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Old 08-01-2014, 12:45 PM
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Work from home & home based business

1)I work for a company and I receive W2. My wife also works and she too receives her W2.
My wife also works for a company as part timer. For this she works from home. For this part time work, my wife received 1099 from her client(for last year) and we showed it in our joint tax filing. We did not show any expenses for it.


As part of my regular work, I work from home for 4 hours/day. I have a separate room for my work with table, chair, laptop, printer, phone etc., Can we get some tax deductions for this as I and my wife are working from home? If answer is yes, What I need to do for this? Can I claim it for last year during next year tax filing?


2)For my wife's part time work, could we open a new home based business? She would be the only one person in that company. What type of company should we open? We would like to save our personal savings; not to be affected by any law suites or litigations. Sole Proprietorship or LLC?


How to file the taxes for home based business? Is it going to be separate tax filing or part of our joint tax filing?



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Old 08-01-2014, 11:05 PM
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Quote:
Originally Posted by Sanjeev View Post
1)I work for a company and I receive W2. My wife also works and she too receives her W2.
My wife also works for a company as part timer. For this she works from home. For this part time work, my wife received 1099 from her client(for last year) and we showed it in our joint tax filing. We did not show any expenses for it.


As part of my regular work, I work from home for 4 hours/day. I have a separate room for my work with table, chair, laptop, printer, phone etc., Can we get some tax deductions for this as I and my wife are working from home? If answer is yes, What I need to do for this? Can I claim it for last year during next year tax filing?


2)For my wife's part time work, could we open a new home based business? She would be the only one person in that company. What type of company should we open? We would like to save our personal savings; not to be affected by any law suites or litigations. Sole Proprietorship or LLC?


How to file the taxes for home based business? Is it going to be separate tax filing or part of our joint tax filing?

As part of my regular work, I work from home for 4 hours/day. I have a separate room for my work with table, chair, laptop, printer, phone etc., Can we get some tax deductions for this as I and my wife are working from home? If answer is yes, What I need to do for this? Can I claim it for last year during next year tax filing?=======>> if you use a portion of your home for business, you may be able to take a home office deduction. As an employee you can only qualify for the home office deduction if your home is your principal place of business and it's a condition of your employment. As you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer If it's merely for your convenience , then,you cannot deduct it. Home office deductions are a popular audit item for both IRS/ our state since the rules are so strict. You need documentation from your employer that there is no office space for you to work at. Your deduction would be fed through the 2% line of schedule A. That means you figure out the deduction, subtract 2% of your AGI and then add it to sch A. If you cannot itemize it does not make a difference. Employees are denied the deduction for the business portion of mortgage interest and property taxes, but can deduct both the business and non-business portion as a Schedule A personal itemized deduction.

2)For my wife's part time work, could we open a new home based business?====>Sure as a contractor as she receives a 1099 rahter than a W2.

She would be the only one person in that company. What type of company should we open? We would like to save our personal savings; not to be affected by any law suites or litigations. Sole Proprietorship or LLC?=======>>>>>>>>Either a sole ownership or a SMLLC; IN the case of SMLLC, the major appeal of an SMLLC for an individual business owner is Unlike sole proprietors, SMLLC owners have separation between their business assets and debts and their personal finances. This means that if the business is sued for injury or other damages, your personal assets are not normally at risk. Your personal assets are also not usually accessible for creditors when your business doesn't pay its debts.


How to file the taxes for home based business? Is it going to be separate tax filing or part of our joint tax filing=======>>>>>>>Your spouse as a sole owner, needs to file Sch C of 1040 aslongas the amoun ton SCh C line 29/31 is $400 or exceeds $400 also aslongas the amount on Sch SE line 2/ 3 is also $400 or exceeds $400 then she needs to pay self employment taxes. If you are filing as a sole proprietor , and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1K or more when you file your return.however, you do not have to pay estimated tax for the current year if you had no tax liability for the prior year; you were a U.S. citizen or resident for the whole year; Your prior tax year covered a 12 month period. She can deduct 50% of her self employment tax on 1040 line 27. Underpayment of Estimated Tax
If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.



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Old 08-04-2014, 07:22 PM
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Quote:
Originally Posted by Wnhough View Post
As part of my regular work, I work from home for 4 hours/day. I have a separate room for my work with table, chair, laptop, printer, phone etc., Can we get some tax deductions for this as I and my wife are working from home? If answer is yes, What I need to do for this? Can I claim it for last year during next year tax filing?=======>> if you use a portion of your home for business, you may be able to take a home office deduction. As an employee you can only qualify for the home office deduction if your home is your principal place of business and it's a condition of your employment. As you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be for the convenience of your employer If it's merely for your convenience , then,you cannot deduct it. Home office deductions are a popular audit item for both IRS/ our state since the rules are so strict. You need documentation from your employer that there is no office space for you to work at. Your deduction would be fed through the 2% line of schedule A. That means you figure out the deduction, subtract 2% of your AGI and then add it to sch A. If you cannot itemize it does not make a difference. Employees are denied the deduction for the business portion of mortgage interest and property taxes, but can deduct both the business and non-business portion as a Schedule A personal itemized deduction.

