It wasn’t nearly as scary as I was anticipating
If you’ve been in business for 10 years, or 10 minutes, you owe it to yourself to find a good CPA.
Here are the cliff notes from yesterday, in no particular order:
- For our situation, he highly recommended restructuring to an S-Corp. The threshold where this makes sense from a financial perspective is much lower than I was thinking. Between filing requirements and additional paperwork, it may cost us an extra $800-$1200/yr. But, we could save $5k+ on next year’s taxes. Basically, you can take half your income as salary, and the other half as dividends. You only pay self employment tax on the salary portion. So you save 15.3% off of whatever you take as dividends. For us, that means taking $35k salary, and $35k in distributions.
$35,000 x .153 = $5,355
$5,355 - $1,200 = $4,155 net savings
- If you buy a vehicle that you are heavily modifying to use as a strictly work vehicle, you can enter it as a piece of equipment instead of a vehicle, and expense it 100% the first year with Section 179. For us, this means getting that Tacoma we want with the sub 6k GVWR, taking out the back seats and installing shelving, putting on a flatbed with our equipment mounted, and some signage, and we can write off the $30k+ for 2018 taxes. This should reduce our liability by around $10k.
There are some caveats to this, of course, which you can go over with your CPA. For one, once you’ve expensed something 100%, if you resell it, 100% of the sale price is treated as capital gains and taxed as such. You can never go back to mileage deduction. And a couple other things I forget, that really didn’t apply to us, anyway.
We’re doing pretty darn good for a seasonal 2 person service business in VT. That was nice to hear
Gotta get a lawyer
Everyone pays taxes at some point. Just comes down to when and how much you want to pay. There’s a lot you can do to avoid paying more than you should. But there’s no free rides.
Accountants are like doctors they all give a different opinion
I’ve asked a few over the years and the all said the s-Corp isn’t worthy he work on the scale I’m at.
All have said if your in a partnership or have employees it’s the way to go.
Being pretty much a sole proprietor your still paying the employer and employee tax just in a different way. Plus the increase led costs of tax prep and depending on the state saving kind of wash out.
But what do I know I only play accountant on Internet forums.
But here’s a way to really reduce tax liability
Open a SEP Ira depending on income can put like 50k a year in it pre tax.
Who cares if you pay taxes on the way out you’ll be in a lower tax bracket and we’re planning on a change in this setup
Yep. Between employer and employee deductions I can put away $52k a year tax deferred. Add on the IRS mileage deduction is way higher than my actual costs and my tax bill is pretty limited.
My high school wrestling coach use to say with some regularity, “A good chiropractor and a good CPA are worth their weight in gold.”
I finally understood both a few years later. Lol. My CPA recommended LLC filing as S-corp. So that’s what I do.
You’ve got kids, so your tax situation will be a little different than ours. For our circumstances, he assured us that our savings from restructuring will be pretty substantial.
IRA is a good idea. We’ll probably talk with him about that as well as other things we can do to further reduce our tax bill.
Solo 401k is an IRA on steroids.
That’s a nice truck , I’m closely looking at this one . Only 20k miles
I’m still in disbelief myself, as I sit in it adjusting the stereo settings, lol
What trimline? Looks like a lot for used. But I know there’s a big difference between some of the trimlines. I got a 2019 SR V6 4x4 access cab
It’s a 4x4 SR 3.5 , but not TRD. But I would rather have TRD. I think the price is because it’s a doubl cad / 4 door , but I’m sure it’s negotiable
In my research, the double cab was always pretty comparable to the access cab in price. We only got the access cab so we can make sure it qualifies as a non-personal business use vehicle. I also wanted the full size bed on the shorter wheelbase.
I would look more closely at brand new. These trucks have such high resale value that it’s really hard to find a used one that’s actually a better deal than buying new, especially when you account for the warranty and better interest rates. We got 2.99% for 72 months through our credit union.
The only other trimline besides the SR that I was interested in was the TRD Off Road. Seemed like everything in between was a bunch of pointless frills (besides intermittent wipers, those I’ll be installing myself at some point).
But it’s quite a hike in price from an SR to the off road model. All the Tacoma’s come with an “electronic LSD” now (basically just uses the brakes to introduce friction to the slipping wheel; just a fancier kind of traction control, but I’m told it makes a big difference over previous models)
I agree , price doesn’t drop much or sometimes nothing going pre owned . I just haven’t spoken to their in-house fleet department/internet sales manager to see what kinda price they can give me . I have 3 kids , so I need the double cad. I like the TRD option , my 2001 doesn’t have it I regret not getting it . I also would like long bed 6 feet long with a Daco/snugtop camper shell . No sure I’d the black wheels are stock or are extra , but I like them . I think they’re the TRD rims , not sure . But congrats on the beautiful truck, that’s going to last you 20 years easy .
What in particular did you feel you missed out on? Just curious
I no longer go window shopping because of this! Congrats!
Besides the cool sticker , the 2001 model came with more expensive tires , better suspension and I believe a small modification to the engine. Plus re-sale value , I dont think I will ever get rid of that truck thought . My son turns 16 next year , so I’ll pass it to him for the mean while . So I’m kinda starting to really look in to getting a new one
We got set up with a good CPA last year as well. Moved to an S-corp and i think we saved maybe $6,000 by doing it. It was a great move in my opinion. Great choice in truck Alex, I’m happy for you. I look at every tacoma i drive by. They are great trucks for sure. My wife makes fun of me for how much i pay attention to Toyota trucks lol. Can’t wait to see how you set it up.
I’ve got a buddy at the local Toyota dealership. He called me today letting me know they have 0% financing on their trucks this month. If I hadn’t just bought a Chevy I’d be buying a new Tundra. Congrats man! I’m sure it will make you a great truck. You’ll have to keep us in the loop with everything you do to it.
This is the stuff that needs to be talked about more!
Out of curiosity, how long do you think a business could go without paying taxes before they get audited or shut down? ASKING FOR A FRIEND. no seriously, I really am asking for my “brother in law” lol
hes not up to date on his stuff and always is asking me tax stuff. I just say “idk man just get quickbooks online and do your best with organizing stuff, quickbooks will remind you when taxes are due and stuff”
Honestly tho, your post has motivated me to go see a CPA, it sounds like they could save me some serious money in the long run (im still running sole proprietor)