Taxes

[Kerry F]

Wow, self-employment tax if you don't own a house and therefore itemize deductions is really high.  Like a 25 to 30 percent tax bracket for the average court reporting income.

Any ideas?  Incorporating then also reduces the amount of Social Security one could collect later as you pay in less.

[Martha R]

self employment, as in Social Security, should be no more than 15 percent.   Are you talking about federal taxes and medicare, etc., too?   And if you live in the great state of California, you pay an extra 9 percent something.

Ways I try to reduce my taxes.  Yes, I own an home, so I get to deduct the interest but it's not much.  Other ways I reduce my taxes:  Give to charity (although you have to itemize).  

I also put money in an IRA or SEP IRA or self-employment 401K.   Pay yourself so you don't have to pay the government!  It lowers your taxable income.

Also if you have a high deductible health insurance policy you can put money in a Health Savings Account and that's tax deductible in the sense it lowers your taxable income.

Also I believe you get to deduct what you pay for health insurance premiums if you are self-employed and it doesn't require that you itemize.

Also if you are self employed you get to deduct some part of your self-employment tax (or payments to Social Security).  

Also I declare a home office and deduct whatever square footage.   

[Kerry F]

Martha,

I do all those deductions except the home and health insurance.  I think it's 15.3 percent for FICA and then there's Federal, State and Medicare.  It still puts me in a 26 percent tax bracket on my adjust gross income.

[Kelli Combs (admin)]

It's just such a pain to incorporate.  You have to have your paychecks go through a payroll agency and not directly to you.  What's frustrating to me is I live in a very expensive area to live in - San Francisco/Bay Area.   I only get to write off half of what my house cost because the government does not believe a home should cost this much.  When we bought it, it was a mess and we still had to gut it and start over.  Is there a write-off there?  No. 

I would love to write off with incorporating but don't want to go through the hassle.  I don't even balance the money in my checking acct.  How am I supposed to deal with all of this incorporating stuff?  Sounds like lots of work for a tiny gain.  I may be wrong, though.  Would love for someone to tell me otherwise.  I've just been told what I said above from others and that's why I chose not to do it.

[Kerry F]

Kelli,

My accountant just emailed me back and said I would have to pay him about $600 to $800 a yearto do my S corp quarterly paperwork and stuff and could save enough to make it worth it on taxes I pay.  I'm sure with what you make you would save a ton.   You should ask your accountant.  With an S corp I don't think you have to have your paycheck go through a payroll agency.  Maybe with another kind of corp, but not through a payroll agency certainly.  I've never heard of such a thing.

[Martha R]

Kerry,  how is it you don't pay SS taxes?  Is it because you give yourself a "bonus" and you don't have to pay some of the taxes on that?   Or is there something else?    You need to remember to take all your profits and leave nothing in the corporation or you will have to pay corporate taxes.   Is that the only way you save money by incorporating?

[Kerry F]

Martha,

Where did I say I don't pay SS taxes?  I pay them at 15.3 percent.

[Martha R]

I have never heard that a court reporter incorporating is a good deal.   I have never actually known any CR who has done it.  The concept has been bandied about from time to time.

My husband has a S corp for his small business that he has with a partner and 20 employees, and the corporation has to have shareholder meetings and minutes and file K-1s and prepare corporate tax returns.  Seems like a lot of bother and not sure what benefit it would have for a court reporter.

I also don't use a CPA to do my taxes.  I use a Enrolled Agent, but she charges me $450 because of all the extra paperwork for my husband's business.   A CPA did our tax return once and they did nothing different but charged us 1000K.   So next year, back to the EA.

[Marge Teilhaber (TILE hobber)]

Speaking of taxes, my accountant is a friend, a CPA.  I know his wife and daughters well and for many years.  He's known to be expensive.  I know two people who left him because of the price.  I will soon say to him, "So, Jeff, what will it take to lower my bill?"   But I need some proof. 

For my 2012 taxes, my bill was $1,325.  This seems CRAZY & NUTS.  I've spoken to a few people and the highest is $500, none of them CRs.  One CR friend said something like $1300 (he wasn't sure) but he's got a corporation and does payroll.   I am strictly 1099 and have no corporation.   I've never been audited.

