We started this business a little over five years ago on one guiding principle.
People pay enough tax as it is, and legally avoiding tax is not only desirable but really, a responsibility of the taxpayer.
Oh, really? It’s MY responsibility to pay less?
Why yes, it is.
If you can legally pay several thousand dollars less a year, you know about it, but you don’t do it because it’ll take too much time or it looks too hard, you’re quite literally stealing that money from your family.
You are a witting accomplice of the IRS and their puppet masters in the U.S. Congress in a bizarro world scenario: stealing from the “poor” (more exactly the working middle-class) and giving to the rich.
The rich in this case of course being the Ultimate Sugardaddy of America (U.S.A.).
This is just one of many sneaky ways millions of people overpay taxes, or penalties and interest on those tax obligations.
Yet, this continues to happen for millions of people across this great land.
23 million in fact, though an arguable percentage of those will be barely- or sub-profitable.
We’ve always wanted to make sure every client we’ve ever had pays as little tax as legitimately possible.
In the beginning what this looked like to me was making sure none of the special credits or other deductions on a Form 1040 get missed.
Add to that the list of things a lot of small business owners miss in deductions through no fault of their own other than just not knowing about them, and you can save someone significant cash.
Then a couple of things became clear very early on.
Working with people year-round partially to ensure that estimated tax payments are calculated four times a year and made by the deadlines is huge.
This can save people hundreds of dollars in underpayment penalties when they file in March or April.
The real motivation for year-round services, however, came from the simple idea that the self-employment tax can be eliminated in favor of a much more reasonable payroll deduction for a transformed owner-officer of an S Corporation.
We put these strategies into place, and have saved every single client that hopped on board this train ride as much or more money than the fees they paid us.
This halogen-bright light bulb went on inside my head not so long ago, and it was epiphanous.
A big college word meaning the clouds parted, and the trumpet-blowing heralds riding unicorns bareback descended from the heavens for me, for a brief glorious moment.
How many professionals out there can say they provide a quality service that not only delivers 100% compliance…
…but actually, pays a dividend in savings in excess of the fees they charge their clients?
S Corporation tax savings are a reality when managed properly.
I routinely save people over $10,000 a year.
That’s not a typo. $10,000.
Or more.
Now, I’m going to hit you with some facts here.
First is what sole proprietorships and S Corporations have in common.
They’re both considered “pass-through” businesses, for tax purposes.
In fact, so is a limited liability company.
What does this mean?
Your business activity is presented to the Infernal Residue Service on another form, which then “passes-through” to your Form 1040 for the purpose of taxation.
Are you thinking, “Well, but aren’t corporations separate entities that pay their own taxes?”
Yes, they are. The “regular” corporations, that is. What the IRS calls a C Corporation.
Amazon, Wal-Mart, Tesla, Yum Foods (Taco Bell, KFC, A&W), Apple, Proctor & Gamble.
Corporations.
That’s the beauty of the S Corporation election, though.
You report taxes and officer compensation from your Subchapter S Corporation, but the bottom-line income is reported from the Schedule K-1 that results, and you got yourself flow-through income.
There are certain requirements and restrictions for being an S Corporation, but most qualify, and the only other consideration that I stress to folks is the income factor.
It is my opinion that to make an S Corporation worthwhile in tax savings vs. costs of compliance a sole proprietor should be making a minimum of $48K per year if doing it his- or herself, or $60K per year with professional help.
Let me say it again! This is my opinion, okay? You’ll hear different levels from different sources, I’m sure. I know I do.
One other important factor here: you must have reason to believe this income is either reliably repeatable year-after-year, or even better you are experiencing business growth and scaling.
I do know this from actual experience: savings of over $20,000 a year are possible.
I’ve done this myself. No kidding.
What could YOU do with an extra $20,000 a year?
I have mixed feelings about an author named Grant Cardone, who has set the business development world on its ear with his book “The 10X Rule,” and others that followed, but he does say something that has stuck to me.
I quote: “You have a duty, an obligation, and a responsibility to make the greatest amount of money possible.”
The idea here is that, unless you have an unusually solitary lifestyle and no personality, you’ve got people.
You need to do it for them, but most importantly for yourself.
Actually, this idea is similarly presented in a book from 1910 by Wallace D. Wattles titled, “The Science of Getting Rich.” So it’s probably not even Grant’s original thought process that cooked that up.
Taxes are for most of us the single largest class of expense in our businesses and personal lives put together.
If you can increase your personal wealth by the application of a tax strategy?
You have a responsibility to do so.
Oh, and of course, if you want to talk about how I’ve done this for others already, and how I can do this for you?
I am able to take on two new clients this month. Let’s talk!