June 16, 2017
should i use a roth or traditional

How a Properly Planned 401k Can Lower Your Taxes?

If you participate in a qualified 401k plan, you’re among millions of Americans utilizing this option for retirement planning. These plans are a great way to stock away pre-tax dollars to fund your future lifestyle once you retire. A properly planned 401k can also represent an excellent benefit for a business owner as well. Here’s how. The Scenario We recently met with small business clients, along with their CPA. This particular client generates around two-and-a-half million dollars in gross revenue a year. The owners, a husband and wife team, each earn $75,000 a year in W-2 wages, and the business saw a profit of just over $297,000, which is split 50/50 between them. They’re frugal with their money, carrying no debt and spending roughly $6,000 a month on living expenses. This has been the key to their success. The Before and After They’re making almost $450,000 a year in taxable income. Before they incorporated 401k planning into their business model, it wasn’t unusual for them to get tax bills ranging from $150,000 to $180,000 a year. Now, with their 401k plan in place, their combined tax bill was $63,000. We placed $106,000 of their income into the plan. Utilizing employee […]
May 9, 2017

Tax Tips for Cash Intensive Small Businesses

Small business owners that offer goods and services through an online platform may be part of the sharing economy. Some participate part time while others operate full time. Activities such as ride sharing, freelancing, renting a spare bedroom and crowd funding are usually taxable. The IRS has a Sharing Economy Tax Center to help these taxpayers find the information and help they need to meet their tax obligations. Tax Tips for Cash-Intensive Small Businesses Taxes. Sharing economy activity is generally taxable. Payments received in the form of money, goods, property or services may require filing a tax return to report that income to the IRS.Tips. People often conduct sharing-economy activities electronically but tips in cash are still a common occurrence. Tips are generally subject to withholding. Small businesses or self-employed persons should report tips they receive as income on Schedule C or C-EZ. See Publication 334, Tax Guide for Small Business, for more details. Large Cash Amounts. Any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, within 15 days after receiving […]
May 2, 2017
Employee or Independent Contractor? Know the Rules

Employee or Independent Contractor? Know the Rules

Employee or Independent Contractor? Know the Rules The IRS encourages all businesses and business owners to know the rules when it comes to classifying a worker as an employee or an independent contractor. An employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Employers normally do not have to withhold or pay any taxes on payments to independent contractors. How to Classify Workers Here are two key points for small business owners to keep in mind when it comes to classifying workers: 1. Control. The relationship between a worker and a business is important. If the business controls what work is accomplished and directs how it is done, it exerts behavioral control. If the business directs or controls financial and certain relevant aspects of a worker’s job, it exercises financial control. This includes: The extent of the worker’s investment in the facilities or tools used in performing services The extent to which the worker makes his or her services available to the relevant market How the business pays the worker, and The extent to which the worker can realize a profit or incur a loss 2. Relationship. How the […]
April 28, 2017
5 Financial Do-Overs I Wish I Had

5 Financial Do-Overs I Wish I Had

Whether they’re personal or financial, life always comes with regrets. How many times in life have you uttered the words, “If I could do that over…” Probably many! Just like you I’ve wished for my fair share of do-overs. So today I’m going to share the 5 financial do-overs I wish I had, in hopes that you won’t make those same mistakes. 5 Financial Do-Overs I Wish I Had I wish I maxed out my ROTH contributions the moment I started making money. — If I’d put back $300-$500 a month back when I first began working at 16 years old, the compound interest alone would be unbelievable. However, like most young folks, I wasn’t looking toward the future. Obviously, I hadn’t grasped the concept of compound interest. Albert Einstein is attributed as saying, “Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it.” Whether he said it or not, the truth behind that quote is undeniable. The power of compound interest is truly mind-blowing. I wish I had hatred of debt, the way I do today. — I hate debt! Hate it! I hate it! Hate it! I hate it! To see the crippling effect […]