Lee Riley CPA MBA-tax Lee@RileyAccounting.net
Bank and Credit Card Statements >>
QuickBooks Registers >>
Direct Connect not Web Connect
Avoid Enter Bills
1) Maintaining Tax Records
2) Small Business Taxes
3) Corporations and LLC's
4) QuickBooks made easy
5 years ~> 80%
10 years ~> 90%
Sales $50,000 $100,000 $200,000
Expenses (25,000) (50,000) (100,000)
Taxable 25,000 50,000 100,000
Tax 5,000 15,000 40,000
====== ====== ======
Federal Income Tax 20 ~ 40%
State Income Tax 5 ~ 10%
Social Security Tax 15%
Total ~ 40%
Year 1 Year 2 Year 3
|-----|-----|-----|-----| |-----|-----|-----|-----| |-----|-x---|-----|-x---|
$-0- tax $-0- tax per quarter 90%
$8,000 $2,000 per quarter
Employee verses Independent
W-2's 1099's W-9's
...Corporation or LLC
...work is not what the business does
...Website, business cards, etc.
~ 100% penalty
~ Obama Care violation $100 a day
~ Pension Plan penalties
~ Workman's Comp. penalties
Costs, employee wages (50,000)
Net Profit 100,000
Social Security Tax 15%
Social Security Tax 7,500
K-1 distribution $49,000
Social Security Tax -0-%
Social Security Tax $-0-
SCORE SAN FRANCISCO
~ scan to pdf
~ folder for the year/vendor
~ Neat Receipts travel scanner
New tax law
...LLC's often make sense for one owner businesses, subject to limitations. Maybe work as an LLC
instead of being an employee?
...you get a 20% deduction for qualified business income from flow through entities, subject to limitations shown below
...for service businesses with joint household income over $157,500/$315,000 the 20% deduction is limited and completely phased out by
...Specified Service Trade or Business - Does your business survive on the reputation or skill of its owner(s)?
...if over the income limits above, and not a Specified Service, the deduction cannot exceed 50% of all the wages from the business, or, 25% of the
wages plus 2.5% of the basis of qualified tangible property, as long as the 50%/25% etc. is more than 20% of your business income to get the full
20%. In other words, 50% of the wages you pay goes towards your 20% deduction. If the 50% number is less than 20% of your business income, you
do not get the full 20% deduction, but get a smaller amount.
...high income S corp. owners, etc., might need to increase W-2 wages to themselves to lower the income thresholds so that the 50% of wages
number exceeds 20% of the business income.
...the 20% deduction is limited to 20% of taxable income not just your business income, so itemized deductions etc. might reduce the 20%
...if the business has a loss, it carries forward to reduce the deduction
...for your personal taxes there are no more $4,050 personal exemptions and you get a $12,000/$24,000 standard deduction, $10,000 cap on state
and local taxes, $750,000 mortgage loan limit unless grand-fathered in before 12/14/17 (refi's are allowed at the old limit), charitable donations are
still deductible. New tax rates are generally lower now. The child tax credit went from $1,000 to $2,000 and the increased credit generally saves you
more than the lost personal exemption. Children age 17 and up only get a $500 credit. 401k's are still deductible. 80% of middle class households
with kids will get a tax cut, but upper middle class and many San Francisco home owners may pay more. Business interest deductions can be limited.
Business meals are deductible, but entertainment is not. Medical deductions are still allowed.
Section 199A Decision Tree
Remember that taxable income is all income for the household.
Specified Service Trade or Business
If taxable income is less than $157,500 / $315,000 then the 20% deduction is fully available if a sole proprietor because the W-2 limitations do not
apply, but if an S corp. then the deduction is 20% of qualified business net income after deducting the W-2 wages - still there is the social security tax
savings which might exceed the 199A deduction.
If taxable income is greater than $157,500 / $315,000 but less than $207,500 / $415,000 then a partial deduction is available.
If taxable income is greater than $207,500 / $415,000 then you do not get the 20% deduction.
If taxable income is less than $157,500 / $315,000 then the 20% deduction is fully available.
If taxable income is greater than $157,500 / $315,000 but less than $207,500 / $415,000 then a partial deduction is available with the W-2 and
depreciable asset limit calculations phase in.
If taxable income is greater than $207,500 / $415,000 then the 20% deduction is compared to the full W-2 and depreciable asset limit calculations
(not to exceed the greater of 50% of W-2 or 25% plus 2.5% of the cost of tangible assets) - if there are no W-2 wages the deduction would be zero
(so landlords might want to take a W-2 salary from the business or deduct 2.5% of tangible assets because it is the greater of the two).
Generally try avoid do-it-yourself tax
software, Turbo Tax etc.
-audit risk increases
-major mistakes with huge penalties
-the new 20% business income
deduction is very complex