The document discusses the top 10 most expensive tax mistakes that business owners can make, including failing to do tax planning, misunderstanding audit odds, paying too much self-employment tax, choosing the wrong retirement plan, missing opportunities for family employment and medical benefits, not claiming a home office deduction, missing car and truck expense deductions, not deducting meals and entertainment expenses, and not using tax coaching services. It provides details on how to avoid these costly mistakes.
With the elimination of the personal exemption in 2018, some large families could experience increased state-level taxes. In states where families trend to larger sizes, such as Utah, the State Tax Commission anticipates tens-of-millions in surplus revenues as a result of the personal exemption elimination.
This slideshare offers tax strategies and tips for real estate investors. This includes keys to cutting tax and personal property examples.
http://www.orlandotaxcoach.com/
With the elimination of the personal exemption in 2018, some large families could experience increased state-level taxes. In states where families trend to larger sizes, such as Utah, the State Tax Commission anticipates tens-of-millions in surplus revenues as a result of the personal exemption elimination.
This slideshare offers tax strategies and tips for real estate investors. This includes keys to cutting tax and personal property examples.
http://www.orlandotaxcoach.com/
Q4 2015 is here already! Take a look at our Key Numbers for Income, Taxation and more. Weiss & Hale works with clients to help them to Plan Well, Invest Well & Live Well! Visit us at : www.weissandhale.com!
The 2011 Tax Guide provides you with a summary of the 2010 Tax Relief Act, and guidelines on:
Tax rates
Payroll taxes
Retirement
Dividends and capital gains
AMT
Estate and gift taxes
Education tax breaks
Proactive Year-end Financial and Tax Planning StrategiesAICPA
ย
In the third webcast in the AICPA Insights Live webcast series, Beth Gamel, CPA/PFS, Robert S. Keebler, CPA, Ted Sarenski, CPA/PFS and Scott Sprinkle, CPA/PFS, CGMA came together to discuss year-end financial and tax planning strategies, specifically to address the American Taxpayer Relief Act and the Net Investment Income Tax. Below you can find an audio recording from the webcast, as well as the accompanying presentation. Be sure to explore the other webcasts in the AICPA Insights Live webcast series.
We want to help you manage your tax activities and simplify complex tax laws. We hope youโll find that our 2014 Quick Tax Facts guide helps you do just that. This handy guide compiles frequently changing tax information applicable to most businesses and households.
Because of the multi-dimensional tax environment that now exists post-American Taxpayer Relief Act, CPA financial planners must look at the tax impact on clientsโ financial plans through a 5 to 10 year horizon. Ordinary income tax rates from the Bush Administration were made permanent. The capital gains rate increased from 15% to 20% for taxpayers with income greater than the threshold amounts. Phase-out of personal exemptions and limitations on itemized deductions (Pease) become critical in managing tax brackets by shifting income and deductions into certain years. Visit the AICPA PFP Sectionโs Post ATRA & NIIT Toolkit for more in-depth resources on planning in preparation for year-end.
In the event a taxpayer has a balance due on their income tax return and currently unable to pay. The taxpayer should file the tax return without payment. Doing this will avoid a late filing penalty. Under ยง6651 of the Internal Revenue Code a penalty is imposed for failure to file a tax return. This penalty is 5% of the balance due (on the return); and 5% for each additional month the tax return is not filed but not to exceed 25%. Therefore it is more important for a taxpayer with a tax return balance due to timely file than a taxpayer who is due a refund, since the taxpayer receiving a refund will not be subject to the failure to file penalty under IRC section 6651.
Q4 2015 is here already! Take a look at our Key Numbers for Income, Taxation and more. Weiss & Hale works with clients to help them to Plan Well, Invest Well & Live Well! Visit us at : www.weissandhale.com!
The 2011 Tax Guide provides you with a summary of the 2010 Tax Relief Act, and guidelines on:
Tax rates
Payroll taxes
Retirement
Dividends and capital gains
AMT
Estate and gift taxes
Education tax breaks
Proactive Year-end Financial and Tax Planning StrategiesAICPA
ย
In the third webcast in the AICPA Insights Live webcast series, Beth Gamel, CPA/PFS, Robert S. Keebler, CPA, Ted Sarenski, CPA/PFS and Scott Sprinkle, CPA/PFS, CGMA came together to discuss year-end financial and tax planning strategies, specifically to address the American Taxpayer Relief Act and the Net Investment Income Tax. Below you can find an audio recording from the webcast, as well as the accompanying presentation. Be sure to explore the other webcasts in the AICPA Insights Live webcast series.
We want to help you manage your tax activities and simplify complex tax laws. We hope youโll find that our 2014 Quick Tax Facts guide helps you do just that. This handy guide compiles frequently changing tax information applicable to most businesses and households.
