Thursday, November 20, 2014

Big Companies are Making Big Deals Again

Recent financial woes reshaped the U.S. economy, but big companies are making big deals again, especially in health care, technology and the media industry.  Monday was a tipping point following the acquisition between two big pharmaceutical companies and then with another multi-billion dollar takeover between two oil field service companies. It's the biggest year on the books since 2000. The conditions are ideal, with borrowing costs low and share prices rising, and because deals don't happen unless people are feeling good, it seems that corporate leaders are optimistic with the times, with foresight on growth. [more...]

November's "Down Under" Theft of Your Bank Account

On November 16, the world of banking and money was officially flipped upside down because of actions taken by the G-20 nations meeting "down under" in Brisbane, Australia. People deposit their money in banks for safety. But on November 16, this gathering of 35 national leaders turned your bank into one of the most unsafe places to put your money. Without warning, these G-20 leaders agreed that the money in your bank account can be seized to pay bank debts. And some of these leaders - especially President Barack Obama - have already begun imposing billions of dollars in regulatory penalties on banks to squeeze money out of them to grow their governments. [more...]

Wednesday, November 12, 2014

Big Bank Bail-Ins vs. Bail-outs: Bad News in Disguise

In the November 10 London Telegraph, James Titcomb reports that the chairman of the international Financial Stability Board Mark Carney, Governor of the Bank of England, reveals how future bank problems will be handled. His plan is that future problems in banks that are "too big to fail" will never again end in government bailouts using taxpayer money. Instead, as Craig Smith and I explained in our latest book, Don't Bank On It! The Unsafe World of 21st Century Banking, governments will employ "bail ins" forcing what he calls "creditors" of various kinds to bear banks' losses.

This seemingly good news, however, conveniently neglects to reveal who all these "creditors" are. It turns out that they include mere bank employees, whose income and pensions may get a "haircut" to cover bank shortfalls. Those stuck paying for bank shortcomings may also include customers - depositors who do not understand that when they opened a bank account, they were in effect lending their money to a bank and getting in return only an IOU. [more...]

Thursday, September 18, 2014

Wage Wars

A series of protests partially funded by the Service Employees International Union (SEIU) sought to highlight the difficulty of low-wage workers. Workers across the country gathered over Labor Day demanding that they be paid no less than $15 per hour. President Obama, the man whose job is to make America a competitive economy globally, publicly sided against business owners when he stated, "America deserves a raise." Such a statement by the President of the United States shows that even he does not understand why the U.S. economy is flawed or how economics works. [more...]

Tuesday, September 16, 2014

Will America Erect an Iron Tax Curtain around us to Keep Corporations in?

In a powerful and profound Editorial this week, The Wall Street Journal presents new information from the Tax Foundation that America’s tax burden on businesses is nearly the worst in the industrialized world.  That’s right, America is ranked number 32 out of 34 of industrialized nations that are part of the OECD (Organization for Economic Co-operation and Development).  This ranking is from a new index that utilizes 40 tax policy variables in its index.  If that's not enough bad news, there are some who want to raise the taxes even further, and erect barriers for corporations that seek to flee America, looking for a reduced tax burden. [more...]

Thursday, August 14, 2014

Fix the U.S. Before Sticking Your Nose in Other People's Business

Why is the U.S. involved in Iraq again? Even though the situation is dire in Iraq, is it really our nation’s business? Before getting into other people's business, the U.S. needs to clean up its own financial house. This is one of the key elements to determining what a business is really worth, as seen in my book, Sell Your Business for More Than It’s Worth. No matter whether we are talking about the politics of business or the business of politics, the fact of anything’s worth is found in the numbers. The U.S.'s financial records show a staggering number of unsolved conflicts within our own nation’s government - too many to afford sticking our nose in another country’s problems. [more...]

Tuesday, August 12, 2014

Deducting Entertainment Expenses

Knowing when to discuss business and how to document it can make a HUGE difference as to whether you can deduct your golf game or costs for attending a sporting event such as a football game or even attending a play. To deduct fun activities such as tickets to a football game or golf costs, these are the overriding rules:

1. You have to discuss business during the same day as the activity, but it can't be during the fun activity; it has to be either before or after the fun in a business setting.
2. You document this correctly in a tax tracker, such as Taxbot.
3. You can usually only deduct 50% of the costs.

Golf is an expensive hobby. However, everything becomes a LOT less expensive when you get a deduction. Golf costs include green fees, guest fees, cart rental fees, tees, balls, gloves, depreciation of golf clubs and also beverages, snacks, lunches and dinners at the club. NOTE that you can deduct these costs even if you pay only for yourself and not for your prospect. However, paying for the other party and his or her spouse would also be deductible. Moreover, if you entertain another couple, you can bring your own spouse or significant friend and deduct their costs, too. Think about this. With the right knowledge, you can literally golf away your taxes. We really do have some great tax laws.

Also as noted above, you have to talk business on the same day as the fun activity either before or after the fun. The IRS will NOT accept that you had a business deduction while schmoozing with prospects on the golf course. Moreover, the business discussion has to be in a quiet conducive surrounding. This means that you need to take your prospect to a restaurant or quiet bar to discuss business without having a floor show or theatrical show interfering with your discussion.

