Tax Law (Questions About Taxes)/LLC question.
Hi there,my wife and I incorporated an Llc in the state of nj for a small online retail business in August of 2013. We avg. About 5-6k a month in sales. All of it goes back into web fees and reinvestment of product. We have not actually taken any Money out for personal gain. We have all receipts for inventory. We are currently not reinvesting so we can pay off debt and finally make profit. My question is, do we need to file business tax, do we need a cpa or is it to small to file or simple enough to use turbo tax. I also work on the books. We are clueless as to how to approach this. We also went to purchase a house, we need to show more income. Can we pay taxes for a certain amount that we never pocketed so to increase our income on paper?
"do we need to file business tax?" Yes, whether you pay any tax or not your business needs to memorialize your cash flow. Without a tax return the IRS could create their own and ignore all of your reasonable deductions.
"do we need a cpa?" No, you need to have provable records of your accounting to support the tax return.
"is it to small to file or simple enough to use turbo tax?" Most every tax preparer uses software programs to do tax returns. Turbo Tax is one such program. Intuit #the owner of Turbo tax# makes a separate product for tax preparers call pro series, and there are a number of other "professional" tax preparations software companies. Professional software is not "more right". The Pro versions usually have greater depth of forms available, and a user interface designed for the convenience of the Tax Preparer.
Turbo tax or tax cut or the many other end user oriented tax prep software packages, have all of the most common forms built in, but have developed a user interface that is more end user friendly.
What does that mean? Most people when confronted with an IRS form stare blankly at it, their eyes glaze over and they start mumbling incoherently to themselves, ultimately curling up in a ball and sucking their thumb.
So Turbo Tax overcame that by hiding the form. Instead of putting a form on the screen that is full of questions that have to be answered. It shows a blank screen with just one question. Once that is answered, then it asks another, then another, then another. The end user never sees the form until is is printed and the only thing needed is a signature.
Voila, the tax return is done.
Do you need tax software? no, does it make it easier, Yes, does the tax software have resources and information that may be informative, YES DEFINATELY. Is that a good reason to use tax software? Can't my tax preparer give me that same information? In theory, possibly, If you ask the right questions in the right way and they knew the answer. But they go to their tax software to get answers top tax questions.
Purchasing a house involves "qualifying to purchase", and, "being able to make the payments".
Your question has to do with qualifying. Paying taxes on money you never receive does not help in making the payment.
The mortgage company does not determine your qualifications from your tax return. they do it from your pay stubs. They may verify from the tax return.
This business is not your primary source of income. Standard mortgage industry practice says: Secondary source income #This LLC# has little influence on your qualification to borrow. So jacking the income from the LLC would not adjust your qualifying income. In their analysis, second jobs are never long lasting.
You may not know what you have to pay in taxes to get an extra dollar of income. Did you know that EVERY dollar of your income is going to be subject to Social Security and Medicare? 15.3% now you just have $0.84, your business is paying workers comp and unemployment, that might be just a couple of cents, now let's take out your federal income taxes, if your total family revenue is low, then it is only another 15 cents, if you have moderate income it's 25 cents, New Jersey 2-4 cents. So you only get to spend $0.52 to $0.58 of the dollar.
If you want to pay taxes on money you didn't even get. . . You will never be in a position to save a down payment. I'd work toward a bug down payment first.
There are a lot of non-conforming mortgage options out there, but they come with great risk.