Practice English Speaking&Listening with: California LLC Tax Trick

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hi this is Bob Toombs again and I just wanted to show you what I call the

California LLC tax trick now although this is specific to California I'm I

want to show it to everybody because every state really has its own little

tricks and if you can gain insight into what one state does typically you can

get an insight into what your state is likely to do besides if you live in

California I really want you to see this because it's very important what we're

looking at here is the 2007 limited liability company return of income form

568 let's just do a little let's just say that you've made a hundred thousand

dollars for this tax year ok that's terrific now what it comes down to for

this particular trick is lines two and three the limited liability company fee

see instructions and the limited liability company tax see instructions

okay so let's go to the instructions here's

what this is all about I think everybody knows that if you run an LLC in

California you owe $800 to the state regardless of whether you've made any

money or not now if you're just looking at the form if it's your first time

filling this out you're gonna see limited liability company feet well that

sounds like that $800 thing that you've heard about because the $800 is a flat

amount did you have to pay regardless of whether there's any income or not and

then down here limited liability company tax well that sounds like an amount that

would be based on your income because every other tax you've ever seen in your

life is based on the amount that you've made or that your company's made or

whoever has made it to graduated tax if you made this much you owe this much if

you made more than that you owe more than that so you've made a hundred

thousand dollars for the year and there happens to be a cut-off of about two

hundred and fifty thousand dollars this year so you're under that cutoff so you

don't go any of what you would think of as a tax but back to the instructions

where we see annual limited liability company tax LLC's are subject to an

eight hundred dollar annual tax if they are doing business in California

oh wait a minute that thing you thought was a fee is here called a tax and down

here a limited liability company fee in addition to the annual tax every LLC

must pay a fee based on total California income that's a complete reversal of

what any reasonable human being would expect and believe me people make this

mistake I made this mistake friends of mine made this mistake it happens all

the time and here are the consequences if you do this wrong if you fill out

lines two and three wrong many months later you will get something that looks

like this in which they tell you fee nothing tax eight hundred dollars what

they're telling you is that because you put you thought this was a fee so you

put eight hundred dollars here and you put zero here

that weird thing is PDF and trying to fill in a an old value of pay no

attention to it this is wrong don't do this otherwise you will get

this and what they've done is they've literally sent us back our eight hundred

dollar check and they're asking for an eight hundred dollar check plus all

these penalties and interest for doing it wrong by the way this was a few years

ago so those amounts have probably changed so the thing that you need to do

go back to here is this is zero and this is eight hundred dollars that is correct

do that and you'll be fine now that was part one of the trick you thought that

was enough oh no there's more part two has to do

with the fact that you're $800 LLC tax is due literally the second you

incorporate your company even if you incorporate on December 10th of let's

say 2007 you owe $800 for the entire year that amount is not prorated and

it's due right away so first bit of advice we'll just add $800 to your

startup budget and just get it paid whenever you start up

and just get it over with because here's what happens you're seeing that I'm

doing the 2007 form 568 at the same time that I file this on April 15th I'm going

to file the 2008 LLC tax voucher now let me just show you that again because

there is a logic to this but you kind of have to hang on tight to get there we're

doing it it happens to be March of 2008 right now as I'm recording this and so

I'm going to be preparing the 2007 return of income because I can only

report last year's numbers I don't have this year's numbers that's why these

reports always trail by one year but if you think of the fact that the LLC tax

is always due no matter what then it's kind of always do in the present so

you're going to be doing the 2008 tax voucher the 2007 return of income

reporting on last year's numbers but the 2008 tax voucher for this year so again

just just remember that this is always do in the present it's kind of always do

now so that as soon as you start your company just go ahead and budget the

extra money pay the $800 get it done and then you'll be on track so that's really

those are parts 1 & 2 of the LLC tax trick and I just really wanted to show

this to you I don't get anything out of showing it to you but it's it's terribly

important so there it is and again this is only relevant to California LLC's

specifically but again every state has its own little tricks so please keep in

a close eye out for this sort of thing um so that's it please go forth and be

prosperous and thanks very much

The Description of California LLC Tax Trick