Ask MetaFilter questions tagged with business and taxes

Do I need a business license?

jefeweiss — Fri, 06 Nov 2009 07:31:10 -0800

Last year I got most of my income for working from home in the state of Virginia. I did work for a company that is not owned by me and was located in another town in Virginia. I got a 1099 as an individual from the company for the work that I did. This work was all conducted by phone and email, no one came to my home. I recently got a letter in the mail from the City of Winchester, VA saying that I did not register as a business in the city and that I needed to pay back licensing fees. I know you're not my lawyer, but do I have to do this?

Hit the 401k to start a business?

wezelboy — Thu, 01 Oct 2009 15:17:02 -0800

I'm thinking about cashing out my 401k to help start a business. I know I will pay a penalty, and that what I take out will be taxable income, but I expect my business to post a loss the first year that would offset most of (if not all) of this income. Would I still have to pay taxes on all of the 401k money? The business I am planning will take a while to get going, and I expect a significant loss the first year- probably more than I take out of the 401k.
I'm also wondering if rolling over into an IRA and then pulling the money out might mitigate some of the penalty and/or taxes.

Taxes/licenses required for Nevada company providing consulting services in California?

Jacqueline — Fri, 14 Aug 2009 16:16:38 -0800

Taxes/licenses required for Nevada company providing consulting services in California? My friend has a small business incorporated as an LLC in Nevada. This business manufactures and sells scientific instrumentation.

Another company/organization is going to pay his business for him to travel to their site in California to demonstrate the instrumentation. They're not buying or leasing the instrumentation (yet), they're just paying for the use of it with the accompanying services of the operator (him).

What State of California taxes or business license requirements apply here? Should we also investigate county or city requirements for this sort of thing?

(I don't even know which California government office to call to ask!)

Thanks!

Do I have to assign percentages?

TungstenChef — Mon, 08 Jun 2009 15:06:04 -0800

Mixing business and pleasure as a small businessperson, I need a little advice regarding taxes and business travel. I'll be traveling to Minneapolis twice in August for personal reasons. A friend has asked about commissioning a web site and it may make sense for me to stay in Mpls for the intervening two weeks and create it. I assume that food and lodging during the business portion would be deducitble, what about plane tickets? Also, if I buy a cheap bike from Craigslist for local transportation, can I deduct that as an expense? Anything else obvious I can deduct?

What kind of records do most sole proprietors, freelancers and consultants keep?

Anonymous — Tue, 17 Feb 2009 19:39:33 -0800

What sort of state of organization are the financial records of most sole proprietorships in? I've had a small freelance business for about 15 years. About 3 years ago, I was in a car accident that was 100% not my fault. (The other driver admitted fault and there were witnesses.) I am now in the middle of legal dealings with my insurance company, because of the state of whiplash, the effect on my pregnancy and the effect on my ability to run my business and maximize earnings. (I do have a lawyer.) The insurance company is asking for all my financial records from the past nine years. They want copies of every receipt, invoice, mortgage interest statement, etc.

I've never kept a general ledger or anything like that. I just invoice and pay my expenses and credit cards and stuff like that. I've never been very formal about things, although I am excrutiatingly honest. I don't lie on my taxes. However, there have been situations where I just phoned the mortgage company to get the interest amount for my mortgage for the year (for business use of home), because I figured that if I got audited by the government, I would just phone and get a statement sent out. And, as I mentioned, I don't have cash flow statements or anything like that. And sometimes my receipts are in my name, my husband's name or both our names. But I always put money into our joint account to cover everything, usually lump sums throughout the year.

I had planned to incorporate and set up with an accountant, but, because of the car accident, I am just beginning that process now. Going forward, my records will be more diligent, since I'll be incorporated.

But, I'm wondering...what is the typical state of financial records for most freelance and consulting type businesses? My lawyer seems baffled that I have unaudited records...he's not used to sole proprietors. He seemed surprised that I had been doing my own taxes (for all but 3 of the total years, because, honestly, the accountants never got me any more tax back than I got on my own). For the most part, my business records are my personal income tax records, since the sole proprietorship income tax is part of that. I never saw any point to doing balance sheets and neither did the bookkeepers or accountants. Are other freelancers and consultants in a different situation? (Again, I'll be changing this going forward.)

