Business Growth By Design

Design a business you can live with

Archives for February 2019

A W-9, 1099, sea of tax confusion

by

I am drowning in W-9, 1099, sea of tax confusion, what am I supposed to do?

Here the scenario:   new business owner is asked by a customer for their social security number. That’s private. Why are they asking me for my information? They say they want to send me a 1099. What am I supposed to do?

I am asked all the time by business owners what is a W-9, a 1099 and, what are they for and when am I supposed to use them?

Let’s end the W-9, 1099, a sea of tax confusion right here for you.

Two Rules that will end the W-9, 1099, a sea of tax confusion

Rule Number 1

You do work for a client. They want a tax deduction for the money they pay you. A W-9 is the form that tells the client whether they have to report the money they pay you to the IRS.

If the business owner is a sole proprietor the answer is yes. With some exceptions, if the business owner is a corporation, the answer is no. Either way, the W-9 is the client’s proof of what it needs to do. An example where you as the client don’t need a W-9 is where you are getting your personal family photos taken.

Rule Number 2

A 1099 is the form used by the business client to report to the IRS and the business owner, how much the client paid to the business owner for services during the year. The business client wants to deduct as an expense on their tax return the amount paid to the business owner providing the service. If the amount of money paid is less than 600 dollars, then no 1099 needs to be issued.

I had this real life question come up with a photography business.

The photographer had done a personal photo shoot. The client later called asking for the photographer’s social security number. It seemed odd. The photographer called me up and we talked about the situation.

Turns out the client wanted to deduct the personal photo shoot expense on his business tax return. As such, he needed the photographers W-9 so he could give her a 1099 and take the tax deduction.

I told the photographer that since she is reporting the income she received from the client anyway, as she should, that she has no downside risk of providing the W-9 to the client.

The client bears all the risk. If the IRS audits the client’s tax return they would have to explain how a personal photo shoot turned into a business deduction. If the IRS audits the photographer she has reported the income. As such, she has done everything she was required to do.

Questions about these tax forms, what they mean and how they can be used for your benefit is the core work of our business.

The wrong choice and wrong decision can result in substantial penalties and money. It is better to be armed and prepared when it comes to taxes.

End Your W-9, 1099, sea of tax confusion Today

Take action by creating a long range plan for your business that will help you keep more money in your pocket rather than the government’s.

Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.

Or you can contact us >>HERE<<

Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.



Smart tax strategies for growing businesses

by

How you do business is how you pay taxes!  In this article, I share my favorite tax strategies for growing businesses.

How do entrepreneurs get ahead by using tax strategies to grow their business?

The story of Cal the plumber perfectly illustrates how this can be done…

Cal owns his own business. That’s what he knows. That’s what he learned, that’s what he does everyday and he does it well. Cal doesn’t know tax law. He doesn’t know where to invest his money for the future.

Cal doesn’t know whether he is paying too much in tax or too little in tax. He relies on his tax professional to give him the answers to these questions.

He hopes his tax professional has been trained correctly. The problem is that there are many tax professionals that don’t understand the deep insights of the tax laws as a tax attorney.

I am asked what are the advantages of my being a tax attorney?

I explain that my knowledge, experience and training is the highest that any tax professional can achieve. I am trained in law and I am trained in tax law.

This means that if and when you ever are faced explaining what you did before the IRS, I am able to give you advice on how the law will look favorably or unfavorably on your situation.

The advantage is the training in the understanding of how the law exists, how it is interpreted, how it applies and how it can be applied either as a shield or a sword. It doesn’t matter whether you think what you are doing is right when push comes to shove, it only matters whether you are in compliance with the law or not.

When it comes to the type of entity that is the best structure for a business, a proper understanding of the laws and tax laws are essential.

This tax strategy can change your wealth- Use of an S corporation instead of an LLC or sole proprietorship.

Most business owners start their business as a sole proprietorship.

One of the reasons for this is they don’t have much money nor are they making much. When your income is low and you have a very little risk this kind of structure can be perfectly fine.

As your income grows, though, and particularly when you take on more liability to your customers and clients, moving to a different form of doing business can make a huge difference in how you are protected and how your efforts can affect your net worth.

A C.P.A. stands for certified public accountant.

This has nothing to do with law, tax law or the type of business structure that is most suitable for a business.  However, because some C.P.A’s prepare tax returns, the client looks to their C.P.A. for advice on the type and structure of their business.

Although the C.P.A. is not a lawyer, many times a C.P.A. will advise a client to structure their business as a Limited Liability Company (LLC). The can be a BIG mistake.

When business owners do business as an LLC, they are taxed just like sole proprietorships.

That means they are going to pay two taxes. One, the payroll tax on their net profit from their business and two, income taxes. If you like being separated from your money this is a good way for it to happen.

As a 35-year tax attorney who has advised thousands of business owners and their families, I generally recommend that an LLC should never be used for business.

LLC’s are fantastic when you own real estate.

For business, I almost invariably recommend the business be structured as S corporation. Using an S Corporation, there is a tax trick where some of the profit avoids the 15% payroll tax.

This can end up being thousands to tens of thousands of dollars. That’s a lot of money every year just from how you operate your business.

Identifying the right entity for you takes the right knowledge and experience. Business Growth By Design through its legal arm, Legacy Legal, can give you the right information and put you on the right path to growing a wealthier business.  

Do You Have the Right Structure for Your Business?

Take action by creating a long-range plan for your business that will help you keep more money in your pocket rather than the government’s.

Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.

Or you can contact us >>HERE<<

Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.






