Feb. 24, 2025

S-Corp the Good Bad & the Ugly

S-Corp the Good Bad & the Ugly

S-Corp the Good Bad & the Ugly. Why choose and S-corp what are the complicatiosn of S-Corps. Waht are the pro and cons of choosing S-Corp status, S-corp how to make the election. Trucker per diem rate change how to figure Per diems for Trucker...

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Season 2

S-Corp the Good Bad & the Ugly. Why choose and S-corp what are the complicatiosn of S-Corps. Waht are the pro and cons of choosing S-Corp status, S-corp how to make the election. Trucker per diem rate change how to figure Per diems for Trucker Owner Operators OTR Over the Road Trucker Per diems

Tax Talk 4 U is broadcast live Mondays at 10AM ET and Music on W4CY Radio (www.w4cy.com) part of Talk 4 Radio (www.talk4radio.com) on the Talk 4 Media Network (www.talk4media.com). Tax Talk 4 U is viewed on Talk 4 TV (www.talk4tv.com).

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WEBVTT

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The topics and opinions express in the following show are

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solely those of the hosts and their guests and not

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those of W FOURCY Radio. It's employees are affiliates. We

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make no recommendations or endorsements for radio show programs, services,

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or products mentioned on air or on our web. No

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liability explicitor implies shall be extended to W FOURCY Radio

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or its employees are affiliates. Any questions or comments should

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be directed to those show hosts. Thank you for choosing

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W FOURCY Radio.

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Barry G.

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Fowler EA brings you tax talk for you right here

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on W four CY Radio and talk for TV. As

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an enrolled agent and a national leader in tax resolution

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as well as Trucker bookkeeping and tax planning. With over

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thirty years of experience, Barry will break down taxes, bookkeeping,

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tax planning, and tax relief for individuals and businesses just

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like you. So let's have some tax talk for you

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with your hosts.

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Barry G.

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Foul Hey, welcome man, Good morning in America. You know

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it's always great to be here. We start out Monday,

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Mondays here at ten o'cloud Eastern time, getting to talk about,

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you know, taxes, bookkeeping, tax relief, things that are important

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to everybody. This this show, we're going to talk about escorps,

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the good, the bad, and the ugly. First, we had

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a lot of questions about per diems, especially for diams

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for truck drivers, and this becomes a very hot topic

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for truckers out there. And when I'm talking at O

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i D a Truck to Success Seminar, we get into

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talking about trucker per diems. And sometimes when you're doing

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your taxes with somebody that doesn't know truckers, they don't

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know or don't think about per diems for you as

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a truck driver. Now, if you're a W two driver,

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you know it's really up to the company that you're

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working for if they're going to pay you per diems.

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The bad side if company is paying your per diems

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and on your paycheck is the per diems are not taxable,

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so they're not included in your income. So if you

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ever go to get loans and stuff, your income will

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look a lot lower because they're paying your per diems.

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Usually offsets what they're paying you with taxable income. But

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if you're an over the road driver, owner operator, per

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deems are going to be for you, and it's per

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publication irs for sixty three travel, entertainment, gift and car expenses.

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It allows for standard meal and incidental expense deduction for

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you as an owner operator. Now, these per diems did

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have a rate change, and so for January through September

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you were allowed to take a deduction of sixty nine

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dollars per day. Now that's sixty nine dollars for the

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middle days, but you get half of that for the

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first day and half for the last day. And then

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October first it changed to eighty dollars per day. Again,

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you get half for the first day, half for the

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last day, but all the days in between you would

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get the eighty. So you've got to make sure you're

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getting this deduction and you're getting it right. So that

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fordeem change again was October first, So you're going to

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use that lower rate of sixty nine through September thirtieth,

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and then the eighty dollars rate after October through December

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and currently through twenty twenty twenty five. Now, how do

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you determine. You got to look at days on the road,

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days you're away from home, when's the first day you

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left on the trip, when's the last day you came

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back and the days in between, and so you'll have

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to count that. You can use your eled to come

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up with those numbers. You can use your logbook, you

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can use a calendar. You got to keep track of it.

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You've got to have the evidence and you've got to

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have the proof that you're out there and you're on

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the road and away from home. Now, to qualify, IRS

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established specific criteria for transportation workers to claim the standard

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meal incidental expenses. Of course, you've got to be employed

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in the transportation industry or being an owner operator in

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the transportation industry. Over the road driver, you're not doing

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local deliveries because you're not going to be away from home.

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You're going to return home. But of course, Transportation Industry

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IRIS says, your job must be directly involved moving goods

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or people by truck, train, bus, ship, airplane, bar so

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at least they lay down, hey, every every time every

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way of transporting goods or people. IRS qualifications This is

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kind of the big one. You must have a tax

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home and you're required to encour expenses to maintain the

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home while you're on the road. So if you don't

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have a tax home, you consider living in a tax turtle.

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You're taking your home with you, just like a turtle

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does in his shell. But if you have a home

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that you actually maintain and pay for the expenses, you

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know a husband and wife, and your wife could be

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maintaining the home and paying part of the expenses and everything,

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that's fine, but you've got to have something you're maintaining

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for your home. Now, these per diems are only eighty

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percent deductible for twenty twenty four twenty twenty five. You

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have to be able to track your travel, so don't

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think you can just guesstimate. Yeah, I've had clients, guests

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made it quite a bit, and so we're asking, hey,

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phil this form, how many nights have you been on

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the road away from home? And when they report three

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hundred and eighty five nights, man, there's something wrong. There's

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only three hundred and sixty five days in a year,

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So come on, be realistic. If you're on the road

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three hundred and sixty five days in a year, you

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probably never went home and you should be making a

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ton of money. But that being said, you know you

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got to make sure you're counting those days because I

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can almost guarantee that IRS is going to audit. If

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you're reporting three hundred and sixty five days that you're

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going to be on the road, you're going to say

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you never went home. You don't have a tax home,

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you never had a place where you laid your head

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down besides the truck. So you know, kind of remember

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that out there again. W two employees, this is not

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a deduction for you. Yes years ago before the Trump tax,

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go used to file Form twenty one oh six and

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take these pretty ms and reduce your W two salary down.

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But we can't do that anymore. Some employer again will

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pay you these per diems, but it's something you've got

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to talk to your employer about before you get hired.