Blogging and Money and Taxes - Oh My!

catcatwomanman — Mon, 08 Dec 2008 11:47:35 -0800

blogging as a business and taxes - it can't be so difficult! Or can it? The Plan - spouse and I want to start a travel blog (we love to travel and are *good* at it!) as a business. You know, run some google ads, make a little money. Actually, if we make enough to cover our travel, we'll be happy (until the eventual greed kicks in). Soooo... if we're going to make more than $600 here in America, the IRS is going to want it's share. But two can play at that game! We want to take all the deductions we can (home office, website costs and, of course, our travel). It will just be the two of us, no employees. But therein lies the confusion... As this will be a partnership (rather than a Corp or LLC), can we carry losses over to our personal incomes (initial research says yes, hivemind says... ?)

Any advice from anyone who has a blog making money?

Any advice from anyone running a web-only based business?

Any advice from anyone who doesn't meet the above criteria but is 99% sure they know what they're talking about?

Do you recommend a business tax id number? A business bank account? A business anything else?

Do we pay estimated quarterly taxes? Even if we're losing money?

What about employee tax of 15%? Pay that too? Quarterly? Even if we're losing money?

Any online references you recommend?

Super duper thanks in advance!

Someone wants to pay me to do stuff! Only I'm not really sure how to go about it. Now what?

Anonymous — Sat, 11 Oct 2008 18:46:22 -0800

Someone wants to pay me to do stuff! Only I'm not really sure how to go about it. Now what? So I have a portfolio-ish website for creative services I (sort of) offer. It mainly was a hobby, nothing I really ever expected to profit from. I have done a few jobs as favors for family/friends, and I didn't charge them anything (they took me out to dinner, paid the material costs, etc.)

I just started a new job, and in the interview process, one of the key things that sold them on me was my portfolio (the work is somewhat related to some aspects of my new job.) New job doesn't have any problems with me doing creative jobs on the side as long as they aren't during company time/with company equipment.

In the standard "welcome to the company" email that my boss sent out to the whole company, he linked to my portfolio site (with my permission), and much to my surprise, shortly thereafter I got an inquiry from someone within the company possibly wanting to use my services. He asked for a price list, and I am writing one up now (never had the need for one before, oops!)

As I am thinking this is more of a once or twice a year kind of thing, I really don't want to go through the whole hassle of becoming incorporated, etc., etc. I kind of view this as a fluke.

However, I definitely don't want to be seen (by a co-worker) as someone who deals under the table, so I want to be as professional as possible about the whole situation.

So...what do I do? Specifically I am thinking about how I would handle sales tax or invoicing, etc. Or should I just say, it'll cost you $XX and have them write me a check and be done with it? I just want to be careful that word doesn't get out around my company that I'm not following "the rules" of small business or whatever.

Thanks for any advice you can offer!

sole proprietor to LLC in California

supermedusa — Wed, 20 Aug 2008 15:17:33 -0800

Experiencing turning a sole proprietorship into an LLC in California? I am definitely planning to make this switch, for liability protection reasons. I am looking at Nolo Press Online California LLC and this website as possible ways to accomplish this. Have you used these or some other method to transfer a sole proprietorship into an LLC in California? Do you recommend one package or outfit over another? Did you feel that the switch was worthwhile tax-wise etc., oops that is too many questions! thanks!!

Deductions for Bi-Coastal Business

vVCHAZVv — Thu, 27 Mar 2008 11:07:46 -0800

I’m a writer who is spending more and more time in Los Angeles for work. I live in Florida, and am a Florida resident. My question is this: If I rent a place in LA, because I am spending roughly half of my time there, what deductions can I take advantage of? Further info: I’ve established a Florida Corporation for my work. My primary residence is in Florida. Most of my work revolves around the entertainment industry these days, thus requiring me to spend roughly half the year in LA. Hotels are just getting too expensive, as is renting a car.

If I lease a place in LA, and purchase another car for LA, what deductions are available to me/my company? Would I be able to deduct all of the rent? What portion? How about utilities? Car insurance? Essentially, the only reason I am in LA is to work, and all of these things are necessary to for me to work here. Personally, I’ll spending as much time as possible in Florida (my home), and will keep my residency there. However, the business needs to provide a place for me to live and work when on the west coast.

Believe it or not, I’ve asked this same question of some accountants, and I’ve gotten different answers from each of them.

I’d love to hear what any accountants, lawyers, business owners, etc have to say about this.

Thanks!

Payroll processor or part-time bookkeeper for startup? (US/SF)

Anonymous — Fri, 21 Mar 2008 21:13:11 -0800

StartupFilter: Payroll processing co or part-time bookkeeper for SF Bay Area co? My friend and I started a company. Until now, it's just been the two of us working for equity. We're about to hire our first full-time employee, and want to stay on the good side of the IRS and the labor department.

