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Trump Tax Law Makes Now the Perfect Time for the Roth Conversion Retirement Trick

Tax and Financial News April 2019

Trump Tax Law Makes Now the Perfect Time for the Roth Conversion Retirement Trick

Roth Conversion

Converting a traditional IRA to a Roth IRA takes some fortitude and faith in the future numbers because this change can accelerate your tax bill. The current market and tax rate cuts from President Trump’s plan, however, are creating an environment ripe for conversions and making the move much more palatable. Together, these two factors are essentially creating new groups of taxpayers for whom a conversion makes good sense.

IRA Basics Revisited

Contributing to a traditional IRA gets you a tax deduction now, at the time of your contribution and allows your money to grow tax free. You’ll also need to begin withdrawing your annual required minimum distributions (RMDs) once you hit age 70½, with whatever you take out taxed as ordinary income. Roth IRAs operate differently, as your contribution is made with after tax income but in return your investments grow tax-free and you pay no tax when you finally withdraw the money.

Roth Conversion Mechanics

Under a conversion you choose to pay tax at the time of the conversion on the money in the traditional IRA and transform the account into a Roth, making all future gains and withdrawals free from taxation. The ability to convert was limited for many people, however, because back when Congress created Roth IRAs, there were income limits above which the conversion was not allowed. In 2010, the government removed the income restrictions on conversions and now anyone can make a conversion.

Running the Numbers

Understanding if making a conversion is worthwhile requires calculations that depend on assumptions of tax rates in the future and investment performance. Generally, if you believe your investments will be worth more and the tax rates will be higher when you withdraw the money, then a conversion makes sense.

Benefiting from the arbitrage on tax rates between now and the future often requires spacing out the conversion over multiple years. The idea is to convert just enough out of the traditional IRA to raise your income until it’s just below the next higher tax bracket. The recent tax cuts to individual rates make the conversion option a lot clearer as they both cut rates and expanded tax brackets.

Finding the Sweet Spot

Under the previous tax law, the sweet spot for many people was after retirement but while they were still under 70 and not yet taking RMDs. The widening of the 24 percent bracket means that the sweet spot for converting will extend to a greater number of taxpayers, both younger and older.

No Second Chances

The new law cut out the ability to “recharacterize” conversions. Recharacterization allowed taxpayers to unwind a Roth conversion any time before Oct. 15 the year after you convert. The idea is that if you convert $250,000 at the beginning of the year and then the market drops dramatically (like in 2008 when the S&P 500 fell almost 40 percent) you could unwind the conversion and do it again later when the balance is lower (and therefore your tax bill from the conversion as well). There are no more do-overs under the current tax law.

One strategy to mitigate this risk is to convert specific investments first if you are looking at a multi-year conversion strategy, focusing on those that are performing the worst. The idea is that they are more likely to go up in the future, like when you rebalance a portfolio to harvest your best performers and buy more of those that are down. Another strategy is to take a cost-averaging strategy to conversion.


In the end, the real payoff comes not from market timing, but from making the conversion and allowing the money to grow tax-free for decades, taking advantage of the power of compounding and then reaping the rewards tax free. If you have assets in a traditional IRA, now may be a good time to talk with a financial planner to see if a Roth conversion is the right move for you.



General Business News April 2019

How to Determine a Business’ Health by its Net Profit Margin

Net Profit Margin

When it comes to figuring out a company’s net profit margin, this calculation gives a business and its financial officers a much better picture of the company’s profitability.

Defining Net Profit Margin

Net profit margin determines the percentage of revenue that ends up as profit after expenses are accounted for. Represented as a percentage, it’s calculated by taking the company’s net profit and dividing it by the entire revenue.

Looking at the Formula Itself

When it comes to calculating the net profit, it goes beyond the gross margin calculation, which only factors in the “cost of goods sold” – or how much the input materials and direct labor cost the company to produce saleable goods. Determining net profit includes factoring in the cost of goods sold figure, but also includes other expenses, such as payroll, lease payments, taxes, and others.

Once all cash flow, expenses and costs are factored in, whatever amount remains would be considered the net profit. The total revenue is self-explanatory as it’s simply 100 percent of a business’ sales in a defined time-frame. From there, the net profit is divided by the company’s total revenue, and then multiplied by 100 to get the percentage or net profit margin.      

Potential Explanations for Varied Net Profit Margins

Ideally, the higher the net profit margin is, the better the financial health of a company. However, a low profit margin for a period of time or over the long term doesn’t necessarily mean a business is poorly managed. There are many reasons why a low net profit margin may exist and persist.

Different Margins Depending on Each Industry

As Forbes and Sageworks points out, the higher the net profit margin is, the better it is for the company. However, there are some considerations when it comes to what’s expected for different industries. For example, looking at the data ending June 30, 2017, for the previous 12 months, the Medical and Diagnostic Laboratories industry saw an average net profit margin of 12.1 percent. Conversely, “Accounting, Tax Preparation, Bookkeeping, and Payroll Services” saw a net profit margin of 18.4 percent.

While these industries are on the high end, Forbes and Sageworks point out that other industries, such as the grocery industry, are still profitable, but do so by making their profits on lower margins, with a much higher volume. 

Financing Considerations

Another factor that can lower a company’s profit margin is how its financing is structured. If a company chooses to incur debt financing to buy fixtures or pay employees to run operations, interest expenses,  – especially initially – , could negatively impact a company’s net profit margin.  

Infrequent or One-Time Exceptions to Operations

If a business has recently sold a profitable (or unprofitable division) and that sale has made a material change in revenue, especially for a single quarter, it can provide an anomaly in a company’s net profit margin calculation. Similarly, if business fixtures don’t get purchase often or equipment is reduced, for example, net profit margin can be impacted noticeably.

Regardless of the industry, understanding business’ net profit margin is, another helpful tool in determining how and why a business is making or losing money. 





Tip of the Month April 2019

3 Tax Woes and How to Survive Them

3 Tax Woes and How to Survive Them

The tax deadline is roughly two weeks away. But if you’re going to be late in filing, can’t pay all of what you owe or have the fear that you might be audited, don’t panic. We’ve got you covered with some smart ways to handle these three, potentially scary scenarios.

Late Filing

Of course, if you owe, make every effort to file as soon as possible to avoid penalties and interest. But the good news is, if you’re owed a refund, there’s no penalty for filing late. More good news: For those who qualify, Free File is still available on through Oct. 15 to prepare and file returns electronically. There’s more: If you have a history of paying on time and are missing this year’s deadline, there’s always Penalty Relief.This provision, called First Time Penalty Abatement, allows you to qualify if, a) You haven’t previously filed a return, or if you have had penalties in the past, you have no penalties for the three years prior to filing this year; b) You filed all currently required returns or filed an extension; c) You have paid, or arranged to pay any tax due. See? There’s hope.

Can’t Pay All of What You Owe?

Due to the Tax Cuts and Jobs Act, you might find that you owe because you didn’t change your withholding, as well as the fact that the law eliminated exemptions, increased child credits and limited popular deductions, to name a few of the changes. Not to worry. If you’re stuck and need help, you’ll be relieved to know that you can apply online for a Payment Plan. While you’re settling your debt, you can view your balance online and pay with IRS Direct Pay or by a debit or credit card.

If you need further assistance, consult a professional. If this is any consolation, the Government Accountability Office estimated in a report last summer that about 30 million workers had too little withheld from their paychecks. While this increased their take home pay, it also increased their tax liability. Again, consult a tax professional if you have questions, but remember: there is light at the end of the tunnel. You will get out of this.

If You Get Audited

The truth is, unless your income is super high, you have less than a one percent chance of being audited. That said, if this does happen, you’ll want to be prepared. But first, a little education. There are three kinds of audits, a) Correspondence Audit: The simplest kind and it’s usually the result of you making a mistake on your return; b) Office Audit: This one is more complicated. You’ll need to go into an IRS office with required paperwork, but the bigger thing to keep in mind is that this kind of audit could be a result of some high tax deduction like, say, a large medical expense; and c) Field Audit: This one is similar to an Office Audit; however, this time, the IRS comes to you and asks to see your records.

No matter the type of audit, don’t freak out. Simply take a deep breath, and gather all your documents: W-2s, 1099s, bank statements, proof of income, investment statements, along with bills, receipts and other proof of expenses. Next, schedule your audit or postpone it. Then, keep a cool head and strive to be compliant with IRS representatives because, after all, they are just doing their job. However, the very best option is to call a tax professional. He or she will know exactly what to do and walk you through this sometimes hairy process.

So there you have it. There are ways to survive the situations that you might have around filing your taxes. The motto to keep in mind? This, too, shall pass.

Winners and Losers of the Tax Bill

Tax and Financial News March 2019

Winners and Losers of the Tax Bill

Winners and Losers of the Tax Bill 2018

In 2018 when President Trump and the Republican Congress rewrote the tax code, everyone knew there would be winners and losers. Exactly how this will play out is just starting to be seen – it closes loopholes while opening others and takes away some perks while creating new ones. Let’s see who the winners and losers really are by looking at the results of the tax law now and over time.

Winners and Losers Will Change Over Time

Almost all taxpayers get some type of tax cut; for example, the Tax Policy Center estimates that only about five percent of families will face an increased tax obligation in 2019. This sounds great! Initially, measured as a percentage of their total tax bill, things start out evenly. According to the nonpartisan Joint Committee on Taxation, households earning between $200,000 to $1 million will see a nine percent decrease in their tax burden compared to only an eight percent reduction for families earning $75,000 to $100,000.

Unfortunately, not everyone gets to keep their tax cuts over time because while the average rates dropped in 2018, they will return to 2017 levels by 2026 for individuals. The changes to corporate tax code are permanent. As a result, most taxpayers will see a modest tax hike by 2027, mostly impacting middle-income families.

Big Benefits Don’t Come Easy

Many Americans will benefit from the increase in the standard deduction, but they will no longer receive personal exemptions for themselves and family members, and many will lose the ability to itemize deductions. Some higher-earning small business owners, however, will benefit from a new 20 percent tax break for pass-through income. Above certain income limits, some professions such as health care, accounting and law, among others, are not entitled to this tax break. Those who are will need to use a complicated formula to calculate their benefit. Corporations face the most complexity, especially if they operate internationally, and will face increased compliance costs.

So, the winners are individuals who always had simple returns and pass-through business owners who qualify for the 20 percent break. The losers are taxpayers with several children, those who used to itemize extensively, and people who live in states with high taxes (the maximum deduction for the total of mortgage interest, state and local taxes is $10,000).

Corporate Competitiveness Increases

The reduction in the top corporate tax rate from 35 percent to 21 percent brings the United States closer to other countries. According to the Tax Foundation, which ranks countries based on the competitiveness of their tax environments, this change moved the United States up four spots from 28th place to 24th place. For now, it appears most companies aren’t making major changes, but this could take more time to play out. Large corporations are unlikely to act until there is more certainty around how long the tax break will last. The United States will also have to hope that other countries don’t respond to even the playing field.

Who’s Footing the Bill

The tax bill was sold by many on the premise that the tax cuts would pay for themselves through economic growth generating enough revenue to offset the tax cuts. The Congressional Budget Office has a different view, estimating the tax changes will increase the federal debt by almost $2 trillion by 2027. Initial tax receipts suggest the CBO’s view is right, but it’s too early to tell.