Wealth Preservation: Health

by

If you are a person well-liked, trusted, with a winning attitude who adds value and you die, you are no good to anyone.  

You can’t preserve wealth if you are hobbled by sickness, physical maladies unable to perform the work necessary to achieve to the level of your capability.  

Good health is good wealth and good wealth is good health. Your body is the only one you have- surprise surprise. Treat it well and it will return the favor.  The cliches eat well, exercise and get rest are time old sayings for a reason.

Being in good health provides you with the energy necessary for you to build, grow and preserve the wealth you want.

Our vision is to enhance the way people think and talk about wealth not only in money but in values, beliefs and traditions.  

Our mission is guiding people in Mastering the 5 Stages of Wealth.

Survival to make ends meet; Security for themselves and their family; Affluence in enjoying the fruits and benefits of the hard work put in to make money; Influencing others through clarity of purpose and vision; and Legacy of how you will be remembered and the impact and difference you can make in the world.

Thank you for being a part of our Straight Talk community.  What stage of wealth are you in? What can you do to get to the next Stage?

Wealth Preservation: Security

by

Preserving Wealth is under your control and power.  The entire legal industry is built on the idea of managing risk and protecting your wealth from others.  

Setting up a business entity that will protect your personal wealth from unforeseen problems that might occur in your business operations.  

Creating a Will and Trust and advanced plans to identify how your assets will be distributed when you are gone while providing you with the opportunity to secure that wealth for generations.

I like this one.

Lately, when people come in to do their estate planning, I ask them if they realize this isn’t their plan. It is the plan for the kids, or friends or whoever.  I get funny looks. The plan is a future plan and they won’t be here. The real question is are those receiving the plan ready for it and what actions can be taken today to be secure in the knowledge the plan will work.

Knowing how your business will transfer to future owners whether inside the family or not.

Having proper insurance to make sure that you and your family are protected against any of life’s uncertainties.  Making enough money and having enough money so you don’t have to worry about whether you will be able to pay the rent or the mortgage or the utility bill.  Security is being in a position to be able to say no to temptations that are not in your best interest. Security is a platform on which wealth preservation can be constructed.

In the Security Step of our Business and Wealth Strengthening system, we make sure the business owner has solid foundations and security so they will be ready to move affluence and have more in their life.

Our vision is to enhance the way people think and talk about wealth not only in money but in values, beliefs and traditions.

Our mission is to show people how to strengthen their business and fortify their wealth through 5 simple steps.  

Survival to make ends meet;  Security for business and family; Affluence in enjoying the fruits and benefits of the hard work put in to make money; Influencing others through clarity of purpose and vision; and Legacy of how you will be remembered and the impact and difference you can make in the world.

Wealth Preservation: Rigor

by

Rigor is attention to detail.  It’s looking to catch the smallest most seemingly insignificant detail which if disregarded or overlooked can have long term damaging effects.  

Whether it’s going over the terms and conditions of a contract, or a business deal or focusing on the fine distinctions of a movement in a physical activity which can either hold you back or propel you forward, whatever it is you are focusing on, the difference between having rigor along the way or just breezing through can often either make or break a goal or a large scale business deal.

Our vision is to enhance the way people think and talk about wealth not only in money, but in values, beliefs and traditions.  

Our mission is to show people how to strengthen their business and fortify their wealth through 5 simple steps.

Survival to make ends meet;  Security for business and family; Affluence in enjoying the fruits and benefits of the hard work put in to make money; Influencing others through clarity of purpose and vision; and Legacy of how you will be remembered and the impact and difference you can make in the world.

Thank you for being a part of our Straight Talk community.  What step of wealth are you in? What can you do to get to the next Step?

Kids are great for tax planning

by

We have twins. They are fantastic. Kids are great. They help do chores, they give us so much pleasure and the best part is we get to use them as tax deductions.

I am joking about the best part of course but who wouldn’t want more tax benefits if we could. In this article, I discuss how kids can be a great source of tax savings and wealth building.

Why Kids are Great For Tax Planning

Here’s the story about Jeff and how he was able to take advantage of having kids and using them to save taxes..

Jeff had a printing business. He has two children ages 14 and 16. Joe would like to understand how he might be able to save taxes. If Joe’s kids can both work in the business then Joe can pay them just like any other employee.  The key here is in understanding that a person pays no tax when their income is less than $12,000.

Therefore, if Joe pays each of his kids $12,000, neither of them will have to pay tax on that income.

What’s better is that Joe can deduct the $24,000 he has paid to the kids on his tax return. If he is in the 30% tax bracket that is a tax savings of over $7,000.

Now that the kids have $12,000 each, what are they going to do with it?

  • First, this money can be used for their college education if necessary.
  • Second, the money can be put into an investment account that can grow tax free.  That can make them a millionaire when they are in their 50’s or 60’s.
  • Third, the money can use used for other expenses that you would ordinarily have to pay for clothes, sports or other activities.

In summary, reduce your own income tax, pay no tax on the child’s income and set up a tax-free retirement plan for your child. Yes…kids are great for tax planning!

Are You Taking All of the Deductions Available for Your Business?

Take action by creating a long-range plan for your business that will help you keep more money in your pocket rather than the government’s.

Set up a meeting with one of our tax professionals and discuss ways to position your company for success by giving us a call at (760) 579-0079.

Or you can contact us >>HERE<<

Unless your situation is very straightforward we are well positioned to find ways that will more than compensate you for the time and cost you spend with us.






CONNECT WITH US

Facebook Twitter Linkedin

QUICK LINKS

QUICK LINKS

Copyright 2019 - 2022. All Right Reserved, Rich Gaines