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?
First, I’d get a new accountant. If you have 100k in profit you don’t just “pay 30%”. You would pay 10% on the first $22,000 then you would pay 12% on $67,450 and then you would pay 22% on the remaining amount. There isn’t even a 30% tax bracket to begin with, it goes from 24% to 32%. (the above numbers are assuming you are filing jointly with your wife)
2nd, you can take a lot of that money and use it as “business expenses”, did you and your wife go out to eat and discuss work at any point? deductible. Did you purchase any toilet paper? deductible, did you purchase any coffee? deductible etc.
Last, I don’t know if you have kids or not, but there are deductions you can take, child tax credits etc.
If that $100,000 was actually pure profit you, and you add in the married deduction of $27,700. It would leave you a taxable amount $72,300. Now out of that your total taxes for the year should be roughly $11,361
So yeah, I’d recommend finding someone who knows what the hell they are doing.
As I wrote we pay ourselves W2 income which brings us in the 24% bracket. The $100k are on top of that (net income after wages are paid) which brings us in the 32% bracket. So the effective tax rate is 30% on the $100k