TOPICS COVERED IN THIS ISSUE
- Business real estate ownership
- Family wealth management
- YOUR customers
- Elder care
- Tax deductions
- Do what you do best
- Watch out for this
- Financial professional
- Nexus in another state
- When is it time to partner with
a CPA?
- Ten tax tips to consider
- Don’t procrastinate
- Insurance review time
- A long time
coming
BUSINESS
REAL ESTATE OWNERSHIP
Based
upon current tax laws, I believe it is
better for business property to be held by the shareholder(s) of
the business or by the business owner either personally or in a
Grantor Trust created on behalf of the shareholder(s) or owner,
or by family members of the business owner. The Grantor Trust, if
worded properly, acts as a title holding entity with income and
the related deductions being reported for tax purposes by the Grantor
on his/her own individual income tax return. The Grantor Trust should
be established in conjunction with an attorney experienced in this
field. If you are contemplating the purchase or construction of
real property (land and building or a condo office) for your business,
consider the type of ownership carefully.
There are many reasons to support this suggestion. Reasonable rental
income paid by the business to the owner could be made without the
consideration of Social Security or Medicare payroll taxes, such as
would be withheld and paid on the gross payroll paid to a shareholder
or paid as Self-Employment persons. Currently, the combined rates
for Social Security and Medicare taxes or Self-Employment taxes are
15.3%.
FAMILY WEALTH MANAGEMENT
The smart planning objectives of owners of family
held businesses should not be just tax
reduction, but wealth management.
This includes more planning than
you normally would think should be accomplished
to reduce business taxes. Added would be the restructuring of your
business to best meet your objectives and the objectives of the family
as a whole, including business succession planning to ensure continuity
of management. .
Also in this level of planning, you should
include estate tax strategies that protect the wealth of your business.
You should expect to provide family planning to preserve family harmony
and avert disputes that could harm the business and the family.
YOUR CUSTOMERS
If you or your staff park cars in front
of your door, where will your customers or
clients park? Do you really believe they will drive far
away from your place of business and then walk back to your
door? Think about your customers.
Planning for the
future is a lot like planting a tree. You've
got to do it today if you want your family
to enjoy it tomorrow.
ELDER CARE
Some time ago, I discussed long-term care
with a client, but he just could not talk about it. He ended
up waiting too long to begin a program. During our various
meetings, he was diagnosed with a terminal disease, and
was no longer eligible for long-term care insurance. We
know delaying is common when it comes to planning for elder
care issues. While causing a temporary relief of a person’s
discomfort, delaying a decision can cause massive financial
problems. Long-term care costs in a nursing home can range
anywhere from $45,000 to $120,000 per year, depending upon
the level of services you require. Assisted living could
cost as little as $30,000 per year.
You basically have three options when
it comes to long-term care. You can go on Medicaid if you
are at the poverty level, purchase long-term care insurance
coverage or you can self-insure. Medicaid, the state administered
program for low-income people, has many restrictions and
limitations. To self-insure your long-term care program
could devastate your estate planning and your heirs’ benefits
(use your own money to cover the cost of long-term care
until Medicaid kicks in).
The safest way to prepare for the financial
risk of long-term care is to obtain sufficient insurance
coverage. There are many choices and benefits available
to this form of protection. Some premiums may be tax deductible.
For more information, call my office.
TAX DEDUCTIONS
Are you
interested in an unusual tax deduction? When
was the last time you reviewed the depreciation schedule
of your business income tax return. Whether you are a single
businessperson or a corporate giant, I’ll
bet you have “stuff” listed in your depreciation
schedule that you no longer use, or worse
yet, “stuff” you
no longer own. Abandoned or junked property
should be written off.
Did you know we do more than just prepare,
compile, and crunch numbers? We are not just
bean-counters. We
can also advise you on estate and business
planning and offer financial strategies to
meet your goals. As your CPA, we know your
needs better than many other professionals.
DO WHAT YOU DO BEST
In your business or as an employee, you do some
things extraordinarily well. People pay for what you and
your employees have to offer.
Don't spend your valuable time doing
things you don't enjoy or fully understand. Do what you
do best. You should elevate the rest to experienced professionals.
Sometimes, it is hardest to let go of the tasks you least like
to perform. Try it; you and your family may appreciate the change
in you.
