Business Owner Powerpoint 2009 Pdf

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"10 Most Expensive Tax Mistakes That Cost Business owners Thousands"

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Business Owner Powerpoint 2009 Pdf

  1. 1. 10 Most Expensive Tax Mistakes That Cost Business Owners Thousands! Copyright©2009 Vicki D Bealman Your Logo Here 2476 Nimmo Parkway Suite 115, #271 Copyright©2009 Virginia Beach, VA 23456 (757)581-6668
  2. 2. #1: Failing to Plan “There is nothing wrong with a strategy to avoid the payment of taxes. The Internal Revenue Code doesn’t prevent that.” William H. Rehnquist Copyright 2009
  3. 3. Why Tax Planning? 1. Key to financial defense 2. Guarantee results Copyright 2009
  4. 4. Taxable Income  Earned income  Interest/dividends  Add Taxable Income  Capital gains  minus Adjustments to Income  Pension/IRA/Annuity  Rent/royalty  minus Deductions  Alimony  times Tax Bracket  Gambling winnings  minus Tax Credits  Illegal income Copyright 2009
  5. 5. Adjustments to Income  IRA contributions  Moving expenses  Add Taxable Income  ½ SE tax  minus Adjustments to Income  SE health insurance  Keogh/SEP  minus Deductions  Alimony  times Tax Bracket  Student loan interest  minus Tax Credits Copyright 2009
  6. 6. Deductions/Exemptions  Medical/dental  State/local taxes  Add Taxable Income  Foreign taxes  minus Adjustments to Income  Interest  Casualty/theft losses  minus Deductions/Exemptions  Charitable gifts  times Tax Bracket  Miscellaneous itemized  minus Tax Credits deductions Copyright 2009
  7. 7. Tax Brackets Rate Single HoH Joint 10% 0 0 0  Add Taxable Income 15% 8,351 11,951 16,701  minus Adjustments to Income 25% 33,951 45,501 67,901  minus Deductions 28% 82,251 117,451 137,051  times Tax Bracket 33% 171,551 190,201 208,851  minus Tax Credits 35% 372,951 372,951 372,951 Copyright 2009
  8. 8. Tax Credits  Family credits  Education credits  Add Taxable Income  Foreign tax  minus Adjustments to Income  General business  Low-income housing  minus Deductions  Renovation  times Tax Bracket  minus Tax Credits Copyright 2009
  9. 9. Two Kinds of Dollars  Add Taxable Income  minus Adjustments to Income Pre-Tax Dollars  minus Deductions  times Tax Bracket  minus Tax Credits After-Tax Dollars Copyright 2009
  10. 10. Keys to Cutting Tax “You lose every time you spend after-tax dollars that could have been pre-tax dollars.” 1. Earn nontaxable income 2. Maximize deductions and credits 3. Shift income: later years, lower brackets Copyright 2009
  11. 11. #2: “Audit Paranoia” Copyright 2009
  12. 12. #3: Wrong Business Entity C-Corp? S-Corp? LLC? Sole Prop? Copyright 2009
  13. 13. Sole Proprietorship Report net Pay income income on tax on net Schedule C income Pay SE tax up to 15.3% on income Copyright 2009
  14. 14. S-Corporation Split proceeds Pay income into “salary” tax on salary and “income” and income Salary Income Pay FICA up to Avoid FICA/SE 15.3% on salary tax on income Copyright 2009
  15. 15. Employment Tax Comparison S-Corp FICA Proprietorship SE Salary $40,000 Income $80,000 FICA $6,120 SE Tax $11,304 Net $73,880 Net $68,696 S-Corp Saves $5,184 Copyright 2009
  16. 16. #4: Wrong Retirement Plan 50,000 40,000 Contribution 30,000 20,000 10,000 0 30,000 60,000 90,000 120,000 Income SEP SIMPLE Copyright 2009 401(k)
  17. 17. Simplified Employee Pension  “Turbocharged” IRA  Contribute up to 25% of 30000 income 25000  Max. contribution: $49,000 20000  Must contribute for all 15000 eligible employees 10000  Contributions directed to 5000 employee IRAs 0  No annual administration 30,000 60,000 90,000 120,000 SEP Contribution Copyright 2009
