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Small Business Taxes - How To Reduce Your Taxes By Being Taxed As An "S" Corporation
Looking for an effective tax reduction strategy for your small business? This article explains how to reduce your taxes by choosing to be taxed as an S corporation. Question: What do all the following small business owners have in common? 1) C corporation shareholders; 2) sole proprietors; 3) partnership partners; and 4) limited liability company (LLC) owners who are being taxed like a sole proprietorship or a partnership. Answer: Each of these entity types has the potential to pay less tax by choosing to be taxed like an S corporation. C corporation owners face the dreaded double taxation of corporation profits. Any corporate profits are usually taxed twice. The corporation must pay its own corporate income tax on those profits. And if the corporation distributes those profits to the shareholders as dividends, those dividends get taxed a second time on the personal income tax returns of the individual shareholders. Ouch! Sole proprietors, partnership partners and LLC owners all face the dreaded self-employment (SE) tax on their business profits. And unlike an employee, they pay twice as much SE tax (15.3%) than their employee counterparts pay in payroll tax (7.65%). What are all these small business owners to do? One option is to choose to be taxed like an S corporation. An existing C corporation that switches to S corporation status can avoid the double taxation of corporate profits. This is possible because an S corporation typically doesn't pay any corporate income tax on profits. The profits are only taxed to the individual shareholders on their personal income tax return. End result: no double taxation. Sole proprietors, partners and LLC members can legally reduce SE tax by receiving reasonable employee compensation from the S corporation. If this compensation is less than the total business profit, the remaining profit legally avoids payroll tax, because only employee wage/salary is subject to payroll taxes. How do you "choose" to be taxed like an S corporation? This choice is made by filing Form 2553 with the IRS, Election by a Small Business Corporation. Think of this form as an application by an existing small business to be treated like an S corporation for tax purposes. Here's how it works for each entity type: C corporation. File form 2553. That's all there is to it. You don't have to shut down the existing corporation; nor do you have to form a new corporation. The existing corporation continues to exist, just like it did before, as a corporation in good standing of the state in which the corporation was formed. Limited liability company. Likewise, just file Form 2553. You don't have to shut down the LLC and/or form a new corporation. The original LLC remains intact for legal purposes. You simply submit Form 2553 in order to tell the IRS you want your business treated like an S corporation instead of a sole proprietorship or a partnership. Sole proprietors and partners. Before filing Form 2553, you must form a corporation or LLC. Once this new entity is set up, submit Form 2553. Important: There are specific rules regarding the timing of the Form 2553 filing, so be sure to read the instructions carefully or consult with your tax professional.
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New Tax Credit Website Draws A Lot Of Hits
The recently launched web site, federalhousingtaxcredit, that was developed for the newly signed tax credit law has brought over 100,000 visitors. This shows that there is a rather strong interest of first time home buyers wanting to take advantage of the temporary incentive. The $7,500 tax credit is available for all first time homebuyers who buy a home from April 2008 to July 2009. The tax credit was signed in hopes of encouraging potential first time homebuyers to take advantage of the surplus of available homes and buy now. Many potential first time homebuyers have hesitated as the economy continues to dip; however, now is a buyer's market and a great time to take advantage of the falling home prices.
News of the day
New Federal Loan Modification Program Saves American Citizen's Homes and Lowers Payments
The Federal loan modification program sure has seen its bad days. There are notes all over the internet criticizing the qualifications, complaining about using tax payer's money, and all the rest of it. There are critics who are actually paid to do this by the way, however that does not include all of them of course. There will be some sad stories attached to this program, but it's the same for any type of program. Some families in great need don't match all of the criteria, so they are left out. This is terribly unfortunate. However, we do have to remember the families that have gotten accepted and were made able to keep their homes because of it. In fact, when this is through and all 75 billion dollars accounted for, more than five million families will have been rescued granted they keep up with the new mortgage payments.
Debt consolidation

Scope of Investing in Real Estate and Land

Real estate includes landed property and such other possessions that are permanently and immovably attached to land like buildings. Investment is the process of purchasing assets in order to make profits by either selling these assets at a later date or by deriving other benefits like rent or dividend from the possession of these assets. Therefore real estate investments involve acquisition (unlike other economic or financial investments, real-estate is purchased), holding and sale of rights in real property with the expectation of using cash outflows for the potential of future cash inflows, and hence, generating a favorable rate of return on that investment. Benefits and Scope of Real Estate Investment In contrast to stock investments, which requires more actual investment of assets from the investor, heavy leverage is possible in a real estate investments. That is to say a real estate investor can use other people's money to amplify his rate of return and control a much larger investment than would be possible in stock and other types of investment. There are also other advantages of investing in real-estate. Returns on investment in real estate include cash flows after paying annual tax, equity build up through increase in the value of the asset and cash flow after sale of real-estate after tax on the sale is paid. Some other non monetary and intangible benefits are also associated with investing in real-estate. For example pride of ownership, the security that the investor controls ownership and diversifying the investment process are some of the benefits of this type. Real estate investment in productive during phases of urbanization, which more often than not is the result of industrialization. What happens in that the introduction of industries created the requirement for manpower, which triggers a wave of migration from rural areas and low tier towns. Naturally these people will require housing and the demand for houses fuels a demand for land, which in turn pushes land prices northwards. This is what is happening presently in many countries across the globe- India, China, Vietnam, Malaysia, Poland, The Baltic States, Brazil-to name a few. In most of these countries the aforementioned trend has been found to hold true. There are no hard and fast rules on how a person can become a successful real-estate investor. The first and foremost requirement is that of having a good feel of which way the wind is blowing. That is to say that the person should know which areas are likely to experience a land boom. This knowledge can be acquired by being in touch with real-estate professionals or even with policy makers, who know where a particular investment will materialize. Then he should have the appropriate skills to raise adequate financial resources for the purchases. Once this is done the person should have the insight as to when the sale or the lease has to be made. This would give him the best deal.


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