About Coach Janelle CPA
My passion is to help 6 & 7- figure+ earners see their financial possibilities through financial literacy and strategy.
I want to help you save on taxes so you can keep more of your money to live the life you dream of and have worked for NOW, and build wealth and equity for the next generation.
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Check Out Some Of Our Latest Blog Post
The New 62.5 Cents Mileage Rate
Written by Coach Janelle CPA on August 29, 2022
The IRS noticed that average gas prices across the United States exceeded $5.00 a gallon and took action. Small businesses that qualify to use and do use the standard mileage rate can deduct 62.5 cents per business mile from July 1 through December 31, 2022. That’s up ...
Paying Your Child: W2 or 1099?
Written by Coach Janelle CPA on August 8, 2022
Here’s a question I received from one of my clients: “I will hire my 15-year-old daughter to work in my single-member LLC business, and I expect to pay her about $12,000 this year. Do I pay her through payroll checks and file a...
Transferring Your Home to Your Adult Child
Written by Coach Janelle CPA on August 1, 2022
With today’s home prices and the crazy real estate market, it’s likely difficult for your children to buy a home. And it’s conceivable that you are ready to move on from your existing home. If this is true, consider...
Selling Your Appreciated Vacation Home? Consider the Taxes
Written by Coach Janelle CPA on July 27, 2022
The tax-code-defined vacation home rules come into play when you have both rental and personal use of a home. Thus, you can have tax-code-defined vacation homes in the city, in the suburbs, and in recreati...
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Self-Employment Taxes for Partners and LLC Members
Written by Coach Janelle CPA on August 20, 2022
Here’s a question:
Does a member of a Limited Liability Company (LLC) or a Partner In A Partnership have to pay self-employment taxes on the member’s or partner’s share of the entity’s income?
Incredibly, the answer is not always clear.
If you are a GENERAL PARTNER IN A GENERAL PARTNERSHIP, you must pay self-employment tax on your entire distributive share of the ordinary income earned from the partnership’s business. General partners also must pay self-employment tax on any guaranteed payments for services rendered to the partnership. Partnerships generally are not required to pay guaranteed payments to the partners. Guaranteed payments are like employee salaries; the partnership pays them without considering the partnership’s income. They are often incorrectly called “partner salaries.”
If you’re a LIMITED PARTNER IN A LIMITED PARTNERSHIP, you don’t pay self-employment tax on your share of the partnership’s profits. But you do pay self-employment tax on any guaranteed payments you receive. That’s all well and good. But what about LLCs? They are the most popular business entity in the U.S. today, with an estimated count of 21 million. It is not always clear when LLC members (owners) pay self-employment tax.
LLCs are state law entities not recognized for federal tax purposes. In other words, they are always taxed as something else. The tax code taxes the single-member LLCs as a sole proprietorship unless the owner elects taxation as a corporation (which is rare). Thus, owners of SINGLE MEMBER LLCs file Schedule C and pay self-employment tax on their net profit. It couldn’t be simpler. LLCs with multiple members are treated as partnerships for tax purposes unless they elect taxation as a corporation. If a multi-member LLC is taxed as a partnership, should its members be treated as general or limited partners?
Under Proposed IRS Regulations:
1. Members of member-managed LLCs cannot be treated as limited partners and must pay self-employment tax.
2.Members of manager-managed LLCs can qualify as limited partners, provided they work no more than 500 hours per year in the LLC business.
3.Members of service LLCs engaged in health, law, engineering, architecture, accounting, actuarial science, or consulting must be classified as general partners.
Fortunately, you don’t have to follow the proposed regulations. The IRS has not finalized them and says it won’t enforce them.
You can look at U.S. Tax Court rulings instead. The leading case says an LLC owner may be treated as a limited partner only if he is a passive investor who does not actively participate in the LLC business.
Self-Employment Taxes for Partners and LLC Members
Written by Coach Janelle CPA on August 20, 2022
Here’s a question:
Does a member of a Limited Liability Company (LLC) or a Partner In A Partnership have to pay self-employment taxes on the member’s or partner’s share of the entity’s income?
Incredibly, the answer is not always clear.
If you are a GENERAL PARTNER IN A GENERAL PARTNERSHIP, you must pay self-employment tax on your entire distributive share of the ordinary income earned from the partnership’s business. General partners also must pay self-employment tax on any guaranteed payments for services rendered to the partnership. Partnerships generally are not required to pay guaranteed payments to the partners. Guaranteed payments are like employee salaries; the partnership pays them without considering the partnership’s income. They are often incorrectly called “partner salaries.”
If you’re a LIMITED PARTNER IN A LIMITED PARTNERSHIP, you don’t pay self-employment tax on your share of the partnership’s profits. But you do pay self-employment tax on any guaranteed payments you receive. That’s all well and good. But what about LLCs? They are the most popular business entity in the U.S. today, with an estimated count of 21 million. It is not always clear when LLC members (owners) pay self-employment tax.
Under Proposed IRS Regulations:
1. Members of member-managed LLCs cannot be treated as limited partners and must pay self-employment tax.
2.Members of manager-managed LLCs can qualify as limited partners, provided they work no more than 500 hours per year in the LLC business.
3.Members of service LLCs engaged in health, law, engineering, architecture, accounting, actuarial science, or consulting must be classified as general partners.
Fortunately, you don’t have to follow the proposed regulations. The IRS has not finalized them and says it won’t enforce them.
You can look at U.S. Tax Court rulings instead. The leading case says an LLC owner may be treated as a limited partner only if he is a passive investor who does not actively participate in the LLC business.
About Coach Janelle CPA
My passion is to help 6 & 7- figure+ earners see their financial possibilities through financial literacy and strategy.
I want to help you save on taxes so you can keep more of your money to live the life you dream of and have worked for NOW, and build wealth and equity for the next generation.
Sign Up To Our Weekly Newsletter
Get the latest tax planning tips content delivered straight to your inbox.
All Your Information is Protected When You Sign Up
Check Out Some Of Our Latest Blog Post
The New 62.5 Cents Mileage Rate
Written by Coach Janelle CPA on August 29, 2022
The IRS noticed that average gas prices across the United States exceeded $5.00 a gallon and took action. Small businesses that qualify to use and do use the standard mileage rate can deduct 62.5 cents per business mile from July 1 through December 31, 2022. That’s up ...
Paying Your Child: W2 or 1099?
Written by Coach Janelle CPA on August 8, 2022
Here’s a question I received from one of my clients: “I will hire my 15-year-old daughter to work in my single-member LLC business, and I expect to pay her about $12,000 this year. Do I pay her through payroll checks and file a...
Transferring Your Home to Your Adult Child
Written by Coach Janelle CPA on August 1, 2022
With today’s home prices and the crazy real estate market, it’s likely difficult for your children to buy a home. And it’s conceivable that you are ready to move on from your existing home. If this is true, consider...
Selling Your Appreciated Vacation Home? Consider the Taxes
Written by Coach Janelle CPA on July 27, 2022
The tax-code-defined vacation home rules come into play when you have both rental and personal use of a home. Thus, you can have tax-code-defined vacation homes in the city, in the suburbs, and in recreati...
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@coachjanellecpa
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@coachjanellecpa
Follow me. Let's be friends!
© 2021 Coach Janelle CPA. All Rights Reserved.
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