Category Archives: Planning

• How The Tax System Works

  Posted on 10/06/2017 in Planning, Taxes

  “The hardest thing in the world to understand is the income tax.” – Albert Einstein The bad news is, the tax code is so complicated Albert Einstein can’t understand it. The good news is you don’t have to be Einstein to cut your taxes. You just have to know how the system works for you – your job or business, your investments, and your family.  Here is an overview of how the tax system works: Add taxable income from all sources to figure total income. Subtract “adjustments to income” to determine “adjusted gross income” (AGI). Subtract standard or itemized deductions and personal exemptions to determine taxable income. Consult table of tax brackets to figure your tax. Subtract any available credits to figure your final bill. That’s really most of what you need to know. The real issue isn’t the numbers. It’s what you have to include in your income, what you get to deduct from that income, and where you invest to avoid reporting income at all. Having said that, there are three main strategies for cutting your tax: Earn as much nontaxable income as possible. You have more control over business and investment income than any other income you…

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• What Will Your Tax Bill Be In April?

  Posted on 09/28/2017 in Planning, Taxes

  It’s the end of September.  Now is the time to start thinking about your tax bill for April next year.  It’s September, why should I be thinking about something that isn’t due for another six and half months.  The answer is simple.  Now is the time that you have opportunity to affect your tax bill in April. Once December 31st has come and gone you have closed the year and there are very few things you can do to lower your tax bill in April. Estimating a tax bill is something that a good CPA should be able to do for you.  There is a bit of estimating involved in this process but at a high level this is what needs to be done to estimate your tax bill. Estimate your income for the year. Estimate your deductions for the year. Estimate your taxable income (income – deductions for the year. Once you have your estimated taxable income it is easy to estimate your tax. Compare your estimated tax with your tax payments. This process is a cooperative process.  You need to give your CPA information so that he/she can accurately do the calculations to estimate your taxes.  The CPA…

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• Too Tasty for the IRS

  Posted on 09/26/2017 in Planning, Taxes

  Most of us like to eat, even if we choose to deny ourselves this pleasure from time to time. And those of us with an entrepreneurial bent often dream of opening a restaurant. Sometimes it’s a bustling cafe fronting a busy urban sidewalk. Sometimes it’s comfort food served on a rural byway. And when the dream works, it really is a dream. Just ask celebrity restaurateurs like Vanity Fair editor Graydon Carter, proprietor of Greenwich Village’s Waverly Inn, or Hollywood legend Clint Eastwood, whose Mission Ranch eatery draws diners and fans to Carmel, California. Unfortunately, opening a restaurant is one of those adventures that all too often ends in disaster. Sure, FEMA may monitor Waffle House closings as a measure of hurricane intensity. But restaurants are notoriously difficult businesses to run. CNBC reports that about 60% of new restaurants fail in the first year, and nearly 80% close before their fifth year, mostly due to being in the wrong location. So if you’re hoping to launch the next food empire, or just cash in on the next food craze (cupcake ATMs, anyone?) it behooves you to spend as carefully as you can — including serving the IRS as little in…

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• The Goal Formula

  Posted on 08/16/2017 in Planning, Success

  Goals are an important facet of making progress in life.  I’ve talked with a lot of times and I find that sometimes people talk about their goals, but they are not really talking about their goals.  They are talking about wishes.  When I hear someone make a wish it sounds something like this.  I want to grow my business.  I want to make more money.  I want to take more time off.  I want to improve the relationship with my son or daughter.  I want to have a better marriage.  The problem with these “goals” is they are not goals. Let’s deconstruct one of these wishes and see where the problems are.  I want to grow my business.  Here are the problems I see with this wish: There is no measurable criteria in this wish.  How is one to know when the the business is grown?  Am I looking to grow sales?  Am I looking to grow profit?  Am I looking to increase my market share?  What exactly is my objective? There is no deadline in this wish.  It does not give one a timetable to work on.  Without a deadline, once could wait 30 years to reach the wish….

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• Oops!

  Posted on 08/15/2017 in Planning, Taxes

  Mark Twain once said, “Never put off till tomorrow what may be done the day after tomorrow just as well.” But Twain’s advice doesn’t always pay when it comes to taxes. The calendar watchers at the IRS charge a 5% per month failure to file penalty, up to 25% of the amount due, along with a ½% per month failure to pay penalty, also up to 25% of the total amount due. And the IRS isn’t the only tax man to pay attention to deadlines, even if they don’t loom as large in our minds as April 15. Presidio Terrace is a private block-long oval of a street in San Francisco’s pricey Presidio Heights neighborhood, lined with 35 multimillion-dollar mansions. Residents have included Senator Dianne Feinstein, Representative Nancy Pelosi, and former San Francisco Mayor Joseph Alioto. There’s a stone-gate entrance to the street, a rent-a-cop stationed at the gate to keep out snoopy mcsnoopfaces, and a manicured island inside the oval for residents to enjoy. The street and sidewalks are owned by a homeowners association made up of surrounding residents. Because it’s private, the association pays tax on the property — in this case, a whopping $14 per year. Now,…