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And the pre diem is not going to be higher

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than the federal per diem rate. You still, as an employee,

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are going to have to prove time, dates, places, and

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other business purposes. So you're going to have some of

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the same requirements out there, but your employer is going

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to be paying that and usually going to reduce your

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gross wages, which reduces what's can pay for Social Security

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and Medicare tax, which is going to reduce future Social

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Security and Medicare benefits. It also reduces what people see

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when you go to get loans because it reduces your

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pay and it's the same effect that it has for

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an on our operator out there as a sole proprietorship,

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it's reducing your income down, and as scorbs LLCs, it's

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going to be reducing that income down. So when you

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go to get a loan, sometimes the income doesn't seem

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as high as it is. You can have to explain

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to them that you're able to take these per diems

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for travel meals and incidental expenses and it's usually higher

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than the actual out of pocket, So you know, keep

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that in mind as you're possibly going through loans and

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trying to figure out, hey, what do I need to

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do when I'm taking you know, per diems that are

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out there. So the real fun part is is, you know,

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we get to talk about these things as at the

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Owner Operators Independent Drivers Association o i das Truck to

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Success Seminar. So if you're a member of o I

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DA or maybe your WQ driver and you're looking to

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get out to you know, in our operator and be

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out there on your own Truck to Success seminars are a

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really good seminar. The o IDA Foundation puts on usual

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in October every year. They haven't given the schedule yet

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for this year's, but it's a great seminar, great opportunity

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when I'm out there to be able to sit down

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and talk with truckers and here a little bit more

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firsthand what's happening out there on the road, what things

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are impacting owner operators out there. Besides talking to the

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clients at Trucker Tax Tools, you know, we get a

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great insight of what's happening. Now. Hey, you may go

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to that seminar and decide, hey, being an owner operator

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isn't right for me and I just want to stay

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W two driver. Hey, that's great too. It's valuable learn

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and that's something that you would learn in that seminar

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as well, because of everything that OIDA staff goes through

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from getting your own authority, least purchase insurance, medical requirements,

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all those fun things that you get to do as

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a owner operator. So if you're looking for some help

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with your bookkeeping and your taxes and for dems, go

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to Trucker tax tools dot com. We have solutions built

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just for you. We have a great new base plan

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that starts at just twenty five dollars a week for bookkeeping. Uh,

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you're not going to beat that anywhere, So go to

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Trucker tax tools dot com or give us a call

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at eight seven seven nine sixty six two four seven

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seven again eight seven seven nine sixty six two for

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seven seven give us a call. Let us talk about

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your bookkeeping. Let's talk about your taxes. Let's talk about

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your per diems and how we can go about, you know,

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saving you more money on your taxes as being an

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owner operator. Hey, we promised today we were talking about escorps,

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the good, the bad, the ugly of being an escort,

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and then we're gonna do that right after this.

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We have only scratched the surface of today's show. Please

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stand by as Barry G. Fowler will be right back

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with tax talk for you. If you own the IRS

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or are going through an IRS audit, don't go at

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it alone. Call Taxation Solutions Tax Relief at eight eight

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eight nine three zero one zero one six. We are

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your solution for IRS debts, audits, back taxes, garnishments, leans

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and levees. Whether you're an individual or business, you need

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a solution and a strong, aggressive tax resolution.

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Don't let the IRS walk all over you.

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Stop the IRS now call eight eight eight nine three

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zero one zero one six or go to Taxationsolutions dot

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net now for a free no obligation consultation. Let's get

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back to tax Stalk for you with war tax Talk

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once again.

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Here's your host, Barry G. Faller.

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You know, welcome back. You know, this year is just

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kind of moving fast. Here we are the last Monday

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of February and just can't believe that we're this far

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into the year. And you know, we're talking about es

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corps and the good, the bad, the ugly of being

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an escorp and making the election for escorp. And speaking

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of making the election for escorp, you only have until

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March fifteenth to make the election to be taxed as

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an escort for twenty twenty five. So sometimes this is

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really critical to make this decision. Should I be, shouldn't

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I be? What are the reasons? What are the pros

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and what are the cons? What is an escorp? We

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don't know, that's what people say.

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We don't know.

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Well, ESCORP is a designation by the US tax Code

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for small businesses. So whether you're an LLC, whether you're

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an inc. Whether you're a LLP, you can make the

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election to be taxed as an escort. Now, this isn't

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an election that you make when you set up your

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company with your Secretary of State in your state. So

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when you go to the secretary of State, you decide, hey,

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I'm going to be a limited liability company or I'm

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going to be an inc. Or I'm going to be

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a limited liability partnership. And then once you get that

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designation and you get your employer identification number, then you

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would have to go back to the IRS and make

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the election through the US Department of Treasury to be

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taxed as a escort. There's rules and regulations. You know,

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one of the things I hate the most. And you know,

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a lot of times we service the trucking industry at

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truck or tax Tools, but servicing many other industr and

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companies around the nation with tax relief. We see where

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people have had let's say, truck stop bookkeeping or coffee

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shop bookkeeping or taxes. And all that means is that

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you're at a coffee shop, you're at a truck stop,

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and somebody starts telling you that, Hey, I'm an escort

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and I'm saving a bunch of money, or hey, I

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became an I'll see and saving a bunch of money.

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So you jump out there and just do things, and

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you don't get advice. Get advice, you know, whether you're

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here at tax Talk for You. By the way, subscribe

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at tax Talk for you dot com so you never

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miss an episode. But when you're taking advice from somebody

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at the fuel pump, they don't always get it right.

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So you know, when you form your LLC and thing,

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somebody at the truck stop said, hey, you can do

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this because you're can save you money on your taxes,

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and you just go and do it. But you have

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no clue what you're doing, and they tell you things

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that aren't right about this. So get advice. And that's

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why you're here. Get advice. So again, es court is

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it is a designation by the US Tax Code for

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small businesses. Again, you got to make the election. So

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when you see INC or LC at the end of

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the business name is it's not for show. It's a corporation.

