You only pay self employment tax on income from a business activity. Generally 1040 Schedule C. If you do free-lance work or own a business as a 'sole proprietor' then you file Schedule C, and pay self employment tax, and you can deduct one half of that.
My business is an S Corp. I file a Schedule E to report any corporate earnings I receive, other than payroll or dividends. Schedule E earnings are not subject to employment taxes. Dividends are reported on Schedule B, and are taxed at a max rate of 15%.
Badly worded. I meant, I hate GIVING interest free loans to the government, therefore I hate getting some of my money refunded. I only want to pay precisely what I owe. On my W-4, I mark down more than my actual exemptions, so I underpay my taxes. I then make it up with quarterly estimated tax payments, and a bit on April 15th. As for ends barely meeting, my system ensures that I have more money year-round, not just some big windfall in April every year. Plus I earn the interest, not Uncle Sam, however little it may be.
Um, THIRTY percent? Are you counting all your taxes, federal income, FICA, state, sales, use, property, and so forth?
Our federal income tax burden is around FIVE percent of gross for 2004. Married couple, one child. That's not including FICA on the wage portion of income. Also, I owe money... I hate refunds, otherwise known as interest free government loans. Quarterly estimated taxes baby.
Where do you live? I live in urban Chicago... where postal workers are known to stuff undelivered mail under their porch so they can just stay home and drink all day.
Who knows... I've broken CDs myself with cracks like that. Never had one shatter into shards. As for how it happens in the postal system, I haven't a clue. But it does.
The WSJ had a good article about this. Hint: why do you think Comcast was hot to buy Disney? The problem with VOD is content. The content providers do not want to provide content for VOD delivery for a price that will permit Comcast to deliver it, especially when Comcast wants to offer it for no extra monthly fee. That is the kicker. Getting content providers, ESPECIALLY of recently released movies, to permit delivery via VOD for a price that makes even a reasonable monthly flat fee possible.
Content providers have in their sights now HD-DVD and reselling DVDs all over again in that new format, for probably $30/pop at first. Why on earth would they let a cable company take away that plump cashflow, especially without ironclad, unbreakable methods to prevent the copying of the content when delivered.
It predict that it will take nothing less than consolidation between the cable companies and content providers, ala ComDisney. That, and cable companies pumping money into their own fresh content to bypass the major studios, which has already begun. So, I wouldn't hold my breath waiting for any breadth of popular movies to show up on your VOD service any time soon, except maybe on a PPV basis. If it does happen, it might come on the back of something we won't like: even bigger, more powerful, and fewer super conglomerates controlling all media.
Oh my lord. I'm on like my 77th month of service, and I've never encountered any "unreasonable" slowness of service that I wouldn't blame on my occasional slow-ass urban mail service. Of course, I have a life (job, wife, hobbies, boat, now a kid) so I'm not renting a dozen movies a week. I don't have a DVD ripper either, which might also explain it.
So, how big is your DVD collection? I'm convinced that those Netflix DVDs that go missing wind up in some postal employee's collection...:-) Seriously though, sure I've had a bill or two go missing, but Netflix DVDs... a couple dozen have disappeared into the void over the years.
I've done the Netflix thing for years... when my wife got pregnant, I thought it would work out even better, since we wouldn't be able to go out as much. Damn if it isn't worse (in a good way) with our three month old. We can barely find the time to sit down and actually watch a movie, I have discovered.
Yeah, you pimply Slashdotters... wait til you have kids.
Netflix is in business to make money. I know they do that rationing of heavy customers, and I don't mind one tiny bit. Why: I want them to survive and continue to offer an incredibly broad and diverse selection of movies to be delivered to my home for a reasonable monthly rate. I don't want to have to resort to some lame companies like Blockbuster or Walmart. The Netflix business model is predicated on customers who have actual real lives, and don't watch twelve damn movies a week. If I ran Netflix, I'd cut you people loose, or charge you more. But what they do instead, throttling your consumption, is fair enough, as it is passive and lets them maintain their pricing model.
As for intentionally denying getting it. Give me a break. Maybe they do, maybe they don't. I doubt it. I've been a member of Netflix since they opened shop, 1998, back when I bought my first DVD player and paid through the nose for it. I'm grandfathered in to the four-DVDs/month plan, but pay for three. I have about 500 DVDs in my queue (of course I'm delusional to think I'll ever get all those, esp. since we just had a baby), and my wife has a couple dozen in hers now (that new split queue feature is excellent). Over those almost seven years, I've rented hundreds of movies from them. I've returned movies and gotten the replacement BEFORE Netflix even indicated that they'd received the return. Netflix has never received probably a dozen of the movies I've returned, and they've always taken it on the chin. I've never received a good number they sent. I've received movies that were broken clean in half, or more pieces. And I'm still thrilled with the service. Just not the Postal Service. I'm sure some bastard mail handler has a lot of those missing movies sitting at home.
