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jadegetchell
New Member

1. How do you pay myself in order to deduct the cost of labor? My company is a DBA in design/marketing. 2. Should I become an LLC or Corp for tax purposes?

 
4 Replies
MichaelL1
Level 15

1. How do you pay myself in order to deduct the cost of labor? My company is a DBA in design/marketing. 2. Should I become an LLC or Corp for tax purposes?

OK a couple things, a LLC (single member) is reported on your return as part of your 1040.  Many form this because of liability reasons and it is less complicated than a regular corporate return. 

A Corp return (non LLC) has a separate 1120 to report income and expenses.

Both of these need to set up with your respective State ahead of time.

So you have right now a sole proprietorship, which is reported on Sch C business as part of your tax return.

Now to first question:  You don't need to pay yourself a salary and net profit (business income less business expenses) from the business is your income.   You will pay income tax and self-employment taxes on this net profit.

Don't worry as TurboTax does this for you.

jadegetchell
New Member

1. How do you pay myself in order to deduct the cost of labor? My company is a DBA in design/marketing. 2. Should I become an LLC or Corp for tax purposes?

Thank you for your help on this. How do I take advantage of the "cost of labor" option for write off's then? What do I need to do? My company is all service oriented - so I don't have much to actually write off since there are no cost of goods.
MichaelL1
Level 15

1. How do you pay myself in order to deduct the cost of labor? My company is a DBA in design/marketing. 2. Should I become an LLC or Corp for tax purposes?

Cost of labor for your business will be what you actually paid to others as wages.
jadegetchell
New Member

1. How do you pay myself in order to deduct the cost of labor? My company is a DBA in design/marketing. 2. Should I become an LLC or Corp for tax purposes?

That is the problem. I am the only one who works for my company so how do I decide what to pay myself so that I can write it off? Are you I just decide whatever I want my hourly wage? Or is it better to just pick a salary?
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