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Wealthy Accountants in Your Area / Wealthy Accountant in the DC-VA-MD Area...
« Last post by dcrefugee on July 23, 2017, 01:43:04 PM »
Greetings, looking for a tax professional with a “Wealthy Accountant” mentality for tax and estate planning.  I live in the DC-VA-MD area but happy to work with anyone comfortable with virtual consultations in other locations.  Happy to expand more if you reach out personally.  Respectfully, -brian
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Taxes / Re: S Corp Health Insurance
« Last post by Maccountant on July 20, 2017, 03:46:49 PM »
Typically you would claim the adjustment to reduce your AGI for self-employed health insurance premiums paid (Line 29 of your 1040).

The benefit would come from reducing your income tax liability through this adjustment.

Since you are the 100% shareholder, I presume your children are traditional employees (receive a W-2). Whether the company wants to offer health insurance to its employees or reimburse them for costs incurred is up to you (assuming you are compliant with ACA), but as an employee you don't get any benefit for healthcare costs paid out of pocket other then claiming them on the Schedule A (if you itemize) like you had mentioned. 
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Real Estate / Re: Forming an LLC to Manage Real Estate
« Last post by Maccountant on July 20, 2017, 03:33:47 PM »
The beauty of rental real-estate is that it is considered "passive income" which means it is not subject to "payroll or self-employment" tax. In other words, you do not have to pay the 15.3% FICA on wages from rental income. Unlike your W-2 earnings where you have 7.65% withheld and your employer kicks in the additional 7.65%.

Establishing a property management company to mange real-estate, and invoice you (the property owner) is possible, but may not be advantageous. The management fees earned by the property management company would be considered earned income. Thus you would have to pay the 15.3% plus income tax on those earnings.

Additionally, the property management company could not bill for the entire profit, the management company would have to bill a "reasonable amount", typically most management company's charge 10% of rents collected.

Would you offer property management services to other landlords in your area? Or are you just looking to play a shell game?

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Entrepreneurship / Re: Multiple Side Gigs- accounting and tax help
« Last post by Maccountant on July 20, 2017, 03:17:45 PM »
I would advise to continue to file as a sole proprietor and claim the income as business income.

One of the things the IRS factors in an audit is "intent" when determining if a hobby is in fact a hobby or is it a business. You obviously are not giving these piano lessons away free and unintentionally made money through pursuing your passion for teaching piano. You are billing students for your time to teach them a skill.

On top of that you are intending on making a profit in future years. To try and take the position that teaching piano lessons is a hobby and not a business venture is pretty thin.

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General Discussion / IF YOUR BANK SAY NO TO YOUR LOAN APPLICATION CONTACT US NOW
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General Discussion / Selling house-capital gains tax?
« Last post by Irishgolfer317 on July 11, 2017, 10:01:13 PM »
Selling a house we purchased 14 months ago. Expecting it to sell quickly with an expected net profit of $60,000. Will we pay capital gains tax or is there a way to avoid. Besides profit we"0're selling due to a new job in different state. Thanks!
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Entrepreneurship / Avoiding SE tax
« Last post by MKCarter24 on July 11, 2017, 08:57:32 AM »
I have two companies, one is a single member LLC that builds homes. I also have a spousal LLC that owns developmental land (for investment). What are some ways to avoid SE tax with these two entities?
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Taxes / S Corp Health Insurance
« Last post by wealthcreature on July 06, 2017, 10:18:06 AM »
My question has to do with how health insurance premiums are paid under a S corp group policy. If I am the sole shareholder of the S corp then I realize that the S corp must pay/reimburse me, include the premiums paid/reimbursed in my gross wages (not subject to FICA) and then I will be able to deduct a self employed health insurance. What about if I just paid the premiums out of pocket? Assuming my only tax benefit would be the potential to itemize subject to 10% of AGI? Therefore, my only employees, who are my non-minor children, would also be paying their own premiums and not being reimbursed by the S Corp. They should still be able to pay premiums with pre-tax dollars, correct? Any thoughts are very much appreciated.
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Entrepreneurship / Multiple Side Gigs- accounting and tax help
« Last post by FrugalSister on June 16, 2017, 03:08:47 PM »
I started teaching piano lessons last year and filed that as self-employment income.  Now, after reading TWA's post on hobby income, I realize that I could have filed as hobby and kept more of my income.  This is year #2 of teaching, and I am running a profit every month, is it too late to amend last year's taxes and file form 5213?  Could I do this myself, without the help of a tax pro, and would this save me money?  I anticipate making a profit every year that I teach. 