I've been their customer since before they went the subscription route, in 1998. I've seen several discs like that. Just one half broken, from center to edge. I'm in Chicago, and I've seen how our mail gets treated. I once had a carrier open my mailbox, the kind in a building where it swings open and you put the mail in from the top. The bastard put the envelopes over the opening, and then pushed them down into the box from the center, making a nice wad/funnel out of my mail. I've also had a number of discs disappear, into the collection of USPS employees I am sure. Bastards.
The IRS knows that Joe Blow Inc. is not the same as Mega Corp., I doubt they'd be so simple. The thing to do is determine what you would pay a person to do what you do. If my company bills out at, say, $125/hr, there is no way I pay my employee that much. As the owner, you are paid on two things, reasonable pay for the actual work you do that is billable, and the work you do running the business. The tax strategy for an S corp is to pay yourself as little as possible, and take the rest in distributions. For an S corp with a single employee, you probably need to take more in salary than distributions. With employees and attendant profit from labor other than your own, that may wind up being not true. What I read is that to be completely safe, and if your company is profitable, pay yourself the FICA ceiling, which is around $88k. You own no social security taxes beyond that anyway. So, anything above $88k, pay as dividends.
I suppose I could have worded that better. The guidance I received is that exclusive use of the space doesn't mean that you cannot sit at your desk when you are not doing business, that you cannot take a personal call there, that you needn't tackle your kid before he wanders into it, so on. It means that the area is set aside specifically for business use. It is not space that is expected to serve dual purposes, but it needn't be walled off either. You cannot write off the couch in your living room because you occasionally do work there on your laptop. If the IRS walks into your home and sees your home office, it needs to be a home office, not your kitchen table. I was told not to be anal about it, treat it like you would your office if you were renting space.
The guidance I was given was that you need to be paid a "reasonable" salary. I pay all of my profit, anything beyond the "reasonable" salary I pay myself for my actual work, as qualified dividends. Reasonable is subjective, and depends on the nature of the work performed. There are no hard numbers. As I own an S corporation, all profit (and depreciation expense) is pass-through to shareholders. That money would come to me as dividends, or at the end of the year as pass-through profit. Neither have payroll taxes. One of the difference between me and others here, perhaps, is that I have employees, from whom I earn profit.
A friend of mine was told by her accountant to pay herself completely via distribution/dividends... I don't go that far, and I think she was given bad guidance.
A standard part of a corporate vendor relationship is giving your client information, such as your EIN. For your information, they are legally required to file a 1099 with the IRS covering all payments that they made to you in any year where the total exceeded $600.
Actually... from the IRS instructions for 1099-MISC:
Exceptions. Some payments are not required to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include:
Generally, payments to a corporation; but see Payments reportable to corporations on page MISC-2;
You are not required to file a 1099 for payments to any form of a corporation, except for these specific exceptions:
Medical and health care payments reported in box 6. Fish purchases for cash reported in box 7. Attorneys' fees reported in box 7. Gross proceeds paid to an attorney reported in box 14. Substitute payments in lieu of dividends or tax-exempt interest reported in box 8. Payments by a Federal executive agency for services (vendors) reported in box 7.
It is not the form of the corporation that matters, it is the payment.
So in this case, if the vendor is a corporation, then the client need not file a 1099.
Good message. I'd like to add some real numbers to this too.
I own an S corporation, with two employees. We do technology consulting/software development, not just "PC repair" type work, so our hours are more regular as we get long term and short term contracts. BTW, every business client I have is bound by a contract, whether it mandates a fixed number of hours, or is open-ended. That is a good policy to protect all parties.
For fiscal year 2004, we paid out $388.00 for liability insurance, and $1028.00 for workman's compensation. You *must* have workman's compensation if you have employees. If you are a corporation, you are an employee, even if you own 100% of the stock. Liability insurance is a requirement if you are serious, as most clients will expect it and many will request a certificate of insurance. If you ever work through a headhunter, they'll want a cert for both liability and workman's.
