THE CASE OF “THE MEGABYTE GEEK”

Rolando was a self employed computer whiz. He had been a regular employee for 2006 but for 2007 he was an independent contractor. His income was $200,000 for the year but he had forgotten to send any estimates in for his income taxes. He came to us in March and we had him send in $20,000 to appease the Gods of tax a bit. Now the work of getting him out of this scrape began.

He had, fortunately, set up and office in his home, which he needed for his business so he could deduct a portion of those expenses. A side benefit was that now he could deduct all of his mileage from his home office to the projects he worked on. The biggest benefit for him and his family is that, as self employed, he could contribute up to 25% of his self employment income to a retirement plan and have that as a deduction. The savings on has tax bill was about 40% of his contribution.

When he was all done about 1/3 of his gross income went into retirement programs or income taxes but he felt he’d gotten a fair shake.

Uncle Sam and Goldy Gopher have programs for everybody, but when you make much, the bottom line is that you pay much.