Ok, tax time around. LLC S-corp. My wife has her W2 and I do have mine. The profit is $100k. My tax accountant says I have to pay our tax bracket on this profit. In our case 30%. So $30k in taxes.
I get that I have to pay taxes but what is the best way to deal with this? I can’t predict the year end profit so I don’t want to pay quarterly.
How do you deal with this?
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Botox. Sephora. Only fans. Lavish trips to Atlantic City. 🤣
Personally, I allocate 30% of my income to a designated tax account, which is used to cover my annual taxes, excluding any interest.
There are so many ways to keep your money and do good things with it. Your own non-profit charitable trust can be written off of your taxes and put that money for scholarships or other assistance programs. We don’t expect the gov’t to do anything useful with our tax money, but in this way, we know it’s there to help pay for future and current employees certifications or the occasional one-off car fix. You need a better cpa/lawyer.
Have you taken all exemptions ? Business write-offs ? Contributed to everyone’s Ira’s ? Got new vehicles, business equipment, thrown lavish end of year parties ? Etc… ?
Yes, except lavish business parties as I want to keep my money not spend it without return.
Get a new cpa, please…
Pay your quarterlies. S-Corp…… pay yourself average wages. EoY take disbursement as dividend. Less taxes that way.
You should change an accountant. A good one will advise how to reinvest those money back into business and only pay little to no taxes.
I can only reinvest so much. Beyond that it’s a waste of money.
First: Get a new accountant and put them on retainer so that you can have year-round guidance on avoiding this.
Second: Spend money in Q4. Lease yourself a “company car.” Upgrade equipment. Take a long business trip, etc.
I am an s-corp too and yes, the s-corp designation means that instead of the company paying the income tax that income is treated as your income and you pay the income tax.
What I am going to do is pay myself the profits at the end of the year and pay the taxes. At the beginning of the year I will loan back to my company the overhead for 3 months. That will give them enough time to be self sufficient. At the end of the year, the company will pay back the loan + interest, distribute the profits for the year to me, and start the whole process over again. That way, anything I invest into the company (for equipment, etc.) also qualifies as a shareholder contribution.
How does that strategy lower your tax burden? The interest you earn your own money. It kind of doesn’t matter if you call it profit or interest. You still would be taxed on it.
I’m a CPA… specializing in tax. Get a better accountant. I don’t know you and can come up with a list of things you can do to lower your tax liability.
Google IRS Safeharbor Rules This will give you the authoritative answer to your question. There are specific rules in place that allow you to pay based on prior tax year numbers that are knowns. If you follow these rules you can avoid penalties no matter what your income ends up being at the end of the year.
Personally I’m not in agreement with the “just spend it” crowd, or the “just ignore it” crowd. I’m more of a spend less, save more and “knowledge is power” kinda guy.
I’m also not with the crowd “buy a G-wagon. You can write it off”. 🤪 Spending has to make sense otherwise what’s the point.
Just try to guesstimate and pay some quarterly.
For the profit, try reducing it with expenditures that can grow your business. We’ve purchased vans at the end of the year that helped expand our service offerings - better than giving it all to taxes at least.
I would consult someone about real estate. If there’s a way to put thay as a down-payment for a property, you may be able to lower taxes substantially. BUT it has to be someone who really knows this, and your accountant doesn’t seem to be someone thinking out of the box. I’ve always worked with a tax attorney who filed my taxes and she is a shark!
Buy shit and write it off.
I don’t know why you’re getting down voted.
I pay quarterly. Then max out investments. Then finally buy (lots) of shit and write it off."
Exactly.
If you arent trying to scale up to the moon or get VC funding and go public or something, this is exactly the kind of stuff you should do. Buy stuff on the business accounts and save your personal income to reduce taxes.
Prepay 2024 expenses as much as possible. Invest in anything that will increase efficiency and reduce expenses next year.