Welcome to Our Blog
We’re a San Diego, Calif.-based boutique tax consulting firm focused on personalized tax and financial guidance to individuals and businesses. Here on our blog, you’ll find you’ll find news, insights, and observations from trusted sources in the world of tax planning and and financial guidance.
4 Ways Businesses Can Save on Taxes in 2022
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Every cloud has a silver lining. That’s especially true of the clouds that gather around business owners near tax time (which happens to be all the time, by the way). The tax code is highly complex.
According to one estimate, the federal tax code — at a whopping 2,652 pages — is 187 times longer than it was a century ago. The silver lining to all this? Within that highly complex tax code are the keys to the kingdom: unlocking enormous tax savings.
This is especially true for businesses, because government organizations at the federal, state, and local levels all want to stimulate business development. They know their funding is tied directly to the profits and personal income that those businesses generate. And the primary way governments stimulate business is by offering tax breaks and incentives.
As a business owner, you can capitalize on those tax breaks by 1) knowing about them and 2) taking full advantage of them over the course of the tax year. That means not waiting until April 15 of the following year, when it may be too late.
In this post, we address four areas of focus for reducing your business taxes in the 2022 tax year. We also want you to consider asking your CPA or tax planning firm about scheduling a mid-year meeting for your business, because the steps you and your CPA take now will pay dividends in the Spring of 2023!
First up is a section of the tax code that allows you to deduct the cost of certain types of property as an expense, rather than requiring that the cost of the property to be capitalized and depreciated.
Section 179 Expense and Bonus Depreciation
The U.S. tax code provides different methods for writing off the cost of new or used machinery or equipment. Consider the following four options: Continue reading… Continue reading… Continue reading…
Want to Reduce Your Income Tax? Start Planning Now!
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You probably just filed your 2021 tax return a month ago or so, and you’re ready to put taxes at the back of your mind for at least a few months. This may not be your best thinking because, if you want to pay less in 2022, now’s the time to start planning.
What you do from now until December 31 of this year, can have a significant impact on how much income tax you’ll owe, or the size of the refund you can expect to receive, next year. That’s why here at SWC, we’re encouraging our clients to schedule a Mid-Year Tax Planning Meeting as soon as possible.
In fact, tax planning is becoming increasingly important for two reasons:
- First, thanks to inflation and other economic pressures, increases in income aren’t likely to keep pace with inflation. Saving on taxes may help alleviate some of that pain.
- Second, if any pieces of current administration’s tax plan are implemented, tax rates for both individual and corporate taxpayers could increase. Having a tax plan in place to account for these potential increases and maximize the deductions and credits for which you qualify, may help to counter some of those increases.
As you prepare for your Mid-Year Meeting with us, we encourage you to start thinking about the various steps you can take now to avoid any nasty surprises next year, including:
- Consider adjusting your tax withholding or estimated payments
- Get a grip on the timing of investment gains and losses
- Take advantage of lower tax rates on investment income
- Check your deduction strategy
- Be prepared for issues related to virtual currency
- Consider if a reverse mortgage is right for you
In this post, we’re going to cover all of the above and more. First up, tax withholding and estimated payments.
Review Your Tax Withholding or Estimated Payments
The U.S. has a pay-as-you-go tax system, meaning that citizens pay taxes as they earn money. Here’s what that means: Continue reading… Continue reading… Continue reading…
The Basics of Finding New Sources of Business: Part 2
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Welcome to the second part of our two-part series, “The Basics of Finding New Sources of Business.” In Part 1 of this series, we explored various ways to grow your business, including increasing customer spend, diversifying, and increasing market share.
In this part, we seek to inspire more ideas for driving growth through disruptive innovation, alliances, and partnerships. Then we wrap up this series by taking a quick look at how to analyze your company’s strengths so you can leverage them to grow in the right direction.
As we explained in Part 1, growth is essential not only for a business to succeed but, more important, for its very survival. As the old saying goes, “If you’re not growing, you’re dying,” and that’s especially true for small businesses. If you’re not actively pursuing customers, a competitor will be chipping away at your consumer base until the entire foundation of your business crumbles. This series might inspire you, but only you can do the difficult and creative work to make growth happen.
