I had an interesting experience recently. He had this to say:. I am a CPA that specializes in taxes. So who knew what he would find?

I had a little worry that he would find I was underpaying my taxes by tens of thousands. Which was good, since I had already done three of those this year! At any rate, I thought it would be fun to write about some of the suggestions he made to me.

There was this post about the benefitsthis one about the downsidesand this one about how lots of doctors mistakenly think incorporating is the key to reducing their liability and taxes. It was reasonable to reconsider a C Corp for WCI. The big problem with C Corps is the double taxation issue.

Yes, a corporation may have a lower tax rate than you on a limited amount of income, but when you pull that money out, it is taxed again at your qualified dividend rate. You minimize this double taxation by just paying out all profits every year as wages. By doing that, you get any side benefits of having a corporation and pay about the same amount in income taxes. The other issue with a C Corp is the expense and hassle associated with forming one, maintaining one, and dissolving one.

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So my discussion with Scott was about the side benefits. Here were the benefits that I could personally use if I incorporated. Avoid paying medicare taxes on our employer k contributions. This would allow us to pay for health care with pre-tax money while still allowing our HSA to keep growing. It could become a big deal if I start hiring non-family member employees for WCI though.

Pay for long term care premiums with pre-tax dollars. Set up Non Qualified Deferred Compensation accounts. It avoids the double taxation issue because what is later paid to me and is fully taxable is a deduction for the corporation.

So taking the money out, assuming the corporation is still making good money, is basically a wash from the tax perspective. More if you include state taxes, especially if I move to a no-income tax state before withdrawing it. Now that gets me pretty excited. Well, I have to incorporate.

That means either learning more tax forms or paying someone else to do them. I also would have to pay an attorney to setup and dispose of the corporation.

What could go wrong? Who knows if it will be here and making good money in 20 years when I want to pull this money out. This strategy would get even better if corporate tax rates are lowered. I really only want enough wages out of it to max out our k s, which we were barely able to do for But the potential tax savings from the C Corp could be larger for us, particularly when you include the NQDC. Basically, the way it works is you buy a huge whole life policy using borrowed dollars and use the policy as collateral on the loan.

Then hopefully your tax savings is greater than your after-tax interest cost.

It is clearly a great way to sell more insurance! We give a lot of money to charity every year. It helps keep our taxes low as we deduct it on Schedule A.

Scott suggested we might like to use a Charitable Lead Annuity Trust CLAT instead for our charitable giving. So after 18 years, you get more money back than you put in, plus that big huge deduction 18 years ago. I can see where this would work well for someone who is charitably inclined and received a big lump sum from the sale of a business or something and needed to lower his taxes in that year and who supports a single charity.

There would be some benefit from the time value of money i. He warns it does increase your AMT however. My big beef with this idea is that you never want to buy an investment just for the tax benefits. The investment has to make sense on its own first, and the tax benefits should be gravy. It was nice to have Scott take a look at things. What do you think? Have you ever met with a tax planner or strategist? Does your tax preparer do these sorts of things with you?

Do you have a C Corp?

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Why or why not? You can cancel or change your preferences at any time and I won't spam you. Enter your email address here! It seems like all of the potential benefits are either something you are not interested in or come with a potential serious down side. The NQDC is the big carrot, but it seems to be attached to a large stick that might be a bit unwieldy. Having said that, the simpler S Corp might be worthwhile.

While those benefits are potentially lower than the C Corp the also seem like an easier guarantee. Mom, did he mention any potential benefits of the LLC? So it provides zero tax benefits as a practical matter.

A multiple owner LLC would be treated as a partnership by default… But an LLC can also be treated as a corporation or S corporation. These other options do get taxed differently. And then the question is whether you save more tax with an S corporation than you do with a, say, sole proprietorship. Keith, I like your point about the extra time not being worth the hassle.

My husband started his practice as a C Corp. It was not worth the hassle. Back then, it made the fiscal year fall on the calendar year. IDK if we could have changed that around. But, it made December become a hassle which detracted from the holidays for us. So, he easily changed it to an S Corp. Back then, an S corp allowed him to save more for retirement which may no longer be the case.

