Archive for the ‘Tax Tips’ Category
Conducting business under corporate, LLC or limited partnership IRS tax codes offers the Owners and Principals tax deductions not available to individuals. The tax advantages derive from the Owners and Principals ability to deduct expense items before taxation rather than after taxation. Example, as an individual your medical and dental expenses are borne by you after taxable earnings and other income. AS A PRINCIPAL IN A COMPANY ALL THESE EXPENSES MAY BE BORNE BY THE COMPANY AND IRS TAX EXPENSED, with no taxable income to the Principals.
One might think combining the above deductions with the further advantages of a Sub Chapter”S” entity to be a tax euphoria.
Save income tax money by starting your own business. You have control over your expenses, tax deductions, medical, dental, cars, truck. eqipment,entertainment, etc.
HISTORY AND BACKGROUND
Self-Employment Tax (SE) is in addition to the self-employed individual’s income tax. Currently the SE tax consists of the combination two (2) taxes: 1. Social Security of approx. 12.6% and 2. Medicare of approx. 2.9%, totaling 15.3%.
For the year 2007, the SE tax applies to net earnings of up to $106,800.00, thus $16,340.00. This is already a significant burden on the self-employed, however the worst may be yet to strike.
Congress, faced with a significant shortfall of revenue, should the split social security retirement plan be adopted for younger workers, is considering raising the taxable SE income level to $200,000.00, thus a SE tax of $30,600.00.
