They’ll Only Make You Think It’s Hard To Do…

 

Between this message and my last one (“Why NOT To Use the Equity In Your Home”), I’m not trying to strike a somber tone, just a realistic one. The COVID pandemic has changed many people’s financial pictures, and with tax season knocking on the door, most folks are more worried than ever before. 

Not a day goes by without a call here in the office asking about tax payment options, worries about judgments, and so on. 

With that in mind, I’ve also had many people sharing with me how they “discovered” experienced financial accounts they’d forgotten about, they are now pulling money from to pay off bills or consolidating with other accounts. 

These might be accomplished 401(k)s from earlier jobs, IRAs given from parents to new graduates, and various others, but the point of all this is simple: the institution that handles that account is going to make it sound far harder to close than it is. 

One example recently shared with me was a client who had been given a tiny IRA from his parents as a 21st birthday gift.  He’d never “forgotten” about it, but the bank that had originally handled the transaction had been bought and sold three times since that time. The total value wasn’t anything to write home about, and after he studied the various options he had to put these monies to work, he decided to close the account, cash it out, and invest it elsewhere. 

To hear him tell it, the first three people he talked to in the bank made it appear as though he was trying to drill their teeth! My client kept calm, continued to explain his wants, and finally got through to someone who could help him. 

Nearly forty-five minutes of being on hold, being transferred, and generally being told how dumb he was for doing this, when he got to someone who could actually help him, the transaction ended up taking only about fifteen minutes. 

(As an aside, Hew took those funds, invested in the crypto market, and had already gained a larger return in four months than the account had produced in the last four years…)

The moral of the story is this:  if you have lazy financial assets (or simply ones that you need to reallocate), you don’t always need to listen to the people at the bank. Yes, there are often financial or tax liabilities that come from closing a retirement account, but those aren’t impossible to sort out. 

It’s your money, you have access to it whenever you need it! If you’ve got an account like this and aren’t sure about what – or how – to proceed, then feel free to reach out to me or my team and let’s discuss what might be the best game-plan.  

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Going “Green” in 2021

Stop me if you’ve been here before – your trash can is filled with junk mail, you don’t have a stamp (or an envelope) to send that invoice to your client, and your printer isn’t working because you’re out of ink. 

Now, I’m ALL for saving the environment, and that’s surely a part of this message, but the real reason I’m sharing the following ideas for you is simple – going paperless puts everything you likely need to run your business at your fingertips. 

For starters, you can opt out of all that junk mail in your “complete” mailbox and your email inbox.  That solves much drama right there.  How and where you need to go to do that depends on what you’re “cleaning up,” but if you’re finally tired of it, know there are ways.

Next, go through all your bills this month and, again, a bit of judicious searching will likely enable you to either go paperless, with email or text billing messages or set up an auto-pay for recurring payments.  Usually, when these draw from your account, you’ll simply receive a message that they have been withdrawn, so there’s a record of the transaction (plus the transaction is recorded in your banking or credit account for monthly or annual bookkeeping). 

Many folks simply stop right there and figure that as “paperless” as they can go, but there are actually a few more steps open to you…

From the view of financial statements, anything older than a year is often difficult to track down from your bank, credit card company, or financial institution.  I’m here to recommend you create a digital storage area for all these types of documents.  Now, it could be a physical storage drive that stands alone and can be stored securely in your home or office, or it could be one of dozens of these types of cloud-based digitally accessed storage companies.  In either case, it never hurts to have a little redundancy, so explore you options for access, portability, and security.  Remember, if you have a physical external drive, it is subject to theft and damage, but hard to “hack.”  Obviously, the opposite is true for a cloud-based solution. 

A clever tool to consider for business like signed contracts and invoices is a digital signature.  Companies like DocuSign have an excellent track record in court when it comes to people getting “amnesia” regarding what they did and didn’t sign, so there shouldn’t be any fear of that tripping you up, and it will save much space on printed contracts sitting in files years from now. 

With that in mind, consider digitizing historic paperwork.  There are significant ways to take an image and save it, from scanners in your office to a simple app on your phone.  No matter, the result is the same – a digital copy or file that can and will replace a box filled with unnecessary records. 

