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A tremendous way to use leverage in a wealth strategy is with reporting.
As I've shared before, reporting is often underutilized in a wealth strategy because it is perceived as too complicated or too confusing.
The Balance Sheet and Profit & Loss Statement (also referred to as the Income Statement), are basic reports included in every accounting software.
These reports are necessary when it comes to tax planning and tax returns, but they aren't very helpful when it comes to analyzing...
•An Additional Step to Consider Before Investing in Real Estate in Your IRA
I recently shared two key steps to do before investing in real estate in your IRA.
Step #1: Understand the Special Tax Treatment Rules for IRAs Only certain types of income receive special tax treatment.
Step #2: Understand the Type of Income Your Real Estate Will Generate Real estate can generate many types of income - some types receive the special tax treatment and others don't.
These two steps help create a clearer picture of the tax consequences to your IRA.
But, of course,...
•Two Overlooked Issues with Real Estate in an IRA (Individual Retirement Account)
Two Overlooked Issues with Real Estate in an IRA (Individual Retirement Account) I've recently been sharing steps to consider before investing in real estate in your IRA.
There are layers and layers of complexity when it comes to this topic. Right now, I'm going to wrap it up with two commonly overlooked issues when it comes to real estate in an IRA.
When I create a wealth strategy with a client, two components I always discuss are:
1 - How will they use leverage in their wealth...
•2 Key Steps to Take Before Investing in Real Estate in Your IRA
To put it simply - there is a lot of confusion in this area.
This week, I'll share 2 Key Steps to Take Before Investing in Real Estate in Your IRA.
While I'm focusing on the U.S. tax law here, the approach can be applied to retirement plans in other countries as well.
Step #1: Understand the Special Tax Treatment Rules for IRAs IRAs receive special tax treatment on certain types of income.
The special tax treatment is that the income is not taxed currently. In the case of a...
•3 Step Approach to Maximizing the Magic of Depreciation in Rental Real Estate
As I shared last week, real estate is one of the most complex areas when it comes to tax law and accounting which can easily lead to mistakes.
A common mistake I see with rental real estate is the amount of depreciation taken.
If you've ever heard me talk about depreciation, then you know I think depreciation is like magic. Rental real estate can be depreciated, and when done properly, it can take rental real estate with positive cash flow and turn it into a loss for tax purposes.
That...
•Avoiding the Traps of Accelerated Depreciation
It's common to break out land and building in a rental property for depreciation purposes, but there are many more components to consider. These additional components may include appliances, parking structures, landscaping, furniture, fixtures, and much more. Most importantly, these additional components can be depreciated much faster than land and building.
The result is accelerated depreciation which means more depreciation can be taken sooner.
I think depreciation is like magic. When...
•When is the Perfect Time for Your Tax & Wealth Planning?
? This week, I'm on to the next habit:
Habit #3:
Don't put off until tomorrow what you can do today
We've all heard this adage before. And let's face it, when it comes to taxes, most people are happy to put things off until later.
The reality, though, is it is crazy to put off anything you can do today to reduce your taxes. Every day you delay your tax planning represents money you are unnecessarily giving to the government that you could be putting in your pocket.
That is why now is...
•How the Little Things Can Add Up to Big Tax Savings
The last few weeks I've been sharing how to create habits that enable you to use your taxes to build your wealth.
Here are the habits I have shared so far:
Habit #1: Avoiding tax advice that is for the general population
Habit #2: View every day as an opportunity to reduce your taxes
Habit #3: Don't put off until tomorrow what you can do today
Last week I shared that those who stay organized throughout the year are more successful at reducing their taxes than those who don't.
This goes...
•Another Year End Tax Planning Tip to Avoid
This time of year, the media starts to focus on taxes and what "you" can do to reduce your taxes before the end of the year. This tax advice is geared toward the general population.
Last week I went through the example of maximizing a retirement plan contribution and how that was tax advice for the general population and not for business owners and investors. There are better ways for business owners and investors to reduce their taxes.
Making it a habit to avoid tax advice that is for the...
•How to Use Taxes to Build Your Wealth
Yesterday, I spoke at a fantastic event and I had many people come up to me afterwards telling me they have never heard anyone so passionate about taxes.
For me, it is easy to be passionate about taxes because taxes are a tremendous tool when it comes to building wealth - and I love to share this information with others.
Over the next several weeks, I will share how to create habits that enable you to use your taxes to build your wealth.
Last week I shared how your habits can actually cause...
•What is Your Reporting Wish List?
? For business owners or investors, information is a valuable resource.
Information is valuable when it provides data and details that help you make business and investment decisions. And it's even more valuable when it comes in a format that is easy to understand.
This is what reporting should be - the communication of information in an easy-to-understand format.
As I shared last week, many people shy away from reporting because the reports they typically get don't provide the information...
•Protecting Your Business and Investments from Embezzlement
The difference between those who are successful at building permanent wealth and those who aren't is how they use their resources.
The last few weeks I have been sharing the resources I see used incorrectly or not at all in a wealth strategy. If you missed these reports, you can read them now in the Wealth Strategy section.