Recognize that any time there are changes in the tax law, there will be winners and losers. These winners and losers change over time and often there are unintended consequences. For now, it’s clear who are the winners and losers in some respects, but in others it will take time.




General Business News March 2019

How to Create Cash Flow Projections and Profit & Loss Statements

How to Create Cash Flow Projections and Profit & Loss Statement

When it comes to making cash flow projections, we’re all aware that it’s not an exact science. One of the main difficulties about accurately projecting cash flow has to do with timing. Examples include factoring in overhead such as payroll; lease or tax payments on the building; using credit to make purchases or for future investment to grow the business; and when payment is collected from clients.

Understanding Cash Flow Projection

One important reason that many business owners create a cash flow projection is to include it in their business plan when they approach an investor or bank for a loan. Detailing a company’s cash flow projection consists of three parts: positive, negative or break-even results going forward.

The first section details all incoming cash flow. Examples include sales revenue from products or services expected to be collected during the month noted. These often include assumptions when the majority of receivables are collected within 30 days. However, the projection may be more or less dependent on whether invoices go unpaid or collections efforts are more costly or last longer than anticipated.

The second part documents all cash outlays that will be paid during a month for business expenses. Examples include payroll and associated taxes, installment payments on loans, buying new equipment, lease or rent payments, etc. The third part of the cash flow projection for each month takes the incoming cash flow and subtracts the cash outlays from it.

Cash flow projection is a good way to determine if there will be enough collections on invoices, if expenses will be in line, and if the existing business strategy needs to be adjusted for more sales of products or services. This also can help business owners better determine strategy if they need a larger initial investment before opening or an injection of new capital post-launch.

Profit & Loss Statement

The first part consists of how much revenue the business made (from either products and/or services sold), minus any returns that must be repaid.

The second part of a Profit & Loss Statement looks at the cost of goods sold. It calculates how much it costs the company for any input or raw material expenses, labor for employees to manufacture the product or deliver the service, and whatever it took to run the factory or office. However, the costs associated with products not sold or delivered during the time frame are not included.

Along with the ability to include business overhead expenses for consideration, an important distinction with the Profit & Loss Statement is that some non-cash considerations are included –  such as depreciation or how much the business can deduct for the purchase of a fixture or vehicle.   

The final section specifies if a business made or lost money from selling any assets or it received interest income during the time frame.

Much like cash flow analysis is important to business operations, companies can use the Profit & Loss Statement to modify their business’ path. For example, a business owner may wish to evaluate whether or not he can increase profitability by choosing different material suppliers. Or, hedge for projected increases in raw materials to improve profit margins.

Depending on the stage of the company, these are two ways a business owner can better understand how to account for the operation in order to enhance his chances for profitable and long-term sustainability.




Tip of the Month March 2019

8 Good Things to do with Your Tax Refund

8 Good Things to do with Your Tax Refund

Getting a tax refund is always a great feeling. But what should you do with it? While the first thing you might be tempted to do is spend it on a splurge for yourself, here are a few other things you might want to consider.

Start an Emergency Fund. If you don’t have one, this kind of account is critical. If you already have one, add to it. Online savings accounts that are interest bearing or money market accounts are your best bets. You can’t control the future, which is why being prepared is your best defense.

Pay Off Debt. Whether it’s a credit card, student loan or car loan, paying on – or eliminating – the account with the highest interest is best. Becoming debt free not only provides emotional relief, it’s also the key to financial freedom.

Start Saving for Specific Dreams. Do you want to travel? Buy a new car? Make a home improvement? You can either put your entire refund toward one of your life goals, or break it up into different buckets. This way, you’re not only being disciplined and mindful, you’ll also avoid taking on future debt. Most importantly, you’re taking intentional steps toward making your dreams come true.

Refinance Your Mortgage. When you do this, you still have to pay closing costs and fees, but your refund can contribute to or cover this entirely. Plus, you can potentially save a lot of money each year on mortgage interest. You’ll thank your future self for this move.

Start a College Fund. With costs skyrocketing, this might be one of the best gifts you can give your kids or grandkids. Set up a 529 plan, a tax-advantaged investment vehicle designed to encourage savings for a designated beneficiary’s higher education expenses. The best thing about this is that you might be eligible to deduct it from your state income taxes. Thinking ahead pays off in the long run.

Kick Your Career Up a Notch. If it seems like your colleagues are getting promotions and raises because they know a certain skill, then use your refund to enroll in a class and catch up. One of the cool things about this is that you can take advantage of a Lifetime Learning credit and claim it on your taxes. Remember, you’re worth it.

Donate to a Charity. What are you passionate about? Giving to a cause you believe in not only helps others, you can also use it as a deduction on your taxes. Doing good for those in need always feels good.

Put it Toward Your Retirement. Though you might be years away from retirement, it will be here before you know it. Use your refund money to purchase or add to a Roth or traditional IRA. That irresistible thing you might be tempted to blow your money on today will be long forgotten by the time you retire.

Truth is, what you do with your tax refund is up to you. However, putting it toward something that has a long-term pay out or a significant goal can be a very smart thing to do.

When Is A Loan Not A Loan?

Tax and Financial News February 2019

When Is A Loan Not A Loan?

When Is A Loan Not A Loan

With the sweeping new tax legislation in 2018 capturing everyone’s attention, other changes have taken a back seat. There were several Tax Court cases in 2018 that rendered important decisions impacting how things work – one of which was Povolny Group, Inc. v. Commissioner, T.C. Memo 2018-37.

The Povolny Group decision centers on a common issue where an individual uses his corporation like a personal pocketbook, transferring money in and out without any formality.

Facts of the Case

James Povolny joined his spouses’ company (LLC) as a minority owner. Later in 2002, he went out and started his own real-estate brokerage firm, the Povolny Group (PG), as a 100 percent owner.

At one point, PG won the bid to build a hospital for the Algerian Ministry of Health. To perform the job, Povolny formed another company as the sole owner: Archetone International (AI). To secure the contract, the government mandated guaranties and collateral. To meet this obligation, Povolny had AI, PG and LLC borrow money from lenders.

Unfortunately, the Algerian government quit paying Povolny and terminated the project. In the end, Povolny had a lot of debt and AI couldn’t pay it so he used LLC to pay $241k of AI’s debt, with LLC claiming a deduction for bad debt for tax purposes.

Later, Povolny used PG to pay $70k of the debt for both LLC and AI, with PG deducting these amounts as cost of goods sold. Eventually, when he was audited, Povolny changed his position claiming the amounts were really loans from PG to the other two companies.

IRS Position 

The IRS denied LLC’s $241k deduction for bad debt, claiming that the amounts were capital contributions and not loans and therefore could not be deducted as bad debt. The IRS also denied PG’s $70k deduction again on the premise that it was not a loan, but a capital contribution.

Relevant Law for Business Owners

If an individual owns 100 percent of a company or group of companies, they often treat business transactions informally because they view it as all their own money – taking cash in and out of the business without any formal process. This is something that could never happen if the business had multiple owners.

Example and Why It Matters

This often results in midstream changes in how the owner treats the transactions for accounting purposes. One example is where a business owner takes cash out and later discovers that these distributions exceeded their stock basis. This should result in a capital gain, but due to the informality of the transactions the shareholder changes how they treat the cash withdrawal from a distribution to a loan.

Another example of what frequently happens is there is a shareholder who puts money in a corporation, either themselves or through another entity they own, without any formal designation and then later accounts for it as a loan instead of a capital contribution.

What Really Matters

The rules are that you can only claim a bad debt deduction if there’s been a loan. Problems stem from the informality of the treatment between the individual and the entities they control; the IRS wants these types of dealings to be treated like arms-length transactions to validate the treatment and classification as either debt or equity.

Generally, there are 11 factors the IRS considers – all of which focus on how the transaction is structured and documents to see if it acts more like a real loan from a third-party lender or more like a capital contribution from the owner.


In the end, the court sided with the IRS and disallowed all of the deductions. The lesson here is that if you or a company you own advance money to another company and you want it to be considered a loan, then you need to treat it as a loan. Make sure you use a formal note with a stated maturity date, post collateral, pay interest, and record it as a loan on the tax return. If you want to write off debt as bad debt, you need to prove that you’ve done everything possible to collect and that repayment isn’t possible.

At the end of the day, the IRS doesn’t care if you own it all. But they do expect you to treat each entity you own as a separate entity rather than extensions of each other, making sure that everything is documented and treated with the appropriate formalities.




General Business News February 2019

How Businesses Can Effectively Manage Seasonal Sales

How Businesses Can Effectively Manage Seasonal Sales

When it comes to businesses dealing with seasonal sales, making payroll and other financial obligations can be stressful on budgets. However, one way to deal with fluctuating sales and cash flow problems is to see if invoice factoring is appropriate to meet year-round needs.

Invoice Factoring

One way for businesses dependent on seasonal sales is to have better financial predictability and available resources, as the Journal of Accountancy explains. Businesses can accomplish this by selling their accounts receivables through factoring.

Companies looking to increase cash flow during the slow sales season can benefit by selling their accounts receivable to a third-party business called a factor. When a company sells its invoices through the factoring process, it can collect much faster on that invoice from recent customer purchases compared to Net 30, Net 60 or Net 90 when an invoice is submitted. 

How the Process Works

During the course of this arrangement between a company and the factor, there are three main phases. The company receives an advance, or a portion of the invoice’s outstanding balance from the factor. The difference between the portion the factor pays the company initially and the remaining portion of the invoice is called the reserve. This remaining amount is held by the factor until the invoice is completely paid off by the company’s customer –more commonly referred to as the debtor.

Depending on the factor, there could be an initial invoice fee, along with an “interest charge fee,” which is determined by how much is advanced from the factor’s purchased invoices multiplied by the factor’s interest rate and how long it takes the debtor to pay the invoice.

Accounting for Recourse and Non-Recourse Factoring

Depending on how invoices are arranged to be sold to a factor, accounting must be noted accordingly. If receivables are sold to a factor with no recourse, it should be classified as a sale on the balance sheet.

The Journal of Accountancy discusses how Generally Accepted Accounting Principles (GAAP) applies to factoring contracts with recourse. A company looking to sell its accounts receivables sells them to the factor with no stipulations attached. If an invoice transferred to the factor can’t be paid for within 90 days by the customer, the borrowing company assumes all risk for the factored invoice.

Factoring for Companies and Accounting Considerations

According to the FASB Account Standards Certification (ASC) Section 860-10-40, if receivables are sold to a factor with recourse, there are guidelines that determine if it’s a sale or a secure borrowing. If the three following tests, referring to the example sale above and according to the above referenced ASC Section are satisfied, it can be accounted for as a sale.

First, if the invoices are put “beyond the reach of the transferor and its creditors” including in times of bankruptcy or if a company’s assets and/or its operations are put in a legally appointed receiver, it has met the “isolation condition.”

Second, the factor has the right to exchange the asset. Third, the company relinquishes control over the transferred invoices by not having an agreement the permits the company to rebuy or reclaim the accounts receivables prior to the date of maturity. The other prohibited method of control for the transferor is to have a one-sided ability to demand the transferee give back certain assets, except through a cleanup call – which is when the factoring company can make the initial company buy back the invoices before the factoring term has expired.




