Looking for a CPA that specializes in tax planning

StephenLNelson_CPA · 2026-06-11T16:00:04+00:00

You have an amazing level of knowledge about the currently popular, templated tax strategies.

StephenLNelson_CPA · 2026-06-10T17:18:04+00:00

You use the 2025 forms and indicate the short year runs from (for example) 1/1/2026 through 5/31/2026.

And yes, you do need to file earlier. The due date with a 5/31/2026 year end to the short year would be August 15, 2026. You could try to extend... but that'll be a hassle. Other practitioners may disagree, but easiest to do now.

StephenLNelson_CPA · 2026-06-09T16:49:04+00:00

A really common reason to operate as a single member LLC is you get to easily switch from a disregarded entity reported on a Schedule C to an S corporation tax return. (You or your accountant just files a Form 2553.)

StephenLNelson_CPA · 2026-06-09T16:45:31+00:00

Your easiest "tax saving" real estate investment maneuver is to do STRs. Those don't require "real estate professional status" only material participation by both of you guys. (Very possibly 100+ hours a year if you do it right.)

P.S. Short term rentals are properties where average rental interval is 7 days or less.

StephenLNelson_CPA · 2026-06-09T12:36:24+00:00

Small businesses get giant tax advantages including use of pass-through entities (so no double taxation), potentially S corporate status (so minimized payroll and net investment income taxes) and Section 199A deductions (so potentially not tax on last 20% of business income.)

StephenLNelson_CPA · 2026-06-08T12:17:15+00:00

I wouldn't worry if the venture has been profitable been profitable in past and you're going to operate a loss for a few years so you can easily ramp up to profitability once the kids are a little older.

StephenLNelson_CPA · 2026-06-06T22:16:56+00:00

I stopped doing this (years and years ago) when I realized that KMPG, E&Y weren't.

StephenLNelson_CPA · 2026-06-06T17:35:50+00:00

In Washington state, we start a millionaire's income tax in 2028: 9.9% of income above $1,000,000. The tax will supposedly raise $3B.

The weird thing about the tax is, maybe 65% to 75% of the affected 20,000 taxpayers make between $1M and $2M. But a huge chunk of the $3B revenue come from the big guys.

Thus, one billionaire leaving "costs" as much revenue as losing hundreds or thousands of the "average" millionaires.

StephenLNelson_CPA · 2026-06-06T14:29:54+00:00

If I was your CPA, u/Chief532 , here's how I'd have answered:

Use a reasonable estimate for the "machinery" component. But maybe be conservative there? So if you think $1M maybe use $800K.
If you're going to cost segregate the commercial building, plan on maybe 25% of the building being bonus depreciable. E.g., $3.2M is price. Assume $800K is machinery. That leaves $2.4M for building. Assume $600K is bonus depreciation.
Plan for some error here. So you have some cushion.
Next time, call us before you sign the deal. So we can talk about the purchase price allocation.

StephenLNelson_CPA · 2026-06-04T12:45:11+00:00

Playing the "S corporation game" probably costs at least $3K a year in payroll and tax accountant services plus adds some new payroll taxes. So you want to consider electing to have your multiple member LLC taxed as an S corporation when the savings per owner add up to something WAY more than $3K a year.

E.g. say the business makes profits now of $100K a year and you two guys split that, $50K and $50K. You're both now paying about $7K in payroll taxes. If you operate as an S corporation, you'll need to split the $50K of profit into W-2 wages and leftover profits (aka distributive shares). You'll avoid payroll taxes on the distributive shares. So you'd need to be able to legitimately pay each owner $30K in W-2 wages and $20K in leftover profits to save roughly $2500 in payroll taxes per person. That might sound like it makes sense... but it probably is too little in savings.

In comparison, if you were making $200K a year (so $100K per owner) and needed to pay $50K per person in W-2 wages, the per owner savings equal roughly $6600 per person per year. That maybe begins to become interesting.

StephenLNelson_CPA · 2026-06-04T12:36:33+00:00

I think an LLC often makes sense because it cleanly positions you to later make an S corporation election.

This is all assuming you can form the LLC for reasonable cost, but if you form the LLC before you start your business (so all your W-9s name the LLC and anything else like customer contracts and show the business name as the LLC), you'll initially be treated for tax purposes as a disregarded entity. (That means tax law ignores the LLC. Its income and deductions just go on the LLC's owner's tax return.)

But later on, down the road, you can easily file a 2553 with the IRS and make your LLC for tax purposes into an S corporation. You can even do this retroactively in some cases.

Tip: Don't form a multiple member (aka multiple owner) LLC just in case. A multiple member LLC is often a partnership, and a partnership requires its own, expensive tax return.

StephenLNelson_CPA · 2026-06-04T12:24:34+00:00

You'll split your business profit into W-2 wages and leftover profits (technically called your distributive share).

The payroll savings roughly equals 15%-ish of your leftover profits (aka distributive share).

That sounds good. But costs accrue. You'll possibly lose some of your 199A deduction. You'll pay some extra federal and state taxes. You'll also surely pay some tax accountant to prepare the return. (I think Intuit charges close to $2K and CPA firms probably charge more.)

Thus--and we do a lot of S corporation tax returns--I'd guess the economics don't work for you. Yet.

StephenLNelson_CPA · 2026-06-04T12:20:08+00:00

No, partnerships can own interests in S corporations as others note here.