Because of the multi-dimensional tax environment that now exists post-American Taxpayer Relief Act, CPA financial planners must look at the tax impact on clientsโ financial plans through a 5 to 10 year horizon. Ordinary income tax rates from the Bush Administration were made permanent. The capital gains rate increased from 15% to 20% for taxpayers with income greater than the threshold amounts. Phase-out of personal exemptions and limitations on itemized deductions (Pease) become critical in managing tax brackets by shifting income and deductions into certain years. Visit the AICPA PFP Sectionโs Post ATRA & NIIT Toolkit for more in-depth resources on planning in preparation for year-end.
In the event a taxpayer has a balance due on their income tax return and currently unable to pay. The taxpayer should file the tax return without payment. Doing this will avoid a late filing penalty. Under ยง6651 of the Internal Revenue Code a penalty is imposed for failure to file a tax return. This penalty is 5% of the balance due (on the return); and 5% for each additional month the tax return is not filed but not to exceed 25%. Therefore it is more important for a taxpayer with a tax return balance due to timely file than a taxpayer who is due a refund, since the taxpayer receiving a refund will not be subject to the failure to file penalty under IRC section 6651.
http://www.orlandotaxcoach.com/
Small business owners typically make these 10 tax related mistakes. Avoiding these mistakes all starts with proper tax planning including choosing the right business entity and maximizing your tax deductions.
This is a presentation that I put together while in college to educate other students about 401k's. My intention was to get them to participate in a company 401k if offered at their starting jobs. Originally the presentation had an intro slide show of people moving from college through various stages of life to retirement with the Rolling Stone's "Time is on My Side" playing in the background. Unfortunately, Slideshare doesn't support embedded video and audio, since that was probably my favorite part of the presentation.
Most small businesses are losing thousands of dollars by making expensive tax mistakes. Make sure you're setting up your business correctly and are using the right deductions and expenses. Call us at (214) 600-8609 with any tax questions. Serving small business in the greater Dallas, TX area with tax planning and preparation.
Income Tax saving tips for your online businessSam Elahee
ย
Five Star Tax Service Online Income Tax Tips. www.taxsupport.ca your one stop source for Canada, USA and Cross Border Taxation. These income tax tips are applicable to all businesses and specially businesses operation on line. It is important to keep detail record of all expenses so that you can offset some of your income and lower your tax rate. Tax in most countries are progressive. These income tax tips will help you reduce your marginal tax rates. Moving from a higher marginal tax rate to a lower marginal tax rate means savings of thousands of dollars in taxes.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
ย
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujaratโs DholeraAvirahi City Dholera
ย
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isnโt just any project; itโs a potential game changer for Indiaโs chipmaking aspirations and a boon for investors seeking promisingย residential projects in dholera sir.
Visit : https://www.avirahi.com/blog/tata-group-dials-taiwan-for-its-chipmaking-ambition-in-gujarats-dholera/
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
ย
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.๐คฏ
We will dig deeper into:
1. How to capture video testimonials that convert from your audience ๐ฅ
2. How to leverage your testimonials to boost your sales ๐ฒ
3. How you can capture more CRM data to understand your audience better through video testimonials. ๐
"๐ฉ๐ฌ๐ฎ๐ผ๐ต ๐พ๐ฐ๐ป๐ฏ ๐ป๐ฑ ๐ฐ๐บ ๐ฏ๐จ๐ณ๐ญ ๐ซ๐ถ๐ต๐ฌ"
๐๐ ๐๐จ๐ฆ๐ฌ (๐๐ ๐๐จ๐ฆ๐ฆ๐ฎ๐ง๐ข๐๐๐ญ๐ข๐จ๐ง๐ฌ) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
๐๐ ๐๐จ๐ฆ๐ฌ provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
โญ ๐ ๐๐๐ญ๐ฎ๐ซ๐๐ ๐ฉ๐ซ๐จ๐ฃ๐๐๐ญ๐ฌ:
โข 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
โข SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
โขFreenBecky 1st Fan Meeting in Vietnam
โขCHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
โข WOW K-Music Festival 2023
โข Winner [CROSS] Tour in HCM
โข Super Show 9 in HCM with Super Junior
โข HCMC - Gyeongsangbuk-do Culture and Tourism Festival
โข Korean Vietnam Partnership - Fair with LG
โข Korean President visits Samsung Electronics R&D Center
โข Vietnam Food Expo with Lotte Wellfood
"๐๐ฏ๐๐ซ๐ฒ ๐๐ฏ๐๐ง๐ญ ๐ข๐ฌ ๐ ๐ฌ๐ญ๐จ๐ซ๐ฒ, ๐ ๐ฌ๐ฉ๐๐๐ข๐๐ฅ ๐ฃ๐จ๐ฎ๐ซ๐ง๐๐ฒ. ๐๐ ๐๐ฅ๐ฐ๐๐ฒ๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐ ๐ญ๐ก๐๐ญ ๐ฌ๐ก๐จ๐ซ๐ญ๐ฅ๐ฒ ๐ฒ๐จ๐ฎ ๐ฐ๐ข๐ฅ๐ฅ ๐๐ ๐ ๐ฉ๐๐ซ๐ญ ๐จ๐ ๐จ๐ฎ๐ซ ๐ฌ๐ญ๐จ๐ซ๐ข๐๐ฌ."
