Happy Holidays! Year-End Tax Saving Tips to Spend or Save for the Holidays

It looks like the end of the year is coming, and we are pretty sure many of you are still frantically shopping for gifts for your family and friends. Do you ever wish you had more money to spend for your friends and family, but just could not figure out how you can save more money?

Well have no fear! We are an Orange County CPA firm who will be here to provide tips on how you can cut tax spending to save or have more money to spend for you your loved ones.

Capital Gains and Dividends. The tax rate on qualified capital gains (net-long term gains) and dividends range from 0 – 20%, depending on the individuals income tax bracket.

STRATEGY:  Spikes in income, whether capital gain or other income, may push gains into either the 39.6 percent bracket for short-term gain or the 20% capital gains bracket. Spending the recognition of certain income between 2016 and 2017 may help minimize the total tax paid for the 2016 and 2017 tax years.

State and local sales tax deduction. The PATH Act made permanent the itemized deduction for state and local general sales taxes. That deduction may be taken in lieu of state and local income taxes when itemizing deductions.

STRATEGY: Generally IRS tables based upon federal income levels and a taxpayer’s number of departments are used for this optimal deduction. Taxpayers who wish to claim more than the table amounts must provide adequate substantiation.

Tuition and fees deduction. The PATH Act extended the above-the-line deduction for qualified tuition and related expenses for two years, for expenses paid before January 1, 2017. The maximum amount of the tuition and fees deduction is $4,000 for an individual whose AGI (Adjusted Gross Income) for the tax year does not exceed $65,000 ($130,000 in the case of a joint return), or $2000 for other individuals who’s AGI does not exceed $80,000 ($160,000 in the case of a joint return)

STRATEGY: Payments by year-end 2016 may be particularly critical to taking this deduction. There is some – but not unlimited – flexibility regarding the deductibility of tuition paid before a semester begins. As with the AOTC, the deduction is allowed for expenses paid during a tax year, in connection with an academic term beginning during the year or the first three months of the next year.

Nonbusiness energy property credit. The PATH Act extended the nonrefundable non business energy property credit allowed to individuals, making it available or qualified energy improvements and property placed in service before January 1, 2017.

STRATEGY: Several overall limitations apply. A credit amount for qualified energy efficiency improvements equals 10 percent of the amount paid or incurred during the tax year and 100% of the amount paid or incurred for qualified energy property during the tax year. The maximum credit amount for qualified energy property varies depending on the type of property, further all nonbusiness energy property carries a $500 maximum lifetime credit cap.

Individual Shared Responsibility Payments. For 2016, the individual shared responsibility payment is the greater of 2.5% of house-hold income that is above the tax return filing threshold for the individual’s filing status or the individual’s flat dollar amount, which is $695 per adult and 347.50 per child, limited to a family maximum of $2,085, but capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2016.

STRATEGY: Open enrollment for coverage through the Health Insurance Marketplace for 2016 has closed. However, some qualifying life events may make an individual eligible for non-filing season special enrollment.

Medical expense deduction. Taxpayers who itemized deductions (for regular tax purposes) may claim a deduction for qualified reimbursed medical expenses to the extent those expenses exceed 10% of adjusted gross income (AGI), unless the tax payer falls within an age-based exception. Taxpayers (or their spouses) who are aged 65 or older before the close of the tax year, may apply the old 7.5% threshold for tax years but only through 2016.

STRATEGY: Tax payers who are age 65 or older may consider accelerating medical costs into 2016 if they want to itemize deductions since the AGI floor for deductible expense rise from 7.5% to 10% in 2017. For deductions by cash-basis taxpayers in general, including for purposes of the medical expense deduction, a deduction is permitted only in the year in which payment for services rendered is actually made.

 

A Smart Business Decision Maker = A Successful Entrepreneur

Many successful business leaders all share a common skill that most people do not posses. Although this skill comes in all forms and is dependent on the amount of opportunities given to them, they all still have to undergo a process whether it takes a long time to process or a very short amount of time. That skill, my fellow entrepreneurs is: Smart Business Decision-making. Every day people from all over the world make decisions. You may not realize it but you, the reader, just made the decision to read this article (Thanks by the way!). However, let’s take it to a business perspective; business leaders, (including yourself) “make dozen of decisions a day” that creates an impact to the success of their company while creating an influence factor to employees as well. “Developing such a skill requires a combination of education, experience, and intuition.”

