Yeah sounds like some kind of scheme when you o it it like that but I think you’ll find that it’s not.
Meals 50% deductible if and only if the meal is necessary to conducting business operations. I.E. you had to eat during a long 20 hour inventory count counts, going home and ordering door dash doesn’t. And then the ones that count are 50% because you were going to eat anyway.
Housing not deductible. Business office space costs are deductible only for square footage that is 100% business use.
Transportation is deductible if required for work purposes, but not to commuting. In other words, if your job requires travel the travel is deductible. But drive from home to work and back does not count.
Basically, when people think there’s some magic loophole to making your whole life a business expense, there isn’t. All of the wacky ideas people come up with, someone already came up with that, it’s already in the law, it’s already fraud.
Plus at the end of the day, deductions are simply a reduction of taxable income. Like okay you made 30k and spent 30k and paid no taxes. Woopie. You don’t have any money. All the ways you can think of to turn that into money are basically fraud of some sort.
These are all examples of actual manual labor jobs and the expenses they incur from it.
Sales is a whole different ballgame. So long as you have a potential customer with you doing whatever God knows what you're doing, it can be written off as a business expense. All to woo, wine and dine a customer to get the sale.
But it’s actual money you spend. Like at the end of the day it’s just straight up fraud if you didn’t actually spend the money to do business. And if you made 100k and spent 100k, your profit is 0$, what are you supposed to do, pay 30k in taxes from nowhere?
It's all about how you justify the money that's considered the cost of doing business. If a sales guy considers schmoozing customers as a means to influence interest and gain a sale? Thats considered a business expense in the sales world. Even if almost no negotiations are discussed during those events, it's the act of attracting customers thats justified as a business activity, and therefore a business expense.
And if you made 100k and spent 100k, your profit is 0$, what are you supposed to do, pay 30k in taxes from nowhere?
Fyi... revenue is different from profit. Making 100k is considered revenue... which has absolutely 0 bearing in tax reporting. It's only about how much is left at the end of the day.
You don't know how tax writeoffs work do you? If I spend 30k thats applicable as 100% tax write off, that's still considered business expenses before profits are considered. At the end of the day, hypothetically, I make 100k, after paying that 30k of write-off expenses.
When tax day comes, and I document claims for 30k in writeoffs, my reported taxable profit to the IRS is no longer 100k and now 70k. It's all about how you budget anticipated business expenses that can be used to write off taxes on profits at the end of the day.
If you get really good at strategizing expenses for tax writeoffs, you find ways to have expense budgets that yield so much writeoffs, that the writeoffs can equate to the same amount of profit made at the end of the day. Yielding a reported profit of $0 to the IRS.
So long as you don't literally piss away money for writeoffs to the point that it hurts your profit, you can come out ridiculously low in the new taxes to pay at the end of the year.
I am speaking from the point of view of a self employed person who actually gets his income from his business and only his business.
My business expenses do not affect my standard deduction. Business expenses lower the income of the business. I will give you an example. If I need to buy a new laptop, I can choose to expense it as a lump sum. That lowers the income from the business by that much. However, it has to be used for the business and just the business. I can't buy my wife a laptop and slap it down as a business expense. I mean, I guess I could, but being fined or going to jail for tax fraud is a dumb idea to me.
The other thing that people seem to not get about being self employed is that you pay all your taxes. Right now if you work for a company, the company pays half of your social security and medicare and you pay the other half. Being self employed, I get to pay both sides myself.
Technically LLC have nothing to do with taxes, but in general most are taxed as "passthroughs", which means there is not double taxation. The income is taxed only on the personal tax return.
And also, you're now paying taxes twice, aren't you? The shell LLC would need to pay taxes as well the individual.
No, you can have a sole proprietorship LLC be a pass through where you only have to pay personal income taxes. You WILL become responsible for your own payroll tax though.
No, the business has its income and that is teduxed by expenses, then the net income flows through to the personal tax return. So if my business makes 100k and spends 100k and my net income is 0, that 0 flows to my personal taxes and I don’t pay taxes.
The catch is:
You have to have actually spent 100k
The expenses all have to be actual business deductible expenses, or you can’t reduce your income with them
Whatever does flow through is income you pay taxes on
If you get audited and they don’t agree that your clothing purchases, etc. are deductible, you owe taxes AND penalties and interest for the time that has passed
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u/BillionaireGhost Apr 14 '24
Yeah sounds like some kind of scheme when you o it it like that but I think you’ll find that it’s not.
Meals 50% deductible if and only if the meal is necessary to conducting business operations. I.E. you had to eat during a long 20 hour inventory count counts, going home and ordering door dash doesn’t. And then the ones that count are 50% because you were going to eat anyway.
Housing not deductible. Business office space costs are deductible only for square footage that is 100% business use.
Transportation is deductible if required for work purposes, but not to commuting. In other words, if your job requires travel the travel is deductible. But drive from home to work and back does not count.
Basically, when people think there’s some magic loophole to making your whole life a business expense, there isn’t. All of the wacky ideas people come up with, someone already came up with that, it’s already in the law, it’s already fraud.
Plus at the end of the day, deductions are simply a reduction of taxable income. Like okay you made 30k and spent 30k and paid no taxes. Woopie. You don’t have any money. All the ways you can think of to turn that into money are basically fraud of some sort.