Taxes were a mere $195, though that was really for fiscal 2003. Most all income is passed through, either as reimbursable expenses, payroll, contributions to the SEP-IRA plan (mandatory 10% of pay for all employees), or dividends (for me). Unfortunately, I do not have group health insurance, but do pay into HSAs if established.
Looking at my 2004 P&L sheet, there are tons of expenses which add up. Bank fees, business cards, promotional materials, fax line, phone/cell, office supplies, office equipment, technology to use and/or to keep you up-to-date, continuing education expenses. There is the time you spend on running the show, which is not billable of course: tax administration, paperwork, accounting, finding clients.
Once you run a business and do all these things, you realize that there is no way you can charge as little as some geeks charge, and still run an actual business. I say $75.00/hr is a bare minimum to make it worthwhile, and that is for simple things. More complex projects are worth more.
You must have an area where you perform mainly business tasks. It needn't be dedicated 100%, and it needn't be a walled off room. It could just be a corner of a room with a desk and filing cabinet and such. That's what I used to do when I filed as a schedule C sole proprietorship. The IRS mandates that you determine the square footage being used for the business, and then calculate a percentage of your expenses which you can then deduct.
However, once I incorporated, I lost that deduction. I looked into renting a room in my home to my business, but then you just claim that as rental income, so what is the point. I do, however, reimburse myself for utility expenses related to the business, such as the fax line, cell phone bill, portion of electricity, and DSL line. Make sure you have an "accountable reimbursement plan" for that.
If you are really going to have a business, incorporate and register as a subchapter S corporation. It does not cost much, and it comes with many advantages.
There is the limited liability aspect, where you are only liable for up to the amount you have invested. So if you authorize 1,000,000 shares, and then issue 5,000 of them to yourself at a price of $1.00 per share, your liability is only $5000.00, max.
There is the advantage in most states of not needing to register in each county in which you do business. Your assumed name for the business is valid state-wide.
Tax-wise, you file a separate return, the 1120S for an S corp, and pass through the profit, or loss, to your personal taxes. You have flexibility in deductions for business expenses as a corporation you wouldn't have as a schedule C filer. One thing you do lose is the home office deduction. You do not get that if you are an employee of your corporation. You can pay yourself mileage though, $0.37 or so a mile. You could also sell your car to your business and have it pay for it, and then claim personal usage as a fringe benefit. You'd still come out ahead most likely.
And very importantly, you can pay yourself dividends. Dividends are not wages, and you do not owe any payroll taxes for them: no social security, no medicare. They are taxed at a flat rate, as low as 5% now. The max is 15%. Payroll taxes ALONE are 12.4%. You just need to be sure to pay estimated taxes, so you don't get socked for under-withholding.
Hubble was designed for an era which is dead and gone, if it ever existed: space shuttles making routine trips to orbit. It *requires* regular missions by shuttles in order to operate. That is dead and gone. Since Hubble was built, there have been two catastrophic shuttle disasters, with the loss of the crew and vehicle, and we aren't building more of them. They are a finite resource, far more expensive and risky to operate than expected. The space station requires the shuttle in order to be completed. Not only do we have obligations to complete the station, but the station provides a safe way station in the event of damage to the shuttle. There is no such place for a mission to Hubble.
NASA has decided that the risk to the vehicle and to human life is not justified by a mission to eke out a few more years of life for Hubble. It is a wise decision. Better to design a new orbiting optical telescope which is suited for the new, post-shuttle era. It would probably cost around the same as a shuttle mission, pose far less risk, and would provide a longer payoff for the investment. Get over these emotional ties to Hubble. It is going to burn up in the atmosphere. Get over it. I'd much rather see the remaining shuttles in museums than see one more streaking across the sky in flames with seven suffering fellow humans in it, their remains scattered across a few states, in the name of servicing an old telescope that should just be replaced with an updated more modern successor. As a former AAE from Purdue, I'm all for taking risks in our space program, but not for something so pointless.
I've been putting machines directly (24/7 connection, routed address) on the ARPA/NSF/Internet since the 1980s. I have yet to put a Un*x box behind a dedicated hardware (non Un*x) firewall. The available OS based security has always been sufficient. Windows, however, I refuse to ever put directly onto the Internet. It is always behind a secure firewall, preferably a Un*x box, and assigned a non-routable private address.
This Dowling case clearly establishes that copyright infringement, is just that, infringement of copyright.
It is not technically theft.
