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The Family Business and Taxes Part One
What is one thing that most business owners have in common? Why did you start your business? Many business owners I have talked to over the past decade started their entrepreneurship journey for similar reasons. Think about your clients and what reasons they have given you and see if these ring true. “I want to be in control of my time.” “I need to spend more time with my family.” “I don’t want a cap on my earning potential.” I find those to be pretty noble reasons. I haven’t come across a business owner yet that says, “I want to pay more taxes for fun.”. So as an advisor how can we help our clients have freedom, time with family, and save on taxes? One strategy is to hire family members. It can’t be any family member though, remember there is a strategy to this. I know some of you are thinking, “that sounds great!”. Then others of you are thinking, “who wants to work with their family?”. Well trust me, when saving money is the topic of discussion more people tend to listen. The least you can do is present your clients with the facts, and here they are: • The taxpayer can avoid paying certain payroll taxes by hiring a family member. • You can help them potentially drop a tax bracket while keeping the spending power in the family. • Protecting a spouse from tax debt. • Lower Federal student loan payments. To do this we have to make sure the client hires their family as employees. This whole strategy goes down the drain if the family member is a contractor that receives a 1099. Today we will focus on how to properly implement the game plan when hiring a parent or spouse.
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CURRENT EDITION
An Analysis of the OBBBA’s Trump Accounts (Part 2)
In part one of this series, I went over the basics of the new retirement accounts for minors, Trump Accounts, which were created as part of the One Big Beautiful Bill Act (OBBBA). Trump Accounts allow the Government, Charitable Organizations, Parents, and others to contribute to a child’s savings, usually on an after-tax basis. These accounts then transition to a traditional individual retirement account (IRA) when the child turns 18. Although the contribution limits act like non-deductible traditional IRA contributions and have a contribution limit of only $5,000 per year, they do not have the same earned income requirements that traditional IRA contributions have. This means that children are able to accumulate savings even without earned income. This article presents several scenarios to examine how Trump Accounts may play into an overall savings strategy for children.
Another Tax-Smart Way to Save for Retirement
Most clients are familiar with the well-known accounts to save for retirement, such as the 401(k) and IRA. Some clients might be able to supplement those with a lesser-known vehicle as well. A life insurance retirement plan (LIRP) is a type of permanent life policy with a cash value basically funded by overpaying premiums. The money can eventually be taken as a tax-free loan against the policy for anything from medical expenses and long-term care to supplemental retirement income to, for the wealthy, the payment of taxes on large estates.
Taxes & Taxidermy: Rampaging Through The Tax Code On The Back Of A Stuffed Rhinoceros
Is the taxidermy fee for a stuffed bear deductible? If so, should I depreciate it? What would the basis and class life be for depreciation? Those are real questions asked in a group chat with some colleagues. Of course my answer was “It depends.” And, like all good tax professionals, I proceeded to ask a series of follow-up questions. And, like a good writer, that got me to thinking about all of the tax-related case law surrounding taxidermy and what it can teach us—it’s more than one might think.
SIMPLIFIED TAX STRATEGIES &
PRACTICAL IMPLEMENTATION
Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