Business Valuation Principles for EntrepreneursBen Wann
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This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
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Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
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A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Putting the SPARK into Virtual Training.pptxCynthia Clay
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This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
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Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
Website โ www.pmday.org
Youtube โ https://www.youtube.com/startuplviv
FB โ https://www.facebook.com/pmdayconference
Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
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This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
Editable Toolkit to help you reuse our content: 700 Powerpoint slides | 35 Excel sheets | 84 minutes of Video training
This PowerPoint presentation is only a small preview of our Toolkits. For more details, visit www.domontconsulting.com
VAT Registration Outlined In UAE: Benefits and Requirementsuae taxgpt
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Vat Registration is a legal obligation for businesses meeting the threshold requirement, helping companies avoid fines and ramifications. Contact now!
https://viralsocialtrends.com/vat-registration-outlined-in-uae/
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
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Discover the innovative and creative projects that highlight my journey throughย Full Sail University. Below, youโll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
Discover the innovative and creative projects that highlight my journey throu...
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10 Most Expensive Tax Mistakes
1. 10 Most Expensive Tax Mistakes That Cost Business Owners Thousands Dirk Dixon, LPA 8033 University Blvd Suite C Clive, IA 50325 Baker & Associates, LLP Certified Public Accountants and Business Consultants
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6. Tax Brackets ๏ต Add Taxable Income ๏ถ minus Adjustments to Income ๏ท minus Deductions ๏ธ times Tax Bracket ๏น minus Tax Credits Rate Single HoH Joint 10% 0 0 0 15% 8,026 16,051 16,051 25% 32,551 43.651 65,101 28% 78,851 112,651 131,451 33% 164,551 182,401 200,301 35% 357,701 357,701 357,701
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8. Two Kinds of Dollars ๏ต Add Taxable Income ๏ถ minus Adjustments to Income ๏ท minus Deductions ๏ธ times Tax Bracket ๏น minus Tax Credits Pre-Tax Dollars After-Tax Dollars
11. #3: Too Much SE Tax 1. Report net income on Schedule C Pay SE tax up to 15.3% on net profits
12. Proprietorship vs. S Corp 1. Report net income on Schedule C Pay SE tax up to 15.3% on net profits 1. Split income into wages and pass-thru Wage Pass-Thru
13. Proprietorship vs. S Corp 1. Report net income on Schedule C Pay SE tax up to 15.3% on net profits 1. Split income into wages and pass-thru 2. Pay FICA tax up to 15.3% of wages Wage Pass-Thru
14. Proprietorship vs. S Corp 1. Report net income on Schedule C Pay SE tax up to 15.3% on net profits 1. Split income into wages and pass-thru 2. Pay FICA tax up to 15.3% of wages 3. Avoid SE tax on pass-thru Wage Pass-Thru
15. Proprietorship vs. S Corp 1. Report net income on Schedule C Pay SE tax up to 15.3% on net profits Wage Shift income to lower-bracket family Pass-Thru Pass-Thru
16. Entity Comparison Proprietor S Corp State Filing None Articles IRS Filing None EIN/S Election Meetings None Annual Owner Payroll None FICA, UC,WC SE Tax Net income Salary Only File Schedule C 1120S + K1 Income Split? No Yes
32. #8: Missing Car/Truck Expenses AAA Driving Costs Survey (2007) Vehicle Cents/Mile Small Sedan 41.4 Medium Sedan 52.5 Large Sedan 62.5 4WD SUV 66.6 Minivan 57.6 Figures assume 15,000 miles/year; $2.256/gallon gas
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Editor's Notes
Are you satisfied with the taxes you pay? (Pause โ audience will laugh and say โno.โ) Are you confident youโre taking advantage of every available break? (Pause again) Is your tax advisor giving you proactive advice to save on taxes? (Pause again) Iโve got bad news and Iโve got good news. The bad news is, youโre right. You do pay too much tax. Youโre probably not taking advantage of every tax break you can. And most advisors do a poor job of actually saving their clients money. The good news is, you donโt have to feel that way. You just need a better plan. Today, weโre going to talk about some of the biggest mistakes that business owners make. Then weโll talk about how to solve them. (At this point, go ahead and introduce yourself and discuss your credentials.)
