Author Topic: Should You Do Your Own Taxes? (and Why I Donít)  (Read 2456 times)

ponyespresso

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Should You Do Your Own Taxes? (and Why I Donít)
« on: February 12, 2016, 10:16:19 AM »
This was an eye opener for me. Anyone else? My business partner and I have been making more profits than is a reasonable salary for probably three years now, and for some reason we always decided to stay as an LLC (or just kind of forgot about it.) I think maybe we didn't quite realize how much we could save until I saw that nice sketch in MMM's blog post.

The deadline to elect s-corp status is March 15th, but I'm wondering, how the heck do I recharacterize the YTD ownership draws and guaranteed payments? If we elect s-corp status then we need to draw salaries and do payroll. I don't know about doing back-dated payroll (maybe we just pay ourselves for YTD with one big paycheck?? and return the draws??) lots to think about. But what is clear is our FICA savings could be huge!

I'd like to hear if this was eye opening for others, too!

RelaxedGal

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Re: Should You Do Your Own Taxes? (and Why I Donít)
« Reply #1 on: February 12, 2016, 01:32:45 PM »
Not an eye opener for me as I'm not a business owner, but many of the strategies are similar to those my husband and I used before we married.  I made less, but we owned the house together.  His cousin is an accountant and suggested that I take the standard deduction while he itemized and claimed the full mortgage interest deduction.  There are a few other things like that, that work well if there is income inequality for a couple.  As a married couple, I have the dependent care account deductions taken from my paycheck because they're taken out before Social Security and he hits the SS cap, so there would be less ($100?) tax savings.  Caveat: It decreases my earning from the Social Security Administration's perspective and if we divorced it would make things less comfortable for me in old age.  We're both happy, so we do it.

Another trick/tip, recommended by our financial advisor: donation of appreciated stock rather than cash.  The charity of your choice gets the same dollar amount you were planning to donate, you avoid the capital gains tax.  Works best if you are a regular/generous donor. 

ponyespresso

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Re: Should You Do Your Own Taxes? (and Why I Donít)
« Reply #2 on: February 12, 2016, 02:05:21 PM »
thanks for the tip on donating stock instead of cash!

clarkfan1979

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Re: Should You Do Your Own Taxes? (and Why I Donít)
« Reply #3 on: February 14, 2016, 10:28:02 PM »
This has been my attitude toward taxes for the last 8 years. I always did my own taxes. However, my parents are business owners and have their taxes done by a professional. About 7 years ago my parents really wanted me to use their tax professional because of all of the savings. Instead of $40 for turbo tax, it cost me $500. It wasn't even quicker or easier because I had to send him all of my information instead of just typing it in. When I looked at the professional report, it was the same as I had always done in the past. Regular W-2 income with one rental house.

ponyespresso

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Re: Should You Do Your Own Taxes? (and Why I Donít)
« Reply #4 on: February 17, 2016, 11:46:22 AM »
I use TT for personal income taxes (which includes Airbnb rental of our MIL apartment). I have always used an accountant for my business tax return though. And the accountant is giving me helpful info on s-corp nitty gritty, although I am also supposed to do consult with MMM's accountant too. I need to get that set up! I have a feeling of loyalty to my accountants but I could always have them do my books or something if I decide to switch.

marty998

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Re: Should You Do Your Own Taxes? (and Why I Donít)
« Reply #5 on: February 17, 2016, 01:48:00 PM »
See. Accountants are useful for some things after all :)