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Thread: Taxes and Small Businesses

  1. #1
    Featured Member tRoUbLeMaKeR's Avatar
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    Taxes and Small Businesses

    Hello Everyone - wow it's been forever since I've had time to post!!! But I had no where else to go but stripperweb for this question....

    So I went to H&R Block today. I told the guy I started dancing and that someone had recommended that for 2005 I set myself up as a small business so I can write things off and set up a retirement plan. The guy didn't really understand. He seemed alittle focused on my job as a dancer rather than my question.... Anyway, he told me to just keep track of what I make and spend and deal with it at the end of the year. There's got to be a better way than that!!!

    I'm interested in the small business idea though. Does anyone have any information about how to do this or advice for me. I want to claim my dancing money because I'm going to be doing this for at least a few more years so I don't want to have no tax record when I'm done.

    Any help would be greatly appreciated!!
    [SIGPIC][/SIGPIC]

  2. #2
    Banned Melonie's Avatar
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    Default Re: Taxes and Small Businesses

    Anyway, he told me to just keep track of what I make and spend and deal with it at the end of the year. There's got to be a better way than that!!!
    Actually, if you followed the H&R Blockhead's advice, you would technically be breaking the law and subject to an IRS penalty for failing to pay estimated taxes every three months.

    Assuming that you're not working at a club from which you receive a weekly paycheck as an 'employee', *poof* you're already an independent contractor i.e. sole proprietor business ! Unless there is some sort of local regulations requiring a particular business license, or unless you want to do something really fancy accounting wise in regard to multiple vehicles, multiple residences or protecting million dollar assets from potential lawsuits, you really don't NEED to do anything else in regard to officially setting up a business.

    If you just started dancing, the next thing you need to prepare to do is send out a 1040-ES form and a check for estimated taxes on money you earned from the first of the year through the end of March by this coming April 15th. You may also have to send out an equivalent form and a check for estimated taxes to your state tax agency if you live in a state which has an income tax.

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    Member HIJACKER's Avatar
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    Default Re: Taxes and Small Businesses

    Well, if your hired on a 1099 Form, porlly a 1099MISC, then your considered a contractor. Being 1099 is considered self employment, and along with Income AND State Tax, you will also have Self-Employement Tax. SE Tax is high, roughly 18%. However, whatever your GROSS wages are (as claimed on the 1099) is what you will get taxed on. If you intemize, you can deduct ANYTHING you buy that is in regards to the job (Makeup, outfits, getting your nails done, etc.)

    So basically lets say your GROSS figure is 10,000 for a year (without tips).

    You deduct $520 for charitable contributions (10/week in church, can't be proven, no receipt)

    - You deduct $480 for fake nails (receipts)
    - You deduct $500 for clothes pertaining to job (receipts)
    - Any mileage to and from Bachelor or Birtherday parties, is deductable at 37.5 cents/mile

    Anyhow.. you started with 10,000, after itemized deductions, your down to maybe $6,000, so.. the figure 6,000 is what you get taxed on. Yearly tax owed on $6,000 INCOME is roughly $2,000 Federal, $1,050 Self-Employment tax, and $400 State.

    Hope that helps..

  4. #4
    Member Jon_CPA's Avatar
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    Default Re: Taxes and Small Businesses

    Quote Originally Posted by tRoUbLeMaKeR
    I'm interested in the small business idea though. Does anyone have any information about how to do this or advice for me.
    Congratulations, you ARE a small business. I think what you’re asking about is if you should incorporate and what form should it be.



    Some of the more common forms are:



    1) Unincorporated sole proprietorship - What you currently are. You have no legal separation personal assets from business assets in civil actions arising out of the ordinary course of your business. You will file the form 1040 and a schedule C. You are allowed to deduct all business expenses that are ordinary and necessary for the industry that you are in. You can establish a 401(k) plan/ a Self Employed Pension Plan (SEP/IRA) / a traditional IRA plan to defer the income for retirement from taxation until you reach age 59 & 1/2.



    2) Single member Limited Liability Company (LLC). You have legal separation personal assets from business assets in civil actions arising out of the ordinary course of your business. You will file the form 1040 and a schedule C. You are allowed to deduct all business expenses that are ordinary and necessary for the industry that you are in. You can establish a 401(k) plan/ a Self Employed Pension Plan (SEP/IRA) / a traditional IRA plan to defer the income for retirement from taxation until you reach age 59 & 1/2.



    3) Sub chapter S Corporation (S-Corp) You have legal separation personal assets from business assets in civil actions arising out of the ordinary course of your business. You will file the form 1120s for the corporation and form 1040 for the personal. The income is not taxed at the corporate level, it flows through to the individual and is taxed at the personal level. You are allowed to deduct all business expenses that are ordinary and necessary for the industry that you are in. You can establish a 401(k) plan/ a Self Employed Pension Plan (SEP/IRA) / a traditional IRA plan to defer the income for retirement from taxation until you reach age 59 & 1/2.



    4) A Corporation (C-Corp) You have legal separation personal assets from business assets in civil actions arising out of the ordinary course of your business. You will file the form 1120 for the corporation and form 1040 for the personal. The income is taxed at the corporate level. Regular compensation is deductible at the corporate level and taxable at the individual level. Non-compensation distributions are not deductible at the corporate level and taxable at the personal level. You are allowed to deduct all business expenses that are ordinary and necessary for the industry that you are in. You can establish a 401(k) plan/ a Self Employed Pension Plan (SEP/IRA) / a traditional IRA plan to defer the income for retirement from taxation until you reach age 59 & 1/2.



    NOTE: As an entertainer, if you incorporate as a C-Corp, you will be classified as a Personal Corporation (PC). All corporate earning will not be taxed using the corporate graduated tax rates but taxed at a flat 35% rate.


    The main reason for incorporating is to protect your personal assets from litigation arising out of the due course of business. The form of incorporation will have an impact on how the earnings are taxed. It is always best to consult with legal counsel and your tax advisor when incorporating. Depending upon the type of retirement plan you choose to set up consult with a financial planner, tax advisor, and/or legal counsel.


  5. #5
    God/dess montythegeek's Avatar
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    Default Re: Taxes and Small Businesses

    Jon did not give you the advice which would have been best because he did not want to blow the horn of his own profession.

    The very nice people at H&R etc are not accountants. They are tax preparers. If Joe 6-HArdons walks in off the street with his W2 and interest and mortgage they do your taxes. they know a few things to look for which are often overlooked.

    The best advice Jon could have given you (but discretion prevented him) is "See a REAL Accountant". The alternative is to learn a lot of stuff yourself which would take you hours. One good day of work probably would net you more than what an accountant would charge. Learn from what they do.

    I can give this advice without blowing my own horn because I am not an accountant or interested party. Even Melonie who knows more than 99% of the dancers on SW about taxes went to an accountant. Where did she learn of lot of it--her accountant. Your choice, rent an accountant or start studying a LOT.


    Jon ,In the interest of people's decision making could you give an idea what fees would be for the kind of startup services someone would need(with room for local variation).

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