Not "technically" theft. To delve into this (note, that page calls the ruling, at twelve pages, "kind of long" -- that statement shows that the author hasn't read many substantive SCOTUS rulings -- it is in fact a quite brief ruling, hope you read it), the SCOTUS ruling in Dowling, per the summary of conclusions, is very clear in that they did not find an intent of Congress to criminalize copyright infringement. They wrote: Since the statutorily defined property rights of a copyright holder have a character distinct from the possessory interest of the owner of simple "goods, wares, [or] merchandise," interference with copyright does not easily equate with theft, conversion, or fraud.
Note two things. First, the Supremes were not devining some everlasting moral truth regarding copyright infringement and theft. Rather, they were interpreting Congressional intent as of approximately 1980, specifically as to whether a particular action can be considered theft in a statutory sense, in particular since the bundle of statutory rights associated with a copyright is more complex than simple "goods, wares, [or] merchandise[.]" Second, that was 1985, an appellate ruling on a case heard originally in 1980.
The last ruling by the Supremes directly regarding the Second Amendment to the Federal Constitution (Miller) found that as the defendant (who did not show up in court) did not prove that a sawed off shotgun was in common use by the United States Army, Congress could ban its possession. That is the extant standard by which the Second Amendment is officially viewed by the SCOTUS. Would you argue, however, that a ruling in the 1930s is the last word on the issue? There are many who quite passionately would not. Just as today it is unlikely that the Supremes would overturn a federal ban on so-called "assault weapons" based on that criteria (the U.S. Army uses them), likewise it is rather unlikley that Dowling would be the last word on the issue of copyright infringement and the criminality thereof. Congressional intent has changed over the course of 25 years. Copyright law has adapted, and Congressional intent to make circumvention of the protection of copyrighted works a crime is now law.
Further, I believe that taking something which is not yours, without permission, is theft, regardless of whether it is actionable under criminal or civil juris. Semantics matter greatly when one is in court. However, in a discussion of the morality of the issue, I believe that the larger meaning of the word theft is appropriate, and I shall assuredly continue to use it.
I highly doubt that you purchased the music. You purchased a right to listen to/play/perform the music, what we call a license. That license has restrictions to which you agreed by the act of purchase.
Look, you must understand that you have no innate right to the music. None. Every last right in that music belongs 100% to the author and then to those to whom he has delegated rights. The only rights you obtain in the work are those granted to you, under the terms granted. Just because it is only recently that authors have had the technical ability provided to them to sell more fine-grained rights in the work, via encryption and DRM, doesn't make that any less their right to do with their works. If you don't like the terms, do not buy it! If you and one hundred million of your friends do that, the industry would surely listen. But instead, you just have to have that new Britney Spears song! To play on your kewl portable music player. Your short term desire to listen to music is more important to you than the long-term goal of forcing change in the way music is marketed. If you and many millions of like-minded friends don't have the stomach for a long-term, years-long consumer revolt against purchasing music when the terms are disagreeable, then the market will not adapt, as you provide it no reason.
As for Microsoft, the fact that you value your short-term pleasure (playing games) more than the long term effect of denying revenue to Microsoft is of no matter. In the final analysis, you are rewarding Microsoft for their market behavior: you are buying their products. How your money gets into their bank account matters not. This is analogous to purchasing clothing made by slave labor is some third world country, contributing to the profit of the slaveholder, and then stating that just because you wanted to save $1.37 over the other, non slave-produced product, you in no way whatsoever support slavery. You want to have your cake, and eat it too. You can't do it.
Also, keep in mind that I am speaking of a legal principle here, inherent in the functioning of a free market economy: the protection of property rights. Given full disclosure by all parties, agreements must be respected and enforced. In the case of DRM and Apple, that is the case. There is a license agreement presented to purchasers prior to purchase, disclosing the terms of the purchase. However, in the case of DRM and CDs purchased in the store, where said CD has no disclosure, I would argue that the purchaser has, at minimum, a right to return the product when the product is not what was reasonably expected: unencrypted music. Likewise, purchasers of software with "shrinkwrap" licenses, not disclosed prior to purchase, should have an uninhibited right to return the software.
I am not entirely on the side of the Big Evil Corporations. I am however on the side of the owners of property, and believe that the terms under which that property is sold or licensed must be respected and enforced by law, whether criminal or civil. If the terms are odious, then the market will respond. Perhaps it will take many years, but it will respond. If the market accepts the terms, despite your personal disagreement, well, that's life.
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You only pay self employment tax on income from a business activity. Generally 1040 Schedule C. If you do free-lance work or own a business as a 'sole proprietor' then you file Schedule C, and pay self employment tax, and you can deduct one half of that.