The first mistake is the biggest mistake of all. Itโs failing to plan. I donโt care how good you and your tax preparer are with a stack of receipts on April 15. If you didnโt know you could write off your kidโs braces as a business expense, thereโs nothing we can do. Tax coaching is about giving you a plan for minimizing your taxes. What should you do? When should you do it? How should you do it? And tax coaching offers two more powerful advantages. First, itโs the key to your financial defenses. As a business owner, you have two ways to put cash in your pocket. Financial offense is making more. Financial defense is spending less. For most of us in this room, taxes are our biggest expense. So it makes sense to focus our financial defense where we spend the most. Sure, you can save 15% on car insurance by switching to GEICO. But how much will that really save in the long run. And second, tax coaching guarantees results. You can spend all sorts of time, effort, and money promoting your business. But that canโt guarantee results. Or you can set up a medical expense reimbursement plan, deduct your daughterโs braces, and guarantee savings.
Letโs start by taking a quick look at how the tax system works. This will โlay a foundationโ for understanding the specific strategies weโll be talking about soon. The process starts with income. And this includes most of what youโd think the IRS is interested in: Earned income from wages, salaries, bonuses, and commissions. Profits and losses from your own business. Interest and dividends from bank accounts, stocks, bonds, and mutual funds. Capital gains from property sales. Pensions, IRAs, and annuity income. Alimony and gambling winning. Even illegal income is taxable. The IRS doesnโt care how you make it; they just want their share! (The good news is, if youโre operating an illegal business, you can deduct the same expenses as if you were running a legitimate business. If youโre a bookie, you can deduct the cost of a cell phone you use to take bets.
Once youโve added up total income, itโs time to start subtracting โadjustments to income.โ These are a group of special deductions, listed on the first page of Form 1040, that you can take whether you itemize deductions or not. Total income minus adjustments to income equals โadjusted gross incomeโ or โAGI.โ Adjustments to income are also called โabove the lineโ deductions, because you take them โaboveโ AGI. Adjustments include IRA contributions, moving expenses, half of your self-employment tax, self-employed health insurance, Keogh and SEP contributions, alimony you pay, and student loan interest.
Once youโve determined adjusted gross income, you can take a standard deduction or itemized deductions, whichever is greater. The standard deduction for 2008 is $5,450 for single taxpayers, $8,000 for heads of households, $10,900 for joint filers, and $5,450 each for married couples filing separately. Tax deductions reduce your taxable income. If youโre in the 15% bracket, an extra dollar of deductions cuts your tax by 15 cents. If youโre in the 35% bracket, that same extra dollar of deductions cuts your tax by 35 cents. You can also deduct a personal exemption of $3,500 for yourself, your spouse, and any dependents.
Once youโve subtracted deductions and personal exemptions, youโll have taxable income. At that point, the table of tax brackets tells you how much to pay. You may also owe self-employment tax, which replaces Social Security and Medicare for sole proprietors, partnerships, and LLCs. Youโll also owe state and local income and earnings taxes.
Finally, youโll subtract any tax credits. These are dollar-for-dollar tax reductions, regardless of your tax bracket. So if youโre in the 15% bracket, a dollarโs worth of tax credit cuts your tax by a full dollar. If youโre in the 35% bracket, an extra dollarโs worth of tax credit cuts your tax by the same dollar. Thereโs no secret to tax credits, other than knowing whatโs out there.
Ultimately, there are two kinds of dollars in this world: pre-tax dollars, and after-tax dollars. Pre-tax dollars are great. And after-tax dollars arenโt bad. But theyโre not as good as pre-tax dollars.
So hereโs the bottom line: You lose . . . every time you spend after-tax dollars . . . That could have been pre-tax dollars. Let me repeat that. You lose . . . every time you spend after-tax dollars . . . That could have been pre-tax dollars. Weโre going to spend the rest of this presentation talking about how to turn after-tax dollars into pre-tax dollars. Weโre going to use three primary strategies. First, earn as much nontaxable income as possible. Second, make the most of adjustments to income, deductions, and credits. Thereโs really no magic to it, other than knowing whatโs available. Finally, shift income to later tax years and lower-bracket taxpayers. This includes making the most of tax-deferred retirement plans and shifting income to lower-bracket children, grandchildren and other family members.