Marci Martin, author of Business News Daily who wrote the article “How to Make Effective Business Decisions” has stated a great quote: “There are many things that influence how an individual makes decisions. They include emotions, perceived personal and professional risks and rewards, preparation through experience or education, deadlines, stress and a host of others. It is important to mitigate the irrational and embrace the rational.”

Many decisions always comes with a process, as mentioned above, there are many factors that come into play before coming up with a conclusion. Some of those decisions usually come from a “gut feeling” while others come from undergoing a long process of asking others, and a more common form would be the opportunity cost (Is it more beneficial to me than the cost?). As Martin mentioned, the “bottom line is that being an effective decision-maker requires practice.”

Gayle Abott, President of Strategic Alignment Partners, a human consulting firm, has implemented a four- point strategy to deploy whenever you must act:

–          Identify the problem.

–          Analyze the possible solutions

–          Evaluate the possibilities that are likely to bring you closer to your goal.

–          Make the decision.

However, as easy as this 4 point system sounds, this type of strategy does not come easily for any beginner. As Abott has said in Business News Daily, it takes years of practice to master this skill. Many people who have become masters did not simply start off as talented decision makers, they made many mistakes in the past, learned from them, and simply moved on. The most crucial part in any decision making in a business, is the ability to learn from them. It is not easy as you think it is because people still make the same mistake, whether it’d be motivated by an emotion, by influence, or by stubbornness. The reality is that, it will not be easy to become a smart business decision maker until you have made enough decisions to consider yourself a smart business decision maker. 

How to Deal with Stress of Running a Business

Are you a business owner who has been through a lot of stress these past couple months? Especially, when tax season is coming and you have no one to prepare your tax forms for you? Well, let us take a moment to tell you that, if you are reading this blog post right now, you are probably looking for someone to prepare your tax returns or looking for a CPA accountant who can do that work for you. In fact, we are a CPA firm in case you haven’t noticed!

Anyway, this blog post is not about how to hire an Orange County CPA, the main point of this blog is to talk about how to deal with stress when running a business. So how can you deal with it? According to Pratik Dholakiya, Co-Founder of E2M, he wrote an article called 3 Tactics for Dealing With the Stress of Running a Business, which talks about dealing with stress and said that an entrepreneur is always required to be involved in every activity that their business is undergoing, always taking on new challenges, and creating bonds and relationships while learning on the go. Of course, as Pratik mentioned, will be overwhelming, which is something that most entrepreneurs face.

Pratik listed out three powerful ways to fight against this overwhelming stress that will keep you on track with your business goals without going insane.

 

1)      Create a priority list, and list all of your goals in a list from most important to least important.

Sounds easy right? It is! If you actually take the time to do it. The overwhelming amount of work you have to do is actually not that bad if you know how to prioritize and focus through them on the entire day. Keep a list of priorities and keep a list of dates to make sure when to start on those, and when the deadline is for each of them. This is very important, as this will keep your mind organized, and you can keep a simple focused mindset without going off in a tangent. Complete the task that is most important, and then once that is complete, move on to the next one and complete that one, and keep going through them all until you have completed them all. If you have a reoccurring event that constantly needs to be taken care of, always keep that task in your list.

 

2)      Relax and clear your mind before you go to bed, go back into work mode the next morning.

Of course, every night, we all feel like we have so much information in our heads that we just want to explode. The endless thinking is killing us all, and we just want to keep thinking. Do not try to fight through this complicated matter, instead, clear your mind, and then set yourself up to think about first thing tomorrow morning. You will feel refreshed the first thing in the morning, and your decision making will be better than yesterday’s.

 

3)      Analyze and reassess your circle of control

Pratik explains how we should focus our energies on things that are directly in our control and how we should not be drawn to things where we have little to no influence over. He makes a good point about how most entrepreneurs start with a great idea of what their circle of control has, but as time progresses and they meet new business people, the circle will consistently change. Depending on the entrepreneur, the circle will either shrink or it will grow. The point is, it will not stay the same, it is always changing, so it would be wise to consistently, evaluate your circle of control. “When you are feeling hammered, and are struggling to keep yourself sane in the middle of your fast-growing business, it’s a good idea to take a step back and ask yourself, how much of that which you are contending with do you actually control?” (Dholakiya) 

The Lesson from Rich Dad, Poor Dad

 

“Many people work very hard, but they never seem to earn enough. In Rich Dad, Poor Dad, Robert Kiyosaki explains how to escape this “rat race” and achieve financial independence.”

