OT: Suggestions on reducing taxable income

[ocrenter]

After reaching a certain level of income, it just makes sense to go to a CPA/tax attorney. To me, something are just best left to the pros. Certainly, today if you are pulling in just a W2 wihin a five figure salary, turbo tax it. But given you already have to pay this much AMT and at total rate of 27%, I have to assume your income is well above the $300k mark. If you are not above $300k then you are most likely paying way too much.

At the level of income I’m assuming, the Art of Itemized Deduction becomes extremely critical. This is where a live body is needed to provide solid advice and redirect if you are too aggressive and provide hints if you are “underestimating.”

Plus the fee itself is a deductible expense!

Addendum: in regard to the not spending part. If you are an individual propriator, there are things that you spend that are 100% deductible, right off the top. Maximize those to get you down to a lower bracket, otherwise you lose it to the government.

[meadandale]

[quote=flu][quote=no_such_reality]Actually UCGal, you’re close. If he hasn’t, he needs to spend the $700 to incorporate out of state. Contract through the corporation and pay himself and meager but reasonable salary and have the corporation distribute the bulk of his earnings as dividends for the stock he holds in the corporation.

(Note, I’m not a tax attorney so you need to verify)

And I would suggest getting much more serious but deducting your business expenses and identiying them as such.[/quote]

I’m confused. If we’re talking about an s-corp, the dividend paid to shareholders, I believe still gets treated as ordinary income. (What it can do I believe is getting you out of paying self-employment taxes that you would pay receiving instead a salary), But then, even this, you have to pay yourself a reasonable rate.. Also, if you pay out a dividend, it goes to every shareholder.

Maybe I’m missing something.[/quote]

I don’t know about the dividend angle…

However what I do with my S-corp:

* Pay myself a modest salary to limit payroll taxes. I pay myself about what an Indian here on an h1b visa would be paid to do my work. Completely legit as far as I am concerned.
* Contribute the max of that modest salary to my 401k (Keogh).
* Have the company contribute the max to my 401k as a profit sharing bonus.

The second two allow me to divert over $30k annually for retirement, tax free. The first saves me about $7-10k in direct taxes.

Note that there is virtually no tax advantage to incorporating out of state if you live in CA. CA will still tax you even if you are incorporated in NV or DE. There may be other advantages but this isn’t one of them.

For the home office deduction…it’s virtually worthless. However you should have your S-corp purchase everything IN the office.

As to why the home office deduction isn’t really that big of a deal. I have an 1100 sq ft house. My office is 100 sq ft. Let’s round up and call that 10% of the square footage. Let’s say I have a $3000 mortgage so the most I could ‘write off’ a month is $300. However, most of that $3000 is interest which I’m already writing off and I can’t double dip. Say $500 is principle. That means I can write off $50 a month. The same math applies to utilities (cable, electricity): I can write off 10%.

I’ve added everything up and found that the total subject to write off, for me, is only a couple of thousand a year…with a real tax savings of only a couple hundred dollars. The risk of an audit is very high IMO and the bookkeeping/paperwork to support this isn’t worth the effort.

However, I do have my company pay the cell phone bill (and buy the phones) and it pays my medical insurance premiums.

[Coronita]

Ok folks. Since ocrenter mentioned this that 27% is too high tax rate. What are you folks seeing really? The irony is this doesn’t even include the social security, medicare, sdi,etc portion. So, yah I don’t want to hear about folks suggesting we should pay more taxes.

[moneymaker]

Are you talking taxable rate or actual taxes paid?
Recently heard a person tell me that they paid themselves minimum wage and socked the rest into a retirement account that is not taxable until taken out. Please consult an expert on this as I have no idea how this is done. In my opinion tax rates will be going up so might as well take the hit now.

[surveyor]

[quote=flu]So, yah I don’t want to hear about folks suggesting we should pay more taxes.[/quote]

Congratulations on joining us, fellow conservative.

[Coronita]

[quote=surveyor][quote=flu]So, yah I don’t want to hear about folks suggesting we should pay more taxes.[/quote]

Congratulations on joining us, fellow conservative.[/quote]

Dude. I didnt just join the overtaxed party. I’ve been the host of it for years.
It’s there’s been so much bending over that it hurts to sit down so I’d rather just stand up.

[Coronita]

Tax deferral strategies are really going to be interesting

[Coronita]

Tax deferral strategies are really going to be interesting

[carlsbadworker]

You should be able to contribute to pre-tax income to HSA/FSA…it would lower your AGI. Then it doesn’t matter whether your medical expense >10% or not.

[no_such_reality]

I was thinking LLC or C-Corp. I think the LLC is taxed like a LLP which in turn is still taxed like an S-Corp, just more forms.

As for our rate, I don’t know it. I know the rough amount, and I’ll stop there because the raw dollar figure is just RAW…

[SK in CV]

Don’t take amature advice. Much of it is wrong, stupid, worthless, costly or dangerous.

[scaredyclassic]

Professional advice is sometimes bad too. But at least you can sue them and collect.

[an]

[quote=walterwhite]Professional advice is sometimes bad too. But at least you can sue them and collect.[/quote]
How many people successfully sue their professional real estate agent for suggesting them to buy in 2005 and collect?

[(former)FormerSanDiegan]

[quote=SK in CV]Don’t take amature advice. Much of it is wrong, stupid, worthless, costly or dangerous.[/quote]

Isn’t the suggestion above amateur advice ?

10 If I take your advice it tells me not to take your advice. Then again, if I don’t take your advice, it doesn’t tell me not to take your advice, so I guess it’s safe to take it.

20 GOTO 10

[Author]

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