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• How to Pass the CPA Exam Part Two

  Posted on 08/10/2017 in Planning, Success

  This is part two of my post on how to pass the CPA Exam.  This first post dealt with the planning portion of my CPA exam preparation.  This post deals with the work I did to pass the CPA exam. I had two priorities at this point in my life.  One priority was to build my accounting business and the other priority was to pass the CPA exam.  About two weeks into my CPA exam study I realized that I was getting behind on my study schedule.  The reason I was getting behind was I was spending too much time networking to build my accounting business.  I had to make a difficult decision.  My decision was to spend more time studying so I didn’t fall behind on my CPA exam study.  This would mean it would take me longer to build my client base in the short term.  However I knew that passing the CPA exam would be the best career enhancement. On average I spent 4 – 6 hours a day studying for the CPA exam.  I spent four and a half months on this endeavor.  The most important aspect of the study was the practice questions.  The practice…

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• How to Pass the CPA Exam Part One

  Posted on 08/09/2017 in Planning, Success

  At first glance this post may seem like it may not apply to you.  Stay with me for a minute.  The purpose of this post is to explain a process.  How do you accomplish something difficult?  Because of the length of this post, I’m going to break this post into two posts. For those unfamiliar with the CPA exam.  The CPA exam when I took it was composed of 4 half day testing sessions.  One is tested on information ranging from business law, auditing, tax law, accounting standards and securities laws.  It was described to me that the knowledge  you need to know is a mile wide and an inch deep. I had just finished graduate school in the summer of 2008.  I was currently unemployed and little did I know that I was about to enter one of the scariest points of my life.  When I had started graduate school I had a good job.  When I started graduate school in 2005 the economy was robust.  Little did I know that when I finished graduate school the country would be in the midst of the Great Recession. I was unemployed when I finished graduate school.  I had two children…

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• Bottoms Up!

  Posted on 08/08/2017 in Planning, Taxes

  What were you doing at the end of your day on Friday, August 4? Were you knocking back a bottle of suds at your favorite happy-hour bar? Enjoying vacation time with a cold one overlooking a beach or a harbor? Maybe feeling ripped off paying $14 for a tallboy of St Louis’s finest at your local ballpark? Well, hopefully you were doing something like that, because the first Friday in August is International Beer Day! Beer is the world’s oldest alcoholic beverage — chemical tests of ancient pottery jars reveal that brewers produced beer as long as 7,000 years ago in ancient Iran. It’s the third most popular beverage overall, behind water and tea. (Sorry, Starbucks, it’s the rare coffee drinker who chugs more than one of your lattes in a day.) As Ben Franklin once famously said, “Beer is proof that God loves us and wants us to be happy.” It’s almost as easy to make as it is to drink, and you can do it with as few as three ingredients: water, hops, and barley. So . . . would it surprise you to learn that taxes are actually the priciest ingredient? Taxes are more expensive than labor…

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• Making More By Paying Less

  Posted on 08/01/2017 in Planning, Taxes

  When affluent clients want to pay less tax, they turn to accountants, attorneys, and financial advisors, among other advisors. And we can make a nice living helping clients accomplish that goal. (At the risk of sounding self-serving, it’s because we’re worth it.) But you won’t find any tax professionals populating the Forbes 400, or your hometown paper’s list of richest local residents. Having said that, there are a few people who have made legitimate fortunes helping people pay less tax. They just aren’t working where you think they are. Most of us don’t give much thought to tariffs, simply because we don’t directly pay them. When we do pay them any mind, we typically think of international trade policy and raw materials like steel. But governments impose import taxes on consumer goods, too, including luxury favorites like perfume and cologne, watches and jewelry, high-end spirits, and the like. And while those duties don’t add up like income taxes, buyers don’t want to pay any more of them than they have to. Robert Miller grew up in Massachusetts and attended Cornell University’s prestigious School of Hotel Administration. But he took a different direction than most of his classmates, and five years…

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• How to Eat an Elephant

  Posted on 07/27/2017 in Planning

  An elephant is a big thing.  At 9 – 11 feet and 12,000 to 13,000 pounds the animal is massive.  You got a big trunk, two 10 foot long tusks, two ears, a tail, four legs the size of trees and a tail to boot.  How do you eat an elephant?  One bite at a time. If you haven’t thought about it recently, it’s worth taking the time to ask yourself a few questions about what you want your life to be like in five years.  A lot of things can happen in five years.  Think about each of the areas of your life and what’s important to you.  Think about relationships with family.  Think about career or business.  Think about hobbies that you would like to do.  Would you like to go on an adventure?  Would you like to travel to some place?  What would you improve in your life you could get what you want?  The fact of the matter is you are the one driving the ship of your life.  If you want something, only you will be able to get what you want. I had a conversation with someone recently and the person said I’d like…

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