My business is an S Corp. I file a Schedule E to report any corporate earnings I receive, other than payroll or dividends. Schedule E earnings are not subject to employment taxes. Dividends are reported on Schedule B, and are taxed at a max rate of 15%.
Larry
Not true. Our son's Social Security card came in the mail a month ago. In an unmarked envelope at least.
Larry
Badly worded. I meant, I hate GIVING interest free loans to the government, therefore I hate getting some of my money refunded. I only want to pay precisely what I owe. On my W-4, I mark down more than my actual exemptions, so I underpay my taxes. I then make it up with quarterly estimated tax payments, and a bit on April 15th. As for ends barely meeting, my system ensures that I have more money year-round, not just some big windfall in April every year. Plus I earn the interest, not Uncle Sam, however little it may be.
Larry
Um, THIRTY percent? Are you counting all your taxes, federal income, FICA, state, sales, use, property, and so forth?
Our federal income tax burden is around FIVE percent of gross for 2004. Married couple, one child. That's not including FICA on the wage portion of income. Also, I owe money... I hate refunds, otherwise known as interest free government loans. Quarterly estimated taxes baby.
Larry
Where do you live? I live in urban Chicago... where postal workers are known to stuff undelivered mail under their porch so they can just stay home and drink all day.
Larry
Who knows... I've broken CDs myself with cracks like that. Never had one shatter into shards. As for how it happens in the postal system, I haven't a clue. But it does.
Larry
The WSJ had a good article about this. Hint: why do you think Comcast was hot to buy Disney? The problem with VOD is content. The content providers do not want to provide content for VOD delivery for a price that will permit Comcast to deliver it, especially when Comcast wants to offer it for no extra monthly fee. That is the kicker. Getting content providers, ESPECIALLY of recently released movies, to permit delivery via VOD for a price that makes even a reasonable monthly flat fee possible.
Content providers have in their sights now HD-DVD and reselling DVDs all over again in that new format, for probably $30/pop at first. Why on earth would they let a cable company take away that plump cashflow, especially without ironclad, unbreakable methods to prevent the copying of the content when delivered.
It predict that it will take nothing less than consolidation between the cable companies and content providers, ala ComDisney. That, and cable companies pumping money into their own fresh content to bypass the major studios, which has already begun. So, I wouldn't hold my breath waiting for any breadth of popular movies to show up on your VOD service any time soon, except maybe on a PPV basis. If it does happen, it might come on the back of something we won't like: even bigger, more powerful, and fewer super conglomerates controlling all media.
Larry
Oh my lord. I'm on like my 77th month of service, and I've never encountered any "unreasonable" slowness of service that I wouldn't blame on my occasional slow-ass urban mail service. Of course, I have a life (job, wife, hobbies, boat, now a kid) so I'm not renting a dozen movies a week. I don't have a DVD ripper either, which might also explain it.
Larry
So, how big is your DVD collection? I'm convinced that those Netflix DVDs that go missing wind up in some postal employee's collection... :-) Seriously though, sure I've had a bill or two go missing, but Netflix DVDs... a couple dozen have disappeared into the void over the years.
Larry
I've done the Netflix thing for years... when my wife got pregnant, I thought it would work out even better, since we wouldn't be able to go out as much. Damn if it isn't worse (in a good way) with our three month old. We can barely find the time to sit down and actually watch a movie, I have discovered.
Yeah, you pimply Slashdotters... wait til you have kids.
Larry
Netflix is in business to make money. I know they do that rationing of heavy customers, and I don't mind one tiny bit. Why: I want them to survive and continue to offer an incredibly broad and diverse selection of movies to be delivered to my home for a reasonable monthly rate. I don't want to have to resort to some lame companies like Blockbuster or Walmart. The Netflix business model is predicated on customers who have actual real lives, and don't watch twelve damn movies a week. If I ran Netflix, I'd cut you people loose, or charge you more. But what they do instead, throttling your consumption, is fair enough, as it is passive and lets them maintain their pricing model.
As for intentionally denying getting it. Give me a break. Maybe they do, maybe they don't. I doubt it. I've been a member of Netflix since they opened shop, 1998, back when I bought my first DVD player and paid through the nose for it. I'm grandfathered in to the four-DVDs/month plan, but pay for three. I have about 500 DVDs in my queue (of course I'm delusional to think I'll ever get all those, esp. since we just had a baby), and my wife has a couple dozen in hers now (that new split queue feature is excellent). Over those almost seven years, I've rented hundreds of movies from them. I've returned movies and gotten the replacement BEFORE Netflix even indicated that they'd received the return. Netflix has never received probably a dozen of the movies I've returned, and they've always taken it on the chin. I've never received a good number they sent. I've received movies that were broken clean in half, or more pieces. And I'm still thrilled with the service. Just not the Postal Service. I'm sure some bastard mail handler has a lot of those missing movies sitting at home.
