Linda Stauffer on thu 16 oct 97
I am very excited about joining this list. I've been a potter for about
25 years. I am also an art teacher. I recently moved to a new home with
a large out building I've turned into a studio. I would like to turn
what has been a "hobby" into an official business. But I don't know how
to deal with the IRS. How can I "transfer" all the equipment I've
purchased over the years, two kilns, 3 wheels, tons of clay and
chemicals, etc. so I can use them as expenses to balance the sale of my
work? Is there a publication I can consult for advice?
Joyce Lee, Jim Lee on fri 17 oct 97
Even if you customarily complete and submit your own tax information to
the IRS, it might be a good idea to pay a consultant this first year
when you are replacing your hobby with an official business. I, just by
chance, happened to select a tax consultant who is, also, a potter in
the off-season. Lucky for me! She assures me, however, that almost any
experienced consultant can provide you with the information and
literature you need in order to take all legal deductions and to prepare
your forms correctly.
Joyce
In the Mojave recovering from observing all the laborers at Nils Lou's
kiln-building workshop at Bob and Lynn Rank's last weekend. (Jim worked
very hard, though; this time we reversed roles and I was the "support
person" for Jim.) Beautiful car kiln! Some kind of team! Mountains were
gorgeous, we enjoyed the people, and we now have a better understanding
of kilns and firing thanks to Nils' expertise. We've also been invited
by Justin to a giant pitfiring in '98. Aren't potters grand?
WardBurner@aol.com on sat 18 oct 97
Try This:
Incorporate as a C corporation then lease all your equipment to the
corporation. The corporation now deducts all the lease payments as business
expense. You receive lease payments from the corporation. This income from
the corporation is considered passive income and not subject to Social
Security taxes (The dreaded SE Tax which is double over what is taken out of
your paycheck if you work for someone else). You also may claim a personal
depreciation on the equipment because it is now business equipment that you
lease to a business.
Double deductions on the same equipment and less tax paid.
I suggest you speak with a tax attorney not a CPA.
Marc Ward
Ward Burner Systems
PO Box 333
Dandridge, TN 37725
USA
423.397.2914 voice
423.397.1253 fax
wardburner@aol.com
Jeremy/Bonnie Hellman on sun 19 oct 97
Marc-
What you don't mention is that it will cost money to incorporate (to pay
someone to do the papers for you if you cannot prepare them yourself,
plus filing fees) and different states have a variety of taxes on
corporations NOT on non-corporations. (eg Pennsylvania has a minimum
capital stock tax of $300 per year just for the privilege of being a PA
corp or S corp). It will also cost money to prepare a corporate return,
and possibly double taxation if the corp has a profit and has to pay
income tax (federal and state) on the profit, and then is taxes again
when this money is paid to the stockholder (either as a dividend which is
not deductible to the corp) or as salary (which puts you back not only
with double social security tax, but which may also require you to pay
unemployment taxes, both federal and state). Furthermore, if you hope to
collect social security one day (assuming that there is still a solvent
social security fund when you are eligible) you may actually wish to pay
into the social security fund.
What I'm saying is that it is not quite as simple as you think. Not only
may it not be cost effective for the people involved because of the
additional costs of incorporating and maintaining a corporation, the
total dollars that the person may pay in taxes alone may be higher than
the cost of just depreciating the equipment over the pre-determined IRS
life, usually 7 years.
Yes, see a tax lawyer if you want help incorporating, but see a CPA when
you want financial help and tax advice.
Bonnie Hellman in Pittsburgh, PA
CPA licensed in PA and CO
>----------------------------Original message----------------------------
>Try This:
>
>Incorporate as a C corporation then lease all your equipment to the
>corporation. The corporation now deducts all the lease payments as business
>expense. You receive lease payments from the corporation. This income from
>the corporation is considered passive income and not subject to Social
>Security taxes (The dreaded SE Tax which is double over what is taken out of
>your paycheck if you work for someone else). You also may claim a personal
>depreciation on the equipment because it is now business equipment that you
>lease to a business.
>
>Double deductions on the same equipment and less tax paid.
>
>I suggest you speak with a tax attorney not a CPA.
>
>Marc Ward
>Ward Burner Systems
>PO Box 333
>Dandridge, TN 37725
>USA
>423.397.2914 voice
>423.397.1253 fax
>wardburner@aol.com
"Outside a dog, a book is a man's best friend. Inside a dog, it's too
dark to read" Groucho Marx
" " Harpo Marx
"Time flies like an arrow. Fruit flies like an avocado" Att. to GM
freewill on tue 21 oct 97
Bonnie in PA advised:
>Furthermore, if you hope to
>collect social security one day (assuming that there is still a solvent
>social security fund when you are eligible) you may actually wish to pay
>into the social security fund.
All of what you'd said about the "down" side of incorporating (I'm hoping
to become a Limited-Liability Company (Sole Proprietorship, not
incorporated) myself, this particular bit of advice puzzled me. You seem
to imply that it's a CHOICE whether you pay into social security (on your
own salary), and that if you don't ever want to collect, you don't have to
pay into it. Is this true, or did I misunderstand?
