Small Business Owners

Maximizing Small-Business Tax Deductions

Maximizing small-business tax deductions

How small-business owners can take advantage of Section 199A

The Tax Cuts and Jobs Act (TCJA) passed in December 2017 offers a wealth of opportunities to small-business owners. Among the most notable provisions is Section 199A, which provides for qualified business income (QBI) deductions. These deductions are available to taxpayers who are not corporations, including S corporations, partnerships, sole proprietorships and rental properties.

While Section 199A provides a huge tax break for small-business owners, determining who is qualified can be complicated. In addition to eligibility requirements, there are income thresholds after which deductions are phased out. Here’s a look at who is eligible to use Section 199A, as well as strategies business owners above phase-out thresholds can use to recapture QBI deductions. 

Are you eligible?           

In general, small-business owners may qualify for QBI deductions if they meet one of the following criteria:

  •  No matter the type of business, if a business owner’s taxable income falls below $157,500 for single filers or $315,000 for joint filers, that business owner is eligible for a QBI deduction. That deduction is equal to the smaller of 20% of their qualified business income or 20% or their taxable income.

  • Businesses that offer specified service—such as lawyers, accountants, athletes, financial services, consultants, doctors, performing artists, and others with jobs based on reputation or skill—may have deductions phased out if they make too much money. If your income is above $207,500 for single filers or $415,000 for joint filers, you can no longer claim the QBI deduction.

  • If you own a business that is not a service business or a specialized trade, the QBI deduction is partially phased out if your taxable income is above $157,500 for single filers or $315,000 for joint filers. The deduction is limited to the lesser of either 20% of qualified business income or the greater of the following: 50% of W-2 wages paid, or the sum of 25% of W-2 wages paid by the business generating the income plus 2.5% times the cost of depreciable assets

The retirement solution

If your income is above the phase-out limits, you can preserve your full deduction by making smart use of retirement plans. Here’s a look at a few examples of ways to strategically employ retirement plans to reduce your income and recapture a QBI deduction:

Example 1: A couple, age 50, with a specified service business

A couple, each 50 years old, has a specific service business in the form of an S corp that pays W-2 wages of $146,000 and pass-through income of $254,000, for a total income of $400,000. The couple claims the standard deduction of $24,000, making their adjusted gross income $376,000. Because of their high earnings, the couple’s QBI deduction is only $19,812 due to QBI phase-outs. Their total income is  $356,188.

The couple can capture their full QBI deduction by setting up and funding a 401(k) plan. They can set up an individual 401(k) plan, deferring $24,500 as an employee contribution and contributing 25% of salary, or $36,500, as a profit sharing contribution. The deferral and profit sharing max out their individual 401(k) plan with a total contribution of $61,000. In this way, their W-2 wages are reduced to $121,500, and their pass-through income is reduced to $217,500 after the profit sharing contribution. Their total income after the standard deduction is $315,000.

As a result, the couple can claim their full QBI deduction of $43,500 (20% of 217,500), and their income is now $271,500. With a $61,000 contribution to a 401(k), the couple was able to effectively reduce their income by $84,688. In other words, this couple was able to get 1.39 times the income reduction for every dollar they contributed to a retirement plan. 

Example 2: A couple, age 55, with a higher-income specified service business,

Business owners who earn higher income may need to deploy additional retirement plans to capture their QBI deduction. Consider an S corp that pays W-2 wages of $146,000 to the couple, and pass-through income of $317,500 for a total income of $463,500. They claim the standard deduction of $24,000 and their adjusted gross income becomes $439,500. The couple does not receive a QBI deduction because their high income results in a complete phase-out. Their total income therefore remains $439,500.

However, this couple can still take advantage of a QBI deduction by setting up an individual 401(k) plan and deferring $24,500 as an employee contribution. They also can add a defined benefit (DB) plan or a cash balance (CB) plan and contribute even more to a retirement plan. Suppose they set up a DB or a CB plan and the actuaries calculated they could contribute $100,000 to the plan for a total combined contribution of $124,500. In this case, their W-2 wages are reduced to $121,500 and their pass thru income is $217,500.