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It signifies that a business is essentially separate entity from

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the owners, separate from you. So what's the right way

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to structure your business? Go back and listen to one

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of the other podcasts to the tax talk for you

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and you can hear all the difference between the LLC,

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escort LLP, the different types of entities. But the main

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purpose at the end of the day sometimes is to

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limit your liability. Sometimes it's putting the structure together to

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limit your taxes. So choosing that structure and then choosing

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how to be taxed, so choosing whether I should be

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taxed as an es court or as a single member

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LLC on Schedule C or an INC or tax decisions.

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So if your business is an LLC or an INC,

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you typically enjoy that limited liability, which means the company,

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not the people who own it, the shareholders, partners or

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investors are not going to be held legally liable for

266
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the debts of the company unless you sign as a

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co signer, which a lot of times you got to

268
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do it To'll tell you consults an attorney for more

269
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information on liability and liability protection within your corporation. How

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or you know, if you're an owner operator and you're

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out there driving and you have an escort orate an LLC,

272
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and you're the driver and something happens, you're the one

273
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getting sued anyway because you were behind the wheel. Just

274
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the same as if you have drivers driver for you,

275
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you'll be protected if they do something, but they may

276
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not be They will not be protected because they got

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into the accident they were behind the wheel. So there's

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a couple of crucial factors to keep in mind for escort.

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Escort status has limits and requirements on who can own

280
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your business. Second, payroll, of course, paying employees. As an employee,

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you're required to pay Medicare, Social Security taxes, and on

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all the wages that you pay. However, this includes wages

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you pay yourself. And the i RS requires and escope

284
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s Corp Owner be compensated for the work they do

285
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so and then they have medical insurance guidelines as well too.

286
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You've got to navigate in this process as well. And

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you've got to have a reasonable wage, meaning you can't

288
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just pay yourself, you know, let's say ten thousand dollars

289
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to be the CFO of this business or to be

290
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the truck driver. This business has got to be reasonable.

291
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What are you going to pay somebody else to do

292
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the jobs that you do? And the IRS is going

293
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to look at that if you don't pay yourself awage.

294
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But you work in the business. Guess what the IRS

295
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is looking for that, So you've got to have that

296
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out there as well. So those are the two hurdles

297
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you've got to get through. So IRS rules of ownership,

298
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so the IRS has fairly strict rules and who can

299
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hold ownership in escort per the IRS. The rules for

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electing a status. You've got to meet these requirements, and

301
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a lot of some of them are pretty easy. You

302
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can't have more than one hundred shareholders. You can only

303
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issue one class of stock. Your investors can be individuals,

304
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as well as certain trusts and estates. According to the IRS,

305
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you and your spouse can be considered one shareholder court

306
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and the same goes for members of family and their estates.

307
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You can't have entities such as partnerships or corporations as

308
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an investor. So if somebody else is running an LLC

309
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and wants to own the shares through the i'll see,

310
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you cannot elect es corp status. You can also not

311
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have a non resident alien as a shareholder. According to

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the Agency, a person can be considered a resident alien

313
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if he or she is not a permanent resident or

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you a citizen, as long as the individual has been

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in the United States for at least thirty one days

316
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in the current year one eighty three days over the

317
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last three years, and you can actually go to the

318
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IRS and get the substantial presence test to see if

319
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ace those certain owners as a non resident alien would qualify.

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You can go back and look at the instructions for

321
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Form twenty five point fifty three, which is the form

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you're going to have to file to choose your s

323
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corp status.

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So you know, you got to make.

325
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Sure that you're filing the right paperwork, make sure you

326
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meet the deadline. It's two and a half months from

327
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either one you start your business or two and a

328
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half months into the current count or a year, so

329
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that would be March fifteen, So you're coming up on

330
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a quick deadline to make an election for escort status

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for twenty twenty five if you've been operating, you know,

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in twenty twenty four or before. So you've got to

333
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really sit down and do an analysis of whether or

334
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not escort is going to save you money on taxes

335
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or if it's going to benefit you in any way,

336
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and get a good tax repayer somebody that's going to

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be able to walk through and go through this analysis

338
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for you, and if you're an owner operator, you give

339
00:20:42.519 --> 00:20:44.640
us a call that eight seven seven nine ninety six

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00:20:44.759 --> 00:20:46.880
two four seven seven, or go to truck or tax

341
00:20:46.960 --> 00:20:50.480
tools dot com set up a free consultation when we

342
00:20:50.519 --> 00:20:52.720
can kind of talk about what we do, how we

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can help you in some of the analysis that we

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go through as well. And so you know, these are

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the kind of things that you've got to kind of

346
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talk about, look at and analyze before making a rash decision.

347
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Is do I want to be an escort? Do I

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just want to be a single member I'll see report

349
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on schedule see Or do I want to be just

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incorporated and stay as a inc and get tax as

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a corporate corporate entity itself and file its own taxes

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and pay its own taxes as well out there? So

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what are the pros and cons of choosing es corp status?

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And that's a great thing that we should talk about

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right after this break.

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We have only scratched the surface of today's show. Please

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00:21:46.240 --> 00:21:49.400
stand by as Barry Chief Thuer will be right back

358
00:21:49.599 --> 00:21:55.440
with tax talk for you. As an owner operator, you

359
00:21:55.680 --> 00:21:59.079
already spend too much time away from your family. Truck

360
00:21:59.160 --> 00:22:02.160
or tax tools handles all your bookkeeping in taxes.

361
00:22:02.240 --> 00:22:04.759
No matter what level trucker you are, life on.

362
00:22:04.799 --> 00:22:07.920
The road can be taxing, but that doesn't mean that

363
00:22:08.039 --> 00:22:11.880
your wallet or time with your family should suffer. Trucker

364
00:22:12.000 --> 00:22:14.599
Tax Tools makes your life run smoothly.

365
00:22:15.160 --> 00:22:16.839
Go to Trucker tax Tools.

366
00:22:16.559 --> 00:22:19.039
Dot com for a free guide that will give you

367
00:22:19.240 --> 00:22:23.400
the tools to never worry about your taxes again. Call

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00:22:23.599 --> 00:22:27.759
Trucker Tax Tools eight seven seven nine sixty six two

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00:22:27.960 --> 00:22:31.920
four seven seven or go to Trucker tax Tools dot.

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00:22:31.839 --> 00:22:35.039
Com now and let the experts keep you trucking.

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Let's get back to tax stock for you with war

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tax Stock once again.

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Here's your host, Barry G.

