Steve Boultbee
Forum Replies Created
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[walter biscardi] “[Rich Rubasch] “With an LLC, in Wisconsin, the corporate client must issue a 1099 at the end of the year.”
See here in Georgia it’s not necessary but many of them do anyway. I try to tell them it’s not required, but we just shred them when they get here.”
They’re probably issuing 1099s because they are required to issue them under Federal law to any person, including partnerships (which LLCs are taxed as), that they pay $600 or more to in the course of their business. There are penalties if they don’t issue a 1099 and were required to, so they may just issue them to everyone as a CYA move.
Georgia may not require them to send a copy to the state (which is also how California operates), but they still have to send a copy to the IRS. The IRS will forward a copy to the state.
In any event, whether the client issues a 1099 or not doesn’t matter for the recipient of the payment, since you’re required to report the income no matter what. Just make sure that you report at least as much income as is on the 1099s so the IRS doesn’t send a matching notice!
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[David Roth Weiss] “What I want to know is, how is it possible for a CPA to have any part of his brain left over for video related technical issues??? I can assure you, after dealing with the technical issues, I have no part of my brain left over for tax related matters.”
I can say that I have very little (if any) capacity left over after April 15. But video for me is a hobby, so if I sit and stare at After Effects or FCP for a long time because of my brain being fried from doing taxes, it’s OK since I’m only missing my own self-imposed deadline. Video is my creative outlet, since in my chosen profession, if you hear the word “creative” being used, you often end up with Enron-like situations. Not a good thing…
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[Brendan Coots] “My understanding overall is that LLCs and S-Corps have the same pass-through taxation as a sole prop/partnership, whereas the tax structure of a C-Corp provides a way to pay the lower, corporate tax (15%) on retained profit rather than paying your personal tax rate on every penny of income. “
I’ll try to discuss the differences (in general) in the taxation of the different business structures. I see from your profile that you’re in San Francisco (like myself), so I’ll address some of the state issues as well. Of course, there may be legal reasons for choosing an entity type that may not be the most advantageous for tax purposes. With regard to the legal matters, I am not qualified to address those. Please note that this post is not to be considered as tax advice.
C Corporation – I think you might be confusing the first tier of the C Corp’s corporate tax rate with the qualified dividend rate of 15% that an individual taxpayer pays on dividend income. A C corp pays 15% tax on its taxable income up to the first $50,000. For taxable income of $50,001 – $75,000, it’s 25% (in addition to the 15% on the first $50,000), from $75,001 – $100,000, the tax rate is 34%, and from $100,001 – $335,000, it’s 39%. Once you get over $335,000, the tax rate starts to fall again, but it never gets below 34%. California will tax you at a flat rate of 8.84% (but not less than $800).
One of the biggest drawbacks to the C corporation structure is double taxation of income. Not only are the net profits taxed at the corporate level, but when you as the owner want to take money out of the corporation, those payments are considered dividends, and you pay tax on those dividend payments. As an example (ignoring state taxes), the C corp has taxable income of $25,000. It pays corporate level of tax of $3,750, leaving $21,250 available to retain or pay out as dividends. Assuming it pays the entire amount out as dividends, the owners would get hit with a 15% tax on the $21,250, which is $3,188. So, between the corporation and the owner, they pay total taxes of $6,938 on the $25,000 of income. That’s an effective rate of just under 28%. That effective rate goes up as the corporate tax rate increases.
You’ve also got corporate formalities to deal with (board meetings, keep minutes, etc.), which is more trouble than some small companies want to get into.
S Corporation – S corporation income flows through to you, the owner, and is taxed on your personal tax return. The S corp (except in very specific circumstances) does not pay any federal taxes, but will pay CA taxes at 1.5% (but not less than $800) on its net income.
S corporation income is not considered to be self-employment income, so the income that passes through to you is not subject to social security and medicare taxes. This is one big reason why many people like to use S corps, and this is what Mr. Bennett is doing. However, you can’t pay yourself a minimal salary to let most of the income pass through to you and avoid the SE tax. You still have to pay yourself a reasonable salary – reasonable being what other people in the same industry in your position would be paying themselves.
You also still have some of the same requirements with regard to the corporate formalities with an S corp.
LLC – An LLC is easy to administer, as you don’t have the same formalities to go through as you do with either of the corporate entity types.
Like an S Corp, the LLC income passes through to the owners, where they pay the tax on their personal returns. The LLC will not pay federal taxes, but CA institutes a gross receipts fee that’s not based on your net income, but your receipts. There’s no fee if your receipts are less than $250,000, and then the fee progresses to $900, $2,500, $6,000, and finally $11,790 for gross receipts in excess of $5,000,000. As you can see, this means that you’d still be subject to the $11,790 fee if your receipts exceed $5,000,000 but you had a net loss for the year. As a fee and not a tax, it’s deductible on the CA return for the year in which it’s paid.