The couple’s total income after the standard deduction is $315,000. Their QBI deduction is $43,500 (20% of $217,500) and their income is now $271,500. With $124,500 in contributions to their individual 401(k) plan and DB or CB plan the couple received a $168,000 income reduction. This couple was able to get 1.35 times of income reduction for every dollar they contributed to a retirement plan.  

This material is for educational purposes and is not intended to provide tax advice. Talk to your tax professional to find out how QBI deductions may apply to your financial situation.

To learn more about how to maximize your QBI deduction, please email us at rpyle@diversifiedassetmanagement.com or call (303) 440-2906.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice

Diversified Asset Management, Inc. - 2018 3rd Quarter Newsletter

New Ways To Influence The Next Generation

The Tax Cuts And Jobs Act of 2018 (TCJA) gives you more good reasons to help you children, grandchildren, great nieces and nephews. Any amount you give to a 529 account that's used to pay for qualified expenses for college as well as private or religious schooling before college is deductible. With tax reform eliminating all or a large chunk of state income-tax deductions for many individuals in 2018, giving to a 529 lightens your state income-tax load while perhaps changing a life of a family member or friend and influencing their values.

Are You “Rich” Or Not? New Survey Hits The High Points

Do you consider yourself rich? If you own a couple of mansions, a fleet of luxury cars, and financial accounts reaching high into the millions, it may be easy to answer that question. But other well-to-do people might struggle with the issue of whether they are "rich" or not. 

New Deduction Rules For Business Owners

If you are a small business owner, Washington, D.C. has changed tax rules to lower your burden but the new rules are fairly complex. Many small businesses, and some that aren't so small, are "pass-through companies," tax-jargon that means the entity's net income isn't taxed at the corporate level but flows straight to their owners' personal returns. That income is taxed at personal income tax rates, as opposed to corporate rates that are generally lower.

Five Retirement Questions To Answer

How much money do you need to save to live comfortably in retirement? Some experts base estimates on multiple of your current salary or income, while others focus on a flat amount such as a million dollars. Either way, the task can be daunting.

A Guide To The New Rules On Tax Deductions In 2018

Uncle Sam giveth, and Uncle Sam taketh away. New federal tax code, which went into effect in 2018 and affects the return you'll file in spring 2019, lowers taxes by expanding some deductions, but restricts or outright eliminates others.

Giving More To Loved Ones – Tax-Free

While it may be better to give than to receive, as the adage contends, both givers and receivers should be happy with the new tax law. The annual amount you can give someone tax-free has been raised to $15,000, from $14,000 in 2017.

To read the newsletter click on the link below:

Diversified Asset Management, Inc. - 2018 3rd Quarter Newsletter

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

10 Things That Will Soon Disappear Forever

Here is a nice article provided by David Muhlbaum and John Miley of Kiplinger:

 

By David Muhlbaum and John Miley / March 2017

 

Ten years ago, thousands of Blockbuster Video stores occupied buildings like this all over the country, renting DVDs and selling popcorn. Today, all but a handful are closed. The company’s shares once traded for nearly $30. Now Blockbuster is gone, scooped up (and then erased) by the DISH Network in a bankruptcy auction.

Obsolescence isn’t always so quick or so complete, but emerging technologies and changing practices are sounding the death knell for many familiar items. Here are 10 for which you should say your goodbyes ... and, as a bonus, seven that have defied the odds and refuse to die.

 

Things That Will Soon Disappear Forever

 

Keys

 

Keys, at least in the sense of a piece of brass cut to a specific shape, are going away.

At the office, most of us already use a card with a chip embedded to get access. But for getting into your house (and your car), the technology that will kill off the key is your smart phone. Connecting either via Bluetooth or the Internet, your mobile device will be programmed to lock and unlock doors at home, at the office and elsewhere. The secure software can be used on any mobile device. So if your phone runs out of juice, you’ll be able to borrow someone else’s device and log in with a fingerprint or facial scan. Phone stolen? Simply log in and change the digital keys. Kwikset, a brand of Spectrum Brands (SPB), offers the Kevo, and lock veterans Yale have partnered with Nest, now owned by Alphabet (GOOGL), to create the Yale Linus.

