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Since taxes for most of us are done for last year, I got to thinking about becoming an LLC again when I file my poker taxes for the next year. I currently am a part-owner in a construction LLC that does mostly federal contracting. The actual LLC creation was relatively simple, although I was present and paying attention to only parts of it. Deduction-wise vs filing as a pro there have to be significant advantages.
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I just incorporated myself. I decided on an S-corp instead of an LLC, but I believe they are exactly the same when there's a single owner.
It's my understanding that the deductions are the same as filing as a self-employed pro. The only three differences I can find are that you are considered differently for audit purposes, you can take a portion of your income as dividends instead of ordinary income, and you can put slightly more into a SEP IRA (per dollar of ordinary income).
Apparently the IRS currently cracks down pretty hard on people trying to give themselves a salary of 0 and avoiding _all_ of the self-employment taxes. So, now we enter a gray area of the IRS tax codes:
single owner s-corp salary discussion
I plan to give myself a salary of around 40k, and take whatever else I earn as dividends (hopefully it's a positive number). I am at peace with 40k being a fair salary for the 25 hours a week or so that I actually play poker.
I posted asking about this in the legislation forum a couple months ago. People argued about whether a salary less than your total winnings was "reasonable" or not, but there is no hard evidence. No one admitted to having filed as a business.
cheers,
-jj
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A few months ago a guy in here asked a similar question, and if I remember correctly a CPA-type said it was improbable that the IRS would allow it, or it would be an audit-magnet for the business deductions you'd naturally try to take.
I don't remember the exact details of the reasoning why it would be a good or bad idea.
Anybody?
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