Today’s Tax Tuesday episode answers several listener questions on HSAs, S-Corps vs. LLCs, and reducing your taxes with rental properties. Eliot Thomas hosts, along with Jeff Webb, CFO of Anderson Business Advisors.  Online we have Dana, Dutch, Piao, and Troy - all kinds of resources there to help answer some of your questions.

In this episode, you’ll hear our advice on the tax benefits gained from being an LLC, S-Corp or C-Corp, and we’ll answer a couple questions concerning HSAs - their contribution limits and investing with that HSA money. There are also some questions answered about home offices, ITIN numbers, bitcoin and of course a little bit about short and long-term rental properties and their tax implications. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

"Can you please explain the difference between an LLC, a C-corp, and an S-corp? Can an LLC also be a C- or an S-corp? I understand that C-corps and S-corps are tax elections, but are they also a type of entity?" –LLC is a legal entity, it is not a tax entity. If you want anything else like an S-corporation or C-corporation, you actually have to tell the IRS that, make an election.

"Are the limits for contributions a monthly or annual amount? On irs.gov, the limit as listed is $3200 for single and $7200 for family." - the contribution limits are annual amounts.

"My accountant thinks I should switch from an S-corp to a Schedule C," that's a sole proprietorship on the 1040, "because my profits are below $80,000–$90,000, and the S-corp is expensive, and I'm just one person, so I do not want to grow any bigger, and I'm happy with the sales. My question is, what is best for me, not the company? What happens if I switch? What is better for retirement and social security as I am 56 years old?" - You are going to pay for a tax return to the S-corporation that you wouldn't have to pay for extra on Schedule C. There's some work to do to put that Schedule C together. Your 1040 may get a little more expensive. If you have a health insurance plan for yourself that you're paying for, that should be paid for by the S-corporation. It will save you a good deal of money.

"Can you convert a personal vehicle into a business vehicle if you only use it for business? What if you only own one vehicle? Can you deduct mileage, gas, or anything else?" - You can do that, but you have to actually contribute the vehicle to the business. Because what we don't want is any personal use of this vehicle. The solution is to track your mileage. If you are one who drives a lot, the more you drive, the more mileage, the better this comes out - keeping it in your name as a personal vehicle.

"Can I reduce my W-2 taxes for my job by owning rental property?" – If you are materially participating in your short-term rental—it's not really a rental to trade or business—yes, the losses from that could reduce your W-2 income. It's plausible, but you're going to have to be within these parameters, short-term rental, or long-term rental and meet the criteria for it.

"I have a C-corp staffing business. Since Covid, I've been using my home office. The home is in mine and my son's name. How can I count for the space used as an office for a tax deduction?

“What is your advice for a small business owner on employing people who only have their ITIN number pending the social security number?" -Basically, you're not allowed to have people with an ITIN as employees. They have to have a social security number and be registered in the US to be here.

"Can you discuss the step-by-step process of completing a 1031 exchange? - The forward 1031 makes more sense, because keep in mind, you cannot touch the cash. You also need a Qualified Intermediary. Determine if you want to do a forward 1031, a regular 1031, or do you want to do a reverse?

"I have a question regarding investing with my HSA. Does an HSA function like a Roth IRA in terms of paying UBITs (unrelated business income tax)? In other