For the car, a variety of "connected car" services such as Audi Connect and GM's OnStar already let you unlock and lock the car remotely and even start it with a phone app — but you still need your keyfob to drive off. Next up: Allowing you to drive without even the keyfob, just your phone. Volvo is testing this capability in a pilot program in Los Angeles.

 

Blackouts

 

Frustrating power outages that leave people with fridges full of ruined food are on their way out as our electrical grid becomes increasingly intelligent – and resilient.

Two factors are at work: slow, incremental “smart grid” improvements to the system that delivers electricity, and the rapidly expanding use of solar energy in homes and business.

The breakthrough product here is the home battery. Developed by electric-car maker Tesla (TSLA) and others, by 2020, batteries will be cheap enough to store surplus solar power during the day and discharge it overnight, helping to better balance electricity supply and demand – and run a home for up to days during a blackout. LED lighting and more efficient appliances are helping, too, by reducing load on the system, whether the grid is or a backup system is running.

Utilities are also deploying huge banks of batteries, from suppliers like AES (AES), in storm-prone areas to make sure the power stays on for everyone.

 

Fast-Food Workers

 

Burger-flippers have targets on their backs as fast-food executives are eager to replace them with machines, particularly as minimum wages in a variety of states are set to rise to $15.

Diners will notice reduced staffing up front as outlets such as Panera (PNRA) turn to touch-screen kiosks for order placing. Behind the scenes in the kitchen, industry giants like Middleby Corp. (MIDD) and boutique startups like San Francisco's Momentum Machines are all hard at work for devices that will take on tasks like loading and unloading dishwashers, flipping burgers, and cooking french fries.

Humans won't be totally out of the picture — the machines will require supervision and maintenance, and dissatisfied customers will need appeasing. But jobs will plummet.

 

The Clutch Pedal

 

Every year it seems that an additional car model loses the manual transmission option. Even the Ford F-150 pickup truck can’t be purchased with a stick anymore.

The decline of the manual transmission (in the U.S.) has been decades in the making, but two factors are, ahem, accelerating its demise:

•Number one: Automatics are getting more efficient, with up to 10 gear ratios, allowing engines to run at the lowest, most economical speeds. Many Mazdas and some BMWs, among others, now score better fuel mileage with an automatic than with a stick.

 

•Number two: Among high-performance cars, such as Porsches, “automated” manual shifts are taking hold. They use electronics to control the clutch instead of your left foot. You can select the gears with paddles, or just let the computer take care of that, too. The result: The computer shifts faster than even the most talented clutch-and-stick driver, improving the cars' acceleration numbers. Plus, the costs on these are coming down, and they can now be found in less-expensive sporty cars, such as the Golf GTI.

Even the biggest of highway trucks are abandoning the clutch and stick for automatics, for fuel-efficiency gains and to attract drivers who won’t need to learn how to grind their way through 18-plus gears.

Some price-leader economy models, such as the Nissan Versa and Ford Fiesta, will list manuals on their cheapest configurations (though few will actually sell), and a segment of enthusiast cars, such as the Ford Mustang and Mazda Miata MX-5, will continue to offer the traditional three-pedal arrangement for some years to come. “It will be reserved for the ‘driver’s vehicle,’” says Ivan Drury, an analyst for Edmunds.com. But finding one will be a challenge — those holdout drivers had better be prepared to special-order their clutch cars.

 

College Textbooks

 

By the end of this decade, digital formats for tablets and e-readers will displace physical books for assigned reading on college campuses, The Kiplinger Letter is forecasting. K–12 schools won’t be far behind, though they’ll mostly stick with larger computers as their platform of choice.

Digital texts figure to yield more bang for the buck than today’s textbooks. Interactive software will test younger pupils’ mastery of basic skills such as arithmetic and create customized lesson plans based on their responses. Older students will be able to take digital notes and even simulate chemistry experiments when bricks-and-mortar labs aren’t handy.

