Tax saving strategies for real estate professionals

The Southeast Valley Women's Council of Realtors monthly Business Resource Meeting features guest speaker Cheryl Wilson of C&D Tax & Financial Partners. A well rounded tax professional with years of experience, Cheryl will share some vital tax saving strategies as she addresses this group.

You do not need to be a WCR member (or real estate professional for that matter) to attend this meeting. If you have questions about how you can save money on your taxes (perhaps by starting an LLC), please feel free to join this energetic and enlightened group of business professionals.

Date:	November 20, 2009
Time:	Registration and networking start at 10:45;
	Meeting runs from 11:30 to 1:00
Place:	Dobson Ranch Inn Conference Center
	Dobson at I-60
Cost:	$22 with advance registration
	$27 at the door
RSVP:	RSVP Mary Badger – mhbadger@cox.net

But I'm a Realtor and I already have a corporation

This statement is typically followed by the question, "why can't I get paid real estate commissions through my existing corporation?"

We addressed the issue of fictitious names in an earlier post. The State of Arizona will not allow you to use a fictitious name for your PLLC (Professional Limited Liability Company).

Creative agents...or ones who are frustrated that they spent money to set up their business entity the wrong way...will wonder why they can't just wash their 1099 real estate commission income earnings through the corporation they've already set up.

Creative? Yes. Good idea? NO. Here's why. Your broker is going to issue a 1099 under your social security number; by law your broker can't pay a LLC or Corporation with a fictitious name. This sets up a paper trail for the IRS. Eventually the IRS is going to want to know why there are reported earnings with a tax return to match.

As my favorite accountant Roger Lamberson says, "just because you can do it, doesn't mean you're going to get away with it if the IRS audits you."

So, left with the choice of scrapping the corporation they can't use, throwing their arms up in the air in frustration, or risking an audit by the IRS, many Realtors are turning to refiling themselves the right way as a PLLC.

True, it will cost you $279 if you use Reliable LLC Filings, LLC to do the filing and publishing for you but you have comfort in knowing that it will have been done right. Our cost of $279 seems a small price to pay to save money on taxes and avoid an audit.

You will also have comfort in the fact that we know that you need a PLLC and not an LLC in Arizona, we know that you can't use a fictitious name and we know exactly what verbiage needs to be on your Articles of Organization.

Reliable LLC Filings, LLC can help with the filing but we can't help with the tax advice. To reach Roger Lamberson (accountant extraordinaire) please call me him directly at 480-220-4111 or roger@lambersonassociates.com.

Reliable LLC Filings, LLC does not dispense legal or tax advice. For more information on your particular situation, please consult Roger Lamberson or your own tax professional.

LLC avoids double taxation trap of C-Corps

Have you been considering incorporating your small business or self-employment activity? The advantages are many! To begin with, you will be protecting yourself from a potential business ending lawsuit. Forming a corporation is the first step on the path known as "asset protection;" you are moving from the world of unlimited liability to the world of limited liability. From a tax standpoint, there are both advantages and disadvantages to incorporating. Yes, forming a corporation can either reduce your taxes or increase your taxes, depending on what type of corporation you create.

There are two main types of corporate entities: "C" Corporations and "S" Corporations -- and which type you choose can make all the difference in the world of taxes. NOTE: The question of "C" Corp vs. "S" Corp has no effect on the asset protection provided by your corporation. This is a tax issue, not a legal issue. A "C" Corporation can lead you into a tax trap known as "double taxation." Yes, income from a "C" Corporation can actually be taxed twice -- once when it's earned on the corporate level and again when it's paid to you, the shareholder, in dividends.

There are several ways to avoid double taxation. Often the easiest way is to tell the IRS that you choose to be an "S" Corp instead of a "C" Corp. The profits of an "S" Corp are not taxable to the corporation; instead, those profits are reported directly on the shareholder's personal income tax return and are therefore only taxed once. And once is enough, don't you think! [Note from Reliable LLC Filings: See our previous article on how an Arizona LLC gets the benefit of filing taxes as an S-Corp without all the formality of being one. This type of business structure also help avoid the double taxation trap.]