2)For my wife's part time work, could we open a new home based business?====>Sure as a contractor as she receives a 1099 rahter than a W2.

She would be the only one person in that company. What type of company should we open? We would like to save our personal savings; not to be affected by any law suites or litigations. Sole Proprietorship or LLC?=======>>>>>>>>Either a sole ownership or a SMLLC; IN the case of SMLLC, the major appeal of an SMLLC for an individual business owner is Unlike sole proprietors, SMLLC owners have separation between their business assets and debts and their personal finances. This means that if the business is sued for injury or other damages, your personal assets are not normally at risk. Your personal assets are also not usually accessible for creditors when your business doesn't pay its debts.


How to file the taxes for home based business? Is it going to be separate tax filing or part of our joint tax filing=======>>>>>>>Your spouse as a sole owner, needs to file Sch C of 1040 aslongas the amoun ton SCh C line 29/31 is $400 or exceeds $400 also aslongas the amount on Sch SE line 2/ 3 is also $400 or exceeds $400 then she needs to pay self employment taxes. If you are filing as a sole proprietor , and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1K or more when you file your return.however, you do not have to pay estimated tax for the current year if you had no tax liability for the prior year; you were a U.S. citizen or resident for the whole year; Your prior tax year covered a 12 month period. She can deduct 50% of her self employment tax on 1040 line 27. Underpayment of Estimated Tax
If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.
Thank you for the detailed reply. Assume that I too work for part time in addition to my regular work. Should we start SMLLC or MMLLC?



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Old 08-04-2014, 10:03 PM
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Originally Posted by Sanjeev View Post
Thank you for the detailed reply. Assume that I too work for part time in addition to my regular work. Should we start SMLLC or MMLLC?
. Assume that I too work for part time in addition to my regular work. Should we start SMLLC or MMLLC?==================>>> I should say it is up to you/it depends; The answer to whether an LLC owned by a husband and wife are treated like a sole proprietorship or like a partnership depends in part on the state where the LLC is located. Generally, a business entity with two or more members is classified for federal tax purposes as either a corp or a partnership. That general rule applies equally even if the two members are husband and wife. Since the default rule for multi-members LLCs is that the LLC is treated as a partnership, an LLC composed solely of a husband and wife will be a partnership for tax purposes unless the members choose to have it elect to be treated as a corporation.There is one exception to the general rule, however. If the husband and wife are in a community property jurisdiction and the business meets three conditions set out by the IRS in tax lw, the entity will be treated as a "qualified entity." what I mean is that aslongas you live in one of the community pty states,then you can set up your biz as a QJV ,a special tax situation in which a husband and wife jointly running a business that is not a corporation may qualify to file as a sole proprietorship rather than a partnership. The IRS has determined that in the case of spouses owning a partnership, they do not need to file as a partnership on Form 1065, with individual K-1 forms.t each of the couple neds to file his/her own Sch C/SE and pay his/her own self employment taxes and deduct it on line 27 1040. In this case , they do not have to file complex form 1065/Sch K1s.To qualify as QJV, they should not set their biz as a SMLLC/ MMLLC. UNLESS you qualify asQJV, then you, in lieu of filing your return as MMLLC, you may hire your spouse as your EE(issue her a W2) and you , as a sole proprietoror as a SMLLC, may file Sch C/Sch SE as a sole proprietorship. If you do not want to operate your biz as a SP/a SMLLC, then your choice’d be a MMLLC as a partnership.
NOTE; I guess it is hard to say which one is better between SMLLC and MMLLC; the principal disadvantage of a MMLLC is that it must file a partnership tax return and comply with the sometimes complex rules of partnership taxation. A SMLLC, on the other hand, is disregarded for Federal (and most state) tax purposes. The member of an SMLLC simply reports the income and expenses of the LLC on his or her own Form 1040 on Sch C/SE as mentioned above.In addition to the complexity of partnership taxes and the need to file an extra return, in several states (Illinois is one), there are income taxes imposed on partnerships that are not imposed on individuals. If one spouse is an employee, it makes the tax situation a little less complicated. The owner-spouse can set up the business as a sole proprietorship or a single-member LLC with little paperwork involved. The employee spouse receives a paycheck, with federal income tax and FICA (Social Security/Medicare) tax withheld. The employee-spouse receives Social Security credit based on wages.

Income taxes will be based on the employee's salary and the profits of the business, if it is a pass-through business such as an LLC or partnership. If the company is a corporation, both spouses are employees, so I mean both husband ans wife can no be co- owners of a SMLLCUNLESS one of the couple needs to be an EE.then the other , as a sole owner, may set up the biz as SP or a SMLLC.



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