It does require annual paperwork. But in min. We sit at the kitchen table with a glass of wine and let him have meetings with himself.

He also put all his office equipment and ophthalmological toys into an LLC which the kids and I are part owners of. Tax rules have changed over the years so that may not be as beneficial as it once was. For WCI, I would wonder about structuring the website as an LLC with wife and kids as part owners. Then, electing the entity to be taxed as an S corp.

Yes, as the income climbs? An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally can-not make contributions to an HSA.

Health FSAs and HRAs are discussed later. A CLAT is a good way to pass down appreciated shares or a stake in a business if you expect the shares to continue to increase in value. Second, as discussed in your earlier post and comment thread referenced below, I am surprised your arrangement to create earnings for your wife to boost pension fund contributions generates enough value to offset the extra payroll taxes:.

Regarding the S corporation comment, I love S corporations. And we do a ton of work with S corporations, some small, many very large. And do you really get enough true tax savings to pay for the payroll taxes you guys pay…. Screws up the backdoor Roths. The point about the extra payroll taxes vs lower income taxes is legit, of course. Can he really max the k a second time? CPAs love Oil and Gas partnerships for their obvious tax advantages. If anyone has found a way of doing this I would love to hear about it.

Unless you are going to drill the well yourself, I believe the only way to participate and claim the tax benefit is by being a limited partner. However, the partnership agreements I have seen make it clear that even though the probability of trouble is small basics of bse stock market pdf nevertheless have unlimited liability if you want the tax deduction.

The two seem to be joined at the hip. You can use insurance to how to convert black money into white without paying tax this risk, but if when you look at forexcopy trader terbaik insurance policy will you find that it does not provide unlimited protection.

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If so, I would be very grateful if you could point m91/30 tactical stock to one so I can review. Philip, I think you are right. I am actually concerned about something worse, e. My understanding is that as a partner, you would be liable for your share of the damage. I would love to be told otherwise. And then had trouble sleeping at night. My family invests in working interests through our fxdirectdealer online forex trading limited partnership—so any potential liability from those investments is limited to the assets of the family LP.

If we were really paranoid, we might have the family LP create a single-member, single-purpose LLC for each working interest investment with the LP being the single member. Thank you for your insight here. People invest in these partnerships so there must be a way to do it. Presumably investing in them via an entity still allows the pass through of the front-loaded tax credits. The other aspect of your comment that rings out for me is that your state really matters.

In California, the courts would be delighted to toss out the single-member LLC at the least provocation.

But in Texas, I would expect that these legal protections would be respected. Dare I ask how you found the working interests in the first place?

My guess is that they came to you from some trusted personal source rather than from a financial product salesman. In general, the tax treatment is still favorable. The specifics can be dependent on state law. Yes, the working interest we have is the result of a personal connection.

However, we would not invest in one again, regardless of the source. A very close friend who owns an oil and gas company told us at the time we invested that working interest investments are a terrible idea for anyone who is not in that business, and he recommended against the investment he was right.

The risks are high and many, even when you can trust the operator, which is far from a certainty. For most investors, a royalty fund is a better way to invest directly in oil and gas wells. With royalty funds, you can capture the upside from investing in oil and gas wells but without the unlimited liability. However, like working interests, royalty fund investments are highly illiquid. Granted, I would probably not recommend that strategy to the general public.

Philip — Off topic, but I wanted to thank you how to convert black money into white without paying tax writing The Affluent Investor. For those of you who have not read it, the book is one of my personal favorites. It helped me solidify how I think about our personal finances. You are too kind. Jim explains personal finance better than anyone I know. Phil I how to make quick cash in gauteng enjoyed The Affluent Investor and your new book Tax Alpha Dog.

The books you co-authored with Ben Stein no loss forex robot also classics.

I had never heard of Monte Carlo analysis prior to your book with Ben Stein. I have no plans to invest in oil wells or pipelines. I have been obsessed with taxes lately. I think the big takeaway for physicians is that they are likely to end up with big IRAs as they approach retirement, such that the rising required minimum distributions will force them into higher brackets as retirement goes on.

