Freelance and paying taxes

Hal Smith · December 1, 2006

Section 179 (which permits a small business to fully expense tangible property in the year it is purchased, up to $100,000 per year) has been AWESOME for small businesses.

Since I have had a small business CPA doing my taxes for 15 years, I've rarely paid taxes on real property bought for my business. Some things have had to be depreciated but it's amazing how much she's been able to legally expense, year by year.

My main gripe is selling a business that was a "C" corporation and getting NONE of the dividend tax benefits, none of the deferred taxes available to large corporations, etc., etc. Uncle Sam got about $250,000 worth of tax money that GE, Ford, Citigroup, etc., etc. never would have paid. As I was saying, all the Bush Administration tax cuts were specifically designed to benefit large corporations and their super-rich contributors, PERIOD! Small businesses with professional tax advisors have always been able to invest in equipment without paying tax on the expenditure. I can even avoid a lot of self-employment tax if I'm careful in how I buy and sell property used in the business.

Annie Wengenroth · December 13, 2006

Wow...this is the first year where I'll have to deal with this and I'm NOT looking forward to it. Especially because before I joined 600 and was just trying to get myself out there, I did so many low-budget jobs where I barely got anything. Now I'm REALLY gonna get nothing. Yikes!

December 16, 2006

Wow...this is the first year where I'll have to deal with this and I'm NOT looking forward to it. Especially because before I joined 600 and was just trying to get myself out there, I did so many low-budget jobs where I barely got anything. Now I'm REALLY gonna get nothing. Yikes!

Wait until you see the schedule for Self Employment Tax, basically you'll pay the full load of the social security taxes your self. Benefits to you, nothing.

R,

Annie Wengenroth · December 17, 2006

For some reason all I can think of is that Invader Zim episode when Gir shouts, "Yaaaay! WE'RE DOOMED!" It is exactly how I feel when it comes to taxes. :huh:

Thomas Worth · August 6, 2007

Wait until you see the schedule for Self Employment Tax, basically you'll pay the full load of the social security taxes your self. Benefits to you, nothing.

You can avoid paying the 15.3% self-employment tax on your total income (this is in addition to regular income tax) if you form an LLC, elect corporate taxation with the IRS (as a C-corp) and then immediately file for S-corp status. You can then decide how much to "pay yourself," and you only pay employment tax on that amount. And since you're taxed like an S-corp, you still get the "pass-through" tax benefit from the LLC to yourself.