Case Studies

A Successful Sole Proprietor with a Growing Tax Problem.

E (name redacted) is a 34 year-old self-employed professional. She had been filing her taxes as a sole proprietor. Her income has increased over the past several years and taxes are taking a larger bite. She came to us for help.

Our Services

We reviewed E’s last 2 years of tax returns and asked about long-term goals. Her main goal was to remain independent for the foreseeable future and to accumulate some savings. We analyzed the tax effect of continuing as a sole proprietorship for the next 3 years versus as a Subchapter S Corporation.

The Results

We demonstrated the potential tax savings that she would achieve with a Subchapter S Corporation rather than as a sole proprietor. The tax savings would significantly exceed any additional administrative costs as a result of her incorporating.

Since E is in her 30s we suggested she consider a Roth Solo 401K. She has been contributing to a Roth IRA, but soon the ability to do so will be phased out by her increasing income. However a Roth Solo 401K would allow her to put even more annually into a Roth retirement vehicle and continue her Roth strategy.