Growth Through Disruptive Innovation
One great way to quickly grow a business is through disruptive innovation — introducing a new product or service to a market that makes traditionally successful products or services in that market obsolete.
Two familiar examples of disruptive innovation
Here are a couple examples of disruptive innovation that you’ll probably recognize:
- The first digital cameras were low on functionality and didn’t match the quality of traditional film cameras. The leading camera manufacturers, including Kodak, continued to manufacture and market cameras that used film. This of course left a massive opening for smaller consumer electronics manufacturers to nearly supplant their larger and more entrenched counterparts. Since then, smartphones have made traditional digital cameras nearly obsolete.
- In its early days, Amazon.com disrupted traditional bookstores, using the Internet and traditional delivery services to make it far more convenient and less expensive to purchase books. It has continued to disrupt the publishing industry with its Kindle reader and self-publishing services, making it possible for authors to publish and sell directly to readers.
Principles of disruptive innovation
Several factors make disruptive innovation possible. By understanding these factors, you have a better chance of identifying the soft underbelly of large companies and taking advantage of their susceptibilities: Continue reading… Continue reading… Continue reading…
The Basics of Finding New Sources of Business: Part 1
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Frequent readers of our blog may recall that in How to Grow Your Business: 4 Surefire Methods, we suggested that the primary causes of business failure are often related to cash flow (more cash flowing out than flowing in), poor money management, slow or non- existent growth, and a decline in sales and revenue.
Business growth, as it turns out, is the heartbeat of success. The more business you conduct, the more revenue you generate. The more customers or clients you have, the less likely your business will fail if you happen to lose a few. The broader your market, the less susceptible your business is to market changes. And the happier your customers are, the more your business is worth when you decide to sell.
As a business owner, you want to be constantly finding or creating new sources of business. But how?
In Part 1 of this series, we dive deep into the basics of growth and explore how to grow your business by increasing customer spend, diversifying, and increasing market share. In Part 2, which we’ll publish next week, we introduce a few more ways to grow your business — including through disruptive innovation and by pursuing alliances and partnership opportunities. Finally, we look at how to analyze your business’s strengths so you can leverage and build on them to grow.
So, let’s get started.
Business Growth Basics
Business growth is about expanding your business in some way — increasing revenue or profitability, your customer base, your market share, your physical size or geographic coverage, your executive and/or support staff, or some other aspect of your business.
To understand business growth basics, you just need to know Continue reading… Continue reading… Continue reading…
Happy Tax Day! Care to Share a Happy Dance?
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If you believe taxation is the price we pay for civilization and the social and civil institutions it supports, as it was suggested back in 1852 by a committee appointed by Vermont Gov. Charles K. Williams, then Happy Tax Day to you!
If on the other hand, you view taxes as an involuntary extraction from those engaged in economic production to those who control coercive power producing no reciprocal benefit, then read no further.
With today being Tax Day, we’ve decided here at SWC to flip the script on the dread associated with filing tax returns. Instead of replaying vinyl of The Beatles’ “Taxman,” quoting biblical references to the tax collectors in the temple, or reflecting on tea in Boston Harbor, we’ve chosen to step to the tune of the happy dance.
Now you’re probably thinking, “Of course CPAs and tax planning firms celebrate Tax Day. That’s how they make bank!” But if you take a deeper dive, beyond the oft-onerous task of tax preparation and the pain of paying those taxes and occasional penalties, there’s plenty to celebrate.
And so, in this post we shine the spotlight on all the positive aspects associated with paying taxes and filing tax returns.
Ka-Ching! Receiving a Tax Refund
Many momentous occasions bring joy to people’s lives — graduations, weddings, anniversaries, birthdays, and retirements among them. After preparing tax returns for tens of thousands of clients, the team here at SWC can add to that list the joy of receiving an annual tax refund, especially when it exceeds our client’s expectations.
In 2020, nearly 170 million people filed tax returns, and about 74 percent of them received a refund, which accounts for approximately 126 million refunds! The average refund: $2,549. Even though you earned it, it feels like easy money, free money, and it is certainly a cause for celebration.
