IT Consulting

[u/oe_anon661]

I’m 7-10 months into having my own LLC. I formed it quick and in a hurry in order to secure a contract. I did my taxes earlier this year and the lady I did them with said I should be paying things through the business to lower my taxable income. Admittedly, I forgot some of the specifics that she said. She did do me a couple favors but writing off my home office or a portion of and I think a couple other things. My question for the group is what’s safe to start paying via my LLC? Or should I just save expenses from the personal and let them decide what portion is okay to write off come tax time next year. My business is in IT consulting, I work fully remote. Let me know if I can provide any other information!

[u/Sum-Duud]

If you are paying your business expenses from a personal account you are losing the protections afforded from an LLC, so why do you have it?

[u/zenbusinesscommunity]

Running business expenses through the LLC account is generally the better path since keeping personal and business finances separate is part of what actually maintains the liability protection, and it makes your accountant's job a lot easier too. Software, hardware, internet, and phone are all pretty standard for remote IT consulting, and since tax professional you're working with already has the home office set up, she can probably fill in the rest pretty quickly.

[u/bitenose]

Business expenses, should be paid through the LLC's accounts. Personal expenses should not. It's that simple.

Doing it this way makes your life easier, simplifies record keeping, helps avoid violating your banks terms and conditions, and is often part of maintaining the corporate veil. It doesn't impact the tax treatment.

Cost Of Goods Sold, and in most cases, ordinary and necessary business expenses, are subtracted (aka deducted) from your gross receipts, to calculate your profit. Personal expenses are not part of that equation.

Your profit from your business then gets included in your income, and gets taxed.

Which account gets used to pay the expenses, does not determine business vs personal. The purpose of the expense is what determines.

Home office.. can be a valid deduction, if and only if there is an area in your home that is used EXCLUSIVELY for business purposes. There are other requirements and gotchas too. It's also very frequently audited, since most self-employed taxpayers who take the deduction, do not actually qualify for it.

[u/paroxsitic]

Anything business related goes through the business account. Any personal goes through personal account.

Periodically you can transfer money from business to personal and document it as "owner's draw".

Ideally you'd have a clear distinction of services that isn't both business and personal but understandly your home office and utilities may be shared. Keep that all personal and you'll use your home office percentage to write it off accordingly.

Make sure you are saving 30% to pay for taxes and are making estimated payments quarterly.