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Any accountants in the house?

Discussion in 'Non-Vegas Chat' started by lsiunsuex, Apr 28, 2017.

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  1. lsiunsuex

    lsiunsuex Low-Roller

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    I can build you a multi million dollar website single handedly; build you a server farm, install and configure a PBX - but I can't for the life of me get accounting down or keep my stuff strait :(

    I have 2 jobs -
    day job is a regular every day paycheck with W4 and government taxes taken out per check, every 2 weeks
    2nd job is my startup - I get paid once a month; no taxes taken out and I file as a contractor at the end of the year.

    The 2nd job kills me - at the end of the year I end up owing in excess of 20k.

    We do not have the financial savings ethic to send the government a check every 3 months for $5000 as we've been instructed to do so since I started getting paid from my startup. It's just not us. So we pay it in 4 payments after tax season (now)

    Assuming everything stays the same; startup keeps making money; I keep getting paid - I do not want to owe again next year

    So - I have 2 options that I know of (if anyone else has an idea; I'm all ears)
    option 1 - max out my 401k contribution at day job - having another $461 taken out of each paycheck
    option 2 - re-file my W4 at the day job and have them take out an additional $500 / paycheck

    None of these are fun obviously - who the hell wants to take a $500 / paycheck pay cut - but if it means I owe less next year...

    Assuming the 401k contribution is pre-tax now (I know I'll be taxed on it when I use it) - are these 2 options equal? Obviously, it's a better idea to pay myself then send it to the government. But if I put another $461 on the 401k every 2 weeks and I still owe 10k+ next year, I'll be pissed...

    Not looking to get a refund, just looking to get as close to $0 owed as possible next year.
     
  2. rscpa

    rscpa Low-Roller

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    Hate to break it to you. If you owe 20k in your startup income, funding 12k into your 401k isn't going to wipe out 20k of taxes. It will reduce it by about 4K in taxes, so you still owe 16k. I tell all my self employed clients, save 50% for taxes and spend the rest. Will your taxes be that high? No. But even my less than sophisticated clients can divide by two. You will have money for taxes and funding a portion of your retirement account. I used to calculate a percentage for them and tell them to put that aside, but they never seemed to do it. Now they have no excuses at 50%.

    To arrive at the 50%. Feds charge 28-33, self employment tax 15.3 and state about another 5%.

    Sounds like you need to get with a CPA. A decent one will save you what he charges for fees in deductions you aren't claiming now. You need advice and a Vegas message board shouldn't be the go to location for the tax advice you need.
     
    • Agree Agree x 2
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  3. lsiunsuex

    lsiunsuex Low-Roller

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    No - but you can find talented people anywhere :)

    Maybe it's time for a CPA - another thing I've been told to get but haven't...
     
  4. rscpa

    rscpa Low-Roller

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    Agree, this board has some very talented and unique perspectives.
     
    • Agree Agree x 1
  5. hammie

    hammie VIP Whale

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    I'm far from an accountant, but I'm self employed. The problem is that you are on a payment plan to catch up with the taxes owed from your 2016 tax return, so it will be difficult to pay 2017 estimated taxes each quarter unless you make some short term lifestyle changes.

    If you are drawing a monthly check from the second job, you need to have the discipline each quarter to live on two of those checks and devote the third check to paying quarterly estimated taxes. But the easiest thing to do is increase your withholding right now to cover the taxes from job 2.

    Hiring a CPA would be wise because there may be some expenses and legal deductions that you're missing from the startup.
     
    • Informative Informative x 1
  6. SH0CK

    SH0CK Stylin' and Profilin' Quasi Tech Admin

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    I do things on the side that get reported and have to pay the self employment taxes on those. To combat it, I did option 2, which really helped reduce the amount I owed come tax time. But, if you can live without the money you pay extra in taxes every 2 weeks, it's much more satisfying to not have to write a huge check April 15th. I also dump as much into 401K as I can as I'd like to retire early and be able to enjoy it.

    But, like is said above, with that kind of money being thrown around, I'd get with a CPA and let them handle it.
     
  7. lsiunsuex

    lsiunsuex Low-Roller

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    Exactly - now we're always behind. After April 15th paying last years taxes and after that's paid, trying to save for next years taxes (which we don't do).

    I think to stop the bleeding ASAP - alter the W4 and start giving them more out of my paycheck. It's already May, so next year won't be $0, but it won't be 20k either.

    Then, find a CPA or whatever, get them to figure it out and if the W4 needs to be modified again, ok, or do whatever they suggest.

    The world needs scriptable bank accounts
    if check_deposited_from_EmployerA move $x to accountA
    if check_deposited_from_EmployerB pay BillA
    etc... new startup?!? hahaha
     
  8. vetsen

    vetsen Low-Roller

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    If you hit any jackpots, have them withhold Federal tax.
     
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  9. Chuck2009x

    Chuck2009x VIP Whale

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    If you have to choose between those two, mathematically Option 1 is better because it reduces your overall tax liability, and your tax rate is way more than the rate than the IRS charges you.

