Out of Pocket Expenses Employee vs Indy

20 replies [Last post]
peanutbroker's picture
Offline
Joined: 2006-04-06

I expect expenses for the year (non reimbursable) to approach $12K -$15k for the year. How much is everyone spending out of pocket per year? Which firm do you work for? How much are you making? I have found that out of pocket expenses as an employee (rather than owning) of a firm to be a bit ridiculous. Getting a reduced payout and paying thousands of dollars a year unfair.

babbling looney's picture
Offline
Joined: 2004-12-02

Define out of pocket.

FreedomLvr's picture
Offline
Joined: 2006-02-10

Front or side pockets only.  NOT cargo pockets.
OH!  And not those zipper pockets they used to have on the Kangaroo sneakers, or whatever they were called...

My Inner Child's picture
Offline
Joined: 2006-10-08

peanutbroker wrote:I expect expenses for the year (non reimbursable) to approach $12K -$15k for the year. How much is everyone spending out of pocket per year? Which firm do you work for? How much are you making? I have found that out of pocket expenses as an employee (rather than owning) of a firm to be a bit ridiculous. Getting a reduced payout and paying thousands of dollars a year unfair.

Yep.

peanutbroker's picture
Offline
Joined: 2006-04-06

babbling looney wrote: Define out of pocket.

things you spend your money on for your job and you do not get reimbursed. For example: mileage, telephone, misc office expenses, office equipment.

doberman's picture
Offline
Joined: 2005-02-22

peanutbroker:
 things you spend your money on for your job and you do not get reimbursed. For example: mileage, telephone, misc office expenses, office equipment.
-----------------------------------------
Actually, mileage deductions are one of the best deductions around, if you drive an economical car. It costs me between .05-.10 cents/mile to drive my car and as of the end of last year, I could deduct .43 cents/mile. That means .33 cents of earned taxable income, per mile driven, is sheltered from income taxes. Drive 30,000 business miles per year and $9,900 of your taxable earnings are sheltered from income taxes. In other words, $3,000 in annual out-of-pocket business mileage expenses shelter nearly $10,000 in earnings from income taxes.

troll's picture
Offline
Joined: 2004-11-29

peanutbroker wrote:I expect expenses for the year (non reimbursable) to approach $12K -$15k for the year. How much is everyone spending out of pocket per year? Which firm do you work for? How much are you making? I have found that out of pocket expenses as an employee (rather than owning) of a firm to be a bit ridiculous. Getting a reduced payout and paying thousands of dollars a year unfair. It is insane isn't it?  Yet the wirehouse guys don't seem to get this is one of the nicer benefits of being indy.

AirForce's picture
Offline
Joined: 2006-10-12

Don't forget the 40 dollar kicker for phones over the past few years. Entertainment also is a nice expense. For sure mileage is great!

uwec86's picture
Offline
Joined: 2004-11-30

Peanut,
Don't forget that you can't even deduct the 1st 2% of your expenses.  If you make $100k/yr, your first $2k of expenses are not deductible.  In may case, AMT kicked in too.  Now that I'm Indy, all the deductions come out of the biz before they get to my return...no 2% floor or AMT.

Indyone's picture
Offline
Joined: 2005-05-31

My expenses average right at $4K/month for everything but my salary.  Gross will come in around $225K and I clear about 86% of that from my B/D.

My Inner Child's picture
Offline
Joined: 2006-10-08

uwec86 wrote:
Peanut,
Don't forget that you can't even deduct the 1st 2% of your expenses.  If you make $100k/yr, your first $2k of expenses are not deductible.  In may case, AMT kicked in too.  Now that I'm Indy, all the deductions come out of the biz before they get to my return...no 2% floor or AMT.

Not accurate. It's 2% of AGI, not the first 2% of the expenses.

CIBforeveryone's picture
Offline
Joined: 2005-07-12

Another reason Indy is so much better than Jones. At Jones I was splitting the phone bill, splitting the postage (of which there was plenty since I mailed out my own confirms), and supplying the office. And yes, they were only deductible after those expenses exceeded 2% of AGI. As Indyone said, everything runs through my business account.
 
 

Broker24's picture
Offline
Joined: 2006-10-12

FYI, at Jones you are reimbursed 100% postage for all confirms generated.  All copier paper and toner is free.  Telephone bill is how much, $50/month?  $25 after split?  C'mon.
Once you get on the Business Expense plan, they deduct the out of pocket expenses from your gross pay (paycheck gross) so they are 100% tax deductible.  I had that at my last company, too.
I don't need to spend more than a few hundred a month on expenses (unless I do large marketing compaign, etc. - and those are mass mailed and subsidized by home office). 
There really is not much that you pay for at Jones that you don't pay for at a wirehouse.  Indy is difficult to compare as it totally depends on the individual situation, payout, overhead, support staff,etc.  Last time I checked, admin staff was not free.

babbling looney's picture
Offline
Joined: 2004-12-02

Last time I checked, admin staff was not free
Not really "free" at Jones either since the cost of your BOA and her/his health insurance and other benefits are deducted from your profit and loss.  You don't have a choice in how much to pay or whether your BOA is full or part time.
You are right however, it is not easy to compare EDJ to truly independent since we are all so different in how we run our practices.  HOWEVER, spending the same out of pocket costs as an indy vs Jones, I am thousands dollars ahead.

jeno1000's picture
Offline
Joined: 2006-10-11

do u guys write expenses in ur schedule c{being single member llc/sole proprietor} or r u guys s corp .....for abt 200k projected gross for year and with no employees which would be better,,,,?

