Hi all (and Pilot as this especially applies to him)
For those of you who do a lot of CA's, the fees you receive for these are considered active income and therefore subject to tax at your individual tax rate, correct? I have a single member LLC for this, and I know this is simply pass through taxation. I didn't know if there was some way to cut/save on taxes by doing a lot of CA's and/or not to be taxed as a dealer, etc.? Thanks!

Eric

Correct. You're a dealer in intangible personal property. It's all self-employment income. If your income is substantial you can save quite a bit on employment taxes by doing business through an S-Corporation or an LLC electing to be taxed as one.

Your LLC would file a Form 8832 followed by a Form 2553.

efete,

You can receive ordinary self employment income without being a dealer. In the situation you describe, you are taxed as a sole proprietor and your LLC's net income is self-employment income reported on Schedule C (1040) and taxed at your ordinary income tax rate. Furthermore, you will also owe the social security and medicare taxes that will be assessed on that income when you fill out Schedule SE.

This is the same tax treatment that a dealer to real estate would have if he were in the same circumstances.

Did you believe that dealer income is taxed any differently?