Tax Cuts and Jobs Act

[Revolver]

You're a CPA? I have a wall of questions, if you don't mind. Feel free to PM if you don't want to answer publicly. Do you have a rough rule of thumb regarding earnings paid as salary? Say you do 10 hours a week running a concierge type service that caters to high earners paying in cash. Even if you are making much more per hour than average, can you take the local market average for 40 hours / 4 and take that as your pay? Does it not look a little shady if earnings paid as a dividend = or > salary?

Profitability between businesses in the same industry can vary widely so there's no real rule of thumb. My suggestion would be if your business was extremely profitable to pay yourself the market rate one would expect to earn in a similar job. Now if your business was barely making it wouldn't be wise to pay yourself any where close to this because you would basically be lending the company money just to pay payroll taxes. That's why it varies depending on situation.

How would one find a good CPA?

Referral would be the best way IMO. If you're a high net worth client then you could even interview potential CPA's who you would be interested in working with.

I assume not all of them will have the same experience (partner buy-ins, solo-401ks, malpractice) What benefits do you provide beyond tax deductions?

Correct. Not all have the same experience. Some have the same skill set as basic tax preparers. Others are a lot more knowledgeable of the IRS tax code and other areas.

Can you explain why I should use a CPA? I've heard self-prepared higher earners are much more likely to be audited vs CPA assisted. Is this true?

Without knowing the complexity of your tax situation I'm not sure how to answer this. You may not need one. But if your situation is a little more complex with businesses and passive income streams it can help to have a CPA since they can often devise income tax plans to help reduce potential tax liabilities and inform you of credits that are available to you (depending on the industry).

How do you help clients during an audit?

It basically depends on how much the client wants to spend. We can do everything regarding the audit (ie. provide documents, create schedules, communicating with the auditors). Or we can just give the client advice on what the audit is seeking and how to handle it.

How often do you meet with clients? You follow with them throughout the year?

Not all clients are the same so I'm not sure how to exactly answer this. Some clients don't need much help and don't need us unless there's an issue or when it's time to prepare their returns. Others need their hands held at every step of the way.So some clients we may see once a year and others we may see once a week, lol.

What's the average cost for CPA services?

Most CPA's charge hourly and depending on the size of the firm and what staff is working on it can vary.

This is not ours but it would follow something like below:
Administrative: $100
Staff accountant: $150
Managing accountant: $250
Partner: $500

A lot of the smaller local CPA firms will charge less than this. Those will probably be the ones you will want to talk to if you are interested in hiring a CPA.

 

[Revolver]

ugh, get yourself a CPA, you'll probably end up asking these questions again...

Use them if you're self employed and have to do payroll. They prepare the checks for you, and it was fairly inexpensive from what I recall, unless you find some gouging prick. They take care of you start to end, including audits and should work with you on a weekly/bi-weekly basis. If you're doing any form of estimation, stick with a CPA, better if they fiddle the numbers for you.

I usually suggest clients get a payroll company to handle that stuff for them since it's tedious work and you can't really charge a lot and usually end up losing money on it.

 

[VivaRevolution]

Oh this thread is so priceless.

Bernie Sanders is apparently insane for thinking we can pay for free college, but 700 billion dollar defense spending bills, and trillion dollar tax cuts are perfectly reasonable.

You guys want to know what is scarier than a tax and spend Democrat?

Anyone who thinks you can cut taxes, and increase spending without consequence.

 

[kpt018]

This is not ours but it would follow something like below:
Administrative: $100
Staff accountant: $150
Managing accountant: $250
Partner: $500

A lot of the smaller local CPA firms will charge less than this. Those will probably be the ones you will want to talk to if you are interested in hiring a CPA.

Those numbers are close to what I've seen as well (live in NY), but for many clients it can be done project based as well instead of hourly. I worked at firms that use both methods depending on situation.

 

[Limbo Pete]

Oh this thread is so priceless.

Bernie Sanders is apparently insane for thinking we can pay for free college, but 700 billion dollar defense spending bills, and trillion dollar tax cuts are perfectly reasonable.

You guys want to know what is scarier than a tax and spend Democrat?

Anyone who thinks you can cut taxes, and increase spending without consequence.

 

[Limbo Pete]

"Tax-exempt nonprofits can make explicit election endorsements."

Absolutely cancerous

 

[woodguyatl]

Sure, but it also means that citizens of low tax states like Florida are in effect subsidizing citizens of high tax sates like Massachusetts.