Protecting Your Wealth
As part of running a business and growing an investment portfolio, most business owners and investors understand the importance of creating and...
•Why Didn't My Accountant Tell Me That?
? I shared that the difference between those who are successful at building permanent wealth and those who aren't, is how they use their resources. The resource I used as an example last week is one that everyone has - YOURSELF.
Many of you got the concept of focusing on tasks you enjoy to maximize the results of your personal efforts in your wealth strategy. You also had one very important follow up question:
What do I do with those tasks in my wealth strategy that I don't enjoy doing?...
•Inflation: The Hidden Tax
I refer to inflation as a hidden tax because it can dramatically increase a person's taxes without that person ever realizing just how much more in taxes they are paying because of inflation.
Inflation is the increase in price of goods and services over time. I was reminded of this recently at the car wash when I saw one of my favorite childhood treats - a Chick-0-Stick. When I was a kid, I could buy a big Chick-0-Stick for $.05. Today the price was $.25 and the size of the candy was about...
•The Resource that is Used Incorrectly on a Daily Basis in Wealth Strategies
The difference between those who are successful at building permanent wealth and those who aren't is how they use their resources.
This week I'll share another resource that I see used incorrectly in wealth strategies on a daily basis. Let me start by asking you a question:
How many agreements have you made today? On an average day, you probably make at least a hundred or more agreements.
When people hear the term "agreement," they usually think of a formal written agreement. The...
•Take Action in Your Wealth Strategy
What will you do today that will have a positive impact on your wealth strategy?
Many people think of a wealth strategy as a project that you tackle once, you dedicate a period of focused time on it, and then you are done.
This is not the case! At least not with the most successful wealth strategies. A wealth strategy is a way of life. The actions you take to create, build and enjoy your wealth must become part of your day-to-day routine.
A wealth strategy isn't a big "to-do" hanging...
•Your Retirement Plan and Your Wealth Strategy
Last week I shared the different types of capital that can help get you started on your wealth building.
One of the most popular questions I receive during these monthly coaching teleconferences is:
I want to use the money in my retirement plan for a specific investment. Should I make the investment inside my retirement plan or should I distribute the money from my plan and make the investment outside of my retirement plan?
My answer? It depends! It depends on several factors.
A Few...
•Your Tax Strategy and Your Tax Return
The last few weeks I have been sharing the details behind my list of 5 Planning Tips for After April 15th. This week I'm sharing the details behind:
Planning Tip #5:
Get your tax return done If your return is on extension, it's time to get it done. Most people don't look forward to the preparation process which makes it tempting to procrastinate. But your tax return is a tremendous tool in your tax planning so getting it done sooner may mean paying less tax sooner.
BUT, if you do not...
•Your Tax Strategy Questions Answered
Last week I shared that if you do not have a tax strategy yet, then you definitely want to get your tax strategy done before you file your tax return.
I also shared that a strategy is a step-by-step action plan that ensures you are paying the least amount of tax allowable by law, regardless of your business or investment situation.
I received questions from many of you asking me to explain the idea of a tax strategy even further. In fact, there were so many requests for the answers to these...
•The Strategic Way with Estimated Tax Payments
The last few weeks I have been sharing the details behind my list of 5 Planning Tips for After April 15th.
This week, I'll share the details behind:
Planning Tip #4:
Track your estimated tax payments On the next income tax return you file:
Will you have a refund? Will you owe tax? Are you not sure where you stand?
If you know where you stand, then you are on the track. If you don't know where you stand, then it's time to get on track - even if you won't file your next tax return for...
•Starting Your Wealth Strategy with Little or No Capital
Last week I shared how a wealth strategy can answer your investment questions.
But what happens if you are ready to get started on your wealth strategy and don't have a lot of income to invest?
This question comes up often when I am speaking to those interested in developing a wealth strategy. They usually think they must wait until they have "enough" money to get started. They are always pleasantly surprised when I tell them that they can create and implement a wealth strategy without any...
•Is This a Good Investment?
? One of the most common questions I get from the participants in my monthly tax and wealth coaching teleconferences is, "Is XYZ a good investment?"
XYZ may be storage units, gold, international funds, mobile homes, businesses, commercial real estate, you name it.
The answer I give to each participant is the same. It depends.
It depends on your personal wealth strategy.
The Magic of a Wealth Strategy
The magic of creating a personal wealth strategy is that you can answer all of your own...
•How Your Company Book Can Protect Your Tax Savings
This week I'll share my third planning tip, but before I do, I want to share a very important item that could significantly impact your tax planning:
If the IRS believes that your tax planning doesn't meet their standards, then they can fine you an amount equal to 40% of the tax they think you should have paid.
This is a new law included in the health care reform. While the passing of the health care reform dominated the news, nobody talked about this one "little" law that could have the...
•A Planning Success Story
When it comes to planning for financial purposes, most people know they need it, and yet still don't take action to do it. A great example of this is with estate planning.
Nobody wants to think about dying, let alone prepare for it. Those who do prepare make things so much easier on the loved ones they leave behind. One such person was a good friend and client of mine.