LLC ordinary business income will be subject to SE tax on the owner’s personal tax return.
Partnership – From your post, it sounds like this is what you’re operating as at the moment. Income passes through to the owners’ personal tax returns, and the ordinary business income is subject to SE tax. There are no taxes at the entity level for federal purposes, and CA only charges the $800 franchise tax, unless you’re operating as a general partnership – then you aren’t subject to the $800. However, I seriously doubt you’re operating as a general partnership since that would mean that all the owners have unlimited liability. I assume you’re a limited partnership, but even then, there has to be at least one general partner who has unlimited liability.
All of the above entities (as well as a sole proprietorship) can take advantage of the IRC Section 179 expense deduction, allowing you to write off purchases of certain property in the year of purchase, rather than having to depreciate that property over 3, 5, 7, etc. years, which is what Mr. Terry is referring to. In 2007, the maximum Sec. 179 deduction was $125,000. If you purchase too much equipment during the year ($500,000 in 2007), the amount of Section 179 deduction you can use begins to get reduced. California, on the other hand, only allows a Section 179 deduction of $25,000. This deduction passes through to the owners of the passthrough entities on the Schedules K-1.
No matter the type of the entity you choose, you still have to file tax returns for those entities in addition to your own personal return. The exceptions are the sole proprietorship and the single-member LLC, both of which are reported on your 1040, Schedule C. In CA, you’d still have to complete the state LLC return to figure out the gross receipts fee I mentioned earlier. And, since you are already operating as a partnership, neither of those exceptions to filing separate returns is available to you.
The spending sprees at the end of the year are well and good assuming you need the equipment either at that time or in the near future. The ability to immediately expense some or all of that purchase for tax purposes should be a secondary consideration. It certainly doesn’t make sense to spend the money just to save on taxes – since you’d be spending $100 to save $35 or so.
Hope this helps.
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Final Cut Pro 5.1.4 and later are supported on Leopard.
https://docs.info.apple.com/article.html?artnum=307092
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I see this error on AE 7 when switching quickly between AE and Final Cut Pro. Both apps are set to send a preview out via FireWire.
My understanding of the error is that only one application can be using the QuickTime output component at any one time. When you switch quickly back to AE, the other application hasn’t released its hold on the Quicktime output component, and you get this error because both apps are trying to use the component simultaneously.
Dismiss the error dialog and try moving the playhead in AE’s timeline to another frame. That should cause AE to attempt to gain control of the QuickTime output component again. Since the other app should have released the component by now, it should work.
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[John Nelson] “The activity monitor just shows CPU activity, along with the other stuff, not multiple CPU’s, right? Uninformed minds want to know…”
There are two easy ways in Activity Monitor to see how much CPU power your computer is using.
The first is to sort all the processes by the CPU % column. On your Quad, you’d want After Effects to be as close to 400% as possible. Since there are other processes running, you won’t get there, but ideally it’d be over 350% if you’re not running any other programs (excluding OS X itself). I have a feeling that AE is only running at 125 – 150% when you render.
The second method is to look at the CPU graph window. As I recall, you get to that through the Window menu. You’ll get a vertical bar graph for each CPU. The more the four bars are near the top, the more your CPUs are being utilized. With AE 6.5 and without Nucleo, you will probably see alternating bars spiking to 100%.
With Nucleo installed, you should see separate processes in Activity Monitor (on mine, they show up as ‘aerendercore’ in Activity Monitor’s list), and each of them should use close to 100%. The CPU graph would show all four CPUs at full utilization.
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[Robert Thomas] “Still Missing Codecs
I tried the QT 7.4.1 update on a mac power pc laptop (10.4.11) I use for testing, it rendered fine in about 30 minutes. No problem. However the choices of codecs are still limited. I won’t be updating my Mac Pro until I find out why.
Missing codecs:
BMP
Cinepak
Component Video
Graphics
H.261
H.263
Motion JPEG A
Motion JPEG B
Planar RGB
Sorenson Video
Sorenson Video3
TGA
TIFF
Video “Have you tried going into System Preferences -> QuickTime -> Advanced and checking the box marked “Show legacy encoders”?
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Artbeats has some stock footage of bullet holes in wood. Of course, it’s not free.
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[Dave LaRonde] “There will be other posts coming.”
Or this one!
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That eBay one is a PC X800 that’s had its ROM flashed to work in a Mac. Note the seller’s details on a few items – the DVI doesn’t work, so you can only hook up analog VGA displays. That’s one of the side effects of flashing the card. The fact that is has “Gigabyte Technologies” on the cooling system is another dead giveaway that it’s been flashed.
For new, Mac Edition X800XTs, give OWC a try: https://eshop.macsales.com/item/ATI%20Technologies/100435338/