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Stephen G.
Stephen G., Sr Financial Expert
Category: Finance
Satisfied Customers: 6103
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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I am a 66 year old self employed person who has a sole

Customer Question

I am a 66 year old self employed person who has a sole proprietorship. I have always had modest income, until this year. I am now in line to get from $1-4 million as my fee for being able to help with a business deal!!! I have no SEP IRA which I know I need, but I am hoping there are other things I can do BEFORE I GET the money that can shelter taxes on some of it, and then my goal is to have SAFE no stock market ways to preserve and keep my money as safe as possible, even if I do not earn much more than inflation. I just MUST keep it safe due to medical problems.I live in a state that takes both federal and state taxes in the Midwest. Should I change from a sole proprietorship to an S corporation or LLC? I can afford to pay the additional fees to my CPA to do the tax and other paperwork. Or an LLC perhaps? Can I defer some of the 2016 income into the next 1-2-3 years perhaps? Just tossing out ideas. Once I have sheltered as much as I can of what I will get in 2016, I need a pplan then to put it in SAFE annuities, muni and other bond funds I guess, and other short term things. I need to keep it safe and "liquid" due to health issues and the need to move to an assisted living place in the next 1-2 years, plus other medical expenses, even though I have Medicare now and a Medicare supplemental plan. I had thought about keeping this town home (or leasing it) and using the $9,000+ a year I get for paying on the mortgage & town home fees, then buying a new place and putting down 30-50% and using the whatever mortgage and interest I have on it as a future tax deduction. I know I probably can never get into a lower bracket once I am above $1 million a year, but want to save as much as I can. Feel free please to ask any other questions. I need for this to be accurate information and I don't really trust my small bank or others in town here to advise me in things that would not make them huge fees for some things I could do myself, such as open an SEP IRA for example. Thanks very much, Dennis
Submitted: 6 months ago.
Category: Finance
Customer: replied 6 months ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  Stephen G. replied 6 months ago.
I'm sure I can assist you if you can wait until tomorrow morning.I've assisted with this type of situation many times in the past.You are right to be concerned about getting advice from from those are receiving commissions from you following the advice they are giving you.I can tell you that it's probably a good thing that you have a CPA on board & I'm sure you'll get good advice from him or her.Now, I'm be honest with you; I'm watching he Jack Nicklaus special on the golf channel about his victory in the Masters Tournament in 1986.I can tell you one thing, when all is said & done the one thing that you can do to save the most income taxes for the year your receive that fee is to set up a Defined Benefit Pension Plan; that will get you the biggest tax deduction and provide you with the most flexibility going forward while at the same time giving you access to the funds through loans which are permitted in that type of a plan. We can discuss the details further tomorrow morning if you are willing to wait until then. If so, let me know; if not let me know & I'll "opt out" & you can see if another expert is available tonight.By the way, I'm a retired CPA & Personal Financial Specialist.
Expert:  Stephen G. replied 6 months ago.
OK, haven't heard back from you, but the Nicklaus Special is over & I'm about to pack it in for the night. It's just after 10PM on the East Coast where I am & I've been at it here since early this morning and I've about had it for one day; 14 hours is about my limit these days & you'll do much better with me when I'm fresh in the morning.By the way, there's a giant difference between 1 & 4 million, when is it likely that you will know a little more precisely what that number is ***** to be and when is it likely to come your way. Is there any opportunity to receive the funds over more than one tax year without putting the payment itself at risk or is that not a possibility?Is the payment only going to come in cash or are you dealing with a Company that has other options in the way that they can compensate you? What is the nature of the fee that you will receive? Is it a commission based upon a sale or something related to that type of business deal?Again, let me know & I'll check back in the morning.
Customer: replied 6 months ago.