This means they should do long-range tax projections in their 60s to see if they can avoid this. I totally agree with you re: You have an impressive body of work where do you get the time??? Yes I see this as a HUGE problem down the road.

I am trying to do serial Roth conversions now to decrease this going forward. I am 59 and the rmds worry me quite a bit. There are worse problems to have than so much IRA income that it forces you into super high tax brackets. The fact is that a reasonable retirement spending plan is spending your entire RMD. I just think lots of younger people do not realize that rmd are taxed at ordinary income tax rates not capital gains rates.

Also when you get rmds you are also starting social security at All this income will also raise newspaper article of the stock market crash 1929 b rates on Medicare.

It is an indicator that you have been extraordinarily successful in the financial realm. At age 70 an RMD is 3. Oh if only I and every other doctor could have that problem. So, is it something to plan for if you have been uber-successful?

Should this be some overwhelming worry? I think we should look at not just RMDs at 70 but also at 75 and 80 as well. This percentages starts to rise very rapidly and so do the taxes. Fully agree that this is a good problem to have. At some point tax deferred accounts are not worth it, and they may be better of investing in taxable or even retiring early to do Roth conversions or simply starting to withdraw from tax deferred accounts.

But people need to understand that people with RMD issues are generally multimillionaires. It saves me TONS of hours in time and probably a few hundred dollars dead trigger 2 mod money gold more given that they know quantum binary option strategies buy call sell put more about taxes than I do and I know a lot.

I kenyan stock market analysis to be honest and comment flea make market money selling CPAs have created more headache than they are worth for me.

Although the learning curve was a tough, actually understanding to do your own taxes has been much less stressful for me in the long run. My life is actually times to trade forex and less stressful without the CPA.

All the info I need to collect and present to the CPA I can just as easily present it to turbotax. Also, since I started doing my own taxes I stopped easy ways to get neopoints on neopets questions from the IRS requiring more info.

Unfortunately Many of my physician colleagues complain of similar issues with their CPAs. I really wish it was not the case. Mom above gets audits from the IRS requiring answers.

If a everything was done appropriately the first time that should never happen. Just questions asking for further documentation which was not required on initial submission of return. They often ask for more documentation there also. We are done qualifying for that one as of last year.

Having a CPA we trust has been great. Sorry you have not found one. We got to ours by having him review returns we were pretty sure were wrong years ago. He saved us more than we thought we were due. Audits are usually not as scary as you see on tv. The IRS is just asking for extra information or clarifying something you submitted.

Pretty high level stuff here. I like being able to keep the HSA fully invested every year regardless of actual medical expenses. My tax planning sessions with a CPA are well worth the cost. After making strategic decisions with her, I could care less about punching all that information into the computer and making the correct IRS approved forms come out.

A great analogy is payroll processing. That seems to be the primary motivation for doing your own taxes each year. After deciding on compensation and benefits for the year, I update the payroll service Zen Payroll nowadays, but recently renamed as Gusto and never think about it again for twelve months.

All the forms are filed at the correct intervals, payroll taxes are withdrawn and sent electronically to the various federal and state agencies, checks are deposited in different accounts every payroll cycle. Doing that myself would be a major error-prone PITA.

A second, and perhaps more important reason to do your own taxes, is to learn the tax code. A third is because you enjoy it. But I confess it becomes less enjoyable each year.

I just see a difference between knowing the useful parts of the tax code and having to actually apply it. Sites like yours THANKS!!! Maybe things changed for you from circumstances outside of your control, but would that have been necessary had the pro put them together instead?

They are offered by community foundations, large brokerage houses such as Fidelity Charitableand other organizations. Contributing appreciated assets to charity such as appreciated stocks or mutual funds you have held for at least one year gives you a double tax benefit: This allows you to contribute significantly more to charity at the same net out-of-pocket cost.

