Employment/Tax Question (2 Viewers)

[Pipe Line]

I have no knowledge on this and I'm probably going to ask multiple dumb questions in this thread. But, am considering the idea of self employment as a second income in 2024. I am going to talk to my tax guy soon to ask similar questions, but want to gather as much information as possible.


This would be a legal business with an LLC, but what are the tax laws in Nebraska surrounding second incomes, or combining incomes?

Full transparency, I'm 31 next month and never really paid much attention to taxes in my early adult life. I just know we have a tax guy at work and we use him for taxes and it just gets done. My wife had a second job for many years and she said she always got clobbered on her taxes because "she never made enough, but also made too much money". That's confusing, but that's what she told me last night when we talked about it.


I'm doing research, but, easier terminology would be helpful from anyone.


Is there a certain amount you need to make for a person with two incomes to not get clobbered or what's the minimum to make it worth it?

 

[Alcaus]

I'm assuming you'd run the business out of your home?

 

[Chi7397]

I think people have a misconception that your marginal tax rate applies to all your income so if you make enough to break into the 24% bracket for example, it’s possible for the taxes to go up enough and eat all the extra income - that’s not how it works.

If you make more money, the extra money may be taxed at a higher rate bc your total income has gone up, but it’s still more income to you.

You should work a CPA for your taxes if you have a side business bc it’s more complicated beyond a W-2, but you won’t get clobbered by taxes regardless.

 

[Adolph Coors]

jim will be able to break it down. my suggestion would be to become an employee of your LLC & draw a salary

 

[Pipe Line]

I'm assuming you'd run the business out of your home?

Not really. Call it weekend lawn care/snow blowing in my neighborhood to start

 

[Chi7397]

jim will be able to break it down. my suggestion would be to become an employee of your LLC & draw a salary

Gotta go S Corp to do that, no?

 

[Pipe Line]

I think people have a misconception that your marginal tax rate applies to all your income so if you make enough to break into the 24% bracket for example, it’s possible for the taxes to go up enough and eat all the extra income - that’s not how it works.

If you make more money, the extra money may be taxed at a higher rate bc your total income has gone up, but it’s still more income to you.

You should work a CPA for your taxes if you have a side business bc it’s more complicated beyond a W-2, but you won’t get clobbered by taxes regardless.

What is a CPA? I know I'm asking tax questions, but through my conversation with my wife last night, my goal of this would be to essentially have more income for daily/monthly/ every few months funds that may come up. We have plans for my daughter as she grows as well as conversations about baby #2. I guess I'm trying to understand if it's worth wearing it on taxes for the added immediate income.

 

[Pipe Line]

jim will be able to break it down. my suggestion would be to become an employee of your LLC & draw a salary

@Jim14510

 

[2010sarenevercoming]

Accept cash only & don't pay taxes.

 

[Pipe Line]

Accept cash only & don't pay taxes.

lol thought about that. Tax Evasion made me hesitant

 

[Savedatmoney]

What is a CPA? I know I'm asking tax questions, but through my conversation with my wife last night, my goal of this would be to essentially have more income for daily/monthly/ every few months funds that may come up. We have plans for my daughter as she grows as well as conversations about baby #2. I guess I'm trying to understand if it's worth wearing it on taxes for the added immediate income.

Constant Pain in the Ass

 

[Alcaus]

Not really. Call it weekend lawn care/snow blowing in my neighborhood to start

I’m not a tax expert but I’ve been under the impression that one of the benefits of starting a home business is the write-offs you can take advantage of such as your mortgage and internet/phone provider.

I’m just unsure what revenue, if any, needs to be shown in order to do so.

 

[Chi7397]

What is a CPA? I know I'm asking tax questions, but through my conversation with my wife last night, my goal of this would be to essentially have more income for daily/monthly/ every few months funds that may come up. We have plans for my daughter as she grows as well as conversations about baby #2. I guess I'm trying to understand if it's worth wearing it on taxes for the added immediate income.

Certified Public Accountant

 

[That SOB Van Owen]

Gotta go S Corp to do that, no?

Correct

 

[That SOB Van Owen]

Making more money means you pay tax on that money. You may get pushed into a higher tax bracket, but that applies only to the marginal income. Your old income is always taxed at that lower rate. Your income from your “day job” won’t be taxed at a higher rate as a result of a side hustle. But the side hustle income may be taxed at a higher rate than your day job income.

When people say they get screwed on their taxes it’s bc they didn’t withhold enough or make estimated payments on their business income. You don’t get money tax free.

 

[herbsinator]

jim will be able to break it down. my suggestion would be to become an employee of your LLC & draw a salary

I don’t think there is much of a point in doing that if the LLC is taxed as a partnership or a disregarded entity. All of the income is getting passed through to the members.

 

[skersker]

Ah the ol “I make too little but also make too much” problem. One of life’s greatest scams

 

[Pipe Line]

Did a little more research over the lunch hour. From my understanding, it's as basic as however much more you make on income, you just get less on your return. The trick is just that balance on having to pay the government or not. From what I'm thinking/planning, my numbers would only cut the return a little bit, so at that point it's just if me and my wife valuing a slightly larger tax return, or immediate financial gain. Personally, I'd value the immediate gain due to it being barely a cut.....assuming I understand correctly.

 

[Pipe Line]

Ah the ol “I make too little but also make too much” problem. One of life’s greatest scams

Financially, it's amazing how much differently I think at 31 in about 6 weeks compared to first being married 6 years ago lol

 

[herbsinator]

Did a little more research over the lunch hour. From my understanding, it's as basic as however much more you make on income, you just get less on your return. The trick is just that balance on having to pay the government or not. From what I'm thinking/planning, my numbers would only cut the return a little bit, so at that point it's just if me and my wife valuing a slightly larger tax return, or immediate financial gain. Personally, I'd value the immediate gain due to it being barely a cut.....assuming I understand correctly.

Just to be clear, whenever you get a tax return that means that you just overpaid the government over the course of the year. Ideally you’d want that to be $0.