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Four Year-end Business Tax Planning Mistakes To Avoid

Posted By Jason Trujillo, Woodbury Financial, Tuesday, November 18, 2014

Four Year-end Business Tax Planning Mistakes To Avoid by Steve Parrish. Article originally appeared Nov. 17, 2014 Click here to read original post. 

It happens every year.

Sometime in November I start getting calls with an amazingly predictable concern:

“My business made good money this year, and now I have to figure out how I can save on the taxes I’m going to pay!”

Maybe next year?

It’s a common lament but one that can cause more trouble than create solutions.

First, there is an implication in the statement that there’s a limit as to how much tax the business owner is willing to pay. Short of giving it away, the math is that more earnings mean more taxes.

Second, the statement assumes that tax planning, and more importantly tax savings, is a task that is a year-end project. It doesn’t work that way.

I sometimes tell business owners that there are only three major things that can be done yet this year to save taxes:

  1. Buy something deductible for the business.
  2. Put more into your qualified plan
  3. Give more to charity.

If, however, your plan is to save, diversify and otherwise be more efficient with taxes in the future, there are myriad ideas that you can initiate this year that will pay off in succeeding years.

A good place to start is to consider what not to do this year to save taxes.

A million reasons

I recently talked with a business owner who paid over $1 million in personal taxes last year. He could easily look at that bill and attempt something crazy to lower this year’s tax bill. But that would be, well … crazy.

Tempting as it may be, there are many quick-fix tax ideas to avoid.

  1. Resist making business decisions where tax is the primary motivator. Look at the many companies making all kinds of employment moves in order to avoid being defined as a large employer for purposes of the Affordable Care Act. While it may be advantageous to keep your workforce below 50 full-time employees tax-wise, good business planning should trump tax planning. Avoiding the “pay or play” features of the new healthcare law is desirable but not necessary. If having 55 full-time employees instead of 49 will increase your earnings by a double-digit rate, is it so bad to be treated as a large employer for tax purposes?
  2. Don’t reinvent the past. Occasionally, I see businesses try to save taxes by attempting to change what happened earlier in the year. In an effort to save employment taxes, they may try to recharacterize owner wages as owner dividends. Or they may set up a nonqualified deferred compensation agreement with income that has already been earned. Figure that the IRS has algorithms capable of picking up such abuses.
  3. Be careful how you move the present into the future. There are a number of ways to legitimately direct money into various tax years. For example, accrual-based taxpayers can commit to and tax deduct arrangements such as qualified plans and executive bonus policies this year but actually pay for them early next year. The danger, however, is when the movement of money is done haphazardly and without sound tax advice. Attempts to save taxes by postponing the cashing of a check or by delayed recording of income are neither worth the tax risk nor the ethical discomfort they engender.
  4. Avoid year-end tax schemes. After Halloween is when the really scary creatures appear. The late fourth quarter is when tax promoters prey on business owners who are looking for a last-minute reprieve from high taxes. Earlier this year, the IRS released the “‘Dirty Dozen’ Tax Scams for 2014”. The following IRS-identified scams are ones business owners in particular should watch out for:
  • Hiding income offshore
  • False income, expenses or exemptions
  • Misuse of trusts
  • Abusive tax structures

All is not lost. Your tax advisor may have some ideas that will work for your particular situation yet this year. And, consider using this as a lesson for next year. With enough time and advice, tax planning can legitimately save you and your business a lot of money. There are tax savings to be had in benefits, business tax elections, products that are tax-advantaged, exit planning, etc. Such planning needs time, and there’s no better time than the present.

Tags:  affordable care act  benefits  business tax elections  charitable giving  deductions  exit planning  IRS  principal financial group  steve parrish  tax advantage  tax deferral  tax mistakes  tax planning  tax savings 

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What's Not Keeping The Fastest Growing Companies Awake At Night

Posted By Jason Trujillo, Woodbury Financial, Tuesday, October 21, 2014

What's Not Keeping The Fastest Growing Companies Awake At Night by Steve Parrish. Article originally appeared on on October 17, 2014. Click here to read original article.

I’m in Arizona this week at a meeting where 1,500 business owners and key employees have gathered to:

  •  Share best practices
  • Learn from each other
  • Hear from nationally recognized experts

 These are businesses that have made the prestigious Inc. 500/5000list.

