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Post by iteach3rdgrade on Mar 30, 2017 21:02:29 GMT
If you own an LLC, do you use a regular accountant that you would have used before you owned a business? I've never been overly impressed with our accountant, but the company she works for is fine and they do our payroll. My dh asked her a few questions today and I guess I expected some different suggestions than what she told him.
Our profits have increased enough this year so we owe, and I guess I'm having a difficult time understanding the separation or lack of separation between business and personal. We can do x,y and z, but not this or that. While I'm happy that business is doing well, it's irritating that I'm taking a hit at home.
She also said something about the social security tax benefits me, but I don't receive SS as a teacher when I retire. I guess I'm expecting either more advice than she's qualified to give or unable to give for whatever reason.
I don't think a corporation would be helpful, but shouldn't she be able to tell us the difference for taxes.
I appreciate any input.
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Deleted
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Post by Deleted on Mar 30, 2017 21:10:43 GMT
An LLC is a pass thru entity. Any income or loss "passes thru" the business to your personal return. Tax rates at the personal level are lower than the corporate level.
If it were a corp, (C Corp, not S Corp) the tax would be levied at the corporate level and paid through the corporation, but at a higher rate.
I am not sure what more advice you are looking for.
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Post by vspindler on Mar 30, 2017 21:13:55 GMT
With a single member LLC (or a jointly owned LLC by married couples in a community property state) the LLC is what is known as a disregarded entity. Meaning, the revenue and expenses are reported on your personal return.
I'm not really following the other items in your post, like what you can or cannot do. Some specific examples would help.
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Post by iteach3rdgrade on Mar 30, 2017 21:21:46 GMT
An LLC is a pass thru entity. Any income or loss "passes thru" the business to your personal return. Tax rates at the personal level are lower than the corporate level. If it were a corp, (C Corp, not S Corp) the tax would be levied at the corporate level and paid through the corporation, but at a higher rate. I am not sure what more advice you are looking for. Thanks. That's my understanding. I guess I'm just questioning the advice we might be getting and I'm a bit bitter about taking the hit. I expected to hear of some other options aside from start offering retirement to employees. I suppose we could buy a new forklift to help. My dh runs the business with the help of my FIL and my FIL has been in this business for many years. I don't want to end up like FIL did with his business. When I retire from teaching then I'll be able to be more involved, but not until then. Bottom line is the LLC is still helpful especially if I'm taking a hit now. It'd be worse with a Corp. |
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Post by iteach3rdgrade on Mar 30, 2017 21:32:09 GMT
With a single member LLC (or a jointly owned LLC by married couples in a community property state) the LLC is what is known as a disregarded entity. Meaning, the revenue and expenses are reported on your personal return. I'm not really following the other items in your post, like what you can or cannot do. Some specific examples would help. I expected more ideas of how we can reduce our taxes from our accountant. Retirement contributions was the only suggestion. I guess I don't have enough knowledge of anything more specific to ask about. Thanks! |
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Post by Deleted on Mar 30, 2017 21:39:30 GMT
If you're looking to lower your tax, have more expenses/buy something big. We have a major purchase on both business and personal each year.
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Post by tommygirl on Mar 30, 2017 21:56:27 GMT
My parents have an LLC. I am not a tax expert. They use a regular accountant-the accountant handles clients with personal and businesses.
Ways to lower your taxes:
-contribute to charity/church
-contribute to Roth IRA's (depending on your income)
-make sure you are capturing all of the business expenses
-my parents invested their extra income in a rental property. They have to claim the income, but also get to use the interest on the mortgage and all other expenses and get to use it.
Also make sure you are paying enough quarterly so you do not get hit with a big bill in April. Your accountant should help you figure that out.
Congrats on the fact that your business is doing so well!!
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Post by Bitchy Rich on Mar 30, 2017 22:03:43 GMT
If by taking a hit, you mean you are paying tax on the increased profits from your business, are you really surprised? You make money, you owe tax.
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Post by Deleted on Mar 30, 2017 22:05:28 GMT
You can be an LLC with an S-Corp Election, which allows you to put yourself on payroll and then the business can pay its share of taxes through paycheck withholdings, rather than you personally paying the whole amount.