The key is that you have the burden of proof to show that you met these rules. So here is what you need to write in your tracker:

* Names of people entertained.
* Where the entertainment took place.
* When the entertainment and business discussion occurred.
* Why you entertained these people. [You need to be specific. Simply saying prospect or good will in your tracker won't be good enough.]
* How much the entertainment cost.

Example: Marc and I play golf, where I probably frustrated both of us with my lack of talent. We then went to a restaurant to have dinner and discuss business, which I documented in my tracker. I would be able to deduct 50% of the golf costs and 50% of the dinner. However, if I simply discuss business between holes 12 and 13 and document it, I can't deduct the golf expenses. The key is that the business discussion must occur either before or after the fun activity in a quiet business setting.

Friday, August 8, 2014

The Recent Ruling by the National Labor Relations Board

The National Labor Relations Board recently ruled that McDonald’s (and subsequently all other fast-food chains and franchises) is subject to corporate penalties based on violations made by individual store fronts. While some believe this ruling will alter our entire economic system for the worse, others are calling it a victory for fast food servers everywhere. But what exactly does this mean for you?

1. Expect to see your local burger joints undergo major changes.
Now that this ruling has been passed, the way these businesses run will greatly affect your experience as a customer. For example, now that McDonald’s is being held liable for each individual store’s appearance and codes of conduct, they’ll begin to make major renovations both physically and in terms of public relations.

2. You may start to receive better quality service at the drive-thru.
With the new system in place, McDonald’s employees will find themselves in a makeshift union. For many this means finally feeling like a valued member of a working environment instead of a fry-slinging, minimum wage emotional punching bag to anyone who has an extra dollar or two. By protecting their rights, the NLRB has now given employees something to smile about.

3. Lots of angry mobs (and by mobs, we mean political pundits).
As with any major change in law, the big shots on every new channel will have heated discussions on the positives and negatives of both sides. However, only time will tell what effects these changes will really have on the economy and your fast-food bingeing. I detail more pertinent business tactics in my award winning and best-selling book, “Sell Your Business For More Than It’s Worth.” [more...]

Wednesday, August 6, 2014

Spending a Fortune on that "Dream School"

A friend of my daughter attended NYU and majored in English. Although she got a scholarship, she still had over $45,000 in yearly costs when you count room and board and most of which was debt. Let me be clear: I have NEVER met anyone, in my 30+ years of tax and financial coaching, who was happy with incurring substantial financial debt for his or her undergraduate school. In fact, most people who have incurred significant debt for undergraduate studies are really in trouble.

There was a recent article in the Money section of Time Magazine about sixty-year-old people who are still not out of debt! The problem is that most schools don't meet the real financial need.

If a student has $150,000 in total student debt, this would cost $1,819 a month for ten years to pay off! Even $100,000 in debt would take about $1,212 a month for 10 years to amortize. This monthly burden has to be compared to starting salaries for most kids, which is between $3,300 and $4,600 a month. Even worse, one-third of these salaries have to be budgeted for taxes. This leaves between $2,200-$3,100, after taxes for everything else such as debt service repairs, insurance, food, clothing, rent, auto expenses such as gas and insurance and maintenance, gifts, travel, utilities, Internet etc.

Even worse, the most that a student or parent could deduct each year in student loan interest is only $2,500! Incurring more student loan interest each year won't be deductible above this limit. This makes student loans very expensive. Finally, neither kids nor parents can discharge student loans in bankruptcy unless the kid is totally disabled and can't ever work.

First Conclusion: It would be almost impossible for a new college graduate to pay even $1,200 a month, let alone $1,800 a month.

One of the biggest financial time bombs is when the parents guarantee student loans. It might sound good to help out kids who will supposedly pay off the loans from their salary, but studies have shown that 50% of college graduates are either unemployed or underemployed. Thus, many parents are being called about to ante up the payments on the loans. Even worse, there are cases when kids die and yet the parents are still obligated on the guaranteed loans. Thus, DON'T GUARANTEE STUDENT LOANS. If you do ignore this, then at least take out a term life insurance policy on your kids for the loan amount.

Second Conclusion: Attending an expensive school is normally NOT worth it particularly if it will require incurring substantial debt. Thus, going to a cheaper alternative such as a state school is a MUCH better option for most kids. There are, however, some limited exceptions:

1. The state school doesn't have the needed program that the kid wants, such as learning assistance, or doesn't have the major required.
2. The parents have more money than they can spend. So spending tens of thousands on tuition each year won't substantially impair their retirement.
3.The private school gives great financial aid so that the cost will be equivalent to that of a state school; however, this is relatively rare.

Thursday, July 31, 2014

Student Loan Defaults

Here is a very sad case that EVERYONE should know about. Steve Mason was a pastor earning $75,000 when he guaranteed his daughter Lisa's student loans. He and his family were, however, devastated when his daughter died of liver cancer. Sadly, if this wasn't bad enough, the student loan bills started coming in since Mason had co-signed on the $100,000 in private student loans that his daughter took out for nursing school, and the lenders wanted their money.