Should we: a) get a payroll company to handle payroll and tax compliance, and if so, which one?, b) hire a part-time bookkeeper to do this, and if so, is there a good one in the East Bay, c) man up and do this stuff ourselves in QuickBooks Pro, or d) just hire people as contractors to work on well-defined projects until we are larger?

Additional info: we have no income yet, no debt, and are a CA S-Corp. We're funding this out of our own pockets for now, and plan to do so for the next six months.

Both of us are smart enough to learn tax and labor law, but would prefer not to have to.

... Insert witty remark here...

bitteroldman — Thu, 21 Feb 2008 16:51:54 -0800

CanadianTaxesFilter: Can I legally claim some of my debt as an "investment expense" if I give up my second job to focus on my business? I currently work 2 jobs - one full-time as well as a part-time job to help bring down my debt. Whenever I have free time, I am trying to work on a business that I would like to develop, but there is not much time left at the end of the week.

So I would like to quit the part-time job and spend more time working on the business.

If I would have made about $10-$20K annually with the part time job, could I legally claim $10-$20 K of the debt (and associated interest) as an investment expense?

My rationale is that had I not decided to invest in the business, I would have time for my part-time job and thus would be $10K-$20K richer by the end of the year.

I guess I could always "borrow" $10-$20 K and then pay down $10-$20 K of my debt, so that on paper, I have this amount specifically tagged as a "business investment expense", but I would rather avoid all the paperwork associated with it and besides, I think I have maxed out all my cards!

Thanks!

Need X income, therefore business must by Y profitable?

garfy3 — Sun, 10 Feb 2008 14:42:08 -0800

Simple set of calculations/spreadsheet formulas for thinking about the true cost of starting a business or going freelance? I'd like to do a spreadsheet that "reverse calculates" what I would need to charge per-widget in order to make a living wage. Something like input-current-cost-of-living, then see how many widgets you can make in a day, and see how productive you'd have to be. (Asking because I noted a colleague of mine had "gone independent" and was charging $17 per digital image to clients...thought this was rediculously expensive, then figured taxes/health insurance, etc, might even make this way unprofitable?).

I've seen cortex's question which covers some of the considerations on starting/not-starting a business. One of these is "if you have to pay self-employment tax then reduce your profit calculations by 40%." Got it. So I'm thinking the equation should show loss to taxes, loss to health insurance, loss to business registration fees, loss to capital expenditures, etc? What else do I need to add to this equation?

(Oh, and I'm in the US).

What's the perfect app to track expenses?

mathowie — Thu, 31 Jan 2008 14:04:39 -0800

Is there an expense reporting app that's flexible, handy, and will help me finish next year's taxes quickly and easily? I know about excel, quicken, and various financial transaction apps, but what if I drive 100 miles to a tech conference and want to note my mileage? And what if I'm out entertaining clients and I want to pop onto my iPhone to note the total bill for the evening (before I forget the next day to open excel). Are there any web-based flexible apps for doing all the expense reporting you might need for a small business' bookkeeping needs?

Tax MetaFilter

sprocket87 — Fri, 28 Sep 2007 20:54:47 -0800

I'm planning to do some on-the-side freelance photography in the next year. I'd like some advice on how to play the tax game most effectively. I have an 8-5 weekday job that pays my bills, but I'll probably be doing a small-potatoes amount of photography as a side business over the next year. Nothing to warrant obtaining a business license, incorporating, or anything like that; probably about 6-12 or so events/jobs at a modest rate. My expected earnings will almost certainly be higher than the $600 minimum for reporting additional income, but not anything in the several-thousand range. After doing a bit of research, here's my game plan:

1. Keep detailed receipts and records of ALL income and potential business-related expenses
2. Use 1040 (long) as normal for personal filing of W2s
3. Also file as "sole proprietor" using form Schedule C-EZ for business income based on receipts

Seems simple enough, right? Well, I'm wondering about deductions: I know with the Schedule C-EZ I'm allowed to file up to $5,000 worth of business expenses. I'm NOT planning on filing a home office expense, etc. But what about photo gear, computer equipment, software, or web hosting/printer subscription costs? Should I deduct these?

The obvious answer to me would be "yes", but I'm wondering that since I won't be making a tremendous amount of profit, it might be wiser to ignore some of those deductions to keep "under the radar". I mean, I'd love to get a new MacBook for my photo editing and write it off as a business deduction [which it legitimately would be], but if that offsets the majority of my profit, would the IRS consider me as being a "hobby" and screw me in the long run?

