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Another benefit of celebrities using companies that nobody mentioned yet is controlling image rights and intellectual property. My brother-in-law is an entertainment lawyer and explained that celebrities can license their name, image, catchphrases, etc. through these entities, which creates additional income streams and tax planning opportunities. It also helps with receiving royalty payments, appearance fees, and merchandising revenue in a more structured way. The company becomes the "brand" that contracts for all these different income sources.
Does this work for regular people too? Like if I have a small YouTube channel or something, would it make sense to set up a company?
It depends entirely on your income level and future expectations. For a small YouTube channel, it's probably not worth the setup and maintenance costs until you're earning at least $75-100K consistently. Below that threshold, the tax benefits usually don't outweigh the additional costs and paperwork. However, if you're growing rapidly or expect significant income in the near future, it might make sense to establish the structure early. This is especially true if you're branching into merchandise, speaking engagements, or other revenue streams beyond just ad revenue. The liability protection alone can be valuable as your public profile increases.
I worked as an assistant to a TV actor a few years back. One thing nobody's mentioned is that these company structures also help celebrities manage their teams. My boss had his entire entourage (personal assistant, security, stylists, etc.) employed through his company, which made everything from insurance to travel expenses way more manageable from a tax perspective. This might not apply to regular folks, but once you have multiple people working with you, having a company structure creates cleaner accounting and more potential deductions.
Owing a little at tax time is actually a GOOD thing from a financial perspective! I'm a CPA and I always tell my clients that the goal should be to owe just under $1,000 come tax time. Think of it this way - if you're getting a big refund, you've essentially given the government an interest-free loan all year. That money could have been in your savings account or investment portfolio earning returns! The sweet spot is owing just under $1,000 because that's generally the threshold where the IRS might assess underpayment penalties. So you've kept as much of your money as possible throughout the year without crossing into penalty territory.
What about the psychological factor though? I know financially it makes sense, but I LOVE getting a big refund. It feels like a forced savings account and I usually use it for something fun or a big purchase I've been putting off.
That's actually a really good point! Personal finance isn't just about the math - psychology plays a huge role too. If getting a refund works as a "forced savings" mechanism for you and you enjoy that annual windfall, there's definite value in that approach for many people. I always tell clients to do what works best for their lifestyle and habits. For some people, the discipline of keeping that extra money each paycheck and investing it is tough. If you know you'd just spend that extra $50-100 per paycheck on random things, but would use a $1,200-2,400 refund for something meaningful, then by all means, set your withholding accordingly!
Am I the only one who deliberately overwitholds so I get a big refund?? I know everyone says it's an "interest-free loan to the government" but honestly it's the only way I save money lol. I get about $3200 back every year and use it for vacation.
One thing nobody's mentioned - make sure you're filing your S Corp extension ELECTRONICALLY if possible. Paper extensions can get lost or delayed. I learned this the hard way last year when my mailed extension wasn't processed and I got hit with late filing penalties. Had to go through a whole appeal process to get them removed.
Wait, can you file the S Corp extension (Form 7004) electronically yourself? Or do you need a tax professional to do it? We're trying to save money where we can since our first year was so rough.
Yes, you can absolutely file the Form 7004 electronically yourself! You don't need a tax professional. You can use the IRS e-file system, or many tax software programs include the ability to e-file the extension. If you're really trying to save money, even the free versions of some tax software will let you prepare and e-file just the extension forms. Just make sure you still estimate any taxes owed properly, as the extension only gives you more time to file the paperwork, not more time to pay.
Don't forget that while the S Corp itself doesn't pay income tax, if you have employees (including yourself as an owner-employee), you still need to make sure all your employment tax deposits are current. The extension doesn't apply to those!
This is so important! My friend got an extension for his S Corp but didn't realize he still needed to make his quarterly payroll tax deposits on time. Ended up with some hefty penalties.
Whatever you do, don't ignore this! I made that mistake and ended up with a tax lien that destroyed my credit score for years. The IRS has more collection power than any other creditor. Call them directly, be honest about your situation, and they'll usually work with you. Despite their reputation, most IRS agents I've dealt with have been reasonable when you're proactive about resolving your debt.
This is so true. My brother ignored his tax debt and eventually had his wages garnished - they took 25% of his paycheck until the debt was paid. The IRS doesn't mess around with collections.
Exactly. And garnishment is actually worse than a payment plan because you have no control over the amount taken. With a payment plan, you can at least negotiate a monthly amount that works for your budget.
Has anyone actually tried requesting penalty abatement themselves? I've heard mixed things about how likely the IRS is to approve these requests.
I successfully got First Time Penalty Abatement last year. The key is that you need a clean compliance history for the 3 prior years. If you meet that criteria, they almost always approve it. I just called and specifically asked for "First Time Penalty Abatement under IRM 20.1.1.3.3.2.1" and the agent processed it right away.
Oliver Weber
I drove for Doordash last year too, and here's exactly what you need to do in TurboTax Deluxe: 1. Go to the Business section (Self-employed) 2. When it asks about your business, select "I provide services" and then choose "Delivery services" 3. Enter your business info and your 1099-NEC details 4. After the income section, it'll take you to expenses 5. Choose "Car and truck expenses" (don't skip this!) 6. Select "Standard mileage rate" (not actual expenses) 7. Enter your business miles for the year The key mistake most dashers make is not selecting "Delivery services" as their specific business type, which sometimes causes the car expenses section to be hidden.
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Ava Williams
ā¢Thank you so much for this step-by-step breakdown! I tried again following your exact instructions and found the mileage section. You were totally right - I had selected "Other services" instead of specifically "Delivery services" which is why I couldn't find the mileage entry screen. Got all 12,500 miles entered now and seeing a nice reduction in what I owe. You just saved me a ton of money!
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FireflyDreams
Has anyone tried using the Stride app for tracking mileage instead of manually logging it? I'm doing DoorDash part-time and wondering if the automatic tracking is accurate enough for tax purposes.
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Natasha Kuznetsova
ā¢I've been using Stride for 2 years with my delivery gigs and it's been super reliable. The automatic tracking works really well and you can edit trips if needed. The best part is it generates a tax-ready summary at the end of the year that you can just input directly into TurboTax. Saves so much time compared to manual logging.
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