Caution Prospective Independent O/O! My Embarrassment.

This is exactly right. We have to get out operations efficient enough that we can survive and make a living wage on a buck fifty a mile freight cause no matter how good freight is today, it will always cycle back to those lousy rates in bad economies. Survive the lean years so you can thrive in the good years.

 

The most important part of that post

 

Ok, I know your being funny but.................?

 

Good for you @TallJoe !! I started in 2016 and understand. I was fine but it was close a few times. Last year was much better and the first quarter this year is even better.

I feel the same way. I’m running and operating like the worst quarter I had. Is going to be tough to go back to those poor rates when they come back around. But like you a mans got to do what a mans got to do. Difference this time around the truck will be in better shape, most of the debt will be gone or cash in the bank to clear it up and the war chest most of the way full this time. In the meantime I’m working as hard as I can to keep working even though I want to take it easy. I’ll save that up for when rates are in the crapper again.

Thanks for the update!

 

The federal tax on $80,000 of business net income in 2018 will be $15,045 if you file married jointly and $17,450 if you file single. It is calculated as follows:

$80,000 * .9235 = $73,880 * .153 = $11,304 (self employment tax)
$80,000 - $5,652 (1/2 self employment tax deduction) - $16,000 (20% qualified business income deduction) - $24,000 (married filing jointly standard deduction) = $34,348 (* .12 - $381) = $3,741 + $11,304 (SE tax) = $15,045

Substitute in a $12,000 standard deduction for a single filer gets you to $46,348 (*.22 - $4,061) + $11,304 = $17,450.

The tax will be reduced further by any health insurance, Health Savings Account and SEP IRA deductions.

Anyone thinking about electing to be an S Corporation for 2018 has to work the numbers to see if it will be worth it to pass up a full 20% qualified business income deduction for a pass through entity because of having to take a paycheck for a S Corporation. The salary income does not qualify for the 20% deduction.

 

Of course, the more you make, the higher % they take

 

If you are paying yourself more than $22,000 as a S-Corp employee and you are under 50 years old, you might want to look at having the S-Corp make a 25% SEP IRA contribution on your behalf based on your salary. For example, if you pay yourself a $30,000 salary, the S-Corp can make a maximum SEP IRA contribution of $7,500 ($30,000 * .25). The SEP IRA contribution is a deduction as a pension expense on the corporation tax return, which reduces the pass through income that is taxable on your personal tax return. Your spouse still qualifies for a spousal IRA contribution and deduction on your personal tax return. The break even point for a person over 50 who can contribute $6,500 to an IRA is $26,000 for a SEP IRA S-Corp contribution.

Another thing to take into consideration when you are a S-Corp is the pass through income that is not subject to self employment tax does not count as earnings when calculating your eligible social security income when you retire. If you are planning on having social security supplement your retirement income, this should influence your decision on whether to elect S-Corp status for an LLC entity.

Many unscrupulous accountants always recommend their clients to elect S-Corp status because then they can bill for two tax returns instead of one. An S-Corp tax return will always command a higher fee with these accountants because it is a separate entity.

I have many clients who are S-Corps, but skirting the self employment tax is not the main reason why they chose this type of entity.