Larry
I've been their customer since before they went the subscription route, in 1998. I've seen several discs like that. Just one half broken, from center to edge. I'm in Chicago, and I've seen how our mail gets treated. I once had a carrier open my mailbox, the kind in a building where it swings open and you put the mail in from the top. The bastard put the envelopes over the opening, and then pushed them down into the box from the center, making a nice wad/funnel out of my mail. I've also had a number of discs disappear, into the collection of USPS employees I am sure. Bastards.
Larry
The IRS knows that Joe Blow Inc. is not the same as Mega Corp., I doubt they'd be so simple. The thing to do is determine what you would pay a person to do what you do. If my company bills out at, say, $125/hr, there is no way I pay my employee that much. As the owner, you are paid on two things, reasonable pay for the actual work you do that is billable, and the work you do running the business. The tax strategy for an S corp is to pay yourself as little as possible, and take the rest in distributions. For an S corp with a single employee, you probably need to take more in salary than distributions. With employees and attendant profit from labor other than your own, that may wind up being not true. What I read is that to be completely safe, and if your company is profitable, pay yourself the FICA ceiling, which is around $88k. You own no social security taxes beyond that anyway. So, anything above $88k, pay as dividends.
Larry
I suppose I could have worded that better. The guidance I received is that exclusive use of the space doesn't mean that you cannot sit at your desk when you are not doing business, that you cannot take a personal call there, that you needn't tackle your kid before he wanders into it, so on. It means that the area is set aside specifically for business use. It is not space that is expected to serve dual purposes, but it needn't be walled off either. You cannot write off the couch in your living room because you occasionally do work there on your laptop. If the IRS walks into your home and sees your home office, it needs to be a home office, not your kitchen table. I was told not to be anal about it, treat it like you would your office if you were renting space.
Larry
The guidance I was given was that you need to be paid a "reasonable" salary. I pay all of my profit, anything beyond the "reasonable" salary I pay myself for my actual work, as qualified dividends. Reasonable is subjective, and depends on the nature of the work performed. There are no hard numbers. As I own an S corporation, all profit (and depreciation expense) is pass-through to shareholders. That money would come to me as dividends, or at the end of the year as pass-through profit. Neither have payroll taxes. One of the difference between me and others here, perhaps, is that I have employees, from whom I earn profit.
A friend of mine was told by her accountant to pay herself completely via distribution/dividends... I don't go that far, and I think she was given bad guidance.
Larry
A standard part of a corporate vendor relationship is giving your client information, such as your EIN. For your information, they are legally required to file a 1099 with the IRS covering all payments that they made to you in any year where the total exceeded $600.
Actually... from the IRS instructions for 1099-MISC:
Exceptions. Some payments are not required to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include:
Generally, payments to a corporation; but see Payments reportable to corporations on page MISC-2;
You are not required to file a 1099 for payments to any form of a corporation, except for these specific exceptions:
Medical and health care payments reported in box 6.
Fish purchases for cash reported in box 7.
Attorneys' fees reported in box 7.
Gross proceeds paid to an attorney reported in box 14.
Substitute payments in lieu of dividends or tax-exempt interest reported in box 8.
Payments by a Federal executive agency for services (vendors) reported in box 7.
It is not the form of the corporation that matters, it is the payment.
So in this case, if the vendor is a corporation, then the client need not file a 1099.
Larry
Good message. I'd like to add some real numbers to this too.
I own an S corporation, with two employees. We do technology consulting/software development, not just "PC repair" type work, so our hours are more regular as we get long term and short term contracts. BTW, every business client I have is bound by a contract, whether it mandates a fixed number of hours, or is open-ended. That is a good policy to protect all parties.
For fiscal year 2004, we paid out $388.00 for liability insurance, and $1028.00 for workman's compensation. You *must* have workman's compensation if you have employees. If you are a corporation, you are an employee, even if you own 100% of the stock. Liability insurance is a requirement if you are serious, as most clients will expect it and many will request a certificate of insurance. If you ever work through a headhunter, they'll want a cert for both liability and workman's.