George & Mary
George (not his real name) was a physician. He and his wife lived very happily for many, many years....
•Implementing the Tax Recommendations from your CPA
This week, let's get into the details of the first one.
Planning Tip #1:
Implement the tax recommendations from your CPA
When my team prepares a tax return, we are not just focused on that one year. We are also looking for tax saving opportunities in future years. Now is the ideal time to discuss these opportunities with your CPA.
Tax Saving Opportunities to Discuss with your CPA
Here are just a few of the tax saving opportunities we recommend to clients after preparing their tax...
•Building a Business Around Your Wealth
This week, my group wealth coaching teleconference focused on building a wealth team for your investing.
The team concept is often missed by investors. Many investors ask me, "Why do I need a team when I can do it myself?"
My response is always the same:
The 3 most expensive words in the English language are do-it-yourself.
Having a team brings leverage and velocity to investing which leads to better and faster results. This is what businesses do. They build a team with their employees,...
•How Reducing Your Taxes Can Prepare You for an Audit
Another big reason many people dread the tax return process is the fear of an audit.
I've seen people give up thousands in LEGAL tax savings in an effort to hopefully reduce their audit risk, and many times at the advice of their own tax preparer!
I regularly have new clients tell me their prior tax preparer told them not to take a particular deduction because the deduction wasn't worth the audit risk.
I'm always shocked when I hear a tax preparer recommends not taking a legal tax deduction...
•3 Quick Tips to Make Sure You Are Ready for the April 15th Deadline
April 15th is right around the corner. Are you ready?
Here are 3 quick tips to make sure you are ready for the deadline.
Quick Tip #1:
Now is the Time to File an Extension
If your tax return is not completed yet, it is time to file an extension!
Extensions are a great tool in a tax strategy. Tax returns that are prepared in a hurry are more likely to have mistakes. While it may be tempting to just get it done, you definitely want to make sure you give your CPA time to analyze your tax...
•What Steps Does Your Tax Return Preparer Take to Reduce Your Audit Risk?
? The last few weeks I've been sharing questions that you can ask your tax preparer to determine whether or not your tax preparer is right for you.
Does reading this question make you wonder if your tax preparer is doing everything possible to reduce your audit risk?
Many people have a fear of being audited. Here are some common concerns I hear:
They are worried their tax return has errors They are concerned about being able to provide the required information They fear the cost. Most...
•Is Your Tax Return Preparer Taking the Right Steps to Minimize Your Taxes?
? What Steps Are Taken to Minimize Your Taxes? When most people hear this question, they usually wonder, "Isn't my tax preparer already doing everything possible to reduce my taxes?"
Of course, everyone would like to assume their tax preparers are doing everything possible to legally reduce their taxes, but that is not a safe assumption.
Here are just a few things to look for to determine if your tax preparer is taking the steps to minimize your taxes.
Are missing deductions identified?...
•What is Your Investment Criteria?
? They are in your mail, your email, your drive to the office, your meetings, your lunch conversations and even at the weekend get together. They are everywhere! What are they? They are investment opportunities!
You probably get a steady flow of investment opportunities coming your way and if you are like most, you scratch your head wondering how people have the time to look at all these opportunities.
You may toss these opportunities aside because you don't have the time to deal with...
•Take the Dread Out of the Tax Return Process
Do You Dread the Tax Return Process?
While few people look forward to filing their tax returns, many people truly dread it.
If you are in the group that dreads it, figuring out why you dread the process can actually unlock potential tax saving opportunities.
I come across two major reasons people dread the tax return process:
Reason #1: Gathering the Information
Many people dread the process of gathering all their tax information because it can be a tedious process that can take hours....
•3 More Myths About Tax Return Preparation
Copyright (c) 2010 Tom Wheelwright
As someone who has been involved in the tax return preparation process for 30 years, I've heard many myths about tax preparation. I shared a few of these myths last week and this week I'm ready to share a few more.
Myth #1: A Refund is Great News You've probably heard some tax preparation firms brag about how many of their customers receive refunds, or the average size of their customers' refunds.
Isn't this great news? Well, I'm not sure. A refund can...
•The First Step to Creating a Wealth Strategy
Copyright (c) 2010 Tom Wheelwright
Last week I shared 3 tips on how to get your wealth building on track in the New Year.
Where Will Your Wealth Take You? Most people dream about being wealthy or play the lottery in hopes of winning millions, but few people actually have a strategy to achieve their dreams of wealth.
I hear many reasons as to why someone doesn't have a wealth strategy:
They don't really know what a wealth strategy is They don't know how to get started They think they need...
•Every Day is an Opportunity to Reduce Your Taxes
Copyright (c) 2009 Tom Wheelwright
Our taxes are impacted any time we receive or pay money, and we have a lot of control whether that impact is positive or negative.
Here are a few things many of us will be doing over the coming holiday weekend and how they can impact our taxes.
What Are You Doing This Weekend That May Impact Your Taxes?