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Post by pepperwood on Mar 30, 2017 23:02:58 GMT
I am self employed and am able to contribute to a SEP plan.
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Post by iteach3rdgrade on Mar 30, 2017 23:15:52 GMT
If by taking a hit, you mean you are paying tax on the increased profits from your business, are you really surprised? You make money, you owe tax. No, I'm not really surprised, however , it's the first year that we've owed. We had fewer things to write off and we made more. |
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Post by iteach3rdgrade on Mar 30, 2017 23:17:11 GMT
You can be an LLC with an S-Corp Election, which allows you to put yourself on payroll and then the business can pay its share of taxes through paycheck withholdings, rather than you personally paying the whole amount. Thanks. That's something to look at! |
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Post by iteach3rdgrade on Mar 30, 2017 23:21:49 GMT
If you're looking to lower your tax, have more expenses/buy something big. We have a major purchase on both business and personal each year. With a seasonal business, it is finding that balance. He bought less this year. |
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Post by Bitchy Rich on Mar 30, 2017 23:44:34 GMT
You can be an LLC with an S-Corp Election, which allows you to put yourself on payroll and then the business can pay its share of taxes through paycheck withholdings, rather than you personally paying the whole amount. Thanks. That's something to look at! The upside of being an S-corp is that you can avoid paying some self-employment tax, but you will either need to pay someone to file your quarterly/annual payroll returns, or be able to do them yourself. And if you suck at doing them, you will wind up paying someone to respond to the tax notices and straighten that shit out. |
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Post by iteach3rdgrade on Mar 31, 2017 0:31:43 GMT
Thank you everyone! After the initial shock, dh told me we owe more money. Sigh. I just have little faith in the accountant so we need to make some decisions.
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Post by Deleted on Mar 31, 2017 3:25:36 GMT
You can be an LLC with an S-Corp Election, which allows you to put yourself on payroll and then the business can pay its share of taxes through paycheck withholdings, rather than you personally paying the whole amount. Thanks. That's something to look at! It works out really well for small businesses. You're not an S-Corp, you're an LLC with an S-Corp election. There's a difference. The primary one for us is that you don't have to do the corporation stuff like form a board and have minutes and officers, etc, etc, which doesn't make sense for a truly small business. As another poster said, you probably should pay an accountant, but at least for us, it's a few hundred dollars a year and well worth it because then the business can share some of the taxes. Either way it's still "us" at the end of the day, but this burdens our personal family budget less. It's just a form you file with the government-easy peasy. |
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Deleted
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Post by Deleted on Mar 31, 2017 14:54:55 GMT
Consider funding an IRA for you and or DH. It will help a bit, and at least you are paying yourself and not Uncle Sam.
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Post by anneinwa on Mar 31, 2017 15:34:04 GMT
Thanks. That's something to look at! It works out really well for small businesses. You're not an S-Corp, you're an LLC with an S-Corp election. There's a difference. The primary one for us is that you don't have to do the corporation stuff like form a board and have minutes and officers, etc, etc, which doesn't make sense for a truly small business. As another poster said, you probably should pay an accountant, but at least for us, it's a few hundred dollars a year and well worth it because then the business can share some of the taxes. Either way it's still "us" at the end of the day, but this burdens our personal family budget less. It's just a form you file with the government-easy peasy. Would this be beneficial for a business whose income can vary greatly each month? Mainly in regards to ACA and reporting income to the healthcare authority? Would we only be reporting what the business actually pays us vs it's profit for the month? |
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Post by ktdoesntscrap on Mar 31, 2017 17:40:26 GMT
I would look around and talk to other accountants.
They should be able to help you with the tax burden and to understand what you can do to lessen your taxes.
Remember it is always hardest when you go from owing nothing to having to pay... a good accountant can help you understand where you need to get to revenue wise so that you are happy to pay taxes.. because you are making enough money.