This is a mixed bag for publishers. They’ll sell more digital licenses of semester- or yearlong usage of electronic textbooks as their customers can’t turn to the used-book marketplace anymore. On the other hand, schools are seeking free online, open-source databases of information and collaborating with other institutions and districts to develop their own content on digital models, cutting out traditional educational publishers such as Pearson (PSO), McGraw-Hill and Scholastic (SCHL).

 

Dial-Up Internet

 

If you want to hear the once-familiar beeps and whirs of a computer going online through a modem, you will soon need to do that either in a museum or in some very, very remote location.

According to a study from the Pew Foundation, only 3% of U.S. households went online via a dial-up connection in 2013. Thirteen years before that, only 3% had broadband (Today, 70% have home broadband). Massive federal spending on broadband initiatives, passed during the last recession to encourage economic recovery, has helped considerably.

Some providers will continue to offer dial-up as an afterthought for those who can’t or don’t want to connect via cable or another broadband means. But a number of the bigger internet service providers, such as Verizon Online, have quit signing up new dial-up subscribers altogether.

 

The Plow

 

Few things are as symbolic of farming as the moldboard plow, but the truth is, the practice of “turning the soil” is dying off.

Modern farmers have little use for it. It provides a deep tillage that turns up too much soil, encouraging erosion because the plow leaves no plant material on the surface to stop wind and rain water from carrying the soil away. It also requires a huge amount of diesel fuel to plow, compared with other tillage methods, cutting into farmers' profits. The final straw: It releases more carbon dioxide into the air than other tillage methods.

Deep plowing is winding down its days on small, poor farms that can't afford new machinery. Most U.S. cropland is now managed as "no-till" or minimum-till, relying on herbicides and implements such as seed drills that work the ground with very little disturbance. Even organic farmers have found ways to minimize tillage, using cover crops rather than herbicides to cut down on weeds. Firms like John Deere (DE) offer a range of sophisticated devices for these techniques.

 

Your Neighborhood Mail Collection Box

 

The amount of mail people are sending is plummeting, down 57% from 2004 to 2015 for stamped first-class pieces. So, around the country, the U.S. Postal Service has been cutting back on those iconic blue collection boxes. The number has fallen by more than half since the mid 1980s. Since it costs time and fuel for mail carriers to stop by each one, the USPS monitors usage and pulls out boxes that don't see enough traffic.

Some boxes will find new homes in places with greater foot traffic, such as shopping centers, public transit stops and grocery stores. But on a quiet corner at the end of your street? Better dump all your holiday cards and summer-camp mail in them, or prepare to say goodbye.

 

Your Privacy

 

If you are online, you had better assume that you already have no privacy and act accordingly. Every mouse click and keystroke is tracked, logged and potentially analyzed and eventually used by Web site product managers, marketers, hackers and others. To use most services, users have to opt-in to lengthy terms and conditions that allow their data to be crunched by all sorts of actors.

The list of tracking devices is set to boom, as sensors are added to appliances, lights, locks, HVAC systems and even trash cans. Other innovations: Using Wi-Fi signals, for instance, to track movements, from where you're driving or walking down to your heartbeat. Retailers will use the technology to track in minute detail how folks walk around a store and reach for products. Also, facial-recognition software that can change display advertising to personalize it to you (time for a mask?). Transcription software will be so good that many businesses will soon collect mountains of phone-conversation data to mine and analyze.

And think of this: Most of us already carry around an always-on tracking device for which we usually pay good money — a smart phone. Your phone is loaded up with sensors and GPS data. Is it linked to a FitBit perhaps? Now it has your health data.

One reason not to fret: Encryption methods are getting better at walling off at least some aspects of our digital lives. But living the reclusive life of J.D. Salinger might soon become real fiction.

 

The Incandescent Lightbulb

 

No, government energy cops are not coming for your bulbs. But the traditional incandescent lightbulb that traces its roots back to Thomas Edison is definitely on its way out. As of January 1, 2014, the manufacture and importation of 40- to 100-watt incandescent bulbs became illegal in the U.S., part of a much broader effort to get Americans to use less electricity.

Stores can still sell whatever inventory they have left, but once the hoarders have had their run, that’s it. And with incandescent bulbs burning for only about 1,000 hours each, eventually they’ll flicker out.