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Fallon ROSENCNS. You know. That's sometimes you know, and you're

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sitting down talking to your parents and you're trying to

376
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make a decision. They tell you to take a piece

377
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of paper and write down two columns. You know, pro

378
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of doing this and cons of doing this? Is it

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worth doing? As kind of what we do? You know

380
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as well? Pros cons? What are the numbers? Let's run

381
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the numbers as well, you know, so let's take a

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look at kind of the list of the pros and

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cons and then we'll go through them. So if I'm

384
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listing down, you know, pros of being an escort or

385
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escorp status as opposed to being a sole proprietorship, limited liability,

386
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potential of lower Social Security tax, potential of lower Medicare tax,

387
00:23:33.799 --> 00:23:37.839
pass through status. And we'll go through this here in

388
00:23:37.920 --> 00:23:41.960
a little bit each one of these things, additional possible

389
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deductions and benefit programs that are out there, What are

390
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the cons administrative complexity, restrictions on the shareholders and types

391
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additional tax return that you're going to have to file,

392
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and equal distribution amongst all shareholders or partners, and we'll

393
00:24:04.640 --> 00:24:06.920
go through that as well. Some of these things get

394
00:24:07.079 --> 00:24:13.200
violated when you're running your business when you have shared

395
00:24:13.200 --> 00:24:16.519
a lot of shareholders that are out there. So for

396
00:24:16.640 --> 00:24:21.519
most business owners owner operators, you know, looking at escort status,

397
00:24:21.640 --> 00:24:24.200
the lower Social Security and Medicare tax and the pass

398
00:24:24.240 --> 00:24:28.440
through status is what provides the greatest benefits. So you

399
00:24:28.480 --> 00:24:30.319
know what is the pass through status? So if you

400
00:24:30.359 --> 00:24:36.480
structure your business as escort, you will pay taxes federal

401
00:24:36.559 --> 00:24:39.480
taxes and state taxes only on the money you earn

402
00:24:39.559 --> 00:24:43.640
from your business, which is recorded as personal income and

403
00:24:44.599 --> 00:24:48.079
the business itself isn't taxed. So if you were a

404
00:24:48.480 --> 00:24:52.240
eleven twenty corporation, you would have corporate tax and then

405
00:24:52.319 --> 00:24:55.680
the corporation pays the tax, and then you get dividends

406
00:24:55.839 --> 00:24:59.119
like you would get from any major corporation that's out there,

407
00:24:59.519 --> 00:25:02.200
and then you taxed on the dividends. You have double taxation,

408
00:25:02.720 --> 00:25:07.279
whereas an escorp just passes it through to you and

409
00:25:07.640 --> 00:25:11.960
the escorp itself through the form eleven twenty S pays

410
00:25:12.079 --> 00:25:16.519
no federal taxes and then provides each of the shareholders

411
00:25:17.079 --> 00:25:22.960
the form K one to report on Schedule E for

412
00:25:23.160 --> 00:25:27.680
your share of the income from the escorp. Now that

413
00:25:27.759 --> 00:25:31.480
doesn't include your W two wages and your reasonable salary,

414
00:25:33.000 --> 00:25:37.119
now where lower Social Security and Medicare tax comes in.

415
00:25:37.839 --> 00:25:41.839
So the advantage of an escorp over an unincorporated business

416
00:25:42.000 --> 00:25:45.720
or a single member LLC reporting on Schedule C is

417
00:25:45.839 --> 00:25:50.359
that the owners of that unincorporated business are personally responsible

418
00:25:50.400 --> 00:25:55.000
for paying Social Security and Medicare taxes collectively known as

419
00:25:55.119 --> 00:26:00.519
self employment taxes on all net earnings from the business,

420
00:26:00.799 --> 00:26:05.160
whereas s corps, who are also employees, being paid that

421
00:26:05.319 --> 00:26:11.039
reasonable salary taxes is only based on your compensation. So

422
00:26:11.640 --> 00:26:14.359
here's where we use an example. We're going to use

423
00:26:14.440 --> 00:26:16.759
some relatively big round numbers.

424
00:26:16.759 --> 00:26:16.920
Here.

425
00:26:17.400 --> 00:26:21.440
Your business makes one hundred thousand dollars and you are

426
00:26:21.559 --> 00:26:26.200
unincorporated or a single member LLC. You get down to

427
00:26:26.279 --> 00:26:29.559
the bottom line of your schedule see and it reports

428
00:26:29.599 --> 00:26:33.279
one hundred thousand dollars of net income. You are immediately

429
00:26:33.480 --> 00:26:38.079
taxed fifteen point three percent on that for Social Security

430
00:26:38.400 --> 00:26:43.359
and Medicare taxes. Fifteen thousand, three hundred. That's the tax

431
00:26:43.400 --> 00:26:45.400
you're going to pay when you net one hundred thousand

432
00:26:45.400 --> 00:26:48.640
dollars being self employed, whether you're an owner operator, whether

433
00:26:48.799 --> 00:26:51.920
you are in small business, whatever it is, that's the

434
00:26:51.960 --> 00:26:54.519
self employment tax you're going to pay. And then you

435
00:26:54.640 --> 00:26:59.599
pay federal income tax that one hundred thousand less half

436
00:26:59.680 --> 00:27:02.279
of security of Medicare. So you're going to pay your

437
00:27:02.319 --> 00:27:07.400
federal income tax on basically, you know, ninety three thousand

438
00:27:07.680 --> 00:27:11.240
some odd dollars. Now, if you were an escort, and

439
00:27:11.359 --> 00:27:14.319
let's just say we could prove that your reasonable salary

440
00:27:14.359 --> 00:27:18.519
is fifty thousand, so you would be taxed on your

441
00:27:18.599 --> 00:27:24.079
reasonable wages of fifty thousand, basically the employer side and

442
00:27:24.400 --> 00:27:26.920
the employee side, which comes out to about fifteen point

443
00:27:26.920 --> 00:27:29.720
three percent. So you're going to get taxed roughly seven

444
00:27:30.119 --> 00:27:34.200
six hundred and fifty dollars for those same Social Security

445
00:27:34.240 --> 00:27:37.599
and Medicare taxes. But you're going to save the other

446
00:27:37.799 --> 00:27:41.440
other seven thousand, six hundred and fifty dollars because you're

447
00:27:41.519 --> 00:27:45.480
not paying that tax. You're paying the tax only on

448
00:27:46.359 --> 00:27:50.559
the reasonable wages. Now, the other fifty thousand comes through

449
00:27:50.799 --> 00:27:55.519
to your personal tax return and is subject to federal

450
00:27:55.640 --> 00:27:58.640
income tax as well as your W two wages were.