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Post by mikklynn on Mar 31, 2017 17:42:49 GMT
If by taking a hit, you mean you are paying tax on the increased profits from your business, are you really surprised? You make money, you owe tax. No, I'm not really surprised, however , it's the first year that we've owed. We had fewer things to write off and we made more. You can pay estimated taxes quarterly to reduce the pain of one single payment. That is what we did with DH's LLC. |
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Post by mikklynn on Mar 31, 2017 17:43:29 GMT
Thank you everyone! After the initial shock, dh told me we owe more money. Sigh. I just have little faith in the accountant so we need to make some decisions. You can always get a second opinion from another firm. |
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Post by iteach3rdgrade on Mar 31, 2017 17:49:47 GMT
No, I'm not really surprised, however , it's the first year that we've owed. We had fewer things to write off and we made more. You can pay estimated taxes quarterly to reduce the pain of one single payment. That is what we did with DH's LLC. This year it isn't a large amount but next year it will be greater. We've slowly seen the change of our returns these last 5 years. I was still expecting to get a small amount back. |
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Post by tuva42 on Mar 31, 2017 17:54:14 GMT
Remember that if you get money back from taxes, then you are overpaying during the year. Wouldn't you rather keep that money, then pay some if you owe it at the end of the year.
I don't think you should be blaming your accountant if you made more money and therefore owe more taxes.
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Post by busy on Mar 31, 2017 18:00:19 GMT
Another thing you can do to reduce your taxable income is to purchase needed equipment and use Section 179 depreciation to write off the full amount in a single tax year instead of over its useful life (there are limitations, it's not quite that simple).
However, keep in mind that although I understand wanting to minimize your tax burden as much as possible, if the business ever needs financing for equipment, working capital, real estate, etc., you are going to have a difficult time obtaining it if the business shows no or very little profit.
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Post by iteach3rdgrade on Mar 31, 2017 19:02:07 GMT
Remember that if you get money back from taxes, then you are overpaying during the year. Wouldn't you rather keep that money, then pay some if you owe it at the end of the year. I don't think you should be blaming your accountant if you made more money and therefore owe more taxes. I said the exact thing to my husband last night although I'm the one that has an issue with it. I know it's better to not get a return, it's just nicer than unexpectedly owing.  I'm not blaming her for us making more money.  She clearly knows more than I do. |
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Post by iteach3rdgrade on Mar 31, 2017 19:07:23 GMT
Another thing you can do to reduce your taxable income is to purchase needed equipment and use Section 179 depreciation to write off the full amount in a single tax year instead of over its useful life (there are limitations, it's not quite that simple). However, keep in mind that although I understand wanting to minimize your tax burden as much as possible, if the business ever needs financing for equipment, working capital, real estate, etc., you are going to have a difficult time obtaining it if the business shows no or very little profit. Good points. Thanks! I think she has used the write off for use over it's useful life. Purchasing property is something we will need to consider down the road. |
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Post by iteach3rdgrade on Mar 31, 2017 19:10:14 GMT
I would look around and talk to other accountants. They should be able to help you with the tax burden and to understand what you can do to lessen your taxes. Remember it is always hardest when you go from owing nothing to having to pay... a good accountant can help you understand where you need to get to revenue wise so that you are happy to pay taxes.. because you are making enough money. Thank you for your input. That's exactly how I'm feeling. |
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Post by iteach3rdgrade on Mar 31, 2017 19:13:58 GMT
Consider funding an IRA for you and or DH. It will help a bit, and at least you are paying yourself and not Uncle Sam. We need to consider this. |
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Post by iteach3rdgrade on Mar 31, 2017 19:22:07 GMT
My parents have an LLC. I am not a tax expert. They use a regular accountant-the accountant handles clients with personal and businesses. Ways to lower your taxes: -contribute to charity/church -contribute to Roth IRA's (depending on your income) -make sure you are capturing all of the business expenses -my parents invested their extra income in a rental property. They have to claim the income, but also get to use the interest on the mortgage and all other expenses and get to use it. Also make sure you are paying enough quarterly so you do not get hit with a big bill in April. Your accountant should help you figure that out. Congrats on the fact that your business is doing so well!! Thank you for your input! I'll pass on rental properties. Teaching is keeping me busy enough! In 13 years I'll be more involved with the business if teaching doesn't get the best of me by then. LOL |
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I'm not blaming her for us making more money. 
She clearly knows more than I do.