The lighting industry has moved forward with compact fluorescents, halogen bulbs, and most recently and successfully, bulbs that use light-emitting diodes (LEDs), and General Electric (GE) and Sylvania have found themselves sharing shelf space with newer firms like Cree (CREE) and Feit.

Soon, the only places you'll still see the telltale glow of a tungsten filament in a glass vacuum will be in heavy-duty and appliance bulbs, and some decorative items — and even for those, LEDs may ultimately 

 

Things That Refuse to Die: Parking Meters

 

Along with the pay phone and a cup of coffee, the parking meter was once one of the main reasons people carried around coins. The pay phone is gone, and a regular coffee now costs two bucks a cup, but meters are still standing on their stanchions, awaiting your quarters, in cities and towns across America.

New technologies are nibbling at the meter base: Many municipalities have installed machines (usually one per block) that let parkers buy a slip of paper to display on their windshield. Systems such as MobileNOW and Pango, which allow parkers to pay for parking by cell phone, are being enabled all over the country. Some experts see a future where the GPS in your car will link up with a municipal parking network, let you know where a spot is available nearby, and allow you to pay for it, all at once.

But don’t wave good-bye to Rita the meter maid yet; parking meters still have decades left on many streets and lots. For one thing, meter makers have introduced innovations of their own, such as new tops that accept credit cards, are powered by the sun and can relay through wireless connections to parking authorities how often spots are being used.

Plus, there’s a familiarity factor, says Casey Jones, a former chairman of the International Parking Institute. A city that has used meters in one place is likely to stick with that technology even when adding new metered spaces.

 

Things That Refuse to Die: The Cassette Tape

 

In the beginning, there was the LP record. When the compact disc arrived, many forecast the LP’s demise. It never happened; there's still a vigorous niche market for vinyl, even in the era of streamed downloads.

In between those two technologies came the cassette. Remember those rattly little plastic boxes full of tape? They were designed for dictation but pressed into service to deliver music to millions, particularly during the 1980s, when they were the only way to take tunes with you, whether with a Walkman, boombox or in your car’s tape deck.

They’re still around, actually. And not just as a last-gasp way to hear music when borrowing Granny's Buick Century. New music is being released on cassettes, kept alive by punk rockers, lo-fi artists and their labels. Sale numbers are generally small — a few hundred here and there for many promoters, although Burger Records, a Fullerton, Calif.-based label, estimates that it has sold upward of 300,000 tapes over the last eight years.

Cassette culture today thrives on the medium’s low production cost—at least compared with vinyl records. And being able to hold music right in your hand can also be a revelation to younger generations, for whom music is something you get online. "It's just something great to walk away from a show with," says Matt Stuttler, a St. Louis musician, publisher and producer who puts out cassettes under the label Eat Tapes. "A stack of cassettes is a reminder of specific shows, and they're a whole lot cooler to look at than a few loose scraps of download cards."

 

Things That Refuse to Die: Ethanol-based Flex Fuel

 

You may have seen E85 fuel at the pump—it’s the one with the yellow nozzle. Perhaps you’ve been tempted by a price per gallon that’s lower, sometimes much lower, than unleaded. Maybe you’ve even bought some, if you owned one of the millions of cars in North America capable of running on “flex fuel.”

E85, a blend of mostly ethanol (a type of alcohol) with a just a splash of gasoline, is one of a number of efforts by farmers (and the federal government, among others) to get you burning more corn in your car. (Oil companies are opposed—it’s one of those classic Washington battles).

Here’s the hitch: Running your car on E85 usually means a 15% to 30% mileage penalty, since ethanol produces less energy than petroleum gasoline. If the price discount isn’t bigger than the loss of fuel mileage, you’re probably spending more. The plummeting price of petroleum is making it harder and harder to find a discount that makes economic sense.

So why does E85 continue to sell? Enough folks like the up-front discount but aren’t doing the math. The National Association of Convenience Stores dug deep into the prospects for E85 in a study last year. Among their conclusions: “Consumers are focused on the absolute price differential, not the percent change, and that price discount need not be equal to the energy differential.”

