Tax Inquiry: I am an writer who has pulled down over $250k from major publishing companies over the past 18 months. Only this money has been deposited in a company bank account; a company which pays every expense having to do with publishing my work and operating the same. I have never received a pay check or salary from the company (an LLC) and have been struggling to get ahead (out of the black) over the past 3 years. Being a writer isn't all it's cut out to be! Meanwhile, I also don't have a personal bank account, nor do I have any assets to speak of, unless you count my written work.
My question is: should I be filing taxes?
2007-04-12 12:44:37 · 5 answers · asked by Rel 1 in Business & Finance ➔ Taxes ➔ United States
You have to file yearly regardless, it lets the IRS know you're trying to do it right. Even if you have to show a loss, which a large percentage of companies/businesses do. If you ignore filing, you're inviting an audit if anyone's 1099'd you or claimed you for any reason, and that's a pain you don't want.
2007-04-12 12:49:04 · answer #1 · answered by pancakes & hyrup 6 · 0⤊ 0⤋
You as an individual need to file a tax return - you are living on some kind of income - it needs to be reported. The LLC is a separate entity and that too needs to file a tax return (so if this LLC has been set up by you as a way to screen your income you will be responsible for reporting there too).
And being in the red is having a loss - being in the black is turning a profit. Perhaps you should take a break from writing and read a few finance books - it sounds like you need to take control of them for yourself. $250K over 3 years makes your income about $40 per hour at a full time job. That should be enough to be in the black.
2007-04-12 12:59:07 · answer #2 · answered by justwondering 6 · 0⤊ 0⤋
Who are the members of the LLC? An LLC is a pass-through entity, i.e. if you are the only member, the LLC is just you and therefore YOU earned $250k which YOU have to report as income whether or not it was actually distributed to you. On the upside, you as the LLC also get all of the deductions for your business expenses, even if you had losses you still have to file an individual income tax.
The LLC also has to file an informational return. If there are other members of the LLC, the tax liability will depend on the LLC agreement and how the members have agreed to share the profits/losses. You may want to ask the attorney who drafted your LLC agreement.
2007-04-12 17:52:26 · answer #3 · answered by Anonymous · 0⤊ 0⤋
You have $250k in income, so of course you must file! The IRS only knows about the money you've been paid, not your business expenses. If you don't file, they'll be looking for tax on $250k even if your net income is currently $0.
2007-04-12 13:20:46 · answer #4 · answered by Bostonian In MO 7 · 1⤊ 0⤋
Sorry, I never took an H&R BLOCKHEAD CLASS. You may want to ask a tax professional. At the very least, they may be able to get you a few tax write-offs which may slightly improve your situation. Oh, and being a writer cannot be all that bad. I think you may just need to find your niche.
2007-04-12 12:49:46 · answer #5 · answered by Heero Yui 3 · 0⤊ 2⤋