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Posted: 12/29/2016 6:13:48 PM EDT
This is my first full year in business and we did far better than we could have ever imagined, which is a blessing and a curse at the same time. We were unprepared for our tax liability on the profits and it caught me off guard last week after meeting with the accountant which caused me to panic buy shit I simply don't need. I am not one that enjoys spending money on things I absolutely don't need, I would much rather invest in the business or retirement.
Company is a LLC S-corp We have two full time and three part time employees. I have already made a few large purchases to reduce profit and tax liability. We (wife is part time) have maxed out two IRA's at $5500 in each of our names. Is there anything else I can invest in outside of my company that will help me reduce my tax liability and help with personal or business growth. I am rather new at this and never had much money in the past so the in's and out's are daunting. Thanks. 
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Posted: 12/29/2016 6:15:46 PM EDT
[#1]
Hookers. Will help with personal "growth"
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Posted: 12/29/2016 6:17:08 PM EDT
[#2]
What's the business?
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Posted: 12/29/2016 6:17:40 PM EDT
[#3]
Don't report any cash sales
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Posted: 12/29/2016 6:19:02 PM EDT
[#4]
Quote HistoryQuoted:
What's the business? Mechanical contractor. HVAC, piping, fabrication, etc... |
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Posted: 12/29/2016 6:25:47 PM EDT
[#5]
There is no such thing as making too much money
It seems like you have already purchased what you need, so pay the tax and enjoy your profit 
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Posted: 12/29/2016 6:26:12 PM EDT
[#6]
HSA
Health savings account you can put up to I believe this years limit is $6700 for a family |
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Posted: 12/29/2016 6:29:12 PM EDT
[#7]
you can put more than that in a sep ira or simple ira, I ain't no tax planner though
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Posted: 12/29/2016 6:29:47 PM EDT
[#8]
What equipment can you buy to dump the money back into the business? Need a new truck? |
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Posted: 12/29/2016 6:30:04 PM EDT
[#9]
Profit sharing with your employees?
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Posted: 12/29/2016 6:31:54 PM EDT
[#10]
there used to be special deductions for trucks over 6000 pounds but I never tried it
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Posted: 12/29/2016 6:43:12 PM EDT
[#11]
No, I have already purchased three new vehicles this year, all the tools we could ever want, trailer, etc...
I need nothing for the business, and I mean nothing, it's 100% stocked. I went out and bought a $50k pickup truck I don't need earlier this week to dump money. Aimless, accountant said $5500 was the max we could invest this year, not sure why and that's why I am asking here. I have another $20k I could dump by the 1st to be comfortable with the tax liability. I absolutely hate coughing up so much to the .gov, it makes me sick. |
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Posted: 12/29/2016 6:44:16 PM EDT
[#12]
Quote HistoryQuoted:
Profit sharing with your employees? Everyone got a very very nice Christmas bonus and customers got awesome gifts. Got that covered already. 
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Posted: 12/29/2016 6:44:36 PM EDT
[#13]
Quote HistoryQuoted:
There is no such thing as making too much money
It seems like you have already purchased what you need, so pay the tax and enjoy your profit I like the way you think. No one hates paying taxes more than I do, but some times it is the best thing to do. I hate the way income tax distorts decision making. Repeal the 16th amendment. |
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Posted: 12/29/2016 6:45:18 PM EDT
[#14]
Quote HistoryQuoted:
HSA Health savings account you can put up to I believe this years limit is $6700 for a family I will look into this. Thank you for the advice. |
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Posted: 12/29/2016 6:46:41 PM EDT
[#15]
Ask your accountant if he knows any good retirement plan advisors. Depending on your age, the age of your employees and the likelihood that they will choose to participate in an retirement plan, it may be well worth it.
When my father-in-law started his company, he was in his 60s and all the employees were in their 20s. His CPA had him set up an old school defined benefit plan. That permitted him to contribute a lot for himself and only a little bit for his employees. A lot of times, younger and/or lower income choose not to participate even if they can. Sounds like you or your accountant should be more proactive. We offer our clients the opportunity to do tax planning quarterly. Updating their estimated tax calculations avoids ugly surprises at year-end (or worse yet, in March and April). |
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Posted: 12/29/2016 6:50:25 PM EDT
[#16]
Quote HistoryQuoted:
Ask your CPA if he knows any good retirement plan advisors. Depending on your age, the age of your employees and the likelihood that they will choose to participate in an retirement plan, it may be well worth it. When my father-in-law started his company, he was in his 60s and all the employees were in their 20s. His CPA had him set up an old school defined benefit plan. That permitted him to contribute a lot for himself and only a little bit for his employees. A lot of times, younger and/or lower income choose not to participate even if they can. I will ask about this as well. Thank you. |
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Posted: 12/29/2016 6:53:09 PM EDT
[#17]
Each truck needs a Milwaukee thermal . Get the $2500 ones.
