Have a Client that Wants to Lessen the Impact of Their Taxes

[scagnt83]

The standard single deduction is $6100.

The only need for her to itemize anything is if the itemized items are over $6100.


Personally, I have found that car/office expenses can be the big things that put you over the Standard Deduction.

Plus, those are extremely easy to document and track, even after the fact (assuming you do not pay with cash).


So as stated before, IRA/SEP IRA Contributions and Deductions totaling over $6100 are her only real options.


But be careful advising her to contribute to the IRA just to lower her tax bill!
If she didnt have a desire to contribute to one before, then she should not do it just for the sake of taxes.
These are the situations where people end up tapping into it to live off of and end up paying more taxes on the money (10% more) than they would have in the first place.

She most likely does not have the cash flow to do anything more than a couple grand... which would only save her a few hundred dollars in taxes.

 

[Justin Bilyj]

I just wanted to thank everyone for their responses. JmHalvo, you are now added to my list of "people who know what they are talking about".

Quick question for everyone, in TOP GUN PRODUCER FORUM, Brent mentioned an intro he used to get in the door to business owners,

"do you have an income tax problem"? I assume it kinda falls in line with contribute to a qualified plan like a SEP or Koegh. How well does this method work for lowering income taxes for business owners? At what income level or tax level does this become a viable strategy?
Thank you!

 

[VolAgent]

The standard single deduction is $6100.

The only need for her to itemize anything is if the itemized items are over $6100.


Personally, I have found that car/office expenses can be the big things that put you over the Standard Deduction.

Plus, those are extremely easy to document and track, even after the fact (assuming you do not pay with cash).


So as stated before, IRA/SEP IRA Contributions and Deductions totaling over $6100 are her only real options.


But be careful advising her to contribute to the IRA just to lower her tax bill!
If she didnt have a desire to contribute to one before, then she should not do it just for the sake of taxes.
These are the situations where people end up tapping into it to live off of and end up paying more taxes on the money (10% more) than they would have in the first place.

She most likely does not have the cash flow to do anything more than a couple grand... which would only save her a few hundred dollars in taxes.

Hate to bust your bubble again...

For the self-employed, 1099 or statutory employee, you better be filling out a Schedule C. If not, fire your tax adviser. All expenses come off your gross business income to determine your business profit. They are not itemized deductions. As a 1099, you can write off all your miles, take your home office deduction and anything else you can take business related AND then turn around and take the standard deduction if you don't have enough itemized deductions.

 

[scagnt83]

Hate to bust your bubble again...

For the self-employed, 1099 or statutory employee, you better be filling out a Schedule C. If not, fire your tax adviser. All expenses come off your gross business income to determine your business profit. They are not itemized deductions. As a 1099, you can write off all your miles, take your home office deduction and anything else you can take business related AND then turn around and take the standard deduction if you don't have enough itemized deductions.

Im not a CPA. And its been a few years since I did my taxes myself. So obviously take my advice for what im charging for it...

But from what I remember, yes you have to fill out a scheduleC, but, if business expenses are not over your standard deduction it doesnt matter, the standard deduction is still used.

And itemized might not be the exact terminology for a scheduleC expense, but its basically the same concept at the end of the day, it reduces your taxable income.

 

[VolAgent]

Im not a CPA. And its been a few years since I did my taxes myself. So obviously take my advice for what im charging for it...

But from what I remember, yes you have to fill out a scheduleC, but, if business expenses are not over your standard deduction it doesnt matter, the standard deduction is still used.

And itemized might not be the exact terminology for a scheduleC expense, but its basically the same concept at the end of the day, it reduces your taxable income.

The bolded part would be incorrect. Schedule C has nothing to do with your standard deduction. You get both. The results of Schedule C are reported above the line. Deductions are below the line.

Now as a W2, you can take a deduction for unreimbursed employee expenses. It is subject to a 2% threshold of income, or at least it was. And obviously you either got it or your standard deduction.

 

[scagnt83]

The bolded part would be incorrect. Schedule C has nothing to do with your standard deduction. You get both. The results of Schedule C are reported above the line. Deductions are below the line.

Now as a W2, you can take a deduction for unreimbursed employee expenses. It is subject to a 2% threshold of income, or at least it was. And obviously you either got it or your standard deduction.

Ah, that would make sense. Good info.

So the standard deduction is only offset by personal deductions or unreimbursed w2 expenses is what your saying?

 

[VolAgent]

Ah, that would make sense. Good info.

So the standard deduction is only offset by personal deductions or unreimbursed w2 expenses is what your saying?

Right, you can take your itemized deductions, which unreimbursed employee expenses are one, or the standard deduction.

 

[Norwayguy]

Hate to bust your bubble again...

For the self-employed, 1099 or statutory employee, you better be filling out a Schedule C. If not, fire your tax adviser. All expenses come off your gross business income to determine your business profit. They are not itemized deductions. As a 1099, you can write off all your miles, take your home office deduction and anything else you can take business related AND then turn around and take the standard deduction if you don't have enough itemized deductions.

Beat me to this....Business expenses first on schedule c and then standard deduction....Matter of fact if your taking the home office deduction you can pull in a portion of the mortgage utilities etc so taking the standard deduction is even more attractive.

 

[KaseyNM]

I like DHK's first reply.
If she has a long term mindset, taxes this year don't really matter.
Well... Unless she's never going to increase her income, in which case she's a terrible client (unless you have a TON of similar clients, enough to keep your business going on such small potatoes)

 

[dhigg27]

Does anybody have any advice on obtaining a series 6 and series 7 license in the state of Ohio I currently belong to a life and annuity IMO and I'm not sponsored by an investment brokerage