Of course, any article on choice of entity must contain the old disclaimer, "Consult your tax professional!" I am not prescribing a one-size-fits-all approach to this issue. But for many small biz owners and self-employed folks, the "S" Corporation is a good fit because it provides protection from personal liability and avoids the nasty tax trap of double taxation -- two great benefits worth checking into.

Should you decide that the "S" Corporation is the right fit, you must inform the IRS that your corporation is choosing "S" Corporation status by filing Form 2553, which is, in effect, an application to become an "S" Corporation. IMPORTANT: If you incorporate and do not file Form 2553, you are automatically defaulted to "C" Corporation status by the IRS.

There are critical rules regarding how and when to file Form 2553, so be sure to read the instructions carefully, or check with your tax pro. Failure to file Form 2553 on time or filing Form 2553 incorrectly results in a rejection of your corporation's "S" Corp application, and the corporation is then by default treated as a "C" Corp, subject to double taxation, the very trap you were trying to avoid.

About the Writer
Wayne M. Davies is author of 3 tax-slashing eBooks for small business owners and the self-employed. For a free copy of Wayne's 25-page
report, "How To Instantly Double Your Deductions" visit http://www.yousaveontaxes.com./

Do I make enough money to justify an LLC?

We get this question a lot. According to Veronica Santee of Wayne Bradford CPA, the typical sole proprietor crossing the $20,000 to $25,000 profit threshhold will be saving enough on their taxes to offset the "overhead" expenses of a corporate tax return and quarterly payroll forms. Veronica stressed, like we do, that each case is individual.

As a reminder, LLCs can be taxed multiple ways. One of the most popular options is to be taxed as a Sub Chapter-S corporation. This allows you to draw a reasonable salary from your business, save on self employment tax and take the remaining profit as a distribution. Drawing a reasonable salary requires some kind of payroll. The payroll aspect turns away some people who might really benefit from doing business as an LLC or PLLC.

"Quarterly payroll" isn't nearly as scary or cumbersome as it sounds. Once you're set up with a good CPA, there are three, count them, three payroll forms that need to be sent in to the IRS and State on a quarterly basis. Wayne Bradford's office will generate the forms and mail them to you automatically for about $50 per quarter if you retain his services.

I don't know about you, but $50 extra out of my pocket per quarter plus the cost of a few stamps to mail forms to the IRS and State seems like a small price to pay to potentially save thousands on my taxes at the end of the year.

Again, the above information is not to be construed as tax advice. However, any one can tell you that it is just sound business planning to have a good CPA in your corner who can help you reduce your tax burden to its lowest. After all, the money stays in your pocket instead of going to the government!

For more information on tax planning and strategies, however, please contact Wayne Bradford CPA at 480-317-9588. If you want help to set up an Arizona LLC or PLLC, please consider using Reliable LLC Filings, LLC.

Can an LLC help you avoid photo radar tickets?

At Reliable LLC Filings, LLC we don't dispense legal advice. And, we don't advocate doing anything illegal or unethical. But, when someone casually mentioned that photo radar tickets are not mailed for incidents involving cars titled to a company (LLC) versus a person...we wondered if it were true.

Now we finally have an article to cite that this may be true. Read and ponder at your own risk...however, if you read this article and think you might need an LLC please keep us in mind!

* * * *

Arizona Photo Enforcement Ticket: How to Beat It and Keep Your Conscience Clear
By Ray Stern in News
Friday, Dec. 5 2008 @ 4:29PM

People ask us all the time: What can I do about that nasty photo radar ticket I got in the mail?

The answer: Nothing.

Literally. Chuck it in the trash.

It's perfectly ethical -- just look at the ticket's fine print. You see, for photo enforcement citations to be valid, the state Supreme Court rules say it has to be properly served to you. And the U.S. Mail won't cut it. So, the ticket asks you to sign a waiver of your right to proper service and mail it back to the authorities.

We ask you this one simple question: Why waive that legal right?

