New 2018 Tax code, S-Corp questions...

I'm no expert brother but I have mine structured like you thought about , I payroll myself and pay payroll taxes every month and I'm a llc sub s as far as I know.
I've heard the pass through on a sub s is 25% , not the 21 % in c corps .
I only have to buy OC ACC ins , but being a one man show I think I could do that even if I wasn't incorporated in Florida , my ex was my partner , and a lot of what I do now might not be nessesary now that I'm a one man show , but the accountant says just leave it alone

 

Well, I just spent a little time researching, and this change is not all that it's cracked up to be. It's not a 20% tax rate, it's a deduction of 20% of the income. Also no need to incorporate, it applies to sole proprietors as well (THAT'S BIG!). It's limited to 50% of your W2 income from the business (not sure how they are going to tackle that with Sole Proprietorships).

Most O/O's are going to be in the new 25% bracket, so it's going to save 20% on 25% (5%) for most guys. However, my state calculates income tax based on Federal AGI, so I can also avoid 7.4% on that 5%. We can continue to avoid paying self employment tax (15.3%) on the whole shebang, but it may not be worth it to increase your w2 level to get more of this 20% deduction, because it triggers the self employment tax, work comp on the increased wages. So, it you net 100K and you take 60 in wages, you can take the 20$ deduction on 30K of the 40K profit distribution. It looks to me like you should continue to take a modest wage from the LLC, and take the 20% deduction on the profit distribution that qualifies.

BUT..........the fly in the ointment is the new, higher, personal deduction. If the deduction is a 20% deduction on, for example, a $20,000 distribution, that's $4,000. The standard deduction is $24,000 for couples. Unless you have a LOT of deductions (HUGE mortgage, taxes, etc), you're still better off to take the standard deduction and the whole thing is just political masturbation.....

 

Good thread idea.

We’re set up as LLC, S Corp election, 1 man band. I’m leased to Landstar - 1099. We’re in Missouri.

So, Gretchen does all the paperwork, aside from the end of year filings, the CPA does this, as we have the rentals side too.

Weekly, she takes the settlement and pulls 12.5% of the total before fuel and deductions, and sets it aside in an untouched bank account for the end of the year marked ‘Taxes’

I give her my miles ran for the week and she generates a paycheck at .40 cpm.

From this figure, she calculates state and federal employment taxes, unemployment, SS, Medicare - for me (employee), AND business (employer), and puts that into an account marked ‘Employment Tax’, from which she pays to the state and fed monthly/quarterly.

Cents per mile figures for Maintenance, Truck/Trailer loans, Equipment upgrade are pulled and put in separate accounts marked as such, from which applicable bills are paid.

Anything left over gets placed in the ‘business account ‘ .

Quarterly estimates are paid, first year was none (startup year), 2nd year was $1000 odd (based off the previous), this year none.

Work comp is through LS.

We don’t take any lump sum draws during the year, nor pay any cents per mile as per diem.

So, basically at the end of the year, we’re both current on taxes paid, and financially prepared to pay more if needed, though this becomes more apparent during the year as to which side we’re on.

As I understand - in 2018, there’s 2 changes to OUR situation that I need addressed.

1 - We get to deduct 20% of the profit before paying taxes. Sounds good to me. At what rate - I have no idea.

2 - The $63/day *80% per diem is going away for company drivers, but not for owner operators - but which am I in the outlined structure above. I’m an employee of our own company so I would assume I lose the daily rate.

I’ll ask the CPA obviously, but we may have to pay myself a CPM per diem rate this year to offset the daily rate disappearing (if it does).

Obviously - the above system relieves us paying employee taxes on any profit over and above the employee wage (and matched business) amount - and I ask the CPA every year “ Is it still worth it”, and so far he has said “Yes, this saves you about $5,000” over the sole proprietor set up”.

Also apparent - I look like a fairly low paid driver on paper, and Gretchen is unpaid, so SS contributions are low/zero. We’ve both paid a TON into SS over the years and have 401ks - we’re not relying on SS for retirement income - they can go pound sand IMO, as I feel they misuse the funds - but that’s a personal stance.

We’ll be in his office before January is done, and have any changes in place immediately, going forward - so I’ll try and remember to check back in here to update.

Hope this helps.

 

More often than not, these threads get the . . .

“Don’t ask a dumb trucker, seek professional advice”,

We pay $1400 to file as we stand, one business, one employee (me), 4 rentals. This includes the “represent me in an audit” insurance.

In my mind - as we pay in regularly through the year, I FEEL we are under less scrutiny - aside from that FEELING - we don’t try to pay any less than owed. Give Caesar what he is due.

I’ve got a list of questions to ask him for this year - like you, I see no need for clutter if there’s no substantial advantage.

 

And I thought I saw somewhere that tax preparation would no longer be a deductible expense - anyone?

 

I had heard 20% on pass through s corp was a sticking point and they went with a 25% tax rate , and gave s corps more deductions , but c corps got 21 instead of 20% also .
I used to take bigger distributions and not pay payroll taxes on them but was advised to up my payroll .
My accountant may be to careful , I don't take every deduction , like home office etc.
I will definitely watch this thread and maybe push the deduction envelope a little harder .
Thanks for all the good input .
I'm looking forward to a good year , maybe we will all get to keep a few more sheckels

 

If you pay to have your taxes done, 2018 would be a good year to have a tax man who is fluent in trucking and not just a side line for them.

 

That’s a good idea no matter what year it is!