No matter how you end up doing this, the question I always hear from clients is “What can I keep?” 

As a rule, correctly now, there is always something to keep a paper record of, but that rule is changing nearly daily.  Obviously, title documents, deeds, and ownership records, or documents with seals or notary images need to be kept as paper.  The good news is this – most of us don’t have THAT many factors that cannot be stored digitally now, so box after box of paper documents can be disposed of safely and replaced with the digital images.  (Now, remember, it’s ALWAYS a good idea to check with your attorney before throwing anything away, but – and I consider this yearly in Tax Season – many of the things we “keep” don’t need to be anymore.)

Go green this year!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.

COVID related pension withdrawals

What can you do about the tax on your “coronavirus-related distribution” realized on or after January 1, 2020, and before December 31, 2020? #COVID #taxrelief #taxreturns

Why NOT To Use the Equity In Your Home

There has been much drama this last year, and no one can say otherwise. Even with a new president, mass vaccinations, and a “united” Congress, the pandemic isn’t going away and people are hurting financially. 

It’s times like these that my clients inevitably ask me about either taking a second mortgage, getting a Home Equity Line of Credit (HELOC), or a Home Equity Loan. 

My advice, in all but gravest of situations, is don’t do it. 

For most of us, our home represents the biggest investment we’ll gain, and that investment is one we’re counting on to play the role of life savings. Yes, I know that most of us have retirement accounts and other assets, but the home? 

That’s not only where the heart is, it’s where the money really is. 

Why would you want to jeopardize it? 

Right now, I know many you are shaking your heads and thinking I’ve lost my mind, but just hear me out: If you have truly exhausted all your other options – and I mean All Now, I’ll admit there are some circumstances where you may need to consider stripping away the equity you’ve built into your home, but ONLY after you’ve exhausted all your other options – broken open retirement assets, stripped away any consumer-driven spending, and so on, then MAYBE you should be exploring a HELOC – and I’ll get into my reasons for that in a minute.

The far bigger issue to consider is this: how’d you get here in the first place? 

Think about it – we need to solve that problem – and protect you from it happening again – before we worry about your home’s value. 

For example, given the time we’re in now, the bank doesn’t want to foreclose (and then become an owner) – it’s terrible press for them, and they inevitably lose money in that deal, just like you. 

So let’s back up for a second…

If you’re in dire financial straits, have you picked up the phone and called those creditors? Yes, it hurts to discuss it, and collections people are inevitably heartless and trained to NOT listen to your excuses or reasons, but it’s documentation of your plight. 

Years ago, I remember a real estate investor who was in a financial bind and behind on everything – car, house, office rent, health insurance, and so on. Every Tuesday morning, he’d call his creditors and listen to them hound him for money he didn’t have. I well remember seeing him once, soaked in cold sweat, and asking him, “Bob, why do you do this to yourself?”

His answer was simple, “Because they can’t say I didn’t tell them.”

In the end, the deals he was working on paid off, and he could bring everything current and, in most cases, pay the balance off completely. 

Was it tough? You bet! I can’t imagine doing that weekly for months (and, by the way, the phone calls from them didn’t stop, either. Many months later, he jokingly recalled, “Once, I got off the phone with the bank that had the house and fourteen minutes later, the fools in the same office called me to ask where their money was. Those weren’t fun times.”)

The idea of communicating with your creditors might seem old-fashioned, but the truth is, it can be a critical way to keep from losing your assets when times are tough. 

In the end, you do have to make decisions about pulling equity out of your home while you’re current on the payments, but if you worry about clouds on your financial horizon, let’s discuss all the options on the table instead of simply ripping away your financial toilsome work. It might be the right answer, but it is never the only answer. 

Reach out to me and the team and discuss it before you do anything!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Selecting The Structure

This month, we’ve looked at some of the most common and popular structures for businesses and today, I want to wrap that up a bit by sharing some things to think about before you make any decisions.

Basically, I’ve got five questions for you to think about, and, if the answer isn’t “clear,” then you should consider sitting down with a tax professional or legal counsel that focuses on business to make sure you’re headed in the right direction.