WATCH OUT FOR THIS
If someone is promoting a tax savings plan
that sounds too good to be true, it probably is. The plan may
be an abusive tax shelter. Be careful if the promoter says:
- you will never pay taxes again
- the IRS didn't want you to find
out about this
- this is a new promotion
so your CPA doesn't know about it yet
- you
can get a full deduction of your initial
investment in the early years
- you can deduct
the cost of your child's education
- the
plan involves multiple trusts, partnerships,
or other entities
- you can deduct the cost
of your personal residence
- some of the
entities involved in the plan are foreign
FINANCIAL PROFESSIONAL
There has never been a better time to find
a financial professional. Now more than ever, people understand
the importance of keeping what they’ve earned, and potentially
making it last longer than their parents ever had to.
We want to partner with you and provide you
with innovative thinking and support that you need. Call for
an appointment to review your current portfolio and based upon
your time horizon and risk tolerance we can help you decide
where to place your investments.
NEXUS IN ANOTHER STATE
If you have nexus, or “substantial physical
presence” in another state, they will expect you to pay
income and sales/use taxes on revenue generated there.
Definitions of “substantial” vary, and some states
are more aggressive than others to find and levy taxes on businesses
with nexus within their boundaries. Some major considerations
are:
- Do you have a sales office within another
state?
- Do you provide service (other than
just delivery of product or basic
sales assistance) to customers in another state?
This is only a guide to show how some states have
ruled. Call me for more information.
WHEN IS IT TIME TO PARTNER WITH A
CPA?
The Massachusetts Society of CPAs recommends
that you partner with a CPA in 2005, particularly
if you:
- will report income over $100,000;
- need tax-saving advice and assistance;
- need assistance with tax
documents;
- are considering tax-saving investments;
- are self-employed or
a business owner;
- have children in college
and education expenses;
- have significant
or unusual transactions;
- or you want a professional
review of your tax return before filing.
The
Massachusetts Society of CPAs represents
over 8,800 certified public accountants
working in public accounting, industry & business,
government and education.
TEN TAX TIPS TO CONSIDER:
- Is your 401K loosing weight?
CPAs know the best ways to save for retirement
without sacrificing your life now.
- Re-financing?
CPAs have borrowing tips.
- New equipment investment? CPAs can maximize
the tax write off.
- College bound kids? CPAs know what
plans are best for saving.
- Bad Economy? Good time to ask a CPA
how to gift and save on estate taxes.
- Experiencing Capital Losses? CPAs
know the ways to deal.
- Considered real estate? What’s cost
segregation analysis!
- Year-end tax planning with a CPA pays
off!
- Do you have an effective Financial
Plan? A CPA’s creativity and independence
helps make a good one.
- Running a closely held business?
Good management ideas by a CPA are
key.
DON'T FORGET:
"IT'S NOT WHAT YOU MAKE THAT COUNTS; IT'S WHAT YOU KEEP!"
If you are pleased with our service,
please tell your friends. If you are not
pleased with our service, please tell me;
that way we can please you.
DON’T PROCRASTINATE
Only 11% of American workers in their 30’s
and 40’s contribute the maximum to their
401(k)’s. The maximum elective employee deferral
for this group in 2005 is $14,000. 37% of this
group is confident that they will have accumulated
enough assets by retirement age to retire comfortably.
(source: Employee Benefits Research institute,
Money Magazine, Federal Reserve, USA Today).
INSURANCE REVIEW TIME
When was the last time you reviewed
your liability and catastrophic insurance coverages?
You know you should review both coverages and premiums
at least every three years. This risk and its related
cost is usually the least item looked at by a businessperson.
Since you have not looked at it in quite a while,
now is the time to call in your insurance agent
to review coverage and to quote the renewal or
change of existing coverages. It would also be
wise to ask two other insurance agents or companies
to review the same coverages and quote prices.
You may be very pleasantly surprised to see what
is wrong with your existing coverage. Be sure to
tell your current insurance agent that you will
be soliciting two other quotes so he/she knows
where he/she stands. It just may make that person's
pencil a little sharper.
A
LONG TIME COMING
The
House recently debated a bill (H.R. 1185)
that would raise the FDIC insurance limit of
$100,000. The proposal would increase protection
to $130,000, its 1st change since 1980 when the
amount was increased from $40,000.
The
current law covers one person at each separate
banking institution for up to $100,000 of principal
and interest (source: www.house.gov).
Remember: “A failure to
plan is a plan to fail.” (Anonymous.)
