1099 Tax question: Expenses

An LLC can file as an S corp. Under certain conditions.

From Smartasset.com:
What Are the Benefits of Being an LLC?
The LLC business entity has some appealing advantages over its alternatives. They include:

• Limiting liability: LLC owners have limited personal liability for debts owed by the business. Typically, liability is no more than the amount each invested in the business. Partnership owners and sole proprietors may be personally liable for all business debts.
• Avoiding double taxation: An LLC is basically a pass-through entity. Its income passes straight to the owners as self-employment income, avoiding corporate income tax.
• Minimizing paperwork and overhead: Compared to a regular corporation, an LLC has fewer record-keeping and meeting requirements.

Tax Treatment of LLC Income
When an LLC opts for an S corporation tax structure, it typically changes the way the IRS treats that LLC’s income.

When income from LLCs passes through to owners, they pay tax on it as self-employment income. The self-employment tax comes to 15.3%, with Social Security representing 12.4% and Medicare tax representing 2.9%.

As anyone who’s checked their pay stub knows, self-employment taxes are higher than Social Security and Medicare taxes paid by workers who aren’t self-employed. As a result, in 2022 employees withhold just 6.2% for Social Security and 1.45% for Medicare. That’s because employers pay another 6.2% for Social Security and 1.45% for Medicare without passing it onto employees. Self-employed people pay both halves.

There are two more key factors to consider here:

• Income from a corporation is treated as a dividend rather than earnings. That means dividend recipients don’t have to pay Social Security and Medicare taxes on that income.
• The owner of an S corporation can let some of their business profits pass through as earnings. Meanwhile, other profits pay out as dividends that are free of self-employment tax.

By having LLC treated as an S Corp for tax purposes, a business owner may save a considerable amount in tax payments.

How an LLC Being Taxed as an S Corp Works


Say you are sole member of an LLC that earns $100,000 in net income. All $100,000 will pass through to you as self-employment income. In addition to income taxes, you’ll owe self-employment tax of $15,300, or 15.3%.

If you have elected be taxed as an S corporation, you might have $50,000 pass through as earnings and $50,000 distributed as dividends. Then you’d owe just $7,650 in self-employment tax, for a tax savings of $7,650.

Another potential advantage of an S corporation is that the Tax Cuts and Jobs Act made certain pass-through businesses eligible for a 20% Qualified Business Income deduction. This can produce additional tax savings not available to C corporations.

These potential tax benefits are the main reason LLCs elect to be taxed as S corporations.

 

The whole post above is correct. The advantage of an LLC is it limits liability.

The rest of the advantages mentioned can be achieved by forming an S-Corp without paying whatever fees are required to call it an llc.

I guess it’s only a few dollars extra to set one up but I have yet to see an advantage of being a LLC over just being an S-Corp

 

Please explain the cost savings of forming an S-corp over an LLC.

 

Whatever the cost of forming an LLC.

 

There’s no cost to form an S-corp?

What are the regulatory and filing requirements of each?

 

An S corp is about 70 bucks more than an LLC if I recall correctly.

 

My guess would be no way that's okay to write off mileage or actual expenses (or depreciation) on a vehicle you don't actually own. If both the company and the driver tried to do that I'm guessing somebody would get skewered for it.

The largest write off for a 1099 guy driving a company truck would have to be the meal allowances. Other miscellaneous stuff would be shower fees or any unreimbursed tools or supplies needed to do the job. Parking fees would also apply. This is generally a bad deal for the driver and a great one for the company.

 

An S corp is a tax status, not a business structure. You can’t “form” an s-corp. To be taxed as an S-corp, you have to start with either an LLC or a C corp and make the S-corp election with the IRS. For most small businesses, you would want to start as an LLC and make the S election, not a C corp.

 

I was working for a 1099 company for 6 months. They had me doing illegal stuff and I quit. When filing taxes, find a good cpa with experience on 1099s. They're all over Craigslist. Get a local one that way you can drop off any documents that you may need to.
My cpa itemized everything including fuel, repairs, miles, food, cellphone bills, etc.
I made $30k and paid $0.
The company will be hearing from the IRS if they try anything fishy.
Just get an experienced CPA with at least 5 years of experience with 1099.