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Thread: Taxes, starting a business? (Michigan)

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    Featured Member space_cowgirl's Avatar
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    Default Taxes, starting a business? (Michigan)

    I've been wondering about something for quite some time, and would like to get it figured out for sure before tax time rolls around. I live in MI, and my only income right now is from camming. I work for Streamate, which doesn't send 1099's. I deposit all my earnings in my bank account. Now, from what I understand, I don't have to claim that income unless I need to show that I've earned income for the year (like to buy a car, rent something, etc.). Since my husband works and we file taxes together, I haven't been concerned with it.

    However, I'm wondering if it would be smarter to form a business and pay taxes on my income, just in case. I haven't really heard of people on here doing this, but I know from being self-employed before (as my husband is now) that, at least in MI, we get RAPED with taxes, we pay twice, and it adds up to about 33%. If I were to form a business and be able to pay 15-20%, I'd feel better about the whole thing.

    Has anyone done this? What do you recommend?

    Thanks for any advice, I really appreciate this forum so much.

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    Banned Melonie's Avatar
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    Default Re: Taxes, starting a business? (Michigan)

    ^^^ actually, provisions of the new national health care law require businesses like streammate to start issuing 1099's for payments made to other business entities i.e. webcam performers !

    And yes between the 15% Social Security / medicare tax, something like 15% federal income tax, and something like 3% MI state income tax, a 33% effective tax rate is probably pretty close.

    Also yes most dancers who visit SW report their incomes as a sole proprietor business using Schedule C. A few have formed LLC's, but that's usually girls who are 'serious full time strippers' where the health insurance, company owned vehicle, company leased apartment in a different city etc. advantages of an LLC outweigh the additional cost and complexity.

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    Featured Member space_cowgirl's Avatar
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    Default Re: Taxes, starting a business? (Michigan)

    Thanks Melonie!

    I figured that was probably the case. From what I just googled though, the new rule about issuance of 1099's begins in 2012. Is that what you've learned too?

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    Default Re: Taxes, starting a business? (Michigan)

    Where can I find more info on LLCs? I want to form one when I move to Nevada. I still have this link... ...it's a little Grecian to me...

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    Banned Melonie's Avatar
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    Default Re: Taxes, starting a business? (Michigan)

    Re 1099's and the new law. Arguably, in order to be able to issue a 1099 in February of 2012, businesses must start keeping track of their payments to other businesses beginning on January 1st 2011. This is because the 1099 form that must be issued in February of 2012 must show the sum total of all moneys paid to the other business throughout the 2011 tax year.

    I would also point out for other readers that this same new legal requirement arguably applies to all monies paid out by a strip club to dancers. The obvious example might be that club customers pay $20 to the club's cash register for every private dance - with the club in turn paying out $10 or $15 of that customers $20 cash register money at the end of the night. Under the new law the $10 or $15 payout per private dance could be considered to be a 'business to business' transaction subject to 1099 reporting.

    ~
    Last edited by Melonie; 07-12-2010 at 02:56 AM.

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    Banned Melonie's Avatar
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    Default Re: Taxes, starting a business? (Michigan)

    ... and just because you are moving to Nevada it doesn't mean you have to (or should) form your LLC in Nevada ...



    ... and with the upcoming changes in tax laws, it may be worth checking out an S corp or C corp instead ...



    ... I'd probably start by spending a few hundred bucks on a really good small business accountant in the month of december to help you make such a decision ... based on whatever tax law changes will actually show up next January 1st. The biggest area of change that could affect the decision as to the 'best' type of corporate structure for 2011 and beyond will probably involve steeply rising personal income tax rates ( which apply for an LLC and an S corp ) versus moderately rising corporate income tax rates ( which apply to a C corp ).

    Another area of change that could also affect that decision is potential changes to the $106,000 per year Social Security tax income cap. There have been several trial balloons in Washington to reinstate Social Security taxes on incomes above the $200k or $250k per year income level ... with new national health care costs to worry about, with Social Security's cash flows turning negative, and with a climate in place that it's OK to 'tax the rich', there is a very good chance this could get passed in a 'lame duck' congressional session this december, meaning that LLCs or S corps would allow new Social Security taxes on the 'rich' to pass through, whereas a C corp would not.

    Bottom line is that there are so many tax changes tucked away in existing law ( expiration of GWB tax cuts, expiration of AMT patch ), in recently passed law ( the national health care bill ), and potential new laws that could very well be passed in a 'lame duck' congressional session, that much of the past wisdom of unincorporated businesses versus LLC's versus S corps versus C corps will now need to be re-evaluated.

    ~
    Last edited by Melonie; 07-12-2010 at 02:51 AM.

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