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The best tax optimization trick you can do is to open an LLC. Costs $800/year to maintain in California, enables you to claim business expenses for a looot of
by Swizec 5y ago
The best tax optimization trick you can do is to open an LLC.
Costs $800/year to maintain in California, enables you to claim business expenses for a looot of things. Sometimes surprisingly.
You don’t even need a whole lot of revenue. Just sell something, anything, and go for it.
The penalty for going overboard is to pay back taxes with a bit of interest. As long as you don’t do anything crazy, you should be fine.
Remember: USA uses taxes to encourage you to spend money on approved activities. Like running a business, having kids, or buying your primary residence.
- shiftpgdn 5y agoAlso the extreme headache of an audit
- DoreenMichele 5y agoI wonder if odds of that go up if you brag on the internet about your sort of shady approach to taxes and cavalier attitude that it's just some kind of game to be played.
- andrewmcwatters 5y agoOP probably owns an LLC and writes off things that would have him out of compliance based on the way he talks.
- andrewmcwatters 5y agoYeah, for anyone reading who needs to read this: don’t do this. Unless you’re running a legitimate business, this is blatant tax fraud. Also $800/yr in California? You people are being ripped off. LLCs aren’t laid any fees to maintain annually in Arizona, and they’re perpetual entities.
- markdown 5y agoNot necessarily. There's a difference between tax avoidance and tax evasion.
- andrewmcwatters 5y agoNope, it’s really neither. It’s just straight up breaking the law. You’re not evading taxes because LLCs still pay them, and you’re not avoiding them because LLCs have limited taxation benefits.
- Swizec 5y agoDefinitely not tax fraud. You’re allowed yo be bad at business if you can afford it. Afaik you are “running a legitimate business” as soon as you’re selling stuff. Even if it’s github sponsorships for your opensource projects or whatever. Fraud is what most people (probably) do — not report that income on your taxes.
- andrewmcwatters 5y agoYou can’t just form an LLC and start writing off your home furnishings as a “business expense” because you make $5 a month from a browser extension that some people donate to your Paypal account. That’s tax fraud. That’s literally what that is. It’s incredible that anyone would think otherwise.
- Swizec 5y agoYes it’s generally frowned upon to have more business expenses than revenue for multiple years in a row. But claiming your home office (a part of your home explicitly used for work) as a business expense is definitely not tax fraud. You can’t claim your kitchen tho.
- plorkyeran 5y agoClaiming a home office which you do not use exclusively for business purposes as a business expense is tax fraud. If you have a fake "business" which you spend an hour a month on then this is only useful if you have an extra room in your house that you're fine with effectively just boarding up.
- andrewmcwatters 5y agoYeah, the IRS makes it pretty clear what the "Business Use of Home" is, and it's not your bedroom.
- bushbaba 5y agoIf you live in Cali and your Llc is incorporated elsewhere. You still need to report to Cali gov. Cali is not small business friendly
- jokethrowaway 5y agoOpening the LLC and doing a little bit of business is not the fraudulent part. Claiming expenses not linked to the business activity is.
- jamiequint 5y agoYou don’t need an LLC to do this, a single member LLC is a pass-through entity so you’re just buying legal protection for $800/yr, not tax benefits.