The second big mistake is nearly as important as the first, and thatโs fearing , rather than respecting the IRS. What does the kind of tax planning weโre talking about do to your odds of being audited? The truth is, most experts say it pays to be aggressive. Thatโs because overall audit odds are so low, that most legitimate deductions arenโt likely to wave โred flags.โ Audit rates are actually at historic lows. For 2006, the overall audit rate was just one in every 107 returns. Over half of those audits targeted the Earned Income Tax Credit for low-income working families. The IRS primarily targets small businesses, especially sole proprietorships, and cash industries like pizza parlors and coin-operated laundromats with opportunities to hide income and skim profits. In fact, they publish a series of audit guides that you can download from their web site that tell you exactly what theyโre looking for when they audit you! Take a look at the bottom of the chart. Youโll see that the IRS audits just about one-third of one percent of s corporations and partnerships. If youโre really worried about being audited, you might consider reorganizing your business to help fly โunder the radar.โ
If youโre like most business owners, you pay as much in self-employment tax as you do in income tax. If thatโs the case, you might consider setting up an โSโ corporation or limited liability company to reduce that tax. If you run your business as a sole proprietor, youโll report your net income on Schedule C. Youโll pay tax at whatever your personal rate is. But youโll also pay self-employment tax, of 15.3% on your first $102,000 of โnet self-employment incomeโ and 2.9% of anything above that. Letโs say your profit at the end of the year is $60,000. Youโll pay regular tax at your regular rate, whatever that is. Youโll also pay about $9,000 in self-employment tax. The self-employment tax replaces the Social Security and Medicare tax that your employer would pay and withhold if you werenโt self-employed. How many of you plan to retire on Social Security?
An โSโ corporation is a special corporation thatโs taxed like a partnership. The corporation pays the owners a reasonable wage for the work they do. If thereโs any profit left over, it passes through to the shareholders, and the shareholders pay the tax on their own returns. So the S corporation splits the owners income into two parts, wages and pass-through distributions.
Hereโs why the S corporation is so attractive. Youโll pay the same 15.3% tax on your wages as you would on your self-employment income.
BUT โ thereโs no Social Security or self-employment tax due on the dividend pass-through. Letโs say your S corporation earns the same $60,000 as your proprietorship. If you pay yourself $30,000 in wages, youโll pay about $4,500 in Social Security. But youโll avoid $4,500 in self-employment tax on the pass-through distribution.
You can also use an S corporation to shift income to a lower-bracket family member. Letโs say your son is attending college out of state. You can earn money in your business, pay tax on it, and use after-tax dollars to pay his tuition. Or you can give him part of the corporation, pass that income through to him directly, let him pay tax at his lower rate, and pay less tax on those tuition dollars.
The S corporation takes a little more paperwork to operate than the proprietorship. Youโll have to file articles of incorporation with the (Secretary of State/Department of Corporations, etc.), get an employer ID number from the IRS, observe the usual corporate formalities, and manage a payroll for yourself. And you have to pay yourself a reasonable wage for your service. That means something like youโd pay for an outside employee to do the same work. The IRS is on the lookout for business owners who take all their income as pass-through. Theyโre not likely to believe youโll find a brain surgeon willing to work a year for $12,000. That reasonable wage varies from industry to industry. But the S corporation can still be an effective tool for cutting your overall tax.
Now letโs talk about the fourth mistake: choosing the wrong retirement plan. If youโre looking to save more than the $5,000 limit for IRAs, you have three main choices: Simplified Employee Pensions, or โSEPs,โ SIMPLE IRAs, or 401ks. Iโm not here to make you an expert on retirement plans. But I can help you decide pretty quickly if the plan you have is right for you โ or if you should be looking for something more suited for your specific needs.
The SEP is the easiest plan to set up because itโs just a turbocharged IRA: If youโre self-employed, you can contribute up to 25% of your โnet self-employment income.โ If your business is incorporated and youโre salaried, you can contribute 25% of your โcovered compensation,โ which is roughly the same as your salary. The maximum contribution for 2008 is $46,000. If youโve got employees, youโll have to contribute for them, too. You generally have to contribute the same percentage for your employees as you do for yourself. However, you can use whatโs called an โintegratedโ formula to make extra contributions for higher incomes. The money goes straight into employee IRA accounts. Thereโs no annual administration or paperwork required. The SEP is easy to adopt, easy to maintain, and flexible. If thereโs no money to contribute, you just donโt contribute. But the contribution is limited to a percentage of your income. If you set up an S corporation to limit self-employment tax, youโll also limit your SEP contribution.