To make matters even worse, although this is about as bad as it gets; Mason was unable to keep up with the monthly payments on top of all the other mounting expenses. Thus, the $100,000 balance ballooned into $200,000 as a result of late penalties and interest as high as 12%. Yes, student loans can be quite expensive. Even worse, student loan debt is not normally discharged in bankruptcy. Thus, he was drowning in debt.

Interestingly, if these had been federal student loans, Mason could have had the loans discharged or at least gotten some sort of financial assistance. However, since these were private loans, he had little recourse. He called each lender to explain his situation and begged for help. While they sympathized with him, they told him they weren't required to do anything, which is correct! As a result, he did contact some credit services, which got some of his loans down to 0% interest and reduce some of the debt.

Bottom line: Think VERY carefully about guaranteeing debt for your kids, particularly if they are private loans. If you do make a guarantee, consider taking out life insurance in order to avoid this potential disaster.

Material derived in part from Achieve Financial Freedom – Big Time!

Thursday, July 24, 2014

Obamacare and You

You have probably heard the saying, 'No good deed goes unpunished." This seems to be very true with Obamacare. Under the new law, if you have less than 50 employees, you don't need to provide health insurance. However, if you do provide health insurance or even worse, reimburse employees for their premiums, it could be a VERY costly mistake. How costly? How about $36,500 per employee! Yes, I am not kidding.

Here is what you need to know: If you provide group health insurance for all your employees, you are in full compliance with the law. This is true whether you use a private exchange or go anywhere else; you won't have a problem with the law. However, if you provide insurance for some of your staff and not others, or even worse, you reimburse your staff for their purchase of insurance, now you have some big problems. Prior to 2014, you could have done this through a health savings account or a self-insured medical plan. Now you can't reimburse them for their premiums.

The second surprise is that you can't offer a self-insured medical plan to any employees who aren't covered by your group health insurance or you can be subject to severe penalties. This type of plan reimburses them for medical expenses not covered by insurance. However, there are exceptions where you can offer the employee coverage under a self-insured medical plan IF:

* They were offered insurance coverage but declined it because their spouse had the coverage with another company; or
* It is for benefits not covered by Obamacare such as dental, vision care, etc.

Bottom line, if you have more than one employee, then in order to pay for some or all of the employees' health insurance, you MUST buy group health insurance. Thus, you have two choices regarding your employees:

1. Buy group health insurance, or
2. NOT pay for health insurance premiums (assuming you have fewer than 50 employees).

And don't offer a self-insured medical plan unless you either cover these employees with health insurance or they elect out of coverage since they are covered by a spouse's plan or you are covering them for expenses not covered under Obamacare such as dental, vision care, etc. 

Tuesday, July 22, 2014

Microsoft Layoffs: Restructuring to Increase Profits

Microsoft revealed it was releasing 18,000 jobs of its workforce on July 17th. It’s the largest layoff in the company’s history. In addition to the announcement of the massive layoffs, Microsoft has also informed thousands of its contract workforces that they will be touched by the job cuts as well. Though this may not appear as severe of a blow as the cuts are for employees, it’s essential to understand just how many contractors this policy will affect. How much will these drastic changes affect the culture, and more importantly, the viability of Microsoft? 

Due to the recent events, the company will no longer be considered as a secure place of full-time and contract employment, the company must make immense modifications to guarantee that it can sustain the loyalty of its employees, or jeopardize tumbling downward in the face of other technology companies that will certainly take full advantage of the newly unemployed talent currently seeking professional refuge. The layoffs are considered a reformation as the company shifts its focus from electronic programs such as Office and Windows products into phones and mobile devices. [more...]

Tuesday, July 15, 2014

Maximizing Social Security Benefits

Maximizing social security benefits isn't as easy as you may think. In order to accomplish this, you need to navigate the byzantine rules in order to figure out when to start receiving social security benefits; after all, you can start taking it anywhere between ages 62 and 70. Spouses normally can get 50% of the full retirement benefits, which can also be taken between 62 and 70. There are even survivor's benefits.

Government publications on all this are not very clear. Let's face it; it's not in the interest of the government to have all Americans maximize their benefits. Thus, I'd like to discuss some of the rules that deal with spousal benefits, which could apply to just about everyone in the country.

Essentially, the amount of spousal benefit you're entitled to is based on when you, the spouse, initiate it. However, the working spouse MUST either currently be receiving benefits or have "filed for the benefits but suspended these benefits." File and suspending allows one spouse to file for benefits at full retirement age then suspend the payments until age 70 when they will get the maximum amount each month from the government. The longer the spouse waits to receive spousal benefits, the greater the monthly amount. Conversely, the earlier they start receiving the benefits, the less they get.

Currently married spouses who are claiming spousal benefits or who have filed for benefits but chose to suspend them can start receiving spousal benefits earlier than age 66 and still get the higher of their own benefits based on their own work record or the spousal benefits later on. This might actually result in the overall greatest amount of income for the couple over their lifetime - this way the couple starts an income stream at age 62 while the higher earning spouse will maximize their own benefits by waiting till age 70. If your age is within 4 years of your spouse, you should definitely consider having the older spouse file for benefits but having them suspended so that the other spouse can start receiving spousal benefits.

