What type of financial professional is my H seeking?

[sunshineandpinot]

*poof*

Thanks all. I'll update this thread if we find out something interesting, worthwhile! fx! 

[archiethedragon]

With the bonus there is not much to do, expect to make sure you are taking advantage of contributing the max to retirement (both of you) and HSA plans.

How much rev/profit does the LLC earn every year?

[sunshineandpinot]

Nov 1, 2023 12:11:11 GMT -5 archiethedragon said:

With the bonus there is not much to do, expect to make sure you are taking advantage of contributing the max to retirement (both of you) and HSA plans.

How much rev/profit does the LLC earn every year?

poof

[mae0111]

I think it depends on the questions that you have.

When DH founded his company, we sat with our CPA that specialized in taxes for small businesses and we did a bit of tax planning. We shifted to quarterly payments due to the cash flow of the business.

I managed our investments for years and I did a pretty good job, but I did very little advanced tax planning on our investments. I was careful about what I bought and sold and when, but I didn't really plan. Between managing business cash flow and feeling like we weren't well-positioned for a downturn, I felt like I needed to find someone else.

We found our planners/managers pretty randomly, and they've done a good job for us. They are CFPs and they take a fixed percentage for everything. They don't receive compensation for using particular products - they rely on ETFs mostly. They started with a full estate review - did we have appropriate insurance for the various business entities/LLCs we had? Car insurance? Estate planning/trusts? Risk tolerance for investments? Our goals - retirement, education for our kids, etc.? They put us in touch with other professionals that they'd worked with - lawyers, insurance agents - and worked with professionals that we had in place - our CPA.

Our FPs manage our full portfolio, including our 401ks (I have an LLC, DH owns his company). They are in regular touch with our CPA and work on tax planning together. Very few planners actually do this.

I can't speak to your DH's businesses, but our CPAs do a lot more than just "take the standard deductions". Our planners found this weird, backdoor retirement option for DH a couple of years ago that allowed us to save a lot in taxes. Our CPA at the time didn't even know about it.

So... a long-winded way to say that maybe you try a financial planner/wealth manager (CFP) if you're willing to let someone take over the management, but ask questions - do they work with other professionals - yours or theirs? Or do they only work in a silo? You may find that independent CFPs have a lot more flexibility than, say, a Merrill Lynch/B of A planner.

Good luck!

[archiethedragon]

Nov 1, 2023 12:14:21 GMT -5 sunshineandpinot said:

Nov 1, 2023 12:11:11 GMT -5 archiethedragon said:

With the bonus there is not much to do, expect to make sure you are taking advantage of contributing the max to retirement (both of you) and HSA plans.

How much rev/profit does the LLC earn every year?

That is a good amount.    You should look for a CPA that specializes in small service business like your LLC. 

[ohgillian]

If he has an x-figure bonus and also earns x-figures from his LLC, I’m having a hard time imagining a life in which taking the standard deduction would make sense. But the CPAs here know more than I do and it’s true that since TCJA most people take the SD.

That said, CPAs do way more than just that and I personally would want one at this point. I would probably want a FA and a CPA, but that’s because we have both and they earn/save me far more than they cost.

But also? The fact that we’re talking about so much money and you aren’t involved at all makes me want you to have an outside professional. God forbid something happens to your H, it’s going to be a lot easier to pick up the pieces if you already have someone involved.

[wanderingback]

Definitely need a CPA.
I don’t have a financial advisor but if you need help deciding what to do with the money they’d be helpful for that too.

[ellipses84]

At that income level for the LCC alone, I think you need a CPA. If your DH is resistant, ask him to try it for one year (and possibly look back at previous years). I bet they will save you more than their fees cost. For the bonus, just increase / max out any pre-tax contributions by the end of the year. I know my parents financial advisor and CPA have recommended end of year options to reduce their tax liability when they’ve been in a similar situation. Their FA is more helpful for their overall financial picture so I’d recommend both. If you cross a tax bracket you are only taxed the higher % on the $ amount that passes the threshold so I don’t think it’s as bad as a lot of people worry it will be. For the LCC, stock up on supplies / replace equipment before the end of the year.

[sunshineandpinot]

I forgot I poofed all the details. Background- DH has a (side) LLC that earns 6 figures and he has always done his own taxes, taking the standard deduction. I feel like a professional could help us do much better.

We are meeting with a CPA today who specializes in small businesses. We have sent them all of our financial information in advance. Baby steps! Any specific questions we should ask?

Next step is finding a FP.

[jwright]

Jan 18, 2024 10:29:11 GMT -5 sunshineandpinot said:

I forgot I poofed all the details. Background- DH has a (side) LLC that earns 6 figures and he has always done his own taxes, taking the standard deduction. I feel like a professional could help us do much better.

We are meeting with a CPA today who specializes in small businesses. We have sent them all of our financial information in advance. Baby steps! Any specific questions we should ask?

Next step is finding a FP.

I'm glad you are meeting with a professional. The standard deduction is taken on your personal return.  That not the same as business deductions.   Your business will deduct expenses from revenue to arrive at a net income.  That net income is combined with other sources of income (W-2, investment income etc) to make up your adjusted gross income and THEN you can take the standard deduction on your joint return.   Does his business have a separate bank account and set of books?

Questions to ask -
1.  What type of entity is best for this business?
2.  Can this business take advantage of the QBID (qualified business income deduction)? If this was not taken in the past, is it worth amending the returns to take the additional deduction?
3.  What type of retirement contributions can be made through this business in conjunction with any retirement from his regular job?
4.  What other business deductions are missing?  Auto, home office, and how can you organize your record keeping to easily report this at tax time?
5.  What are the state and local filing requirements?   