#1 Traveling
Travel always brings the opportunity to reduce your taxes by turning your travel expenses into legitimate business deductions. If you've...
•5 Tips to Planning Your Holiday Travel with Your Tax Strategy in Mind
Copyright (c) 2009 Tom Wheelwright
With the holidays right around the corner, many of us are making holiday travel plans. As you are making your holiday travel plans, identify opportunities to integrate your holiday travel plans with your tax strategy - legally!
Tip #1
Spend more than 50% of your time during each 8-hour day on business activities and you can deduct 100% of your travel expenses. This means you can deduct all of your travel expenses if you conduct business from 8 AM to 1 PM...
•How to Capture the Opportunities to Reduce Your Taxes
Copyright (c) 2009 Tom Wheelwright
Knowing how your daily activities can reduce your taxes is a great start to actually reducing your taxes. Once you've done this, it's time to make sure the opportunities you've identified actually reduce your taxes and the best way to do this is with your bookkeeping.
Bookkeeping is a fantastic and powerful tool when it comes to reducing your taxes. Remember, our taxes are impacted any time we receive or pay money. Bookkeeping is where all this activity...
•3 Reasons Everyone Needs an Estate Plan
Copyright (c) 2009 Tom Wheelwright
Estate planning is a task that commonly gets pushed to the back burner. Why? The reason I hear most often is not a good one because it's based on a terrible misconception.
Here is the terrible misconception:
I do not need to do estate planning right now because it's not taxable.
Now, it is true that an estate is not taxable if it falls under a certain threshold. That threshold is currently $3,500,000. Many people hear this number and instantly think...
•Applying the New Tax Law to Your Taxes
Copyright (c) 2009 Tom Wheelwright
With the end of the year just around the corner, the new law may provide you with additional tax saving opportunities.
In this report, I'll share the 2 most popular tax breaks in the new law and how they apply to your taxes.
Tax Break #1: First-time Home Buyer Credit Background information The first-time homebuyer credit is one of the most popular tax incentives in recent years. When originally enacted, the credit was limited to $7,500 ($3,750 for a...
•Year-End Tax Planning Tips You May Want to Avoid
Copyright (c) 2009 Tom Wheelwright
It's that time of year when we get bombarded with year-end tax planning tips. You'll see them on the web, in the newspaper, on television, and just about everywhere you look. I read a top 10 list this morning that made me cringe! Why? Because the tips given didn't consider the potential conflict with other personal and financial goals.
Here are the top 2 I see in just about every list:
#1 Buy Something This is the tip I hear most often that quite...
•Year-End Checklist for Business Owners and Investors
Copyright (c) 2009 Tom Wheelwright
Last week I shared a few items from the year-end checklist my team and I use with clients who own rental real estate.
Year-End Checklist for Business Owners and Investors
As I promised last week, this week I'm sharing a couple of items that apply to both business owners and real estate investors. Here they are!
#1 Get Your Books in Order
Do you view your bookkeeping as a necessary evil? As something you have to do so you can file your tax return? If...
•Tax-Free Rental Income
Copyright (c) 2009 Tom Wheelwright
Real estate is one of my absolute favorite areas in the tax law. Why? Because there is so much flexibility in how to do things in order to legally maximize the tax benefits available.
Did You Know You Can Receive Rental Income Tax-Free?
Of course, there are specific rules behind this permanent tax saving strategy. I find that after I go through the rules with my clients, we usually find a way to use this strategy - legally - and it creates another...
•Year-End Checklist for Rental Real Estate
Copyright (c) 2009 Tom Wheelwright
As I mentioned last week, real estate is one of my absolute favorite areas in the tax law because there is so much flexibility in how to do things to legally maximize the tax benefits available.
Real estate is also one of the most complex areas of the tax law. This makes it easy to overlook important steps, which can lead to missing out on tremendous tax savings.
I recommend reviewing your tax strategy throughout the year, particularly as it relates to...
•Why Having No Estate Tax May Not Be a Good Thing
Copyright (c) 2009 Tom Wheelwright
I don't need estate planning because my estate is not taxable.
As I've shared over the last few weeks, estate tax planning is only one part of estate planning. And while it's true that an estate with less than $3,500,000 in value is generally not subject to estate tax, there is still a need for estate planning.
I've been thinking a lot about the reaction I get from clients and prospects when we talk about the estate tax. The reaction that is most...
•3 Ways Partnerships Give Your Tax Strategy Maximum Flexibility
Partnerships are extremely flexible entities which makes them incredibly powerful in a tax strategy. Flexibility in a tax strategy is key because things change! I've studied partnerships for over 30 years and there are hundreds of ways to use them to provide maximum flexibility. I've picked 3 of my favorites to share here.
Here is a common scenario I see in businesses with more than one owner.
When the business starts, the owners have a profit sharing structure in mind, let's say it's...
•An Opportunity to Convert to a Roth IRA in 2010
If you have ever heard me speak on tax or wealth strategies, you've probably heard me say that I am not a big fan of 401(k)s or IRAs.
