Legal Question in Tax Law in California

file segregation

hi, I've been a wage slave my entire life (37) in residential construction and seem to live paycheck to paycheck no matter what. I cant seem to get my papers in order or muster up the couple gerr required to be a contractor(lics,bond,ins,etc.)Although Im getting paid by the square ft I cant get out from under the w-4 form. my earnings are converted to hourly wages for tax purposes I guess. several contractors work for the same company doin the same thing I do for 32% more money and handle there own taxes etc. I feel like a contractor w out write offs. the more I make the less I take home. My personel credit is all but shot at 508 and minimum payments dont even cover interest.30K in back taxes also make it hard to get out of bed each day. I know its wrong to get a EIN to reinvent a credit file,but what about using one to replace a w-4? The last few yrs I,ve focused on just the framing layout of homes which requires no power tools and there's a high demand for it. My question is this: Can I start an LLC then replace the w-4 with anEIN at my current job and approach other builders as well? I just started doing side work for another builder and there's that w-4 form again


Asked on 6/02/07, 5:19 pm

1 Answer from Attorneys
Donald Field Donald L. Field, Jr., Attorney at Law

Re: file segregation

using an LLC may give you more control over the deductible expenses of your business, but it will not otherwise likely reduce your income taxes. you will need to decide whether or not to treat the LLC as a disregarded entity, a partnership or a corporation for income tax purposes. if you do not pay yourself a salary (but take a draw from an LLC which is a disregarded entity or taxed as a partnership), you will need to file estimated taxes and the full amount of social security taxes will be paid on your personal income tax return. the LLC will not affect any back taxes owed or improve your credit rating.

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Answered on 6/13/07, 1:13 pm


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