451
00:27:59.039 --> 00:28:03.079
Now we can structure you're withholdings for federal and state

452
00:28:03.200 --> 00:28:05.799
taxes if you have it applied to come out of

453
00:28:05.920 --> 00:28:08.279
your W two wages, so you're not having to make

454
00:28:08.519 --> 00:28:12.079
estimated tax payments. So there's some advantages that you can

455
00:28:12.160 --> 00:28:16.559
play on this as well. So those are kind of

456
00:28:16.640 --> 00:28:19.680
things that numbers you've got to run through and make

457
00:28:19.759 --> 00:28:22.200
this election. Now, you may have a lot of depreciation,

458
00:28:22.359 --> 00:28:25.480
so it may not be worth making this election that

459
00:28:25.880 --> 00:28:29.279
first year or the second year, maybe three years down

460
00:28:29.319 --> 00:28:32.279
the road. Something you've got to look at and decide, hey,

461
00:28:32.359 --> 00:28:34.880
is this going to save me enough money to go

462
00:28:35.119 --> 00:28:40.000
through the complexity that you've got to go through on

463
00:28:40.839 --> 00:28:44.279
filing an extra tax return. So let's talk about the

464
00:28:44.440 --> 00:28:46.799
cons We know what the savings is going to be

465
00:28:47.359 --> 00:28:49.440
roughly depending on what your income is, because it could

466
00:28:49.480 --> 00:28:51.720
be much greater than that because solid security gets taxed

467
00:28:52.119 --> 00:28:54.640
to a much higher level. So if you're making one

468
00:28:54.680 --> 00:28:56.880
hundred and forty one hundred and fifty one hundred and sixty,

469
00:28:57.160 --> 00:29:00.640
you're going to see potentially greater savings from having that

470
00:29:00.839 --> 00:29:03.880
escort and paying that reasonable salary. But you've got to

471
00:29:03.960 --> 00:29:10.240
deal with the administrative complexity. So corporations LLCs and every

472
00:29:10.319 --> 00:29:13.960
state there are some tax and legal loopholes you've got

473
00:29:14.200 --> 00:29:16.839
hoops you've got to jump through for your business to

474
00:29:16.920 --> 00:29:20.480
remain compliant. These could be such things as a requirement

475
00:29:20.599 --> 00:29:24.480
for an annual board of shareholder meetings, so keeping minutes

476
00:29:24.519 --> 00:29:27.599
from those meetings as well as detailed records of shareholders.

477
00:29:28.440 --> 00:29:30.319
You might have a little advantage there because you could

478
00:29:30.319 --> 00:29:32.960
actually take and have a shareholder meeting husband and wife,

479
00:29:33.680 --> 00:29:35.440
and you take a trip to go through and do this.

480
00:29:36.000 --> 00:29:37.599
Personal is part of the trip is going to be

481
00:29:37.720 --> 00:29:41.160
non deductible, but the business side of the trip is

482
00:29:41.279 --> 00:29:44.039
going to be deductible. Special rules you've got to follow

483
00:29:44.160 --> 00:29:46.559
to go through and do this. But there's some advantages

484
00:29:47.119 --> 00:29:49.960
now at the federal level, there are other requirements which

485
00:29:50.119 --> 00:29:52.480
have an impact on how your business profits are tax

486
00:29:52.960 --> 00:29:54.920
As an escort, you've got to file that twenty five

487
00:29:54.920 --> 00:29:59.839
point fifty three with the IRS. Once approved the escort status,

488
00:30:00.000 --> 00:30:03.680
you'll have to file at the end of every year

489
00:30:03.839 --> 00:30:07.000
within two and a half months the forum eleven twenty s.

490
00:30:07.079 --> 00:30:09.359
Of course you can file extension and get an extension

491
00:30:09.440 --> 00:30:13.839
over there as well. And then let's not forget payroll

492
00:30:14.319 --> 00:30:17.559
and so you're going to have taxes and forms the

493
00:30:17.720 --> 00:30:21.720
file is well there. Payroll tax forms ninety one are

494
00:30:21.799 --> 00:30:26.079
due quarterly, nine forties are due annually. W two's are

495
00:30:26.160 --> 00:30:29.720
due annually. Plus you've got to pay the payroll taxes

496
00:30:30.440 --> 00:30:32.799
as they are due, and the IRS is going to

497
00:30:32.880 --> 00:30:34.920
tell you how you've got to pay them as well.

498
00:30:35.440 --> 00:30:38.480
We tell everybody, hey, make your payroll tax deposits right

499
00:30:38.519 --> 00:30:41.920
after each payroll, so you don't have a huge lump sum.

500
00:30:42.279 --> 00:30:46.119
You've got to pay quarterly or monthly, depending on how

501
00:30:46.200 --> 00:30:50.880
the IRS sets you up. And hey, don't forget any

502
00:30:50.920 --> 00:30:54.839
of these things that you're dealing with. Filing late payroll

503
00:30:54.920 --> 00:30:59.759
tax returns, filing late forms and all this can be

504
00:31:00.079 --> 00:31:05.039
very costly with the penalties that the IRS can blump

505
00:31:05.279 --> 00:31:09.680
on you and many business owners find much of this

506
00:31:09.839 --> 00:31:13.920
information very daunting. You get you get themselves some trouble

507
00:31:14.039 --> 00:31:17.599
keeping up with the paperwork involved in an escort and

508
00:31:18.519 --> 00:31:24.240
making sure that you're in compliance, dotting the i's, crossing

509
00:31:24.720 --> 00:31:27.759
the t's. This is not a decision you make easy.