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Posted: 12/29/2016 6:55:52 PM EDT
[#18]
Quote HistoryQuoted:
I will look into this. Thank you for the advice. Quote HistoryQuoted:
Quoted:
HSA Health savings account you can put up to I believe this years limit is $6700 for a family I will look into this. Thank you for the advice. Generally S Corp owners cannot have HSA contributions pre taxed. They can take them post tax but wouldn't save you shit. I'll follow up a little later walking into business dinner meeting :( |
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Posted: 12/29/2016 6:57:31 PM EDT
[#19]
Quote HistoryQuoted:
Each truck needs a Milwaukee thermal . Get the $2500 ones. Ha! Got that covered already too. I have a FLIR E8 on my truck. Other full time employee is a fabricator, fitter, welder... No use buying him a TIC. |
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Posted: 12/29/2016 7:00:07 PM EDT
[#20]
Quote HistoryQuoted:
No, I have already purchased three new vehicles this year, all the tools we could ever want, trailer, etc... I need nothing for the business, and I mean nothing, it's 100% stocked. I went out and bought a $50k pickup truck I don't need earlier this week to dump money. Aimless, accountant said $5500 was the max we could invest this year, not sure why and that's why I am asking here. I have another $20k I could dump by the 1st to be comfortable with the tax liability. I absolutely hate coughing up so much to the .gov, it makes me sick. http://money.cnn.com/retirement/guide/selfemployment_sep_ira.moneymag/ usually you have until april 15 to fund something but it has to be up and running before 1/1. I don't know how that plays with your existing plans-again, no one is less qualified than I to give investing or tax advice 
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Posted: 12/29/2016 7:00:20 PM EDT
[#21]
Do you have a separate shop from your home address ?
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Posted: 12/29/2016 7:00:40 PM EDT
[#22]
Quote HistoryQuoted:
Everyone got a very very nice Christmas bonus and customers got awesome gifts. Got that covered already. not to late to hire a lawyer to, er do something or other for the business!
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Posted: 12/29/2016 7:17:36 PM EDT
[#23]
Quote HistoryQuoted:
Do you have a separate shop from your home address ? I don't for two major reasons... 1) Being the first year I was not signing a lease or building not knowing how we would do. 2) Our current home is going on the market this spring. My plan is to build a pole barn shop on the new property or lease a shop, still up in the air on which will benefit me more. |
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Posted: 12/29/2016 7:18:52 PM EDT
[#24]
Quote HistoryQuoted:
not to late to hire a lawyer to, er do something or other for the business! The minute you get licensed (am I saying that right?) in Ohio you're hired. My current lawyer is a fucking bum and I am about to fire him due to piss poor communication practices. Thanks for the advice above, I will get to reading after dinner. |
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Posted: 12/29/2016 7:21:50 PM EDT
[#25]
If you don't have anything you would have bought anyways, just pay the tax.
A $50k deduction only saves you up to $20k in tax (40%), so why would you spend $50k to avoid spending $20k? Of course, that doesn't mean there aren't ways to invest or actually "save" the money, but just buying stuff to avoid paying even less in taxes is not a good decision in my opinion. It's similar to people who buy discount items and think they "saved" money. No you didn't, you just spent $x. |
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Posted: 12/29/2016 7:23:21 PM EDT
[#26]
Quote HistoryQuoted:
No, I have already purchased three new vehicles this year, all the tools we could ever want, trailer, etc... I need nothing for the business, and I mean nothing, it's 100% stocked. I went out and bought a $50k pickup truck I don't need earlier this week to dump money. Aimless, accountant said $5500 was the max we could invest this year, not sure why and that's why I am asking here. I have another $20k I could dump by the 1st to be comfortable with the tax liability. I absolutely hate coughing up so much to the .gov, it makes me sick. This is asinine. It's also a common trap to fall into and one i've fell into myself. NEVER. NEVER. Spend money just "for the writeoff". If you were going to buy it in a few months anyway, good. Go buy it. Think this way. You made 100k profit. You can buy 2 new pickups you didn't need and watch them lose value