Or, as one analyst of the renewable fuels market gently put it, "The consumer is a strange animal."

 

Things That Refuse to Die: The Penny

 

A penny for your thoughts isn’t much of a bargain these days. Not only is a penny worth less than ever thanks to inflation, but the cost of minting each Lincoln has been more than its face value for almost a decade.

Canada, Australia, New Zealand and other countries have deep-sixed their smallest coin, but the U.S. penny endures, as the U.S. Mint continues to churn out millions per year to replace the coins vanishing into change jars, vacuum cleaner bags and your car's floorboards.

Noted economists and the editorial pages of major national newspapers and journals continue to call for the penny’s retirement. But it has been years since anyone in Congress made a bid to kill the penny. One reason: While penny opponents are a diverse bunch, one group that’s deeply interested in its continuance is the zinc industry (a penny is actually 97.5% zinc and only 2.5% copper). And yes, Washington has a penny lobby, in the form of Americans for Common Cents (which is largely funded by zinc manufacturers).

But it's not just lobbyists. As an article in the Harvard Political Review put it, Americans' "general apathy and resistance to change" is also keeping the penny around.

 

Things That Refuse to Die: The Fax Machine

 

Ask not for whom the fax machine whirrs—it whirrs for thee. With e-mail, file-sharing, cloud services, collaborative office applications and more, who’s still using fax machines?

Folks (such as lawyers and real estate agents) who want your actual signature, for starters. Then there are offices communicating with far-flung branches that don’t have broadband, as well as mom-and-pop businesses. Finally, there are “non-technical users,” which Ross Rubin, principal analyst at Reticle Research, defines as people for whom sticking a sheet of paper in the fax and dialing a phone number is easier than scanning that document and attaching it to an e-mail.

The Consumer Electronics Association stopped measuring the sales of stand-alone fax machines in 2013, but that year, it estimated that 456,000 of them sold at about $100 each. That spells tweet-tweedle-tweet sounds for some time to come. What will eventually do in the fax (which is now over 50 years old)? Rubin thinks the smartphone will finish the job that e-mail started, with apps that let you sign documents using the phone’s touch screen and your finger.

 

Things That Refuse to Die: The Paper Check

 

We now have credit cards, debit cards, prepaid cards, PayPal, ApplePay, Venmo, Bitcoin and who knows what else. But the woman ahead of you in the grocery store checkout line just pulled out her checkbook!

Electronic means have displaced checks as the primary alternative to cash, particularly among businesses paying consumers (automatic deposit for paychecks, for example.) But Americans cling to their checkbooks, more than in other developed nations.

Just as there are early adopters of new ways to pay, there are resisters. For businesses, the ability to delay payment for a day or two while the check is in the mail is an opportunity to make money on the interest—the “float.”

And for consumers? “Old habits die hard,” says Gareth Lodge, a senior analyst with Celent, a research consultancy. Plus, he notes, “some of the alternatives aren’t really alternatives. Can you imagine your grandmother using PayPal? Can you use Venmo to pay your utility provider? Can you use Bitcoins at Walgreens? All of them will take checks.”

 

Things That Refuse to Die: The CB Radio

 

The citizens band radio (CB) was one of the biggest fads of the 1970s, when millions of people around the country hopped onto the airwaves while driving to chat with truckers and others about road conditions (and traffic enforcement). Movies and TV shows such as “Smokey and the Bandit,” “BJ and the Bear” and “Convoy” glorified the medium.

The dilettantes faded away, of course, and a number of technologies have taken bites out of CB’s relevance: GPS navigation, big trucking companies’ satellite networks and, of course, the cell phone.

But you can still pick up a CB radio online (or better yet, at a truck stop) and join the chatter on channel 19. The technology is still popular with truckers, who face considerable cell phone dead zones as they travel across the country. And preppers—people who are making plans to survive a breakdown in society—are buying them along with batteries and freeze-dried food. Unlike a cell phone, the CB radio requires no towers or network that could go down if the you-know-what hits the fan.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Tips for Running a Successful Seasonal Business

If you have a seasonal business, you most likely face some challenges that year-round businesses don't. After all, trying to squeeze a year's worth of business into a far shorter period can get pretty hectic. Here are some tips that may help.

