All Forum Posts by: Gary Li

Here is the numbers,  We know only the Active Income can contribute to 401K, in order to contribute $20500 to 401K, you need $102500 Net Active income, because Self-employed only allow 20% of the net Income to contribute to 401K. that means you need to put $121015 minimum to schedule C as active income, and you need to pay $18515 for the self-employee tax to convert the passive income to Active Income,  is that worth it?

 I do not think that is a good idea. 

you paid Income Tax and FICA based on $20.5K on schedule C, your net income probably only left $15K (15.3% self-Employee tax + 10%+ Income tax), and you can only contribute 20% of your net income as "Employee" to 401K, that is only $3000. even you can contribute another 20% as "Employer" contribution to 401K, then you need to maintain 2 separate 401K accounts. 

Also IRS may not allow to convert the passive income to the Active income just transferring the rental Income from Schedule E to Schedule C, you'd better to have a LLC as the management.

I am not sure if the forum allow to talk about the name of the Insurance, I called three big Insurance company, all of them said no. they all say that belong to the Workers Compensation. so if you have any new finding, please share with us.

Thanks

Hi David,

I appreciate you share your experience and information with me!

I encounter the problem is, my "regular" Insurance do not sell the umbrella if the rental properties are more than 4. also I asked my insurance agent about the Umbrella coverage - typical example: I hire a handyman to paint a room, he hurts himself, my agent said the Umbrella Insurance would not cover this.

I just curious, here in the forum, there are many investors have dozens properties, they are not big, they are not that small,  what types of insurance they bought to protect themselves? Thanks

Thank you, Frank, David!

For the Umbrella Insurance, do the different Insurance companies have same coverage? which company has better coverage and no limit of the properties? and do not need the car insurance with them?

for hire the contractor/Handymen to do the repair, in case they do not have insurance, what kind of insurance should I buy to protect myself?

Thanks

As a landlord, I own several rental properties, I manage the properties by myself, I also hire the contractors / handymen to do the repairs when the rental Properties have problem, so what kind of Insurances do I have to buy in order to protect my properties and protect myself? I have Rental Properties Policy, I know it is not enough, what else insurance do you suggest? Thanks

lot of insurance companies will not sell the rental policy to you if your primary property is not insured by them.

Hi Eamonn,

Thank you for the information. I do have my CPA, seems like she does not have much experience on this. she told me she need to find out.

So I still continue using Form 1065 for Federal and Form CA 568 for the State to file Tax Return, there is no change, right?

Hi Lance, 

I also found this on the website:

A revocable trust does not need to file a separate income tax return. If the trust was irrevocable it would need to file an income tax return.

The IRS considers a revocable trust to be a "disregarded entity" meaning it doesn't exist for tax purposes. Any income that is generated inside the trust - the savings account for example - will be reported to you on a 1099-INT with the name of the trust as the owner but with your Social Security number. You'll simply enter that 1099-INT on your own income tax return, and that's the end of it.

Living trusts serve mainly as probate-avoiding vehicles and are popular for that reason and because no separate income tax reporting is necessary.

Is that true? 

My Living Trust does not have EIN number, do I have to apply the EIN number? The Living Trust attorney told me there was no impact to file my Tax return, is it not true?