Tip of the Month February 2019

5 Tips for First-Time Tax Filers

5 Tips for First-Time Tax Filers

Filing taxes for the first time can be overwhelming. But if you have the right tools and advice before you start, it won’t be. Here are a few critical things to know before you begin, which will make the seemingly daunting process much easier.

Start Prepping Early

Even though the deadline to file a tax return is April 15, you’ll want to start as soon as you can. You’ll need time to gather all of your important documents like a W-2 from each employer and, if you’re a contractor, your 1099 forms. If you have a full-time job and worked freelance on the side, you’ll need both. The good news is that the forms show how much you made in the past year and how much tax was withheld. According to Kathy Pickering, executive director of The Tax Institute at H&R Block, you should gather any additional forms that show big expenditures, such as paying for education or charitable giving. Finally, proofread your form. Karen M. Reed, director of communications for Citrus Heights, California-based TaxResources Inc., said that a mistake in just one digit can lead to disastrous results.

Learn Key Terms

If you have a basic understanding of key terms, the entire process will be much more manageable, according to CPA Tim Wolfe. Wolfe recommends that you understand the meaning of things like effective tax rates, the average rate at which someone is taxed, and tax-deferred, which refers to investments on which applicable taxes – typically income taxes and capital gains taxes – are paid at a future date instead of during the period in which they are incurred. Other important terms to know are the difference between tax deduction and tax credit – a deduction lowers taxable income, while a credit reduces the amount of taxes you owe.

Consider Educational Expenses

If you’re a student and paying for your education, you just might be in luck. Deductions for your education are key. Arthur Agulnek, an accounting professor at the University of Texas at Dallas, said that new taxpayers should make sure they don’t leave money on the table by looking into the education tax credit and earned income tax credit. In fact, Agulnek said that education deductions can save a student as much as $4,000.

Get Familiar with New Tax Laws

You don’t have to be an expert the first time around, but there have been a few changes you’ll want to be aware of. First, there are new tax brackets. Second, the standard deduction has increased to $12,000 for single filers, up from $6,500 for the 2017 tax year. Third, the personal exemption of $4,050 has been eliminated this year. With all the changes to tax laws, you’ll want to keep up-to-date about the latest information.

Ask the Tax Professionals

If you have a question on your return, don’t guess. Ask a tax professional. If you’re a student, consult your advisor or parents. Remember, there is no such thing as a dumb question. It’s only dumb if you don’t ask it!

Taxes are an inevitable part of living in the United States and something you will learn to harness. The good news is that the process and terminology will get easier each year you file your return. Having informative resources at your fingertips are all you need to be a success.

Divorce Can Be Taxing

Tax and Financial News January 2019

Divorce Can Be Taxing

Divorce is expensive, Divorce taxes

Divorce is expensive. Aside from the emotional toll divorce takes on a family, both the process and aftermath of a divorce can be costly. Below we look at some of the steps people can take to help remove the tax sting out of an already challenging time and arrive at the best financial position.

Changes to Alimony

We ring in the new year with changes to alimony tax law. Prior to Jan. 1, 2019, alimony payments were deductible by the spouse who paid them and taxable to the spouse receiving them. Typically, this provided an overall benefit to the family unit as the alimony recipient, generally being the lower earner, paid a lower tax rate. Often referred to as the “divorce subsidy,” this situation was costly to the government. From 2019 and forward, alimony is no longer deductible by the payer or taxable to the recipient.

This might appear to be a win for the receiving spouse; but consider that the change will most likely mean less alimony for the receiving spouse. It could also cause non-working divorced spouses to lose their eligibility to make IRA/Roth IRA contributions since they won’t have a source of taxable income.

One note on timing: if you finalized your divorce in 2018, the alimony will still be treated under the old rules for tax purposes – and even if you modify your divorce agreement in the future, the alimony will retain this tax treatment.

Pre- and Post-Nuptial Agreements Could be in Trouble

If you have a pre-nuptial or post-nuptial agreement, it is advisable to have the agreement reviewed. Aside from the impact of the new tax provision on alimony, relevant changes since it was written and more recent court rulings could impact how well an agreement holds up in court. Additionally, knowing where you stand if your divorce gets confrontational will give you the knowledge to negotiate your best financial case via a settlement or in court.

Decide What Really Matters to You

It’s unlikely you’ve stopped and taken the time to parse out what you really want in the next chapter of your life after divorce. Going through your divorce with great clarity on this topic will help you focus your financial negotiations to arrive at the best outcome for you in less time and, as a result, lower professional fees.

Calculate Whether You Should or Not

Settling seems enticing instead of fighting it out, but it’s best to work with both your divorce attorney and CPA or other financial professional to understand the long-term implications of any settlement. On the other hand, if there is little at stake, a long drawn out divorce process might prove to be more expensive than it’s worth. Working with the right professionals will help provide an objective view of the financial situation and assist you in understanding if you’ll need to change your spending habits, work longer or take other actions.




Financial Planning January 2019

What Leading Economic Indicators Tell Us

What Leading Economic Indicators Tell Us

One of the reasons investing is tricky is because it involves so many factors that we cannot control. One factor is the specific investment itself. In the case of a stock, the share price relies on company management and leadership; manufacturing, marketing and distribution; and balancing expenses with revenues. Another factor is investor and market sentiment, which can change on a dime based on economic uncertainty, the day’s news or a presidential tweet.

Then there’s a third component, which encompasses broader economic events and how they impact investment market fundamentals and the business life cycle. One way we monitor the economy and try to predict market cycles is through economic indicators. These are trackable data points that economists use to get an idea of the direction of specific aspects of the economy.

The following is an overview of regular economic indicators considered reflective of the current economy and indicative of future activity.

Gross Domestic Product (GDP)

GDP measures the total monetary value of all finished goods and services produced in the United States over a specified time period. Economists believe it is the most accurate measure of a country’s overall health.

Price Indexes

There are several types of price indexes, which are basically a way of tracking prices – and thus cost increases and decreases – in order to measure inflation. The most popular measure is the Consumer Price Index (CPI). It is published monthly and tracks the prices of a “basket” of many of the most common goods and services that urban consumers buy, including food, transportation, clothing and medical care.

The Producer Price Index is used to help monitor data from a commercial (wholesale) perspective. It tracks product price changes from a cross-section of sectors in the U.S. economy and is published on a monthly basis.

Jobless Claims Report

The jobless report tracks the number of workers who file for unemployment benefits, which tend to increase when the economy slows. The report does not track self-employment, contract or part-time employees (none of who qualify for unemployment benefits). It is published weekly but typically evaluated as a four-week moving average to account for short-term variances.

Housing Starts

The New Residential Housing Construction Report tracks the number of new building permits issued, which indicates increases or decreases in new construction activity. For reference, new construction usually picks up during the early expansion phase of the business cycle. This housing report generally refers to supply, while the Existing Home Sales Report, compiled by the National Association of Realtors, reflects the current demand for home sales. When viewed together, they offer a balanced assessment of the housing sector.

Consumer Confidence

Because consumer perspective can influence market fundamentals, economists track what is called a Consumer Confidence Index (CCI) that measures the general outlook of the American population. The CCI monitors a sample of 5,000 U.S. households with regard to consumer spending, which represents 70 percent of the economy. A rise in consumer confidence is typically viewed as a positive indicator for strong economic growth.

Purchasing Managers

The Purchasing Managers’ Index (PMI) gauges the confidence level of businesses, based on their spending patterns with regard to new orders, inventory levels, production, supplier deliveries and employment. The PMI is comprised of a sample of 300 purchasing executives in the manufacturing sector. For reference, an increase in new orders typically indicates a rise in prices, while a decrease points to a drop in prices. This indicator is generally used to anticipate GDP growth.

There are dozens of key economic indicators that signal changes in the direction of the economy. These regular reports help investors, market analysts and wealth managers make day-to-day buy and sell investment decisions.




General Business News January 2019

Tips for Choosing the Appropriate Liability Insurance for Your Business

Which Liability Insurance for Your Business

When it comes to liability insurance, the saying “you can never be too prepared” is quite meaningful. While business owners cannot predict what happens day to day or year to year, they can look into having business liability as way to give themselves peace of mind. The first step is to understand why it’s so important.

The Rocky Mountain Insurance Information Association reports that more than one in two home-based business owners lack necessary insurance. Furthermore, the Independent Insurance Agents of America (IIAA) found that 4 of 10 respondents do not have enough coverage because they believe their homeowners policy covers commercial liability. As you can see, education on this matter is essential. Here are descriptions of several different types of liability insurance from the U.S. Small Business Administration.

General Liability

One of the most common types of liability insurance for businesses is general liability. If the business is a grocery store or restaurant, general liability usually covers customers looking to have their doctor and hospital bills, damaged property or lost wages paid for because they claim they were somehow affected in the course of business operations. General liability also can protect businesses against claims if a third party believes their reputation has been tarnished by written or spoken materials from the company.  

Product Liability Insurance

Whether a business makes a product, is a wholesaler, a distributor or sells the product directly to customers, product liability insurance protects a business against monetary losses if said product is defective and harms the user. Examples of a defective product is if there’s a chain cracked on a swing or there’s an over-the-counter medication with a harmful ingredient and the defective product is determined to have caused the harm.

Professional Liability Insurance

This type of insurance, also known as errors and omissions, protects business owners who provide professional advice or services if they make a mistake or unintended omission in the course of delivery of said services. Examples of this can include a radiologist or one of their subordinates failing to deliver and communicate results of initial and final reports, especially if a medical condition diagnosis has been changed to indicate a more serious problem, and that failure to fully communicate all information leads to preventable medical problems for the patient.

Other examples can include engineers miscalculating combinations of traffic loads on a bridge. If engineers miscalculate the maximum load levels and use incorrect materials and anchors, it could lead to construction delays and/or additional costs to use different materials if a stronger bridge is necessary.

Commercial Property Insurance

When it comes to protecting one’s company against damages to their business’ assets, this type of insurance can reduce the potential financial impact. Policies can and do cover the business owners’ structure from events such as fires, hail and wind events, along with property damage due to criminal activity. This type of insurance may cover business assets as well, such as computers, furniture and inventory.

Home-Based Business Insurance

For business owners who run operations from their home, this type of policy can become part of a homeowner’s existing policy. This type of coverage can protect home-based business owners by covering limited amounts of equipment, such as computers, phones and cameras. It also may provide liability coverage for the homeowner if, for example, a client visits and is injured by slipping on steps or tripping over a box.

No matter what insurance policy a business needs, the best way to protect against loss is to reduce risk in the first place. Along with training employees to follow workplace safety procedures and reducing hazards for customers and workers to reducing the likelihood of accidents, finding the right mix of liability insurance lets business owners focus on growing their business.

What’s the Best Type of Business Entity for Tax Purposes

Tax and Financial News December 2018

What’s the Best Type of Business Entity for Tax Purposes

What's the Best Type of Business Entity for Tax Purposes

There are several major types of business entities, including S Corporations, C Corporations, Limited Liability Companies (LLCs) and being self-employed. Each type of structure has its own advantages and disadvantages when it comes to taxes, assets and liability protection.

Generally, certain types of businesses are best for certain professions from a tax perspective; however, with the tax law changes last year it may be time to reconsider. Under the current tax law, what used to be the best business entity type for certain scenarios may no longer be the same due to the pass-through deduction and corporate tax rate changes. Let’s look at the most common business entity types and see what’s best.