I know that the IRS looks for net profitability in 3 out of 5 years after filing as a sole proprietor. I don't plan on making this a primary source of income - be it next year or in five. Just a little side earnings. So would it be smarter to take the hit on my tax return and skip deducting too many expenses or to deduct away and keep my fingers crossed?

Would it be safe if I just made sure my net profits above were above $600 after all deductions?

Oh, and you can skip the "you should see a CPA" comments, I know you all ANACPA or ANAL, but I'm just "querying the hive mind" :)

Help? I need software to manage my budget!

idlm — Thu, 20 Sep 2007 04:46:01 -0800

I need software to manage my personal & business budget. I need to find a piece of software that can manage my income and track all of my expenses. The thing is that I have the income from my job, the income my wife's job, plus I also do some side jobs that I need to keep track of the money that comes in from that. Then I have all of my expenses and I don't know where the money goes. I also need to keep track for my taxes at the end of the year so that I can write certain things off.

Can you recommend any software that can do that?

Kickbacks and Shady Business

Lieber Frau — Tue, 15 May 2007 23:37:09 -0800

I own with my partner a transcription service for film and TV production companies in Ontario. Recently, a company asked us to do something I consider slightly shady, and I'd like some opinions about what to do. Apples Inc. contacted us and requested us to do some transcription of tapes for Oranges Ltd., for whom they'd produced a series of documentaries. But, they informed us that they did not realize Oranges Ltd. would want their transcriptionist to bill them directly. Oranges Ltd., the larger company, has all work that is done on their behalf billed directly to them for some kind of tax purposes. Apples Inc. was given by Oranges Ltd. a larger budget for transcription than was needed, because my company would do it for cheaper. When Apples Inc. contacted us, they told us that we should bill Oranges Ltd. the full amount, and then they would in turn bill us the difference, so that they could use the extra funds in areas where the project needed the money. As i understand it, because we are billing Oranges Ltd. for the full amount, they are our rightful employers, despite the fact that Apples Inc. contacted us. If Apples Inc. wants us to give them money that Oranges Ltd. is paying us, it is in fact a "kickback" and it's illegal.

Because Apples Inc. is not directly employing us, it's not "marking up", it's just shifting money around to their advantage, and we will have to pay taxes on the amount that the larger company, Oranges Ltd. pays us, so this is bad for us. And possibly illegal.

I want to keep this job because it's lucrative, but I need to figure out a course of action that is legal and smart. I'm fine with Apples Inc. getting their money, but I don't want to be feeding them an illegal kickback, and I don't want us to be participating in any kind of fraud. I am not comfortable invoicing a company for one amount when it's not actually an accurate reflection of the budget. What do you think we should do?

Tax planning advice for the self employed.

Nothing — Mon, 26 Mar 2007 13:57:55 -0800

Tax planning advice for the self employed. The web is full of articles, the bookstores are full of guides. But there is so much "get rich quick" and "pay zero taxes" crap out there that I am not sure where to go for good, solid tax planning advice. Is it better to operate as an LLC? An s-corp? What expenses are deductible? What is a good system of recordkeeping? What records should be kept? If I have two related business pursuits, should I keep track of them separately or together? And so on. I know I need to see an accountant, but I'd like to be as educated as possible. Right now I am paying a rather high percentage of a rather small income in taxes. I'm not anti-tax, but I am very pro-eating.

So, what books do you recommend? What websites have accurate, useful articles? What has helped you better understand managing finances as a self employed person?

Taxing a reinvesting business

blueplasticfish — Tue, 28 Nov 2006 14:42:12 -0800

Can I start a LLC (or similar) who's only business is to manage investments and reinvest any gains? What are the tax implications? If I always reinvest all the gains and dividends of the investments my theoretical net income will always be 0, right?

However, I am sure there is some way I (or the company) would have to pay taxes on this. What would the taxes be, and how can you be taxed if you have no profit? Or, would there be a profit? If so, how is this calculated? Can you be taxed if you reinvest the gains and never take a distribution? What are the different implications for different legal stuctures (LLC, S corps, C corps, etc)?

I will eventually seek legal and CPA tax advice on this matter, but wanted to feel out the Mefi community first.

help me help the man

luriete — Fri, 08 Sep 2006 09:55:59 -0800

I'm trying to make my new web project legal in California. After reading through the Nolo press book(s), we thought that perhaps the LLC was the best corporate structure (we are going to issue stock and give the primary developer a portion in lieu of payment). While the Federal government taxes LLCs like sole proprietorships - you aren't taxed unless you make profit, and I don't see our profit outpacing our costs for a year - the State of California charges an LLC "tax" (really a fee) of $800, due almost immediately after your incorporation paperwork goes through, so... Is there a way to legally put off the incorporation until we can afford to exist as a corporate entity? If we have $799 in startup costs before then, can we defer the deduction of those until after we incorporate and pay the $800? Is the $800 in California state tax fee deductible as a business expense on our federal return?

