Logos Financial Group - Terrance Hutchins

10/27/2023

My daughter decided she wanted to have her own lemonade stand. Of course we couldn’t just slap a sign up and selling lemonade for $.25 a cup. Well one thing led to another and we put together a business plan and now have a podcast to boot. We ending up making over $300(we donate at least 50% of all profits) on our first outing and Abby says she wants to donate $2K. The podcast goes into basic business principles anyone can learn from and we document our journey.

09/21/2023

Got Buyer’s remorse?

After spending money to set up a new venture, if you back out before the first day, taxwise, your costs aren't just straightforwardly deductible as business expenses. They might, however, be deductible as investment expenses. Here's a breakdown based on the IRC § 195:

Rule One: Investigating a business to start or buy.
The costs of a general search or investigation to start a business are not deductible at all.

🍗 EXAMPLE: Bubba wants to open a fried chicken joint. He tours the state, visiting every KFC, taking photos, and sampling the menu. After spending $1,244 and gaining ten pounds, he drops the idea. Result? No tax deduction.

Rule Two: Attempting to buy or start a specific business.

The costs of trying to acquire or start a specific business are deductible as investment expenses.

💇‍♀️ EXAMPLE: Francine, a hairdresser, sees an ad for a HTGT franchise. She meets the owner, hires an attorney, and signs a contract, spending $3,100. Result? She can deduct this as a business expense.

✈️ EXAMPLE: Aaron consults Bridget, his accountant, for tax advice. He earns from a model airplane newsletter. His wife, Clarinda, is an architect. Bridget charges $800: $550 for Aaron's business and $250 for personal tax matters. Tax result? $550 is deductible for Aaron's business, but the $250 isn't deductible.

09/21/2023

Start-up costs for your business are treated slightly differently than your other operating expenses. Here's a breakdown of the three main start-up tax rules and a bonus one to consider:

🔹 Rule One: Deduct up to $5,000 in the first year. Excess over $5,000? Amortize over 15 years. Restrictions apply if expenses exceed $50,000.
🔹 Rule Two: Amortize your start-up costs over 15 years.
🔹 Rule Three: Hold off on deductions. Recover these costs when selling or closing the business.

🌟 Bonus: Business organizational expenses can give an extra up-to-$5,000 deduction, exclusive for business entities. This is on top of the start-up cost deduction.

For instance, Sasha's rock climbing shop, Rox, had $14,000 in start-up costs. Depending on the rule she chooses, her deductions vary. If she opts for Rule One, she can deduct $5,000 immediately and then $600 annually for the next 15 years. With Rule Two, she'd deduct $933 annually over 15 years. If she goes with Rule Three, she'll recover the $14,000 when she sells Rox.

Additionally, Sasha spent $1,790 on business organizational expenses for Rox, Inc. This is deductible in addition to her start-up costs.

But what is she had never opened? The costs might not be deductible as business expenses, but they could be as investment expenses.

09/20/2023

🌟 How are you treating your gifts to clients for tax purposes? 🎁

The IRS has a $25 rule for client gifts per recipient annually. You can spend as much as you want, but the excess is just your generosity.

You can amplify this amount by incorporating costs like engraving, packaging, and postage. These extras don't touch your $25 quota! 📬🎨

Items below $4 that proudly display your brand (think a chic pen 🖊️ or a handy calendar 📆) aren't just tokens of appreciation(they may not be wanted lol) but are also 100% deductible, bypassing the $25 benchmark.

Of course, The IRS adds a wrinkle and breaks down business gifts into two categories: Direct Gifts and Indirect Gifts.

🎯 Direct Gifts: Go straight from you to the recipient. Think of a pound of Dunkin Donuts coffee for a favorite client.
🔄 Indirect Gifts: You give it to one person, but it's really for another. Like giving a customer a set of kitchen knives you know, they'll pass on to their spouse.

The limit still sucks, you might think, but your clients are worth it (hopefully!)