One of the reasons I am not a big fan of Traditional IRAs and 401(k)s is because they only defer tax. While tax deferral can be helpful in a tax and wealth strategy, the best type of tax planning is tax elimination which creates permanent tax savings.
This often leads to the question: What about a Roth IRA? If I have to pick between a Roth IRA and a...
•3 Ideas for Business Financing in a Tough Market
One of the key parts of a successful wealth strategy is using leverage. Leverage can take on many different forms - leveraging your time, leveraging your contacts or leveraging your knowledge.
The form of leverage most people are familiar with is a loan, which is a way to leverage your assets. Leverage in this case may be a mortgage on a piece of property or a line of credit in your business.
Many wealth strategies include a business, and having financing available in that business is a...
•The 2 Questions Every Business Owner Needs to Know How to Answer
Owning your own business is one of the great American dreams. Those of us who own a business know that it comes with headaches and problems, but we cherish the good we can do as well as the people we meet and the freedom that our business can provide, both in time and money.
None of us who owns a business is in it just for fun. We want to profit - both now and in the future, which leads to the 2 questions every business owner needs to know how to answer:
Question #1 How can you maximize...
•The Benefits of Setting Financial Goals
If you don't know how much you are saving or when you will be able to retire, it's time to look at the benefits of setting financial goals. It's important to look at what your future plans are, how much you can contribute to them, and how you plan to manage and grow your wealth. By working with a financial advisor to formulate a plan, you can be secure in the knowledge that your investments are growing appropriately and that you will be able to retire comfortably when you are ready.
Financial...
•Your 15-point tax-return checklist
It's time to start thinking about getting those taxes done. Maybe you're in a panic. Not to worry. Just follow Tom's 15 steps to getting your taxes done, and you'll be much happier. Ready? Here they are:
-Get serious Unless you're focused, you're going to see that receipt six times rather than the once you need. This is all mental now. Schedule a time to get to work and commit to that time. Then . . .
-Get started Remember that commitment to get to work? Keep it! This step requires action....
•Top 3 Incorrect Uses of Like-Kind Exchanges
A like-kind exchange, also referred to as a 1031 or Starker exchange, allows a taxpayer to defer paying tax on the sale of a property. Like-kind exchanges are wonderful and powerful tools to use in tax and wealth strategies, but ONLY when used correctly.
If like-kind exchanges are used incorrectly, the result is not just an increase in taxes, but also a slow down in the ability to build wealth. Here are the top 3 ways I see like-kind exchanges used incorrectly:
#1 Not Following the Rules...
•Exploding the Myths of Financial Health in a Recession
The hot topic on everyone's mind right now, including radio, television and print media is how to cope with the current recession. A lot of the analysts and talking heads are recommending that businesses and investors pull back, reduce their expenditures, create a budget and save their money.
This is the worst advice possible in recessionary times, or any other time, for that matter. Think about what you are doing when you reduce, budget and save. You are very effectively limiting your...
•3 Questions to Evaluate the Internal Controls in Your Business and Investing
Here are 3 questions to help you evaluate your internal control system.
Question #1: Who opens the bank statement? The monthly bank statement for your business and investments is a great tool to reduce the opportunity for embezzlement.
Think about this scenario:
Your bookkeeper receives the bank statement, opens it and does the reconciliation on time, each and every month. While it is fantastic that the bank account is reconciled timely each month, think about the opportunity for...
•Tax Saving Entity Structures
I find that most people have a good grasp of the basics when it comes to entities, but are often missing the little things that can have a huge impact (good and bad) on tax savings. I have a real-life story that captures this well.
Pierre is starting a business and calls his tax preparer to ask what type of entity he needs for his business. Pierre's tax preparer responds with what Pierre refers to as "confusing accountant talk," but Pierre is able to translate enough to learn that S...
•Why You Must Change Your Mindset Before You Can Reduce Your Taxes
Studies show that most of us live our entire adult life based upon the things we learned and especially experienced while we were young. Whether it is our eating habits, exercise or how we relate to others, most of our adult behavior stems from our experience and teachings as a child.
Anytime we want to make a successful change in our lives, we have to start by changing our mindset. Especially when it comes to taxes!
Here is Why You Must Change Your Mindset First Most people have the...
•Reducing Your IRS Audit Risk
Are tax returns really the commodity that they are often perceived to be? Is a tax return prepared by the tax service in the mall of the same quality as that prepared by a major CPA firm?
What does it mean to have a "quality" tax return? In fact, can a tax return be prepared in such a way as to reduce income taxes or reduce audit risk?
As someone who has been involved in the tax return preparation process for almost 30 years, let me share some thoughts on this subject.
In all the firms and...
•How to Turn Your Investing into Something You Like to Do
The secret to determining the type of investing that is right for you is to find the type of investing that best matches what you like to do.
What Do You Like to Do?
It may seem odd to dive deep into self-analysis when picking your type of investing, but it is the foundation of the concept of turning your investing into something you like to do.
Make a list of the activities you love to do. These may be your favorite hobbies, your favorite household duties or the tasks you really enjoying...
•Don't Drive By This Tax Deduction!