Make them come to you. And if they don't bother to do that, or if they simply don't come while someone's home, the ticket becomes legally dead in a few months. That's right -- totally dead, as in dismissed. No suspended license, no problems during police traffic stops, no penalties.

We're not even saying you should try to avoid the process server who may try to deliver the ticket. Let fate decide it: If you're home and they knock, c'est la vie.

The only penalty for doing that is roughly $25 on top of your $180 or $250 fine. You won't get better odds in Vegas.

The ethical questions pop up when you talk about proactively dodging the server. Of course, some of you may wonder about the ethics of photo enforcement itself, so maybe it's all a wash.
Still, even though the process servers may be hired by a foreign firm that's out to make a profit, (the Arizona Department of Public Safety uses the Australian photo enforcement vendor, Redflex), they are bona fide court officials under the law. Telling your kids to be quiet and turn off the lights while a guy is banging on your door yelling "Officer of the court!" -- that's just lame.
One other thing to remember: The process server might not be from Redflex, and what he's trying to give you might be something you actually want.

We studied up on photo enforcement for you last year and published a feature article, "Gotcha!", that will answer many of the questions you may have about your right to process service, the Supreme Court's sweet 120-day rule, and other methods people use to beat the tickets. For instance, you might find it interesting to know that if drivers of vehicles registered to corporations and family trusts ignore speed camera tickets, they don't even get process-served. The ticket just goes away.

There are some good books out there on the subject, and some folks want you to pay big bucks for this information, like Angel Enterprises. But the above-mentioned article tells you all you need to know, and it'll cost you nothing but a mouse click. -- Ray Stern

http://blogs.phoenixnewtimes.com/valleyfever/2008/12/how_to_beat_a_photo_enforcemen.php

LLC numbers are on the rise

In times of economic instability many educated and experienced men and women turn to entrepreneurship by necessity. Perhaps its fear of a job loss, burnout or just plain American ingenuity but many individuals are finding that in this job market it may be easier to set up their own business to create a new income stream or level of comfort. No matter what the reasons, LLC numbers is up 12% over this time last year.

And, the numbers continue to prove that most individuals choose an LLC over incorporating because LLC are cheaper for form, easier to manage and have flexible tax options.

Consulting and marketing companies are on the rise. People are finding new fulfillment in pouring their energies into something they love. I know that starting this company has been a blessing to me too.

If you're in this boat and you have a great marketing idea or you want to take your sole proprietorship business to the next level, let Reliable LLC Filings, LLC help.

A PLLC may help lower your tax burden

How does it work? As a sole proprietor your broker pays commission to you under your social security number. By forming a PLLC and electing to be taxed as a Subchapter S Corporation*, commissions are paid under a Federal Tax ID number thus avoiding self-employment tax. The tax scenario below is based on an annual income of $100,000 but consider the standard self employment tax rate is 15.3%. That means that even on profits from real estate commissions of $10,000 you'd be saving $1530. Offset that by the amount of money to file a corporate tax return and annual payroll form (not as scary as it sounds) and you can see that just about all Realtors who are making a profit could benefit from this business structure.

	Sole Proprietor	LLC Taxed as S Corp
Profit	$100,000	$100,000
Salary	$0	$25,000
Self Employment tax	$14,130	$0
Federal Tax	$11,462	$12,734
State Tax	$3,755	$4,009
Social Security/Medicare	$0	$1,913
Matching Social Security/Medicate	$0	$1,913
Total Tax Paid	$29,347	$20,569

Savings by PLLC filing as Sub S Corporation

$8,778




Information used with permission of:
Lamberson & Associates
609 S Gilbert Rd, Suite B
480-220-4111

Assumes: Tax year 2009, married filing joint status taking standard deductions.
*Please note that in order to save on self employment taxes, you must file additional paperwork with the IRS asking to be recognized as a Sub-Chapter S Corporation. Please refer to your tax professional for information on your potential tax savings.

This post is not to be construed as legal or tax advice. For advice on your own situation, please contact your accountant or CPA.