Even former spouses can get benefits based on the former spouse's work record IF:

* the receiving spouse (the one filing for benefits) is unmarried.
* the marriage lasted at least 10 years.
* you have been divorced for at least 2 years.
* you and your former spouse are age 62 or older and your former spouse is entitled to benefits.

Even better, your former spouse won't even know that you have filed for benefits. However, for divorced spouses, if you initiate spousal benefits before your full retirement age, you are no longer eligible to receive the potentially higher benefits based on your own work record. Thus you might want to wait until full retirement age if you can afford to do so.

If you are a divorced spouse trying to elect benefits based on your ex-spouse's earnings, don't elect spousal benefits before age 66 (for baby boomers) if you will potentially earn more based on your own work record.

What we didn't know when we wrote the book,
Achieve Financial Freedom – Big Time! was that taking a spousal benefit before full retirement age, which is age 66 for baby boomers, will reduce the spousal benefit. Here is a handy chart showing what you will get if you take the benefits before age 66:

Age 62-- you get 35% of the higher spouse's benefit
Age 63-- you get 37.5% of the higher spouse's benefit
Age 64-- you get 41.7% of the higher spouse's benefit
Age 65-- you get 45.8% of the higher spouse's benefit
Age 66-- you get 50% of the higher spouse's benefit

The key here is that either your spouse has initiated benefits and suspended them or is currently getting benefits. Thus, if you haven't worked most of your life in order to have a substantial benefit on your own, waiting until age 66 would produce more money in the long term. Hopefully this article will lead you to make the right choices and raise questions when you meet with someone at Social Security.

Wednesday, July 9, 2014

The Taxpayer Advocate

The Taxpayer Advocate is an office that supposedly oversees the IRS. They recently came out with a "Taxpayer Bill of Rights" that was endorsed by the IRS. Despite endorsing these rights, I personally don't believe that many people at the IRS will adhere to them. However, here they are:

1. The right to be informed about tax law and about IRS actions. This also includes the right to clear explanations of IRS form instructions.
2. The right to quality service. This includes the right to prompt, courteous, clear professional assistance, and to seek the assistance of a supervisor if you don't get this.
3. The right to pay no more than the correct amount of tax.  In other words, tax planning done correctly is legitimized.
4. The right to challenge the IRS’s position and be heard.  Thus, you can raise objections and have the right to provide documentation and receive a response from the IRS.
5. The right to appeal an IRS decision in an independent forum. This can be done by going to the IRS Internal Appeals office or go to court. This sounds good, but who you do you think pays the appellate officers? Also, there is nothing to prevent the agent from disallowing legitimate deductions in order to force taxpayers to Appeals or to court in the hope that the taxpayer won't challenge anything due to the cost involved.
6. The right to finality. You have the right to know the maximum amount of time the IRS has to finish the audit and to challenge the IRS position. You also have the right to know when they finished the audit.
7. The right to privacy. You have the right to have the audit not be too intrusive and are to be allowed all due process rights including those for search and seizure and for hearings.
8. The right to confidentiality. You have the right to expect that none of the information that you submit will be disclosed to the public.
9. The right to retain representation. You can use any authorized representative that you want.
10. The right to a fair and just tax system. This means that taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide timely information. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Thursday, June 26, 2014

U.S. Economic Death Spiral Continues

The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate - the economy's worst performance in five years, instead of the 1 percent pace it had reported last month. Our economy's growth has again fallen below 'stall speed.' This means not only that any recovery has stalled, but also that we might be trapped in an economic 'death spiral' and revealing the nasty truth that the Great Recession of 2009 never really ended. Our spendaholic, taxaholic politicians are choking the life out of this economy. They are frightening would-be investors with uncertainty about future taxes, regulations and penalties. And they are poisoning the environment needed to produce jobs, prosperity and optimism. [more...]

Tuesday, June 17, 2014

The Minimum Wage Trojan Donkey

Author Exposes Hidden Government Taxes in Raising U.S. Minimum Wage

Monday the International Monetary Fund (IMF) joined with labor unions, big government progressives and other pro-wealth-redistributionists in nudging the U.S. government to mandate increasing the U.S. minimum wage from $7.25 to $10 an hour.

The IMF downgraded U.S. GDP growth by 40% this year to 2% this year, yet they still view increasing the U.S. minimum wage as part of the solution. But bestselling author and conservative spokesman Wayne Allyn Root believes pushing wages up is part of the problem, not the solution.

"Like most progressive ideas, it sounds appealing to the public, which is struggling to stay afloat in today's stagflationary U.S. economy, but in reality it's a farce – a giant Trojan Donkey,” says Root.

"The truth is forcing millions of small, medium and big U.S. businesses to artificially raise wages and will end up costing everyone more money - but it will especially hurt lower and middle income families by raising consumer prices via the 'hidden' tax of inflation, which is anti-growth, anti-economic and un-American," warns Root.  "Politicians love playing Robin Hood, but lack real concern for America's poor. Instead they want wealth redistribution costs to be passed onto business owners and customers as an "invisible" tax. Free markets thrive on competition, not regulation,” explains Root, “and raising the minimum wage is a proven formula to further crush the U.S. middle class, which is the true goal of the Obama Administration, as explained in my new book, The Murder of the Middle Class (July 2014, Regnery).

