Got my Contract Today
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That would run completely counter to economic theory. As long as a profit can be made, there will always be a competitor willing to do it for less. Again, I have a contract that says what my payout will be. Any desire for LPL to pay less requires a new contract. You have no such leverage as an employee. As an employee, I had four pay cuts in four years. In the three years since, I've had no pay cuts and two significant pay raises...one when I started and one when the bonus structure was raised.I knew that someone would say, but I can leave to go to another B/D. You can, sure. But, if the indy world as a whole started to lower payouts, where would you go? If you are with the firm you think is the best right now and they screwed you, do you go to the second best firm for a better payout? You’re in no more secure of a position than I am at EDJ as far as that goes. You still have to answer to your own mother ship when it comes to payout.
"Going independant doesn’t solve the payout change problem. LPL or RJ could decide today that they are reducing payouts to 60% across the board. Where is it in your contract or agreement with them that they have to keep payout at 80%, or whatever it is, indefinitely? "
Spiff, don’t be appalled… This is warfare where the newbie has nothing to lose and everything to gain. What CIB was stating about newbie successors digging in the dirt to slam the departed vet is hardly debatable. I will confirm that this has indeed been FACT in my EJ neighborhood. I don’t know about what percent of the time this occurs but this seems factually accurate. Specifically, I saw the newbie get three or four clients to sign an affidavit that the departed vet had solicited them to move their accounts and VIOLA, then came the TRO and (and the newbie can not legally talk to clients about any details of this…) a FINE.
Thanks for the feedback on the tax question. I won’t pass along the Pussy quote…but will pass along the thoughts I’ve recieved. I have no problem thinking out of the box, I’m Indy. But to say my accountant needs to think out of the box is …well…not their nature. In my situation, my wife and I own our own businesses and we fall into the high risk of being audited category because of S corps and Income, active and passive. Just don’t want the IRS knocking on my door…no matter how in or out of the box we think.
as an indy myself, if we indies have to change b/ds, it’s still a pain in the ass to move. in other words new acat forms have to be signed by all clients AGAIN.
Spears, if you can believe it, one of the CPAs in this office sometimes call ME a pussy (he thinks I could pay myself less in wages). I understand that calling your accountant names might not be the most productive thing you can do, so no...I wouldn't recommend you call him a pussy. From a distance, I can opine that he's probably costing you money. There is a lot more aggressive accounting out there than what I've described. Could the government take an adverse position? Sure they could. Would I fight it much like an ex-EDJ rep would fight a training assessment? Absolutely. I didn't create these strategies myself and it's not like they're even uncommon. They've been outlined here before by others and I personally know other independents that have used similar strategies for years without issue. The important thing is to run your business as a business. If you just set things up for tax avoidance, you are playing with fire, and thus, my rationale for paying myself just as I was when I was an employee. That way, a tax official looking at the structure would correctly come to the conclusion that my pay structure generates similar amounts of social security and medicare taxes than what I operated under before. Why indies should pay more is beyond me, so I don't. ...and you are correct in your observation that it's not in the nature of many accountants to think creatively, but the good ones are capable without costing you an arm and a leg in an audit. If you don't have that, I'd ask your best business clients for a referral. There are plenty of good accountants who will tell you that what I've outlined is not unique or even very aggressive. If you have a good accountant, there's no reason to fear an audit unless you are governor of New York.Thanks for the feedback on the tax question. I won’t pass along the Pussy quote…but will pass along the thoughts I’ve recieved. I have no problem thinking out of the box, I’m Indy. But to say my accountant needs to think out of the box is …well…not their nature. In my situation, my wife and I own our own businesses and we fall into the high risk of being audited category because of S corps and Income, active and passive. Just don’t want the IRS knocking on my door…no matter how in or out of the box we think.
I've asked my CPA to get a second opinion on this whole process. You say you can assign income from and individual to an S Corp, he says you can't. His hangup is on the way the 1099 is reported. He called LPL to see if we could get the income reported as income to my ein and they said absolutely not. So if he believes, wrong or right, that you can't assign personal income to an S corp, then we have an issue. It seems to me it would be a simple yes you can or no you can't, no gray areas, as far as being able to assign income to a Corporation. Anyway, Its my decision on either keeping the Corp or moving to another form of structure, such as LLC. I wonder if I get audited, could I say I read it on a forum as justification.
With all due respect, I think your CPA is wrong. I can’t imagine people like Bob Fragasso and Ron Carson not running commissions through a corporation. This example is insurance, but read the third question’s answer…
http://www.wvinsurance.gov/forms/agency/Business_Entity_Licensing_FAQ.pdf ...and no, you can't use a forum post as defense...that's why I have a disclaimer in my post.and I personally know other independents that have used similar strategies for years without issue. [/quote] As of last year, the IRS is specifically singling out S Corps taking large dividend distributions for audits as way to increase revenue. As far as assigning the 1099 income to the S Corp or LLC, I think bspears your accountant is making it more difficult than need be. My schedule-C has my EIN on it, therefore "assigning it."[quote=bspears]Thanks for the feedback on the tax question. I won’t pass along the Pussy quote…but will pass along the thoughts I’ve recieved. I have no problem thinking out of the box, I’m Indy. But to say my accountant needs to think out of the box is …well…not their nature. In my situation, my wife and I own our own businesses and we fall into the high risk of being audited category because of S corps and Income, active and passive. Just don’t want the IRS knocking on my door…no matter how in or out of the box we think.
“As of last year, the IRS is specifically singling out S Corps taking large dividend distributions for audits as way to increase revenue.”
That's why you must have reasonable compensation paid out in the form of a W-2. The people the IRS are after is the rep grossing $500,000 with a $50,000 W-2 and $300,000 in dividends. We've discussed this at length in the office and believe that the key is being reasonable. The most interesting thing is here, is that the IRS is targeting something that will do virtually NOTHING for their collections...it would all go to social security and medicare collections...with the exception of fines and penalties. We have strayed way off topic here, but I'll leave you with this... 1. You and not your accountant are ultimately responsible for the numbers on your return and the method of reporting. Your accountant gets into liability issues if hs/she knowing files false and/or misleading information. 2. There are plenty of gray areas in the tax code so there will always be disagreements in interpretation. There's nothing illegal or immoral about taking a position that falls into these gray areas. Just understand that you may get a fight if audited, but that doesn't mean you are wrong, it doesn't mean you will lose, and it doesn't mean you will pay the full amount if you do. 3. Ultimately, almost everything said here by all parties is opinion only. Your job is to find a like-minded tax advisor and make tax decisions based on the guidance you get from that advisor. Never rely on information from this forum without doing your own due diligence.To tie this back to Jones (as we always must!) I will leave this exchange with this…
Note the EJ people go quiet on these discussions. Partly because it is irrelevant to them, but also because if they are like me while I was at EJ (I admit it) I used to run scared from these discussions. Now I can engage myself with the client and their tax pros to a much greater extent (which is part of the service I can now provide for my advisory fee). This is because I am not chasing dollars daily to make a living, so I have the time to research this stuff, and because I am now actually a business owner, I don't just play one on TV.Thank God, I thought a perfectly good Jones bashing thread had been ruined! Maybe we should start a thread that just says Jones Bashing and keep them all in one place. It’s hard to keep track of all of them when they are spread throughout all the topics…
Hey Guys-I think we are bringing Spiff closer. When he goes indy it will be a great day for him.
More than one avid EJ supporter has reversed course and seen the light in the time I’ve been on this board.
I think I was most shocked by Bill Fakkland. I hope he comes back and tells us the rest of the story some day…