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Ask HN: How do I manage the profit of a successful website?

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Re: Ask HN: How do I manage the profit of a successful website?

#121

Post by HWR_14 »

robomartin wrote: post #93

I'll add to the advice you have received regarding getting a good accountant by suggesting you might want to use a good accounting firm rather than a single accountant. Depending on where you live, you might be able to get a sense of whether or not there's a dominant firm that is handling financial matters for local businesses. I switched from using a single guy someone recommended to a real accounting firm years ago…

There is a difference in using tax avoidance programs the way they were designed (eg socking away money in a 401k) and taking advantage of tax loopholes, morally at least. Yes, no one wants to pay extra for a laptop, but it's not moral to take advantage of a website error which accidentally did all the math in cents as opposed to dollars to buy 100 top end laptops for $30/each.

Re: Ask HN: How do I manage the profit of a successful website?

#124

Post by cercatrova »

oliv__ wrote: post #113
ryanjmo wrote: post #27

Are you a solo owner? You need to take an s-corp election and you do not need to pay yourself that type of salary. At most you should pay yourself $54,000 a year. The reason is money that goes through an s-corp you don’t pay self employment taxes on. Salary you do. That is 15%. You wouldn’t need to pay yourself more than $54,000 without the government getting upset. Right now, based on $54,000 a month you are losing…

I have a (maybe dumb) question about salary: wouldn't "officially" paying myself $54k / year result in my not being able to rent or buy real estate where there are income requirements?

Yes that can definitely happen so you'll need to be careful about that. For some areas or houses, you can show your bank statements rather than income, but not all places accept those.

Re: Ask HN: How do I manage the profit of a successful website?

#125

Post by robomartin »

HWR_14 wrote: post #121
robomartin wrote: post #93

I'll add to the advice you have received regarding getting a good accountant by suggesting you might want to use a good accounting firm rather than a single accountant. Depending on where you live, you might be able to get a sense of whether or not there's a dominant firm that is handling financial matters for local businesses. I switched from using a single guy someone recommended to a real accounting firm years ago…

There is a difference in using tax avoidance programs the way they were designed (eg socking away money in a 401k) and taking advantage of tax loopholes, morally at least. Yes, no one wants to pay extra for a laptop, but it's not moral to take advantage of a website error which accidentally did all the math in cents as opposed to dollars to buy 100 top end laptops for $30/each.

I don't understand your point of view.

If the tax code says that I can obtain a tax credit for investing in solar panels, I buy a shitload of solar panels and get a massive tax credit. That's legal and also deemed moral. It was codified into the tax code as something society wants me to do. If I take all of my profits at the end of the year and spend a pile of cash buying equipment under section 179 of the tax code, I might very well end-up paying zero taxes and my even get a refund. If I amortize equipment over several years based on the schedule mandated by the tax code and, as a result, obtain tax benefits, it will reduce or eliminate a large chunk of taxes due.

All of this, and more, much more, is in the tax code. Society, through our representatives, decided these are worthwhile investments that result in benefits for all. Enough so that they are incentivized through deductions or tax credits. This is moral, ethical and absolutely 100% legal.

You website error is a ridiculous attempt to equate deductions and credits that exist in the tax code with stealing. How dare you? If you think I should not be entitled to a tax deduction when I choose to spend $250K in equipment at the end of the year, then go talk to your representatives and have these provisions removed. Until then, stop vilifying perfectly legal and REQUIRED tax accounting regulations. I say "required" because your accountant has the legal responsibility to manage your tax filing in accordance with the law. I could sue my accounting firm if they systematically neglected to file taxes in accordance with the law.

I love it when people go on and on about businesses paying zero taxes. It reveals complete ignorance of how money, business and the tax system works. Some businesses wouldn't even be viable without the tax code codifying what society wants them to do. Solar and electric vehicles are perfect examples of this.

Re: Ask HN: How do I manage the profit of a successful website?

#126

Post by vmception »

nodesocket wrote: post #102
vmception wrote: post #16

My favorite thing to do is tax shelter! With $45k/mo income self employed, you can contribute to a self directed Roth 401k as both the employee and the employer. This boosts your maximum 2022 annual contribution from $20,500 to $60,500. You can only contribute with 20% of the revenue, so you need around $300,000 to pump the max of $60,500 into one of these. It is slightly lower if you do this through an S-Corp. So ev…

Maybe I am not understanding but even with a solo 401k you can’t contribute it all into the roth part. Only like $5k. The rest goes into standard retirement account which is tax deferred.

Roth 401k contributions are subject to the same traditional 401k contribution limits. I think you are not understanding. Where does this conflicting information come from?

Do note that there is a super confusing "after tax 401k" as well as a "roth 401k" which is also after tax but different. Search engines have trouble with this, and it also confuses gurus. But neither of these reduce a 401k contribution down to $5k, and the roth 401k is all taxed now and tax free later exactly like a roth ira with 1,000% higher contribution limits.

Sources for my world:

https://www.nixonpeabody.com/en/ideas/blog/trusts-and-estate...

My CPA

https://www.nerdwallet.com/article/investing/roth-401k

https://www.irs.gov/retirement-plans/roth-comparison-chart (only details the employee contribution here)

Re: Ask HN: How do I manage the profit of a successful website?

#127

Post by RhysU »

nodesocket wrote: post #99
cashsterling wrote: post #86

Earlier quoted context omitted.

This is very solid advice. I would only add that you should consider maxing out your Roth IRA contribution every year (6k USD per year), particularly if you are young. You use post tax dollars to fund your Roth IRA, but all of the funds in your Roth IRA, including all gains, are tax free when you retire.

Thanks to absurd tax laws, they won’t qualify for roth IRA. I’m in the same boat, have to look at backdoor, but does draw some heat and attention of the IRS doing back doors.

AFAIK, backdoors are a non-issue with the IRS so long as the paperwork is done correctly.

Do, do, do read up on "pro-rata" considerations because the regular->Roth conversion of post-tax contributions is definitely not tax-free if you have any other pre-tax dollars sitting about in any IRA.

Re: Ask HN: How do I manage the profit of a successful website?

#128

Post by RhysU »

meetingthrower wrote: post #111
tomcam wrote: post #103

Earlier quoted context omitted.

I had to jump through hoops and pay a specialized firm to administer. Maybe it no longer applies?

Both are basically plug and play now with places like fidelity or vanguard. Zero admin fee for mine.

Seconded on no cost with at least Fidelity. They start having reporting requirements at $250K of assets. They are also something of a pain to close if you have multiple participants.

Re: Ask HN: How do I manage the profit of a successful website?

#130

Post by tradertef »

Asking__HN wrote: post #110

A special thanks to all who replied! The spirit of the question was definitely less “how do I avoid taxes” and more “what other things should I be considering”, _but_ I’ve learned that I definitely need to find a good accountant and tax person because what I’m doing now in that regard is horribly inefficient. I love the wide range of suggestions I received as this is exactly what I was looking for and the HN communit…

On your last point, here is a good advice: https://www.youtube.com/watch?v=rJjKP8vYjpQ&t=105s
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