In Root's new Timeless Truth About Money DVD and Coined Freedom Special Report, he explains why our money system and economy will either be “the builder or the destroyer of American civilization.”

"History confirms the rise and fall of nations and civilizations are always linked to the collapse of their money systems. All civilizations start out strong, but after about 200 years on average, one by one, they destabilized and destroyed their culture, economy and money system with unsustainable debt and rampant taxation," Root says in The Timeless Truth about Money.

Root reminds Americans of the strong economic warnings from our Founding Fathers, such as Benjamin Franklin and John Adams:

"If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." -Benjamin Franklin

"All the perplexities, confusion and distress in America arise not from defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation." -John Adams

Root says today our nation is caught in an economic death spiral - unless 'We the People' can find and elect true statesmen willing to reverse these ominous economic trends:

1) Dependency: More Americans receive government entitlements than work full-time.
2) Joblessness: Over 100 million working-age Americans are not working - the highest in history!
3) Income Stagnation: The typical American family earns less today than they did back in 1989.
4) A Weak Dollar: The U.S. Dollar is in a 40-year downtrend, fast becoming an 'IOU nothing.'
5) Global Uncertainty: Rising geopolitical crises, wild-cards and oil-wars in the Middle East.

Root says the first key to family survival is to begin moving yourself onto a “personal” gold standard. Wayne is offering audiences a free copy of The Truth about Money DVD and Coined Freedom Special Report online at

Choosing a Successor for Your Business

Most people are so business growing their business that planning the business succession goes on the backburner. It is critical that succession be considered. After all, why not reap the rewards of your success with a great retirement as well as keeping the business in the family?  Here are some thoughts that you need to consider, which will apply to ANY business owner:

1. The first step is to identify a successor. This does NOT mean to pick the oldest child or grandchild, which was the case during the middle ages. You need to pick the one you think is most able considering their strengths and weaknesses.
Being a good manager isn't enough. They need to have the ability to focus on the big picture and think strategically.

2. Groom your successor. Hiring your kids or grandkids is a great way to shift income and teach them the business. It also will give you insight into what type of worker he or she may be.

3. Communicate to the kids why you picked a successor in order to avoid sibling rivalry.

4. Giving one kid the business doesn't mean you need to leave the others "out in the cold." You could give the others the assets such as the business real estate in trust that can be leased to the business. Alternatively, you can give them non-voting shares in a corporation or non-voting interests in an LLC.

5. You, as the owner, may need to be compensated for the business. This can be done with a consulting agreement in which you get paid a salary for a number of years. Alternatively the buyer/children can go to a backer and get financing to buy you out or you can finance the purchase with seller financing.

6. Finally, if you have no kids who are qualified to run the business or don't want the business, you will need to sell it to a third party. This will entail cleaning up financial statements for several years, deducting any payments to country clubs or other personal items.

The bottom line: Selling a business can really beef up your retirement. However, you must consider these factors several years in advance before you consider retiring or the business might just die off leaving your family with nothing.

Tuesday, June 3, 2014

Controlling Emotional Spending

One of my friends was complaining about his wife's spending. He then asked her if she knew what the opposite of spending was. Her answer: "charging." He knew he was in trouble.  One main reason people have incurred a lot of debt is due to their desire for "instant gratification."

I have found that most people are VERY shortsighted. We don't want to wait for the long term. We want things now and are not willing to invest or save for the future. Thus, people want "premature instant gratification." This is caused by having what they want, when they want it without regard to whether they need it.

The key here is to understand a basic financial truth: spending is emotional; and nothing gets people more emotional than money. I see it all the time. This is particularly true when there is a death in the family. Beneficiaries go crazy over the money and the assets. I have seen whole families stop talking to each other over a fight about furniture or a ring.

It is thus imperative that people need to be much more logical about their money and less emotional; however, this is easier said than done. We need to focus on what we are spending and why we are buying a particular item and try not to be in denial about it.

Ask yourself: How many times have you or your spouse bought something because you were upset or stressed out? This type of consumerism is called "shopaholicism." How many times have purchased something extravagant after an argument?

I don't think people can ever totally stop emotional purchases. Thus, set up a monthly savings budget for it, and don't spend more for these types of purchases than the budget allows.

From my book, "Lower Your Taxes: Big Time"

"But Still I Rise" Like Legendary Poet & Activist Maya Angelou

Are you experiencing a challenge, injury or illness that is holding you back and preventing you from performing at your best? The answers and solutions you are looking for already reside within you. Maya Angelou, an impoverished adolescent from the segregated South who made her way to San Francisco and went on to become one of the most significant literary figures of her time died last week at 86. In my award winning and bestselling book, Sell Your Business for More Than It's Worth, I emphasize the importance of overcoming the obstacles that are placed in our way to help us grow into super-entrepreneurs. Your true and authentic self, your energetic spiritual core is what supersedes everything in the material plane. The biggest lesson we must take from the extraordinary life of Maya Angelou is to rise from the ashes and fulfill our greatest destinies as business owners and entrepreneurs. [more...]

Thursday, May 29, 2014

Needs vs. Wants

What are the key factors that incur a lot of debt for many of us? Not understanding the difference between a "need" versus a "want" - the need for instant gratification - and the fact that people are in denial about their financial problems, which must be addressed head on and discussed with their spouse or domestic partner.