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Actually, Florida is a net taker and Maasachusetts is a net payer with respect to Federal funds. The subsidizing goes the opposite way of what you are suggesting.

 

[AznTrojan]

Do you have any pass through income? That could be the biggest boost next year for me I think, assuming this goes through.

i have an llc

 

[Lubaolong]

...

Thanks for the detailed reply, dude.

 

[Jorge Luis Borges]

That's not necessarily true in the Net effect. Florida relies on more Federal aid as a part of their state budget and gets a lot more money back compared to what they pay into the Fed

https://www.theatlantic.com/busines...tates-are-givers-and-which-are-takers/361668/

https://taxfoundation.org/states-rely-most-federal-aid/

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Actually, Florida is a net taker and Maasachusetts is a net payer with respect to Federal funds. The subsidizing goes the opposite way of what you are suggesting.

https://mises.org/blog/which-states-rely-most-federal-spending

Spoiler

These responses all have to do with where federal funds are directed after taxation. That is an entirely different issue than allowing residents of high tax states to deduct those taxes, thus placing part of the burden of those taxes on residents of low tax states.

 

[Jorge Luis Borges]

Why? doesnt that amounts to a double taxation?

I don't think so. Suppose you pay 20% federal and 5% state income tax on $100K. Paying 25% taxes on that income leaves you $75K, not $76K, as it would if you first deducted the state tax.

 

[Jorge Luis Borges]

Not really since they've allowed residents of these states to deduct sales taxes.

How does that change the fact that some states have significantly higher tax burdens than other states?

 

[Rod1]

I don't think so. Suppose you pay 20% federal and 5% state income tax on $100K. Paying 25% taxes on that income leaves you $75K, not $76K, as it would if you first deducted the state tax.

But your income isnt really 100k, since you are already being taxed, either the federal government gets dibs or the state government get dibs and the rest is taxed at the other income level.

So 5% state means 95k then tax that at 20% or tax 100k at 20% and then tax the rest at 5%.

 

[Rod1]

How does that change the fact that some states have significantly higher tax burdens than other states?

Because some states are more self-sufficient and thus need the federal government less.

Look at the chart i pointed out, states with the highest tax burdens are usually federal givers, not takers.

 

[Rod1]

These responses all have to do with where federal funds are directed after taxation. That is an entirely different issue than allowing residents of high tax states to deduct those taxes, thus placing part of the burden of those taxes on residents of low tax states.

Its not an entirely different issue, a better funded state relies less on the federal government.

Look at the chart i pointed out and then look at state tax burdens, its not a coincidence.

Basically they are saying fuck it, let the federal government pick up the tab for all the shit that im not willing to do.

 

[Jorge Luis Borges]

But your income isnt really 100k, since you are already being taxed, either the federal government gets dibs or the state government get dibs and the rest is taxed at the other income level.

So 5% state means 95k then tax that at 20% or tax 100k at 20% and then tax the rest at 5%.

I understand the idea, but there's no need for it. Both should tax the full amount so that one is underwriting the other. If that ends up being too heavy a burden, they should adjust their tax rates down.

When it comes to taxes simpler and more straightforward is much better.

 

[Jorge Luis Borges]

Because some states are more self-sufficient and thus need the federal government less.

Look at the chart i pointed out, states with the highest tax burdens are usually federal givers, not takers.

I saw your chart, and I thank you for providing it. but my comment was in response to the idea that allowing people to deduct sales tax evens things out. Your chart doesn't address that. And the answer to that is, not necessarily.

 

[Rod1]

I saw your chart, and I thank you for providing it. but my comment was in response to the idea that allowing people to deduct sales tax evens things out. Your chart doesn't address that. And the answer to that is, not necessarily.

Of course not, but your idea that some states subsidize others is also off, since it doesnt takes into account the level of taking and states with lesser funds are probably going to take less. So without deductions there is an even greater incentive for States to not raise taxes.

 

[djacobox372]

So they're going to pass on debt to the next generation to "stimulate" an economy that is already booming.

 

[Rod1]

I understand the idea, but there's no need for it. Both should tax the full amount so that one is underwriting the other. If that ends up being too heavy a burden, they should adjust their tax rates down.

When it comes to taxes simpler and more straightforward is much better.

How can you tax the full amount when the amount isnt full?

Say that the State wanted a 50% income tax and the federal government wanted a 80% income tax.

The individual would need to pay 130k dollars out of 100k, clearly a mathematical impossibility, ergo it logically sound that there ought to be deductions or that income needs to be taxed consecutively.