510
00:31:28.279 --> 00:31:32.319
And I suggest highly that you can sell it with

511
00:31:32.400 --> 00:31:36.519
your attorney and your tax professional, and they shouldn't just

512
00:31:36.880 --> 00:31:42.920
carte blanche recommend that you are an escort. Evaluate, evaluate

513
00:31:43.079 --> 00:31:47.519
the benefits the time. Is this the right path for

514
00:31:47.759 --> 00:31:52.279
you in your business? You know, is the savings going

515
00:31:52.359 --> 00:31:55.960
to outweigh the costs and the time it takes to

516
00:31:56.039 --> 00:31:59.200
be an escort? Is it going to keep enough money

517
00:31:59.319 --> 00:32:01.759
in your pocket it to be worth it? You know,

518
00:32:01.880 --> 00:32:06.400
your tax preparer and your attorneys can make money off

519
00:32:06.440 --> 00:32:09.480
of this, but are you keeping enough money to make

520
00:32:09.559 --> 00:32:13.519
this election worthwhile? You know, if you're saving two thousand

521
00:32:13.559 --> 00:32:16.680
dollars and you've got to pay somebody to do payroll,

522
00:32:16.720 --> 00:32:18.799
and you've got to pay somebody to do tax returns,

523
00:32:19.119 --> 00:32:21.440
and it's going to cost you fifteen hundred dollars to

524
00:32:21.559 --> 00:32:24.240
have all that stuff done every year, depending on where

525
00:32:24.279 --> 00:32:27.200
you go for your payroll services, is it worth it

526
00:32:27.359 --> 00:32:29.759
keeping five hundred dollars in your pocket to me now,

527
00:32:30.319 --> 00:32:34.559
to you, it might be what's going to do the

528
00:32:34.680 --> 00:32:37.480
best thing for you. We're going to tell you a

529
00:32:37.519 --> 00:32:39.359
quick break when we come back. If you're looking to

530
00:32:39.400 --> 00:32:42.240
start a business in choosing escort status, We're going to

531
00:32:42.279 --> 00:32:43.759
talk a few steps to get started.

532
00:32:44.079 --> 00:32:45.079
We'll do this right after this.

533
00:32:46.599 --> 00:32:50.200
We have only scratched the surface of today's show. Please

534
00:32:50.279 --> 00:32:53.279
stand by as Barry Chief Power will be right.

535
00:32:53.240 --> 00:32:54.920
Back with tax talk for you.

536
00:32:57.799 --> 00:33:01.119
As an owner operator, you already spend too much time

537
00:33:01.160 --> 00:33:05.319
away from your family. Stop spending time doing payerwork. Go

538
00:33:05.440 --> 00:33:09.680
to Trucker tax tools dot com a solution filled specifically

539
00:33:09.799 --> 00:33:13.359
for truckers. Trucker tax tools dot Com makes your life

540
00:33:13.759 --> 00:33:19.359
run smoothly. Let's get back to tax stock for you

541
00:33:19.559 --> 00:33:22.079
with more tax stock once again.

542
00:33:22.599 --> 00:33:25.200
Here's your host, Barry G. Fallam.

543
00:33:28.039 --> 00:33:30.839
Hey, welcome back. I'm going to address a couple of

544
00:33:30.920 --> 00:33:34.519
quick questions we got in here. One from Gary for DMS.

545
00:33:34.599 --> 00:33:37.359
I'm a W two driver. Why do I not get

546
00:33:37.359 --> 00:33:41.880
to deduct for DMS on my taxes? This seems so unfair.

547
00:33:43.279 --> 00:33:46.319
Trump tax Code Back in two thousand and I believe seventeen,

548
00:33:46.480 --> 00:33:51.400
when they revised the tax code. They took away unreimbursed

549
00:33:51.519 --> 00:33:56.079
employee business expenses. The company should be reimbursing you for

550
00:33:56.240 --> 00:34:02.799
business expenses. Many trucking cup these back in twenty seventeen eighteen,

551
00:34:02.960 --> 00:34:05.599
when we could no longer do Forum twenty one oh six.

552
00:34:05.720 --> 00:34:08.679
To take these expenses, we worked with some of the

553
00:34:08.880 --> 00:34:12.920
smaller and mid sized companies to structure pay to where

554
00:34:12.960 --> 00:34:17.480
they paid a per diem to the truck drivers but

555
00:34:17.800 --> 00:34:23.480
lowered their W two wages And so it would save you,

556
00:34:23.840 --> 00:34:28.679
as a W two employee money on taxes and you

557
00:34:28.800 --> 00:34:32.400
get money tax free for each night you were out

558
00:34:32.719 --> 00:34:36.719
on the road away from home. And so we structured

559
00:34:38.280 --> 00:34:40.480
business to be that way so it could save you,

560
00:34:40.840 --> 00:34:43.840
the W two employee money as well. And it does

561
00:34:43.960 --> 00:34:47.000
come with, you know, consequences of you know, if you

562
00:34:47.039 --> 00:34:49.079
went to apply for a mortgage or something else, your

563
00:34:49.119 --> 00:34:52.639
income is lower than what you would be getting normally

564
00:34:52.719 --> 00:34:56.920
on a W two. If this wasn't change, I don't

565
00:34:56.960 --> 00:35:02.000
foresee that changing anytime soon. It's just working with your

566
00:35:02.079 --> 00:35:07.639
employer and maybe they can revise their employee plan to

567
00:35:07.880 --> 00:35:14.519
include you know, perdems. Over there on that side, Alex,

568
00:35:15.239 --> 00:35:19.960
you set up an LLC and you thought it would

569
00:35:20.039 --> 00:35:26.159
be effective from January. I have a client that's in

570
00:35:26.239 --> 00:35:31.400
this very similar situation. They set up an LC at

571
00:35:31.440 --> 00:35:34.480
one point during the year, and somewhere or somewhere somebody

572
00:35:34.559 --> 00:35:36.199
told them they could make it effective all the way

573
00:35:36.239 --> 00:35:39.320
back to January. Well, that doesn't happen. Your company didn't

574
00:35:39.320 --> 00:35:43.480
get formed until I think August, you said here, and

575
00:35:44.280 --> 00:35:47.320
that's when that company would take over and you would

576
00:35:47.360 --> 00:35:52.800
have to file that be nine's for anybody you're working

577
00:35:52.880 --> 00:35:56.039
for that would issue you at ten ninety nine to

578
00:35:56.239 --> 00:35:59.039
get the income over there. Otherwise, if you were running

579
00:35:59.079 --> 00:36:03.519
as a soul for priorship before then, that money would

580
00:36:03.599 --> 00:36:07.480
be taxed on a ten ninety nine to you personally

581
00:36:07.760 --> 00:36:10.960
and would go on a schedule. See, no matter what

582
00:36:11.159 --> 00:36:13.480
you did out there, it's going to take effect the

583
00:36:13.800 --> 00:36:17.239
date your business actually went into a fact, not after that.