Broker24's picture
Offline
Joined: 2006-10-12

jeno,
First, easy on the "web speak" or whatever you call that internet
shorthand. We write in real sentences here.

I work for Jones, and I would honestly say, that for an established practice
that is not going crazy with overhead, you probably take home more with
Indy. Of course, it does depend on your product mix, your AUM, and a
few other variables. At Jones, really successful brokers make a ton due to
the bonus structure (I'm talking over 100MM AUM and/or 500K+ gross).

Again, depends on a lot of things. But I would guess that at 200K gross,
you will take home more being Indy. Again, depends on your overhead.
If you are a little shop with no support staff and cheap rent, 200K gross
will go a long way. At Jones, your W2 gross would be around 70-75K
(including deductions for phone, stamps, etc.).

Sort of beside the point, but one thing I notice at Jones is that brokers
don't pay much attention to ROA. Our ROA is probably one of the lowest
in the industry. It is higher for those of us that know what we are doing
(not that I consider myself truly successful yet, but I know my own
formula for getting better ROA).

Lex123's picture
Offline
Joined: 2006-10-26

All you little indies are getting so giddy about deducting mileage.  Go waste you time driving all over so you can sit at Mrs. Smith's breakfast table and try to peddle her some unnecessary insurance.
Wirehouse guys have all our wealthy clients come to us in our beautiful glass buildings.

My Inner Child's picture
Offline
Joined: 2006-10-08

Lex123 wrote:
All you little indies are getting so giddy about deducting mileage.  Go waste you time driving all over so you can sit at Mrs. Smith's breakfast table and try to peddle her some unnecessary insurance.
Wirehouse guys have all our wealthy clients come to us in our beautiful glass buildings.

You have to DRIVE the miles to deduct them?

Indyone's picture
Offline
Joined: 2005-05-31

Lex123 wrote:All you little indies are getting so giddy about deducting mileage.  Go waste you time driving all over so you can sit at Mrs. Smith's breakfast table and try to peddle her some unnecessary insurance.
Wirehouse guys have all our wealthy clients come to us in our beautiful glass buildings.
Oh get over yourself.

troll's picture
Offline
Joined: 2004-11-29

My Inner Child wrote:Lex123 wrote:
All you little indies are getting so giddy about deducting mileage.  Go waste you time driving all over so you can sit at Mrs. Smith's breakfast table and try to peddle her some unnecessary insurance.
Wirehouse guys have all our wealthy clients come to us in our beautiful glass buildings.

You have to DRIVE the miles to deduct them? You mean as opposed to riding around town on your horse?Miles driven in your pickup truck or Suburban do apply!

spikedkoolaid's picture
Offline
Joined: 2006-04-20

I am an expert on out of pocket expenses...Broker24, you are a little
off base when you were explaining the costs between Jones and
Indy.  I was one of the people who was grossing about $525,000
when I left.  Every year I bumped up against the AMT because I
live in California where my mortgage interest and my "out of pocket"
expenses were a lot.  At Jones, I always felt poor even though I
was bringing home $20,000 net every month.  Here's why?

$20,000  Gross
$5,000 Fica/State/Medicare
$1200  401k
$2000  Flex Spending Account--Expenses (Use it or lose it)
$1000  Insurance premiums (for a family of four)(not available
for           
        above the line credit/like a
business owner
$200   Dependant Care/Flex Spend
$200    Disability Insurance
$500   Flex Spending--Health Car
$200  1% of National Advertising Campaign (no Write Off)
________

$10,000 Net/Net

$4,000 Mortgage (21 year old home/ 4 bdr 3bath, 2400 sq feet) Nothing fancy
$750   Second Mortgage

$1000 529 for children
$3,000 left over on a great month.

I'm sorry, when I have a $50,000 gross month at LPL I take home $45,000 and then I can use Section 79 expenses to my advantage.
My salary I pay my assistant is tax deductible and she likes that I
can  give her a profit sharing contribution that is $12,000 this
year alone.

Bottom Line:  Indy beats Jones at any level after 4 years with
Jones.  I think that's about the time you kinda know what you are
doing.

Please or Register to post comments.

Industry Newsletters

Sponsored Introduction Continue on to (or wait seconds) ×