So let’s dig in!

·      What extent do you, as the legal owner, need to be shielded from legal liabilities? 

While an LLC,  an S-Corp, or a C-Corp all offer this to a greater or lesser degree, other structures, like a sole proprietorship, offer no legal protections to your personal assets. Now, this might be okay if you were a writer or a computer programmer who did contract work, for example, but the real world we live in is a litigious one. You MIGHT get away with a good insurance policy to cover a sole proprietorship, but today, I really cannot recommend it, especially given the low cost of entry into the LLC game. 

·      Where are the opportunities to mitigate taxation in the business? 

The truth of the matter is, a business that has little to deduct or write off may not need a lot of tax options. On the other hand, smart business owners know that designing their company and choosing the right entity structure allows for long-term growth and planning, too. Even though a sole proprietorship might be “right” now, what happens when that company suddenly experiences rapid growth? “Tax problems” might seem fun, because they generally mean you’ve made a lot of money, but planning ahead and choosing the right structure can prevent worry down the road. 

·      What are the real-world costs of doing business?  

A C-Corp offers the singular best protection to owners, but the administrative costs of setting one up and managing it year after year can be immense. Obviously, there’s a balance to be struck between the tax liabilities, management costs, and overall profitability, so these all need careful consideration based on your own growth and expansion plans. 

·      Obviously, this leads to the long term goal – the entity structure you choose must be flexible for the future. There’s simply no way around this one! The structure you create and use has to provide you with the amount of protection and tax mitigation you feel is correct (I know how subjective that is) and it needs to ensure that your business growth is protected in the long run, too. The last thing you want to do is build a business as a sole proprietorship, then grow too fast and open yourself up to a lawsuit and a huge tax bill!

·      Building on that flexibility, your entity should be able to handle long term challenges. 

When you build it right the first time, you need not worry about how the business can be sold, or what happens if one partner wants to get out of the company. The business structure helps to dictate the rules of survivorship, ownership, and even taking a company public. This is why it’s so critical to make sure you understand your long term goals for growth and expansion, no matter how small your business is today.

NONE of these are “easy” questions, if you think about them properly. That’s why I shared them! On the other hand, every one can be sorted out and does have a specific answer for you and your business. As always, I’m happy to help you find those, so if you’re struggling with them, don’t worry – schedule a time for us to talk and we’ll be happy to figure out the right answer to each and every one of them. 

See you soon!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Is There Growth Outside of Wall Street?

I get asked – usually several times a week – where there is “positive” growth in any market. Now, usually, the person asking is searching for an alternative to an IRA, or even a 401(k), and, if I know a little of their personal finances, I can give them one of several answers. 

It seemed like a good time to have that discussion in one of the monthly emails, so let’s get down the rabbit hole on it, shall we?

First of all, there is such a thing as “scale” when it comes to investing. Yes, I know “risk” plays a huge part, too, and that’s a conversation you’ll have to have with yourself, your family, or your significant other. 

I can’t fix them, but I can share some places I realize my savvy clients stash money. 

The first thing to remember is this: retirement accounts are all about long term growth. You’re not going to (or you shouldn’t) expect to double your money in a year or two. When you check off Wall Street, you see a different level of risk and reward. 

My first example is cryptocurrency. Bitcoin and a host of other names are creating a good deal of news and more than a few millionaires nearly daily. Since the market is still shockingly new, there is significant money being earned and not as many rules (per se) on what that “gained” money does afterwards. A “real world” example is this: Bitcoin nearly quintupled in the last year alone. If you took your maximum contribution for your company 401(k) this time last year and invested in Bitcoin, you’d have six figures now. 

In reality, that’s kind of scary, because that sort of growth nearly always comes with a drop. And it will, and it has, but year over year, it seems to continue to grow at a far higher rate than most traditional stocks and mutual funds. 

The next choice is the rally on the opposite end of the spectrum – if crypto markets represent the newest ways to invest, then real estate might represent the oldest. 

