All Forum Posts by: Corey G.

"You and your friends should not be messing with this when you don't understand these concepts well, and they are confusing."

Who is messing? I'm asking if it's possible before I go through the hassle of hiring a CPA for one question that I find out is probably not doable or worth it. 

"See, it is not simple. Get yourself some good tax advice from a real tax pro. But right now none of us has time due to the April 15th deadline."

Who said it was simple? I asked if it was doable. You make it seem like everybody should go set up an appointment with a professional anytime someone wants to ask one question about a particular topic... that's kind of the point of the forum. Bigger pockets wouldn't exist if every answer was "just go hire someone".

If I needed to speak with a professional every time I had a question about real estate, I wouldn't have got to the point where I've essentially made this my full time job/retired off my rental income. 

So I posted the other day asking if I could get around passive income on my rental properties so I could contribute to my retirement account. Post here: https://www.biggerpockets.com/forums/51/topics/1183339-contr... I read that it was possible to create a PM company under an LLC and pay myself to manage the properties but then I would be subject to 15% Self Employment taxes. However, now I'm learning that I should be able to do the same thing and just classify the LLC as an S Corp when filing my taxes and it avoids nearly all of the self employment taxes. This would then allow me to create a solo roth 401k and contribute a substantial amount more to it than just a traditional roth IRA. Has anybody done this? Do I have the gist or am I missing something important? I don't have a CPA yet and so I don't have anybody to ask currently. (I need to shop for one as I don't have a lot of friends doing the same thing as me in my state.) If this sounds like it's doable, then I'll need to find one and get the process started. Any information or experiences are appreciated.

I don't have a CPA at the moment so maybe I should try to find one. However, what you said confused me a little because you said that I could contribute 25% or 20% depending on if it's an S-corp or LLC but if I'm reading you correctly, those limitations are only on the employee side? Employers side doesn't have that same restriction and so they can contribute 100%? Is that what you meant by "if you don't need the money to live on".

Ideally what I would want to do is pay myself about 7000-10000 per year or so, pay self employment taxes out of there and then contribute the remainder to a retirement account. But if I'm limited to 25%, I wouldn't be able to contribute nearly as much to make it worth it due to paying self employment taxes on the other 75%. Additionally, as the sole person running this business do I need to set it up for my properties to pay the PM company and then the company pays me as an employee or since I'm the owner of the company I don't have any employees and so there would technically be no employee side? 

I asked this question elsewhere and someone said that they do this but do not have an LLC and are a sole proprietorship and just file with a schedule C. Does that sound like it would work? I'm concerned about losing the QBI deduction because then the "management company" would be the one active in managing the business.

 Yeah my roth and traditional are separate and I've never comingled the funds. 

So what are the downsides of creating a PM company and paying myself? I think there are self employment taxes. I heard that contributions are limited to 20% for a SEP IRA but are you saying the solo 401K is not limited?

So I quit my job in 2022 and so for the last year I have been working strictly on my properties. I never bothered with logging my time (because it was a hassle and I didn't think it would be much benefit) but now I'm realizing that I can't contribute to my Roth SDIRA anymore because all my income is passive. I probably would quality for being a trade or business with the amount of hours I put in remodeling and such but since I don't have logs for the past 4 years (since I've had my rentals for much longer), it would be at least 3 to 4 more years before I'd qualify for that. Or I'd have to try and work up my log hours from home depot & gas station receipts which would be a big pain in the butt. I've heard about people creating Property Management businesses and billing their properties for service... which seams easier but I know that subjects me to self employment tax (but does open up other possibilities of self employed 401ks and such). Anybody have any other suggestions or experience with going the management route? 

I thought I'd give an update, I reached out to titan and they did exactly what I wanted. Plus I get 25 free domestic wires a month. Thanks for the tip. 

Okay, I got the impression that the Self directed IRA was going to try to open a second SDIRA for me. If that is just a LLC bank account, then that's what I want. I'll probably reach out tomorrow. I started the application for the business deposit account because I thought that's was the bank account option.

Thanks I actually looked at them before but I wasn't sure if the link posted was for opening another self directed IRA? or just a bank account for my existing IRA? I see there is also an option for business deposit accounts. Do you know?

I have an self directed IRA and the bank it's with (Solera) has problems with Plaid. It prevents me from transferring money to my crypto exchanges and I end up wiring money, which gets expensive. It would also be nice to earn a little interest on the cash in there so I want to open a 2nd bank account under my LLC, but several banks have turned me down. One doesn't allow business accounts dealing with crypto, one wouldn't allow a LLC account for retirement funds, and another wouldn't open a business account "because it's not a business". I didn't have this much trouble opening the crypto accounts under the LLC so I'm not sure why it's so difficult. So does anybody have any recommendations on banks that are okay with opening business accounts for LLCs with SDIRA funds? Preferably with low fees? Any help is appreciated.