Hi Stephen,Well ha-ha bless your heart for being honest! I enjoy (watching) golf also. Just have other things on my mind tonight! Before you get into the details of things tomorrow let me say I know about the SEP IRA and will set one up very soon - one of the few things I can do myself for free with my bank. I never had enough money to have one in the last 10+ years, due to health issues. But this year I finally hit the gold mine and as I said my commission for finding a lost treasure in the art field to sell for an owner will be anywhere from probably $3-5+ million USD before taxes. It depends on what we can get for the painting. It could be even a tad more, but I'll be in the top income bracket none-the-less. I hope/assume you are a CFP or similar financial planner with some certification or many years of experience? You have excellent ratings. I just wish this Just Answer place would give short bios on the "experts," as some of those I have used over time were not experts at all in the field they said they were when I requested them. I am trying to get as much good, solid information on my own to save some on the CPA, since I don't have much to pay him with until I get my money, and some of these things need to be IN PLACE by the time I do get the money (60-90 days or so). He is good, but he has started charging me for even a 5 minute phone call or 3 sentence email where I wished him Merry Christmas and he replied! Not sure if he's trying to get as much for HIS retirement or what, but after using him for 25 years it is a bit irritating.Tomorrow I have a kind of messy schedule, but can tell you in advance. The best time for me to read what you send and also ask any questions you have is afternoon. I am on Central (Iowa) time. I have a medical appointment and will be home and available to chat by phone or back & forth online here after 2 pm MY time - 3 pm EST. No idea what your time zone is, but hopefully that will work? Since I am waiting for this, maybe you'll be as detailed as you can, since I am going to put my trust in you and not ask for "rush" delivery?" $45. is still fine as long as I get several detailed, accurate options to try/mull over before I get the money. After I get it I will need to protect it also. I had in mind various accounts within my main bank: Checking, savings, an annuity of some kind, a bond fund that is safe and not long term, then keeping this modest ($100,000 sales value) town home and paying the mortgage or possibly leasing it (don't really want to have to worry about "tenants" however) and deducting the $10,000 or so a year on mortgage/interest and association dues and of course. I'd get another place nearby, pay only some of the mortgage, and have THAT as another deduction. Those are MY ideas as a non-expert.
Not sure if changing to an S or LLC corp instead of my sole proprietorship would help me much or to what extent. I know it's more paperwork, etc. but I can afford to pay my CPA to do that if it is worth the trouble.
The main thing is to try and preserve as much as I get in 2016 as I can. I read somewhere if I paid my STATE taxes early in full that could help me some versus waiting to pay them in 2017.I'll be around after 2 pm central time tomorrow. If you want to call I can be reached at(###) ###-####Thanks, ***** ***** your documentary! I look forward to hearing from you tomorrow.
Customer: replied 6 months ago.
To answer your questions:"By the way, there's a giant difference between 1 & 4 million, when is it likely that you will know a little more precisely what that number is ***** to be and when is it likely to come your way." >>>"Is there any opportunity to receive the funds over more than one tax year without putting the payment itself at risk or is that not a possibility?" >>>>>Is the payment only going to come in cash or are you dealing with a Company that has other options in the way that they can compensate you? What is the nature of the fee that you will receive? Is it a commission based upon a sale or something related to that type of business deal?
Customer: replied 6 months ago.
No precise number until almost ready to be paid. Will be bank wire transfer to any account I could be sent to various places. No options. Must take it within a few days anyhow in full. But will be taking in more money in 2016 also, so it need to prepare for the initial sum, then more to come. Maybe into 2017, if my health holds out. Then I would "retire."Yes - sales commission, shared between myself and a trusted art expert/private broker. we split 50-50.
Expert:  Stephen G. replied 6 months ago.
OK, Dennis, tomorrow afternoon is fine;The documentary is over at this point.I've got plenty of credentials, the main one is being a CPA since 1973 and working as an Audit Manager for Coopers & Lybrand (now PriceWaterhouseCoopers) for 7+ years in Boston and then leaving to start my own practice where I specialized in wealthy individuals and small business & spend the last 10 years of my practice working on Estates & Trusts estate taxes & fiduciary income taxes. I am a retired CPA/PFS the PFS being comparable to the CFP except that you must be a CPA before you can even sit for the PFS credential which also requires references form financial planning peers and clients before you are eligible to sit for the PFS exam which I passed on the first try in 1993.
