off of it, the benefit will be that you will get to keep a shit-ton more money out of your "main job's" tax witholdings, etc.

[ideliver]

Who are your "clients"? If they are legitimate businesses they will issue you a 1099 with your SSN...

If you incorporate, then you will get 1099's (depending on how diligent the customer is at tax compliance) with your TIN...

The most common way that people get undeclared income is not get a 1099 from a careless business...

[MadDog]

Originally Posted by TENCHI

what he said.

+1.

[cougfan335]

It sounds like you are doing some freelance consulting in the restaurant business. If you are doing something I would recommend filing a schedule C, since you are acting as a separate business. It might be a bit late this year, but you can write off meals out while meeting with paying clients, $.55/mile for car expenses, purchases for the business etc. You will likely have to self employment tax on any income (which means both the employer and employee portions of SS and Medicare), but you can also show a loss as the business. Your schedule C would look something like Your Name DBA Rook's Consulting. The miscellaneous income is usually more like tip income, but legally you should be paying self employment tax if you have your own business.

[stooken]

LOL PM'ed you. i may get flamed from all the legal nutheads.

[TurboFan]

It depends on your state. I'm not up on PA law, but if they recognise S-Corp, C-Corp and LLC's, it works like this:

LLC - all profits move to your 1040 on the Schedule C. You can not leave profits in your company tax free. You pay taxes at your personal income tax rate, plus you'll pay self-employment taxes - ie, the portion of FICA and income taxes that the employer normall pays. This essentially doubles your personal income tax for this income.

C-Corp - you probably don't want to mess with this. Not a good structure if your state allows S-Corp and you are a very small business that's not interested in an IPO / selling shares.

S-Corp - you can protect up to $75,000 / year in income in your company at a rate of 15% tax. You can then pay yourself from those funds when you choose. I use this structure for my business that makes a decent cash flow, as I don't need the cash now. When you do take the money out, it flows onto your 1040 like an LLC.

I highly recommend you buy and read NOLO's books on forming an LLC. It'll tell you a great deal about LLC and S-corp, as well as a bit about tax structure. Do your research, and when you are ready, I would suggest you talk to an accountant.