12/30/2022

So here are the updated standings in our stock game. Everyone got $250 to invest in a stock(s) or ETF. Everyone ended up picking 2 different stocks to split the money in. The winner gets to keep the money or cash out and spend after a year. A lesson we are focusing on now is to first think long term with your stock investing, diversify if you're not one to pay attention and there are still opportunities to make money in any market.

11/17/2022

If you look at any corporate income statement(otherwise known as a profit & loss statement) you will notice the company lists income tax as an expense. These are generally C-corporations that pay their own taxes separately. Most small businesses are considered “pass through businesses” so the owner(s) personally pays taxes on the profits of the business on their personal tax return. in your small business do you consider your income tax an expense that you factor into your month to month or quarter to quarter projections? 

Many business owners only think about taxes at the end of the year and they will do whatever they can to reduce their tax bill, even if it could be detrimental to the business in the long run. However, if you treat income tax like any other expense it positions you to plan out how much the tax should be, set aside money to pay it, and strategize the best ways to reduce your tax burden. If you have no money set aside to pay the tax then you will be tempted to buy things to get write-offs(hello G-wagon!) and/or write off personal items as business items(of course no one reading this has done that but you probably know someone who has).  

Lastly if you have the taxes set aside then you can be more clear headed in your decision making and can decide to either pay the taxes or look to see how you can reinvest the money for growth. For example, if I have $10K set aside in my tax account I can think how that money could be better used business growth. Could I invest in training, marketing or an asset that actually will increase my revenue? This will not only reduce your tax bill but it will also increase your future cash flow. For those looking at some year end tax strategies you can check out my “Tax tips” blog(link in the comments) for some year end planning ideas.

10/26/2022

The housing market is beginning to slow as rates are on the rise. If you are in the market to purchase it is important to re-assess the affordability of your next home so that you will not feel house poor. A recent poll by Homelight stated that 70% of people have at least one regret after purchasing their home with one of the top regrets being the underestimation of the total cost of buying a home. With rates even higher now the total cost of purchasing is increasing. So although the bank may qualify you for a certain loan amount be very aware of what that payment would do to your overall lifestyle. You may end up settling for a smaller home today but a good buy today could position you for a better spot in the future. I go into more detail in my blog post in the comments section.

09/28/2022

Two options exist for depreciating a vehicle over 6,000 lbs. in 2022: (1) the taxpayer can claim a §179 deduction of $27,000 and depreciate the remainder of the business cost under MACRS (5-year), and (2) the taxpayer can claim a bonus depreciation [§168(k)] for 100% of the business use.

You would deduct the portion of business use with the personal-use portion being nondeductible.

If claiming §179, recall the following three attributes:

• The annual deduction limit is $1,080,000 for 2022.
• A business may not create a loss using the §179 deduction, but unusable amounts may be carried to future years (the business income limitation).
• For pass-through entities, the individual shareholder or partner faces their own §179 limitation, and if a spouse also has a §179 deduction, they may find an unwelcome combined limitation.

The bonus depreciation percentage is scheduled to be phased down to zero in 20% increments from 2023 through 2027.

09/22/2022

If you are a high earner then you should look into taking advantage of the “paycheck raise” you get once you have paid the maximum social security for the year. You pay social security on the first $147K of wage income you make in 2022. This number is generally inflation adjusted upwards annually. If you are used to paying social security throughout the year then when you get a higher paycheck you have the option to utilize that money towards investing in your future. Generally if we aren’t intentional about allocating “extra money” it will get absorbed in our day to day living. If applicable, use this end of year “raise” to invest or pay down debt. .

09/20/2022

Here is a recent blog post with some tax strategies.

Everyone is always looking to pay less tax and certainly not pay more than their share. Here are some ideas to keep in mind for your specific situation.

09/20/2022

Pay no tax with these 10 Strategies

Everyone is always looking to pay less tax and certainly not pay more than their share. Here are some ideas to keep in mind for your specific situation.

09/05/2022

High tax, no time, big revenue goals? FREE GUIDE