Reducing taxable income of an s-corp

[transistor]

Quick question... I was supposed to meet with my CPA to get some ideas before I meet with my financial advisor tomorrow, but I kind of forgot about it. Can you guys list a couple ideas so I don't look like a complete retard? I know my CPA mentioned once that I could start like a 401k plan for myself or something. I think he also said I could buy myself life insurance through the company.

Any other things you guys do?

 

[FerrisHilton]

Quick question... I was supposed to meet with my CPA to get some ideas before I meet with my financial advisor tomorrow, but I kind of forgot about it.

I think this issue should be addressed first. Keep a calendar for your appointments?

 

[transistor]

I think this issue should be addressed first. Keep a calendar for your appointments?

Well to be honest, I remembered it, but my sleep schedule has been so messed up lately, I wouldn't have been able to meet with him anyway.

 

[gimmedat]

Yea, you can start a solo 401k. smSmallBiz.com | The Solo 401(k)

 

[Rexibit]

Keep a receipt of every purchase (you should anyway) you make using the bank account for the s-corp. Write what it's for/highlight the business purchases (if you are buying mixed stuff like at wal-mart).

Then, write off the meals as "Entertainment", your pens and envelops as "Supplies", etc. It'd look really suspicious in an audit if you were "Entertaining" yourself for every meal, so only do it once or twice a month if you aren't really doing if for a client.

I write off all my domains, hosting, file-storage, etc.

If you have a fair amount of excess capital, invest in land. Hold it for a few years and donate the useless lots you don't plan on developing to a local school/group as charity. You can then write off the current value. So if you paid $10k and it's now worth $15k, you write off $15k. (Granted, you would probably have been better investing in rental property, but you could have been speculating on the land purchase for a strip mall to buy you out)

 

[FerrisHilton]

Well to be honest, I remembered it, but my sleep schedule has been so messed up lately, I wouldn't have been able to meet with him anyway.

alrighty

 

[Sharksfan]

Also...

If you are really making bank - and have an office - start an LLC. Loan money from the S-Corp to the LLC and have the LLC buy the office for you.

Then turn around and lease the space to the S-Corp for the highest possible amount your CPA will let you get away with.

This turns into a 100% tax deductible expense for the S-Corp. Meanwhile, the money that flowed to your LLC as rent is taxed completely different -and at a LOWER rate - than "normal" K1 income through an S-Corp.

Also, your LLC will be making loan+interest payments back to your S-Corp. The interest is tax deductible as well.

 

[BigWill]

SEP IRA

Last year you could put 49k into it all tax deductable

 

[Rexibit]

Also...

If you are really making bank - and have an office - start an LLC. Loan money from the S-Corp to the LLC and have the LLC buy the office for you.

Then turn around and lease the space to the S-Corp for the highest possible amount your CPA will let you get away with.

This turns into a 100% tax deductible expense for the S-Corp. Meanwhile, the money that flowed to your LLC as rent is taxed completely different -and at a LOWER rate - than "normal" K1 income through an S-Corp.

Also, your LLC will be making loan+interest payments back to your S-Corp. The interest is tax deductible as well.

Oh, that's brilliant.

 

[DKPMO]

Also...

If you are really making bank - and have an office - start an LLC. Loan money from the S-Corp to the LLC and have the LLC buy the office for you.

Then turn around and lease the space to the S-Corp for the highest possible amount your CPA will let you get away with.

This turns into a 100% tax deductible expense for the S-Corp. Meanwhile, the money that flowed to your LLC as rent is taxed completely different -and at a LOWER rate - than "normal" K1 income through an S-Corp.

Also, your LLC will be making loan+interest payments back to your S-Corp. The interest is tax deductible as well.

Interesting tips. I am just curious whether these sorts of multi-entity transactions have withstood scrutiny by IRS and state tax authorities...

Do you have any info on that?

 

[identity_00]

If you work at home you can pay yourself rent for the business area (office) used.

 

[Sharksfan]

Interesting tips. I am just curious whether these sorts of multi-entity transactions have withstood scrutiny by IRS and state tax authorities...

Do you have any info on that?

Every CPA we've ever used has been cool with it.

You are not hiding income which is the big no-no with the IRS. You are just taking full advantage of the tax laws which are fucking insane.

But on that note - DO NOT TAKE TAX ADVICE FROM PEOPLE ONLINE. The only person you should take tax advice from is a CPA who knows your entire corporate picture. If for some reason I have ever have IRS problems - and I do not expect to, because I have a CPA do everything - I am confident I will not have any legal issues in the long run. The worst the IRS could do is find some kind of error and a minor fine.

CPA's - they cost just as much as they are worth. Last year mine saved me $4900 and charged me $800. That's a hell of deal.

 

[kisforkarla]

Every CPA we've ever used has been cool with it.

You are not hiding income which is the big no-no with the IRS. You are just taking full advantage of the tax laws which are fucking insane.

But on that note - DO NOT TAKE TAX ADVICE FROM PEOPLE ONLINE. The only person you should take tax advice from is a CPA who knows your entire corporate picture. If for some reason I have ever have IRS problems - and I do not expect to, because I have a CPA do everything - I am confident I will not have any legal issues in the long run. The worst the IRS could do is find some kind of error and a minor fine.

CPA's - they cost just as much as they are worth. Last year mine saved me $4900 and charged me $800. That's a hell of deal.

OP - Totally solid advice. Especially about not taking tax advice from people online. I'm a licensed tax preparer (not as in H&R Block minimum wage season employee) I live in one of the two states that requires education and rigorous testing before doing taxes. Having said that, consulting a CPA is your best bet. They are spendy, but worth it when it comes to the ADVICE. Do your homework though, just having the letters "CPA" after a name does NOT make someone an expert on tax laws. If you want a tax expert, consult an enrolled agent. They are experts on taxation, work with attorneys, and represent clients against the IRS.

Good luck!

 

[creativepart]

If you work at home you can pay yourself rent for the business area (office) used.

Woa, check that first. Here's the deal, when you pay yourself rent you'll have to:

A. Declare the rent as personal income
b. Recapture the expense at the sale of the house

Paying yourself rent is also one of the top ten ways to get audited.

In other words, not a good idea.

 

[kingfish]

The CPA should be the one giving you advice not the other way around.

 

[Caspah]

If you work at home you can pay yourself rent for the business area (office) used.

It would be wiser to just write off a percentage of the mortgage and utilities of your home according to my cpa. You take the square footage of your office and divide it by your total house square footage and use that % of all your mortgage/utility bills.

But again...check with your cpa.

 

[BigWill]

It would be wiser to just write off a percentage of the mortgage and utilities of your home according to my cpa. You take the square footage of your office and divide it by your total house square footage and use that % of all your mortgage/utility bills.

But again...check with your cpa.

Yup % is the way to go. Like someone else said if you pay yourself rent then your just getting income that you have to report. In a scorp that most likely won't save you anything.