The self-employed includes everyone who is a freelancer, independent contractor and many business owners who don’t have any partners. The nice thing about being self-employed is that it’s simple; you don’t need to set up any type of legal entity. Moreover, if you qualify for the 20 percent pass-through deduction, you’ll pay even less. Being self-employed is best for simple businesses without major assets and little potential legal liability due to the lack of protection.

The self-employed are required to pay both halves of self-employment taxes on top of their regular income (if you are an employee, you pay one half and your employer pays the other) so you’ll need to take this into account.

S Corporations

Aside from taxation, asset protection is a major consideration when selecting a corporate entity. For those who have significant assets that need protection, especially if they don’t have any partners in the business, an S Corporation may be the best bet. There are restrictions on ownership structure; for example, S Corporations are limited to 100 shareholders, so this might be a limitation for some.

As a pass-through entity, an S Corporation doesn’t pay taxes on income at the corporate level; instead, it passes through to the business owners. As a result, S Corporations can benefit from the 20 percent pass-through deduction as well, though high earners may be phased out. S Corporations are generally favored by certain professions such as doctors, dentists and certain types of consultants.

C Corporations

Unlike S Corporations, there are no restrictions on ownership for C Corporations, and they provide great asset protection. Therefore, almost all public companies and those that want to go public are C Corporations, such as start-ups.

The downside of C Corporations is that they are subject to “double taxation.” The corporation is taxed on entity level profits and then shareholders are taxed again on dividend distributions. The dividend distributions are not deductible to the entity, hence the double taxation issue.

The new tax law lowered the top corporate tax rate to 21 percent, so for high earners the double taxation issue is not as much of a consideration as it used to be. Also, Section 1202 allows shareholders of start-ups to sell their stock without any taxes on the first $10 million in gain after five years.

Limited Liability Company (LLCs)

LLCs are generally the preferred entity structure for certain professionals and landlords. LLCs have flexibility as the owners can file as a partnership, S Corporation or even sole proprietor since the LLC is really a legal and not tax designation. LLCs benefit from the 20 percent pass-through deduction if the owner elects to be taxed as a pass-through, depending on the income level and nature of the business.

Many states do charge annual fees or minimum taxes on LLCs, but it’s usually insignificant. California is one of the most onerous with an $800 minimum fee per year.


Tax savings are often the main motivator in selecting a corporate entity, with asset protection right behind it. The new tax law’s 20 percent pass-through deduction and corporation tax rate reductions make the choice a little tougher than in the past, but generally unless a company wants to go public most businesses will either choose an LLC or S Corporation structure. Every situation is unique, so make sure to consult a professional that can help you choose the right entity type for your situation.




Financial Planning December 2018

Financial Planning Advice for Women

Financial Planning Advice for Women

The path for women is a little like two steps forward, one step back. For example, almost 40 percent of all privately held firms in the United States today are owned by women. Furthermore, the 2018 midterm elections yielded 23 female senators and more than 100 in the House of Representatives.

And yet, despite the fact that women comprise 51 percent of the U.S. population, their ranks account for less than one-quarter of Congress. And women hold only 10 percent of chief executive and chief financial officer positions in S&P 1500 companies.

What is most unfortunate about the lack of women in powerful positions is that they continue to trail men in terms of income and investment assets. When it comes to managing money, this means women are at a disadvantage because they tend to live longer than men, often are financially responsible caregivers – both as single moms of dependent children and elderly parents – and tend to have higher health and long-term care expenses as they age.

Earning Discrepancy

While younger, well-educated professional women are starting to level the playing field when it comes to earning salaries on par with male counterparts, this does nothing to help the mid-career, near-retirement or retiree with long-term financial security. Women still earn an average of 20 percent less than men in the same positions despite the fact that women have earned the majority of master’s degrees in the United States since as far back as 1981.

To add insult to injury, women’s earnings tend to peak at an earlier age and their income level drops at a faster rate than men as they grow older.

The income component of the financial picture has far-reaching impacts, such as:

  • Less disposable income than men
  • Less savings
  • Less money invested
  • Lower Social Security benefits during retirement

One of the oft-cited reasons for women earning less is because they tend leave the workforce for extended periods of time to raise children. Not only does career interruption leave them with fewer opportunities for promotion, but it reinforces the perception that women are less reliable and easily distracted by home-life responsibilities. However, the opposite is true of men. Employer surveys have revealed that when a man starts a family, he is perceived as more reliable and dedicated.

Lifestyle Benefits

While the financial scenario appears bleak for women, there are ways that they can take advantage of inherent lifestyle benefits to improve long-term security. Consider the following tips:

  • Firsthand knowledge – Because women are often in charge of the household budget, they are in a position to know where and how to cut costs.
  • Diligent – When it comes to saving money, studies show that at every salary level women consistently save a higher percentage of their income than men.
  • Communication skills – women tend to ask lots of questions, especially about things they don’t understand. When working with a financial advisor, they are more likely than men to ask about fees and expenses.
  • Practical – Women tend to value money in terms of what it can provide, thus they are not just interested in accruing money for the sake of wealth – and less inclined to chase investment performance.
  • Conservative – Women tend to be more conservative investors than men. They prefer lower-risk, conservative growth and are more focused on asset preservation.
  • Longevity – Women tend to have a longer time period for their investments to grow because, demographically speaking, they live longer than men. This means women benefit from their conservative style of investing slow and steady for the long game.
  • Outperformance – Despite their penchant for lower-risk investing, on average women’s investments have performed better than men by 0.4 percent, according to research by Fidelity Investments. While the variance is small, it can have a substantial impact over their longer lifespan.

By utilizing inherent lifestyle, disposition and life expectancy advantages, women can work toward long-term financial savings and investment earnings to help secure their future.




What’s New in Technology December 2018

Online Home Appraisal Tools

Online Home Appraisal Tools

Real estate appraisal and land valuation is the process of putting a price on the value of property. Buy and sell transactions generally require an up-to-date appraisal because each property is unique and values are based on the current economic landscape.

In the past, it was necessary to hire a professional real estate appraiser to conduct an onsite property visit to make this assessment. Granted, an onsite appraisal is still considered the most accurate because it involves a thorough review of the home, including the roof, siding, foundation, windows and doors, flooring, walls, plumbing, electrical, kitchen and bath updates.

However, it is also possible to get a relatively accurate appraisal using automated valuation models. Fortunately, there are a variety of websites that can provide this valuation for free. In addition to basic criteria such as square footage and the number of bedrooms and baths, online appraisals rely substantially on a comparative market analysis (CMA). This is basically a calculation of data from similar homes that have recently sold (within six months to a year) in the same geographical proximity. Online appraiser tools generally utilize publicly available data to estimate a home’s value without having to consult an appraiser or real estate professional.

The following is an overview of some of the most popular websites for establishing a home’s value. By comparing the estimates of several sites, you might be able to establish a reliable value or value range.

The real estate website Zillow offers a tool called “Zestimate,” which basically compiles an appraisal based on comparable homes in the same general locale. For most homes where public data is accessible, Zillow provides an automatic home value evaluation based on comparable home sales, local tax assessments, and market appreciation of local home values over 1-, 5- and 10-year periods.

A homeowner also has the opportunity to adjust his own real estate appraisal. To use this function, he should set up a free user account. This will require an email-based verification process to ensure that he is the actual owner of the property. Once he is logged into his Zillow account, he should enter his home address to get started.

Zillow automatically uses public data in its proprietary formula to estimate the value of a home. The formula looks at factors such as number of bedrooms, number of baths, square footage and location, and assigns a weight to each factor. However, the website also enables a homeowner to edit the home’s information, such as upgrades like a new bath, deck, swimming pool, renovated kitchen, new roof or HVAC. Next, the homeowner can choose comparable homes in the area that have sold recently. This means if one home sold way under market price for the neighborhood because it was a fixer upper or private sale, he can exclude that home from the CMA calculation. Comparables also can be viewed on a map to determine if they are in a similar neighborhood from a value perspective. Once the owner has selected comparable homes, his Zestimate will be updated as a Private Estimate.

RealtyTrac works similarly to Zillow, using publicly available data to generate an online appraisal tool called Home ValueTrac. Enter the street address, city and state or zip code to receive an estimate of median value as well as an estimated change in value over the last month.

Chase Mortgage Services

Chase Bank offers a free home property value tool for online users. Enter the property address to receive a price range rather than an exact number. This tool also provides an estimate value for surrounding homes in the neighborhood.

Not only can you list your home for sale at this website, but it offers a simple tool to help establish your home value. Simply enter your address and the Pricing Scout instantly estimates your home’s value based on nearby comparables. The tool provides an exhaustive list of the most recent sales of comparable homes in the area, detailing their address, bed/baths, square footage and sales price. The property valuation tool illustrates where your home value lies on a scale of nearby properties.

While online tools can provide a general estimate, they do not necessarily dictate the price you would receive at sale. In addition to using a home appraiser, you will want to meet with two or three real estate agents for their market value estimate, as they probably have better insights into your local market. Clearly, home appraisals are not an exact science. Whether using an online tool or personalized estimates from professionals, your estimates will almost always vary within a range.

IRS Releases New Projected 2019 Tax Rates, Brackets and More

Tax and Financial News November 2018

IRS Releases New Projected 2019 Tax Rates, Brackets and More

IRS Releases New Projected 2019 Tax Rates, Brackets and More

Bloomberg recently released projected tax rates, brackets and other numbers that apply to the 2019 tax year (the IRS will release the official numbers later this year). Note, these are NOT the numbers that apply to the 2018 taxes you file in 2019, but to the income and activity that occurs during the 2019 tax year that starts January 1, 2019.

A big part of the IRS’s consideration in formulating 2019 numbers is the inflation index. The Tax Cuts and Jobs Act (TCJA) replaced the normal Consumer Price Index with chained CPI. Chained CPI doesn’t simply measure the change in prices, it measures consumer responses to high prices, effectively creating a smaller inflation adjustment. In any case, inflation adjustments are a critical component (and often the main driver) in year-to-year tax bracket, exemptions and eligibility thresholds.

With an understanding of what underpins the 2019 adjustments (in addition to the impact of the new tax legislation), let’s look at the changes.

Tax Brackets

The increasing CPI means brackets are being pushed upward – albeit slightly – giving us these projected tax brackets for 2019.

