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13 Replies Last post: Jan 17, 2008 7:35 PM by CEO Space

"Long-term", "Tax Home", deductions question

Jul 10, 2009 11:26 AM

Click to view New_Biz's profile Professional New_Biz 4 posts since
Jul 10, 2009
Hello folks, I've started a single-member LLC and have a question about what is deductible in my situation.

My home and business are in one state, but my sole contract is in another. The contract is over 1 year, and would require me to rent an apartment or something of that nature in the state which I will be fulfilling the contract. While I understand the "long-term", "tax-home" laws won't allow me to personally write off my expenses for having to rent a place outside of my main residence state, but does it qualify as a business deduction as a "cost of doing business"?

I appreciate any insight, thanks!
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Click to view bm911tax's profile Mogul bm911tax 64 posts since
Jun 30, 2009
1. Re: "Long-term", "Tax Home", deductions question Jul 10, 2009 12:28 PM
in response to: New_Biz

Is this your only contract (source of income) or do you have other contracts in your state where the LLC is formed? How is the SMLLC taxed: Sole-Proprietor or Corp? Also I am curious for what reason did you form SMLLC?

Ben

http://taxbizpro.com/

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Click to view New_Biz's profile Professional New_Biz 4 posts since
Jul 10, 2009
2. Re: "Long-term", "Tax Home", deductions question Jul 10, 2009 12:33 PM
in response to: bm911tax
Yes, it's my only contract. Would it make a difference otherwise? I have not elected to do an S-corp on the LLC, but it is incorporated with its own EIN.

I had to form the SMLLC to fulfill a corp to corp contract. There are a lot of other variables involved, but it was the best benefit for me, and I was restricted on my options.
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Click to view New_Biz's profile Professional New_Biz 4 posts since
Jul 10, 2009
3. Re: "Long-term", "Tax Home", deductions question Jul 10, 2009 12:41 PM
in response to: New_Biz
I should also add why I had to form the LLC. It is a consulting business, contract required corp to corp be incorporated, (not 1099).
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Click to view bm911tax's profile Mogul bm911tax 64 posts since
Jun 30, 2009
4. Re: "Long-term", "Tax Home", deductions question Jul 10, 2009 3:36 PM
in response to: New_Biz

I hate to inform you but SMLLC that is not a Corp still required to get 1099 Misc. Since you are reporting your income on Schedule C of 1040 you are treated as self-employed for tax purposes and thus companies will ask you how are you taxed. If you are taxed as corp then no 1099 required but if you are taxed as Sch. C filer then they will require to issue you 1099-Misc not on your EIN but your personal SS# and write your LLC name under your personal name on 1099.

Also since 100% of your income is from 1 contract you will have to pay taxes to the state of earnings and not where your actual LLC is formed. So you will need to file tax returns in 2 states and get a tax credit for taxes paid on your domicile state from the other state. (This way you aren't double taxed)

You will be entitled to deduct all ordinary and necessary business expenses that pertain to your contract like with any self-employed.

Best of luck.

Ben

http://taxbizpro.com/

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Click to view New_Biz's profile Professional New_Biz 4 posts since
Jul 10, 2009
5. Re: "Long-term", "Tax Home", deductions question Jul 11, 2009 12:49 AM
in response to: bm911tax
Thanks BM911tax, it's an easy solution for me though, I looked at the IRS site again, looks like I have to file another piece of paper (form 8832), easy fix.
.
Thanks for your help!
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Click to view bm911tax's profile Mogul bm911tax 64 posts since
Jun 30, 2009
6. Re: "Long-term", "Tax Home", deductions question Jul 11, 2009 10:00 PM
in response to: New_Biz
Why are you filing 8832. Are you considering to be an S corp?
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Click to view Bridge's profile Mogul Bridge 364 posts since
Jun 3, 2008
7. Re: "Long-term", "Tax Home", deductions question Jul 13, 2009 9:19 PM
in response to: New_Biz
Actually, you will probably want to file:

1) Form 8832 entity classification - to be taxed as a coporation (rather than a sole proprietorship)
2) Fom 2553 election by a Small Business Coroporation; "S" corp. election

If you just file form 8832, you will be taxed as a "C" corp.

Best of luck.
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