    But as a practical matter, you should do Option 2 and stop accumulating debt to the IRS even though the interest rate they charge is low. I contracted for a year at my current job before I converted to a W2 FTE and I was cash poor at the time, so I didn't set aside any money for taxes and had to go on a payment plan. I can't honestly say making the payments sucked, but it was an annoyance.
     
    Last edited: Apr 28, 2017
  10. gguerra

    gguerra High-Roller

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  11. The Rumor

    The Rumor VIP Whale

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    They could have locked the thread after this one - the #1 thing for you to take away is reducing your taxable income by $500 per paycheck is not the same as increasing your tax withholding by $500 per paycheck

    One caveat - I hope you are at least funding enough to the 401k to get your maximum match, but that's a separate issue

    And you could also look at funding an HSA if your health plan has that option if you're looking for more income deferral in future years due to where your marginal rate is
     
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  12. roycpa

    roycpa High-Roller

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    I am retired and not looking for your business, but besides a CPA you apparently need a life coach. If you are making enough at a second job to owe 20k and you don't have the willpower to pay quarterly estimates, you are living way beyond your means. You certainly aren't alone, but your choices have not been good. I'm not a big Dave Ramsey fan, but it sounds like you at least need to read his books. Secondly, if you can't pay your taxes until after April 15, you shouldn't even be visiting the VMB!
     
    • Wow! Wow! x 1
  13. lsiunsuex

    lsiunsuex Low-Roller

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    You work your ass off for 5 years; maintain 2 jobs to build a website that actually helps people and isn't trying to sell them something. Finally, it generates some money and instead of good job! or try this or this! you get a scolding, told you made poor life choices and need counseling.

    There's another post here about a couple that had credit fraud recently via paypal or such. How about instead of consoling them or telling them how to get through it, we tell them their stupid; they should use strong passwords in excess of 10 characters and numbers, 1 upper (at minimum), 1 extended character (at minimum), no repeating characters and no proper words or names? That they should rotate all their passwords every 3 months; that they should never use the same password for 2 different sites and that they deserve it happening to them because they don't know the basics of strong passwords or password rotation? I mean, I know how to make strong passwords and keep them secure, why don't they!?!?

    Seeing how I got married in LV and LV is hands down my favorite place to visit - so much so I'm seriously considering moving there, this sounds like a pretty good place to hang out. I know I'm not a gambler but seriously? Comments like that make communities unapproachable - and this part of the forum is called Non-Vegas Chat - so if not to put it in non-vegas chat then?

    Everyone has bad days; everyone makes poor decisions - this is a site about LV - a place practically built on bad decisions - but no need to be so blunt. Suggest a life coach (and, I've actually considered one), suggest a CPA - but don't assume for a moment i cant pay my taxes (I very much can) or that I'm not intelligent enough to learn or deal with this OR question why I'm on this board. I've earned my vacation this year through an incredible amount of hard work and intend to enjoy it.
     
  14. birdman925

    birdman925 Low-Roller

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    I am a CPA and will not judge. The poster who suggested putting 50% of your contractor income aside for taxes gave perfect advice. Discipline to do that and you will have enough cash to pay your 2017 taxes in April 2018. Have your 2017 tax preparer prepare 2018 quarterly estimates and pay those. Once you do that you won't be chasing and you should be able to make your quarterly payments going forward.
     
  15. roycpa

    roycpa High-Roller

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    Sorry you thought I was being blunt. Aside from that I strongly agree with most of the above posters who suggest you get a CPA. Don't wait until time to do next year's taxes. A CPA can do much more than give you numbers. He might also suggest you form a Corp or an LLC, in which case you can pay yourself a salary with withholding, etc and not have a big balance due. Some CPA's probably aren't even blunt. And congrats on making your business a success.
     
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  16. abraxis

    abraxis Low-Roller

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    Op: choose a cpa who is willing to be blunt with you. The hurt feelings will be worth it. I'm in the professional services industry and i tell my clients how it is without sugar coating. It saves time and generates better outcomes. I expect my service professionals to do the same with me.
     
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  17. JeJas

    JeJas VIP Whale

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    I am no CPA, but I have a few in my house.
    I thought somethings not right.
    For the second job (your startup) why you get paid as contractor?
     
  18. WHITEJACKET73

    WHITEJACKET73 High-Roller

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    I'm not an account, but I DID stay at a Holiday Inn Express last night............
     
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  19. hammie

    hammie VIP Whale

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    I'd like to second that!! Congratulations on generating enough income from this business to have this "problem! That is no small achievement.

    For me, becoming self employed has been the greatest career move and the best thing to happen since marriage and the birth of two daughters. It was the ultimate liberation from a job and a company that I had grown to despise.
     
  20. h0llywood

    h0llywood VIP Whale

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    I don't think roycecpa comes from a place of malice but rather from a place of experience. Being you are seeking opinions, and he brought up the uncomfortable aspect of lifestyles (true or not), it does have an impact on how 20k becomes an inconvenience or a nightmare.

    I wouldnt take what he said personally but rather take it as advice, reflect and move on.

    Good luck to you.
     
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