How to unscrew disregarded entity owner paid by W-2

[MDknucklehead]

Hi. Single member LLC in MD formed in 2021. I'm the owner and only worker (for now, since inception to date). IRS has it as a disregarded entity. I'm just catching up to that important distinction.

I've been paying myself as a W-2 employee since June when I started doing contract work. And now I realize that was a mistake. I tripped over the details as I was looking to see how to handle my SEP contribution and I see the 20% for self-employed vs. 25% for employee. And it seems I'm the former, W-2 notwithstanding.

Fixing this for the SEP is important but not urgent since I've got a few months. What's really urgent seems to be deciding how I want to fix the bigger LLC/partnership vs. disregarded entity thing.

My guess at this point is I have two choices:

1) Stay single member LLC, stop paying myself as an employee, start handling things as self-employed with flow-through to my personal tax filings. File to recover the employer payroll withholdings that I didn't need to make in 2021.

2) Take on my wife as a second member for the LLC and stop being a disregarded entity. Be a LLC/partnership. MD is not a community property state. Zero concerns about loss of control  or assets to her.

What do you think? What do I have to do by year end? How can I find the right pro to steer me through this and the other things I'm screwing up. I'm in MD just outside NW DC. 

Thanks for reading this far and any insights or well-meaning dope-slapping you can offer. 

[BobKamman · Accepted solution]

You’ve come to an Intuit site supporting tax professionals, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

[TaxGuyBill]

You have a business and you screwed things up.  Go to a tax professional.

[George4Tacks]

You can start your search for a professional at https://irs.treasury.gov/rpo/rpo.jsf Check the boxes for Certified Public Account Credential and for Enrolled Agent Credential.

[MDknucklehead]

Thanks Bob & George. I appreciate the constructive responses.

[TaxGuyBill]

I apologize, I missed the part about you asking how to find a tax professional. 

I just saw you lay out the situation and ask what do you need to do.  And the answer to THAT (and your entire situation) is to go to a tax professional.  But again, I missed the part about you asking how to find the tax professional.

[qbteachmt]

"I hope that at least helped you feel superior for a moment or two as you prowl the internet looking for opportunities."

You don't need to accuse the Peer User Volunteer Participants in this Community forum of "prowl"ing. No one here is an ambulance chaser looking for work. The people helping and redirecting you are professionals that help each other, and this is not a paying gig for anyone unless you see "Intuit" by their username.

Intuit has lots of these Peer Communities. You happened on the wrong one. You obviously were seeking personal tax guidance; look at the bulk of your content. That's what their TurboTax forum is for; it has lots of social circles (subforums) in various topics for running a business, being in business, and of course, DIY taxes.

"Superior" is not the issue. "Appropriate" is the issue.

All you have to do is say Thank You and move on.

[MDknucklehead]

No problemo Bill. Thanks for the kind follow up note to the prior drive by, and gee whiz, this thing has an edit feature. Which I don't usually like to use, but what the heck, it's almost Christmas.

qbteachmt, thank you, moving on. Good job, the internet is more ordered today. Yup, wrong place, I don't have the vibe of it, and I'm under duress. I'm glad some of the folks nudged well.

Posted at risk of bumping and prolonging things. Best to all. Outta here.

[qbteachmt]

The log in you used here will work on the TurboTax forum, too. Good luck.