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Recent Tax Planning questions

Robin, I will try to give you as much info as I can, I am

Hello Robin,I will try to give you as much info as I can, I am looking for where should I be putting, paying, my post tax dollars. I am married filing jointly I make 180k with a defined retirement at work, my wife makes 10-12k with no retirement. I am coming to the end of my mortgage $1330 for 2 more years, I have a child 24yo in nursing school 2 more years that I am paying thru sallied mae 36k a yr. I have a rental property in FLA that is generating about 1k a month and I am spending at least 1k a month on the rental (property manager, pool ,taxes etc.) I have 28 years left on that mortgage $1150 a month. I have put about 6500 in my wife's IRA this year, I have put about 4500 in church and other donations this year. I am looking to lower my tax obligations or get the most bang for my post tax dollars. any suggestions will be greatly appreciated

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PDtax

Owner

Master's Degree

7,272 satisfied customers
I am a tax professional (EA) and one of my clients sent me

I am a tax professional (EA) and one of my clients sent me the following article. He has an S Corp. Please review it and let me know your view on it. As far as I know, what he is proposing requires the client to pay 15.3 % of all ;profit to Social Security and Medicare. And for a one man S corp I see little advantage in what he is proposing. Am I missing something here? Also, last I knew S corps were way less audited than Sole Props. Not sure about partnerships. And I do not see why he would put things in a format that appears to give no SE tax shielding. Let me know your view. I am dealing with many one and two man S Corps and LLCs filing as S-Corps. Usually it is a step up from Sole Prop to shield profit from SE tax. Is there some advantage to what this guy says, or is he just ranting.LET'S PLEASE PUTS-CORPS COMPLETELY TO REST – DEAD & BURIED!We are in the 21st century, not the 1st century!Despite telling real estate investors and business owners to avoid S-corps in my courses, newsletters and other correspondence, I continue to get questions on using an S-corporation. The “S” in S-corp stands for SUCK! Here is why, which is not based on my opinion, but based on factual data…Major Tax Pitfall Of S-Corporations_More IRS audit profile and audited much more than partnerships. Very high IRS exposure (the most IRS litigated entity where the taxpayer almost always losses)._Highly Taxed W-2 Salaries With Substantial Employment Taxes – The net income of an S-corp is presently exempt from employment taxes*. But, based on numerous and continuing Tax Court cases, IRS requires the S-corp to pay you a significant amount (even 100%) of highly taxed W-2 salaries along with payroll taxes and filings. This amounts to thousands of dollars of “garbage” employment taxes out the window, reducing your business cash flow. (*Pending legislation would make S-corp net income totally subject to employment taxes)._Limits on fully deducting business tax losses because such losses are limited to the shareholder's basis in the S-corp's stock, which does not include third party debt. Termination of an S-corp status freezes the deductibility of unused carryover losses._S-corp distributions of tax-free borrowed money to shareholders could be taxable because of the above basis limitations. What a tax disaster!_Income and losses must be apportioned strictly in accordance with the exact number of shares owned, with no variations of special allocations to different shareholders._Limits on who can be a shareholder. S-corporations cannot have as shareholders – IRA's, corporations, partnerships and non-resident aliens._An S-corp can have only one class of stock ownership. Not being able to treat entity owners differently puts a limit on tax-reduction planning, such as with a special two-tier LLC structure (see below).What To Do > LLC-partnerships do not have the following disadvantages. Therefore if you have an S-corp, for your real estate investments or your small business other than real estate, get RID it.For real estate investments use a properly structured real estate LLC-Partnership per The LLC Master Machine Asset Protection System www.LLCProtectYou.comFor a small business other than real estate, use a properly structured two-tier business LLC-Partnership per The Business Owner's LLC- Protection System www.LLCBIZShield.comKnow Thy Money!SOME HARDCORE FACTS ABOUT MONEYFACT 1: NO body, but NO body. cares more about your money than YOU! And that is the way it should be as you are the owner. When I say “money” I do not just mean cash or bank accounts; there is also the equity in your home, real estate investments and other assets – IRA, 401(k), other retirement plans, stocks, bonds, mutual funds, insurance, annuities, etc. And your taxes (see below).FACT 2: Taxes = Money! Saving taxes is like making money. The wealthy know that taxes are a primary factor in determining whether you get rich or stay poor. Let's say, for example, you're able to save just $2,000 annually on your tax bill. (With a good tax plan it will be much higher). You invest the $2,000 annually in an IRA which earns a tax-free annual return of 10%. After 20 years, you'll have over $114,000! If you can save $10,000 annually on your tax bill and invest it in a Simple IRA for 20 years, you'll end up with almost $573,000! Over a half of million dollars!! (Imagine how much with Mike Warren note buying!) $5,000 in tax savings (which is found money) as a 10% down payment can allow you to buy an additional $50,000 in real estate! Assuming a 20% yearly return you would earn $10,000 which in 5 years would accumulate to $50,000! Get the point? Money makes money, but tax-free money makes a lot more!!