Expert:  Stephen G. replied 6 months ago.
As far as the $45. dollars that you spoke about, I don't have anything to do with what the site charges except that I only receive a portion of whatever it is you pay. As experts we are users just like you are; the site assigns amounts to the questions based upon whatever interchange you have with them. I'm not doing this just for the money, I'm retired now, so I just enjoy assisting people & keeping myself involved in my profession.I will tell you that this is a very busy time here as you can imagine and this is the one time as a tax pro I have to fund my entertainment budget so if we were talking in July, I could be more generous with my time. Not that it matters to me, but you are going to have to make up your mind that you are going to have to spend some money to get the kind of advice you need from someone who isn't trying to sell you something and get compensated based upon a commission they would receive, particularly when they hear that you may be interested in an annuity; you'll have the investment or insurance agents drooling at the thought of earning upwards of 8% - 10% or more of whatever you put into an annuity. Just do the math.I've already given you the best piece of advice that you'll get from anyone with respect to tax savings namely given your age and the income you expect, a defined benefit plan is ideal for your situation & I suggest you do some research on that idea.As soon as your CPA gets past the tax filing deadline, I suggest that you meet with him in person and discuss how you wish to proceed. If you don't have a meeting of the minds, then you should go somewhere else. If you have an attorney you trust, you can start there. But you are going to be talking about several thousands of dollars to get the advice you need (not for me); if you aren't willing to go in that direction, you are going to be dealing with amateur acts that will take more than that from you, they just won't tell you about it and by the time you find out, it will be long gone; the things you mentioned are good ideas, but for the most part not for you; the alternate minimum tax will negate most of them and the with that level of income, you'll lose most of not all of your itemized deductions, including the state income tax deduction. Rental property is risky in more ways than one so if you are interested in that from an investment standpoint, you'll need a separate entity like an LLC and you'll need a management company; depending upon what you receive and the timing an apartment building with 20 +- units might make sense if your commission gets up in the range you expect.I know there's a lot to process here and I think the best thing before I go any further with you is for us to speak on the phone, so why don't you check in here when it is convenient for you tomorrow afternoon as anything we do has to go through the site (those are the rules) and I know the site charges extra for phone calls, so you'll need to inform customer service if you want to speak with me by telephone. They set the fees, and give us a portion of them; we don't get involved in that aspect of the site administration until much later in the process.I look forward to speaking with you and being able to get you headed in the right direction.Steve G.
Customer: replied 6 months ago.
OK. I'll be back tomorrow afternoon and try to "connect" with you by phone. Thanks, Dennis
Expert:  Stephen G. replied 6 months ago.
Sounds good, talk to you then.Steve G.Going to bed.........................
Customer: replied 6 months ago.