The next step up the retirement plan ladder is the SIMPLE IRA. This is another โturbocharged IRA that lets you contribute more than the usual $5,000 limit: You and your employees can contribute up to $10,500. If youโre 50 or older you can make an extra $2,500 โcatch upโ contribution. If your income is under $42,000, that may be more than you could sock away with a SEP. But - you have to match everyoneโs deferral or make profit-sharing contributions. You can match everyoneโs contribution dollar-for-dollar up to 3% of their pay, or contribute 2% of everyoneโs pay whether they defer or not. If you choose the match, you can reduce it as low as 1% for two years out of five. The money goes straight into employee IRAs. You can designate a single financial institution to hold the money, or let your employees choose. Like the SEP, thereโs no set-up charge or annual administration fee. The SIMPLE IRA may be best for part-time or sideline businesses earning less than $42,000. You can also hire your spouse or children, and they can make SIMPLE contributions. Weโll be talking more about those strategies in a few minutes.
The final step up the ladder is the 401k. Most people think of 401ks as retirement plans for bigger businesses. But you can set up whatโs called a โsoloโ or โindividualโ 401k just for yourself. The 401k is a true โqualifiedโ plan. This means youโll set up a trust, adopt a written plan agreement, and choose a trustee. But the 401k lets you contribute far more money, far more flexibly, than either the SEP or the SIMPLE. You and your employees can โdeferโ 100% of your income up to $15,500. If youโre 50 or older, you can make an extra $5,000 โcatch upโ contribution. You can choose to match your employees contributions, or make profit-sharing contributions up to 25% of their pay. Thatโs the same percentage you can save in your SEP โ on top of the $15,500 deferral. The maximum contribution for 2008 is $46,000 per person, plus any โcatch upโ contributions. You can offer yourself and your employees loans, hardship withdrawals, and all the bells and whistles โthe big boysโ offer their employees. 401ks are generally more difficult to administer. There are antidiscrimination rules to keep you from stuffing your own account while you stiff your employees. If you operate your business by yourself, you can establish an โindividualโ 401k with less red tape. And again, you can hire your spouse and contribute to their account.
If youโre older, and you want to contribute more than the $45,000 limit for SEPs or 401ks, consider a traditional defined benefit pension plan: Defined benefit plans let you guarantee up to $175,000 in annual income. You can contribute โ and deduct โ as much as you need to finance that benefit. Youโll calculate those contributions according to your age, your desired retirement age, your current income, and various actuarial factors. A 412(i) plan, which is funded entirely with life insurance or annuities, lets you contribute even more. Defined benefit plans have required annual contributions. But you can combine a defined benefit plan with a 401k or SEP to give yourself a little more flexibility.
Now letโs talk about the fifth mistake: missing family employment. Hiring your children and grandchildren can be a great way to cut taxes on your income by shifting it to someone who pays less. Yes, thereโs a minimum age. They have to be at least seven years old. Their first $5,450 of earned income is taxed at zero. Thatโs because itโs the standard deduction for a single taxpayer โ even if you claim them as your dependent. Their next $8,025 is taxed at just 10%. So you can shift a lot of income downstream. You have to pay them a โreasonableโ wage for the service they perform. The Tax Court says a โreasonable wageโ is what youโd pay a commercial vendor for the same service, with an adjustment made for the childโs age and experience. So, if your 12-year-old son cuts grass for your rental properties, pay him what a landscaping service might charge. If your 15-year-old helps keep your books, pay him a bit less than a bookkeeping service might charge. Does anyone have a teenager who helps with your web site? What would you pay a commercial designer for that service? Continued on Next Page
To audit-proof your return, write out a job description and keep a timesheet. Pay by check, so you can document the payment. You have to deposit the check into an account in the childโs name. But it doesnโt have to be his pizza-and-Nintendo fund. It can be a Roth IRA for decades of tax-free growth. It can be a Section 529 college savings plan. Or it can be a custodial account that you control until they turn 21. Now, you canโt use money in a custodial account for your obligations of parental support. But private and parochial school arenโt obligations of parental support. Sleepaway summer camp isnโt an obligation of parental support. Letโs say your teenage daughter wants to spend two weeks at horse camp. You can earn the fee yourself, pay tax on it, and pay for camp with after-tax dollars. Or you can pay her to work in your business, deposit the check in her custodial account, and then, as custodian stroke the check to the camp. Hiring your daughter effectively lets you deduct her camp as a business expense. If you hire your child to work in an unincorporated business, you donโt have to withhold for Social Security until they turn 18. So this really is tax-free money. Youโll have to issue them a W-2 at the end of the year. But this is painless compared to the tax youโll waste if you donโt take advantage of this strategy.