Individual Taxpayers

Taxable Income

Tax Due

$ – to $9,700

10% of Taxable Income

$9,701 to $39,475

$970 plus 12% of the amount over $ 9,700

$39,476 to $ 84,200

$4,543 plus 22% of the amount over $39,475

$84,201 to $160,725

$14,383 plus 24% of the amount over $84,200

$160,726 to $204,100

$32,749 plus 32% of the amount over $160,725

$204,101 to $510,300

$46,629 plus 35% of the amount over $204,100

$510,301 and higher

$153,799 plus 37% of the amount over $510,300


Married Filing Jointly

Taxable Income

Tax Due

$ – to $19,400

10% of Taxable Income

$19,401 to $78,950

$1,940 plus 12% of the amount over $19,400

$ 78,951 to $168,400

$9,086 plus 22% of the amount over $78,950

$168,401 to $321,450

$28,765 plus 24% of the amount over $168,400

$321,451 to $408,200

$65,497 plus 32% of the amount over $321,450

$408,201 to $612,350

$93,257 plus 35% of the amount over $408,200

$612,351 and higher

$164,710 plus 37% of the amount over $612,350


Married Filing Separately

Taxable Income

Tax Due

$ – to $9,700

10% of Taxable Income

$9,701 to $39,475

$970 plus 12% of the amount over $ 9,700

$39,476 to $ 84,200

$4,543 plus 22% of the amount over $39,475

$84,201 to $160,725

$14,383 plus 24% of the amount over $84,200

$160,726 to $204,100

$32,749 plus 32% of the amount over $160,725

$204,101 to $306,175

$46,629 plus 35% of the amount over $204,100

$306,175 and higher

$82,355 plus 37% of the amount over $306,175


Head of Household

Taxable Income

Tax Due

$ – to $13,850

10% of Taxable Income

$13,851 to $52,850

$1,385 plus 12% of the amount over $13,850

$52,851 to $84,200

$6,065 plus 22% of the amount over $52,850

$84,201 to $160,700

$12,962 plus 24% of the amount over $84,200

$160,701 to $204,100

$31,322 plus 32% of the amount over $160,700

$204,101 to $510,300

$45,210 plus 35% of the amount over $204,100

$510,301 and higher

$152,380 plus 37% of the amount over $510,300


Trusts & Estates

Taxable Income

Tax Due

$ – to $2,600

10% of Taxable Income

$2,601 to $9,300

$260 plus 12% of the amount over $2,600

$9,301 to $12,750

$1,868 plus 22% of the amount over $9,300

$12,751 and higher

$3,076 plus 37% of the amount over $12,750

Personal Exemption Amounts

Personal exemptions are eliminated under the TCJA, so there is no adjustment any longer. The deduction for a qualifying relative is a similar type of item to the personal exemptions and is expected to be between $4,150 and $4,200 for 2019.

Standard Deduction

Standard Deductions

Filing Status

Standard Deduction Amount



Married Filing Jointly & Surving Spouse


Married Filing Separately


Head of Household


In combination with eliminating personal exemptions, the TCJA approximately doubled the standard deduction for most taxpayers in 2018. With inflation figures where they currently stand, projections are as follows for 2019:

Certain taxpayers receive additional standard deductions; for example, the aged (65 or older) or the blind will be $1,300 in 2019 for married filing jointly and $1,650 if neither married nor a surviving spouse.

Capital Gains

There is no change in capital gains rates for 2019; break points between brackets do change, with the maximum zero and 15 percent rate amounts as follows: 

Capital Gains

Filing Status

Maximum Zero Amounts

Maximum 15% Rate Amount




Married Filing Jointly & Surving Spouse



Married Filing Separately



Head of Household



Trusts & Estates



Section 199A Deduction (aka the Pass-Through Deduction)

Under the TCJA, sole proprietors and owners of pass-through entities are allowed up to a 20 percent deduction on qualified business income. To qualify for the deduction, a certain threshold must be met, and phased-in limitations are applicable. They are projected to be as follows for 2019:

Section 199A Deduction (aka the Pass-Through Deduction)

Filing Status

Threshold Amount

Phased-In Amount

Married Filing Jointly



Married Filing Separately



All Other Taxpayers



Alternative Minimum Tax (AMT)

AMT exemptions are also subject to adjustment for inflation and are projected to be as follows:

Alternative Minimum Tax (AMT) Exemptions

Filing Status

Exemption Amount



Married Filing Jointly & Surving Spouse


Married Filing Separately


Trusts & Estates


Don’t forget, these are only projected changes. The IRS will release the official numbers later this year.




Financial Planning November 2018

Advantages of Single Premium Whole Life Policy

Advantages of Single Premium Whole Life Policy

A Single Premium Whole Life (SPWL) insurance policy works just like it sounds – you purchase the contract with one premium upfront. For folks who haven’t carried life insurance since the kids moved out of the house and their term life policy ended, SPWL offers some flexible financial planning options.

First of all, rather than taking a sizeable chunk of savings to purchase a policy, it’s a good option if you come into a windfall, such as an inheritance. This way you can take a lump sum and convert it into your own legacy for your children.

However, you can tap money from the account if you need to. Part of the initial premium goes into a cash account, which is available for either withdrawals or a policy loan. This account earns interest, so the longer you leave it alone, the larger it will grow. If at some point you need emergency funds and wish you had that inheritance back, much if not all of it is available for your use.

Here’s a sample illustration of how SPWL works. Premium: $100,000

Policy Year

Cash Value Available

Guaranteed Death Benefit






















As you can see in the accompanying table, you would have access to much of that initial premium right away, and the equivalent amount within 10 years.


As you get older, you might find you have expensive medical bills or need caregiving assistance. Not only is your cash value available for these expenses, but if you have significant needs, you can borrow against the death benefit. While this reduces the amount your heirs will receive upon your death, they’d probably rather you use that money than rely on them to pay your bills.

Another huge benefit for people living on a fixed income during retirement is that by purchasing the policy with an initial lump sum, you aren’t burdened with ongoing premiums. Since the policy is purchased in full, there is no risk of future default.

Tax Status

The death benefit from a single premium whole life policy is not subject to income taxes for the beneficiaries, but it could be subject to estate taxes on large estates. The cash value account grows tax-deferred; however, SPWL is classified as a Modified Endowment Contract (MEC) because it is paid via a lump sum premium and therefore exceeds IRS limits for how much you pay into a life insurance policy all at once. This means that any money withdrawn or borrowed from the policy is considered “last- in first out,” so capital gains are taxed. Also, withdrawals and policy loans made before age 59½ may be subject to an early withdrawal penalty.

Many of today’s SPWL policies feature long-term care benefits and/or riders. These enable tax-free access to the death benefit due to a qualifying event, such as a terminal illness in which the policyholder becomes unable to perform two or more activities of daily living and needs long-term care.

Be aware that accelerated death benefits and long-term care riders are subject to underwriting approval, so it’s important to purchase a policy while you are still young and healthy. As always, contact a professional to make the best decision for your circumstances. 




Tip of the Month November 2018

Top 5 Latest Tech Advances That Help Heal Our World

Top 5 Latest Tech Advances That Help Heal Our WorldAs much as we lament how fast things change in the tech

As much as we lament how fast things change in the tech world, there is an upside when it comes to treating diseases and chronic conditions. Here are some of the coolest new devices showing how impressive it can be when technology and medicine intersect.

Getting a Foothold on Diabetes. The body’s extremities are most vulnerable to the effects of diabetes – especially the feet. If improperly treated, peripheral nerves and blood vessels can become damaged, causing ulcers, which can become infected and sometimes result in amputations, if not death. Siren© has developed high-tech socks with embedded sensors woven into the company’s Neurofabric™. These sensors continuously monitor the temperature at the bottom of the feet, which can be an indicator that the body is fighting an infection. Measurements are sent to the person’s smart phone, which alerts Siren’s customer service department that then calls or texts the user.

Seeing for the Blind. Created by AT&T, Aira glasses are a lifesaver. When a seeing-impaired person puts on these glasses, they’re connected to agents via microphone who see what the user sees in real time, so they talk them through what’s around them. These agents become visual interpreters, aka “seeing-eye people” and help users accomplish a wide range of daily tasks –everything from crossing busy streets to recognizing faces to traveling the world.

Treating Cancer with Robots. No, it’s not science fiction. The CyberKnife System® is very real. As the only fully robotic radiation delivery system, this miraculous surgical aid uses real-time imaging to deliver a maximum dose of radiation directly to the tumor from many different angles with sub-millimeter precision. It does this by tracking and adjusting for tumor or patient movement during the treatment, which minimizes radiation to healthy organs and tissues.

Scratching the Spread of Infection. Moms the world over have warned against scratching after a bug bite. This advice has some truth and relevance: Recent studies have found a direct connection between scratching, inflammation and the rapid replication of infections. Given the rise of mosquito-borne viruses like zika, dengue and malaria that are making their way into the United States, you’ll want to check out Bite Helper™. This ingenious device neutralizes the itch and irritation of insect bites with Thermo-Pulse Technology™, which delivers heat and vibration to the bite area. This increases blood flow and circulation, relieving the itch and desire to scratch, potentially containing the spread of the disease.

Rehabbing After a Stroke. Upon first glance, the Rapael Neofect© smart glove looks like a robot skeleton from the Lego movie. However, this incredible invention uses a variety of sensors to guide a stroke victim’s rehabilitation for hand and wrist injuries. Using wireless technology, the glove connects to the Rapael app you install on a computer, which guides a patient through repetitive movements to engage specific muscles and tendons. But here’s the thing: it makes the work less tedious and, in some cases, fun. The app projects games involving exercises that are actually everyday tasks like chopping vegetables, pouring a glass of wine or even throwing darts. The secret? Data from the sensors feed through a software algorithm that customizes the game play for the patient’s needs, similar to the way Netflix’s algorithm customizes a viewer’s TV show and movie recommendations.


Tax Reform 2.0

Tax and Financial News October 2018

Tax Reform 2.0

The House Republicans recently introduced legislation that, bundled together, is being referred to as Tax Reform 2.0. Expanding on the Tax Cuts and Jobs Act (TCJA), it’s composed of three main bills that intend to address some of most criticized portions of the TCJA.

H.R. 6760, Protecting Family and Small Business Tax Cuts Act of 2018

Currently, the TCJA tax cuts for individuals and small businesses expire in 2025, but this bill would make them permanent. The bill would also extend the lower 7.5 percent deduction floor for medical expenses through 2020; currently, this provision expires after 2018.Additionally, the bill attempts to clarify the increased child tax credit by making it explicit that a taxpayer identification number is needed to claim any non-child dependent. The estimated cost of these tax law changes is approximately $631 billion over 10 years.

H.R. 6757, Family Savings Act of 2018

This bill aims to help families start saving earlier and save more by expanding options. For example, one of the new savings vehicles the bill is set to create is a universal savings account allowing up to $2,500 in after-tax contributions per year, with tax-free withdrawals that can be made at any time for any reason. 529 plans also would be modified, expanding the definition of qualifying expenses and allowing up to $10,000 in distributions to be used for repayment of qualified education loans. The estimated cost of these tax law changes is approximately $21 billion over 10 years.

H.R. 6756, American Innovation Act of 2018

H.R. 6756 aims to help new businesses by expanding the current start-up and organizational costs deductions. Currently, start-up and organizational costs each qualify for a $5,000 deduction; this bill would allow a combined deduction of up to $20,000 for both.

Under the law as written currently, net operating loss carry-forwards, net operating losses, general business credit carry-forwards, and general business credits are eliminated or limited if there is an ownership change. H.R. 6756 would allow new businesses that have a change in ownership to claim these tax breaks the same as if no ownership change occurred.

The estimated cost of these tax law changes is approximately $5.4 billion over 10 years.


While the House Republicans believe they are being responsive to their constituents with these bills, the total cost for all three over the next 10 years exceeds $657 billion. With a federal deficit growing increasingly fast, it’s not clear how the Senate will react to the bills now that all three bills have passed in the House.




General Business News October 2018

Common Errors and Oversights When Evaluating a Business to Buy

Common Errors and Oversights When Evaluating a Business to Buy

When it comes to selling a business, it’s never a bad thing to be too careful. In fact, according to Forbes’ contributor Richard Parker, 50 percent of business acquisitions fall apart during the “due diligence” phase, where many current and future obligations exist. With such a high rate of deals that fall through, what are the most common reasons that business acquisitions end up failing?