  18. 18. SIMPLE IRA  Defer 100% of income up to $11,500 16000  Age 50+ add $2,500 “catch 14000 up” 12000 10000  Business “match” or “PS” 8000  Contribute to IRAs 6000  No annual administration 4000 2000 0 30,000 60,000 90,000 120,000 SIMPLE Contribution Copyright 2009
  19. 19. 401(k)  Defer 100% of income up to $16,500 45000  Age 50+ add $5,500 “catch 40000 up” 35000  Employer contributes up to 30000 25000 25% of “covered comp” 20000  Max. contribution: $49,000 15000  Loans, hardship withdrawals, 10000 rollovers, etc. 5000  Simplified administration for 0 30,000 60,000 90,000 120,000 “individual” 401(k) 401(k) Contribution Copyright 2009
  20. 20. Defined Benefit Plan  Guarantee up to $185,000 Age Regular 412(i)  Contribute according to age and salary 45 $80,278 $164,970  Required contributions  “412(i)” insured plan 50 $133,131 $258,019  “Dual” plans 55 $211,448 $395,634 60 $236,910 $450,112 Projections based on retirement at age 62 with $165,000 annual pretax income. Copyright 2009
  21. 21. #5: Missing Family Employment  Children age 7+  First $5,700 tax-free  Next $8,350 taxed at 10%  “Reasonable” wages  Written job description, timesheet, check  Account in child’s name  FICA/FUTA savings Copyright 2009
  22. 22. #5: Missing Family Employment  Children age 7+  First $5,700 tax-free  Next $8,350 taxed at 10%  “Reasonable” wages  Written job description, timesheet, check  Account in child’s name  FICA/FUTA savings Copyright 2009
  23. 23. #6: Missing Medical Benefits  Employee benefit plan – Married: Hire spouse (no salary necessary) – Not married: C-corp  Reimburse employee for medical expenses incurred for self, spouse, and dependents  Works with any insurance – Use your own insurance – Supplement spouse’s coverage Copyright 2009
  24. 24. MERP/105 Plan  Major medical, LTC, Medicare, “Medigap”  Co-pays, deductibles, prescriptions  Dental, vision, and chiropractic  Braces, fertility treatments, special schools  Nonprescription medications and supplies Copyright 2009
  25. 25. MERP/105 Plan  Written plan document  No pre-funding required – Reimburse employee – Pay provider directly  Bypass 7.5% floor  Minimize self-employment tax Copyright 2009
  26. 26. Health Savings Account 1. “High deductible health plan” - $2,000+ deductible (individual coverage) - $4,000+ deductible (family coverage) Plus 2. Tax-deductible “Health Savings Account” - Contribute & deduct up to $3,000/$5,950 per year - Account grows tax-free - Tax-free withdrawals for qualified expenses Copyright 2009
  27. 27. #7: Missing Home Office  Determine “BUP” of home – Divide by rooms – Square footage 1500 – Eliminate “common areas” 100 144 Copyright 2009
  28. 28. #7: Missing Home Office  Deduct “BUP” of expenses: – Mortgage/property taxes (better than Schedule A) – Utilities/security/cleaning – Office furniture/decor – Depreciation (39 years)  Increase business miles Copyright 2009
  29. 29. #7: Missing Home Office  When you sell: – Recapture depreciation – Keep tax-free exclusion Copyright 2009
  30. 30. #8: Missing Car/Truck Expenses AAA Driving Costs Survey (2008) Vehicle Cents/Mile Small Sedan 42.1 Medium Sedan 55.2 Large Sedan 65.1 4WD SUV 69.7 Minivan 57.6 Figures assume 15,000 miles/year; $2,941/gallon gas Copyright 2009
  31. 31. #9: Missing Meals/Entertainment  Bona fide business discussion – Clients – Prospects – Referral Sources – Business colleagues  50% of most expenses  Home entertainment  Associated entertainment Copyright 2009
  32. 32. #9: Missing Meals/Entertainment  How much?  When?  Where?  Business purpose?  Business relationship? Copyright 2009
  33. 33. #10: Missing Tax Coaching Service  True Tax Planning  Written Tax Plan – Family, Home, and Job – Business – Investments  Review Returns Copyright 2009

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