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Business Partnership – A Good Plan?

Elements of a Good Business Partnership Like a bundle of sticks, good business partners support each other and are less likely to crack under strain together than on their own. In fact, companies with multiple owners have a stronger chance of surviving their first five years than sole proprietorships, according to U.S. Small Business Administration data. Yet sole proprietorships are more common than partnerships, making up more than 70 percent of all businesses. That’s because while good partnerships are strong, they can be hard to make. Here are some elements that good business partnerships require: A shared vision Business partnerships need a shared vision. If there are differences in vision, make an honest effort to find compromise. If you want to start a restaurant and your partner envisions a fine dining experience with French cuisine, while you want an American bistro, you are going to be disagreeing over everything from pricing and marketing to hiring and décor. Compatible strengths Different people bring different skills and personalities to a business. There is no stronger glue to hold a business partnership together than when partners need and rely on each other’s abilities. Suppose one person is great at accounting and inventory management, and another is a natural at sales and marketing. Each is free to focus on what they are good at and can appreciate that their partner will pick up the slack in the areas where they are weak. Defined roles and limitations Before going into business, outline who will have what responsibilities. Agree which things need consensus and which do not. Having this understanding upfront will help resolve future... read more

Whether to Amend Your Tax Return

Is It Worth It to Amend Your Return? Whether it makes sense to amend your return depends on which of these situations you’re in: If you owe the IRS If you discover an omission on your tax return that results in you owing additional tax, you need to correct it with an amendment and provide the tax due. Don’t delay if this is your situation. If the IRS discovers the omission before you do, they may add interest and penalties to your bill. If you are due a refund If you find a mistake that should result in getting a larger refund check, you can claim it by filing an amended return. But there are several reasons it may not be worth it. It may open a can of worms. In many cases, amending your federal return means also amending your state returns. Multiply the hassle if the error spans across two or more years. It puts a spotlight on you. While your original return may have passed through the IRS’s automated system without a hitch, now that it’s amended you can virtually guarantee it will get a closer look. If you have anything else in your return that can trigger an audit, like business deductions, charitable donations, or other credits, this can be a concern. It may take a long time to get a refund. The IRS tries to process your original return within three weeks. No such luck for an amended return. It can take several months to get an amended return processed and see that extra refund, even as long as 1½ years in rare cases.... read more

New Parents and Tax Breaks

Five Tax Breaks for New Parents New parents have their work cut out for them. Not only are they dealing with lost sleep, they also face the extra cost of raising a child. At least there are a lot of potential tax breaks available to them. Check out this list and share it with any new parents you know. Child Tax Credit Tax law changes this year not only double the size of the Child Tax Credit, they make it available to more parents than ever before. The credit increases to $2,000 from $1,000 (with $1,400 of it being refundable even if no tax is owed). Meanwhile, the eligibility phaseout threshold increases sharply to $400,000 from $110,000 for married joint filers (and to $200,000 for single taxpayers). Child and Dependent Care Credit If you pay a nanny, babysitter, daycare or a relative to take care of your child while you and your spouse are at work, you can claim the Child and Dependent Care Credit. It’s up to $1,050 on $3,000 in expenses for one child and twice that for two or more children. The key is that you and your spouse (if you are married) must both be working, and you can’t claim expenses for overnight care. Below the kiddie tax threshold If you have property that produces income, such as bonds, stocks, mutual funds, interest or realized capital gains, you can lower your tax by transferring a certain amount of that income to your children. Why? Your child has a lower tax rate than you do on unearned income. This works up to a certain dollar limit... read more