Owing Taxes: A Celebration of Financial Success
Owing taxes at year’s end, especially when you already paid a hefty sum over the course of the year, can Continue reading… Continue reading… Continue reading…
Obtaining The Best Valuation of Your Business
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Do you have any idea how much your business is worth? If not, we can guide you through the process of securing an accurate business valuation.
A business valuation is just that: an analysis of how much money a business entity is worth. Knowing the fair value of a business is useful for many reasons, including selling or buying a business, establishing partner ownership, securing business loans, calculating taxes on gifted shares, and in the context of succession and estate planning or divorce proceedings.
Here at SWC, where we help entrepreneurs and business owners maximize their return on investment while achieving both their professional and personal goals, we encourage you to get up to speed on the basics of business valuation, which we cover in this post:
- Why you should have a current valuation of your business
- Some common methods of valuing a business
- How to prepare so as to get the best valuation
- Some advice for improving business valuation prior to a sale or merger
- Next steps you can take with us to get a valuation done for your business
Why You Need a Business Valuation
Business valuations are not exclusively for large corporations. Even small and midsize business (SMB) owners can benefit from knowing the value of their business. For example, a business valuation:
- Reduces the likelihood of costly tax audits and penalties on your estate
- Improves the odds of being approved for a business loan, assuming the valuation supports the business’s credit worthiness
- Reveals the true value of stock/shares
- Simplifies calculations during partner buyouts
- Save heirs from extreme tax liabilities
Not every business needs a valuation. If you are self-employed (meaning, you are the business) and not planning to ever sell your business, pass it down to heirs, or borrow against it, you probably won’t benefit from undertaking a business valuation. (However, that may open the door to the more pressing discussion of why you are not building a business that you can eventually sell or pass down to your heirs.)
Here is a more detailed list of common reasons to get a business valuation: Continue reading… Continue reading… Continue reading…
Should I File for an Extension with the IRS?
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With the federal income tax return filing deadline fast approaching (April 18, 2022, for the 2021 tax year), every day you don’t have your taxes filed can send your psyche soaring to new levels of anxiety.
Maybe you’re waiting for addition documentation — a corrected 1099 perhaps, or a schedule K1. Or maybe you’re a born procrastinator. Whatever the reason, give your anxieties a break, because the feds (and most state taxing authorities) will give you a two-month grace period.
What’s the catch? Actually, there are two important stipulations:
- First, you need to apply for an extension by filing Form 4868 with the IRS. The deadline for submitting this form is the same as the deadline for filing your taxes.
- Second, you must pay what you owe. This is usually the dealbreaker, because most people don’t know what they owe until they (or their CPA firm or accountant) prepare their tax return. So, if you’re going to file for an extension, you need to estimate what you owe and pay that when you file for the extension. If you crunch the numbers and are fairly certain you’ll get a refund, then no worries — meaning you don’t have to pay more money than you’ll eventually get back. However, if you owe anything, you’ll be charged penalties and interest for underpayment of taxes.
In this post, I answer the most commonly asked questions about tax extensions that we receive here at SWC. If your tax extension question isn’t answered below, drop our office a note using our online Contact form, or call us during business hours at (858) 487-4580.
Tax Filing Extensions FAQs
Q: What if my application for a tax filing extension is rejected?
Avoid Tax Sticker Shock: Review Your Income and Withholdings
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Nobody likes to get whacked at the end of the tax year with a higher-than-expected income tax bill or a smaller-than-expected refund, but that’s what happens when you don’t have enough money withheld from your paychecks or aren’t paying enough in estimated taxes.
The United States operates a pay-as-you-go tax system, which means you as a taxpayer are expected to pay taxes on your income as you earn it, not just at the end of the year. If you owe too much at the end of the year, the government charges you a penalty. You can think of it as interest on what you underpaid for the time you underpaid.
To avoid a nasty surprise when you’re preparing your tax return at the end of the year, review your income expectations and withholdings (and estimated taxes) at the beginning of the year and adjust as needed. This is especially important if you have any self-employment or investment income or income from other sources.