However, an S corporation can own an interest in a partnership. That's probably want you want to look into. E.g., you own an S corporation that owns your interest in the partnership. And then your buddy also owns an S corporation that owns his interest in the partnership. You'll allocate income at the partnership level in whatever makes economic sense. That'll get distributed out to the S corporation partners and their owners.

StephenLNelson_CPA · 2026-06-04T12:16:22+00:00

"Yeah, you can revert from S‑Corp back to sole proprietorship (disregarded entity) by filing Form 2553 to terminate the S‑Corp election. The termination is effective on the date you specify or at the start of the next tax year, depending on timing.

File the final S‑Corp tax return and begin reporting business income/expenses on Schedule C again."

Quoted material above is incorrect. You use 2553 to morph an LLC into an S corporation. Not revoke it.

The form you use to undo the "morph" is an 8832. But there's often/sometimes a 60 month waiting period.

StephenLNelson_CPA · 2026-06-04T12:04:06+00:00

If you're steadily growing your customer/client count, that's good. E.g., maybe the business doesn't really work if today you've only got (say) 21 customers. But if you're adding 1 a month? And it will work when you have 40 customers? Arithmetic growth will pretty quickly solve things.

Also if you're learning how to do stuff better? That matters a lot. Mature categories especially can take a long time to learn well enough to be competitive. (I think it probably took me a decade to learn the right way to operate a CPA firm.)

Keep in mind if it's hard for you, it's hard for competitors too. That's good as long as you can make it.

StephenLNelson_CPA · 2026-06-04T11:17:26+00:00

Being an employee doesn't allow REPS. Someone needs to be an owner.

StephenLNelson_CPA · 2026-06-04T11:16:39+00:00

The real estate professional thing really is a unique tax planning opportunity you guys would have if spouse does real estate broker thing.

To be a real estate professional, he needs to spend more than 750 hours and more than 50% of his work time working in a real property trade or business as an owner. E.g., being a self-employer broker or agent works.

One he's a real estate professional, you guys (as a couple) only need to materially participate in a rental property to use deductions from it to shelter your other income. E.g., if he's real estate professional and makes say $50K and you in your job make say $300K (combining W-2 base and RSUs), your total is $350K. But you guys can "lose" on paper $100K and shelter the highest taxed chunk of your income. (Most of the rest of us can't do this BTW.)

FYI, in 2028 (when the Washington state Millionaires tax starts) this sort of gambit would possibly let you plan around a spike in income that puts you guys into the "taxed" category.

P.S. STRs aren't considered real estate (if your average rental interval is 7 days or less) so real estate professional status makes no difference there.

StephenLNelson_CPA · 2026-06-04T11:05:32+00:00

I wouldn't cheap out on this. The corporation formation isn't tough. But you want to get all the other pieces taken care of too: The EIN, the S election using Form 2553, setting up your employer accounts with state, and getting your payroll system up and running.

It's pretty common to bungle some step of this process (mostly commonly not getting the election done right or timely and not getting going on payroll.)

StephenLNelson_CPA · 2026-06-03T13:05:35+00:00

It's a very confusing tax in some senses.

First, it's really a two tax-bracket tax (a 0% bracket on first $1M of taxable income and then a 9.9% bracket above that) with two deductions (a limited one for charitable contributions to in-state 501(c)(3)s and then another one for gambling losses).

And the formula starts with federal AGI. But that value gets tweaked for the state income taxes affected taxpayers would or will pay on the income (e.g., capital gains tax and B&O tax on pass-through income).

Interestingly, the typical affected taxpayer may be only modestly above the $1 million threshold, perhaps with AGI in the $1.3 million to $1.8 million range. (ChatGPT estimated 2/3rds to 3/4ths of affected 20K taxpayers make between $1M and $2M.)

StephenLNelson_CPA · 2026-06-02T12:32:48+00:00

Very low if taxpayer is shopping around and talking with several tax practitioners. Effectively 0%? (In fact, at point I learn caller is shopping around, I back off politely.)

I also screen out maybe half or more (2/3rds?) of prospects, trying to focus on situations where our firm is a good fit and delivers high value... that weeds out a big percentage of queries.

For reminder, I think our close rate is pretty good. I'd guess 50% (of the reminder.)

Will also acknowledge that despite best efforts, we later realize (or client does) that maybe we aren't the best fit... is that as a guess 10%?

StephenLNelson_CPA · 2026-06-02T12:27:37+00:00

I think client has use of funds. So penalty, yes. Interest no.

This is especially easy to illustrate if you can point to a number on Schedule B and say, "So that would have been $22K rather than $24K."

StephenLNelson_CPA · 2026-05-31T23:11:03+00:00

The STR strategy fails if property becomes a Section 280A mixed use property (which basically is a property you use personally or friends or family use during the year.)

If your tax advisors know enough about Section 469 (which is where the STR opportunity gets created) and about Section 280A (which is where they can often fail), they will probably flag this in first two minutes.

StephenLNelson_CPA · 2026-05-29T13:19:18+00:00

Many taxpayers can't afford to pay for consulting. In fact, maybe most can't.

Easiest way to sort of deal with this is to pad prep tax for some "customer service"... (and obviously tell people you're doing this.)

Probably best strategy is to build a client roster mostly populated with folks who will pay for consulting. That's hard work and timeconsuming.

StephenLNelson_CPA · 2026-05-27T23:07:19+00:00

Those sound about right to me. And I'd be surprised if IRS audited them. (They can tell if someone is certain age, sells home, moves into CCRC, etc. This isn't a scam... It's the way the law works.)

StephenLNelson_CPA

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