Business Metrics That May Be Overlooked

Overlooked Business Metrics Revenue, gross margin, net profit – these are the basic metrics every small business owner watches closely. But there are also some often-overlooked metrics that can deepen your insight into your business and inform your decision-making. Here are a few: Customer acquisition cost. Divide the total amount of money you’ve spent on marketing over a set period by the number of new customers you’ve gained. The result is your cost per new customer, also known as your customer acquisition cost. To get an even better read, divide your marketing costs into two buckets; one you spend on current customers and one for money spent to acquire new ones. Now your calculation of customer acquisition costs is even more accurate. Compare this figure against prior years to see if you are becoming more efficient. To go a step further, look at how much each new customer spends on average compared with how much it cost to acquire them. Knowing your rate of return for each new customer can help you revise your marketing strategy.   Lead-to-client conversion rate. For many businesses, generating leads is an integral part of the selling process. If this is true for your business, clearly define each step of the sales funnel from lead to purchase. You can judge how successful your sales efforts are over time by calculating how many qualified leads are converted to sales. Remember to use these measures to refine and improve your selling process. Even a tried-and-true conversion process can get tired, but if you are not measuring it you may not know until it is too late.... read more

Summer Vacation

Unconventional Summer Vacation Ideas Summer is often the perfect time for a vacation that provides a mental break and rejuvenates you. The typical idea is to travel somewhere to relax, dine at nice restaurants and see the sights. While the typical vacation can be fun, why not try something new? Here are some unconventional summer vacation ideas that may be rewarding to you and your family: The edu-vacation There are many full-day or weeklong courses centered around a special theme available during the summer months. If you live by or can travel to a major city, you can often find instruction in interesting subjects such as: Cooking Creative writing Dancing Foreign languages Martial arts and self-defense Painting Sculpture Woodworking If you’re closer to wilderness areas, you can often find courses in things like: Camping and outdoor survival Scuba diving Canoeing and kayaking Target shooting and gun safety Whitewater rafting The great thing about an edu-vacation is that it engages your brain and gives you a purpose behind your time off. Not only will your mind be refreshed, you may come away with a new hobby and a memorable experience. The active stay-cation Many people live in interesting places that tourists come to visit, but they don’t ever take the time to enjoy those things themselves. Why not? Try an active stay-cation where you use the time to look at the place you live with fresh eyes. Here are some things you could do: Take a guided tour of your city or a nearby city. Trolley cars and bus tours are geared toward foreign visitors, but you may be surprised... read more

Home Ownership – Tax Benefits

Six Home Ownership Tax Benefits If you own or are considering purchasing a home, you can take advantage of many tax benefits. Here are six of the most commonly used homeowner tax breaks: Mortgage interest deduction. You can deduct the interest you pay in your monthly mortgage bill when you itemize deductions on your tax return. This can be a huge benefit, especially in the early years of a mortgage. That’s because typically about 80 percent of your mortgage bill in your first year of home ownership on a 30-year mortgage goes toward interest. Principal payments typically don’t exceed interest until year 18 of a 30-year mortgage. Note: This benefit is capped to apply to $750,000 in indebtedness for new loans beginning in 2018 ($1 million for loans taken out in 2017 or earlier).   Property tax deductions. You can deduct up to $10,000 in combined state and local taxes. Called the SALT deduction, this can be used to deduct local property taxes, state income taxes, and state and local sales taxes. Closing cost deductions. You can deduct some of the closing costs of a home purchase in the year you buy it. This includes things like real estate taxes and mortgage discount points you pay up front to lower your interest rate over the life of your loan. Because each point costs 1 percent of your total mortgage amount, the tax deduction on these costs can be substantial. Home improvement tax breaks. If you take out a second mortgage or what is commonly called a home equity mortgage and use it to buy, build or substantially improve your... read more

Tax Planning

Tax Planning Time Now is the ideal time to schedule a tax planning session. Your 2017 tax return outcome is still fresh, and it’s early enough in the year to take advantage of the numerous tax law changes taking place in 2018. Here’s a brief overview of some of the new tax issues that you need to plan for now. Income Tax rates for both individuals and small businesses have changed substantially. Income tax deductions have also changed drastically, including a nearly doubling of the standard deduction and elimination of personal exemptions and miscellaneous itemized deductions. It’s important to review your income tax withholding schedule to see where you fall in the new income tax bracket structure. Small adjustments here could save you hundreds.   Bunching Because of the changes to the deductions structure, using itemized deductions may now require bunching two or even three years of expenses into one tax year. Things like donations to charity and medical expenses that you may have spread across several years are now better bunched into a single year to maximize your tax savings. If you typically take care of medical expenses or charitable donations at a regular time every year, hold off this year until you have a new tax-efficient plan. SALT (State and local taxes) There’s now a $10,000 combined total cap on deductions of state and local income, sales and property taxes, which is going to impact a lot of people, especially in high-tax states. This may be a big factor to account for if you’ve relied on this deduction in the past. Get an analysis done to see... read more

