Been self employed last 5 years , income was About $50k per year, will be getting about $800k as part of a buy out, what’s the best way to a) reduce tax and b) use it wisely?

What would you do? and why?

Thanks

Comments

Parking_Goal_3301 t1_iuhr009 wrote on October 31, 2022 at 12:59 PM

I would speak to an accountant here for the specific tax implications. Not crowd source it

finite_jest_ t1_iuhrp58 wrote on October 31, 2022 at 1:05 PM

Congratulations on the sale!

One potential strategy is to get annual payments over a few years to spread out the income to potentially put you in a lower tax bracket. You’ll need to balance that strategy with losing money due to inflation. 800k in 2022 may be equivalent to 730k next year. Also if your sale is finalized you may not have this option.

Yes, get a real accountant by asking people you know who run businesses for a referral. Don’t go to H&R Block or other chain tax preparers.

Read the Windfall section of this subreddit’s Wiki. Treat yourself to something, but don’t go crazy. Preserve your windfall. Read the mrmoneymoustache website on being frugal and building your stash.

rawlito OP t1_iuhzfty wrote on October 31, 2022 at 2:06 PM

Thanks for this.

I’ll be on the hunt for an accountant :) and checking out MrMoneyMoustach… didn’t even know this existed 😬

finite_jest_ t1_iui83ev wrote on October 31, 2022 at 3:07 PM

Here's the link: Meet Mr Money Mustache

With accountants, it would be could to talk to 2 or 3. You want her to be competent, but you also want someone who you feel comfortable with.

I once had an accountant who was "too creative" for my comfort level, who pushed business and personal deductions for a home mortgage that added up to 110% of the actual cost. I found someone else by asking a friend who ran a small business. That relationship has lasted many years.

It may be good strategy to not lead with I just got a $800k windfall when you ask about fees. Perhaps say you need someone to do your business tax returns.

Also, start reading the /r/PersonalFinance Wiki. Getting that much money in a windfall you owe it to yourself to educate yourself on investing. Check out Windfall Wiki.

rawlito OP t1_iuk5bu4 wrote on October 31, 2022 at 11:06 PM

Thank you, for the advice and pointing me in the right direction, appreciate it.

rawlito OP t1_iuhr6h0 wrote on October 31, 2022 at 1:01 PM

Good advice, maybe I should have asked for recommendations on finding a good tax accountant instead 😬?

[deleted] t1_iuhq2ml wrote on October 31, 2022 at 12:51 PM

[removed]