What is the limit on profits from hobby income?

Also, I just started providing part-time in home daycare to one child and would like to accept a few more children.  Should I open a separate DBA bank account at this point when I am getting paid $40 a week?  Could this income also be considered a hobby and could I file a 5213 on this hobby?

Thanks for any pointers!  Love that there is a forum here.  I'm not a big fan of FB.

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Taxes / Reducing expense ratios and avoiding the dreaded IRMAA
« Last post by Nords on May 04, 2017, 09:01:56 PM »
It's been real quiet around here.  Now that everyone's recovered from tax season, let me start a new question.


As some of you know, I'm my father's conservator.  He first noticed his Alzheimer's symptoms in 2008, he's been in a care facility since early 2011, and this year he's entering late-stage.  The next five years are totally unpredictable. 

I've been handling his finances since 2011, under the benevolent supervision of the Denver probate court.  I've conservatively projected his investments out to 2025, well past most of the Alzheimer's survival bell curve, so I doubt that Medicaid will rear its ugly head.  Let's not turn this thread into a Medicaid tactics discussion.

I'm getting ready to mess with Dad's taxes, and I thought I'd talk through it here to make sure I understand it.  Feel free to poke holes in my plan.


Back in 2011 (when I started my fiduciary forensic financial analysis on his files) I learned that for at least 20 years he'd been living on less than half of his income from investment dividends/interest, a small pension, and Social Security.  His AGI was about $65K and he'd generally spend about $25K.  He was Mustachian before it was cool.

During that time he'd invested heavily in Fidelity mutual funds and by 2011 his asset allocation was over 85% equities.  Back then we were all still scared to death of the stock market's recovery and legislation was expiring for the low tax rates on capital gains.  In 2012 it seemed prudent to rebalance to 25% equities, 25% bond funds, and 50% CDs. 

Since then the capital-gains tax rates have been extended, Dad's long-term care insurance payout has finished, and he's slowly drawing down his assets.  His asset allocation has drifted up to 35/15/50 over the last five years, and I could let that continue to drift.

However his investment expenses are higher than they could be.  He's held some of his Fidelity shares since the early 1990s.  They're in actively-managed funds with expense ratios: 
0.86% Value Discovery
0.82% Blue Chip Growth
0.75% Capital & Income Fund
0.68% Contrafund

Meanwhile the Fidelity S&P500 index fund has an expense ratio of about 0.09%. 

Dad's current fund expenses aren't exactly highway robbery... well... among today's choices maybe they are.  Expenses could be reduced.

When Dad was receiving the payout from his long-term care insurance policy, that was considered untaxed reimbursement on his medical expenses.  He was paying the usual federal and Colorado taxes on his usual taxable income.  But now that Dad's long-term care insurance policy has completed its payout, his medical deductions are about $100K/year.  He paid zero taxes in 2016 and might never have a tax bill again.

Dad used to be in the 25% income-tax bracket, but now his medical deductions put him in the 0% bracket.  More significantly, those medical deductions mean that he could take a lot of capital gains at the 0% rate.  When I play around with MoneyChimp's calculator (http://www.moneychimp.com/features/capgain.htm), he could realize up to $37K of long-term capital gains at the 0% capital-gains tax rate and take an additional $34K in deductions & exemptions. 

But not so fast.

In 2012 when I drastically rebalanced Dad's portfolio, my blissful ignorance ran head-first into the Medicare "Income-Related Monthly Adjustment Amounts" rules.  IRMAA premium hikes cost an extra $2000 on that rebalancing, and I haven't sold any shares since then.
https://www.kitces.com/blog/income-thresholds-for-medicare-part-b-and-part-d-premiums-an-indirect-marginal-tax/
I'm going to avoid IRMAA issues this time around by keeping Dad's modified adjusted gross income just below $85,000. 

His mutual funds have a low cost basis, but I could use those AGI constraints to gradually replace the Value Discovery and Blue Chip Growth funds with a simple S&P500 index fund.  That would save about $150/year on expenses for each year that I took about $20K in cap gains.

If the markets continue to go up, Dad wins.  If the markets stall out, Dad wins.  If the markets go down, Dad has an opportunity for tax-loss harvesting of the S&P500 fund while ditching even more of the other funds with their high expense ratios.  I'd call that a win too. 

I'm still going to model this in Turbotax and make sure that I haven't overlooked something.  Has anyone else dealt with this sort of financial management?  Anything else I might be missing?
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