Jenni, in Omaha, obviously needing to speak to a CPA myself.
Olivia T Cavy on wed 22 oct 97
Jenni-
It is not optional about paying into social security when you have salary
or earned income (net profits) on a schedule C, partnership, or LLC taxed
as a partnership, etc. What is under your control is a situation where
you want to increase your earned income from your company, and you can
elect NOT to deduct all of your expenses, which makes your net profit
higher, your income tax higher and your social security tax higher.
You may wonder why anyone in their right mind would want to do this, but
if you are close to retirement age and have done the calculations and
discovered that by increasing your income (IF this is within your
control) you can increase your social security payments, you MIGHT choose
to do this. It's probably quite uncommon, but in the right situation
could be beneficial to the individual, assuming they could afford to pay
the tax.
My point was that the IRS does not require you to deduct all of your
business expenses. They do require you to include all of your income. So
if I am self employed, or an employee of my own corporation or LLC taxed
as a corporation, I have some (albeit) small measure of control over my
income.
For people who are already deducting every legitimate ("ordinary and
necessary") business expense against their income, there is no other way
to reduce your taxable income, but you could always increase that income
;-}
BTW you certainly do have a choice about not collecting social security,
even if you are eligible. You simply don't apply to collect. However, you
do have to pay into the system.
Bonnie Hellman, CPA in Pittsburgh, PA
Bonnie D. Hellman
Pittsburgh, PA
work email: oliviatcavy@juno.com
home email: mou10man@sgi.net
On Tue, 21 Oct 1997 07:55:31 EDT freewill
writes:
>----------------------------Original
>message----------------------------
>Bonnie in PA advised:
>
>>Furthermore, if you hope to
>>collect social security one day (assuming that there is still a
>solvent
>>social security fund when you are eligible) you may actually wish to
>pay
>>into the social security fund.
>
>All of what you'd said about the "down" side of incorporating (I'm
>hoping
>to become a Limited-Liability Company (Sole Proprietorship, not
>incorporated) myself, this particular bit of advice puzzled me. You
>seem
>to imply that it's a CHOICE whether you pay into social security (on
>your
>own salary), and that if you don't ever want to collect, you don't
>have to
>pay into it. Is this true, or did I misunderstand?
>
>
>Jenni, in Omaha, obviously needing to speak to a CPA myself.
>
freewill on wed 22 oct 97
Bonnie,
OH, okay, I get it. I even understand why you might want to up your
contributions, if you actually thought you were going to get some of it
back. Unfortunately I am young, and I figure there's no WAY I'm going to
see any SS money when I retire - it will be long bankrupt by then. So I
want to limit my contributions as much as possible, and do my retirement
savings on my own.
Thanks for the explanation!
jenni
Jeremy/Bonnie Hellman on thu 23 oct 97
No, Jenni, the basis of the American social security system is that these
days virtually everyone who has earned income contributes and everyone
collects (and actually some who don't contribute such as some children
and non-working spouses collect, based on someone else's contributions).
If you have earned income, either wages or are self employed, you will
contribute, and maybe one day collect.
What you can control is the amount of earned income if you are self
employed, to the extent that you can INCREASE your earned income but not
deducting all of your ordinary and necessary business expenses. The IRS
requires you to include all of your income, but you are not required to
deduct all of your expenses.
Some people try to get around taking wages in their S-Corp (and probably
their LLC) but the IRS sees through this ruse most of the time.
When I prepare tax returns for clients holding their first jobs, almost
universally I hear the complaint about how much they are paying in income
tax and social security and medicare taxes. All I can say is that, the
"over 62" gang thanks you. And maybe one day, you'll get to collect also.
Bonnie Hellman, CPA in Pittburgh, PA
>----------------------------Original message----------------------------
>Bonnie in PA advised:
>
>>Furthermore, if you hope to
>>collect social security one day (assuming that there is still a solvent
>>social security fund when you are eligible) you may actually wish to pay
>>into the social security fund.
>
>All of what you'd said about the "down" side of incorporating (I'm hoping
>to become a Limited-Liability Company (Sole Proprietorship, not
>incorporated) myself, this particular bit of advice puzzled me. You seem
>to imply that it's a CHOICE whether you pay into social security (on your
>own salary), and that if you don't ever want to collect, you don't have to
>pay into it. Is this true, or did I misunderstand?
>
>
>Jenni, in Omaha, obviously needing to speak to a CPA myself.
"Outside a dog, a book is a man's best friend. Inside a dog, it's too
dark to read" Groucho Marx
" " Harpo Marx
"Time flies like an arrow. Fruit flies like an avocado" Att. to GM
gordon jones on sat 22 nov 03
i am going to try to build a kiln vent system and could use some info ,as
in how many cubic feet per minute the fan system is rated and such, i will
be doing an internal vent and the only rating i have found printed is the
hood vent. i will post part numbers and prices ,most of the fan motors i
have looked at are in the 40. dollar range.the placec i will be dealing with
has pre made sheet metal pieces for the duct and all. also found 75thousand
btu gas burneers from furnace system,, can be bought for under 20 bucks.
any help will be greatly apprerciated
gordon earthbound arts
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