584
00:36:17.840 --> 00:36:19.920
And you've got to dot some eyes across some t's

585
00:36:19.960 --> 00:36:24.800
and make sure you're right. So we started talking about

586
00:36:25.320 --> 00:36:28.599
s Corp. And we talked about setting up your corporation

587
00:36:28.800 --> 00:36:30.639
and everything else and some of the steps that you're

588
00:36:30.639 --> 00:36:34.119
going to go through to do this. And the first

589
00:36:34.199 --> 00:36:37.800
one is choose your name for your business. You know,

590
00:36:37.880 --> 00:36:41.159
what do you want your name to be most trucking company,

591
00:36:41.920 --> 00:36:48.440
most consulting, Jimmy's door Dash. You know, whatever name you

592
00:36:48.599 --> 00:36:51.000
want it to be, you can be, but you got

593
00:36:51.079 --> 00:36:53.360
to check with your Secretary of State's office to make

594
00:36:53.360 --> 00:36:55.519
sure no one else has this name. If you're doing

595
00:36:55.559 --> 00:36:59.960
a DBA and you're going to do business as yourself,

596
00:37:01.039 --> 00:37:03.480
you can go down to your local office there and

597
00:37:03.599 --> 00:37:07.079
get an assumed name and run underneath that. But if

598
00:37:07.079 --> 00:37:11.280
you're going to be an LLC or corporation, you're going

599
00:37:11.320 --> 00:37:14.320
to do this through the Secretary of State's office. And

600
00:37:14.519 --> 00:37:17.199
so you're going to go to Secretary of State's office,

601
00:37:17.280 --> 00:37:19.760
check out and see whether your name's available that you're

602
00:37:19.800 --> 00:37:24.280
looking at. And then after that you're going to choose

603
00:37:24.480 --> 00:37:28.960
your entity type, whether it's an LLC limited Liability company,

604
00:37:29.760 --> 00:37:34.400
corporation which usually ends an I INC, or court LP

605
00:37:34.719 --> 00:37:38.360
limited liability partnership, and then you're going to turn around

606
00:37:38.400 --> 00:37:40.800
and file the paperwork with the Secretary of State to

607
00:37:40.960 --> 00:37:45.280
establish your company. Then from there you're going to go

608
00:37:45.440 --> 00:37:48.519
and get an employer identification number. This is not done

609
00:37:48.599 --> 00:37:52.719
through the Secretary of State's office. This is done through

610
00:37:53.119 --> 00:37:57.800
the IRSSET. A company employer identification number is like your

611
00:37:58.239 --> 00:38:03.199
Social Security number, so it is the taxpayer identification number

612
00:38:03.320 --> 00:38:07.280
four your business with the federal government. The states are

613
00:38:07.280 --> 00:38:10.280
going to issue their own number. The federal government's going

614
00:38:10.360 --> 00:38:14.840
to issue the employer identification number or taxpayer identification number

615
00:38:15.920 --> 00:38:20.079
by you filing the form SS four. Now, when you

616
00:38:20.199 --> 00:38:24.679
file that SS four, do it very carefully. Read the form.

617
00:38:25.239 --> 00:38:29.119
Read what the instructions say for the form as well,

618
00:38:29.639 --> 00:38:31.719
because if you make a note that you're going to

619
00:38:31.800 --> 00:38:36.800
have payroll, the IRS will effectively make you start filing

620
00:38:36.920 --> 00:38:42.320
payroll tax forms immediately. Make sure you choose the right selection.

621
00:38:43.159 --> 00:38:45.840
Just because you select the box on there that you're

622
00:38:45.880 --> 00:38:49.480
going to be taxed as a escort, the IRS is

623
00:38:49.559 --> 00:38:52.039
still going to send you this letter that says you

624
00:38:52.400 --> 00:38:56.760
are still taxed at as an eleven twenty or as

625
00:38:57.039 --> 00:39:00.599
a single member LLC is filing SCI ched you'll see,

626
00:39:01.239 --> 00:39:04.360
or a multi member LLC filing A ten sixty five

627
00:39:05.000 --> 00:39:11.079
until you make the election, the file for the escort status.

628
00:39:11.760 --> 00:39:15.719
So you can file the SS four online. You can

629
00:39:15.760 --> 00:39:19.639
print the form out, fax it in, and you can

630
00:39:19.719 --> 00:39:22.679
go to IRS dot gov and search SS four and

631
00:39:22.800 --> 00:39:28.119
you can get the application for the employer identification number. Again,

632
00:39:28.239 --> 00:39:30.840
that form is SS four, be careful how you fill

633
00:39:30.880 --> 00:39:33.719
it out, and then make sure you read the letter

634
00:39:33.840 --> 00:39:37.760
the IRS sends you. When they send you that letter

635
00:39:37.920 --> 00:39:41.880
saying your escort status has been approved or your employer

636
00:39:41.920 --> 00:39:44.639
identification number has been approved and they signed that employer

637
00:39:44.639 --> 00:39:48.920
identification number. Then follow the instructions. When you go to

638
00:39:48.960 --> 00:39:51.360
get your taxes done. If you have a new EI in,

639
00:39:51.599 --> 00:39:54.239
give that to the tax preparer so that they know

640
00:39:54.920 --> 00:39:59.320
how you're supposed to file. Then if you have gone

641
00:39:59.440 --> 00:40:02.920
through the prime SIS and evaluated whether escort status is

642
00:40:03.199 --> 00:40:06.719
the right for you, your company has been registered, you

643
00:40:06.880 --> 00:40:12.480
received your EI N, then make the election to become

644
00:40:12.559 --> 00:40:17.000
an escort with the IRS. And since this is a

645
00:40:17.159 --> 00:40:21.320
designation from the IRS, it's not automatic. So again within

646
00:40:21.440 --> 00:40:26.400
that two months fifteen days, you got a complete ARM

