All Forum Posts by: Steven Hamilton II
Steven Hamilton II has started 25 posts and replied 5110 times.
Post: Am I about to commit tax fraud...?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Your issue stems from a reasonable salary for managing the business. You also did not clarify what your entity is taxed as. That makes a huge difference. If the coffee shop is an S-corp you'll have a different answer than if it is a sole proprietorship.
Post: Am I about to commit tax fraud...?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Originally posted by @Logan Reinard:
I have the opportunity to purchase the (commercial) building that I have a business in.
We currently pay $650/mo in rent.
Our business is set up as an LLC.
We could purchase the building for $92K which would have a lower mortgage payment than what we are currently paying in rent.
What I'd like to do is no longer take a paycheck (which has higher a tax rate) and just pay myself with rental income by raising the rent that the business would pay. Is that illegal?
Also, what is the difference in tax rate when you compare rental income to owner's draw payment (or self employment tax)?
Assuming your LLC is taxed as an S or C-corp you cannot do that. It must be Fair market rent. You are only doing a disservice by not paying into Social Security and paying wages. You could also lose other deductions. If you stop paying there is a point at which you would no longer qualify for disability in the event something happens. Roughly 40% or more of people will be considered "disabled" at some point.
Please speak with a competent accountant as you are required to pay a reasonable salary.
Post: How do I partner on a property through someone else's LLC.?.?.
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
It should be a new LLC Partnership between all of you individual partners. If you cannot all afford to do that bit of protection away from HIS other liabilities and properties than I wouldn't do the deal. The real statement is you can't afford not to. It does not cost thousands. Start with a boiler plate agreement customize it together from there. Then you register in the state that the investment is in.
The filing Fee is about $75. The cost to have an attorney draft an agreement may only be a few hundred. Have a meeting and everyone discuss what they want covered.
Post: REI friendly CPA/Tax consultant recommendations
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
@Natalie Kolodij Thanks for the tag. We have an office in Spring Hill. We work with that IRS office on a regular basis.
Post: Tax benefits of separating rental income from pet rent?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Not a terrible thing but isn't necessary for sales tax etc. They just code it different for the tracking they do.
Post: Tampa Bay Free 1031 Exchange Seminar
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
- I wish I could attend. We've been way overdue on connecting.
Post: WiscoREIA's Kenosha Meeting - July 2019!
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
How can I get on the speaker list? I'm just over the border.
Post: WiscoREIA's Kenosha Meeting - July 2019!
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
How can I get on the speaker list? I'm just over the border.
Post: newbie ?: does my new accountant know what she's talking about?
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Ignore the safe harbor. It is a waste of your attention. You want to be considered a trade or business which is much easier to do than to meet the safe harbor.
Post: Question For CPA's Who Chose Real Estate Tax
- Accountant, Enrolled Agent
- Grayslake, IL
- Posts 5,272
- Votes 2,325
Study study study. What you don't know CAN and WILL hurt your clients. Carry good E&O. Tax is something you truly should have a mentor in. I'd recommend getting industry experience under someone before going solo. It is not for the faint of heart. It can be a very stressful field. I've been in business a long time and I'm still learning new things.
You need to be able to research. If you don't know how to do research tax is NOT a field for you.