How Much Will I Owe In Taxes?

As we're getting towards the end of the year, tell me… have you had this thought yet...

"What am I gonna owe in taxes?" "Okay, should i contribute to the retirement?" or "should I do ________ for taxes?"

Those are all good questions, also very common for this part of the year. And it's exactly what we're doing with our clients right now in the fall. 

One client we met with a couple weeks ago is on pace to owe around 8k in taxes in April and with that, we gave her some options. She can keep going as is and pay the 8k, we can convert her to an S Corp and set her up on payroll plus a few other things and it would save her about 6k in taxes while also paying us about 5k. And then here last option was to contribute to her retirement and bring her taxes down about 1500.

She correctly figured out, and I'm sure you're seeing it too... she really only has lateral moves available. As much as we'd love to take here money and upgrade her to year round services with us.... she'd pay us 5k to save about 6k? Well, that's just lateral.

And that's exactly what we told her... the best use of her money right now is not to pay us. Maybe next year as here business has grown the past couple years, but not yet.

Right, the only way for our client to make the best decision possible was to first have us run the numbers, then we can advise. Right, a tax bill of 6k is way different advice than a tax bill of 60k.

And last thing to remember when it comes to tax deductions... they are NOT dollar for dollar. Right, if you spend $1, you don't save $1 in taxes. No no no no no no no, you only save about twenty cents for every $1 you spend.

Tax deductions cost time, money, and/or effort. For our client in this example, she decided to hold off on the entity change and all that because she had clear numbers that we could walk her through. Here's JT explaining that recently in a chat with a financial advisor partner of ours, https://www.instagram.com/p/DMbHzykp1iT/ 

Hopefully you're meeting with your accountant this fall to project out your taxes and then go over some options to minimize those taxes, even if they answer is just to save for taxes.

Would you benefit from a tax projection like this, or as we like to call it, a mini tax return? Send us a message and we’ll set it up.