647
00:40:27.000 --> 00:40:31.000
twenty five fifty three. And then in the instructions, it

648
00:40:31.159 --> 00:40:36.639
tells you exactly the right location to send this form

649
00:40:36.719 --> 00:40:40.320
in or the facts number to facts this in. The

650
00:40:40.480 --> 00:40:45.599
IRS should be responding to you with an acceptance letter

651
00:40:46.239 --> 00:40:51.840
and when that escort status will take effect. So you know,

652
00:40:52.079 --> 00:40:55.480
make sure that you're looking at these things. You're dotting

653
00:40:55.559 --> 00:40:58.800
your eyes, you're crossing your t's, and you have the

654
00:40:58.960 --> 00:41:03.880
right information and to process the returns in the right way. Hey,

655
00:41:03.960 --> 00:41:06.599
one of the worst things you can do is to

656
00:41:06.880 --> 00:41:12.440
set up this corporation and think that hey, because I

657
00:41:12.559 --> 00:41:14.639
set this up with the state, I'm now an escort.

658
00:41:14.840 --> 00:41:17.239
Or hey because I set this up with the state,

659
00:41:17.519 --> 00:41:21.159
I didn't need an employer identification number. Or I set

660
00:41:21.199 --> 00:41:24.000
this up with the state, I got an employer identification number,

661
00:41:24.000 --> 00:41:25.920
and I checked the box that I wanted to be

662
00:41:26.559 --> 00:41:28.960
an escorp. And I think I'm an escorp. But the

663
00:41:29.320 --> 00:41:31.519
IRS came back and said, no, you've got a file

664
00:41:31.599 --> 00:41:36.000
eleven twenty, which means that entity is taxed as a

665
00:41:36.679 --> 00:41:40.639
corporation and then you get taxed when you receive money

666
00:41:40.840 --> 00:41:44.840
to yourself. Or I didn't follow through all the processes

667
00:41:45.920 --> 00:41:50.599
that it takes to make this corporation that you knew.

668
00:41:51.159 --> 00:41:55.559
Now have LLC, Inc. Whatever to become effective. I didn't

669
00:41:56.000 --> 00:41:58.639
put payroll in the company name. I have payroll in

670
00:41:58.719 --> 00:42:03.320
my DBA names. I never changed with everybody that I'm

671
00:42:03.400 --> 00:42:06.559
working for. I didn't give them a new W nine

672
00:42:06.679 --> 00:42:10.239
to have the income instead of coming to me through

673
00:42:10.320 --> 00:42:15.239
my DBA or me personally to go to my LLC

674
00:42:15.960 --> 00:42:19.920
or my INC. I didn't make the changes that I

675
00:42:20.159 --> 00:42:24.199
needed to make or pay do the payroll tax forms. See,

676
00:42:24.239 --> 00:42:28.360
all these things come with consequences. So we had a

677
00:42:28.440 --> 00:42:31.199
company that came to us and have been having their

678
00:42:31.360 --> 00:42:35.960
taxes prepared for the last three four years from somebody else.

679
00:42:36.079 --> 00:42:39.079
But they never asked the questions. They never got the

680
00:42:39.400 --> 00:42:44.559
employer EI in letter to see how this company should

681
00:42:44.599 --> 00:42:46.559
have been taxed all along, and then they find out

682
00:42:47.280 --> 00:42:49.159
for the last three years you should have had payroll

683
00:42:49.239 --> 00:42:51.800
tax forms, for the last three years you should have

684
00:42:51.840 --> 00:42:54.840
been filing an eleven twenty s, or for the last

685
00:42:54.920 --> 00:42:57.519
three years you should have been filing a partnership return.

686
00:42:57.960 --> 00:43:05.239
Consequences penalties interest a crew and continue to accrue daily, weekly, monthly.

687
00:43:05.719 --> 00:43:09.199
It becomes a nightmare and we've got to go through

688
00:43:09.360 --> 00:43:11.760
and fight it. And then that's when you need taxation

689
00:43:11.960 --> 00:43:14.719
solutions to come in and help find a solution to

690
00:43:14.800 --> 00:43:17.199
the problem. Maybe get the irs to waive it, or

691
00:43:17.239 --> 00:43:19.519
maybe maybe we find a way that hey, yes, you

692
00:43:19.559 --> 00:43:21.639
should have been eleven to twenty s or a partnership.

693
00:43:22.039 --> 00:43:24.599
We go back and file those partnership returns and we

694
00:43:24.719 --> 00:43:27.000
reduce the tax liability on the personal side, which more

695
00:43:27.039 --> 00:43:29.239
than offsets the penalties you have on the personal side,

696
00:43:29.519 --> 00:43:31.760
and then we go back and fight the penalties that

697
00:43:31.920 --> 00:43:35.239
they levied against you as a partnership, because ignorance is

698
00:43:35.280 --> 00:43:38.599
bliss sometimes and the tax preprayer that you hired didn't

699
00:43:38.679 --> 00:43:41.280
follow through with what you gave them to do. Little

700
00:43:41.320 --> 00:43:44.280
things we can do to help solve that problem. But

701
00:43:44.800 --> 00:43:47.880
if you got that problem, you call Taxation Solutions at

702
00:43:47.920 --> 00:43:50.480
eight eight eight nine three zero one zero one six

703
00:43:50.559 --> 00:43:53.599
again eight eight eight nine three zero one zero one

704
00:43:53.719 --> 00:43:56.880
six and get a solution to that problem and get

705
00:43:57.000 --> 00:44:01.280
tax relief for that problem today. And hey, if you

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like escorp, status partnerships, LPs, limited liability companies, tax planning,

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But hey, stay in touch with us. If you have questions, email,

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go through tax Talk FORU dot com. Shot us a

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message over there. You can see us every Monday, ten

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U dot com or tax or Talk for TV. You

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can see us every Monday at ten am right here.

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for you right here at tax Talk for You dot

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Com ten am Monday, See you next week.

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Are you an individual or business that wants to understand

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taxes and how they affect you? Are you looking for

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specific tax advice for self employed business owners and truckers?

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Posted by tax and trucker expert Barry G. Fowler EA Kenyon,

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ten am the Eastern Time, every Monday.

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for TV.

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Don't forget to check this and past episodes at tax

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See you next week at W four c y dot

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com