Learn About Business Obligations Pre-Purchase

One of the many reasons a business deal breaks down is due to either the seller not being transparent or the buyer discovering things about the business’s existing obligations, such as the level of debt or a full accounting of outstanding bills.

This brings up a larger concern of how to determine if a business is a good fit. First, generate many questions to ask. This includes finding out details about the business structure, the company’s outstanding bills, agreements and client contracts and how each of these items will be addressed. For example, if there’s a lease, will it be transferred and renewed as part of the business sale? Is the building’s owner on board and part of the contract to renew the lease after the sale and transfer has completed?

Another consideration, echoed by Parker, is to determine how many customers the business currently has and what the company will be doing to keep developing clients. Is the business on time with bills or are there vendors with outstanding invoices that might be holding back product, thus preventing existing customer orders from being fulfilled?

Parker uses the example of looking at a company and how the majority of its revenue comes from a single government contract. As long as the company has ongoing marketing and sales efforts to gain new clients to expand its client base when that contract ends, it can make reasonable budget and staffing projections depending on how fast new clients are acquired. However, if such efforts are not implemented, a lack of new clients can put a squeeze on future cash flow.

Other considerations include understanding how the new ownership will affect existing and future obligations. For example, have all existing debts and business correspondence been disclosed to the potential buyer? If there’s an indemnification clause in the purchase contract for the business, and the business is subject to collections from an unpaid vendor or is later sued, if the indemnification clause is not fully understood, the new owners might contest indemnifying the previous owner.

An additional consideration is to determine how the business’ ownership is structured and how it will impact unforeseen events. Depending on the business entity, creating a fair operating agreement that sets expectations for all owners can minimize many issues, especially for businesses with more than one partner.

One example of an important clause for business owners is how major decisions are made. Are these decisions made unanimously or are they made with a majority of partners? Without a clear set of expectations for how major decisions will be made, partners could walk away with hard feelings, looking to sell their ownership share unexpectedly.




Tip of the Month October 2018

6 Great Ways to Unplug and Feel Better

6 Great Ways to Unplug and Feel Better

You’ve just lost your phone and you’re in full-on panic mode. When you locate said electronic device, all is well. You heave a sigh of relief. All of this begs the question: Why and how have we become so dependent on our phones? Though doing without a phone entirely is probably not realistic or in some cases necessary, here are a few ways to ramp off your addiction – and why unplugging is so important for your overall well-being.

  1. Don’t Take Your Phone to Bed – Research shows that blue light from the phone screen makes it hard to fall asleep. Wayne Conn, a sleep coordinator at Texoma Medical Center, claims that it wakes up the brain and causes it to be overstimulated, much the way exercising before going to bed prevents our bodies from relaxing. Idea: Put the phone down two hours before you retire for the evening, maybe in another room. If you need to make a call, use a land line. When you do this, chances are you’ll sleep better and wake up refreshed.
  2. Let Go of FOMO – FOMO is the acronym for “fear of missing out”. In fact, Larry Rosen, psychology professor and author of The Distracted Mind, told CNBC that most people check their phones every 15 minutes or less for fear of not being in the know about whatever local or world crisis might be in play. Truth is, if it’s that important, you’ll hear about it on TV, the radio or from a friend. Acquiescing to this phenomenon creates anxiety and interferes with your ability to focus. To avoid all this stress, let go and let live.
  3. Set Alarms to Wean Yourself Off – Relegate your phone checking to certain times, which might be after work or after dinner. Next, set alarms on your phone during these times so that you can take one deep dive into your phone, respond to emails and comment on social media. Better still, Rosen suggests a radical idea: tell friends and family that you might not be responding to messages as quickly as you used to. Talk about liberating! No longer will you be a slave to the world.
  4. Remove Distracting Apps from Your Phone – To avoid accidental time-sucks, remove apps that seem to lure you in and hold you hostage, such as social media sites and games. Instead, deploy apps for reading or learning a new language. If you really want to see who has had a new baby or been on a fabulous vacation, you can do it on your desk computer or laptop. The takeaway? Now when you’re interacting with your phone, you’ll be contributing to your mental health and personal growth, rather than taking away from it.
  5. Rely More on Smart Speakers – Step away from the screen. Give your thumbs a rest. Use your voice to do the heavy lifting with smart speakers like the Amazon Echo or Google’s Home Products. These blue light-free devices can answer virtually any question you have, as well as turn on music or a podcast. When you’re not glued to your phone, you’ll enjoy life a whole lot more.

  6. Try Replacement Therapy – Finally, instead of reaching for your phone, pick up a book. Talk to your coworker, spouse or neighbor. If we’re honest, human interactions far more satisfying than a tiny rectangular screen.

Would a $1,000 Tax Deduction get you in the Gym?

Tax and Financial News September 2018

Would a $1,000 Tax Deduction get you in the Gym?

Would a $1,000 Tax Deduction get you in the Gym?

America is one of the heaviest societies in the entire world. Two-thirds of Americans are classified as obese or overweight using Body Mass Index as a measurement. These aren’t just ugly statistics; medical conditions linked to obesity caused more than 100,000 deaths in 2017.

On top of all of this, obesity-related medical issues are a very expensive problem, costing society more than $190 million annually in preventable costs.

What’s the Solution?

At this point you’re probably thinking, OK, so what do we do about it? Basically, at a societal level, the core of the issue is what can the government do to motivate or incentivize diet and exercise, if anything? (Please, indulge me here and leave aside the argument over whether or not the government should even get involved in something like this.) Perhaps making gym memberships or fitness equipment tax deductible would help?

Some in Washington are thinking about this as we speak. Congressman Jason Smith (R-MO) is attempting to tackle the issue with the the PHIT Act, giving a deduction for taxes capped at $1,000 for qualified fitness-related expenses.

Current Versus Proposed Tax Law on Fitness Expenses

The current tax law allows a deduction under IRS code Section 213 for amounts paid for qualified medical care expenses that are not covered by insurance. While weight reduction programs can be deductible if directed by a doctor, gym memberships and fitness equipment are generally not deductible.

The PHIT Act aims to expand what constitutes medical care to include certain fitness-related costs such as gym memberships, exercise instruction (group or personal trainers), participation in physical activities (sports leagues) and safety equipment for such programs.

Certain sports such as sailing, golfing, horseback riding and hunting do not qualify, and neither do the purchase of exercise books or instructional videos. Under the bill, the tax deduction for memberships and instruction are capped at $1,000/$500 for married/single taxpayers. Fitness related safety equipment is capped at $250.

Limits on Deductibility

As great as this sounds, there are a few potential issues with the execution of the bill, which could prevent it from helping as many people as possible. The first is the medical expense floor.

Under tax law, deductions are limited to the amount of qualified medical expenses that exceed 7.5 percent of AGI. This means that anyone with an AGI of $85,000 would have to have $6,375 in medical expenses before they start to see any incremental benefit. Add to this the increased standard deduction (to $24,000/$12,000 for married/single taxpayers) under the Trump tax plan, and almost no one would qualify for the PHIT Act deduction since only an estimated seven  percent of taxpayers will continue to itemize under the new law. This also disproportionately impact lower income taxpayers, who are more prone to obesity.

The PHIT Act also provides a second way to capture the deduction through the use of a Health Savings Account. Instead of a deduction, taxpayers could pay for the qualified fitness costs with pre-tax dollars up to $1,000.

The third and last way to benefit from the PHIT Act as written would be to reimburse yourself through a Health Flexible Spending Arrangement or Health Reimbursement Arrangement. The problem here is that you will need your employer to offer one of these plans before you can take advantage of them.

Watch and Wait

OK, so you’re thinking that you will get the deduction though one of the ways above – but don’t run out and join the gym just yet. Back in 2015, a similar bill was proposed that sought to allow a $2,000 deduction for fitness-related costs. Ultimately, the bill died; and there’s a good chance this will happen again since the PHIT Act would tack on $3.5 billion to the deficit over the course of 10 years.

As always, consult your tax professional for the latest news in legislation that might affect your bank account.




General Business News September 2018

Help Reduce Call Reluctance Among Sales Professionals

Help Reduce Call Reluctance Among Sales Professionals

When it comes to selling, there are a lot of challenges in the industry. According to a 2016 report by Accenture and CSO Insights, 55 percent of sales professionals believe that their organization’s sales tools make them less productive; and 59 percent of those surveyed said they have too many tools at their disposal. 

Accenture and CSO Insights also found in 2014 that middle-of-the-road performance reduces business revenue by 3.2 percent, which could be improved by a multiprong approach of more effective tools, more targeted training and more efficient data and analytics. It also determined that the top 20 percent of sales performers created three-fifths of a business’ sales, compared to the remaining 80 percent of the organization’s sales professionals producing the rest. Hence, the need to address gaps in performance exists, including sales call reluctance.

Defining Call Reluctance and Causes for Sales Professionals

Simply put, call reluctance by sales professionals is when an agent has a much harder time than normal picking up the phone to pursue the next sale. This is oftentimes due to a fear of being rejected. While this is more common among new sales professionals, it also can happen to the most seasoned salespeople.

Strategies to Reduce Sales Call Reluctance

Depending on the person, there are many ways to tackle this problem. One way to work through the fear is to acknowledge it by not overthinking and just jumping right in and dialing the next person on the list.

If making numerous calls within a week, 50 to 100 for example, seems too overwhelming and causes sales call reluctance, breaking up the number of outbound calls or the length of continuous cold calling with related tasks could help. The break might include answering existing client emails or improving product knowledge for upcoming sales calls, helping to break down calls into more attainable tasks.

Another reason why sales professionals – especially new hires – might experience sales call reluctance is because they don’t have much experience. Developing a script for them might be helpful because it gives them confidence when they’re on the call.

When it comes to creating and using a script, remember that it serves as a general guideline and not a verbatim talking guide for salespeople. For financial professionals for example, regardless of their experience level, it can remind them to explain each financial acronym to a cold-call prospect. By saying return on investment instead of ROI or required minimum distribution instead of RMD, sales professionals can help each prospect understand what those acronyms mean. By not assuming a potential customer understands industry jargon, it will make it easier for each prospect to understand the product or service. This can potentially raise interest in its benefits.

Sales professionals can also use scripts to customize their call, depending whether it’s a cold call or they’re following up on a referral, a sales email or a piece of direct mail marketing. For individuals who receive direct mail, sales professionals will already know who is targeted and this can give them time to make themselves aware of the current promotion before the call. This gives the salesperson more confidence, because when they do reach the person on the other line, they’ll be able to answer questions from the potential customer.




Tip of the Month September 2018

8 Ways to Stay Healthy When You Sit All Day

8 Ways to Stay Healthy When You Sit All Day

According to Dr. James Levine, an endocrinologist at the Mayo Clinic, sitting is the new smoking. In his study that spanned 15 years, it was determined that spending more than six hours a day on your behind contributes to unhealthy blood pressure, obesity, depression and some types of cancer. And that’s just for starters. Here are a few simple things you can do every day to combat these potentially life-threatening conditions.

1. Set a timer. When you’re engrossed in your work, time can slip away. You glance at your watch and you’ve been sitting for two hours. This can take a toll on your health. Set a timer for every 30 minutes. Get up, stretch, go the restroom, drink water, take a lap around the office while your files are downloading or step outside and get some fresh air. The more you move around during the day, the better your overall health – both physical and emotional – will be.