One of the most common tax deductions I see missed on a regular basis is the tax deduction for the business use of a personal vehicle.
When I meet with new clients and discuss this deduction, I hear all sorts of reasons as to why they haven't taken this deduction:
They didn't know they could They don't use their vehicle that much for business They were told that since it was a personal vehicle, it couldn't be deducted They thought it was a red flag for an audit
The truth is, anytime your...
•Is Your Investing a Business or Just a Hobby?
? I'm constantly teaching and sharing the concept of building a business around your wealth. What does this mean? Let's start with a little background.
Historically, all great fortunes have been built in business. Whether it was Andrew Carnegie, John D. Rockefeller, Bill Gates or Warren Buffett, all great fortunes have business as their foundation.
You really don't hear about great fortunes being made by investors. Ever wonder why? It's because business done right provides the most...
•What Are Reasonable Wealth Goals?
? Avoid These 5 Traps if You Want Your Wealth Goals to Stay on Track (1/30/09)
Several of you asked me about this trap, and wondered if I was saying it was okay to set your goals low? Absolutely not! Your goals need to be set high, they just need to be reasonable.
Let me give you an example of what I mean.
Person A & Person B have the same goal. Each has $100,000 to invest and wants to turn it into $1,000,000 in 5 years. Now, this requires an average annual rate of return of 58%.
Is...
•Avoid These 5 Traps if You Want Your Wealth Goals to Stay on Track
More than 50% of New Year's resolutions have already been abandoned and we are barely in to February!
My fitness training coach just shared this statistic with me. Of course, his focus was on fitness resolutions, but the same holds true for all resolutions. In fact, the same things that throw people off track with their fitness goals throw them off track with their wealth goals.
Here are the 5 Traps to Avoid if You Want Your Wealth Goals to Stay on Track:
- #1 Winging It - Winging it...
•Top 3 Reports Every Business Owner and Investor Must Have
A question I commonly hear is what reports should I use for my businesses and investments? I have several customized reports I use, but today, I'm going to share the 3 standard reports I use - these are reports that can be pulled from my accounting software. I use QuickBooks but these reports are standard in all accounting software packages.
- Report #1: Statement of Cash Flows -
Where does my cash go?
Does this question sound familiar? Many business owners and investors are constantly...
•The Big Reporting Mistake
What I find missing most often in wealth strategies is reporting. I find it amazing how so many people think they don't need reporting. Some think they will be so successful that they don't need a report to tell them that. Others think that reporting is just for their accountant to do their taxes. And, others think they aren't big enough to need reporting.
I heard from many of you asking if you really needed reporting, and my resounding answer to all of you is YES!
Whether you have 1...
•5 Reverse Tax Planning Tips
What is Reverse Tax Planning? Normally this focuses on reducing taxable income and taxes. Reverse tax planning does the opposite and may actually increase taxes. Why is this a good thing?
If someone is usually in a high tax bracket and experiences an off year in which taxable income is low, then it means there is opportunity to use lower tax brackets. Reverse tax planning focuses on using the lower tax brackets so they don't go to waste!
I have heard from many of you looking for more...
•Scarcity v. Abundance
There are two schools of thought about money. One is that we need to protect our money, save it for a rainy day, because there is a limited amount of it. In other words, money is scarce. Opportunities are also scarce, so we need to protect the opportunities we have, keep them to ourselves, and never share. This is the theory of scarcity. Since there is only so much to go around, we better protect what we have and keep it to ourselves.
The other school of thought is that there is a...
•3 Tips to Start the New Year with Your Wealth Building on Track
It's that time of year when resolutions are made. If you are one of the many who have a resolution that involves your finances, you'll want to read this article. Studies show that less than 50% of resolutions are kept so it's vital to get started on the right track.
3 Tips to Start the New Year with Your Wealth Building on Track:
#1 - Keep Your Goals Realistic. Starting with an unrealistic goal is a sure way to guarantee failure. An unrealistic goal will drain you of all your motivation...
•3 Tips for Moving Your 401(k) to an IRA
3 Tips for Moving Your 401(k) to an IRA In today's business world, people should expect to change employers a few times before retiring. When you change employers, it is common to be asked if you will keep your 401(k) with your former employer or roll it into an IRA.
- Here Are 3 Tips to Make Your Transition Easier -
* Tip #1: Are you happy with the amount of money your investment is earning in your 401(k)? If you answer yes, then leave your 401(k) where it is. If you answer no, then...
•3 Reasons Why You Need to Know the Basics of Bookkeeping
One area that almost all of my clients and prospects need to increase their knowledge on is bookkeeping. The issue? They don't understand the rules of bookkeeping. After all, they aren't accountants.
Most clients and prospects start out by asking what they should do with their bookkeeping. It's often followed by some nightmare story - they tried doing the bookkeeping themselves and it was a mess, or maybe their bookkeeper didn't get things quite right. Either way, it's an area that most...
•Rich v. Wealthy: The BIG Difference
Is There a Difference Between Being Rich and Being Wealthy?