Now letโs talk about health-care costs. Surveys used to show that taxes used to be small business ownersโ biggest concern. Now itโs rising health care costs. If you pay for your own health insurance, you can deduct it as an adjustment to income on Page 1 of Form 1040. If you itemize deductions, you can deduct unreimbursed medical and dental expenses on Schedule A, if they total more than 7.5% of your adjusted gross income. But most of us donโt spend that much. What if there were a way to write off medical bills as business expenses? There is, and itโs called a Medical Expense Reimbursement Plan, or Section 105 Plan. This is an employee benefit plan, which means it requires an employee. If you operate your business as a sole proprietorship, partnership, LLC, or S corporation, youโre considered self-employed. So, if youโre married, hire your spouse. If youโre not married, you can do this with a C corporation. But you donโt have to be incorporated. You can do it as a sole proprietor or LLC by hiring your spouse. The one exception is the S corporation. If you own more than 2% of the stock, you and your spouse are both considered self-employed for purposes of this rule. Youโll need to use another source of income, not taxed as an S corporation, as the basis for this plan. Continued on Next Page
Letโs assume youโre a sole proprietor and youโve hired your husband. The plan lets you reimburse your employee for all medical and dental expenses he incurs for himself โ his spouse (which covers you) โ and his dependents. This includes all the expenses you see listed here. Major medical insurance, long-term care coverage, Medicare, and Medigap insurance. Co-pays, deductibles, and prescriptions. Dental, vision, and chiropractic care. Braces for your kidsโ teeth, fertility treatments, and special schools for learning-disabled children. It even covers nonprescription medications, vitamins and herbal supplements, and medical supplies. The best part is, this is money youโd spend anyway, whether you get a deduction or not. Youโre just moving it from a nondeductible place on your return, to a deductible place.
Youโll need a written plan document, which we can provide you. Youโll need to track your expenses under the plan, which we can also help with. But thereโs no special reporting required. Youโll report reimbursements as โemployee benefitsโ on Schedule C, Form 1065, or Form 1120. Youโll save income tax and self-employment tax. Thereโs no pre-funding required. You donโt have to open a special account, like with Medical Savings Accounts of flex-spending plans. You donโt have to decide how much to contribute, and thereโs no โuse it or lose itโ rule. Itโs just an accounting device that lets you characterize your family medical bills as business expenses. You can reimburse your employee or pay health-care providers directly. Letโs say your husband needs to pick up a prescription. He can use his own money, and you can reimburse him. Or he can use a business credit card and charge it to the business directly. If you have non-family employees, you have to include them too. You can exclude employees under age 25, who work less than 35 hours per week, less than nine months per year, or who have worked for you less than three years. Non-family employees may make it too expensive to reimburse everyone as generously as youโd cover your own family. But, if youโre offering health insurance, you can still use a Section 105 plan to cut your employee benefit cost. You can do it by switching to a high-deductible health plan, and using a Section 105 plan to replace those lost benefits.
If a medical expense reimbursement plan isnโt appropriate, consider the new Health Savings Accounts. These arrangements combine a high-deductible health plan with a tax-free savings account to cover unreimbursed costs. To qualify, youโll need a โhigh deductible health planโ with a deductible of at least $1,950 for single coverage or $3,850 for family coverage. Neither you nor your spouse can be covered by a โnon-high deductible health planโ or Medicare. The plan canโt provide any benefit, other than certain preventive care benefits, until the deductible for that year is satisfied. Youโre not eligible if youโre covered by a separate plan or rider offering prescription drug benefits before the minimum annual deductible is satisfied. Once youโve established your eligibility, you can open a deductible savings account. You can contribute 100% of your deductible up to $2,900 for singles or $5,800 for families. You can use it for most kinds of health insurance, including COBRA continuation and long-term care premiums. You can also use it for the same sort of expenses as a Section 105 plan. The Health Savings Account isnโt as powerful as the Section 105 Plan. Youโve got specific dollar contribution limits, and thereโs no self-employment tax advantage. But Health Savings Accounts can still cut your overall health-care costs.
Letโs look at a specific example to see just how much the Section 105 Plan saves. Our โguinea pigโ here is a self-employed consultant, married, with two children. He pays 25% in federal income tax and 15.3% in self-employment tax. We replaced a traditional โfirst dollarโ insurance policy with a high-deductible plan from the same company. In this case, it meant a $5,000 deductible before benefits kick in. But it cut his premium by $7,620. So even if he hits that $5,000 deductible, he saves $2,620 in premiums. And now, since he deducts his medical costs from his business income, his self-employment tax savings add another $1,156 to his bottom line. Heโll save at least $3,121 โ and possibly much more.