Cash Control

All small-business owners have to be careful cash managers. Strict management is particularly critical when cash flows in over a relatively short period of time. One very important lesson to learn: Control the temptation to overspend when cash is plentiful.

Arming yourself with a realistic budget and sound financial projections -- including next season's start-up costs -- will help you maintain control. And you may want to establish a line of credit just in case.

In the Off-season

It's difficult to maintain visibility when you aren't in business year round. But there's no reason why you can't send your customers periodic updat es via e-mail or snail mail. You'll certainly want to announce your reopening date well ahead of time. You can also spend time developing new leads and lining up new business.

Time for R and R

You deserve it, so take some time for rest and relaxation. But you'll also want to put the off-season to good use by making necessary repairs and taking care of any sprucing up you'd like to do. You can also use the off-season to shop around for deals on items you keep in stock and/or equipment you need to buy or replace.

Expansion Plans

If you're thinking of making the transition from "closed for the season" to "open all year," start investigating new product lines or services. If you diversify in ways that are complementary to and compatible with your core business, your current customer base may provide support right away. A well-thought-out expansion can be the key to a successful transition into a year-round business.


Being the owner of any type of business has its rewards -- and its challenges. Contact your business advisor, consultant, or small business banker for help. These individuals have experience dealing with the unique challenges of operating small businesses.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provid ed here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

I'm Self-Employed. How Can I Get Health Insurance?

Self-employment is an important career choice for many people, and it is an option elected by many seniors and baby boomers. But with this choice comes the need to provide your own health insurance, which can be a formidable expense. And, thanks to the Affordable Care Act, a necessary one starting in 2014. If you are self employed and are seeking health care coverage, here are your major options.

 

If you have a spouse or partner who is or can be enrolled in an employer-sponsored plan, joining this plan is usually the simplest and least expensive way to maintain coverage. Nearly all employer-based plans offer coverage to spouses and children, and many provide coverage to domestic partners as well.

 

If you formerly were employed by an organization that employed 20 or more people and made a group health plan available to employees, you may be able to obtain medical coverage through the federal Consolidated Omnibus Budget Reconciliation Act, known as COBRA. COBRA requires employers to make available to departing employees the option of continuing membership in an employer-sponsored group medical plan at the employee's expense. You can continue your health insurance under COBRA for yourself and your dependents for 18 months, during which time you can search for the best option as a self-employed person.

 

High-deductible plans (HDPs), as their name suggests, involve a high deductible or threshold below which you must pay all costs.  For 2014, minimum deductibles are $1,250 for an individual and $2,500 for a family. In essence, a high-deductible policy provides coverage for catastrophic situations but does not generally provide for regular doctor visits and routine care. Such plans can involve complex cost-sharing arrangements in which certain procedures or visits are covered only in part. When considering this option, factor in not only monthly premiums but also the costs of partial out-of-pocket payment for different procedures.

 

Combining an HDP with a tax-free health savings account (HSA) can also save you in taxes. You deposit pre-tax dollars into your HSA, and use that money to pay medical expenses that aren't reimbursed by your health insurance.

 

You may be able to save money by enrolling in a group plan sponsored by a professional organization. Check with any affiliations you may have (for example, the American Medical Association or a state bar association for attorneys) to see if they offer group rates for members. As with any plan, you'll need to look at not only costs but also deductibles, co-pays, and how well the coverage meets your needs.

 

Many states now have health insurance marketplaces. The federal marketplace has an up-to-date list and provides insurance referrals to consumers whose states do not have their own websites.

 

For many self-employed individuals, their best option will be to enroll directly in a health maintenance organization (HMO) or preferred provider organization (PPO). In general, HMOs tend to be more expensive than PPOs, but plan costs vary considerably with coverage options, so shop around. Also keep in mind that individual enrollment in a plan is likely to be expensive, often $500 or more per month for individual coverage, and that costs are generally not tax deductible.