I have often thought over the past couple of years about the difference between being rich and being wealthy. Is there a difference? If so, what is it? And how do we become wealthy?
It seems to me that there is a big difference between being rich and being wealthy.
When I think about someone who is rich, I think about someone with a lot of money. And I typically think about someone who is quite showy with their money. They drive...
•True or False: High Income = High Wealth
Do you think making more money means having more wealth? Many people do because it seems logical that high income would translate to high wealth.
This is not true!
Do you know people who make a lot of money from their business or their job but never seem to have any money? Or maybe they have money, a luxurious house and fancy toys, like expensive cars and boats, but they still have to go to work every day to make ends meet?
While these people have high income, they have very low wealth....
•The BIG Passive Income Mistake!
I've been speaking at several seminars this fall. My topic of choice is wealth strategies because wealth strategies cover it all - not just wealth, but taxes and business too. Plus, the topic of wealth strategies takes me all over the world to speak because wealth strategies cross over international borders. I just returned from Canada last week and next month I'm on my way to Sydney, Australia.
- The Big Passive Income Mistake -
At the last seminar I spoke at, I met a gentleman with a...
•The Tax Return Trap
Today my team and I are wrapping up the month of October with our annual Halloween office party. It's a nice way to end the month, which is always one of the busiest months at the ProVision office. One of the reasons October is always a busy month is because of the October 15th tax deadline. It's one of the biggest deadlines because for many, it is the absolute last date to timely file many types of returns.
It is always in October that I see people stuck in The Tax Return Trap!
What Is...
•How to Use Leverage in Today's Economy
Many of you were surprised that there were tax law changes included in the Emergency Economic Stabilization Act of 2008 because most of the coverage has focused on what the Act is intended to do for the economy, specifically, helping the credit markets get back to lending.
One question I have been getting recently is...
How do you keep your wealth strategy moving forward when it's more difficult to get that business loan or real estate loan?
If you have ever heard me speak about creating...
•The Financial Markets Rescue Bill and How it Impacts Your Taxes
Earlier this month, the President signed into law the Emergency Economic Stabilization Act of 2008. The financial markets rescue plan is one of the main components of the new law, but the new law also includes over 100 tax provisions!
HOW THE NEW LAW IMPACTS YOUR TAXES:
Here are a few of the highlights to help you determine how your taxes are impacted:
- Mortgage Forgiveness Debt Relief Act of 2007 Extended This mortgage forgiveness law, enacted in late 2007, was originally set to expire...
•The BIG Secret to Creating Wealth and How to Take Action and Not Be a Statistic
- The Big Secret to Creating Wealth -
The big secret really isn't a secret. Many of you will read this big secret and think to yourself, "Of course! I know that! Tell me something I don't know!"
The big secret to creating wealth is...take action now!
If you did something every day to positively impact your wealth, how much wealth could you build in the next 30 days? In the next 60 days? In the next year?
And while many people know this big secret, very few actually follow it.
Only 83...
•Where Is Your Wealth?
? Where is Your Wealth?
I have been speaking at several seminars lately on the topic of building permanent wealth. One of my favorite things about speaking at seminars is talking with the participants one-on-one. In just the past few weeks I've met hundreds of people with diverse backgrounds, various educations and different professions. All of them wanted to know how to build permanent wealth. And much like those of you I heard from last week, they wanted to know exactly what they needed...
•2 Ways to Put Your Children's Money to Work
Recently I've been sharing tax strategies related to getting your children in the game and on your payroll. Now that you've put your children to work, the next step is to put their money to work!
There are many ways your children can put their money to work. Here are two of those ways:
#1 Have Your Children Pay for Their Extras
One thing most parents agree on is that children can be expensive! All the extras add up - sports, lessons, toys, games, the latest gadgets. All parents know...
•Tax Elimination, Wealth Strategies and Your Children
Tax elimination is my favorite type of tax planning because it permanently reduces taxes. A lot of tax planning is focused on just temporarily reducing taxes, this means you pay less tax today but will pay more in the future. In other words, the tax is just being deferred. Tax deferral has its place in a tax strategy but first I like to look for ways to eliminate tax and create permanent tax savings.
- How to Create Wealth with Tax Elimination Strategies -
Even greater than the tax...
•Put Your Children to Work and Reduce Your Taxes
What Can Your Children Do For Your Business?
As a parent, I'm always looking for ways to teach my children life long lessons about money. One of the best teaching tools I have found is money! What I really like about money as a teaching tool is not only its effectiveness in teaching my children, but also its effectiveness in reducing my taxes!
In a recent article, I asked you to think about this question:
What Tasks Can Your Children Do For Your Business?
What tasks did you come up with?...
•The Biggest Mistake With C Corporations and How to Save Taxes Using the C Corporation Double Tax
When used correctly, C Corporations are a great way to supercharge a tax strategy. I find that when my clients make the most of their C Corporations, they reduce their taxes by a minimum of $10,000 every year.
- The Biggest Mistake With C Corporations -
The key to saving $10,000 in taxes every year is knowing how to use a C Corporation correctly. When I meet with prospects and review their prior year tax returns, it's not unusual that I find a C Corporation that isn't being used correctly....
