Solo K is A.O.K for Small Business Owners Seeking Lower Taxes and Retirement Contributions.
If you missed out on the millions of bucks sent to the big corps in Uncle Sam’s stimulus program, don’t fret, you still have some options (Although, they don’t involve big financial handouts).
The Solo (k) commonly referred to as Solo K is a retirement plan set up for small business owners. Small business owners drive this economy, (in spite of what the lobbyists in DC would have us believe). As a small business owner, your tax liabilities are the most threatening thing to your financial well being right after the economy. Learning how to reduce your tax liability should be a part of every small business owner’s wealth building strategy. Knowledge is power. Let me re-phrase that, knowledge is money! Continue reading →
Admit it. You Don’t Have a Practice – You Have a Job
Many of my tax reduction clients are high-income professionals including doctors, lawyers and even accountants. These are people with unique financial and tax-reduction problems. Having a respectable income isn’t the problem for most of them.
The three primary problems doctors, lawyers, and other professionals have in common are as follows:
1. Working too many hours.
2. No time left for financial planning.
3. Paying too much in taxes and being too tired to enjoy what’s left of their income.
Breaking exhausting cycles like this is not simple. It’s not really difficult but it’s going to take a commitment. Here are a couple of things you can do to shift from having a job to having a business. If you have a true business model that’s working, you can take time off and the business will continue to create wealth for you and your family. If you have a job, you are obligated to be there and you don’t get paid when you are not.
Which do you have? Does your practice allow you to leave without a big dip in income? Does your practice grow without consuming more of your time? If you said “no” to either of those last two questions, you don’t have a business or a practice, you have a job.
There’s nothing wrong with having a job as long as you are aware of that. But a practice that keeps you in the “job” mode is difficult to grow without more of your time. And that takes you back to problem number one. Trying to grow your business, when it’s really a job, means you’ll work too many hours and never get a commensurate reward.
Tax Deductions for Small Business – With all that time spent on the practice, you might have some good revenue coming in but too many doctors, dentists, or lawyers have little time left to do their own financial planning. So, they give it to their spouse, their bookkeeper, or their accountant. And, it’s likely that none of these people are specifically trained in tax-lowering strategies.
So, the money comes in, everyone does the best they can with it and the money goes out. Unfortunately the amount of money going out to Uncle Sam is usually much more than it should be in these situations.
So, my recommendation for anyone facing the endless cycle of work more, spend more, work more is this. Find someone who can help you design a strategy to break this cycle. There are two types of professionals that may be able to help you.
We are not on this planet to figure it all out on our own.
It’s okay to ask for a little help.
GET HELP – First, get a business/marketing consultant to help you find the leverage points in your business. Where is there more profit, less effort, and continuity in your business? Where are the opportunities for exponential growth in your business? Who EXACTLY are your best customers and how can you give them better service in return for greater profits? To turn your job into a business you want to know what your clients are looking for and then give it to them.
Take time this week to work ON your business not IN your business.
Second, get a tax-planning specialist on your team. That person will show you how to utilize legal entities that will protect your hard-earned money and make it work much harder for you. Notice, I said, your MONEY will be working harder, not YOU! Tax planning is beyond checking off the list of business deductions and putting numbers in the right columns. Any accounting person can do that for you.
A true tax specialist will have the ability to help you create a wealth-building plan that will solve the miserable cycle of working too many hours, no financial planning, paying too much in taxes, and being exhausted!
Finally, if you do nothing at all with what you just read, at least do this. Take time this week to work ON your business not IN your business.
More Money Saving, Tax Saving Ideas for Small Business Owners!
The list continues! Check with your tax advisor in your unique situations but ALL of the following should be reviewed by you and/or your wealth team! Here are a few more write offs:
1. Fees we Hate! Service for processing credit cards is deductible!
2. Pens and Paper – Office Supplies! Those little things add up.
3. Bad Debts. As opposed to good debts? The only good in any debt might be its deductibility. If that debt was included in previous income, it may be deductible.
4. Professional Fees – Even if you felt like you got amateur advice, professional fees are usually deductible. Lawyers, accountants, and other consulting fees are write offs.
5. Office Equipment – Computers, iPads, cameras, fax machines, as long as it’s part of doing your biz, deductible it iz! You may be able to take it this year or depreciate it.
6. Furniture – Just like office equipment. Write it off.
7. Repairs and Maintenance – Keeping that office in tip-top-shape costs money! Deduct it and get some of it back.
8. Interestingly Enough, Interest is Still Deductible! Mortgage, finance charges, payment plan interest, and other interest may reduce that taxable income! Now, do you despise your credit card company a little less for that 22% interest rate?
9. Insurance For Sure – Premiums you pay for liability, credit, workers’ comp, malpractice and others is deductible.
10. Software Anywhere – Whether you got it from the box or downloaded it, generally, software is deductible. Future software apps are evolving to online service products that you don’t need to download and those fees are likely deductible as well.
11. License to Kill – Well, James Bond you’re not but most licenses can be written off. Licenses, fees, regulatory gouges, I mean fees are usually deductible.
12. Taxes – Whoa. That’s weird. Pay taxes. Use them as a tax deduction? It’s a strange taxable world we live in but yes, taxes are a business expense and if you incur them running your business, Uncle Sam says, write ‘em off!
Obviously, we have a little fun talking about taxes but the most fun you can have with your taxes is when you go from paying double digit taxes to single digits. That’s what I do. I want you to pay taxes – but only the ones you are obligated to and most of you are paying taxes that you are NOT obligated to pay!
Why pay for something when you don’t have to? Dang good question! We should tax, I mean, talk. ( I really did type that mistake – oooh, it must be tax season!)
