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.