 

When shopping for the right plan, make sure to do your homework. Compare premiums, coverage, deductibles, and copays. Also keep in mind that after you turn 65, you may be eligible for Medicare benefits, even if you remain self employed.

 

For More Information check out the Web resources listed below.

 

eHealth

Small Business Service Bureau

AARP

U.S. Treasury's health savings account resource center

 

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Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Case Study: How to Save Money Through a Financial Crisis - Defined Benefit Plan

Scenario: 

Six years before retirement, a couple, one of which was a corporate executive and the spouse, a self-employed entrepreneur, came to me because they wanted to save the maximum before they retired. When a client says they want to save the maximum that can range from up to the company match in their 401k (4% of salary) to 100k plus per year. 

 

Challenge: 

It was the mid 2008 the financial crisis was just gaining momentum, only we didn’t know it yet. 

 

Solution: 

The corporate executive was already saving the maximum in her 401(k) and continued to do so from 2008 (20,500) thru 2014 ($23,500k). The self-employed entrepreneur was making around 200k and was 61 years old and wanted to set up a plan to shelter his self-employed income.

 

The self-employed partner wanted to save more than the 50k that was available in a single 401(k) during the 2008 time frame. We explored a defined benefit plan (DB) because that would allow the client to save significantly more than a single 401(k). The single 401(k) could be paired with the defined benefit plan for extra deferral, if desired. The ideal profile for a defined benefit plan is: Candidates in their low 60’s, self-employed and no employees, which this client fit.  We completed the paperwork and set a target contribution rate of 100k per year for the defined benefit plan and they were off and saving. 

 

They contributed about 700k between 2008 and 2014 to the DB plan all of which was tax deductible. In addition, during the early years they contributed to a Roth 401(k) when the market was low and that money grew tax-free. The beauty of the DB plan is that you typically want to have a conservative portfolio because you want to try to achieve a target rate of return around 5% to get stable returns so you will have predictable contribution amounts. The portfolio we constructed was on the order of 75% bond funds and 25% stock funds and that worked very well during the drop in the markets in 2008 & 2009 because we dollar cost averaged the funding for the plan over the whole time frame.

 

Result:

In the end the self-employed client contributed over 700k to the Defined Benefit Plan, which resulted in about 140k of tax savings over the 7-year period. We rolled over the Defined Benefit Plan to an IRA and the Roth 401(k) to a Roth IRA. For the corporate executive, we rolled over her 401(k) to an IRA.  They were now set for retirement and can continue to enjoy life without the worry as to how to create their retirement paycheck.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

You and Your Business: Choosing the Right Form of Ownership

The form of ownership you choose for your company can have lasting legal, financial, and tax implications. Here's a review of some of the most common business structures.

 

•Sole proprietorship -- Under this arrangement, one person owns 100% of the business. Taxes are paid using a regular Form 1040, with the addition of a Schedule C to report profits and losses, and a Schedule SE for self-employment tax. While a sole proprietorship is easy to establish, since you and your business are considered the same entity, you potentially face unlimited personal liability if you are sued or become unable to pay your debts.

 

•General partnership -- A partnership is essentially two or more business owners operating under one entity. Ownership can be divided any way the partners see fit, and partners report only their portion of profits or losses on personal income tax forms. As with sole proprietorships, partners can be held personally liable for the debts of the partnership.

 

•Limited liability company (LLC) -- An LLC retains the tax structure and flexibility of a general partnership, but without the personal exposure to liability. Instead, the LLC itself is responsible for company debts and any potential legal claims.

 

•C-corporation; S-corporation -- Corporations also shelter owners from personal liability, but C-corporations get taxed twice -- once as a corporate entity and again on the owners' personal income that is passed through as dividends. In most states, S-corporations avoid the double-tax dilemma by passing profits directly to owners, but they are mired in special rules and regulations that make them more complicated to administer.

 

If you have yet to choose a structure for your business, or if you feel that your business may benefit from a new structure, make sure you talk through the issues with an attorney who is well versed in the legal aspects of business formation as well as an accountant who understands the potential tax implications.

 

Required Attribution

 

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

 

© 2014 Wealth Management Systems Inc. All rights reserved.

 

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.