Hi Steve,
I'm home for the next couple of hours, if you want to send something, or I'll be home after 2 pm Central time. Ignore me being any kind of "landlord." I only mentioned keeping my current town home and paying on it to for awhile to get the $1000. or so a month in deductions from the mortgage, interest and homeowner's dues. I have no interest in having any other "rental property." Likewise, I am not keen on annuities, and never have been. It was just mentioned to me by my banker. I will soon open a SEP IRA. Beyond that, based on what I told you above will be large "windfall" income (not sure HOW large, so deal with basics of just me taking in $2-5+ million in 2016 as a cash commission for something I helped sell as a self employed, (sole proprietor) art broker, and then some more in 2017. After 2016 I need a plan as to ways to **allocate and preserve** as best I can what I have **after 2016 taxes especially,** and shelter as much against self-employment and federal taxes what I will make in 2017. After 2017 I will not be working any longer I am sure, due to health issues.I will be buying another home and have a mortgage and some other possible deductions as long as I have a home office, and also of course quite a bit of health related deductions as well. Typical things self-employed or even retired people can take as personal deductions. I know you can't know exactly what things will be good for me, but if you give me things I MIGHT be able to use, I can research them depending on my situation, and know what you feel are good planning things for what the cost might be or not worthwhile, or even a waste of money. I don't want to be paying any person or bank any more than I have to for asset allocation and tax help on things. I will consult my CPA in time, but not now when I can do some things myself. I also want to read up on things you might suggest. The SEP IRA of course I can do myself for free. Possibly other things I can do myself also. I don't want to get fancy or complicated. My sense from what I have read is that the simplest thing like an SEP IRA is one of the best things I can do. Maybe other things that could be helpful to me are free also. Keep in mind I have no kids or wife, and my Will and Living Will have already been prepared. When I am dead, some charities and a couple of people will get percentages of what I leave behind. Aside from that my "estate planning" is very simple and uncomplicated.Thanks very much,
Expert:  Stephen G. replied 6 months ago.
Dennis:One thing that I can promise you is that I'll be frank with you about what I think you should investigate.In that regard, I have to tell you that I think you are missing the impact of what your tax planning should entail.Almost every time you mention something, there are thoughts that lead me to advise you in basically the same direction; and apparently it's a direction you are reluctant to follow.Many of the ideas you are mentioning make a lot of sense for someone who may be dealing with $200,000. to $400,000. of annual income over an extended period of time, either from salary or self-employment. But when you are dealing with the numbers that you are tossing around, possibly $2,000,000. to $5,000,000. in 2016 and more in 2017, you are in a whole different league. If you fail to get you mindset resent to those figures, you are going to find that all those things that you have mentioned are a mere drop in the bucket to what you need to be doing & their impact would be at best lost in the rounding and at worst, limit your ability to execute what you really need to be considering.While I can give you some direction and assist you with where you should go to get the best advice, timing may become critical if, for whatever reason, these fund become available to you near the end of the calendar year and you haven't done the level of planning that needs to be done to effect any significant savings of income taxes and even more importantly to position yourself financially to execute a safe and reliable investment plan to meet the objectives that you have identified so far.Honestly, the things that you need to consider, as I mentioned yesterday, are fairly sophisticated in nature, difficult and complex, but a good advisor can reduce them to understandable concepts, but the execution must be done under the direction of a "fee only" financial planner experienced in such matters who you are able to develop a trusting relationship with and whose personality messes well with yours, or you are going to find that not only will you not achieve your objectives, but you will wind up spending a lot of money needlessly. and by the time the dust settles you will have missed the opportunity to achieve any real tax savings and your resources will be substantially diminished.Frankly, this is not the place to be looking for the advice you need. I can and will give you some ideas to consider, but as soon as you are certain that you are going to earn these funds this year, you need to spend some serious money in order to establish an overall financial plan to prepare for receiving these funds and further to be prepared to know what to do with them.I'll forward this introduction to you now, and if you want to have a telephone consultation this afternoon, let me know. I can work with you however you wish, but in this format we can barely scratch the surface on the areas that you need to consider with an experienced financial planning firm, such as you would find in the tax or consulting department of one of the major CPA firms in a large city near where you live.
Customer: replied 6 months ago.
Steven,I'm not sure what to say now, except that from your replies it seems you are right this is not the venue or place to establish a plan that cannot possibly be laid out here. So what do I do with the Just Answer people in terms of the money they have taken from me? I am not dissatisfied with your words of caution and honesty at all, but likewise maybe I should have just been told 1-2 emails ago that it was not fair to me or you to try to deal with this situation in an online forum. Suggestions? Clearly I just need to get with my CPA and work something out and/or the Financial Planners in the estate and trust planning department of the bank I have used for 18 years.Thank you,