But the logistics of contributing a small amount of appreciated stock to each of many different charities can be daunting. Fidelity makes this especially easy — you can contribute assets held in a Fidelity account to Fidelity Charitable online with a few mouse clicks, and can recommend grants online. Another advantage of DAFs is that you can contribute to your DAF in a high income year hence getting the biggest tax breakthen grant funds from the DAF to your charities over a period of years, when your income might be lower or your cash flow tighter.

Also, I rather enjoy doing my own taxes with Turbotax strange, I know. I asked a very knowledgeable tax pro whether doing my own taxes increased my audit risk.

He said there might be a small increase; probably not enough to be concerned. You could convert it to an S Corporation and take it as an operating loss, creating a perfect offset. Rules for this are complex and vary by state. This can create some interesting tax planning opportunities.

Others have already suggested making Roth conversions during the low income years. Also, Schedule A deductions such as mortgage interest and charitable contributions will be worth less during the low tax bracket years. So does a regular CPA have knowledge of all the strategies bein discussed here?

The main way to decrease Medicare taxes is to have unearned income instead of earned income. For a doc, that means being taxed as an S corp, either as an S Corp itself or an LLC choosing to be taxed as one.

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The book summarizes the most important information on the blog and contains material not found on the site at all. Straighten out your financial life today! Also available on Audible! Click to learn more! Not all tax questions have clear-cut answers When you have a choice between two legal [tax] alternative, choose the one which results in the lowest tax. Website design by Nina Interactive. Menu Start here Blog Latest Classics Featured Search Archives Forum The Book Description Why You Should Read It Table of Contents Errata WCI Empire WCI Podcast Newsletter Sign-up Newsletter Archives Physician On FIRE Recommendations Books Websites Student Loan Refinancing Physician Mortgage Loans Insurance Agents Financial Advisors Jobs Real Estate Agents Student Loan Advice Contract Negotiation and Review Practice Loans Private Medical School Loans Tax Strategists About About WCI Scholarship Testimonials Guest Post Policy Contact Search.

A Visit With a Tax Strategist September 19, MST Category: Tax reductionTaxes. Gold Level Scholarship Sponsor. Sign up for our newsletter! Related Posts How To Find a Great CPA What You Need To Know About Schedule A An Interview With a Tax Strategist The Perfect Financial Advisor LLC Filing Taxes As An S Corp.

Mom September 19, at 5: The White Coat Investor September 19, at What do you mean option of an LLC? Mom September 19, at 1: The White Coat Investor September 19, at 1: Stephen L Nelson CPA September 19, at 7: Mom September 19, at 8: Sam Adam September 27, at 3: And do you really get enough true tax savings to pay for the payroll taxes you guys pay… http: He can max k same as the SEP in 2nd business, either sole proprietorship, LLC, or S-corp.

Stephen Nelson CPA September 19, at 1: Stephen Nelson CPA September 19, at 5: No problem — I have def had my share of blunders on WCI. Just for the record, not ALL CPAs love Oil and Gas partnerships. Philip DeMuth September 19, at 1: Thank you for your reply.

Philip DeMuth September 19, at 2: Charles September 28, at Philip DeMuth September 28, at Charles September 29, at 1: Mom September 19, at 3: Philip DeMuth September 19, at 5: Philip DeMuth September 20, at Philip DeMuth September 20, at 6: The White Coat Investor September 20, at 8: The White Coat Investor September 21, at 8: EnjoyIt September 21, at The White Coat Investor September 21, at Money well spent IMO.

I also use a CPA. Maybe I could figure out the forms maybe not. Too old to learn now. DrS September 20, at 7: EnjoyIt September 21, at 3: It is a shame because I would have gladly paid someone to make my life easier. Mom September 22, at EnjoyIt September 25, at 5: Which is the same reason my experienced CPA files our business and personal taxes every year. Chris September 20, at 6: More seriously, you mentioned having to file three amended returns in a single year.

Keithly, CPA September 20, at 2: A few clarifications on the strategies: How do you go about with your advice to: The White Coat Investor November 22, at 5: Leave a Reply Cancel reply Your email address will not be published.

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