Listener Q&A with Mike Jesowshek CPA (6/12/2024)

On this Podcast we answer listener questions! If you have a question you would like discussed on a future episode, submit it now!

1. Go to www.TaxSavingsPodcsat.com
2. Click Podcast 
3. Scroll to the Bottom and Submit Your Question

You never know, your question may be on the next Q&A session. Below are today's questions, tune into our Podcast to hear the answers!

Katy: I purchased a home in 2020 and lived in it for two years before starting to rent it out. I did not know anything about depreciation or bonus depreciation when I Convert this into a rental property. Can you retroactively claim depreciation for previous tax year’s? I’m assuming you cannot retroactively apply bonus depreciation for 2020? Thanks so much!

 Jeff: I have an existing business that is 9 years old. We are starting a new division of the company out of the same location that requires a different accounting system and Field service software. HOWEVER we are technically keeping the DBA name for both, the same because our new business is complementary to what we do now and it makes sense to keep that. How do you recommend setting this up? I am concerned about payroll (sales employees will sell for both divisions), shared marketing expenses, making sure that we can track profit and loss for both entities separate, the list goes on.

Julia: Love the pod! My husband and I co-own an industrial services company in which we own and operate commercial vehicles (and employ drivers). In a slight departure from this, we are preparing to hire a project manager who will need a company vehicle. We are considering handing down a work truck that is currently owned and used by my husband, bought and paid off before the company was founded. How should we handle this? Should the company purchase the vehicle from us? Should we donate the vehicle to the company and write it off? Thank you!

Gigi: My consulting business income is variable throughout the year. Q1 is slow compared to the rest. Do quarterly estimates tax payments need to be equal? We've been using the Safe Harbor method, but wondering if that is not the right choice.

 Curtis C: My daughter goes to community college full time. Can I write off tuition, books, and use the mileage rate for commuting costs as part of the related expenses, like books.

 Tony: Hello, How do charitable contributions work for S-Corps? Is it deductible at the corp level or passed through to the shareholder? Thanks

Scott: Do you have more info about putting a spouse on the board? I’m a financial advisor and would like to hire my wife to help with clerical work. Thanks

 Laurie: I was wondering if you could discuss cost of goods sold as a tax deduction? Especially how to handle tax deductions for goods that were bought in one tax year but haven’t yet sold.

Jasper: We love your podcast! What are the benefits and mechanics of paying payroll taxes on a spouse who works as a real estate professional. Here’s what I think the benefits might be:

1. both parents needs to show wages in order for childcare to be tax deductible
2. can put almost all of the spouse’s income into Roth 401k. Their income is an expense in schedule E so it’s simultaneously deductible.
3. can then contribute 25% if income as a match into the Roth 401k which is also tax-deductible and has no payroll tax
4. get the 401k startup tax credit
5. could it potentially act as extra evidence for my spouse’s real estate professional status? She already documents hours so I’m not so worried about this, but helps give piece of mind.

Drawback, of course, is that you have to pay payroll taxes on it. But those are pretty small. How do the mechanics work? How do you pay payroll taxes? Do you just set up an individual 401k at etrade? Do you have to tell etrade which contributions are from the employee vs the match? Like how do you do it?

Katie: Hello: My husband and I opened an LLC last summer to rent out our backyard pool. I brought in very little money ($600) from renting out the pool and this was received into my personal checking account. I now have a business checking account but did not at the time I brought in the few rental fees last year. I opened this LLC to rent out the pool as a business as way to generate tax deductions on our personal taxes. Because I had such little pool rental revenue in 2023, is it worth it to consider this on my 2023 tax return? Am I eligible to claim any deductions (i.e. pool maintenance, home office deduction, cost of water, pool furniture, business formation cost, etc) given the little amount of revenue earned? Thank you so much! 

Angie: I've had a CPA tell me that a Scorp is not worth having as long as the QBID is an option. Can you talk about that and what income scenarios it would affect?

Anonymous Facebook Group Member: Looking for advice on ways to help offset taxes owed. I started a business in March of 2023, by January of 2024 my business has grown a good bit. I'm concerned about how hard I'm going to get hit at tax time for 2024, and I'm looking for advice on ways to help lower my taxable income. I use quickbooks to monitor my earnings/expenses, and it is showing my taxable income so far for this year is just over $100k. At this rate, I'll end up with a taxable income of about $320k or so for 2024 without accounting for any more business growth. I've taken depreciation on equipment/vehicles into account already. I'm an LLC set up to file as a sole proprietor right now as per my accountants suggestion, but really starting to wonder if I should be filing as an s corp based on some things I've read online.