It's a Team's Life Income Tax SHOCK

[chillout]

Our accountant calls, which is unusual as we communicate by email and he says, "Linda, I hope you are not driving and are sitting down".

Each year my goal is to get our information to our accountant as soon as possible so that if there is money owed I have time to prepare. This habit came about from our earliest day of marriage and living from paycheck to paycheck with zero savings. So even though the amount due was unexpected I was prepared.

In this past year our income increased and I also took some money out of a long-term investment to pay off a debt. We had to pay capital gains on the investment and then with our income increasing; the IRS wants their fair share.

So our accountant informed me of how much we were going to owe in taxes and then came the kicker...

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[Dynamite 1]

Hey Linda, Have you ever looked into just paying monthly payroll taxes. Tina & I became employees last year and converted to payroll taxes. While getting use to paying them by the 15th of each month took a little getting use to it sure was nice to not worry about tax liability at tax time. Just a thought !!!!!!!!

 

[TeamCaffee]

We pay quarterly payroll taxes but this past year was an odd year for our business as it was our first full year with Landstar. Next year though is the one I want to be prepared for though.

 

[ATeam]

Generally, speaking, that's the difference between a tax accountant and a financial planner. The accountant is geared toward reducing your tax bill. The financial planner is geared toward increasing your net worth over time.

The accountant's view is narrow. He or she looks mostly at your tax documents. It makes perfect sense for an accountant to recommend spending money to buy something like a truck that is not needed so you can increase your deductions. The accountant's job is to reduce your tax bill. (Sadly, truck dealers broadcast that story and truckers use it as an excuse to buy things they do not need or cannot truly afford.)

If your goal is to increase your net worth over time, the financial planning approach is better. A financial planner looks at all of your assets and liabilities. Taxes are nothing more than a line item or two on your income statement and balance sheet.

You do not accurately gauge your financial success by the amount of taxes you pay or do not pay. You gauge it by the bottom-line numbers on properly-prepared income statements and balance sheets.

 

[TeamCaffee]

Dynamite 1 thank you for the ideas of the payroll as that is something I did not include in the blog.

My thoughts on the blog though was the idea of spending unnecessary money on something we did not need to decrease our tax liability. When I thought about what our estimated tax bill will be in 2017 and what I would be saving we are still money ahead. Our account is always looking at the future and I appreciated his advice as I could start planing and being prepared for 2017.

We have a financial planner and working as a team with our accountant and planner we are always preparing for the future and are prepared when there is a slight detour in our route.

If you do not have a financial planner I suggest you find one even if you do not think you can afford to put money away for the future. There are many to choose from.

 

[Dynamite 1]

We do have both and a personal retirement IRA since we started expediting. My thought was reducing tax liability but only at year end not all together as you are trying to do. We are not a fan of spending on items not needed either. There are better ways to do it which you have mentioned !!

 

[leezaback]

I have a payroll company, pay monthly and taxes are taken out, also do quartlery taxes. easier to see whats coming down the road before you get to the end and empty out your wallett

 

[BobWolf]

When it comes to the government especially with taxes and regulations can someone define fair share?

 

[BigStickJr]

That's a complex answer.

Democrats should pay 15% more than others.

 

[Moot]

We pay quarterly payroll taxes but this past year was an odd year for our business as it was our first full year with Landstar. Next year though is the one I want to be prepared for though.

I file a joint tax return. My wife has a real job with withholding and I make estimated quarterly payments. This year was odd for us also, but the opposite of your odd year. I took almost 5 months off and my wife was between jobs for 10 weeks. We bought a house and sold a house. I bought a van and sold a van. I skipped 2 quarterly payments and we still ended up getting way too large of a federal refund. Our goal with the Feds is $1000 either way. Preferably pay $1000 come April. It's better to give than receive! I estimate my yearly income on the high side, I'm optimistic. If I don't reach that lofty goal I skip the January estimated payment.

We do not buy stuff to get a tax deduction as it is not a case of spend $1000 and get a $1000 tax deduction. First you have to figure out what tax bracket you are in.

Excellent advice! Too many people believe it's a dollar for dollar thing.

 

[ATeam]

Hey Linda, Have you ever looked into just paying monthly payroll taxes. Tina & I became employees last year and converted to payroll taxes. While getting use to paying them by the 15th of each month took a little getting use to it sure was nice to not worry about tax liability at tax time. Just a thought !!!!!!!!

If you and Tina are employees, what person or entity is the employer? What person or entity pays the payroll taxes you refer to?

Also, "payroll tax" is a generic term. When you speak of payroll taxes, what exactly are you referring to?

 

[Dynamite 1]

If you and Tina are employees, what person or entity is the employer? What person or entity pays the payroll taxes you refer to?

Also, "payroll tax" is a generic term. When you speak of payroll taxes, what exactly are you referring to?

The employer is TNT Expedited Svcs Inc. { our Corp. }, we pay ourselves a weekly paycheck with state, fed, ss and IL. unemployment taken out just like every other employer does on their employees. We are the only employees all of our drivers are 1099 contractors.

 

[Lawrence]

The employer is TNT Expedited Svcs Inc. { our Corp. }, we pay ourselves a weekly paycheck with state, fed, ss and IL. unemployment taken out just like every other employer does on their employees. We are the only employees all of our drivers are 1099 contractors.

Kudos for the planing and preparation. Curious, did your CPA advise this strategy?

 

[Dynamite 1]

Kudos for the planing and preparation. Curious, did your CPA advise this strategy?

Yes he did. We were a little put out remembering to do it monthly but both Fed & IL are set up on line and it takes 10 minutes and it is done. Unemployment is done quarterly and you dont pay it all year just until you meet the % required. Now are personal tax is paid at year end and we just concentrate on the corporations tax. With the business plan going forward focusing on replacing the fleet with new trucks he thought it was a good idea. With The new plan of replacing trucks every 3 years the corporate liability will be reduced by accelerated depreciation and normal operating deductions. This will just make our lives easier and will be paying a little less estimated quarterly tax and some years may even have a little credit to carry over. I am sure as we move forward there will be adjustments to be made. We already have adjusted payroll tax as we paid a little more to state then needed but that is easy to fix and as long as we dont give ourselves a raise, that will not change. The business will have some changes, as everything there is estimated and we will have to adjust when we see changes in revenue, which there will be with adding of trucks & teams into the picture since we only have solo drivers now. This will be a slow process of expansion but a needed one if we are going to continue.

 

[ATeam]

The employer is TNT Expedited Svcs Inc. { our Corp. }, we pay ourselves a weekly paycheck with state, fed, ss and IL. unemployment taken out just like every other employer does on their employees. We are the only employees all of our drivers are 1099 contractors.

Thanks for sharing the details. Establishing a corporation and payroll service that touches all the compliance bases (social security, unemployment, worker's comp, others if applicable) makes sense for some businesses. It also involves administrative costs and the tax impact will vary depending on the state and business structure.

While perfect for some businesses, such an approach may not be best for a one-truck owner-operator.

 

[Dynamite 1]

You are rite, not needed in general for a one truck operation !!!