Getting An LLC Tax Deduction

As a classification the LLC tax deduction isn’t recognized by the federal government. Consequently all entities who call themselves LLC or other limited liabilities companies must model out how to pay their federal taxes.

These companies have three possibilities. They can file their returns as a corporation, a partnership or as a sole proprietorship. Actually, the federal government’s classification lists certain LLCs as corporations and taxes them accordingly.

These LLCs are the ones which have been produced under a State or Federal statute or under the statute of a federally which has been acknowledged Indian tribe in which they’ve been described either as a corporation, body corporate or body politic or a joint stock society. The same is valid for businesses described in section 1.892.2-T which are owned by state, foreign governments or entities. Any organization formed under Regulations section 301.7701-3 is also regarded as a corporation by the federal government as are insurance companies for example.

In the case where the LLC is not a company then it can file Form 8832 and choose to carry out business either as a company or as a partnership. At least 2 members in a business can be classified as an association which is taxable as a corporation or a partnership. Also, a trade unit with only one member can opt to be classified as an association which will be taxable as a corporation.

If Form 8832 isn’t filed by the LLC, then certain default rules come into play. These rules put forward that if at least two members work within the LLC and that it does not specify itself as a corporation, then, by default, it will be considered to be a partnership, and will be asked to file its taxes as one. Correspondingly, if an LLC has only one member, it will have to file taxes as a sole proprietorship.

Form 8832 is therefore of major importance for all LLCs to file, in order to receive the tax benefits that are due to them. Also, getting the help of tax consultants can lead you to get the maximum benefits of the LLCs.

 


Elliott Dawson is a contributing editor at DebtFinanceArticles.com. This article may be reproduced provided that its complete content, links and author byline are kept intact and unchanged. No additional links permitted. Hyperlinks and/or URLs must remain both human clickable and search engine spiderable.

 

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Saving Money With Child Tax Deduction Law

A way of reducing your tax bill with the child tax deduction law, is by hiring your own children. If your child is a minor between the age of 7 to 17, hiring them will not only make them smarter, but can also saves you an important amount of tax money!

Generally, each child should have a standard deduction of $4,570; also, children don’t have to pay the first $4,570 in income. However, a child whom you hire in your business will be paid the amount, which will then be deducted from your business accounts. Either you or the child can spent the amount, and, what is best is that you save taxes of about $1,425 (if you are within the tax bracket of 30%).

Also, it is interesting to notice that you will be cleared from paying social security tax on the salary that you pay your child if he or she is minor and if you pay them back out of an only proprietorship or partnership. Your social security taxes will be lifted if the wages come from a corporation.

Some forms will need to be filled in though before you can benefit from this right. The 941 form for example, will need to be submitted four times a year. The 941 form is a form used in order to withhold finances which are generated by an employee. There will be no withholding for a child, however. Also, at the end of the year, you will need to issue a W-2.

It is legal to hire your children as employees when they are 7 years of age, as long as their work is within their abilities. You should record the amount of hours and the type of assignments given to your child on an excel sheet. If the pay and the work given to the child are fair, you will be able to benefit from the deduction.

Your child’s salary should go into your bank account and not into their savings, and the money should be spent only with your acceptance for the needed clothes, education, toys, etc.

One final point; it is of utmost importance that you keep track that your children do not pay for more than 49% of their costs. Therefore, you will always need to keep a good record of their total expenditure. Unfortunately, if they cross 50%, then you will end up losing the itemized deduction on your personal return.

 


Elliott Dawson is a contributing editor at DebtFinanceArticles.com. This article may be reproduced provided that its complete content, links and author byline are kept intact and unchanged. No additional links permitted. Hyperlinks and/or URLs must remain both human clickable and search engine spiderable.