business owner powerpoint 2009 pdf
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"10 Most Expensive Tax Mistakes That Cost Business owners Thousands"TRANSCRIPT
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10 Most Expensive Tax Mistakes That Cost Business Owners Thousands! Copyright©2009
Vicki D Bealman
2476 Nimmo Parkway
Suite 115, #271
Virginia Beach, VA 23456
(757)581-6668
Your Logo Here
Copyright©2009
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#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
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Why Tax Planning?
1. Key to financial defense
2. Guarantee results
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Taxable Income
Add Taxable Income
minus Adjustments to Income
minus Deductions
times Tax Bracket
minus Tax Credits
Earned income
Interest/dividends
Capital gains
Pension/IRA/Annuity
Rent/royalty
Alimony
Gambling winnings
Illegal income
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Add Taxable Income
Adjustments to Income
minus Deductions
times Tax Bracket
minus Tax Credits
IRA contributions
Moving expenses
½ SE tax
SE health insurance
Keogh/SEP
Alimony
Student loan interest
minus Adjustments to Income
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Deductions/Exemptions
Add Taxable Income
minus Adjustments to Income
minus Deductions/Exemptions
times Tax Bracket
minus Tax Credits
Medical/dental
State/local taxes
Foreign taxes
Interest
Casualty/theft losses
Charitable gifts
Miscellaneous itemized
deductions
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Tax Brackets
Add Taxable Income
minus Adjustments to Income
minus Deductions
times Tax Bracket
minus Tax Credits
Rate Single HoH Joint
10% 0 0 0
15% 8,351 11,951 16,701
25% 33,951 45,501 67,901
28% 82,251 117,451 137,051
33% 171,551 190,201 208,851
35% 372,951 372,951 372,951
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Tax Credits
Add Taxable Income
minus Adjustments to Income
minus Deductions
times Tax Bracket
minus Tax Credits
Family credits
Education credits
Foreign tax
General business
Low-income housing
Renovation
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Two Kinds of Dollars
Add Taxable Income
minus Adjustments to Income
minus Deductions
times Tax Bracket
minus Tax Credits
Pre-Tax Dollars
After-Tax Dollars
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Keys to Cutting Tax
1. Earn nontaxable income
2. Maximize deductions and credits
3. Shift income: later years, lower brackets
“You lose every time you spend after-tax
dollars that could have been pre-tax dollars.”
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#2: “Audit Paranoia”
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#3: Wrong Business Entity
C-Corp?
S-Corp?
LLC?
Sole Prop?
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Sole Proprietorship
Report net
income on
Schedule C
Pay SE tax up
to 15.3% on
income
Pay income
tax on net
income
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S-Corporation
Split proceeds
into “salary”
and “income”
Pay FICA up to
15.3% on salary
Avoid FICA/SE
tax on income
Salary Income
Pay income
tax on salary
and income
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Employment Tax Comparison
S-Corp FICA
Salary $40,000
FICA $6,120
Net $73,880
Proprietorship SE
Income $80,000
SE Tax $11,304
Net $68,696
S-Corp Saves
$5,184Copyright 2009
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#4: Wrong Retirement Plan
0
10,000
20,000
30,000
40,000
50,000
Co
ntr
ibu
tio
n
30,000 60,000 90,000 120,000
Income
SEP SIMPLE 401(k)Copyright 2009
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Simplified Employee Pension
“Turbocharged” IRA
Contribute up to 25% of
income
Max. contribution: $49,000
Must contribute for all
eligible employees
Contributions directed to
employee IRAs
No annual administration0
5000
10000
15000
20000
25000
30000
30,000 60,000 90,000 120,000
SEP Contribution
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SIMPLE IRA
0
2000
4000
6000
8000
10000
12000
14000
16000
30,000 60,000 90,000 120,000
SIMPLE Contribution
Defer 100% of income up to
$11,500
Age 50+ add $2,500 “catch
up”
Business “match” or “PS”
Contribute to IRAs
No annual administration
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401(k)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
30,000 60,000 90,000 120,000
401(k) Contribution
Defer 100% of income up to $16,500
Age 50+ add $5,500 “catch up”
Employer contributes up to 25% of “covered comp”
Max. contribution: $49,000
Loans, hardship withdrawals, rollovers, etc.
Simplified administration for “individual” 401(k)
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Defined Benefit Plan
Guarantee up to $185,000
Contribute according to
age and salary
Required contributions
“412(i)” insured plan
“Dual” plans
Age Regular 412(i)
45 $80,278 $164,970
50 $133,131 $258,019
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
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#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
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#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
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#6: Missing Medical Benefits
Employee benefit plan
– Married: Hire spouse (no salary necessary)
– Not married: C-corp
Reimburse employee for medical expensesincurred for self, spouse, and dependents
Works with any insurance
– Use your own insurance
– Supplement spouse’s coverage
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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
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MERP/105 Plan
Written plan document
No pre-funding required
– Reimburse employee
– Pay provider directly
Bypass 7.5% floor
Minimize self-employment tax
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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
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#7: Missing Home Office
Determine “BUP” of home
– Divide by rooms
– Square footage
– Eliminate “common areas”
144
1500
100
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#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
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#7: Missing Home Office
When you sell:
– Recapture depreciation
– Keep tax-free exclusion
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#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
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#9: Missing Meals/Entertainment
Bona fide business discussion
– Clients
– Prospects
– Referral Sources
– Business colleagues
50% of most expenses
Home entertainment
Associated entertainment
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#9: Missing Meals/Entertainment
How much?
When?
Where?
Business purpose?
Business relationship?
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#10: Missing Tax Coaching Service
True Tax Planning
Written Tax Plan
– Family, Home, and Job
– Business
– Investments
Review Returns
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