Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Archive for February 27th, 2008

Articles for small business owners

Posted by taxguru on February 27, 2008

From a Reader:

Hi Kerry,

We just posted an article “50 Tools and Resources for Freelancers During Tax Season” 

I thought I’d bring it to your attention just in case you think your readers would find it interesting.

Either way, thanks for your time!

Amy S Quinn

My Reply:

Amy:

That’s a very impressive listing of useful articles.

I’ll be sure to post a link to it on my blog.

Kerry Kerstetter

 

Go Daddy Domain Names

 

Posted in Reference | Comments Off on Articles for small business owners

Avoiding Double Taxation

Posted by taxguru on February 27, 2008

Q:

Subject: article

Thank you very much for your insightful article on S vs. C Corporations. I have a quick question I am hoping you can help me answer. You mention the possibility of double taxation with a C Corp on paying out dividends, what about paying myself commissions? Would that be similar to paying myself a salary? I have a small business, myself and sub-agents that I 1099 each year.

Please advise. Your response is greatly appreciated.

Thank you,


A:

You absolutely must be working directly with an experienced professional tax advisor on matters such as this.

Avoiding double taxation is very easy and is accomplished by shifting income from the C corp to yourself as an individual via expenses that are deductible from the corp’s taxable income and are then taxable income on your 1040.

The most frequently used types of corp expenses for this are W-2 salaries, 1099 commissions, rents, royalties and interest payments. However, these are not equal in the overall tax burden they create because some of these are also subject to payroll taxes, while other ones are not.

That is why you need to work with a tax pro who can look at the big picture to help you achieve your goals, while minimizing the overall tax bite.

Good luck.

Kerry Kerstetter

 

TaxCoach Software: Finally! Plain-English Tax Planing That Builds Your Business!

 

Posted in corp | Comments Off on Avoiding Double Taxation

Sec. 179 & Rental Property

Posted by taxguru on February 27, 2008

Q:

Subject: section 179

Kerry,
I don’t know if you will read or answer this email but here goes with my question.  According to my CPA some
items that I purchsed in ’07 will qualify for a section 179 deduction on my taxes.  When I read your blog I got really confused.  Let me explain my situation.

1031 exchanged residential real estate property that is fully depreciated.  Original purchase 1981.
In 2007 I remodeled and purchased ref, stove, dw, new tile & carpet flooring & new kit. countertops.  Cost
aprox $10,000.  Will these purchases qualify for 179?

I am retired and own two residential rental properties one rented 12 mos., the other only seasonal.

Thanks,

A:

The ability to deduct the costs of the new items depends on which schedule you are using to report the income and expenses for the properties.

For residential rental property reported on Schedule E, assets used there are specifically not eligible for Section 179 expensing.

For properties that are rented out for an average of less than seven days at a time, and which are thus reported on Schedule C, movable equipment purchased for those properties are probably eligible for Section 179 expensing, subject to the other limitations on Section 179.  Items that become a permanent part of the structure, such as tiling, flooring and kitchen counters, are not eligible.

Your professional tax advisor should understand the difference between these two types of rental properties and understand which types of equipment qualify for Section 179 and which don’t.

Good luck  I hope this helps.

Kerry Kerstetter

 

 

Posted in 179 | Comments Off on Sec. 179 & Rental Property