A good way to avoid, legally this 7.5% tax is to form a General Partnership. All you have to do is get a basic contract between you and your spouse, and name your company "My Name Freight Partnership", jsut an example. Open a checking account with that name and do all your business expenses, paymenbts out of that account. receive all checks made payable to that account. No state or federal forms need to be filed like an S Corp or LLC (plus annual taxes of $750 to $2500 per year). But you still get to use IRS from 1065, which produces two Schedule K-1's. A partnership can be between two spouses or two friends. The only drawback is you are legally giving 50% of your business income and assets to your spouse or friend. But in California she owns 50% whether you like it or not. Also it will affect your Social Security, if there is one, down the road when you retire at 65. Me personally I'd rather stick 7.5% annually in my savings account.
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Avoiding that 1099 Schedule C Self Employment Tax
- Thread starter xkmail
- Start date
RE: Avoiding that 1099 Schedule C Self Employment
Forum name: Tax Topics For Expediters.
Subject: Avoiding that 1099 Schedule C Self Employment Tax
Posted by: xkmail
Message :
A good way to avoid, legally this 7.5% tax is to form a General Partnership. All you have to do is get a basic contract between you and your spouse, and name your company "My Name Freight Partnership", jsut an example. Open a checking account with that name and do all your business expenses, paymenbts out of that account. receive all checks made payable to that account. No state or federal forms need to be filed like an S Corp or LLC (plus annual taxes of $750 to $2500 per year). But you still get to use IRS from 1065, which produces two Schedule K-1's. A partnership can be between two spouses or two friends. The only drawback is you are legally giving 50% of your business income and assets to your spouse or friend. But in California she owns 50% whether you like it or not. Also it will affect your Social Security, if there is one, down the road when you retire at 65. Me personally I'd rather stick 7.5% annually in my savings account.
Kevin,
The statement that you made above is correct as to saving the Social Security Tax on your business but you inturn still have to make out a 1065 Partnership return, and each partner is responsible for the tax owed if any. Plus you are not paying anything into the SS system for your Retirement. It would also depend upon the month of the year you started, and the amount of income involved if you make a profit.
Remember if there is no profit there is no SS tax to be paid.
It is also true in the matter of husband and wife partners, Since they are already partners and file jointly both income from the partnership still show on there personal return, better to have a DBA business as a sole propreitor with a separate checking account to follow your business expenses, remember that 2 sch c's have to be made out, and a 1099misc does not have to be made out to the spouse, but if it is a nephew, son or anyother person a 1099 will have to be made out. due to the fact that you do not file a joint return with that person.
Frank
Forum name: Tax Topics For Expediters.
Subject: Avoiding that 1099 Schedule C Self Employment Tax
Posted by: xkmail
Message :
A good way to avoid, legally this 7.5% tax is to form a General Partnership. All you have to do is get a basic contract between you and your spouse, and name your company "My Name Freight Partnership", jsut an example. Open a checking account with that name and do all your business expenses, paymenbts out of that account. receive all checks made payable to that account. No state or federal forms need to be filed like an S Corp or LLC (plus annual taxes of $750 to $2500 per year). But you still get to use IRS from 1065, which produces two Schedule K-1's. A partnership can be between two spouses or two friends. The only drawback is you are legally giving 50% of your business income and assets to your spouse or friend. But in California she owns 50% whether you like it or not. Also it will affect your Social Security, if there is one, down the road when you retire at 65. Me personally I'd rather stick 7.5% annually in my savings account.
Kevin,
The statement that you made above is correct as to saving the Social Security Tax on your business but you inturn still have to make out a 1065 Partnership return, and each partner is responsible for the tax owed if any. Plus you are not paying anything into the SS system for your Retirement. It would also depend upon the month of the year you started, and the amount of income involved if you make a profit.
Remember if there is no profit there is no SS tax to be paid.
It is also true in the matter of husband and wife partners, Since they are already partners and file jointly both income from the partnership still show on there personal return, better to have a DBA business as a sole propreitor with a separate checking account to follow your business expenses, remember that 2 sch c's have to be made out, and a 1099misc does not have to be made out to the spouse, but if it is a nephew, son or anyother person a 1099 will have to be made out. due to the fact that you do not file a joint return with that person.
Frank
RE: Avoiding that 1099 Schedule C Self Employment
On a general note most people who are over say 55 can easily check the SSA to see what their monthly benefit is when they retire at 65. If they have been productive citizens most will find that even though they continue to pay into SS for the next few years, their benefit amount WILL NOT INCREASE due to the fact that they have allready maxed out. Me personally I'm 37 and with anohter 30 years to wait I find it highly unlikely any of us young folks will even have a SS benefit when we turn 65.
So I am more opt to just put my 7.5% away where I can keep a close eye on it.
If you are teaming with a nephew or friend and say you own the truck and just 1099 him at the end of the year, then the 1099 person should take into consideration theat they lose 7.5% off the top as they will have about zero writeoffs except for occassional meals, lodging, unless the O/O pays a per diem rate also.
keivn
On a general note most people who are over say 55 can easily check the SSA to see what their monthly benefit is when they retire at 65. If they have been productive citizens most will find that even though they continue to pay into SS for the next few years, their benefit amount WILL NOT INCREASE due to the fact that they have allready maxed out. Me personally I'm 37 and with anohter 30 years to wait I find it highly unlikely any of us young folks will even have a SS benefit when we turn 65.
So I am more opt to just put my 7.5% away where I can keep a close eye on it.
If you are teaming with a nephew or friend and say you own the truck and just 1099 him at the end of the year, then the 1099 person should take into consideration theat they lose 7.5% off the top as they will have about zero writeoffs except for occassional meals, lodging, unless the O/O pays a per diem rate also.
keivn
RE: Avoiding that 1099 Schedule C Self Employment
If you are teaming with a nephew or friend and say you own the truck and just 1099 him at the end of the year, then the 1099 person should take into consideration theat they lose 7.5% off the top as they will have about zero writeoffs except for occassional meals, lodging, unless the O/O pays a per diem rate also.
keivn
Kevin Brown
kEVIN,
HE HAS MORE THAN YOU THINK IN WRITE OFFS BY BEING A CO DRIVER, HE IS ALSO ENTITLED TO THE PER DIEM THE SAME AS THE LEAD DRIVER, PLUS HIS SHOWERS, LAUNDRY, AND ANY OTHER EXPENSE THAT HE PAID FOR.
fRANK
If you are teaming with a nephew or friend and say you own the truck and just 1099 him at the end of the year, then the 1099 person should take into consideration theat they lose 7.5% off the top as they will have about zero writeoffs except for occassional meals, lodging, unless the O/O pays a per diem rate also.
keivn
Kevin Brown
kEVIN,
HE HAS MORE THAN YOU THINK IN WRITE OFFS BY BEING A CO DRIVER, HE IS ALSO ENTITLED TO THE PER DIEM THE SAME AS THE LEAD DRIVER, PLUS HIS SHOWERS, LAUNDRY, AND ANY OTHER EXPENSE THAT HE PAID FOR.
fRANK