every year, or you could have 70k cash in the bank. If you really don't want to pay taxes, expand. Buy some rentals, hire more guys, do something but don't throw it away. I buy rentals myself but i'm not afraid to take cash distributions and pay taxes if the need arises. Doesn't bother me a bit. It used to, so I blew all my money on equipment and bullshit that didn't need bought. Just to stick it to the man! Yeah, that'll show the irs. You see it all the time with small business guys. You won't ever see a large operation do it. They'll pre pay some bills, update some things they already planned to update, do planned expansions, take a distribution if they haven't hit their limit set by the bank or pay down notes so they can survive another downturn. Just my 2 cents, from a guy that used to do the same thing and but knows the numbers didn't justify it. The guy above said it perfectly. Why spend 50k to avoid spending 20k? If the transmission goes out in a pickup and you don't want to spend that much, do you ask the mechanic to replace the engine and the transmission while he is there? Nope. |
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Posted: 12/29/2016 7:25:08 PM EDT
[#27]
Set up and fund a charitable trust. The funding counts to this year's liability but you can write the donation checks out later. Iirc
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Posted: 12/29/2016 7:30:00 PM EDT
[#28]
Quote HistoryQuoted:
This is asinine. It's also a common trap to fall into and one i've fell into myself. NEVER. NEVER. Spend money just "for the writeoff". If you were going to buy it in a few months anyway, good. Go buy it. Think this way. You made 100k profit. You can buy 2 new pickups you didn't need and watch them lose value every year, or you could have 70k cash in the bank. If you really don't want to pay taxes, expand. Buy some rentals, hire more guys, do something but don't throw it away. I buy rentals myself but i'm not afraid to take cash distributions and pay taxes if the need arises. Doesn't bother me a bit. It used to, so I blew all my money on equipment and bullshit that didn't need bought. Just to stick it to the man! Yeah, that'll show the irs. You see it all the time with small business guys. You won't ever see a large operation do it. They'll pre pay some bills, update some things they already planned to update, do planned expansions, take a distribution if they haven't hit their limit set by the bank or pay down notes so they can survive another downturn. Just my 2 cents, from a guy that used to do the same thing and but knows the numbers didn't justify it. I 100% agree with you except I was caught with my pants down this first year, I didn't plan on making this much (4th quarter was very very good) and we honestly didn't have the personal funds to cover the taxes, it would have emptied our personal savings. I could have run the company profits through payroll (35% taxed) and then payed my taxes (we are in the 25% bracket). That's a huge hit to take to shuffle money around to cover a tax liability we didn't plan for properly. |
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Posted: 12/29/2016 7:36:04 PM EDT
[#29]
Open a SEP IRA for every employee of the business.
If you get a contribution, everyone else has to get one as well, although it can be for different amounts. The maximum the company can contribute to your personal SEP IRA is 25% of your yearly income. There is a cap, around $55,000 a year that it can contribute. |
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Posted: 12/29/2016 7:43:05 PM EDT
[#30]
Quote HistoryQuoted:
I 100% agree with you except I was caught with my pants down this first year, I didn't plan on making this much (4th quarter was very very good) and we honestly didn't have the personal funds to cover the taxes, it would have emptied our personal savings. I could have run the company profits through payroll (35% taxed) and then payed my taxes (we are in the 25% bracket). That's a huge hit to take to shuffle money around to cover a tax liability we didn't plan for properly. Maybe I'm reading it incorrectly, but you're an S-corp, why would you have to pay tax at the corporate level, and then at the personal level? It should all pass through at the personal level income tax. |
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Posted: 12/29/2016 7:43:25 PM EDT
[#31]
Mount a plow and salt spreader to one of those trucks. Hire a guy to run it and make lots more money by expanding the scope of your business. It's a good problem to have as a business owner, but you should be able to find some way for it to make you more money in the long run.