The home office deduction is probably the most misunderstood deduction in the entire tax code. For years, taxpayers feared it raised an automatic audit flag. But Congress has relaxed the rules, so now itโs far less likely to attract attention. Your home office qualifies as your principal place of business if: 1) you use it โexclusively and regularly for administrative or management activities of your trade or businessโ; and 2) โyou have no other fixed location where you conduct substantial administrative or management activities of your trade or business.โ This is true even if you have another office, so long as you donโt use it more than occasionally for administrative or management activities. You have to use your office regularly and exclusively for business. โRegularlyโ generally means 10-12 hours per week. To prove your deduction, keep a log and take photos to record your business use. You can claim a workshop, studio, or โseparately identifiableโ space you use to store products or samples. The space doesnโt have to be an entire room. If you use it for more than one business, both have to qualify to take the deduction. Once youโve qualified, you can start deducting expenses. If youโre taxed as a proprietor, youโll use Form 8829. If youโre taxed as a partnership or corporation, thereโs no separate form, which helps you โfly under the radar.โ First, youโll need to determine business use percentage of your home. You can divide by the number of rooms if theyโre roughly equal, or calculate the exact percentage of square footage. You can exclude common areas like halls and stairs to boost that business use percentage Continued on Next Page
Next, youโll deduct your business use percentage of rent, mortgage interest, and property taxes. Youโll depreciate the business use percentage of your homeโs basis (excluding land) over 39 years as nonresidential property. Finally, youโll deduct your business use percentage of utilities, repairs, insurance, garbage pickup, and security. If business use percentage for specific expenses differs from business use percentage for the overall home โ such as high electric bills for home office equipment โ you can claim the difference as โdirectโ expenses.โ Claiming a home office can also boost your car and truck deductions. Thatโs because it eliminates nondeductible commuting miles for that business. Continued on Next Page
You can use home office expenses to shelter profits, but not below zero. If your home office expenses exceed your net business income, you can carry forward those excess losses to future years. When you sell your home, youโll have to recapture any depreciation you claimed or could have claimed after May 6, 1997. You can still claim the $500,000 tax-free exclusion for home office space unless itโs a โseparate dwelling unit.โ
Now letโs talk about car and truck expenses. I donโt want to take too much time here, but I do want to point out the most common mistake clients make with these expenses. (At this point, I ask audience members to raise their hands if they take the standard deduction. I remind them that itโs 52.5 cents/mile, then ask them to tell me what they drive and how much they deduct. The goal here is to show the wide variety of vehicles clients drive . . . and emphasize that the deduction is the same for them all.) Are you detecting a pattern here? That deduction is the same for everyone, no matter what we drive. Do you think we all spend the same to operate our cars? It might surprise you to see how much it really costs to operate your car. And itโs probably more than 52.5 cents per mile! Every year, AAA publishes a vehicle operating cost survey. Costs vary according to how much you drive โ but if youโre taking the standard deduction for a car that costs more than 52.5 cents/mile, youโre losing money every time you turn the key. If youโre taking the standard deduction now, you can switch to the โactual expenseโ method if you own your car, but not if you lease. You canโt switch from actual expenses to the mileage allowance if youโve taken accelerated depreciation.
Letโs finish up with some fun deductions for meals and entertainment. The basic rule is that you can deduct cost for meals with a bona fide business purpose. This means clients, prospects, referral sources, and business colleagues. And let me ask you โ when do you ever eat with someone whoโs not a client, prospect, referral source, or business colleague? If youโre in a business like real estate, insurance, or investments, where youโre marketing yourself, the answer might be โnever.โ Be as aggressive as you can with what you define as bona fide business discussion! The general rule is, you can deduct 50% of your meals and entertainment, so long as it isnโt โlavish or extraordinary.โ The IRS knows you have to eat, so you canโt deduct it all. But theyโll meet you halfway. You donโt need receipts for expenses under $75. But you do need to record the five pieces of information listed on the right side of the slide in your business diary or records. And you should do it as close to daily as possible. The IRS wants to know how the cost of the meal, the date of the meal, the place where it takes place, the business purpose of your discussion, and your business relationship with your guest. How many of you entertain at home? Do you ever discuss business? Are you deducting those meals, too? Thereโs no requirement that you eat out. Donโt forget to deduct home entertainment expenses too! You can deduct entertainment expenses if they take place directly before or after substantial, bona fide discussion directly related to the active conduct of your business. You can deduct the face value of tickets to sporting and theatrical events, food and beverages, parking, taxes, and tips.
Now that you see how business owners miss out on tax breaks, letโs talk about the biggest mistake of all. What mistake is that? The biggest mistake of all is failing to plan. Have you all heard the saying โif you fail to plan, you plan to failโ? Itโs a clichรฉ because itโs true. Fortunately, our tax coaching service avoids the problem. We offer true tax planning. Weโll tell you what to do, when to do it, and how to do it. We start with a three-page โcheck the boxโ questionnaire that takes 5 minutes to fill out. Then we prepare a written tax plan that addresses you family, home, and job, your business, and your investments. Weโll even review your last three yearsโ tax returns to see if we can find savings you overlooked. The service costs $_____ (or โranges from $_____ to $_____, according to your circumstances). If youโre serious about the strategies weโve discussed today, then why not give it a try?
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