Yeah, the truth is, they’re not making any more land, and those who own it will, ultimately, make money. Now, obviously, two acres on a dirt road in Slapout, Alabama is probably never going to be worth what two acres in Manhattan will be, but real estate – invested with some due diligence – will almost inevitably grow in value. The downside? Will the costs of that real estate be worth it in the long run? With undeveloped property? Probably not. The key, at least with real estate, is to make sure it’s doing something. Improve it, build on it, rent it out, make it work. Two acres in Manhattan with offices or apartments can make you a wealthy person. That same two acres in Alabama, with a long term lease and a Dollar General on it, can also earn you money yearly. 

These are just a couple examples to get you thinking outside the box. Yes, there is value in a 401(k), an IRA, or a Roth, but there is also value when you put your money to work elsewhere, too. 

I’m always delighted to have that conversation, especially if it’s about putting money to work in a more creative way that can pay off big time.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Your New IRS Account

Do not forget you can securely access your IRS account information through your individual online account. #IRSaccess

Understanding the LLC?

Now, this is the second in a brief series I’m sharing to discuss the basic entity structure options business owners have. Given the shift to a “gig” based economy, many new business owners always seem to find themselves in tax trouble when they drive for Uber, or Door Dash, or even take on contract work. 

Enter the simple, basic LLC, or Limited Liability Corporation. 

It’s the go-to for new small businesses, and the costs for setting it up are almost always under $1,000, so the protections of a corporation (as well as the tax advantages) are within the grasp of anyone who is earning money. 

Depending on where you are geographically, though, yo0u might have more options than you can imagine. 

Single-Member LLC/Sole Proprietorship

General Partnership

Family Limited Partnerships

Series LLC

Restricted LLCs

 L3C Company

Anonymous LLC

Member-Managed LLC or Manager-Managed LLC

Now, some of these are specific to certain states. New Mexico, for example, currently has the only Anonymous LLC, but the key is that all these types do basically the same thing. They are all easily researched, and bear in mind, some will not be an option for you with your specific situation. 

Here’s the key takeaway, though: when you have your small business structured as an LLC, you have the “pass through” taxation, most sole proprietorships are used to coupled with the corporate protections you need. 

One thing that many business owners fail to consider is the fact that new business divisions – or even products – can be broken off into their own LLC to truly test and vet them. 

It might be more work, but if a new product or service is not aligned with your “usual” business, then separating it as an entity is an ingenious idea, especially if you think the new venture is one that might be sold or developed along a different route than your primary business. Sure, this can create a little more work for bookkeeping and tax preparation, but it can also give you valuable metrics and data about how your new entity is developing – and its actual profitability.

The beauty of having multiple LLCs in lieu of one “big” one is the obvious one – they represent separate business ventures you’re involved in and, should one be sued or in financial dire straits, it can be dealt with directly and “protect” the other entities.  Structured properly, even the simplest LLCs corporate veil can be protected, and that means protection for you as well as your other businesses.

None of this is to say that a single LLC is a terrible thing, but as your business dealings get more complex (and successful!), it’s an excellent idea to have multiple LLCs set up. The cost is negligible, the protection is protracted, and my team and I are pleased to advise you on – and assist you – in setting them up and making sure your taxes are easy to handle and understand. 

As always, feel free to reach out and schedule a call to learn how to get the LLC protection that makes sense for your business.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm, so we can schedule a confidential consultation to explain options to permanently resolve your tax problem Make an appointment here!  Or, call Toll-free 1-855-254-1892.

A New Year of Taxpayers

 

Every year, it seems, old clients and friends reach out as their kids or grandkids are beginning their “journey” as taxpayers.  In reality, it’s the same conversation, but it’s always from the heart, and I wanted to share a few “nuggets” of wisdom here today.

Think of it as a summary of what I’d be telling you if you called to ask for your own granddaughter or your teenager…

First things first – when you take the job, take the time to ensure your listing your tax liability properly on your W4.  It might seem simple (and maybe it is to us, but we’ve all been doing this a lot longer than a kid with his first job), but since their employer can’t give them any answers, “our” kid is having to fill out a form that asks some misleading questions…

“Other income.” 

“Deductions.”

“Extra withholding.”

…And so on. 