2. Wash your hands. Those pesky germs are everywhere: door knobs, keyboards, conference rooms, you name it. They’re invisible and potentially harmful. And, as much as you may (or may not) like them, your coworkers are also a source of infection, with their sneezing and coughing. Keep some hand sanitizer at your desk. Even better, get up and wash your hands in the restroom, the latter of which is doubly healthy because you’ll be moving your body.

3. Walk and talk. You’ve seen those movies where the boss says, “Walk with me.” It turns out this dynamic has some merit – and health advantages. Instead of sitting down with someone, ask them to take a walk with you to discuss the subject at hand. If it’s a phone meeting, get up and pace. Moving those legs is a good thing.

4. Drink plenty of water. Hydration is key to keeping yourself in tip-top shape. But know this: thirst doesn’t always signal that you need liquids; it can also be a sign of hunger, at which point you might be tempted to grab a sugary snack. Solution? Drink water instead to quell your grumbling stomach. Thirst is also a symptom of lack of sleep, which leads us to the next tip.

5. Get a good night’s sleep. When you don’t have enough sleep, everything has the potential to be off-kilter: your mood, attention span and your sense of being satiated. In case you feel hungry, drink water – or even hot tea. When your stomach is full, you minimize the chance of overeating or eating something that’s full of fat or sugar, which can lead to weakening your immune system in its already compromised state (sleep deprivation).

6. Invest in a pedometer. Getting steps in is not just for people over 65. Everyone needs them. Pedometers are generally affordable – between $15 and $35. According to an article in Prevention magazine, after one woman increased her daily activity to 9,950 steps a day, she lost five pounds and lowered her cholesterol 24 points. Get steppin’ for feeling better and staying well!

7. Check your posture. If refrains of “sit up straight” from parents and teachers are circling through your head, don’t push them away. Turns out that bad posture can lead to all kinds of detrimental effects: sore muscles, spinal curvature, blood vessel and nerve constriction, not to mention depression, low energy and stress. No one needs that. Instead, adjust your backside so that it touches the back of your chair. Look at the ceiling to stretch your neck. Raise your arms and reach for the sky. Relax your shoulders. And lastly, breathe.

8. Adjust your monitor. Sitting too close to your monitor can cause eye exhaustion, burning and muscle aches. And when your monitor is too high or low, it can lead to headaches, double vision, difficulty focusing your vision, nausea and dizziness. Here’s the remedy: sit about an arm’s length away and align the top of your screen with your eyes so that you look down a bit at your monitor. This should alleviate any irritations that might arise.

So, the next time you’re sitting at your desk and are in between tasks, give these tips a read. See if one of them applies and give it a try. One small tweak to your daily routine could make all the difference for your health and well-being.

Summer Jobs and Taxes

Tax and Financial News August 2018

Summer Jobs and Taxes

Summer Jobs and Taxes

Summer is in full swing and, with school out, lots of high school and college kids are working seasonal jobs before they return to their studies. It doesn’t matter if it’s mowing lawns, checking out groceries, painting houses or lifeguarding at the beach, here’s what you need to know about summer jobs and taxes.

Even if you don’t owe taxes, you still might need to file a tax return

Often, a first summer job is also the first time dealing with a form W-4. Figuring out the right number of exemptions to claim might not be easy, especially with the increased standard deduction under the latest tax law. A summer job has the chance of not resulting in any taxes, so claiming a few exemptions could be fine – but there’s no guarantee. Remember that the more exemptions claimed, the less paid in taxes each paycheck, but this may result in a higher tax liability at the end of the year. If you’d rather play it conservatively, have your child claim 0 or 1 exemption on his W-4 and hope for a refund at tax time.

Getting paid off the books doesn’t mean you’re off the hook when it comes to taxes

Getting paid off the books or under the table means the employer isn’t reporting the wages paid to the IRS and local and state tax authorities. Paying employees under the table is a big risk for the employer and can result in fines and penalties for them, but don’t make the same mistake. If your child is paid cash, she’ll need to report it even if the employer doesn’t.

The IRS isn’t the only one you might owe

The first time doing taxes, kids tend to focus on the IRS and federal taxes, but that doesn’t mean they should forget about state and local taxes. Many states, unlike the federal government, do not exempt low income, and some states even impose taxes on the first dollar earned. Make sure you understand the state and local filing situation or consult a tax advisor. Things can be especially tricky for college kids who have a job at both home and school during the year and end up earning income in more than one state.

Self-employment can happen at any age

Some kids might not get a seasonal W-2 job and instead be self-employed mowing lawns or babysitting, for example. In this case, they’ll need to file a Schedule C to claim their business income and related expenses, the same as everyone else. Encourage them to keep good records and receipts just in case.

Tax professionals may be needed

Just because someone is a high school or college, it doesn’t mean they won’t need the help of a good tax professional – especially with a more complicated tax return. One good example is the kiddie tax rule change under the recent tax law.

Previously, unearned income (such as dividends and interest from investments) could be claimed on the parents’ tax return since the kiddie tax rates were same as the parents. However, the new tax law changed the kiddie tax rates to be the same as trust tax rates. The IRS released a new postcard size return to handle the issue, but the details depend on the situation and this won’t be the answer for everyone.

Don’t spend it all in one place

Encourage your children to save a portion of their earnings and they might end up saving some taxes in the process. Consider helping them set up a ROTH IRA to enable their hard-earned dollars to grow and be taken out tax-free in the future. Parents can even encourage saving by contributing to the ROTH IRA themselves since it doesn’t have to be funded solely by your child’s income. Note, however, that parent/child combined contributions may not exceed the annual IRA contribution limit or 100 percent of the child’s earned income.




Stock Market News August 2018

Speculation of $150 Oil and What it Means for the Markets

Speculation of $150 Oil and What it Means for the MarketsOver the past 30 months, the price of a barrel of oil has

Over the past 30 months, the price of a barrel of oil has increased from the mid-$30s to – in recent days – as high as the mid-$70s per barrel. At nearly half the historic $150 per barrel price level nearly 10 years ago, how will the market react if oil reaches $150 again, as some analysts are speculating?

Understanding the Increase in the Price of Oil

With investors speculating in the markets to drive prices higher and the Organization of Petroleum Exporting Countries (OPEC) and Russia cutting production, global production has been experiencing production pressure since 2016. Add in America’s 2015 decision to export its expanding domestic crude oil production – ending a four-decades ban on the practice – and there are many reasons for the run up in oil prices.

Speculating About Oil’s Future

While there’s no crystal ball as to where crude oil will peak, looking at how production might play out in the near and long terms can provide insight for future global crude supplies. Whenever oil prices increase, producers look to ramp up production to take advantage of increased prices. But what are global producers capable of?

Despite the shale oil renaissance, if America’s existing shale production increased by 100 percent, it would still make up only 15 percent of the world’s oil supply. Of the remaining global oil suppliers outside of America, OPEC accounts for 40 percent of worldwide production, with offshore producers comprising another 30 percent of global supply. While many experts contend OPEC is a cartel, there is much exploration and innovation by offshore drillers and this may have a bigger impact on worldwide oil prices going forward.  

According to industry reports, 75 percent of the globe’s 32 best performing oil fields are offshore. Based on a few data points, there’s a lot of potential for increased oil production at higher margins. Norway has increased its offshore oil output this year compared to last, and the country is expecting another offshore oil drilling project to come online in 2019 – one of the biggest projects in the last half century. This increased production is coupled with one in four of Norway’s new car sales in 2017 being electric, further reducing the country’s domestic demand for refined oil products.

Another example of increases in offshore production is energy companies working with the Guyanese government. Within approximately 24 months, Exxon is planning to extract 500 million barrels. Yet this discovery represents only 15 percent of the total projected output.

Along with increased production, the advent of new technology lowers production costs for offshore drillers to between $20 and $40 a barrel. Due to advances in technology such as sub-sea robots; robo-rigs and drones; and augmented and virtual reality, which will reduce labor costs, the case for $150 per barrel oil is less likely. This is true even if global demand grows at the projected 1.5 million barrels annually.

How Higher Oil Prices Could Impact the Economy Overall

When it comes to increased oil prices, the economy can respond in various ways. For the general consumer, as oil prices increase, a ripple effect will raise the price of gasoline. This will undoubtedly offset some of the recent gains consumers received with the recent tax cuts signed into law, potentially dampening consumer spending.

Similarly, as the cost of oil increases, businesses may choose to pass the increases on to consumers – in the form of higher fares for airlines, for example. Businesses also can increase the price of their services with fuel surcharges or increase prices for products derived from crude oil. However, for workers in the oil and gas industry, companies will increasingly look to invest more in capital expenditures to increase drilling capacity, stimulating job creation and economic growth.




Financial Planning August 2018

The Perks of Working Past Traditional Retirement Age

The Perks of Working Past Traditional Retirement Age

A large number of Americans intend to keep working past retirement age. For many, their reasons are financial. Some have a high level of debt while others are afraid if they retire too soon, they will run out of money.

Working longer offers several financial benefits; workers are able to:

  • Accrue a higher Social Security benefit
  • Grow a higher pension benefit
  • Allow more time to save money and permit investments to grow
  • Utilize company-paid insurance benefits

In addition to financial benefits, there are cognitive, physical and social advantages to working longer. Studies have found that older Americans, who tend to work longer than people in European countries, score higher than those citizens on memory tests. The research correlates continued mental stimulation provided through work with retaining mental acuity longer than those who retire.

Working outside the home also exposes older folks to a larger social network than some retirees might experience. As we get older, our social networks tend to narrow. Most people see fewer people after retiring and must make a concerted effort in order to engage in conversation and activities with a wide range of people on a daily basis. Maintaining a job past traditional retirement age can keep us socially engaged longer. Scientists say that regular social contact contributes to better health and a positive sense of well-being as we grow older.

Some people prefer to keep working because they are self-described workaholics. We tend to associated any type of “-aholic” with negative connotations. However, recent research has found that an addiction to working long hours can yield positive outcomes. For one,

American businesses generally reward workaholic behavior with promotions and higher pay, so there is a financial benefit.

Also, a recent study correlated health benefits as well. The research discovered that workaholics who love their job have no more risk of developing health conditions (e.g., high blood pressure, high blood sugar, abnormal cholesterol, excess waistline fat) than the average employee.

Unfortunately, if work is causing undue stress and health problems, this will likely cost more money for treatment during retirement. In this case, if you don’t love your job it could be worth considering retiring – even if that means living on less income. At least it would give you the opportunity to pursue a daily regime of healthy habits and interesting hobbies – which might help ward off expensive medical bills and provide a higher quality of life.

When weighing the benefits of retiring versus working longer, don’t rule out opportunities for income other than a full-time job. Consider taking on a less stressful part-time job that will allow you to explore some of your interests. For example, if you like carpentry or gardening, consider applying for a position at Lowes, Home Depot or Ace Hardware. If you enjoy crafts or sewing, consider selling wares at a local market or starting your own tailoring and alterations service. If you like being around animals, consider offering a pet sitting service.

Working longer doesn’t necessarily mean working longer at the same job. You can enjoy many of the same perks – financial, mental, physical and social – by simply switching to a less stressful type of work that you enjoy more.




