Business Growth By Design

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Tax Planning

A W-9, 1099, sea of tax confusion

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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

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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.






Kids are great for tax planning

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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.






Critical Actions to Meet Tax Deadlines

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In this article, I cover the 3 critical actions to meet tax deadlines to make sure that you the business owner, are setting yourself up for success.

How can business owners use tax deadlines to their advantage?

Money in your pocket may be of better use than money in someone else’s pocket, in this case, the government. Knowing the rules and deadlines can make a difference.

I am asked about filing deadlines, paying tax, penalties and what choices are available to take advantage of the tax laws.

Tax Deadline Number 1: March 15

Barbara was in a panic. Her bookkeeper was sick, overworked and wasn’t sure if she could get Barbara’s corporate bookkeeping complete before the March 15 deadline for Barbara to get her taxes done.

Barbara called her tax professional…and I calmly talked to Barbara and let her know that because she was an S Corporation there were not taxes to pay and that the March 15 deadline could be extended to September 15.

I also knew that Barbara would have to file her personal income tax return by April 15.

I asked Barbara if she thought she would owe tax based on how this year compared to last year. Barbara thought she might owe some taxes. If so, then I told Barbara while she can extend the filing of the business and her personal tax return she would have to pay whatever tax she thought she might owe by April 15.

Otherwise, she could incur unnecessary penalties that simply cost money. That is not good money management.

Barbara also asked about the $800 she has to pay every to the State of California. U explained that for the benefit of being a corporation the State of California asks for a minimum of $800 even if you make very little money.

I also explained that Barbara had a choice.  

She could pay the $800 by April 15. If she did that she wouldn’t have to pay a penalty. If she didn’t the penalty would be around 32 dollars. This meant that Barbara had the choice of keeping $800 in her pocket and paying 32 dollars extra next year or paying the $800 now. It is simply a cash flow question.  

Tax Deadline Number 2: April 15

As most people know, April 15 is the deadline for filing tax returns for individuals. The same principles apply as just discussed above.

If you are not ready you can extend the filing date to October 15.

If you owe tax that tax should be paid by April 15 or you will incur penalties and interest. If you are getting a refund (paying extra money to the government for no good reason) then filing as quickly as possible is beneficial.

Sometimes, people are waiting for tax information from partnerships and limited liability companies.

The law has changed and now these returns are due March 15 rather than April 15 so it should be easier for you to receive the necessary information before you have to file your personal income tax return.

Individuals also can take advantage of contributing to their regular IRA or their self employed plan if they are operating as a sole proprietor by April 15. This extra time is valuable for individuals and business owners to make last minute adjustments that might lower their taxes.

Tax Deadline Number 3: Estimated Taxes

Estimated taxes are money that you pay to the government in advance for what you estimate your tax to be in order to avoid penalties.

The estimated taxes are due on April 15, June 15, September 15 and January 15 of the year after but applied to the prior year.

The rules relating to whether you will incur penalties are complex and should be discussed with your tax professional to figure out the optimum amount that you should pay to avoid penalties but no so much that you are robbing yourself of your own dollars for use.

Tax laws don’t care who you are. They can and should be used to your advantage wherever possible. Take some time and do proper planning with the tax professionals at Business Growth By Design and keep more of what you make.

Take the Stress Out of Meeting Those Tax Deadlines

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.





3 strategies to pay less taxes

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Yes, it is possible to pay less taxes…in this article, I share 3 strategies to pay less taxes that business owners can and should be taking advantage of.

We hear on the news that rich people avoid paying tax. We hear that rich people avoid their fair share of taxes. We hear how the average American is paying a higher and higher share of tax.

I am asked what strategies are available to pay less tax like the rich.

3 Strategies to Pay Less Taxes

Strategy Number 1:  Tax Rates are your friend

Let’s get something clear…. If you are an employee you will be taxed on what you make and there isn’t much you can do about it.

I have clients making 6 figure incomes, they own a home and they get taxed. Let’s get something else clear. The tax laws are laws that apply to everyone and you are either able to take advantage of them or you are not.

John’s story perfectly illustrates this…

John has a photography business. He has a couple of children who are entering their teenage years. John was wondering whether he could do anything to lower his business taxes.

The answer is a resounding yes.

Children are fantastic and for more than just a tax break. When you own a business and have children, there is a way you can use the tax rates as your friend.

One of the simplest tax strategies is to move money over from the person with the higher income tax rate to the person with the lower income tax rate.

The person with the lower income tax rate can receive the money, possibly pay no taxes and have the money invested into a tax-free investment vehicle that can grow to millions over time. That saves taxes and it benefits the entire family business group.

Strategy Number 2: Investments are your friend

Jane works and she had her money invested. The problem is that her investments are costing her money at the highest federal income tax rate which now has been lowered to 37%. The highest federal capital gain rate is 20%.

Her financial advisor told Jane that paying taxes is a good thing because she is making money. She wondered what a tax professional might say.

The highest tax rate on investments that you hold and do not sell is zero.

That means that if you have money in investments which are growing and you keep them and don’t sell them you will pay no tax until you do. If those investments earn income such as dividends or interest you will pay income taxes.

If those investments are owned by your children they will pay income taxes at their income tax rates.

With this information, Jane was armed and went back to her financial advisor. The advisor told her that since she was invested in safe mutual funds that the managers of those investments buy and sell all the time and that’s what ends up on Jane’s tax return.

Jane asked whether the financial advisor could invest in stocks with similar low risk and not have to pay taxes. The financial advisor told Jane that he could put together some options for Jane to consider.

Strategy Number 3: Tax-Free is tax free

If I told you there is an investment out there that is tax free you probably wouldn’t believe me, but there is.

Not only is it tax free, but this investment is a way to increase the wealth of the family. The investment is life insurance. Just the mention of this word might draw groans and skepticism, however, life insurance is a tool that when looked at as an investment, just like stocks, bonds or real estate, its power is undeniable.

If you are a business owner and you think you are paying to much in taxes, we can look at your situation and determine what strategies will work for you to build, grow and sustain your wealth.

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.






Action Guide: 5 Dynamic Differences to a Wealthier Business

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Business growth expert Rich Gaines talks about the 5 Dynamic Differences that can make your business wealthier.

As business owners we are constantly testing boundaries, facing uncertainties and making hard decisions. Every one of the choices we make has a consequence.

Some better than others. Business owners are good at what they do but when they went into business they usually were not trained in the area of running a business itself, matters of money, law, and taxes. The lack of information in these areas can ruin a business.

Watch this short video and discover the 5 dynamic difference to a wealthier business.

Get your FREE Action Guide:

3D Action Guide 5 Dynamic Differences
CLICK HERE FOR INSTANT ACCESS

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