Accounting Solutions Ltd. provided a Free 60 Minute Accounting Consultation with a referral last Friday morning. He has owned a Limited Liability Company involved in the Advertising Business for the past five years. We asked him to bring in his last two income tax returns as well as his transactions from the past couple of months so that we could provide a complimentary tax plan, answer any questions that he might have, and provide a quotation for any accounting work that was necessary.
We looked at his return for sixty seconds and asked him a simple question. “If we can save you $7,000 in taxes will you pay us $3,500 to do the work?”
In the accounting business you cannot make false claims. People hold you to your word. Once you get letters behind your name, you make it a point of not screwing around.
Were we out of our minds? Were we cocky? Or do we just know this business that well?
He was set up as a single member LLC. From a taxation standpoint he is what we call a disregarded entity because he is treated like a sole proprietor. Sole proprietorships pay one of the highest tax rates legally allowable by law in the United States for an active trade or business.
How can we save him that sort of money? By electing an S-Status for the LLC and declaring a salary. Now he is paying social security and medicare tax on his entire income. By declaring an S-Status and creating a reasonable W-2 Accounting Solutions Ltd. can save the client the self employment tax on almost $50,000. Now the client will only pay self employment tax on his W-2 income. The income of the corporation is not subject to payroll taxes. It is income taxable only, hence the savings.
The question we should be asking is why would the prior accountant do such a terrible thing to this young man? He has a business. Pays his bills. Has a wife and a daughter that was just born. Why?
Sadly the answer is probably that they just didn’t know any better.
It doesn’t take long to do the Free 60 Minute Accounting Consultation. What have you got to lose, other than more wasted tax money going out the door? You can trust us to do the job right for you, the first time!
You can reserve an appointment by calling 773-267-7500 or going to visiting our website at www.AccountingSolutionsLtd.com
Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.
773-267-7500
chris@accountingsolutionsltd.com