Taxes were a mere $195, though that was really for fiscal 2003. Most all income is passed through, either as reimbursable expenses, payroll, contributions to the SEP-IRA plan (mandatory 10% of pay for all employees), or dividends (for me). Unfortunately, I do not have group health insurance, but do pay into HSAs if established.
Looking at my 2004 P&L sheet, there are tons of expenses which add up. Bank fees, business cards, promotional materials, fax line, phone/cell, office supplies, office equipment, technology to use and/or to keep you up-to-date, continuing education expenses. There is the time you spend on running the show, which is not billable of course: tax administration, paperwork, accounting, finding clients.
Once you run a business and do all these things, you realize that there is no way you can charge as little as some geeks charge, and still run an actual business. I say $75.00/hr is a bare minimum to make it worthwhile, and that is for simple things. More complex projects are worth more.
Larry
You must have an area where you perform mainly business tasks. It needn't be dedicated 100%, and it needn't be a walled off room. It could just be a corner of a room with a desk and filing cabinet and such. That's what I used to do when I filed as a schedule C sole proprietorship. The IRS mandates that you determine the square footage being used for the business, and then calculate a percentage of your expenses which you can then deduct.
However, once I incorporated, I lost that deduction. I looked into renting a room in my home to my business, but then you just claim that as rental income, so what is the point. I do, however, reimburse myself for utility expenses related to the business, such as the fax line, cell phone bill, portion of electricity, and DSL line. Make sure you have an "accountable reimbursement plan" for that.
Larry
If you are really going to have a business, incorporate and register as a subchapter S corporation. It does not cost much, and it comes with many advantages.
There is the limited liability aspect, where you are only liable for up to the amount you have invested. So if you authorize 1,000,000 shares, and then issue 5,000 of them to yourself at a price of $1.00 per share, your liability is only $5000.00, max.
There is the advantage in most states of not needing to register in each county in which you do business. Your assumed name for the business is valid state-wide.
Tax-wise, you file a separate return, the 1120S for an S corp, and pass through the profit, or loss, to your personal taxes. You have flexibility in deductions for business expenses as a corporation you wouldn't have as a schedule C filer. One thing you do lose is the home office deduction. You do not get that if you are an employee of your corporation. You can pay yourself mileage though, $0.37 or so a mile. You could also sell your car to your business and have it pay for it, and then claim personal usage as a fringe benefit. You'd still come out ahead most likely.
And very importantly, you can pay yourself dividends. Dividends are not wages, and you do not owe any payroll taxes for them: no social security, no medicare. They are taxed at a flat rate, as low as 5% now. The max is 15%. Payroll taxes ALONE are 12.4%. You just need to be sure to pay estimated taxes, so you don't get socked for under-withholding.
Larry
Hubble was designed for an era which is dead and gone, if it ever existed: space shuttles making routine trips to orbit. It *requires* regular missions by shuttles in order to operate. That is dead and gone. Since Hubble was built, there have been two catastrophic shuttle disasters, with the loss of the crew and vehicle, and we aren't building more of them. They are a finite resource, far more expensive and risky to operate than expected. The space station requires the shuttle in order to be completed. Not only do we have obligations to complete the station, but the station provides a safe way station in the event of damage to the shuttle. There is no such place for a mission to Hubble.
NASA has decided that the risk to the vehicle and to human life is not justified by a mission to eke out a few more years of life for Hubble. It is a wise decision. Better to design a new orbiting optical telescope which is suited for the new, post-shuttle era. It would probably cost around the same as a shuttle mission, pose far less risk, and would provide a longer payoff for the investment. Get over these emotional ties to Hubble. It is going to burn up in the atmosphere. Get over it. I'd much rather see the remaining shuttles in museums than see one more streaking across the sky in flames with seven suffering fellow humans in it, their remains scattered across a few states, in the name of servicing an old telescope that should just be replaced with an updated more modern successor. As a former AAE from Purdue, I'm all for taking risks in our space program, but not for something so pointless.
Larry
No, it was not assembled in orbit.
Larry
Yes, and I'm sure they also whined and moaned about all the money being wasted, that could feed hungry, poor masses.
Larry
I've been putting machines directly (24/7 connection, routed address) on the ARPA/NSF/Internet since the 1980s. I have yet to put a Un*x box behind a dedicated hardware (non Un*x) firewall. The available OS based security has always been sufficient. Windows, however, I refuse to ever put directly onto the Internet. It is always behind a secure firewall, preferably a Un*x box, and assigned a non-routable private address.
Larry
According to the link:
This Dowling case clearly establishes that copyright infringement, is just that, infringement of copyright.