I'd like to consult an attorney but of course cannot afford to, as this project is, at least during its early development, on a shoestring budget. Any suggestions on other tax resources for small businesses?

Business-starting for idiots

medusa — Wed, 17 May 2006 17:39:38 -0800

I have several questions about starting a business. For some time I have been considering starting a part-time side business as an outdoor educator/mountain guide. I have been considering forming a corporation to limit my personal liability if someone got hurt and sued me, and to allow deductions for guide training and certification (an expensive process).

However, I know very little about the legal and tax implications of forming a business. (I have read this and this.) Further information: the business would only involve me (for the forseeable future) and would not necessarily make money for years.

Some specific questions:

Is forming an LLC a good idea?

Can I deduct training/certification expenses even if I don't yet have any revenue? Is there any benefit to me "lending" the business money to get it started, so the corporation then officially owes me money?

Is there anything I should know about doing this in Colorado specifically?

What are good resources to learn more about all this?

Why should(n't) I officially start a business?

cortex — Tue, 28 Mar 2006 15:24:40 -0800

What are the advantages, disadvantages, and Important Things To Know about officially starting a business? I am doing a thing on the web right now. I have made a very, very small amount of money off of it, but I'm seeing the possibility of making more.

I know nothing about the mechanics of officially establishing a business. Incorporating may be the word I'm looking for—taking Cortex Doing Some Stuff and turning it into Cortex Productions, Inc..

I'm in the United States. I'm a one-man operation working out of my kitchen in my spare time. Check the profile if you need to see the site for context.

I have minimal costs, but I am spending a little money—web hosting, musical equipment and software, (tiny, experimental) advertising expenses.

I have minimal revenue (very modest Adsense revenue from modest daily traffic) but hope to improve that—through merch sales; site donations; I'm talking to someone about licensing music from the site, too.

So should I jump through hoops and create, say, Cortex Productions Inc? Why should I? Why not? When should I? Are there distinct tax benefits to be had at this point? Deductions for business expenses, capital, etc? Incentive to have any income going to a business rather than my personal checking account?

Enlighten me!

How do I write off my defunct business as a tax loss?

daHIFI — Mon, 27 Feb 2006 11:57:28 -0800

How do I write off my defunct business partnership on my taxes? I ended a 2 year self employment partnership (incorporated LLC) August of this year, walking away with around $8k in personally liable loans, as well as racking up another $5K after my car was repossessed. I want to know how best to claim this loss on my taxes. My partner and I took a minimal salary from the business that year, doing everything we could to keep our retail computer store afloat. We were not able to pay an accountant near the end and never filed the K1 form at end of year. I'd like to go ahead and fill out my taxes using figures that would go on the K1, as I have the numbers in Quickbooks.

Since my new job has a good salary, I've had quite a bit taken out for takes this year, more than I took home from the store this year. I'd get back $1700 this year without the business loss, but I could get back the full $2600 deducted from my paycheck with the business loss included.

I'm also aware that I can claim the rest of the loss as I pay it back next year as well, right? I expect to have over $12K taken out in taxes in 2006

SUV tax write-offs

mathowie — Wed, 04 Aug 2004 15:32:14 -0800

I never understood how the "SUV as a business write-off" thing works. Can any tax-savvy folks explain to me how this saves you taxes or gets you a virtually free car? More >> I've read the article, the Slate article today that mentioned it, and this list of vehicles you can buy to qualify. But I still don't get how this works to someone's advantage, I mean you're still having to pay for a $60k car right?

If someone was a sole proprietor, bought one of these new vehicles and claimed it and their home office for their business, then claimed 100% vehicle use for the new car, they'd get to write the whole purchase price off. I get that part.

What I don't get is where the money goes. Say the business owner made $100k in a year, and owes say $30k in tax. Say the heavy SUV cost $60k, and is completely deductible.

Does that person get a refund for $30k? Or is the benefit merely that instead of the money going to the IRS it goes into a new car?

Whenever I read a story about this loophole, it sounds like greedy business owners are getting free Hummers thanks to the $100k writeoff, but I guess I don't see where the free money comes from, since you still have to actually break down and buy a really expensive vehicle. What am I missing here?