When you are trying to aim for financial independence, people would think that going to school getting high grades and getting a good job would be the answer to all your financial problems right? Well, if you think that’s the way to go, then you probably shouldn’t be reading this. Just kidding! It’s just a sarcastic comment. According to Rich Dad, Poor Dad, Robert Kiyosaki claims that the education system is the number one cause of why so many people struggle financially. Schools teach people how to work for money, but they do not teach them how money can work for them. For example, Orange County is one of the richest counties in United States and yet many people within that county are not really good at handling their money to a certain extent, that is why they look for Orange County CPA firms and depend on them to manage their money. Although Orange County CPA firms are very useful and helpful, the lack of financial skills taught in school for these people means that even highly educated people generally do not know how to handle their money. The results are that the majority of people are trapped in work to pay their bills and are chasing paychecks all their life.

Unfortunately, Robert Kiyosaki claims this as his sad conclusion. Luckily, he also offers a way out of this loop. The essential element with working for money is that a job is a short term solution to a long term problem. People strongly believe that if they get a promotion or a raise, or get a new job, they will finally have enough to live financially. However, if you do not know how money works, you can never have enough money alone will not solve anything. It will even get most people into more debt. So what is the secret to financial independence?

The secret is actually quite simple: “Know what an asset is, acquire them and become rich.” (Kiyosaki) Sounds easy right? Heres the hard part though, most people are not appropriately taught how to spend their money. Many do you not know the difference between an asset, which is something that puts money in your pocket, and a liability, which is something that takes money out of your pocket. Kyosaki’s main point is that the only way to become financially independent is to accumulate income generating assets which can pay for your expenses. Unfortunately, many people would rather buy a new car or a phone instead of investing their money in stocks or real estate.

If you do not want money to control you like it does most people, then you will have to do things differently from the crowd.

We would highly recommend reading Robert Kiyosaki’s book Rich Dad, Poor Dad, it is very interesting, gives you a different perspective in life, and it is very educational.

***ARTICLE BASED ON VALUESPREADSHEET.COM WRITTEN BY NICK KRAAKMAN***

Small Business Success Story – Chad Mureta (App Empire)

Chad Mureta ran a real estate business when the impossible happened: A devastating car accident has caused to be delivered to the hospital, nearly taking out his arm. His business could not continue without him being physically present, but Mureta’s mounting medical bills meant he had to find an alternative source of income.

After reading a magazine article about mobile apps during his hospitalization, Mureta decided to try his hand at producing mobile applications. At the time, the industry was relatively new, but he felt the growth potential was worth the risk he would say.

“Lying in my hospital bed, I decided to take a Hail Mary shot and get into this industry.” Mureta said. “I needed a new business and decided to jump in with both feet.” Immediately, he started sketching out ideas for his own apps on pieces of paper. Soon after, he found a development company and outsourced all his work to create his first app.

Mureta took out a loan for $1800 to produce his first app. Fingerprint security – Pro. It soon became one of the 50 most popular apps in the App Store, earning him $140,000 in the process. From there, Mureta founded and sold three app companies – Empire Apps, Best Apps, and T3 Apps and now is currently running a blog called App Empire. He has produced 46 apps to date, and authored “App Empire: Make Money, have a Life and Let Technology Work for You”

Mureta advised other entrepreneurs to not be intimidated by their lack of experience in an industry if they see an opportunity. With a thirst for knowledge and the willingness to find and connect with the right people, anyone can begin to carve out an entrepreneurial path for him or herself, he said.

“I’m still not a tech guy,” Mureta said, “I couldn’t tell you how to program an app, but I can tell you how to make it a success. I researched the market and the consumers, and saw opportunities for people like myself. I kept researching and kept expanding my knowledge to grow my business and income.”

 

***ARTICLE BASED ON BUSINESSNEWDAILY.COM, WRITTEN BY NICOLE FALLON TAYLOR***

How to Know What Passions to Pursue in Business

We all have that question where we ask ourselves: “I have a passion for a lot of things. How do I know which one I should really choose?

Well, we all have heard many times in our lives, if you want to make a living, do something that you love to do. But our biggest concern is: how do we know if your passions can become a successful business? Fortunately, according to entrepreneur.com. there is a formula for determining if an idea is a viable opportunity.

It is a two-step process.

