Am I missing something?

[Pacun]

Trump’s Tax Plan Could Turn ‘Everyone and Their Dog’ Into an LLC
(Bloomberg) - The Trump administration’s proposal to slash the tax rate on partnerships and limited liability companies could set off a stampede of individual taxpayers trying to reclassify themselves as so-called pass-through businesses...              

Let's say I am a schedule C person, how can became an LLC help me with the new proposed tax law? Am I missing something? Keep it in taxes, which as Jack said, it is hard.

[Abby Normal]

I haven't delved deeply into it, but it seems an LLC taxed as a partnership (or S corp) would have a special flat 15% tax rate on the pass thru income. So if you're in the 25% bracket, you'll save money if the cost of filing an entity return doesn't exceed the tax savings. BUT, what about S corp salaries and who would a sole prop add as a partner, etc. etc.

The devil is always in the details.

[BHoffman]

I read the article. It was like watching someone trying to chew the cap off a child proof bottle.  I don't think the media is going to be able to write correctly informative articles without having at least a basic understanding of how the current tax code works.  And, they don't.  So, we should be prepared for a lot of amusement and amazement.  

[MDCPA]

What about a sole proprietor forming a single-member LLC - I wonder if that would qualify as a pass-thru for the 15% rate?  Possibly not, no K-1 reporting flow thru items?

[RitaB]

19 minutes ago, BHoffman said:

I read the article. It was like watching someone trying to chew the cap off a child proof bottle.  I don't think the media is going to be able to write correctly informative articles without having at least a basic understanding of how the current tax code works.  And, they don't.  So, we should be prepared for a lot of amusement and amazement.  

Just like when media people assumed that a candidate did not pay any taxes of any kind for 20 years because of a loss on one return. 

This is my face when anybody, any profession besides this one, either party, tries to explain taxes.  They can't.  They don't know. 

 

[BHoffman]

And if they did write a correct article, the reaction of the general public would be this

 

[Jack from Ohio]

More conjecture I have no time for.  I am making plans to spend time with my Grandson.  Now THIS is important!!

[Abby Normal]

1 hour ago, MDCPA said:

What about a sole proprietor forming a single-member LLC - I wonder if that would qualify as a pass-thru for the 15% rate?  Possibly not, no K-1 reporting flow thru items?

You need to make your dog a .0001% partner.

[SaraEA]

Not just pass throughs will get the new low rate.  From the article: " Mr. Mnuchin offered few specifics about the blueprint, other than confirming that its centerpiece will be a 15 percent business tax rate, which would apply not only to corporations, but also to small businesses...."  The IRS has been working hard to reclassify "subcontractors" who are really employees.  If this passes, bet their lead dry up.

[joanmcq]

To the republicans a 'small business' is anyone in an s corp or p'ship. Sole props aren't even on their radar.

[FDNY]

I read in Reuters and Politico that Sole Props are included.  When they talk tax reform for a pass thru they consider Sch C since taxes on business income is paid on individual side.  Really can't be certain with the one page they gave us, need to be a mind reader.

If that's true I'm all for it, we all have plenty of people with Sch Cs in 25 or 28% bracket who are paying out nearly half their income the more successful they become.

[taxxcpa]

If you files schedule c you pay 25% or more in income tax plus 15.3% social security--40%,

[Margaret CPA in OH]

1 hour ago, taxxcpa said:

If you files schedule c you pay 25% or more in income tax plus 15.3% social security--40%,

Except for the 7.65% deducted on Page 1....

Ohio now exempts business income from Sch. B, C, D, E (including guaranteed payments and/or compensation from each pass-through entity in which the taxpayer has a 20% direct or indirect ownership), F, and other items of income and gain separately stated on federal Schedule K-1 and miscellaneous federal income tax adjustments, if any.

I wonder if this is a prototype for the proposed tax reform.  I also note that, along with the elimination of the estate tax in Ohio, these changes have contributed to the decline in tax revenues leading now to a potential budget deficit of $25 million and the not insignificant increases in local taxation to cover the shortfall of funds previously distributed by the state.  It's my understanding that the new federal proposal has not yet addressed a similar potential outcome. 

I think the idea is to assist in creating jobs and expanding the economy but not sure if this can happen simultaneously.  There  may be a lag time.

It does make tax planning for my small businesses, including my own, challenging.  Think I will enjoy the summer and 'think about that tomorrow!'

[Lee B]

Under the current tax system, the total combined taxes paid to the federal and state government  is actually less for the SP, since they do not have pay FUTA and SUTA, not to mention Workers Comp Insurance. It's just sometimes perception and reality are not always the same, especially  when comparing  Quarterly Estimate Payments with paycheck WH plus the unseen employer payments made on the employee's behalf for FICA, FUTA, SUTA and Workers Comp.