Money Management Tips for Couples

Money Management Tips for Couples Couples consistently report finances as the leading cause of stress in their relationship. Here are a few tips to avoid conflict with your long-term partner or spouse: Be transparent. Be honest with each other about your financial status. As you enter a committed relationship, each partner should learn about the status of the other person’s debts, income and assets. Any surprises down the road may feel like dishonesty and lead to conflict.   Discuss future plans often. The closer you are with your partner, the more you’ll want to know about the other person’s future plans. Kids, planned career changes, travel, hobbies, retirement expectations – all of these will depend upon money and shared resources. So, discuss these plans and create the financial roadmap to go with them. Remember that even people in a long-term marriage may be caught unaware if they fail to keep up communication and find out their spouse’s priorities have changed over time.   Know your comfort levels. As you discuss your future plans, bring up hypotheticals: How much debt is too much? What level of spending versus savings is acceptable? How much would you spend on a car, home or vacation? You may be surprised to learn that your assumptions about these things fall outside your partner’s comfort zone. Divide responsibilities; combine forces. Try to divide financial tasks such as paying certain bills, updating a budget, contributing to savings and making appointments with tax and financial advisors. Then periodically trade responsibilities over time. Even if one person tends to be better at numbers, it’s best to have both members participating.... read more

Health Care Coverage Gaps

Handling Health Care Coverage Gaps Health care coverage gaps happen. Whether because of job loss or an extended sabbatical between gigs, you may find yourself without health care for a period of time. Here are some tax consequences you should know about, as well as tips to fix a coverage gap. Coverage gap tax issues You will have to pay a penalty in 2018 if you don’t have health care coverage for three consecutive months or more. Last year the penalty for a full uncovered year was equal to 2.5 percent of your household income or $695 per adult (and $347.50 per child), whichever is higher. The 2018 amounts will be slightly higher to adjust for inflation. Example: Susan lost her job-based health insurance on Dec. 31, 2016, and applied for a plan through her state’s insurance marketplace program that went into effect on April 1. Because she was without coverage for three months, she’ll owe a fourth of the penalty on her 2017 tax return (three of 12 months uncovered, or 1/4th of the year).   While the penalty is still in place for tax years 2018 and earlier, it is eliminated starting in the 2019 tax year by the Tax Cuts and Jobs Act. Three ways to handle a gap There are three main ways to handle a gap in health care coverage:   COBRA. If you’re in a coverage gap because you’ve left a job, you may be able to keep your previous employer’s health care coverage for up to 18 months through the federal COBRA program. One downside to this is that you’ll have to... read more

Tax Cuts and Jobs Act … Changes for 2018

Tax Cuts and Jobs Act Update The Tax Cuts and Jobs Act (TCJA) was passed by Congress in a hurry late last year, and the IRS has been working to implement the changes for 2018. Here are the latest answers to some of the most common questions about the tax overhaul:   Is home equity interest still deductible? The short answer is: Not unless you’ve used the money to buy, build or substantially improve your home. Before the TCJA, homeowners were able to take out a home equity loan and spend it on things other than their residence, such as to pay off credit card debt or to finance large consumer purchases. Under the old tax code, they could deduct interest on up to $100,000 of such home equity debt.       The TCJA effectively writes the concept of home equity indebtedness out of the tax code. Now you can only deduct interest on “acquisition indebtedness,” meaning a loan used to buy, build or substantially improve a residence. If you took out a home equity loan pre-2018 and used it for any other purpose, interest on it is no longer deductible.   I’m a small business owner. How do I use the new 20 percent qualified business expense deduction? Short answer: It’s complicated and you should get help. Certain small businesses structured as sole proprietors, S corporations and partnerships can deduct up to 20 percent of their qualified business income. But that percentage can be reduced after your taxable income reaches $157,500 (or $315,000 as a married couple filing jointly). The amount of the reduction depends partly on... read more

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