Now, this ought to be pretty straightforward, but, before your child goes to fill out their new hire paperwork, take a moment to Google “W4” and look it over with them.  Answer their questions, point out a few things that don’t impact them now but might in the future, and so on. 

While this helps to ensure they have shared their tax and withholding information with their employer, once they begin to get paychecks, it’s never a bad idea to verify with them that the proper amount is being taken out in their checks.  Many, many times we’ve seen where supervisors make input errors with new hires and cause a tax problem for young people.  

When tax season rolls around, here’s where most “kids” struggle:  They don’t know what they did with their W2 or any other tax paperwork they should have held on to.  Today, obviously, this isn’t the challenge it once was, since many companies offer W2s digitally.  A new copy is only a few clicks away, but banking information, or, in the case of trust funds, college savings accounts, and other financial accounts, might not be so easy to track down. 

The biggest question we get, of course, is, “When to file,” and, while there are a lot of rationales for any answer, our experience for anyone filing for themselves and not using a tax professional for preparation is this:  as soon as possible!

I tell them this for two primary reasons:  first, they can beat the rush and, if they encounter any problems, they have time to sort out the proper solution  Second, they can get their refund sooner! 

Cash in hand is almost always preferable to waiting…

One thing that I don’t see a lot of parents and grandparents doing for those first refund checks is one of the most important:  Teaching those kids how to spend it properly.  Every year, the streets are filled with young people who have spent a refund check on rims, or a stereo, or clothes.  Teach them about putting money to work, not on consumer goods, but on purchases that have long-term value.  Sure, they should spend some of it – it’s theirs, after all – but learning financial discipline is a valuable thing that can’t be taught in school. 

Of course, if you have any questions, my team and I are ready to help.  Reach out if you need it!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Tax Preparer Fraud

Avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.

Is It Time To Rethink Your Business Structure?

 

This is the time of year many of my business clients begin thinking (or doubting) how they’ve defined their businesses. 

Should you be a “C” or an “S” corporation?

Should you evolve your LLC into a slightly different version of an LLC for tax or inheritance purposes? 

We get a LOT of these questions, and there’s often no simple answer for them, so this month, I want to take some time to go over some of the options – and try to share some of the tax benefits and liabilities of all of them.  Let’s start with the big ones – the C- and S-Corps and I’ll share some of the LLC information as the month goes along. 

From a strict definition point of view, the S-Corp is “a type of corporation that meets specific Internal Revenue Code requirements. The requirements give a corporation with 100 shareholders or less the benefit of incorporation while being taxed as a partnership. The corporation may pass income directly to shareholders and avoid double taxation.”

By contrast, a C-Corp is “a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. C corporations, the most prevalent of corporations, are also subject to corporate income taxation. The taxing of profits from the business is at both corporate and personal levels, creating a double taxation situation.”

Right away, you can see that the C-Corp has that scary term, “double taxation” – the truth is, the S-Corp is considered a “pass-through” entity, much like the LLCs that many small business owners are familiar with.  Yes, a C-Corp will “tax” you twice, but the benefit is the ability to grow exponentially and protect your individual assets holds a great deal of appeal to many companies – especially those that expect to be 7, 8, or 9 figure businesses in the future. 

The reality is, most business owners who are considering the shift to an S- or a C-Corp are likely better served with the S-Corp, but certain industries – like tech, some retail, or companies that are expecting to franchise quickly – might find the C-Corp designation better in the long run. 

Another handy tool that a lot of tax professionals might share with you is this:  if you aren’t doing over a million dollars a year in income, stick with an S-Corp. 

…And while I would love to talk to you about making that move, I also want you to be aware of the various options that the LLC offers, too.  As you’ll see in the coming emails this month, there are a lot of ways to define your LLC – and even set up the tax structures – that give you many of the benefits of the C- and S-Corporations without the hassle and expense. 

Remember, it’s a process, and one that is based on growing a business, not merely building it and hoping it will be the right one. 

See you soon!

IMPORTANT: Our firm specializes in tax resolution. We serve clients virtually so don't hesitate to reach out.  If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm so we can schedule a confidential consultation to explain options to permanently resolve your tax problem.  Make an appointment here!  Or, call Toll-free 1-855-254-1892.