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tax planning help

    • 59 posts
    October 22, 2007 3:11 PM EDT
    There are several things that her accountant should be helping her with - many options, such as Roland stated with retirement plans and another common one is medical expense reimbursement plans.  You really haven`t provided nearly enough information, nor is it feasible to do so in this forum, to provide the best plan.

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    Gina L. Gwozdz, CPA
    http://GLGcpa.com
    http://TaxTreasures.com

    • 59 posts
    October 22, 2007 11:49 PM EDT

    Thank you glgcpa for your reply.

    She says that her accountant didn`t give any advice at all nor provide any pointers to the various options available - maybe she wasn`t specifically paying him beyond the book-keeping and tax filing activities.

    Could you please let us know what specific type of professionals we should be seeking help from? Is it Tax Planner or Finacial Planner or Investment Advisor?  All the friends and family we know are working class folks whose finances are relatively straightforward and therefore none of them had faced similar situation.



    Most tax accountants provide this advice; thus if that`s who she hired she should be receiving it.  If she`s not she either picked an accountant who does strictly (or mostly) bookkeeping and maybe didn`t feel qualified or realize they should be offering tax advice OR what I see very frequently in large CPA firms - she works with a bookkeeper (either a non-degreed accountant or a first year out of school accountant) who knows virtually nothing about tax planning.

    In short, the answer to your question is that she needs to talk to a tax accountant regarding tax planning.  The tax accountant may refer her to a financial planner or investment advisor after she understands and knows what type of accounts she is interested in and why.

    True tax planning (as opposed to quick short term fixes you hear about on the news each December) involves not only looking at this C-Corporation, but also all the owner`s individual returns.  The reason is that a tax plan focuses on the individual`s complete tax liability from all sources (their business, investments and their individual taxes) and makes recommendations of things that you are not taking advantage of elsewhere in your tax circle.


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    Gina L. Gwozdz, CPA
    http://GLGcpa.com
    http://TaxTreasures.com

    • 747 posts
    October 22, 2007 2:59 PM EDT

    A company retirement plan?
    If she does not need to take an increased salary/bonus, it would be better to have the "profit" put into some sort of tax deferred retirement vehicle. Is there more than one employee (her)? If so, then then the Co`s retirement plan needs to address all qualified employees.

    Personal retirement plan
    She certainly could take fund out and put them in a 401K but the limit is $15,000 in one year (tax deferred). IF she wanted to take more out she could put it in a Roth IRA (but after taxes).

    There are various options, depending upon the Co`s situation and her tax situation. Usually, there would be some planning BEFORE the end of the Company`s tax year to plan for the profit. Could some revenue be deferred? Some expenses accelerated.. it reduce the profit?

     

    ~Roland

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    • 3 posts
    October 22, 2007 2:41 PM EDT

    Hi All, I have a friend (not computer literate) who has a C corp (though in retrospect he feels he should have started the company as an S-corp). Over the past few years, the company didn`t make much profit - but this year it looks like it will end the year with a profit in the low 6 figure range. What are possible options to optimize taxes? Should she take most of the profit as salary? If she does this, should she set up  401K and/or IRA plans etc.? Thanks!

    • 3 posts
    October 22, 2007 7:34 PM EDT

    Thank you Roland for your kind reply.

    1) company retirement plan is a good point you have made - it will be explored as an option - she is the only founder drawing salary - another founder is a silent partner not actively involved and not drawing salary.

    2) personal retirement plan: she is definitely interested in a 401K and will work on setting such plan

    3) Yes - while it would have been better to have some planning done before the tax year ends (on Dec 31) unfortunately no planning was done so far mostly due to the fact that the profits were not expected. Apparently it is not possible to defer much revenue nor there are any planned expenses that can be accelerated. Most likely she thinks this year`s profits to be a special case and does not expect to make similar profits next year.

    4) one option she was thinking is exploring paying upfront full fees for a good MBA program - but couldn`t find any good schools that would allow for such an option.

     

    thomasdsouza92007-10-23 0:44:19
    • 3 posts
    October 22, 2007 7:42 PM EDT

    Thank you glgcpa for your reply.

    She says that her accountant didn`t give any advice at all nor provide any pointers to the various options available - maybe she wasn`t specifically paying him beyond the book-keeping and tax filing activities.

    Could you please let us know what specific type of professionals we should be seeking help from? Is it Tax Planner or Finacial Planner or Investment Advisor?  All the friends and family we know are working class folks whose finances are relatively straightforward and therefore none of them had faced similar situation.