#general
Thread
It's tax season here in the USA. Along with being a freelance FinTech writer, I'm also a CPA. I thought we could use a thread with some helpful US tax or year end accounting (not US specific since accounting rules are generally the same regardless of locale) information.
If anyone needs answers to a quick tax or accounting question, drop it here. I'll answer them quickly.
Feel free to DM with tax or accounting questions if you don't want to share your situation with others.
What a generous offer! I have a general question as a freelancer — when do you see becoming an S-Corp and paying yourself a salary as advantageous compared to being a sole proprietor LLC? I’ve had this question pinging around in the back of my mind but haven’t brought it up with an actual accountant yet.
Valid question @Sara Gates. It's one of the most common small business tax questions. There's no one size fits all in this situation. It depends. While the tax benefits that come from operating as an S-corp are plentiful, operating as an S-corp comes with additional administrative burden. However, a general rule of thumb as to when you should consider the switch from sole proprietor to S-corp is when you have at least $60 - 70k in NET INCOME a year (what's left over after you pay all your business expenses). Income below that won't offer much tax savings to be worth the additional admin work, like running payroll, calculating your reasonable salary, state specific tax and registration considerations, etc.
That rule of thumb is exactly what I was looking for. Thanks Melissa!
This is very kind of you, @Melissa, The CPA Who Writes ! I have often wondered about Sara’s question and was reminded of it recently. Thanks for the answer. I’m also commenting so I’ll be notified of future questions. 😊
just for fun, how many clients do you have during the week before the deadline vs January until then?
@Clayton Excellent question. I provide accounting services (think bookkeeping, virtual CFO type stuff) and tax strategy. I don't do tax compliance (tax return completion). So I don't really have a "busy season" like most folks think CPAs do. My workload is steady throughout the year.
well, that's got to be the best way to do it
100%. Plus the value (and perceived value) I provide to my clients is ♾️ higher than the perceived value a tax return preparer. Tax compliance is a necessary evil for most business owners. It's something they have to do. Nothing something they choose to do. But having a CPA on your team helping you navigate business decisions and financial strategies is a choice. And for me, helping clients with business decisions is the best.