Have a prosperous and deductible day!
Gabby Huguenin
Wealth Coach
Tax Fighter
All Around Fun Gal
P.S. Call me if you want to lower your taxes in 2011!
The Clock has Been Turned Back on Certain Taxes but not for Long!
In my ongoing Axe the Tax campaign, I have been asked by a lot of doctors and other clients what some of the new tax changes will mean to their tax-reduction strategies. It may seem a little strange but Uncle Sam really does give us ample money-saving opportunities to lower our taxes. Unfortunately, the tax gods tend to make things a little too complicated for busy small business owners, doctors with thriving practices, and other mere mortals to grasp.
There are tons of new tax deductions available for the tax enlightened out there. So, if you have not been enlightened yet, let me tax-enlighten you a bit! Here are a few Tax Tips to look into and discuss with your tax advisor and/or CPA right now because they are going fast! Literally.
Retroactively Reinstated Tax Break – Extended through 2011
The following tax breaks for individuals that came to a screeching halt at the end of 2009 are back! They’ve been extended through the end of this year. Not perfect, but not bad! Take ‘em while you can get ‘em!
1. The $250 above-the-line deduction for certain expenses of our beloved elementary and secondary school teachers. Yeah! They deserve a little extra help!
2. The election to take itemized deductions for local and state general sales taxes instead of the itemized deductions permitted for local and state income taxes.
3. An increased contribution limit and a carry forward period for contributions of appreciated real property for conservation purposes (may include partial interests in real property).
4. An above-the-line deduction for your qualified tuition and other related expenses.
5. This one’s BIG! URGENT- The provision that permits taxpayers aged 70 ½ or older to make tax-free distributions to charities from their Individual Retirement Accounts (IRA) in amounts up to $100k per tax payer per tax year. In addition, those individuals will be allowed to treat their IRA transfer to charitable organizations during January of 2011 as if it was made back in 2010. Retro is good! Talk to your tax advisor today!
6. The treatment of any mortgage insurance premiums as a deductible of qualified residence interest and the exclusion of 100 percent of the gains on certain small-business stocks.
7. Retro-refrigeration news: The energy efficient appliance credits may apply but they will be in new amounts and with some new requirements.
8. The Code Sec. 25C credit for energy-efficient improvements made to existing homes. Reinstating the credit as it existing prior to the passage of the American Recovery and Reinvestment Act. The standards for which property is eligible under Code Sec. 25C have been updated to reflect improvements in current energy efficiency standards.
That’s the retro news and the tax-saving views from here! The clocks have been set back for a little bit so check with your tax pro and find out which way to go. The list above is far from complete but these are all tax-saving opportunities you should be aware of. Chat with your advisor or give me a call!
Understanding how to use the tax rules to your advantage is what I teach my students in a variety of programs. Find out more about our coaching programs and let’s Axe the Tax from your life! I’ll cover more on the tax changes soon but move quickly, some of these tax savings are only good for January 2011! Here’s more info on tax extensions.
“14.8 million people are still out of work and has been little changed since May of 2010.
Since October, The unemployment rate remained at 9.6 percent.” – The Labor Statistics.
Looking at stats – What do most people ask themselves?
Well, I think my Grandfather would have loved this, (just kidding!) talking to a man who took $500 and turned it into multi-millions, he helped others help themselves!
No hand out will resolve this 14.8 million people out of work business
I grew up around wealthy people, so I know what they think. They think – hmmm if the economy is struggling, than everything is on sale, and I am going to capitalize on that right now, so when things get better, I be in a great position then and now. (notice I said then and now.)
What do the wealthy, tax advantaged, asset protected, affluent, educated, sophisticated, mentored masses (top 5% of the population do) that is so different?
THEY SEE OPPORTUNITY WHEN EVERYTHING IS GOING ‘WRONG’ AND THEY CAPITALIZE ON IT.
“making lemonade out of lemons”
Daily all you can control are YOUR actions.
I speak to myself as much as I am speaking to you!
You can literally walk into cash flow streams with NO MONEY OUT OF POCKET.
This is not a solicitation it is merely a representation that this “kind of thing” does happen.
How do I know this?
Real Life Example
I had a deal that was a “bad deal” that I got involved with about 4.5 years ago. Month in month out I kept paying for this “bad deal” $182,500 initial investment dollars out, interest payments monthly on that amount out (yeah, we did what everyone was doing and we leveraged the money from a line of credit.) But what I learned in that time frame allowed me with the HELP (notice I said HELP) of some key people to turn that “bad deal” into a great deal with zero dollars out of my pocket.
Better yet, it’s a win / win / win. The buyer, the deal negotiator, and the deal maker all work in unison to provide an equally beneficial outcome for all.
I am walking into about $600 a month in cash flow. That is after expenses, and splitting with an investor. (There are things that have to happen such as management etc… but that are where a great team comes in handy, and a well incentivized team!)
I have the help of a great mentor and friend whom I helped on some other aspects of tax planning and asset protection so we are working together on a different level now.
What did we all end up with?
1. A beacon of hope and inspiration that “stuff like this does happen”
2. A mutual respect for being able to trust another person to help you when you ask for it knowing you will do the same thing in return.
3. Taking the different strengths of the different parties involved and maximizing them
a. I can do tax planning and asset protection
b. Negotiator can negotiate
c. Deal maker can set the terms of the deal
d. Investor can bring their cash to the table and know that they have covered their bases
4. Doing this over and over again.
5. Having clear communicated systems and agreements in place and acted upon.
It can take time to build up a list of trustworthy negotiators, mentors, brokers, attorneys, cpa, investors, bookkeepers, helpers, etc…