•New Tax Legislation Could Save Dentists $$Thousands$$ in 2008
New Tax Legislation Could Save Dentists $$Thousands$$ in 2008 Have you thought about upgrading your equipment to the newest industry standards but were afraid of the cost? Or perhaps you want to improve your office to make it more comfortable for your patients? Do you need to upgrade your reception area to make it more efficient for your administrative staff or look nicer for your patients?
If you have been thinking about any of these improvements for your practice, consider that if you...
•5 Questions for Your Mid-Year Tax Planning
When I coach clients on their tax strategy to legally reduce their taxes, many of the strategies require monitoring throughout the year. The monitoring serves two primary purposes:
#1 To Monitor the Numbers
Many tax strategies are based on income and expenses being at certain levels. It is not uncommon for these numbers to change during the year. Certain changes can impact the effectiveness of the tax strategy so it is critical to know if the numbers change so changes can be made to the...
•Mid-Year Tax Planning: Do You Need to Add an Entity?
? Do you need to add an entity to your tax structure?
This is such an important question for mid-year planning because knowing the right time to add an entity to your tax strategy can often save as much as $10,000 per year in taxes!
What entity should you consider adding to your tax structure?
Many of you want to know what entity you should consider adding to your tax structure. There are 2 levels of tax planning to consider in answering this question.
** Level #1 **
This level is for...
•Standard Mileage Rates Are Increasing: Find Out How Your Home Office Can Help You Deduct Even More
Standard Mileage Rates Are Increasing: Find Out How Your Home Office Can Help You Deduct Even More With gas prices on the rise, the IRS has announced an increase in standard mileage rates effective July 1st. For business miles, the rate is increasing from 50.5 cents per mile to 58.5 cents per mile.
Who is impacted by this increase?
- If you reimburse your employees or are an employee that gets reimbursed for mileage, be sure the rate is the increased rate as of July 1st (assuming your...
•3 Rules to Simplify Your Recordkeeping for Business Travel
Summer is here and for many of us that means summer business trips. I love traveling for business. It usually means I'm on my way to speak at a seminar in a great location. But, my least favorite part about business trips is keeping track of all of my receipts.
I use to come home from a business trip and find my receipts in various places over the next several days (or weeks!). Some I would find in my wallet, others in my briefcase, more in my coat pocket, some in my car and with all of...
•Meals & Entertainment: What Is Deductible and What Is Not?
? Probably the most common business deductions are meals and entertainment. However, people are often confused about whether the expenses are fully deductible, partially deductible or not deductible at all.
50% Deductible
The general rule for deducting meals and entertainment expense is that 50% of the cost is deductible provided the following requirements are met.
Requirement #1
The expense has to be ordinary and necessary in the trade, business, or profession. In other words, it must be...
•How to Deduct Your Travel Expenses
Travel expenses are a favorite deduction of many clients, because they love to travel and especially enjoy it when the IRS is subsidizing part of the expense. In order to deduct travel expenses, however, you must show that the expense has a business purpose and is ordinary and necessary to the business.
Travel expenses that have a business purpose include:
- Meeting customers/prospects/vendors residing in a different location; - Searching for investment property; - Meeting with business...
•Are Your Meals 50% Deductible or 100% Deductible?
? There are several specific rules to determine if a meal is a legitimate business expense. These specific rules include meeting the business purpose requirement and the ordinary and necessary requirement. In this article, it's assumed that the meal has met these requirements and is indeed a business expense.
*General Rule
Meals are generally 50% deductible. This means when a business pays for a meal, only 50% of that amount is deducted on the tax return. It's extremely important to know...
•A Checklist to Properly Document Your Meals and Entertainment Expenses
One thing you can always count on during an audit is a request for documentation supporting meals and entertainment expenses. The IRS has found that these expenses are heavily abused and are an easy way to generate additional tax revenue, not to mention additional revenue from penalties and interest.
You don't have to spend a lot of time reading tax cases to find one where meals and entertainment expenses were disallowed specifically because of improper documentation.
*Here are a few...
•Entity Formation Fundamentals
One of the most important steps in any tax strategy is determining what entity should be formed to hold your businesses and investments. For legal purposes, there are four basic types of entities: sole proprietorship, partnership, corporation and limited liability company. The entity you choose should take into account both the tax effects of the entity and the legal aspects of the entity.
-Sole Proprietorship- Let's examine the tax and legal aspects of each entity, beginning with the sole...
•Is Your LLC a Sole Proprietorship, a Partnership, a C Corporation or an S Corporation?
? The Limited Liability Company (LLC) is a terrific tax entity. The number one reason is its flexibility. Specifically, an LLC can be taxed as:
a sole proprietorship a partnership a C corporation an S corporation
An LLC is not a tax entity, it is a legal entity. As such, an LLC can choose how it wants to be taxed.
Do you know how your LLC is taxed? If your LLC did not make an election, then it is taxed as the "default classification." The default classifications are:
If your LLC has...
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