Another factor which increases debt is failing to plan for large unanticipated expenses - a phenomenon known as "crisis spending." Usually something breaks down and brings with it a burdensome expense. If you don't set up a savings account for these large, unanticipated expenses, it causes overwhelming debt. Huge unanticipated dental and medical expenses are the biggest culprits, but many other factors can also cause this problem.

Solution: You should have a reserve account set up for these expenses. This is one of the first things you must do even before opening any other type of savings account. Everyone reading this post will at some time in their life experience these sudden unplanned-for expenses. Planning for them is the only way to avoid incurring consumer debt or even worse, credit card debt. 

How much should you save for these large unanticipated expenses? I suggest at least $10,000-$20,000. Moreover, these funds need to be in a risk-free, liquid account. Don't worry about the interest earned on this. The key is risk-free. From my latest book: Achieve Financial Freedom – Big Time!

Is the American Economy Close to a "Slipping Point?"

Is the American Economy ready to slip back into a major recession in the next 12 months?  What are the signs of potential problems? Obviously, the shockingly anemic GDP Q1 growth rate of 0.1% stands out as a red flag.  Some observers think such growth is only temporary and Q2 will be better.  But what about the reality of the jobs picture?

Some see the drop in unemployment to 6.3% and the creation of 288,000 new jobs in April as good signs.  But, an Investor’s Business Daily editorial paints a more complete picture.  They point out that the 288,000 new jobs came from surveys of businesses.  However, if you look at the broader household survey, 73,000 jobs were lost in April.  Possibly, the most informative numbers come from the labor participation rate.  It dropped to 62.8% – an all time low.  In fact, 806,000 people left the work force in April.  That's not good news for the economy. [more...]

Reinvention: A Business Facelift

For businesses, the meaning of reinvention is looked upon as a facelift of a company. In order to stay competitive, companies must be able to reinvent themselves. Business reinventions can range from rebranding to creating an entirely new business model.

Many companies I consult with share the need to transport their business into the 21st century. A business owner must first improve the quality of the services or products being offered to compete in a world of “faster is better (with a high gloss finish).” One mustn’t be afraid to embrace technology to move their endeavors forward. Branding has evolved in a way that puts you and what you’re selling in front of the world’s eyes.

Retool outdated logos, graphics and marketing; dated material is consumer repellant in the marketplace. A business owner should target their marketing budget intently, placing ads on sites frequented by their desired clientele and using search-engine optimization to ensure easy access to consumers. But the oldest tool in the shed still holds steady: word-of-mouth. [more...]

Tuesday, May 20, 2014

The Top Reasons People Have Too Much Debt

* The average person can go 17 days without a paycheck.
* One in five people have over $10,000 in consumer debt alone.
* 41% paid nothing on their principal balance of their debts.
* 43% of American families spend more than they earn (in many cases, more than 20%).
* Sadly, young people aren't showing any signs of improvement. For example, the average amount of credit card debt for people between ages 20-29 is $1,800 and total debt for 20-somethings averaged $45,000.
* Only 13 states require students to take finance class yet most require gym classes.
* 60% of people ages 18-34 don't keep a budget.
* Educational debt is the fastest growing debt in the US. In fact, average student loan debt for 2010 (when I researched this) was $25,000, yet they had an unemployment rate of 12.4%. In fact, it is estimated that almost 50% of recent college graduates are either unemployed or underemployed.
From my latest book: Achieve Financial Freedom – Big Time!

Wednesday, April 30, 2014

Estimated Tax Penalties

Here is one area that has a lot of misconceptions. First, you will NOT be charged with any criminal behavior if you don't pay estimated taxes. In fact, surprisingly, you don't need to file and pay estimated taxes at all. If you don't, however, you will pay a penalty that is currently set at a non-deductible penalty rate of 3% unless you meet one of the exceptions from the penalty. Thus, if you can make more than 3% after tax with your investments, it might not be wise to pay estimated taxes. Does that make sense?

So, how do you avoid the penalties? Here are the major exceptions:

1. If you didn't pay any taxes last year, you won't be hit with a penalty for nonpayment of estimated taxes this year. Thus, if you paid no taxes last year but won the Power Ball Lottery this year, you will have no penalty. However, you will need to pay income tax on your winnings by April 15.

2. If your total taxes due are less than $1,000, there is no estimated tax penalty.

3. Safe Harbor Rule: If you pay in 90% of your taxes due in quarterly installments, there is no tax due unless you earn over $150,000 of adjusted gross income. At that point, you need to pay in 110% of last year's taxes over four quarterly installments to avoid the penalty. Thus, if you make $200,000 this year of adjusted gross income and last year's taxes were $80,000, you would need to pay in $88,000 under the safe harbor method. I often wonder who thinks of these things!

4. Withholding: Here is one of the biggest secrets to avoiding the tax; however, it is very underutilized. Imagine that you earned income throughout the year and didn't pay any estimated taxes. Wouldn't it be great if you can avoid the penalty anyway? Well, you can by taking advantage of the withholding rules. Withholding is treated as if it were made throughout the year regardless of when the withholding occurred. Thus, if you increase your or your spouse's withholding towards the end of the year so that the total withholding will meet one of the exceptions noted above, there will be no penalty.