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Lane

JD, MBA, CFP, CRPS

Doctoral Degree

19,110 satisfied customers
Would this be a new question or an extension of the old

Would this be a new question or an extension of the old question?JA: The Accountant will know how to help. Please tell me more, so we can help you best.Customer: Well I need to ask a follow up question to my previous questionJA: Is there anything else the Accountant should be aware of?Customer: Yes. I had a personal bankrupcy, and I wanted to make sure I can still take the loss on the shares. The shares were valued at practically nothing in the bankrupcy.

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PDtax

Owner

Master's Degree

7,272 satisfied customers
We have two companies, a service company and a manufacturing

We have two companies, a service company and a manufacturing company. We are considering combining them into one company, but are trying to determine what the tax factors are. Would it be better for us to leave them separate, or would it not make that much difference if we combined them.JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?Customer: I think that's it. We just want to make the best decision for the company.

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Mark Taylor

Certified Public Accountant

Masters

2,054 satisfied customers
I have a tax question. My gross income for 2016 was $96,000.

Hi, I have a tax question. My gross income for 2016 was $96,000. With deductions my taxable income for 2016 was $88,600 (putting me in the 25% bracket). I have just been informed that I will be getting a 3% raise, which will place me at $98,880. with deductions I'm still looking at crossing the $90,000 threshold into the 28% bracket. Canceling out my raise and since the additional 3% gross will be taxed at 28% I'll actually loose money on this raise..... To complicate things even more I am getting married tomorrow, my wife's taxable income last year was $82,000.She does not invest. I invest in a 401k matched by my employer at ~2.5% and that's it. Should I invest the additional earnings from the raise to qualify it for a deduction? Should we file jointly or separately (we both are full time workers so won't have to worry about that for a while)

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Stephen G.

Sr Financial & Tax Consultant

Bachelor's Degree

9,312 satisfied customers
I am 67 years old. I contributed to my IRA, $6,500 for year

I am 67 years old. I contributed to my IRA, $6,500 for year 2016n (Jan.5, 2016) and purchased Service Credits from Washington State Retirement by rolling over the IRA. Jan. 28,2016. I realized now (6 months later) that I was not allowed to contribute to the IRA because I was retiring and did not have earned income in Jan. 2016. How do I remove the excess so that I do not have a 6% penalty "until the mistake is corrected"?JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?Customer: The IRA was "rolled over" from the Ameritrade Account and that account is now closed. I have talked to both AMeritrade and the Washington State Department of Retirement. The Ameritrade IRA account was closed in February by my request and cannot be reopened. Ameritrade says that there is a form that the State should process called an "excess removal". I have the cash in my Savings account to fixed this myself if I am allowed to do this by IRS rules. Just could not find this on IRS site. Also, would like to avoid taking it from the Washington State Retirement account as it will effect my retirement significantly.

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Lane

JD, MBA, CFP, CRPS

Doctoral Degree

19,110 satisfied customers
I half own an S Corp that my annual W-2 is over $200k and my

I half own an S Corp that my annual W-2 is over $200k and my half of the company profits range around another $100k or so that goes on my tax return. Been a W-2 employee there since 1990 and have a good book keeper and accountant. This job also provides a company car and my health insurance.I have several rental houses in my personal meme that produced income.In addition, on the side I dabble with flipping houses. Since I'm short on time about 1/4 or so of the 5 or 6 houses a year that I sell a year I hold for over a year. No rents. They just sit. Busy.I have always reported the sales on Schefule D except for in 2013 I included two sales on C and 2015 I included two on C. The reason at the time I reported those on C was that they were the only houses I carried in my LLC. The others were in my personal name. Income from the sales are around $100k a year.This year my pay from my normal job will remain the same as well as the company profits rolled to me. Sales of the houses, 2 being held for over a year with one rented for six months to the eventual buyers come Dec.What I want to do is just report all from here on out on Schedule D. I have a full time well paying job outside of real estate. I also am contemplating amending those two other returns to switch the sales from C to D. Do you think this would throw up red flags?

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Stephen G.

Sr Financial & Tax Consultant

Bachelor's Degree

9,312 satisfied customers
When recording a distribution on 1120S do I subtract it from

When recording a distribution on 1120S do I subtract it from Paid in Capital or do I increase negative retained earnings.We need to do this over the phone as quickly as possible.Its easier than it looks, but, you must have a deep knowledge of S Corporation Retained Earnings accounting.BACKGROUND I have an S Corp (never a C Corp.) with beginning of year negative AAA (-$1,964,146) and no OAA, PTI, AE&P, never a C corp.The difference between negative AAA and Retained Earnings (-$1,517,373) is cumulative prior years tax exempt interest $446,773.Beginning of year Basis is zero.2015 separately stated income items are $293,463Distributions $61,000 cashTotal Loss and deductible items 2015 -$39,865Suspended Losses from prior years -$3,367,488

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PDtax

Owner

Master's Degree

7,272 satisfied customers
May I use my lawyer expenses for personal income tax return.

Hello, May I use my lawyer expenses for personal income tax return. It's expenses for marital distribution after divorce. For example as itemize deductions or for selling investment property buying during marriage. In fact, if i didn't hire lawyer , i would never get my partial payment for selling property. Thank you

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Dr. Fiona Chen

President

Ph.D.

760 satisfied customers
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