Self Employment tax calculation on joint return

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Subject Author Date Self Employment tax calculation on joint return privateuly 03-25-2007  Re: Self Employment tax calculation on joint retur... Frederick Lorca 03-26-2007  Re: Self Employment tax calculation on joint retur... Rod 03-26-2007  Re: Self Employment tax calculation on joint retur... Mark Bole 03-26-2007  Re: Self Employment tax calculation on joint retur... Benjamin Yazersky CPA 03-26-2007  Re: Self Employment tax calculation on joint retur... DORFMONT@aol.com (Linda D... 03-26-2007
Posted by privateuly on March 25, 2007, 12:26 pm Please log in for more thread options My wife and I (filing jointly) started an LLC (50-50 members) in 2005. That year, the LLC had a loss of $7000. In the same year, my wife had earned $5000 doing some consulting work. I am now reviewing the 2005 return that our (ex-) accountant did, and I realized that in calculating the Self-Employment tax, he had calculated as the income the $5000 consulting income minus half of the loss from the LLC ($3500), giving an income basis of $1500. In other words, he had ignored my share of the LLC loss eventhough my wife and I filed jointly. Is this right? Should we have been entitled to deduct the full amount of LLC loss which would give us 0 income basis for the purpose of the self-employment tax calculation? Thanks in advance! Uly << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by Frederick Lorca on March 26, 2007, 11:35 am Please log in for more thread options > I am now reviewing the 2005 return that our (ex-) accountant > did, and I realized that in calculating the Self-Employment > tax, he had calculated as the income the $5000 consulting > income minus half of the loss from the LLC ($3500), giving > an income basis of $1500. In other words, he had ignored my > share of the LLC loss eventhough my wife and I filed > jointly. > > Is this right? Yes. > Should we have been entitled to deduct the full amount of > LLC loss which would give us 0 income basis for the > purpose of the self-employment tax calculation? The full loss is deductible against your joint income for income tax purposes. For SE tax purposes, each respective spouse's loss is used to determine his and her net SE income for SE tax purposes. Frederick Lorca << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by Rod on March 26, 2007, 11:35 am Please log in for more thread options > My wife and I (filing jointly) started an LLC (50-50 > members) in 2005. That year, the LLC had a loss of $7000. > In the same year, my wife had earned $5000 doing some > consulting work. > > I am now reviewing the 2005 return that our (ex-) accountant > did, and I realized that in calculating the Self-Employment > tax, he had calculated as the income the $5000 consulting > income minus half of the loss from the LLC ($3500), giving > an income basis of $1500. In other words, he had ignored my > share of the LLC loss eventhough my wife and I filed > jointly. > > Is this right? Should we have been entitled to deduct the > full amount of LLC loss which would give us 0 income basis > for the purpose of the self-employment tax calculation? SE is person specific he was right << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by Mark Bole on March 26, 2007, 11:35 am Please log in for more thread options privateuly@gmail.com wrote: > My wife and I (filing jointly) started an LLC (50-50 > members) in 2005. That year, the LLC had a loss of $7000. > In the same year, my wife had earned $5000 doing some > consulting work. > > I am now reviewing the 2005 return that our (ex-) accountant > did, and I realized that in calculating the Self-Employment > tax, he had calculated as the income the $5000 consulting > income minus half of the loss from the LLC ($3500), giving > an income basis of $1500. In other words, he had ignored my > share of the LLC loss eventhough my wife and I filed > jointly. > > Is this right? Should we have been entitled to deduct the > full amount of LLC loss which would give us 0 income basis > for the purpose of the self-employment tax calculation? Yes, that is right, self-employment tax is never "joint", even on a joint return (same for wage earners -- even if one reaches the max income for Soc Sec, the other is still taxable). You had no earned income from business activity subject to self-employment tax, however your spouse did. This would be more clear if done correctly: in a non-community property state, you and your wife would be considered partners and should be filing a partnership return, in a community property state you are each allowed to file your own Schedule(s) C if you jointly operate a business(es). Either way, the self-employment tax would be individually calculated for each of you. -Mark Bole << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Posted by Benjamin Yazersky CPA on March 26, 2007, 11:35 am Please log in for more thread options > My wife and I (filing jointly) started an LLC (50-50 > members) in 2005. That year, the LLC had a loss of $7000. > In the same year, my wife had earned $5000 doing some > consulting work. > > I am now reviewing the 2005 return that our (ex-) accountant > did, and I realized that in calculating the Self-Employment > tax, he had calculated as the income the $5000 consulting > income minus half of the loss from the LLC ($3500), giving > an income basis of $1500. In other words, he had ignored my > share of the LLC loss eventhough my wife and I filed > jointly. > > Is this right? Should we have been entitled to deduct the > full amount of LLC loss which would give us 0 income basis > for the purpose of the self-employment tax calculation? on the surface, the 2005 seems correct se tax is on an individual, not both h&w ___________________________________ <<< Benjamin Yazersky, CPA [NJ & NY] >>> -----> real address on hobokeni or hobokenx <----- << ======================================================= >> << 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 (2006) - All rights reserved. >> << ======================================================= >> Similar Threads Posted Joint tenancy, multiple owners, capital gains calculation October 7, 2008, 7:41 pm final return: IRD calculation February 13, 2008, 4:45 pm 1099-G from Joint Return Received after Divorce January 16, 2009, 7:50 pm ballpark tax calculation August 29, 2008, 10:12 am 6251, line 16 calculation February 5, 2007, 8:02 pm Tax Prep deduction calculation January 7, 2008, 9:46 am Calculation of 30 day wash sale October 20, 2008, 4:56 pm Tax Calculation from Qualified Dividends February 20, 2009, 9:35 pm 401(k) early withdrawal penalty calculation November 10, 2006, 2:02 am Calculation of interest paid on educational loan for tax rebate January 12, 2009, 11:11 am