Hello,

I found out this year that money can be stressful.  I started an
Internet-based company in February (California, S Corp) that has done
much better than I expected it to.  At the end of 2002, I had about
$250k in the bank from the
business, and I have not done much (if anything) to minimize taxes and
maximize benefits (it's in a savings account earing a measly 1.3%).

I have spoken to a CPA who said "just pay 53% in taxes - that's life."
 I have spoken to two insurance guys who say put it in an 419(a)(f)(6)
or 412(i) and that the IRS is "probably" ok with these.  A few people
have mentioned the SUV (>6000 gross)tax deduction, but I think it may
be too late for 2002, and I don't know how to do it anyway.

A few other tidbits...
- I have not paid myself anything yet. 
- Did not keep records as well as I could have; was busy running the
business
- No employees, although considering 1-2 for 2003.
- Personal income from other sources ~$30
- My California Corp has a calendar FY
- Also acquired a Nevada C Corp with an August FY.  Is there a play
here?
- I'm a relatively young guy and don't need most if the money today,
although considering a house purchase in the next 12 mos, and curious
as to how the business might figure in.
- 2003 is shaping up to be better than 2002... but I have no idea what
2004- will look like.  Could be zero, could be 1 mil.
- Cash basis accounting.  Somewhat concerned that the actual year 2002
is over and I'm just getting around to this now.  Should I be?

My questions are:
(1) Who can give me well-rounded, relatively unbiased (i.e., no
commissions from financial 'products' sold) advice?  I need 'holistic'
advice which takes into account most of the above, and presents a
clear course of action.  Also, by "Who," I mean what is the title of
the position -- CPA, Tax Advisor, etc?  How much will this cost
(approx)?

(2) How can I go about finding / meeting a few of these people and
judging their merits?  I'm in the Los Angeles area.

(3) Since you've read this far, you probably have some ideas or
cautions, because you're probably in the industry yourself.  Fire
away!

Please feel free to ask clarifying questions -- I will be reviewing
frequently.

Thanks!

Dear Mammoth,

You did great. Good for you.

Now, you need to speak to a pro. 

(1) Who can give me well-rounded, relatively unbiased (i.e., no
commissions from financial 'products' sold) advice?  I need 'holistic'
advice which takes into account most of the above, and presents a
clear course of action.  Also, by "Who," I mean what is the title of
the position -- CPA, Tax Advisor, etc?  How much will this cost
(approx)?
 

For your tax planning purposes, you might consider a rather hidden
group of tax pros called Enrolled Agents. They are 'licensed' by IRS,
not by the state. Look for one who is familiar with S-Corp rules
http://taxmama.com/Articles-Pro/EA_1.htm

Naturally, you can speak with a CPA. Again, not all are familiar
with S-Corp rules.

A clever tax attorney may be able to come up with some 
interesting and legal tax savings strategies.
I work with one such attorney who has performed miracles, 
legally, with my clients who have high profits. 
http://www.bbblaw.com/balian.htm
He is in the L.A. area - in Sherman Oaks.


(2) How can I go about finding / meeting a few of these people and
judging their merits?  I'm in the Los Angeles area.
 
The best way to find the right one is to speak with friends in
similar circumstances. Ask them who they use as a tax advisor
and if they are happy with the guidance. 

This article may help you. 
http://www.taxmama.com/Articles-cur/hiringtaxpro.html

If you want a really wicked way to meet some good tax pros?
Find their meetings in the L.A. area. Sit in on some monthly
meetings and see who asks questions - and the kind of questions
they ask. That will give you a really good idea of the level 
of their skills and how their minds work. 

To get information about their local meetings, call the 
California Society of CPAs
http://www.calcpa.org/

The California Society of Enrolled Agents
http://www.csea.org/

And the Bar Association 
http://www.calbar.ca.gov/state/calbar/calbar_home.jsp

(3) Since you've read this far, you probably have some ideas or
cautions, because you're probably in the industry yourself.  Fire
away!
 
Oh goodness....there are so many things you might be able to do.
Unfortunately, most of them needed to be done before 12/31

You could still open a SEP-IRA and stash away a chunk.

You might be able to open a solo-401(k). But that needed to be
done by 12/31.
http://www.investsafe.com/financing3.html


It's too late to take a salary. You could have, sort of, 
back-dated the checks to last year. But the payroll tax returns
were due on 01/31/03. So, it's too late for wages. 
Besides, all your income will be taxable to you on your
personal return, anyway. So it's not that critical anymore.

One thing you can do is to submit all your 2002 out of pocket
expenses and auto expenses for reimbursement. 
You can book that entry at 12/31/02, since it was all spent
at that time.

ARGH! I wish you had asked this sooner.

Let me know if this helps.

Best wishes

Your TaxMama-ga

One idea - call up a CPA firm, tax specialists,
offer to pay them for 2-4 hours of their time
and let them know that they have NO chance
of getting any of your money nor any investments
in things they recommend.  Just an idea, congrads also.
This was more or less a 'second opinion.