Congress at Work August 2018

Offshore Jobs for U.S. Workers, Money for North Korean Refugee and Human Rights Programs, and a New $1 Coin Honoring American Innovation

Offshore Jobs for U.S. Workers, Money for North Korean Refugee, H.R. 5956, H.R. 2061, H.R. 770, H.R. 219, H.R. 2122, 2292, 951, 447, 446; S. 490

Northern Mariana Islands U.S. Workforce Act of 2018 (H.R. 5956) – This bill is related to the Consolidated Natural Resources Act of 2008, which stated that the U.S. Citizenship and Immigration Services must reduce the number of Commonwealth of the Northern Mariana Islands (CNMI) transitional worker (CW) permits each year, with the goal of ceasing all permits by the end of 2019. However, over the past five years, there has been increasing demand for CW permits resulting from economic expansion largely due to the construction of casinos and hotels. H.R. 5956 authorizes an increase in the percentage of U.S. workers for CNMI work permits. The bill was sponsored by Rep. Rob Bishop (R-UT) on May 24 and signed into law by the President on July 24.

North Korean Human Rights Reauthorization Act of 2017 (H.R. 2061) – This bill was introduced by Rep. Ileana Ros-Lehtinen (R-FL) on April 6, 2017, and signed into law by the President on July 20. H.R. 2061 authorizes funding of $10 million a year from 2018 to 2022 as well as reinstates and extends human rights and democracy programs under the North Korean Human Rights Act through 2022. The purpose of these programs is to promote human rights, democracy, and freedom of information in North Korea, and provide humanitarian assistance to North Korean refugees.

American Innovation $1 Coin Act (H.R. 770) – Introduced by Rep. James Himes (D-CT), this bill directs the Department of the Treasury to mint and issue $1 coins commemorating innovation and innovators from each state, U.S. territory and the District of Columbia. Starting in 2019, the Treasury will issue four coins per year over a 14-year period in alphabetical order by jurisdiction. Coin designs may not feature the bust of any person nor the portrait of any living person. The bill was introduced on Jan. 31, 2017, and signed into law by the President on July 20.        

Swan Lake Hydroelectric Project Boundary Correction Act (H.R. 219) – Sponsored by Rep. Don Young (R-AK), this bill authorizes the Department of the Interior to modify the boundary of the Swan Lake Hydroelectric Project (FERC No. 2911) and convey to the state of Alaska any additional land necessary for the project. The bill was introduced on Jan. 3, 2017, and was signed into law by the President on July 20.

To extend the deadline for commencement of construction of a hydroelectric project (H.R. 2122, 2292, 951, 447, 446; S. 490) – This series of bills were sponsored by various Republican Congressmen and women from several different states. Although the initial legislative Acts were enacted in various past years, each of these bills authorizes the Federal Energy Regulatory Commission (FERC) to extend the time period for starting construction on their respective hydroelectric projects. The bills were signed into law on various days in July by the President

Social Security Ground Zero: 16 Years to Impact

Tax and Financial News July 2018

Social Security Ground Zero: 16 Years to Impact

Every year, the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (OASDI) issues its annual report on the Social Security system. The report details the current financial status of both Social Security and Medicare as well future projections. The 2018 report has one key takeaway – both programs are facing long-term financial pressures and potential shortfalls.

How Social Security and Medicare are Funded

To better understand the report’s conclusion, you need to understand how the programs are currently funded. Both self-employment income and wages are subject to Social Security and Medicare taxes, known together as FICA (Federal Insurance Contributions Act) taxes.

Employees pay a Social Security tax of 6.2 percent and the employer also pays the same 6.2 percent again for a total 12.4 percent of every employee’s wages (under the wage cap of $128,400 for 2018) funding the system. Self-employed persons pay both halves themselves (although the “employer” side is tax deductible against total self-employment income).

Unlike Social Security, all wages are subject to Medicare taxes at a rate of 1.45 percent, paid by both the employee and employer for a total of 2.9 percent contributed to the system. Again, the self-employed pay both sides of the Medicare tax, just like the Social Security tax. In addition, anyone who earns more than $200,000 ($250,000 if married filing jointly) pays a Medicare surtax of 0.9 percent on all wages above those amounts.

Earning Your Benefits

Taxpayers need to earn a certain amount of credits in order to be eligible for Social Security benefits, with the amount depending on when they are born. Everyone born on or after 1929 must accrue 40 credits – which equals roughly 10 years of full-time work – to be eligible to collect retirement benefits.

How much you receive in benefits depends on how much you earned during your career. As of the April 2018 tables, individual retirees currently receive an average of $1,411 per month, or just under $17,000 per year.

Taxing Your Taxes

Taxes on Social Security benefits themselves also help fund the system. Depending on your filing status, age, how much you earn, etc., you might have to pay income tax on your Social Security benefits. These taxes are added back to fund the system for other taxpayers.

Historical Perspective

The Social Security and Medicare system are more than 83 years old. During this time, the programs have taken in approximately $20.9 trillion in revenue and paid out about $18 trillion; leaving $2.9 trillion in trust fund reserves at the close of 2017.

Source of the Problem

Here’s the issue: the initial recipients didn’t pay into the system themselves – their benefits were funded by those currently working. The problem is that those entering retirement today represent a large segment of the population, while the working population is increasingly smaller due to declining birth rates. Together, this means the system is paying out more than it’s taking in.

For the first time since 1982, Social Security’s total costs will exceed its total income, according to the trustees’ report. As of now, the trustees expect to continue funding Social Security and Medicare using non-interest income (aka taxes), interest income on reserves and trust fund asset reserves. This leaves the system solvent through 2034, when the trust fund reserves will run out.

How Bad Is It?

Without structural changes or increased taxes, Social Security will be able to pay only about 75 percent of scheduled benefits after 2034 through 2092. Medicare is facing a similar, if not worse scenario.

What’s Next?

The trustees suggest addressing the shortfalls as soon as possible. This is easier said than done, as any solution is going to be untenable to some group of constituents.

Potential solutions include reducing benefits now, raising the retirement age or increasing the wage cap for Social Security taxes. Even more draconian measures being considered include means testing to receive benefits or an outright increase in FICA tax rates.

The trustees’ report places a great emphasis on taking action now rather than later. The longer Congress waits, the worse the problem will become. But since all solutions are politically unpopular, they are unlikely to take any action now.




General Business News July 2018

Key Performance Indicators and Your Business

Key Performance Indicators, also known as KPIs, are core measurements that businesses use to monitor progress toward achieving goals and targets. KPIs, which vary widely by industry and entity structure, can be used to monitor and track all aspects of your business,. Management teams pay close attention to KPIs, looking for anything out of line that indicates action needs to be taken. In this two-part series on KPIs, we’ll look at the difference between KPIs and metrics, methods for choosing KPIs, how to define KPIs and the best ways to track and communicate findings.

Metrics versus KPIs: What’s what?

KPIs and metrics are often conflated because all KPIs are metrics, but not all metrics can (or should) be considered KPIs.

Metrics are data driven, quantifiable measures that track performance. Created from data compiled periodically (such as accounting-based metrics) or continually from a live data source, metrics allow businesses to monitor progress toward achieving goals and objectives.

How to determine which metrics qualify as KPIs?

Peter Drucker, one of the most widely influential thinkers on the subject of management theory and practice, wrote “What gets measured gets managed.” As such, not every metric is truly “key” for your business. If you treat all metrics as equal and don’t differentiate between what really matters, then nothing will stand out and you’ll manage everything equally. This is why it is critical to select the metrics most important to you and your business and designate those as your KPIs.

Metrics Still Matter

Your KPIs might be your most important metrics, but this doesn’t mean the other metrics don’t matter. When something goes awry with one of your KPIs, you’ll need to dig into other metrics to understand the problem, identify the root cause and correct course.

Mirror, Mirror on the Wall: Who’s Performing Best of All?

Not everything your business gauges will be an accurate measure of performance. Metrics that feel good to track but don’t have much impact on progress are often called “vanity metrics.” Vanity metrics are fun to get excited about, but they don’t actually provide much value or insight.

The entire point of carefully selecting KPIs is so that you focus on what really matters to your bottom line.

How to choose KPIs that matter

Delivering the right metrics to the right people at the right time allows you and your team to collaborate, make decisions and take actions based on data. KPIs can go beyond just providing focus to create a cohesive unity among your team in working toward a common objective, but only if they are well defined and easy to comprehend. Next month we’ll look at how to transform a bunch of numbers into something actionable and meaningful.

Before we get into the specifics, the simple way to drill down and select a handful of metrics is by asking two central questions. First, what are you trying to achieve and, second, how will you know if you’ve achieved it?

Stay tuned next month for a continuation of this discussion and more answers to your questions.




What’s New in Technology July 2018

Old School and Hi-Tech Ways to Keep Track of Passwords

In 2017, nearly one-third of internet users reported being victim to online hacking or similar suspicious activity on their accounts. But as anyone who regularly uses a computer – especially for financial transactions – knows, keeping track of passwords can be a time-consuming task. Even so, it is necessary to ensure your personal and financial information is kept private and secure.

Unfortunately, one of the biggest inconveniences that has emerged is trying to keep track of different passwords for different websites. This issue is exacerbated by the fact that many websites require you to change your password every three to six months. Trying to keep up with which password is current at which website is mindboggling and aggravating.

Here’s one easy trick. If you ever want to find your passwords while online, look in the Settings for your browser. For example, with Chrome you log in, go to Settings, Advanced Settings, Passwords, Manage Passwords and click on the “eye” icon to see the username and password for each website. Similarly, with Safari you can log in and click on Preferences, Passwords, and the asteriks to the right of the username to show the password for each website. Most browsers have similar procedures.

However, what is convenient about the ease of finding your passwords is also reason for alarm. If you leave your computer unattended while logged into your browser, anyone can find them.

For this reason, it’s important to keep your computer password-protected and always within reach. Bear in mind, too, that there are other ways to keep track of passwords. For example, if you’re old school you might write them down in a notebook, crossing them out as you periodically update them. Some folks keep them updated in a spreadsheet software program. However, these tactics are susceptible to theft if, say, your home is burglarized and the thief takes both your computer and your password notebook. It can also be cumbersome if you are away from home and want to log in to websites from your smartphone.

Today’s smartphones typically provide a way to store password information in their settings or options menu. For example, on the iPhone go to Settings, Accounts & Passwords, App & Website Passwords, (input security protocol for access), then click on the individual websites and apps for each user name and password.

There also are apps designed to help you keep track of passwords. The following are highly recommended for their ease of use and security measures.

  • LastPass – Import saved login credentials from Firefox, Chrome, Safari, etc. If you opt for the Premium suite for $2 a month, you also get the ability to sync information between your desktop and mobile devices, enhanced authentication options and tech support.
  • Dashlane – This app is known for it simple, intuitive interface accessible with two-factor authentication. The app lets you change passwords across multiple sites with just a few clicks, and also keeps track of receipts of transactions so you can go back and review them.
  • Roboform – This old-school password manager that can generate strong passwords, store and encrypt them, and sync them across multiple devices. It’s an older app that’s recently been updated with a more intuitive interface and features an autofill function.

There are scads of apps designed to track passwords, so you can search for reviews and rankings to see which one offers features best suited to your needs. One of the perks of apps is that many are free to download and try out. If you don’t like it, delete and install another. When you find one you like, you might want to check out any premium features that are available for a fee.