Example, John and Katie will owe $20,000 in taxes on commissions paid to John. Katie has a job that has withholding from her paycheck. If they paid in $15,000 last year in taxes, they only need to pay, through estimated taxes and withholding, $15,000 to avoid the penalty (assuming that their adjusted gross income was less than $150,000). If Katie's withholding was $10,000, she can adjust her withholding for November and December and increase the amount withheld. If the total equals what they should have paid in estimates, there will be no penalty even though most of the withholding occurred in the latter part of the year. Pretty slick, huh?

Sandy's note: the new 3.8% surtax on unearned income isn't subject to withholding. Thus, you may have to take care of this extra tax by increasing your withholding.

5. Get a waiver: Surprisingly, under some circumstances, the IRS will waive penalties. Of course, generally asking the IRS to waive penalties is akin to asking Saddam Hussein for good will. However, there are circumstances that the IRS will in fact waive these penalties. These circumstances involve activities that weren't within your control such as the destruction of your home due to a casualty like a hurricane, flood or fire.

Material derived from my book, "Lower Your Taxes - Big Time."

Thursday, April 24, 2014

How Long Do You Need to Keep Your Records and How Long Does the IRS Have to Audit You?

Do you know how long you have to keep your records in case the IRS chooses to audit you? Do you know how long the IRS has to audit you? Here are the rules:

How long does the IRS have to audit you?

* If you filed your tax return on time or with extensions and didn't commit any fraud and didn't omit over 25% of your income, you can be audited for the three most recent open tax years (these include the year you filed your latest tax return and for the two previous years). Thus, if you just filed your tax return for 2013, you can be audited for tax returns 2011, 2012, and 2013.

* If you underestimated your income by 25% accidentally but didn't commit fraud (meaning you intentionally omitted the income), you can be audited for up to six years for the years you omitted up to 25% of your income.

* If you file a fraudulent return, the IRS can audit you forever on that tax return.

* If you didn't file a tax return, the IRS can go back forever to years where you didn't file a return. Thus, you have to always be looking over your shoulder if you didn't file a tax return. This is why I recommend always filing a tax return even if you didn't make enough money to be required to file a return.

How long do you need to keep records?

* For regular receipts, such as invoices, cancelled checks, etc. you need to keep these for six open tax years.

* You must keep your tax returns and attachments for as long as the seas run dry which means forever. No wonder people are buying bigger homes these days!

* If you buy assets such as stocks, bonds, funds, precious metals and real estate, you must keep proof of purchase for as long as you own the item and for three years thereafter (actually until you file that tax return for the third year). Thus, if you bought your home in 2001 and sold it in 2014, you have to keep all purchase documents and proof of basis additions from 2001 through 2014 and three years thereafter until you file your 2017 tax return.

* Depreciable assets that you elected to write off over one year under section 179 election - you must keep proof of purchase of these assets for as long as the depreciable period exists and for three years thereafter unless you sold them before that period is over. In that case you would keep the purchase documents for three years after a taxable sale. Computers are deemed five year assets, cars are deemed six year assets and furniture are deemed seven year assets. Thus, if you elect to write off a desk and copier costing $4,000 in one year, you would have to keep the purchase documents on these items for the full seven-year life plus three years thereafter for a total of ten years.

Thursday, April 10, 2014

Your ATM Could Turn Into "a One-Armed Bandit"

It might look like an Automatic Teller Machine, but the ATM where you withdraw or deposit your money might soon turn into a one-armed bandit able to steal your cash and your identity. Experts have called what might be about to happen an "Armageddon" and an "XP-ocalypse" with the potential to bring disaster to savers and our economy. The computer brains of 95 percent of the world's ATMs have been running Microsoft's old XP operating system. But as of April 8, Microsoft will no longer be fixing any holes that hackers discover in this software. If hackers find a way into your no-longer-protected ATM, they could do a LOT worse than just drain one of your bank accounts. [more...

Tuesday, April 8, 2014

Obamacare and Small Businesses

I have been getting a lot of questions about how Obamacare applies to small businesses. At the outset, most of the strategies such as heath savings accounts, medical savings accounts and flexible spending accounts are still available. As a small employer with less than 50 employees, you do NOT need to provide health insurance to your employees. If you do, however, provide coverage, you have several choices among those selected:

1. Section 105, self-insured medical plan
2. A flexible spending account (FSA)
3. A Health Savings Account (HSA)

I want to note that if you do provide group health insurance, you need to pay at least 50% of the cost of the plan. [more...]

Friday, April 4, 2014

Why Everyone with Money is Moving Out of California and Into Nevada

I already did it. I am a tax refugee from Los Angeles. In the past decade since I left California, I saved over $2 million in personal, property, sales and especially business taxes (this counts the 100+ employees I took with me when I left Los Angeles). And the money I saved paid for my home in Las Vegas. So I got a beautiful home for FREE... with enough money left over to pay for teachers to come to my home each day to homeschool my daughter who was accepted at Harvard. So leaving California led to my daughter being accepted at Harvard.

