The end of Dot-Tone-Designs?

[Dottonedan]

So our account informed me that my Dot-Tone Designs separation business is killing us. Simply for the reason that the M&R job limits my time of course to do too much with the sep service yet, if I continue with the side income from DTD, it puts me into another tax bracket going from 15% to 25% was the example used. So, in order to keep it going and be with the effort at the 25% tax bracket, I'd have to do twice as much so work or more, and that's just not possible with the M&R job also.

So one might ask, can I make more $ if I went at it full time?  Close. I could get close or match what I make with the full time job but would have to work about 80-90 hrs a week leave me with no benefits or to take Obomacare.

So far, it looks like I will be closing DTD and with my spare time, I will take a year to build on my other project that I've put off for many years. Not for sure yet.

More on that later.

Thanks
Dot-Tone-Dan

[sqslabs]

Best of luck Dan, and thanks for the seps you've done for us...

[sportsshoppe]

good luck Dan! Ever wonder how some folks can squirm out with tax loops :/

[mimosatexas]

Don't mean to cause any kind of controversy here, but just a point of clarification: tax brackets do not change how much you are taxed on any income below the bracket... 

If you make 50,000 taxed at 15%, making 50,001 does not mean ANY of that 50,000 is taxed at 25% (it is still entirely taxed at only 15%), only the $1 would be taxed at 25%.  You never lose money to taxes by making more money, you simply lose a larger percentage of the additional income that would put you over the threshold for the next bracket, and the exact same percentage is taxed of your original income.  Making money from DTD will not cause you to have your M&R income taxed any differently. 

edit: Obviously it's entirely up to you whether the higher rate taxed on whatever income is taxable at the higher bracket means your hourly wage drops below what you need to make it worth your while. a 10% decrease is certainly significant if you are near that bracket, but honestly y'all already charge very little for your seps, and I would bet you could increase your fee by 10% to absorb the difference and still get plenty of business.  That would be something like $5-10 total per job for most sim process stuff.

Just sad to see you stop completely!

[AAMike]

If I ever needed your services, I would pay cash. Just sayin'

[Frog]

probably not the best thing to record on a public forum as possible evidence in the future.

[mk162]

so I probably shouldn't admit to stealing music on Napster back in the day?

[AAMike]

I was just kidding, for the record. I would use bitcoin.

[UltraSeps]

Best of luck to you Dan.  You've been around this industry a LONG time and have helped many with your knowledge, art and color separation services.  Its probably a good move to focus on your M&R career as there's nowhere to go but upwards in a forward thinking, inventive company such as M&R for a talented guy such as you.

In fact, I officially endorse (without compensation) M&R along with the M&R product which you specialize in on my website.

Steve

[Frog]

so I probably shouldn't admit to stealing music on Napster back in the day?

Which peer-to-peer program do you use now? 

[GKitson]

Don't mean to cause any kind of controversy here, but just a point of clarification: tax brackets do not change how much you are taxed on any income below the bracket... 

If you make 50,000 taxed at 15%, making 50,001 does not mean ANY of that 50,000 is taxed at 25% (it is still entirely taxed at only 15%), only the $1 would be taxed at 25%.  You never lose money to taxes by making more money, you simply lose a larger percentage of the additional income that would put you over the threshold for the next bracket, and the exact same percentage is taxed of your original income.  Making money from DTD will not cause you to have your M&R income taxed any differently. 

edit: Obviously it's entirely up to you whether the higher rate taxed on whatever income is taxable at the higher bracket means your hourly wage drops below what you need to make it worth your while. a 10% decrease is certainly significant if you are near that bracket, but honestly y'all already charge very little for your seps, and I would bet you could increase your fee by 10% to absorb the difference and still get plenty of business.  That would be something like $5-10 total per job for most sim process stuff.

Just sad to see you stop completely!

You beat me to making this point but I doubt if I could have done as good a job of clarifying.  Tax code is intricate and often simply does not make sense but it is the law therefore you gotta understand it or employ someone who does.

I agree a relatively small per job increase would offset the additional tax liability and make the effort involved in an occasional sep. well worth your time.

[myseps]

Best of luck, Dan! 

[Sbrem]

Best of luck Dan, but I bet you can still do it without getting too heavily penalized as Mimo and Greg laid out... besides, I have a credit with you

Steve

[3Deep]

TAX is a dirty word when your trying to make a honest living.

[Dottonedan]

Thanks for the kind words.

I understand what you guys are saying. I donno tho. I think the thing is, (and we supposedly are getting this feedback from a professional seasoned tax business), that the day job gig is at one tax bracket but the added income I make from the DTD work sends us over into that higher bracket (on the DTD income).

I have to sit down with them and get the full story still. Most of that DTD is considered as straight income since I have little overhead in doing seps. So all of that is taxed higher (and due to the fact that I can't take on more, it's better business "on the books" to just not do it ...or go all out on it full time. "So I'm told". Maybe they are looking at it as a profitable business standpoint.  It's not a business that can grow (the way I'm doing it now) just as side money. If I remember correctly, according to the Gov. A business has to show a profit over so many years.   There is an income from it only, as it is now. "paying myself", but no "profit" as a business from their perspective (so I've been told by the IRS already).

So the "income" I make is going to be taxed higher as well.


I'm sure it makes sense for Scott @ Myseps since he's at it full time. It did at one point for me also, but I opted for insurance and consistency after I had my own shop I had been putting into as well.  So I donno.
I'll be looking at it hard.

Thanks for the 2nd thoughts.