Looking at my description of charges:

Federal & supplemental forms:

Form 1040, Schedule A, B, C, D, SE (self-employment tax)

Form 8949 x 2 (sold 2 mutual funds to consolidate accts)

Form 8879 (e-file signature authorization (geez, he's really "padding" the bill, huh?)

Form 9325 (general info for electronic filing)

Cap Gains worksheet

auto expense worksheet

SEP worksheet

itemized listing attachment x 4 (I hand him printed categories of expenses all neat; he's listing this to show how much he's doing for me?)

tax year comparison sheet

EIC worksheet (investment income limitation)

ES summary (estimated tax summary page)

1040ES (estimated tax vouchers)

listing of all interest

federal depreciation schedule

Schedule B (interest)

 

AND THEN A BUNCH OF NJ FORMS including 3 "underpayment penalty pages"

My apartment is my only property.  I live in NJ, 10 miles from midtown Manhattan if that enters into anyone’s opinion.

Any thoughts on his $1,325 charge and how I should approach him if indeed the consensus is that this is NUTS??!!

I have an annual meeting with him where we catch up and then I start handing him my summary pages and 1099s and tax forms.  I could mail him everything and right off the bat maybe the bill will be lower.    If you have no corporation, please share what you’re paying your CPA for your annual taxes.

[Martha R]

My EA does that much or more, different forms, and prepares my state taxes and prepares 1040ES vouchers.

This year you might  call several EAs and talk about your return and ask them if they know how to prepare all those same forms and get a price quote from them.  You might want to get a recommendation for a good EA from somebody.   I know the NY area has a lot of professional people who make a lot of money but that seems unreasonable to me. Then after the EA prepares it go over page by page with your old return and see if it is any different.

[Marge Teilhaber (TILE hobber)]

Boy, Martha, that sounds very very good.  I've never heard of an EA but you might be right about what we actually get from one vs. a CPA.   Man, I'm getting pretty peeved but don't know if I'll have the guts to quit him.  He's just got to lower his bill.  Appreciate your thoughts!

[Kellie Zollars]

OOOOOMMMMMMGGGGG.  I pay $300 for both me and my husband federal and state returns (I live in California).  I did mine for years until my husband started getting company stock and I had no clue how to handle that.  Unless you left something out, you are grossly overpaying.  Do you have your own firm with employees or just freelance?  Is he doing balance statements for you during the year?  Setting up your business books?  Sending in your estimated payments for you?  Looking at your investments to see if they are right for you?  

I can meet with my accountant for no extra charge (within reason, I assume), but I fill out the questionnaire that they email to me every year, then hand-deliver the questionnaire and all the backup documentation, then we handle questions through email usually.  

It's all computerized now.  With the qualifier that this sounds like what attys say about our bills - and this is oversimplification - they fill in numbers to questions on a form and the computer fills in the right blanks on the forms and spits out the results. You check it, then they submit it via computer.  Obviously you need their expertise to make sure the numbers are right and what deductions you are entitled to make.  Since he's a friend, you will just have to say something along the lines of now that you've become this successful, in-demand accountant... (sorry, can't think of anything after that really because he knows how much you make and that you can afford his rates)        

Maybe ask him how much it would be if you put everything on Quicken or a similar program, but then you could probably do your own through Turbo Tax.  

[Marge Teilhaber (TILE hobber)]

[[  Unless you left something out, you are grossly overpaying.  Do you have your own firm with employees or just freelance?  Is he doing balance statements for you during the year?  Setting up your business books?  Sending in your estimated payments for you?  Looking at your investments to see if they are right for you?    ]]

No to each item.  It's just me and my 1099s.  No balance statements, no setting up business books.  He tells me what I owe in estimated and I make those payments.  He does not look at my investments.  

I don't want to bother with Quicken etc.  I have total confidence in him.  Let's see if I grow a pair and say something.  I really don’t want to ditch him and I feel guilty paying less due to he has a daughter in college and another one approaching.  And we have a history.  Very delicate situation!   Thanks so much for your input, Kellie!