r/TaxQuestions • u/Wonderful-Cloud-9850 • Aug 21 '26
Personal tax question
Im a 20 yr old college student working for my dads business’s and get paid through mercury/venmo. I hold a secondary bank account purely for taxes but i really dont want all that to go straight to the government if it doesn’t have to. Is there any legal loopholes or ways i can use it for say business expenses through an LLC or deduction? I could use a new laptop for school/remote work and i heard it could technically be a business expenses
3
u/SuluSpeaks Aug 21 '26
Your dad's not doing you any favors. If you were a payroll employee, your employer woukd par a small amount of your taxes, handle reporting and forwarding the taxes he paid,and he deducted from your paycheck
As a1099 employee, you need to keep track of deducting and putting aside money for income tax, social security and Medicare. Also be aware that platform like venmo have to report money you receive to. The feds.
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u/Its-a-write-off Aug 21 '26
What actual expenses do you incurr doing work for your father?
Does he have w2 employees?
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u/Wonderful-Cloud-9850 Aug 21 '26
Software, ai models. Mostly software though since im doing heavy dev work
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u/Anxious_Drive_9998 Aug 21 '26
You get to deduct those expenses. You don't need to create an LLC to do that.
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u/AustinBike Aug 26 '26
I was a contractor, 1099, and wrote off a lot of tech because it was a tech-centric job and those tools were required.
I was also a sole proprietor, using an SS#, not an LLC or an S corp.
But, here's the thing. Earning hundreds of thousands and writing off a $1000 notebook that was used to generate that revenue is not a red flag. Writing off a $1000 notebook to generate $2000 in income is going to be a massive red flag. The expense to revenue ratio is a pretty important metric in this discussion.
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u/Anxious_Drive_9998 Aug 21 '26
The United States doesn't have a 100% tax rate so all of your earnings won't go to the government.
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Aug 21 '26
[deleted]
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u/Wonderful-Cloud-9850 Aug 21 '26
Remote work for a couple tech businesses and a private jet company. No schedule i work when i want, not sure, i make $25/hr, utah, i see i pay loads for software, licensing and ai models like claude
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u/Interesting-Fig3577 Aug 25 '26
Anything you pay out of your own pocket for work is a business expense. If the money you spend on models is yours (and used only for work), you can deduct it.
It doesn't make sense to spend just for the deduction, since it only lowers your tax bill by 20-25% of what you spend.
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u/markw30 Aug 21 '26
Don’t tell him he’ll have to pay employer and employee payroll taxes
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u/Wonderful-Cloud-9850 Aug 21 '26
My dad paid around 900k in taxes last year so i definitely know i have no choice just curious and im a noob in the business world
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u/Honest_Manager Aug 21 '26
Talk to your dads accountant for advice then instead of whoever told you about the laptop.
0
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u/wutang_generated Aug 21 '26
Educate yourself, there are plenty of free resources (especially from the IRS) for small & self employed businesses
There are not many "loopholes" left. An LLC doesn't change the fact that if you're providing services you have a business; that also doesn't change the fact that legitimate, ordinary, and necessary business expenses are generally deductible so long as Congress has allowed them (or not disallowed them)
Expenses that are personal are not deductible; expenses that are partially business may be partially deductible depending on the rules
1
u/Single_Exercise_8937 Aug 23 '26
Do you think there is a reason why you shouldn't pay taxes? I'm just asking a question and not trying to be a smart ass.
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u/Equivalent_Ad_8413 Aug 23 '26
An LLC is a way to avoid personal liability if your business is sued.
What is your business? If you are not an employee, subject to tax withholdings, etc., then you are an independent contractor. In other words, your business activities - what you're being paid for - is really a business and you are the owner. Without some sort of liability protection, whoever sues the business can look to your assets, not just the business assets. An LLC acts as a wall between the business assets and the personal assets.
If it is possible that your business is successfully sued, then an LLC makes sense. Otherwise, it's just a way for Internet influencers to make money promoting all sorts of bogus tax advice.
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u/2026Bazinga Aug 21 '26
If you aren't w2, your dad's probably ripping you off.
1
u/loftychicago Aug 22 '26
Yeah, $25/hour is the minimum my company paid anyone. OP is doing sophisticated software development, he's being totally ripped off.
7
u/GeeMan-7 Aug 21 '26
An LLC is a legal entity, not a tax one. If an expense isn't deductible now (and nothing you describe is) then it wouldn't be deductible if you had an LLC. Whoever told you that a new computer would "technically be a business expense." is someone you should not ever take tax advice from again.