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Posted: 12/29/2016 7:49:35 PM EDT
[#32]
Quote HistoryQuoted:
Maybe I'm reading it incorrectly, but you're an S-corp, why would you have to pay tax at the corporate level, and then at the personal level? It should all pass through at the personal level income tax. The way it was explained to me, and again I am new to all this, is that any profit the company shows is taxed as myself. So the company made out very well and I am responsible for the taxes, but the company cannot directly pay for those taxes, the money has to come from my personal account. Therefore if I don't have enough in my account I first have to run any company money through payroll to pay myself and then pay the taxes. Correct? |
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Posted: 12/29/2016 7:59:02 PM EDT
[#33]
Quote HistoryQuoted:
The way it was explained to me, and again I am new to all this, is that any profit the company shows is taxed as myself. So the company made out very well and I am responsible for the taxes, but the company cannot directly pay for those taxes, the money has to come from my personal account. Therefore if I don't have enough in my account I first have to run any company money through payroll to pay myself and then pay the taxes. Correct? Our CPA had us take a company check, write it to you personally, deposit the check, then pay the taxes. Anything left over, write a check in that amount, back to the company. |
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Posted: 12/29/2016 7:59:07 PM EDT
[#34]
Quote HistoryQuoted:
I 100% agree with you except I was caught with my pants down this first year, I didn't plan on making this much (4th quarter was very very good) and we honestly didn't have the personal funds to cover the taxes, it would have emptied our personal savings. I could have run the company profits through payroll (35% taxed) and then payed my taxes (we are in the 25% bracket). That's a huge hit to take to shuffle money around to cover a tax liability we didn't plan for properly. Quote HistoryQuoted:
Quoted:
This is asinine. It's also a common trap to fall into and one i've fell into myself. NEVER. NEVER. Spend money just "for the writeoff". If you were going to buy it in a few months anyway, good. Go buy it. Think this way. You made 100k profit. You can buy 2 new pickups you didn't need and watch them lose value every year, or you could have 70k cash in the bank. If you really don't want to pay taxes, expand. Buy some rentals, hire more guys, do something but don't throw it away. I buy rentals myself but i'm not afraid to take cash distributions and pay taxes if the need arises. Doesn't bother me a bit. It used to, so I blew all my money on equipment and bullshit that didn't need bought. Just to stick it to the man! Yeah, that'll show the irs. You see it all the time with small business guys. You won't ever see a large operation do it. They'll pre pay some bills, update some things they already planned to update, do planned expansions, take a distribution if they haven't hit their limit set by the bank or pay down notes so they can survive another downturn. Just my 2 cents, from a guy that used to do the same thing and but knows the numbers didn't justify it. I 100% agree with you except I was caught with my pants down this first year, I didn't plan on making this much (4th quarter was very very good) and we honestly didn't have the personal funds to cover the taxes, it would have emptied our personal savings. I could have run the company profits through payroll (35% taxed) and then payed my taxes (we are in the 25% bracket). That's a huge hit to take to shuffle money around to cover a tax liability we didn't plan for properly. Been there. Done all that. Hopefully you take the lesson to plan ahead with your cpa so you dont get yourself in that situation again. Most small business owners went through it. |
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Posted: 12/29/2016 8:02:02 PM EDT
[#35]
Quote HistoryQuoted:
The way it was explained to me, and again I am new to all this, is that any profit the company shows is taxed as myself. So the company made out very well and I am responsible for the taxes, but the company cannot directly pay for those taxes, the money has to come from my personal account. Therefore if I don't have enough in my account I first have to run any company money through payroll to pay myself and then pay the taxes. Correct? Correct. And now you know what you need to put aside. |
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Posted: 12/29/2016 8:02:04 PM EDT
[#36]
Quote HistoryQuoted:
The way it was explained to me, and again I am new to all this, is that any profit the company shows is taxed as myself. So the company made out very well and I am responsible for the taxes, but the company cannot directly pay for those taxes, the money has to come from my personal account. Therefore if I don't have enough in my account I first have to run any company money through payroll to pay myself and then pay the taxes. Correct? That is a c corp. I dont believe that is true for any a corp setup ive seen or had, unless i misunderstand. An s corp is a pass through entity. |
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Posted: 12/29/2016 8:15:14 PM EDT
[#37]
Quote HistoryQuoted:
Correct. And now you know what you need to put aside. 100%. The next year I will be much more vigilant about this, as will my CPA. Just sucks that I dropped the ball this year, didn't make any real mistakes until this point. |
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Posted: 12/29/2016 8:16:40 PM EDT
[#38]
Quote HistoryQuoted:
That is a c corp. I dont believe that is true for any a corp setup ive seen or had, unless i misunderstand. An s corp is a pass through entity. Correct, and the tax liability passes though to me, just can"t let the money pass through unless it's taxed. |
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Posted: 12/29/2016 8:26:51 PM EDT
[#39]
Quote HistoryQuoted:
Correct, and the tax liability passes though to me, just can"t let the money pass through unless it's taxed. My accountant always said i could leave a certain small % in the business, but most of the profit must through. The tax liability went to me at the same time the money went to me. Its not 2 events, only 1. The tax liability is bc the money was passed to you as a distribution. Im not a cpa though, but i dont remember any double taxation as you describe. I had 100k profit (i already drew a salary) so 100k was distributed and i was taxed on it at 20% or whatever. Just my 2 cents. I understand enough to avoid most taxes but i still get confused. My accountant got bought out by a top 50 firm so i assume he is good. Hope anyway. I dont think either of us know enough to debate it.
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Posted: 12/29/2016 8:27:21 PM EDT
[#40]
Umm, my truck needs one. ;). I'll settle for the $500 one.
