Author Topic: Is there an online forum for quick tax advice?  (Read 2757 times)

Pixelshot

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Is there an online forum for quick tax advice?
« on: December 19, 2013, 09:55:49 AM »
As much as I love the MMM community/forum, I do not want to abuse it. However, from time to time I have tax questions as an owner of a small business wanting to save every dollar. And as I grow my MMM stubble, I want to do as much of my own accounting as possible to save a few worker-dollars. I'm wondering if anyone has a resource they can recommend for very specific tax questions that may be similar in nature to this MMM forum (in knowledge and response time).

My question is where I make a specific Schedule C deduction for an employer contribution to an individual 401k plan. (see this forum thread: http://www.mrmoneymustache.com/forum/ask-a-mustachian/taxes-took-the-wind-out-of-my-mmm-sails-help/msg173745/#msg173745) I don't know if this is outside of the scope of the MMM forum but I would rather be safe than sorry.

Thanks!

huadpe

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Re: Is there an online forum for quick tax advice?
« Reply #1 on: December 19, 2013, 02:31:46 PM »
As much as I love the MMM community/forum, I do not want to abuse it. However, from time to time I have tax questions as an owner of a small business wanting to save every dollar. And as I grow my MMM stubble, I want to do as much of my own accounting as possible to save a few worker-dollars. I'm wondering if anyone has a resource they can recommend for very specific tax questions that may be similar in nature to this MMM forum (in knowledge and response time).

My question is where I make a specific Schedule C deduction for an employer contribution to an individual 401k plan. (see this forum thread: http://www.mrmoneymustache.com/forum/ask-a-mustachian/taxes-took-the-wind-out-of-my-mmm-sails-help/msg173745/#msg173745) I don't know if this is outside of the scope of the MMM forum but I would rather be safe than sorry.

Thanks!

In answer to your question, you take the deduction for your own 401(k) on your 1040 on the line for: Self-employed SEP, SIMPLE, and qualified plans (2012 line 28).

The schedule C deduction is for contributions to plans other than your own, which are business expenses and would therefore exempt you from self-employment tax on that money.  The money for your own plan is not a business expense, and is only deductible from income tax, not SE tax.  It is an "above the line" deduction that reduces your adjusted gross income though, and doesn't require filing a schedule A or giving up your standard deduction.

Pixelshot

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Re: Is there an online forum for quick tax advice?
« Reply #2 on: December 19, 2013, 07:11:19 PM »
In answer to your question, you take the deduction for your own 401(k) on your 1040 on the line for: Self-employed SEP, SIMPLE, and qualified plans (2012 line 28).

The schedule C deduction is for contributions to plans other than your own, which are business expenses and would therefore exempt you from self-employment tax on that money.  The money for your own plan is not a business expense, and is only deductible from income tax, not SE tax.  It is an "above the line" deduction that reduces your adjusted gross income though, and doesn't require filing a schedule A or giving up your standard deduction.

Thanks huadpe. I think this is the exact information I'm looking for. However, I'm confused about one item. When you say "plans other than your own" do you mean plans where I am not the ultimate owner of that money? I am under the impression that my business can donate to an individual 401k plan (to me from the business) which was set up under the name of my freelance LLC business (even though I am the only name on the 401k plan). And I can also make personal contributions to my own individual 401k plan (ultimately, the same plan). If the business puts money into the 401k account under the business name, where does THAT money show up on my tax forms? I see that my own personal contributions can be deducted on line 28 and is therefore deductible from income tax (but not SE tax), but what about the contributions made by the business? Wouldn't that be a legitimate business expense? If so, wouldn't it be shown on the Schedule C somewhere?

Huge thanks for your help.






huadpe

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Re: Is there an online forum for quick tax advice?
« Reply #3 on: December 19, 2013, 07:40:02 PM »
In answer to your question, you take the deduction for your own 401(k) on your 1040 on the line for: Self-employed SEP, SIMPLE, and qualified plans (2012 line 28).

The schedule C deduction is for contributions to plans other than your own, which are business expenses and would therefore exempt you from self-employment tax on that money.  The money for your own plan is not a business expense, and is only deductible from income tax, not SE tax.  It is an "above the line" deduction that reduces your adjusted gross income though, and doesn't require filing a schedule A or giving up your standard deduction.

Thanks huadpe. I think this is the exact information I'm looking for. However, I'm confused about one item. When you say "plans other than your own" do you mean plans where I am not the ultimate owner of that money? I am under the impression that my business can donate to an individual 401k plan (to me from the business) which was set up under the name of my freelance LLC business (even though I am the only name on the 401k plan). And I can also make personal contributions to my own individual 401k plan (ultimately, the same plan). If the business puts money into the 401k account under the business name, where does THAT money show up on my tax forms? I see that my own personal contributions can be deducted on line 28 and is therefore deductible from income tax (but not SE tax), but what about the contributions made by the business? Wouldn't that be a legitimate business expense? If so, wouldn't it be shown on the Schedule C somewhere?

Huge thanks for your help.

The only way you don't pay SE tax on it is if the business is not a pass through.  If you're filing the business income on a schedule C, then it's a pass through and you have to pay SE tax on the money.  If you were using a C-corp then it wouldn't, but you'd have to pay corporate income tax so it's not a benefit to do that.

If you end up as the ultimate owner of the money, you're going to pay SE tax on it.  You can only take off contributions to the plans of other employees on a schedule C.

Pixelshot

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Re: Is there an online forum for quick tax advice?
« Reply #4 on: December 20, 2013, 03:39:51 AM »
Thank you huadpe for your clear explanation. It is much appreciated. So it sounds like in my situation there is no advantage for the business to making any contributions (as opposed to a personal contribution), except to raise the limit of the amount I can donate. In the end it would have the same effect as a personal contribution to the 401k - reduce my federal taxable income on the 1040, but not the SE tax.

kkbmustang

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Re: Is there an online forum for quick tax advice?
« Reply #5 on: December 20, 2013, 07:01:50 PM »
You can also go to the IRS website. There is a search function and tons of resources. Www.irs.gov.