LLC and AMT Questions

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Subject Author Date LLC and AMT Questions Anona 08-08-2009  Re: LLC and AMT Questions Arthur Kamlet 08-08-2009  Re: LLC and AMT Questions Anona 08-08-2009   Re: LLC and AMT Questions Steve Pope 08-08-2009  Re: LLC and AMT Questions Stuart A. Bronstein 08-11-2009   Re: LLC and AMT Questions Steve Pope 08-11-2009  Re: LLC and AMT Questions Brew1 08-08-2009  Re: LLC and AMT Questions Phil Marti 08-09-2009  Re: LLC and AMT Questions Gene E. Utterback, EA, RF... 08-12-2009
Posted by Anona on August 8, 2009, 4:07 pm Please log in for more thread options Hello, I am just starting a new business with my husband. My husband will continue to work at his current job while I work to grow the business. I have filed to organize the business as an LLC. I have a few tax questions that I seek some opinions on. 1) I have not yet made my corporate tax election for the LLC and I understand that a variety of options are possible. Since I am starting out with a small amount of seed money and am not paying myself a salary until the business is profitable (which could take some time), it seems to me that the only realistic tax option for me is to elect to tax the LLC as a partnership, since I am not an employee of the business. True? 2) Typically, my husband and I file a joint tax return for our personal taxes and last year we were subject to the dreaded AMT. We will likely be subject to AMT again on next year's return. I assume that because we are subject to AMT, it really does not matter that much whether I have deductible business expenses as the AMT will wipe them out anyway. Correct? Thanks very much for any information! -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Arthur Kamlet on August 8, 2009, 4:18 pm Please log in for more thread options >Hello, > >I am just starting a new business with my husband. My husband will >continue to work at his current job while I work to grow the >business. I have filed to organize the business as an LLC. I have a >few tax questions that I seek some opinions on. > >1) I have not yet made my corporate tax election for the LLC and I >understand that a variety of options are possible. Since I am >starting out with a small amount of seed money and am not paying >myself a salary until the business is profitable (which could take >some time), it seems to me that the only realistic tax option for me >is to elect to tax the LLC as a partnership, since I am not an >employee of the business. True? > >2) Typically, my husband and I file a joint tax return for our >personal taxes and last year we were subject to the dreaded AMT. We >will likely be subject to AMT again on next year's return. I assume >that because we are subject to AMT, it really does not matter that >much whether I have deductible business expenses as the AMT will wipe >them out anyway. Correct? You seem to be confusing employee business expenses, reported on Schedule A as Miscellaneous deductions, and thus not allowed for AMT, with self employment income and expenses, reported on Schedule C for sole proprieors and generally allowed for AMT. If you file as a partnership, the partnership income/expenses are reported to you on the partnership'schedule K/K-1 and also generally allowed for AMT. You need to decide if you are actually a partner of this partnership or if he will be operating the business as a sole proprietorship. Your form of business is a legal decision, although your decision affects and is affected by tax consequences. -- ArtKamlet at a o l dot c o m Columbus OH K2PZH -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Anona on August 8, 2009, 8:13 pm Please log in for more thread options On Aug 8, 4:18 pm, kam...@panix.com (Arthur Kamlet) wrote: > > You seem to be confusing employee business expenses, reported on > Schedule A as Miscellaneous deductions, and thus not allowed for > AMT, with self employment income and expenses, reported on Schedule C > for sole proprieors and generally allowed for AMT. > > If you file as a partnership, the partnership income/expenses are > reported to you on the partnership'schedule K/K-1 and also generally > allowed for AMT. > > You need to decide if you are actually a partner of this partnership > or if he will be operating the business as a sole proprietorship. > Thanks for your comments! I need to do some more research on Schedule C. I am not a sole proprietor as my husband is a member of the LLC along with me. -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Steve Pope on August 8, 2009, 8:37 pm Please log in for more thread options >>I am just starting a new business with my husband. My husband will >>continue to work at his current job while I work to grow the >>business. I have filed to organize the business as an LLC. >You need to decide if you are actually a partner of this partnership >or if he will be operating the business as a sole proprietorship. Acutually, the way I read the above, it's more likely that she (the OP) is the sole proprietor, assuming it's a full time effort for her while her husband is mostly working at an unrelated job. I am not sure what the threshold is of spousal participation in a business before it would be incorrect to report it as a sole proprietorship. According to Nolo Press, a spouse can "volunteer" to work for the business, and have it remain a sole proprietorship; but if the "volunteer" work becomes frequent or regular, or the "volunteer" spouse is in contact with the public or signs documents on behalf of the business, then it is no longer a sole proprietorship and must be treated as a partnership. Steve -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Posted by Stuart A. Bronstein on August 11, 2009, 10:47 am Please log in for more thread options spope33@speedymail.org (Steve Pope) wrote: > According to Nolo Press, a spouse can "volunteer" to work for > the business, and have it remain a sole proprietorship; but if > the "volunteer" work becomes frequent or regular, or the > "volunteer" spouse is in contact with the public or signs > documents on behalf of the business, then it is no longer a sole > proprietorship and must be treated as a partnership. My parents had a situation like that - my mother worked in my father's business. At that time apparently the IRS didn't care if the second spouse was considered an employee or not, no matter how much work she did, because filing a joint return pretty much equalized things. The only real difference for them was whether withholding taxes were paid by the second spouse, allowing her social security to be higher when they retired. Stu -- << ------------------------------------------------------- >> << The foregoing was not intended or written to be used, >> << nor can it used, for the purpose of avoiding penalties >> << that may be imposed upon the taxpayer. >> << >> << The Charter and the Guidelines for submitting posts >> << to this newsgroup as well as our anti-spamming policy >> << are at www.asktax.org. >> << Copyright (2007) - All rights reserved. >> << ------------------------------------------------------- >> Similar Threads Posted A few questions April 11, 2007, 11:28 pm Questions? What to do? April 17, 2006, 10:54 pm 2 questions... September 26, 2008, 3:23 pm LLC (Partnership) Tax Questions November 7, 2006, 8:19 am ROTH questions February 9, 2007, 12:30 am Two questions on deductions April 15, 2007, 1:42 pm LLC taxation questions May 25, 2007, 1:41 pm Re: LLC taxation questions May 29, 2007, 10:45 pm IRS notice questions June 8, 2007, 1:21 pm Tax Software Questions January 17, 2008, 1:35 am