First: You look at the idea itself and see if it meets the criteria for success.

Second: You examine the industry to see if it is an attractive field for launching a new business.

If you launch a true opportunity in an attractive industry, your chances of turning a passion into a viable business go up dramatically.

THE FIRST STEP

Most of us have several things that we are passionate about. The trick is to pursue the one that has the strongest probability for success. Start by evaluating each of your passions against the criteria for a true business opportunity. Here are the critical components:

–          Need – You have to obtain first hand evidence that people really need your product or service.

 

–          Experience – You need to understand the industry from working in it or from regularly using the products.

 

–          Resources – Cobble together the resources to create an initial prototype of your product or service.

 

–          Customers – You have to find customers how are ready to buy your product as soon as you launch venture.

 

–          Model – You need a sound business model where pricing, costs and margins allow you to make a profit.

Let’s take one example: Marshall Miller is a great example of turning a passion into a true business opportunity. He had a corporate job for eight years that he didn’t like. On weekends to maintain his sanity, he would take to the skies parachuting, paragliding, and base jumping. He and his friends started talking about how they might make a living doing this. They approached GoPro about filming their feats and making the footage available to the company – this was the birth of the GoPro Bomb Squad. Marshall now has a number of companies that sponsor his jumps. He displays their logos on his helmets and parachutes, and provides incredible footage they use in commercials and custom videos. Marshall has been doing this full-time for nearly 10 years and is one of the top human flyers in the world.

THE SECOND STEP

The second step for turning a passion into a business is to launch in an attractive industry. Research suggests that about 30 percent of success in business is a result of the industry you enter. Some are more attractive than others. Here are some tips:

–          Size – You want an industry with at least 50 million in sales, but not more than a billion, that means there would be too much competition.

 

–          Growth – You want an annual growth rate of 10 percent or more which means the industry is not shrinking.

 

–          Margins – You want gross margins on products of 40 percent to 50 percent and profit margins of 10 to 20 percent which means it is possible to make money.

 

–          Competitors – You want a handful of competitors but not hundreds which indicates that the market is overly saturated.

 

–          Customers – You want multiple market niches for your product or service as opposed to a single group of buyers.

 

 In sum, list the things you are passionate about and see which ones can become true business opportunities. Then evaluate each industry to see which ones have the highest probability for success. When you launch a true business opportunity in an attractive industry, you can create the company of your dreams.

 

***ARTICLE BASED ON ENTREPRENUER.COM***

 

Tips on How Small Businesses Can Become a Firm of the Future

How can a business become a firm of the future?

 
Well let’s take a step back, what does it mean to become a firm of the future?

 
Let’s look at this example, a firm of the future has been “in business for decades, achieving success using a tried-and-true formula of providing high quality work and or providing great service and product.”

 
Every year as we all witness the everlasting change of businesses, markets, and demands, we; as business owners sometimes worry about our methodology and business practices in our company.We begin to question if our practices are obsolete now, or are they still working for our business? Then the next question arises, how would we grow the practice while maintaining the winning factors that made the firm what it is? And because of this, many business owners worry too much about these changes and will then take up too much time and money.

 

Thus, begs the question: How can do we become firms of the future? Well worry no more! As an Orange County CPA, it is our sole duty to provide fresh tips on how you can become a survivalist in the battlefield of business. We have tips here that will help you achieve that!

 
Do not ever assume that and changes in the market and business world do not apply to you. As George Forsythe states, “even successful and happy firms may not be working as effectively as possible.” Always have a strategic review and assess your plan to measure out the pros and cons to your strategy. If they are working, try to find something that will cause the plan to fail, always assume that there will be change in the future.

 
Figure out where you stand. Create a transitional step tool that a firm can take in its culture, talent, and clients. Use informal brainstorming to identify steps that can help you move your firm forward.

 
Set your own priorities. When you start reviewing your firm’s status, be sure to look out for employees who show a lot of promise in their work. Prepare them for the next generation of leaders, this will ensure the security of your company when you are training new leaders.

 
Do not reinvent the “wheel.” Do not try to create a completely new plan to face the changes your company is facing. Take some of your strategies and create a new way to make them better. Focus on the aspects of creating a simpler, more effective method of that strategy and execute it. Reinventing a new strategy not only makes your employees and partner learn a new method, which takes time, but also, the strategy may not work in this changing marketing and business world.

 

**ARTICLE BASED ON AICPA.ORG***

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