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Thread: LLC and Taxes

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    SitePoint Wizard Another Designer's Avatar
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    Angry LLC and Taxes

    Last year I set up an LLC. Now I'm wondering if this is a good thing.

    I am doing estimated taxes. At the end of the year my wife and I do joint taxes.
    My CPA told me I was no longer eligible to contribute to my Roth IRA since my wife and I made over a certain amount. The guy at Fidelity said I can contribute $4,000 this year to my Roth if my joint income was under $150,000 for 2005. It was!

    I also want to contribute to my SEP, which only has a little over $3,000! I missed last yearís contribution to my Roth because my CPA told me I couldn't contribute. Now, Iím wondering if this is right.

    In short, I'm beginning to wonder if this LLC Tax thing is worth it. I mean, I'm not bringing in any money, and I'm finding that I am restricted from contributing to a retirement fund. My CPA is charging me and arm and a leg, for what I don't' know.


    I'm 45 years old and have to start taking my retirement seriously. No one else will.
    I have a long way to go to understand taxes.

    Thanks for listening.

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    SitePoint Guru Marubozo's Avatar
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    I'm not quite sure what an LLC has to do with your troubles with retirement contributions. First of all, the person at Fidelity is correct. If you are married and file jointly, you must have an AGI of $150,000 or less to contribute fully to a Roth IRA. If your CPA said you are not eligible and you know for a fact your AGI is less than that amount, I would look for another CPA.

    And unfortunately, IRA plans are "use it or lose it", meaning if you miss a year of contributions, you can't make that up. But, you may actually have until April 15 to make a 2005 contribution.

    Another thing to consider, is contributions to a Roth has no effect on your current income tax. You contribute after-tax dollars, so there are no added deductions for contributing to a Roth. The tax benefits come down the line once you begin to make withdrawls tax-free.

    The only thing I can see affecting your CPA's advice is if your LLC is pushing your income over the $150k limit. One thing to remember is that even if you don't pay yourself a salary or take any money out of the LLC, if the company makes money, it is counted as personal income. Unlike a corporation, you can't retain earnings inside the company to reduce your personal tax liability.
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    SitePoint Wizard Another Designer's Avatar
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    Thanks Marubozo.

    Any suggestions on finding a new CPA?
    I really am mad I missed last years Roth contribution. I think it had to do with me opening a SEP IRA.

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    SitePoint Guru Marubozo's Avatar
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    Look for a CPA that deals with small business owners. Most should be well-versed in business issues, but if you can find one or get a recommendation from someone who works almost exclusively with business owners you will probably have the best results.
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    SitePoint Wizard Another Designer's Avatar
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    Quote Originally Posted by Marubozo
    Look for a CPA that deals with small business owners. Most should be well-versed in business issues, but if you can find one or get a recommendation from someone who works almost exclusively with business owners you will probably have the best results.
    Thanks One more thing. Should I hire strictly a CPA or is just an accountant good enough?

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    SitePoint Guru Marubozo's Avatar
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    Depends on the amount of services you require really. A good accountant that knows about business issues could be just as good as a CPA. But with a CPA you are working with a certified professional (and pay for it too). I personally have a good relationship with a regular accountant, but she services business owners almost exclusively.
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    SitePoint Wizard Another Designer's Avatar
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    Quote Originally Posted by Marubozo
    Depends on the amount of services you require really. A good accountant that knows about business issues could be just as good as a CPA. But with a CPA you are working with a certified professional (and pay for it too). I personally have a good relationship with a regular accountant, but she services business owners almost exclusively.

    Thanks. Since I'm not making all that much money yet, I might get an accountant.

    I'm paying too much money for this CPA.

    Is it protical for her to hold on to my returns for my estimated tax returns for the next year?

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    SitePoint Guru Marubozo's Avatar
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    You should be able to take any files/returns at any time. They are your property. Since taxes are ultimately your responsibility, all paperwork should be yours to move accordingly. And if you are talking actual money that you paid for estimated returns, I would assume you could ask for that at any time, unless the money was already submitted to the IRS. But I have not encoutered a situation such as that so I can't be completely certain.
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    Life is short. Be happy today! silver trophybronze trophy Sagewing's Avatar
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    This scenario doesn't sound right to me. If you are paying good money for a CPA, you should EXPECT that CPA to protect your interests and contributing to your tax-deferred accounts is a CORE interest for someone in their 40's.

    I agree that you need to immediately dump your CPA and find a new one. The CPA should be diligent in maximizing your legal contributions to your retirement every year. This should go without saying and you shouldn't have to ask around to get the info.

    I would avoid getting involved in the details and invest your entergy in finding a new CPA who can review your situation and make strong recommendations. Good luck!
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