 And what have I learned?

 It’s my third time at the Inc. 500/5000 annual meeting, but there is always so much insight from this  impressive group.

 A colleague and I presented on the financial issues that are keeping business owners awake at night (taxes, retirement planning, employee benefits, etc.). My big takeaway from the discussion was the long list of business issues that are NOT keeping them awake at night.

 These are issues that are being addressed, neutralized or even leveraged.

 Optimism for the overall business environment

 As always, there is a lot of enthusiasm and confidence among Inc. 500/5000 attendees.

 These are entrepreneurs with fast-growing companies.

 Pessimism and insecurity would simply not work for this crowd. That being said, this is the most upbeat I’ve ever seen Inc. 5000 business owners. They are reporting a positive consumer market, good liquidity and a manageable economic environment.

 The elephant in the room

 In past years, the Affordable Care Act (ACA) had been the proverbial elephant in the room. Some disguised their concerns through a political rant, some procrastinated by taking a “wait-and-see” approach, and many simply chose to ignore the law.

 Despite all the bravado, however, I sensed the ACA was keeping them awake at night.

 This year there seemed to be a refreshing turn. Companies have come to accept the reality of the ACA’s existence and have started learning and adapting. These businesses are almost universally building healthcare planning into their strategic and tactical business planning.

 Incorporating the new law has caused some growing pains. One retailer I met with can’t find anyone who wants to provide his successful company health insurance, and his business – by default – is relegated to the federal exchange market.

 But the owner is simply accepting the challenge as a normal part of doing business, and he’s doing what he can to mitigate its effect on the company’s plans.


 Business owners I talked with are receiving unsolicited sales offers with high multiples of earnings. The buyers appear to have available financing and liquidity.

 These are fast-growing companies, of course, and the multiples being offered are dependent on the industry they’re in. Still, compared with three years ago, the merger and acquisition market has heated up significantly.

 Interestingly, notwithstanding these high multiples, there doesn’t seem to be much of a mood among owners to take the money and run. Many want to grow their companies organically and eventually sell their business interests to their other partners or employees.


 Fast-growing companies always seem to have a unique marketing spin, but there are some themes I noticed that apply to a number of marketing strategies.

  •  Retailers who entered the market by selling online are often seeking to additionally sell their products through brick-and-mortar retailers. I talked with both a snack company and a skin care company that sell through the Internet but have started to also sell their products through name-brand retailers in malls. They report that this gives them some credibility to advertise on the Web. They promote that they also sell their products at, say, Bed Bath & Beyond, GNC, etc.
  • Retailers that traditionally sell through their own stores or dealerships are increasingly finding success in selling online. Imagine an RV company that reports excellent sales through Web purchases. A family researches the product online, even buys online, and then comes to the shop to pick up their camper as part of their vacation.
  • Similarly, manufactures and retailers of big-ticket items like specialty vehicles report success in selling used products through the Web. They buy back products they’ve manufactured or sold, post it on the Web and sell it to a new buyer. Consumers are accustomed to eBay-style purchases, and they find peace of mind in buying a used product through the website of the original manufacturer.

 Key employees

 It was particularly encouraging to see that employers want to address recruiting and retaining key employees.

 Business owners recognize that key people are mobile and attuned to pay and benefit issues. The “keep my head down and keep my job” mentality is history among employees.

 Even more encouraging is that many of these owners want to avoid the mistakes of the past, where the solution was to try to mollify the key employee with stock options or restricted stock. A number of business owners are interested in unique and exciting employee benefits (voluntary service days off, weight loss programs, flex time) and goal driven incentive plans.

 They’ve come to realize pay and bonuses work as rewards but not necessarily as retention tools. More than one owner I talked with plans on selling their business soon yet still wants to install long-term incentive plans for key employees.

 In the end, I can only guess what business issues do or don’t keep these successful business owners awake at night, but I did see a lot more willingness to recognize potential problems as opportunities for the future rather than impediments to growth. No wonder they’re among the fastest-growing companies in the country.


Tags:  Affordable Care Act  Business Best Practices  business concerns  Business Learning  business planning  business worries  employee benefits  fast growing companies  Forbes  Inc. 500/5000  National Business Experts  Principal Financial Group  retirement planning  Steve Parrish  taxes 

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