[sunshineandpinot]

Jan 18, 2024 11:14:03 GMT -5 jwright said:

Jan 18, 2024 10:29:11 GMT -5 sunshineandpinot said:

I forgot I poofed all the details. Background- DH has a (side) LLC that earns 6 figures and he has always done his own taxes, taking the standard deduction. I feel like a professional could help us do much better.

We are meeting with a CPA today who specializes in small businesses. We have sent them all of our financial information in advance. Baby steps! Any specific questions we should ask?

Next step is finding a FP.

I'm glad you are meeting with a professional. The standard deduction is taken on your personal return.  That not the same as business deductions.   Your business will deduct expenses from revenue to arrive at a net income.  That net income is combined with other sources of income (W-2, investment income etc) to make up your adjusted gross income and THEN you can take the standard deduction on your joint return.   Does his business have a separate bank account and set of books?

Questions to ask -
1.  What type of entity is best for this business?
2.  Can this business take advantage of the QBID (qualified business income deduction)? If this was not taken in the past, is it worth amending the returns to take the additional deduction?
3.  What type of retirement contributions can be made through this business in conjunction with any retirement from his regular job?
4.  What other business deductions are missing?  Auto, home office, and how can you organize your record keeping to easily report this at tax time?
5.  What are the state and local filing requirements?   

Thank you for this! For his side LLC he does keep a separate bank account. He doesn't really keep a set of books.  There is no inventory- he travels our state and repairs very specialized machinery. He's not paid an hourly wage, but rather a lump sum for maintaining the equipment. So it's nearly all profit minus the travel expense and tools/supplies which are pretty minimal. 

[jwright]

Jan 18, 2024 11:38:01 GMT -5 sunshineandpinot said:

Jan 18, 2024 11:14:03 GMT -5 jwright said:

I'm glad you are meeting with a professional. The standard deduction is taken on your personal return.  That not the same as business deductions.   Your business will deduct expenses from revenue to arrive at a net income.  That net income is combined with other sources of income (W-2, investment income etc) to make up your adjusted gross income and THEN you can take the standard deduction on your joint return.   Does his business have a separate bank account and set of books?

Questions to ask -
1.  What type of entity is best for this business?
2.  Can this business take advantage of the QBID (qualified business income deduction)? If this was not taken in the past, is it worth amending the returns to take the additional deduction?
3.  What type of retirement contributions can be made through this business in conjunction with any retirement from his regular job?
4.  What other business deductions are missing?  Auto, home office, and how can you organize your record keeping to easily report this at tax time?
5.  What are the state and local filing requirements?   

Thank you for this! For his side LLC he does keep a separate bank account. He doesn't really keep a set of books.  There is no inventory- he travels our state and repairs very specialized machinery. He's not paid an hourly wage, but rather a lump sum for maintaining the equipment. So it's nearly all profit minus the travel expense and tools/supplies which are pretty minimal. 

Whew!  That's good.  

Depending on the facts, they may recommend electing to treat the LLC as an S-Corp, but if he have a decent W-2 already the benefits may not be worth it. 
He can definitely take QBID which he may have been missing if self-preparing so ask about that!

[callmekd]

Jan 18, 2024 11:40:19 GMT -5 jwright said:

Jan 18, 2024 11:38:01 GMT -5 sunshineandpinot said:

Thank you for this! For his side LLC he does keep a separate bank account. He doesn't really keep a set of books.  There is no inventory- he travels our state and repairs very specialized machinery. He's not paid an hourly wage, but rather a lump sum for maintaining the equipment. So it's nearly all profit minus the travel expense and tools/supplies which are pretty minimal. 

Whew!  That's good.  

Depending on the facts, they may recommend electing to treat the LLC as an S-Corp, but if he have a decent W-2 already the benefits may not be worth it. 
He can definitely take QBID which he may have been missing if self-preparing so ask about that!

I’m in a very similar situation. I have a decent 6 figure w-2 job and then a “side” business that is earning 6 figures. I was set up as an LLC and paying self employment taxes on our personal return.

I’ve recently started working with a CPA who focuses on small businesses. I’ve elected to be treated as an S Corp for 2023 to help save money. I was also able to set and contribute to a simple IRA to help off set tax liability.

[jwright]

Jan 19, 2024 21:25:22 GMT -5 callmekd said:

Jan 18, 2024 11:40:19 GMT -5 jwright said:

Whew!  That's good.  

Depending on the facts, they may recommend electing to treat the LLC as an S-Corp, but if he have a decent W-2 already the benefits may not be worth it. 
He can definitely take QBID which he may have been missing if self-preparing so ask about that!

I’m in a very similar situation. I have a decent 6 figure w-2 job and then a “side” business that is earning 6 figures. I was set up as an LLC and paying self employment taxes on our personal return.

I’ve recently started working with a CPA who focuses on small businesses. I’ve elected to be treated as an S Corp for 2023 to help save money. I was also able to set and contribute to a simple IRA to help off set tax liability.

The limit on income subject to social security tax in 2024 is $168,000 per person. If you are earning and paying on that amount through your W-2 there is no additional savings for that portion of tax; you would save on the Medicare portion. Also, since QBID was introduced and the salary portion of the SCorp reduces the amount of that deduction. This has become more nuanced since the Tax Cuts and Jobs Act.

The rule of thumb is higher salaries should remain Schedule C but lower salary requirements will tend to save more as an S-Corp.

Each case is determined by the specific facts and circumstances so definitely consult your professional.

[mae0111]

callmekd - you may want to look into a solo 401k. You can have 2 401ks and you can only contribute to the federal limit in total, but then there’s a profit-sharing option for up to like $66k (with some constraints). I pay $165/year for admin and I have it in ETFs

Just an idea, obviously your CPA will know your situation better…