Goodbye Turbo Tax…hello new baby girl!

Hey yo, about 6 weeks ago we had a baby girl and I celebrated this Mother’s Day as mom to a daughter! Her name is Jonna and she’s unbelievably beautiful and clever (moms aren’t biased at all). That means I’m busy updating wills, insurance, documentation, changing out baby clothes, changing vehicles… basically updating everything in our entire lives. We love it though… and I know someday we’ll look back on these days with fond memories!

Our new baby girl!

So of course, for everyone in the US, tax season came and Ross and I both started stressing about taxes. We always buy TurboTax software and do it ourselves, but the closer we got to selling the rental/fixer (this year!), the more we worried we’re not set up to snag all the savings we can from the government. What if we missed a deduction on which we could have saved hundreds of dollars? We just weren’t sure we were capturing everything within TurboTax. Ross may also have been sick of me sending him Forbes articles about deductions. Maybe. Possibly.

Our situation is unique, because we’ve changed our model from rental to resale since starting the LLC, which changes how you can recognize revenue. Because we won’t have a stream of income, we will recognize a one-time injection of capital at sale, we need to pay close attention to how we’re claiming it on our taxes and how we’re claiming associated expenses.

Long story short, we received a referral from a friend to a tax accountant and she is amazing! Not only did she find crazy HSA over-contributions from years ago that we would be financially penalized for (what the what?!) but she advised we change the structure of our LLC for even more savings come next tax season. She also helped us more accurately and appropriately deduct our current expenses. In other words, she told us things we would never have known, and will continue to advise us through the sale to get the most savings possible.

Yes, paying for a personal tax accountant is about 10x more expensive than TurboTax, but you’re paying for the consulting that Turbo Tax can’t possibly give you. This includes advice like which LLC will be the best vehicle for your business, when exactly it would be most beneficial to claim expenses and revenue and even looking over past years’ filings to find anything you may be penalized for in the future. Well worth it to have confidence in your filing of income taxes if you’ve made a large investment.

It’s kind of like insurance– and I love this analogy. When I was 19 and only looked at cost, I bought car insurance online from Progressive. When in a blizzard (#minnesnowta) my car was hit from behind and I didn’t know how to recover the cost of the damages, I called Progressive (naturally, right?). I think they even told me to call them first if I was ever in an accident. They proceeded to hang up on me and do virtually everything possible to avoid talking to me– to avoid ADVISING me.

It was a total shitshow; it was like being told to fuck off without someone actually saying fuck off. It made me hate the world and I really can’t over-emphasize how horrible they were. Therefore, when they should have just asked about the police report and told me to chase down the idiot who hit me, to force his insurance to pay, I was aggressively told by Progressive that I wouldn’t have any way to fix my vehicle, ever, and that I should just stop calling. The opposite of what I’d call advice, assistance, or even low-level helpfulness. So I drove a wrecked Celica for 5 years and ate my losses. I refused to lose any more money replacing my vehicle.

During the wrecked Celica days. Do I look like I understood insurance? I didn’t even understand how to wear eye makeup.

That was a sweet ride–my wrecked Toyota Celica, urgh. Today I have an actual insurance agent from State Farm (and a non-wrecked car woohoo!) and when me, my husband or my kids (someday) get in a car accident, the first call I make will be to our agent, and instead of telling us to fuck off we’ll get some actual ADVICE! In this world, you really have to pay extra for advocacy, service and helpfulness, and that’s a lesson learned the hard way. Otherwise, the general approach is to take the money and run, don’t look back, and sure as hell don’t answer the phone.

Starting an LLC…and 5 reasons you might just pay an attorney to do it for you

I once learned enough about dentistry in one month to ghost write on behalf of dentists, so I figured I could manage filing for an LLC. I assumed it would consist of a quick form and probably $50 in administrative costs. I was a bit….optimistic. A lot of people pay attorneys to help them start an LLC. This is not a bad idea…. “You might be an….attorney-payer if:”

  • You don’t feel like reading 8 pages of IRS tax information…per day for a week straight. (I’m one of those people that read all of the fine print before I sign anything). Hell, I just like to read.
  • You are not particularly detail-oriented or you are, shall we say, low-energy. Kids anyone?
  • You are an attorney already.
  • You become so frustrated with this run-on sentence that you vow to track down whoever wrote it (oh no, just me?): For Minnesota sales and use tax purposes, charges to lease or rent a residential dwelling, including a home, cabin, condominium or similar building are taxable for a period of less than 30 days and for periods of 30 days or more if there is no enforceable written lease agreement with the customer that requires the guest to give prior notice of their intention to terminate.
  • You’re addicted to Snapchat and can’t put.the.snaps.down.

    My life in snapchat captions

    All the cute this snap can handle

    All the cute this snap can handle

     

[Thought-cloud here] So that run-on sentence…urgh…it is taxable for only 30 days? Changes to lease or charges to lease…do they mean fee charges? Why are they adding superfluous words here? A home or a house? A house is a structure, a home is a residence, whatever form that takes, right? Sigh.

So the actual paperwork bit was daunting. But I’m a stickler for details so I started making a to-do list. Or, more accurately, a to-look-into-further list. Along the way, I learned a lot of surprising facts about doing business in Minnesota, including the fact that you cannot use a PO Box for most government filings. So while a PO Box is a great option for bills and paperwork, government filings are always sent through a physical office or home address.

I learned you will need a tax ID from the state if you have a multiple member LLC or partnership – a must if you have employees. It comes in handy as an alternative to a social security number on LLC filings. Also, you are supposed to file use tax for any faucets or other goodies we buy online that are not taxed – one of the most overlooked details in filing returns. Detail-oriented for the win!

This is our command center slash home office.

This is our command center slash home office.

Not knowing how long it actually takes to set up an LLC, we didn’t get too far into the property-purchasing process until we had the proper LLC structure in place. We wanted to purchase our rental as the LLC, instead of individuals, for the following reasons:

  • It is clean cut and keeps your business separate from your personal life.
  • You are less likely to be personally sued because the house is owned by the LLC. Insurance policies help too, of course.
  • Your taxes should be more clean, clear and under control because everything is owned by the LLC.
  • We knew we were writing up formal leases, so it made sense for the ownership to be formal too (not renting to family/friends). We knew we were not doing short-term (30 day) rental terms.
  • We are sure there are also benefits to owning it ourselves as a second (personal) home, but we just wanted to keep it separate to add a layer of security between us and the business profit or loss.

Here is the checklist I used when starting the business (yeah for lists!). Do you love checklists too? (Is that strictly a female thing?)