Are the tax deductions better as an LLC? US taxes

A good friend of mine freelances an audio engineer and says the tax deductions are not what they used to be as of a few years ago (we are in the US). Another friend of mine suggested setting up an LLC to maximize deductions. I already have a full time job (salary) and a small LLC (kind of bogus at this point since it never took off - my accountant thinks I can probably declare a loss one-two more years since the pandemic hit so many small businesses). But now, I am basically adding freelancing as a graphic designer to my tax filing this year. It’s getting a little convoluted and I’m trying to figure out the best way to move forward. Does it make sense to form an LLC now? I think it does from a legal perspective, but I’m wondering if the tax deductions are better than filing as a freelancer as well?

I think you’d be substantially better off directing these questions to your CPA.

What does your accountant say?

I’m curious which deductions changed for the audio engineer.

I’m not a CPA and know nothing about your situation, but I can respond based on my own experience.

From a legal standpoint of separating one’s finances from the LLC’s finances is good insurance. It’s also necessary for business banking accounts and that sort of thing.

From the standpoint of U.S. income taxes, most freelance businesses don’t have enough expenses or income to warrant filing a separate tax return for the business. The IRS enables freelancers operating out of their LLCs to file a single tax return that combines the LLC with one’s personal taxes. This makes filing taxes simpler, but it also means that the LLC’s expenses need to be greater than the tax payer’s standard deduction before one can begin deducting those expenses from one’s taxes.

As everyone else suggested, though, it’s best to have a CPA analyze your specific situation to see what’s best. U.S. income tax laws are obscenely complex, convoluted, and wasteful, so it’s best to seek the advice of some whose career revolves around wading through all the thousands of ridiculous details.

I went to a CPA. Paid over $100 for a consultation. He never mentioned an LLC as an option. I came to him for advice on how to best set myself up to maximize deductions and avoiding auditing - basically how to do everything right from the start and make sure I’m not missing any write offs. I’m not sure if I can ask him or if I need to set up another consultation for questions. I was a little disappointed in the conversation, personally. It wasn’t anything I didn’t already know and I didn’t feel any more prepared.

My friend did not know - he was relaying what his accountant told him. But he didn’t know exactly what.

I have started looking for an accountant and already paid for one consultation. But I didn’t feel anymore knowledgable after the discussion. The LLC was brought up to me by a friend a few days ago and got me thinking.

Sounds like you need a new CPA.

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So, I did seek out a CPA but was left with more questions than answers. Perhaps I should try another one. After telling him what exactly I was looking for (my options and what I can do to maximize deductions starting now), I really didn’t get any guidance that I felt was useful. It was more along the lines of “keep your receipts and come back in December” sort of thing. I gave up asking questions. I felt like he told me the same ambiguous jargon I could have googled. I was hoping a call with a CPA would make me feel organized in terms of “here is exactly what you need to start keeping receipts of and here are your options” etc. An LLC was never mentioned for the freelancing.

arrg…yah, I think so…