Californians are brainwashed by propaganda. They don't understand what they are losing in taxes and how their lives and their businesses are being damaged or crippled by taxes, regulations, workers comp and lawsuits. Nor do they realize the great quality of life available in a place with zero state income taxes. Nor do they realize every smart business owner in the state is moving out - just like me.

Wednesday, April 2, 2014

Strange Things that are Taxable

Gambling: If you earn any income from gambling, it is taxable. This includes winnings from fantasy football. Casinos must withhold from gross income if you earn over:
$1,200 from slots
$1,500 from Keno
$5,000 or more from poker
$600 or more from horse racing
NOTE: you can deduct gambling losses against gambling winnings when you file your tax return. [more...]

Wednesday, March 26, 2014

The Fifth Milestone of Life: Retirement

For those who feel that they are a long way away from retirement, take a tip from me: retirement comes at you very fast. Time really does pass quickly. Every Boy Scout learns to "be prepared."  Unfortunately, procrastination can be VERY costly. For example, if you put in $5,500 a year, which is the current maximum contribution to an IRA, for thirty years, you will have, depending on earnings assumptions, about $1,000,000 in your retirement fund. However, if you do this for an extra ten years, this $1,000,000 at retirement rises to almost $3,000,000. Ten more years of contributions triples your retirement nest egg. Also, if you invest in a ROTH IRA, you don't pay tax on the fund at retirement, which in my opinion is the better choice.

Now I can just hear some young people complain that with new families, student loan debt, etc., it is hard to put away $5,500. The answer then is to put away something, even if it is only $2,000.

Here is another tip that points out a VERY widespread mistake. If you contribute the same $5,500 for forty years at the beginning of each year vs. the same $5,500 at the end of each year for forty years, you will have an extra $60,000-$90,000 MORE at retirement. It is the same yearly contribution and the same amount of years. Thus, always contribute to your retirement plan as early in the year as possible.

The final tip for this installment involves 401K. Many companies now provide 401Ks for the employees instead of pension plans. As a result, many companies match the employee contributions to some extent. Sadly, I was reading that 50% of people who are in this situation do NOT contribute enough to max out or even get any of the employer contribution. This is INSANE. It is free money that they are turning away. If you work for a company that provides a matching contribution, you NEED to max out whatever contribution that you need to make in order to max out the employer's contribution. Don't be a fool by walking away from free money!

Derived in part from my latest book: Achieve Financial Freedom – Big Time!

Thursday, March 6, 2014

Visa and MasterCard Fraud

SCAM ALERT: This one is pretty slick and is the latest scam dealing primarily with Visa and MasterCard fraud. It is slick because they provide you with all the information except the one piece that they really want. It is worth reading, and YOU SHOULD SHARE THIS WITH ALL OF YOUR FRIENDS, FAMILY MEMBERS AND FACEBOOK FRIENDS.

The scam works like this: Person calling says, "This is (name) and I'm calling from the Security and Fraud Department at Visa. My badge number is 12460.  Your card has been flagged for an unusual purchase pattern and I'm calling to verify. This would be on your Visa card which was issued by (name of bank). Did you purchase an Anti-Telemarketing Device for $497.99 from a marketing company based in Arizona?" When you say "no," the caller continues with: "Then we will be issuing a credit to your account. This is a company we have been watching, and the charges range from $297 to $497 - just under the $500 purchase pattern that flags most cards. Before your next statement, the credit will be sent to (gives you your address). Is that correct?" You answer "yes."

The caller continues: "I will be starting a fraud investigation. If you have any questions, you should call the 1-800 number listed on the back of your card (1-800-VISA) and ask for Security. You will need to refer to this control number." The caller then gives you a 6-digit number and asks: "Do you need me to read it again?"

Here's the IMPORTANT part of how the scam works: The caller then says, "I need to verify you are in possession of your card."  He'll ask you to "turn your card over and look for some numbers." There are 7 numbers: the first 4 are part of your card number, the last 3 are the security numbers that verify you are the possessor of the card. These are the numbers you sometimes use to make Internet purchases to prove you have the card. The caller will ask you to read the last 3 numbers to him. After you tell the caller the 3 numbers, he'll say, "That is correct.  I just needed to verify that the card has not been lost or stolen and that you still have your card. Do you have any other questions?"

After you say "no," the caller then thanks you and states, "Don't hesitate to call back if you do," and hangs up. You actually say very little, and they never ask for or tell you the card number. But after we were called on Wednesday, we called back within 20 minutes to ask a question. We were glad we did! The REAL Visa Security Department told us it was a scam and in the last 15 minutes a new purchase of $497.99 was charged to our card. We made a real fraud report and closed the Visa account. Visa is reissuing us a new number. What the scammer wants is the 3-digit PIN number on the back of the card. Don't give it to them. Instead, tell them you'll call Visa or MasterCard directly for verification of their conversation.

NOTE: The real Visa and MasterCard security will NEVER ask for anything on the card as they already know the information since they issued the card. What is remarkable about this is that I just got a call where they used a word-for-word repeat of this scam. In my case, they told me that someone charged $3,097 for a plane ticket to Spain.  Pass this information on and share it with everyone.

Derived in part from my latest book: Achieve Financial Freedom – Big Time! based on the chapter entitled, "Scams, Slams and Shams."