It is not technically theft.
Not "technically" theft. To delve into this (note, that page calls the ruling, at twelve pages, "kind of long" -- that statement shows that the author hasn't read many substantive SCOTUS rulings -- it is in fact a quite brief ruling, hope you read it), the SCOTUS ruling in Dowling, per the summary of conclusions, is very clear in that they did not find an intent of Congress to criminalize copyright infringement. They wrote: Since the statutorily defined property rights of a copyright holder have a character distinct from the possessory interest of the owner of simple "goods, wares, [or] merchandise," interference with copyright does not easily equate with theft, conversion, or fraud.
Note two things. First, the Supremes were not devining some everlasting moral truth regarding copyright infringement and theft. Rather, they were interpreting Congressional intent as of approximately 1980, specifically as to whether a particular action can be considered theft in a statutory sense, in particular since the bundle of statutory rights associated with a copyright is more complex than simple "goods, wares, [or] merchandise[.]" Second, that was 1985, an appellate ruling on a case heard originally in 1980.
The last ruling by the Supremes directly regarding the Second Amendment to the Federal Constitution (Miller) found that as the defendant (who did not show up in court) did not prove that a sawed off shotgun was in common use by the United States Army, Congress could ban its possession. That is the extant standard by which the Second Amendment
is officially viewed by the SCOTUS. Would you argue, however, that a ruling in the 1930s is the last word on the issue? There are many who quite passionately would not. Just as today it is unlikely that the Supremes would overturn a federal ban on so-called "assault weapons" based on that criteria (the U.S. Army uses them), likewise it is rather unlikley that Dowling would be the last word on the issue of copyright infringement and the criminality thereof. Congressional intent has changed over the course of 25 years. Copyright law has adapted, and Congressional intent to make circumvention of the protection of copyrighted works a crime is now law.
Further, I believe that taking something which is not yours, without permission, is theft, regardless of whether it is actionable under criminal or civil juris. Semantics matter greatly when one is in court. However, in a discussion of the morality of the issue, I believe that the larger meaning of the word theft is appropriate, and I shall assuredly continue to use it.
Larry
I highly doubt that you purchased the music. You purchased a right to listen to/play/perform the music, what we call a license. That license has restrictions to which you agreed by the act of purchase.
Look, you must understand that you have no innate right to the music. None. Every last right in that music belongs 100% to the author and then to those to whom he has delegated rights. The only rights you obtain in the work are those granted to you, under the terms granted. Just because it is only recently that authors have had the technical ability provided to them to sell more fine-grained rights in the work, via encryption and DRM, doesn't make that any less their right to do with their works. If you don't like the terms, do not buy it! If you and one hundred million of your friends do that, the industry would surely listen. But instead, you just have to have that new Britney Spears song! To play on your kewl portable music player. Your short term desire to listen to music is more important to you than the long-term goal of forcing change in the way music is marketed. If you and many millions of like-minded friends don't have the stomach for a long-term, years-long consumer revolt against purchasing music when the terms are disagreeable, then the market will not adapt, as you provide it no reason.
As for Microsoft, the fact that you value your short-term pleasure (playing games) more than the long term effect of denying revenue to Microsoft is of no matter. In the final analysis, you are rewarding Microsoft for their market behavior: you are buying their products. How your money gets into their bank account matters not. This is analogous to purchasing clothing made by slave labor is some third world country, contributing to the profit of the slaveholder, and then stating that just because you wanted to save $1.37 over the other, non slave-produced product, you in no way whatsoever support slavery. You want to have your cake, and eat it too. You can't do it.
Also, keep in mind that I am speaking of a legal principle here, inherent in the functioning of a free market economy: the protection of property rights. Given full disclosure by all parties, agreements must be respected and enforced. In the case of DRM and Apple, that is the case. There is a license agreement presented to purchasers prior to purchase, disclosing the terms of the purchase. However, in the case of DRM and CDs purchased in the store, where said CD has no disclosure, I would argue that the purchaser has, at minimum, a right to return the product when the product is not what was reasonably expected: unencrypted music. Likewise, purchasers of software with "shrinkwrap" licenses, not disclosed prior to purchase, should have an uninhibited right to return the software.
I am not entirely on the side of the Big Evil Corporations. I am however on the side of the owners of property, and believe that the terms under which that property is sold or licensed must be respected and enforced by law, whether criminal or civil. If the terms are odious, then the market will respond. Perhaps it will take many years, but it will respond. If the market accepts the terms, despite your personal disagreement, well, that's life.
Larry