Using the IRS’s Tax Withholding Estimator
To help you determine your correct tax withholding, the Internal Revenue Service (IRS) provides an online Tax Withholding Estimator that you can use for free to determine whether you need to do one of the following:
- Complete a new Form W-4, Employee’s Withholding Allowance Certificate and submit it to your employer
- Make or modify your estimated tax payment to the IRS
Before you start, gather your income documents, including these: Continue reading… Continue reading… Continue reading…
SWC’s 10 Point Identity Theft Recovery Action Plan Means You Can Close the Barn Door
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Despite huge advances in cyber security, identity and digital wallet theft is on the rise, and experts cite a perfect storm of circumstances as a major reason.
For one thing, more people are working from home, and they’re working without the protections of corporate networks which are more reliable at blocking phishing schemes than home networks are. In addition, there are more transactions being handled online these days, including the electronic forwarding of unemployment checks and other government benefits.
Then there are the lingering fears about COVID that make some people vulnerable to online tactics dreamed up by nefarious hackers that enable them to steal your personal information and access your online accounts. And having more of your information stored in the cloud doesn’t help matters in the least.
We’ve all heard the expression about “shutting the barn door after the horse has bolted.” It’s a folksy idiom that means it’s too late to try and stop something that has already happened. It’s a futile effort because, of course, the horse is history.
Unfortunately, even if you are being careful and doing all the right things to prevent identity theft, you can still fall victim to it. That’s why it is so important to know how to recover when the unforeseeable and unavoidable happens to you.
Which is why, in this post, I present SWC’s 10 Point Identity Theft Recovery Action Plan.
(Click for free download — Identity Theft Recovery Action Plan.)
Rest assured that, as your trusted tax planning and financial strategy adviser, we take every precaution to safeguard your personal information, and we’re here to help. If you’ve fallen victim to identity theft, call our offices to find out how we can be of service. We’ll get your wayward steed back in the stall.
Step 1: Don’t Panic
Fear increases your vulnerability to identity theft. Panic makes it worse. You’re not legally liable for crimes that other people commit using the personal information they stole from you. So just scratch that concern off your list.
Likewise, if someone used your personal information to steal from you, you should be able to get your money back. For example, if a con artist filed a fraudulent tax return using your name and their address to steal your tax refund, the Internal Revenue Service (IRS) still owes you that refund.
Pro Tip: While you shouldn’t panic, you should act with a sense of urgency. The faster you do all the right things, the less damage you’re likely to suffer, and the greater the chances the perpetrator of the crime(s) will be caught and brought to justice.
Keep a detailed record of all the steps you take to curtail the damage, along with all the documentation you collect along the way. A written record will smooth the path to recovering any losses and protecting you from any losses that others (for example, your bank or creditors) may suffer as a result.
Step 2: Contact All Organizations That May Be Impacted
Although identity theft involves your personal information, it also impacts companies and organizations you do transactions with, so be sure to involve them in your recovery plan: Continue reading… Continue reading… Continue reading…
Deciding When to Start Drawing Your Social Security Retirement Benefits
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If you or a loved one’s 62nd birthday is just around the bend, first of all, happy birthday! In addition to all the other gifts you or your loved one are about to receive on your special day, perhaps the best present of all is that you’ll be eligible to start cashing in on your social security retirement benefits — assuming, of course, that you paid into social security during your working years.
However, just because you’re eligible to start receiving social security checks at the age of 62 doesn’t mean you should. The longer you wait, the bigger your checks. You can start receiving checks when you hit that 62-year milestone; at the age of 65 (the traditional age for retirement); or at 67, which is full retirement age (FRA). You can even delay benefits until as late as age 70 (to receive the maximum benefit) or start collecting benefits anytime along that timespan.
Starting benefits as soon as possible may seem like a good idea, and it may be in the right situation. The catch is, your benefits will be reduced by as much as 30 percent if you don’t wait until your full retirement age, which is likely around 67 years and change.
The bottom line is that each person’s situation is unique. What’s right for one, may not be the best choice for another. So, what should you do? That’s where we come in. The team here at SWC can sit down with you to analyze your situation and help you decide what’s best for you and your family.
In this post, I explain your options and some of the main factors to consider when deciding the best time to start collecting your social security retirement benefits.
Determining Your Eligibility
First things first. To be eligible to receive social security benefits, you must meet the following criteria: Continue reading… Continue reading… Continue reading…