Investing General Discussion

Jysin said:

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Well, that doesn't look good.

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Jackie Treehorn said:

I still say its bullshit stimulus doesn’t go up to $200,000 or so. If you live in a HCOL area you’re not ballin’ all over the place in your yacht.

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Sanrith Descartes said:

Its one reason my wife and I own businesses. All those deductions flowing through the Schedule C and/or the K-1.

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Jackie Treehorn said:

I’ve been thinking about starting some kind of low effort business from home to reap tax benefits. I really need to look into that more. Interesting idea.

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Fogel said:

Instead of lingerie boxing we can do lingerie investing? Call your foxy stock broker now and watch her seductively enter in your stock picks

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Sanrith Descartes said:

Its not a magical "pay no taxes" hat. Companies have to generate revenue to be of any benefit. I don't know what you do, but consulting is a pretty simple company to form. If you have an accounting degree, doing taxes is another bang-up one. IT consulting is also pretty popular. Driving for UberEats or Grubhub on weekends works too. What the company does for you is to help you expense out revenue so it isn't taxable. One reason consulting companies are so good is you can work out of a home office. Having a home office allows you to deduct a small portion of your mortgage/insurance etc as a deduction off the company's taxes. Home office expenses (paper, computer, internet, toner etc) are likewise written off. In and of itself this alone doesnt help you. But lets say you are able to generate 5k or 10k in revenue from your side hustle. That is only like 5-800 a month so not a huge nut. Now you have revenue to work with.

So you make 10k in a year. You then deduct a portion of your car, that home office expense, meals with "clients", travel to <insert family vacation sport here> to "meet with a client or go to a tradeshow" etc. Lets say you end up showing 11k in deductable expenses. Thus your business runs at a loss. That 10k you made is not counted as income on your Schedule C (an LLC passes through profits/losses to the owner's 1040 via the schedule C generally).

Now this doesnt sound like a lot. But consider all those expenses you would have been paying anyway (car, mortgage etc) on money the IRS would take taxes out of. So lets say you are in the 22% tax bracket, that 10k you write off as expenses on your business is a direct savings of $2200 in taxes on that 10k extra you made. The idea is to generate enough revenue to cover those costs you are paying anyways. In essence you are not paying taxes on money you are using to pay a portion of your life expenses.

Its not complicated and it is 100% legal. It only gets illegal when you start falsifying your deductions or revenue. Write off the vacation to Vegas? Make sure you spend 30 minutes talking finance or IT or whatever your business is to a guy at the bar or by the pool or to the waiter at dinner. You dont expense the wife's airline ticket (unless she has her own side hustle and LLC, hint hint) or the kid's. But if you are all staying in the same hotel room, then expensing the room is fine. Historically, the number 1 or 2 red flag to spawn an audit is people getting greedy on their home office expense and trying to write off their entire mortgage. You follow the approved IRS formula for how much you can legally expense based on square footage and stick to it. If you got a 2k mortgage and can write off 5% of it legally, thats 5% you arent deducting now.

Just like in the market... pigs get fat, hogs get audited.

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Sanrith Descartes said:

Its not a magical "pay no taxes" hat. Companies have to generate revenue to be of any benefit. I don't know what you do, but consulting is a pretty simple company to form. If you have an accounting degree, doing taxes is another bang-up one. IT consulting is also pretty popular. Driving for UberEats or Grubhub on weekends works too. What the company does for you is to help you expense out revenue so it isn't taxable. One reason consulting companies are so good is you can work out of a home office. Having a home office allows you to deduct a small portion of your mortgage/insurance etc as a deduction off the company's taxes. Home office expenses (paper, computer, internet, toner etc) are likewise written off. In and of itself this alone doesnt help you. But lets say you are able to generate 5k or 10k in revenue from your side hustle. That is only like 5-800 a month so not a huge nut. Now you have revenue to work with.

So you make 10k in a year. You then deduct a portion of your car, that home office expense, meals with "clients", travel to <insert family vacation sport here> to "meet with a client or go to a tradeshow" etc. Lets say you end up showing 11k in deductable expenses. Thus your business runs at a loss. That 10k you made is not counted as income on your Schedule C (an LLC passes through profits/losses to the owner's 1040 via the schedule C generally).

Now this doesnt sound like a lot. But consider all those expenses you would have been paying anyway (car, mortgage etc) on money the IRS would take taxes out of. So lets say you are in the 22% tax bracket, that 10k you write off as expenses on your business is a direct savings of $2200 in taxes on that 10k extra you made. The idea is to generate enough revenue to cover those costs you are paying anyways. In essence you are not paying taxes on money you are using to pay a portion of your life expenses.

Its not complicated and it is 100% legal. It only gets illegal when you start falsifying your deductions or revenue. Write off the vacation to Vegas? Make sure you spend 30 minutes talking finance or IT or whatever your business is to a guy at the bar or by the pool or to the waiter at dinner. You dont expense the wife's airline ticket (unless she has her own side hustle and LLC, hint hint) or the kid's. But if you are all staying in the same hotel room, then expensing the room is fine. Historically, the number 1 or 2 red flag to spawn an audit is people getting greedy on their home office expense and trying to write off their entire mortgage. You follow the approved IRS formula for how much you can legally expense based on square footage and stick to it. If you got a 2k mortgage and can write off 5% of it legally, thats 5% you arent deducting now.

Just like in the market... pigs get fat, hogs get audited.

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Furry said:

I use my YouTube channel like this. It doesn’t generate much revenue except for the one year it accidentally did, but can bet your ass I deduct every last cent of that revenue in what I spend. Falsifying revenue is one easy way to get hosed as an addition. IRS won’t think twice about revenue from google, which they have to confirm in their own filings. Get too creative and the tax man might come sniffing around.

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Sanrith Descartes said:

One thing to clarify in what you said. You dont have to show "profit in x years", you have to show revenue. Lots of the companies we are buying shares in have never shown a profit.

What your skillset is really determines alot how this will work out for you. My wife is a CPA/MBA so when she got tired of working for someone else and wanted to open her own company it was easy with her skillset. Building clients wasn't so easy but the transition to entrepreneur was. She gets her health care from me. I own a couple of companies with a partner who also has a couple companies i am not a partner in. I am a business consultant for his other companies with my solo company plus a few other clients. Originally it was more of tax write-off thing but it is actually growing more than I thought it would for a part-time gig. Its one reason consulting is such a good side hustle.

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Jackie Treehorn said:

Ohhh, interesting, big difference between revenue and profit obviously. That sounds pretty cool something small worked into something bigger and sounds enjoyable.

I’ll really have to examine this idea some and do reading. I’ve got spare time during the day that would be cool if I could profit on.

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