TAX MASTERCLASS

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A little bit about braden:

  • Undergrad - Indiana University

  • Russian, Poly Sci, German, Business

  • Law School - Cal Western

  • Tax LLM - San Diego


MEET THE BDL TEAM

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WHAT I DO

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AGENDA

  • Business entities and tax returns

  • Quarterly taxes

  • Issuing 1099s

  • Question & upcoming events

  • How do income taxes work

  • When must you file

  • Hobby or business

  • Small business deductions


HOW DO INCOME TAXES WORK?

biz income - biz expenses = net biz income

biz income + all other income = total income

total income - “adjustments” = Adjusted gross income

AGI - standard or itemized deduction = taxable income


FORM 1040

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SCHEDULE 1

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SCHEDULE C

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CALCULATE INCOME TAX

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ADD SELF-EMPLOYMENT TAX

15.3% ON NET BUSINESS INCOME


EXAMPLE TIME

BARB MAKES $20,000 IN HER PART-TIME JOB.

SHE EARNS $62,000 IN HER BUSINESS.

& HAD $10,000 IN EXPENSES.

$62,000 - $10,000 = $52,000

$52,000 + $20,000 = $72,000

$72,000 - $12,000 = $60,000

INCOME TAX = $9,139 (EFFECTIVE RATE - 11%)

SE RATE = $7,956

TOTAL TAX = $17,095 (EFFECTIVE RATE - 21%)

ALSO, DON’T FORGET STATE TAX


WHEN MUST YOU FILE?

GENERALLY, WHEN INCOME > THAN STANDARD DEDUCTION

OR net Self-employment income > $400


HOBBY OR BUSINESS?

Here’s the actual rule. If you have made a profit in three of the last five year, the IRS will consider you to have a business. Stated in the reverse, if you have a net loss for three out of five years, the IRS will consider you to have a hobby. In that case, you only deduct expenses up to the amount of your income. It prevents a “hobby loss.”

Check the blog for more info.

The key takeaways:

  • If you made any money, you need to report it

  • These rules are in place to prevent fraudulent deductions. Example: I bought a $700 camera in July. I also pay for Adobe (which I probably need to cancel). Say I also decide to take some expenses courses and buy more photo equipment each year. I take $2,000 in deductions on a side photography business for 5 straight years, but I don’t actively seek clients. The hobby loss rules prevent you from reporting a loss on your return.

  • If you have a business website and are actually, legitimately trying, you likely don’t need to worry about this.


SMALL BIZ DEDUCTIONS

The entertainment expense is no longer allowed, but 50% of meals for business appears to still be A ok according to the IRS.

  • Advertising

  • Home office

  • Travel deduction

  • Vehicle mileage

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BUSINESS ENTITIES

DEFAULT ENTITIES - SOLE PROP AND GENERAL PARTNERSHIP

LLC, S CORP, C CORP

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HOW DOES AN S CORP WORK - MONEY IS PAID VIA SALARY AND DISTRIBUTION

Check the blog for more info.


QUARTERLY TAX

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1099s

Due to non-employees to whom you have paid $600 or more who have performed serviced for or on behalf of your business.

Exceptions: Those who have file a business tax return (S corps, C corps, and LLC taxed as S corps)

send W9s

check out 1099online

due by the end of january


NEED HELP WITH YOUR RETURN?

$10 off a DIY Tax Party with code wine+taxes

san jose - 03/23/2019

$100 off tax returns if you sign before end of January

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QUESTIONS?


CATCH ME ON THE GRAM

I will be doing a weekly tax class and Q&A on Thursdays