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Posted: 12/29/2016 8:37:54 PM EDT
[#41]
You might be able to set up a sep or simple ir tomorrow, roll the traditional iras into it and put more in before 4-15-17. But I don't really know
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Posted: 12/29/2016 8:39:23 PM EDT
[#42]
Assuming your company is actually an S corporation and not a C corporation, your accountant needs to do a better job of explaining how S corporation income taxation works. It sounds to me like you might need a better accountant.
If it is an S corporation, the corporation's taxable income will be reported to you on a Schedule K-1. Then it will be reported as income on your 1040 (on page 2 of Schedule E). The income is not taxed at all at the corporate level. There are ways to take cash out of an S corporation (other than as compensation) so you can use it to pay the tax on the K-1 income on your return. Your accountant should know what your options are. |
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Posted: 12/29/2016 8:39:29 PM EDT
[#43]
The point of an s corp is pass thru tax rate unlike a c corp which pays taxes for it then you pay taxes
again not my area |
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Posted: 12/29/2016 8:40:15 PM EDT
[#44]
Quote HistoryQuoted:
100%. The next year I will be much more vigilant about this, as will my CPA. Just sucks that I dropped the ball this year, didn't make any real mistakes until this point. Pat yourself on the back. You did a great job and made money!! Too much! |
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Posted: 12/29/2016 9:17:22 PM EDT
[#45]
Quote HistoryQuoted:
No, I have already purchased three new vehicles this year, all the tools we could ever want, trailer, etc... I need nothing for the business, and I mean nothing, it's 100% stocked. I went out and bought a $50k pickup truck I don't need earlier this week to dump money. Aimless, accountant said $5500 was the max we could invest this year, not sure why and that's why I am asking here. I have another $20k I could dump by the 1st to be comfortable with the tax liability. I absolutely hate coughing up so much to the .gov, it makes me sick. I don't understand spending money on stuff you don't need just to 'save' money from taxes. Either way that money isn't where you want it to be, I'd rather have 60% of the cash to do what I want with than have 100% of it tied up in something I don't need. That's just me though. Eta I need to read the whole thread. You can take a draw from profits. Go and take the money straight out of the business bank account if you need to. I have an S-corp. My accountant takes my taxes straight from my business account. I get a w-2 from my business, but the rest is "dividend". And that dividend is whatever my net income is on my corporate return. Yes, I pay tax on it, because that net income is my money. |
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Posted: 12/29/2016 9:19:18 PM EDT
[#46]
Want to buy a Cattle Ranch in Texas? Wildlife everywhere and the gun range is already set up. Will finance with down payment.
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Posted: 12/29/2016 9:25:45 PM EDT
[#47]
Depreciation on assets?
Real Estate? Building materials you'll need in the future anyway? |
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Posted: 12/29/2016 9:28:23 PM EDT
[#48]
Quote HistoryQuoted:
Generally S Corp owners cannot have HSA contributions pre taxed. They can take them post tax but wouldn't save you shit. I'll follow up a little later walking into business dinner meeting :( Quote HistoryQuoted:
Quoted:
Quoted:
HSA Health savings account you can put up to I believe this years limit is $6700 for a family I will look into this. Thank you for the advice. Generally S Corp owners cannot have HSA contributions pre taxed. They can take them post tax but wouldn't save you shit. I'll follow up a little later walking into business dinner meeting :( I am an S corp. I show taking a "reasonable" salary and fully contribute to an HSA. Ive been with my CPA for 10 years and have been an S corp for the last 2. Maybe its a hold over from pre S corp days. I dont know he would have to talk to his accountant. |
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Posted: 12/29/2016 9:40:43 PM EDT
[#49]
I have no advice but I'm glad you are kicking ass
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Posted: 12/29/2016 9:53:43 PM EDT
[#50]
Quote HistoryQuoted:
Assuming your company is actually an S corporation and not a C corporation, your accountant needs to do a better job of explaining how S corporation income taxation works. It sounds to me like you might need a better accountant. If it is an S corporation, the corporation's taxable income will be reported to you on a Schedule K-1. Then it will be reported as income on your 1040 (on page 2 of Schedule E). The income is not taxed at all at the corporate level. There are ways to take cash out of an S corporation (other than as compensation) so you can use it to pay the tax on the K-1 income on your return. Your accountant should know what your options are. Okay, so let's say hypothetically the business profited $100k, and I earned $80k. Total profits between us were $180k (ignore deductions for now) Tax rate is 25% Tax liability is $45k right? If I don't have that money in my personal bank account how does one pay that liability? |
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