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Make The Numbers Work podcast

By: Steve King MK CPAs & Advisors
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  • Summary

  • The team at MK CPAs is launching the Make The Numbers Work podcast. Steve King will talk about topics related to the firm's CPA and advisory services. He'll break down important issues for small business owners and individuals. You'll listen to Steve as he discusses important tactics and strategies you can use to maximize profitability. Join us for Making The Numbers Work. A new podcast from your trusted partners at MK CPAs & Advisors. For more information visit http://www.MKCPAS.com. You can also find them on Facebook and LinkedIn.
    MK CPAs & Advisors
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Episodes
  • How the Biden Tax Proposals Might Impact You

    How the Biden Tax Proposals Might Impact You
    Dec 21 2020
    Episode 5:  Louisville CPA Steve King discusses what 2021 could bring in terms of tax and fiscal policies by a new administration.  While none of this has been officially introduced, today’s discussion addresses what the Biden-Harris team proposed during its election campaign.  Steve explains what the implementation of some or all of the proposals could mean for you and your business. Tax Rates and Deductions The top bracket will increase from 37% to 39.6%.  During the campaign, candidate Biden has stated that no one making under $400,000 per year will see a tax increase.  At the same time, there is discussion of bringing back some limitations regarding certain deductions. Capital Gains Increase If you realize an increase on the sale of certain assets, you could be exposed to a capital gains tax.  This rate is typically lower than “ordinary” rates.  Currently this rate is between 15% and 20%.  The Biden proposal would eliminate the capital gains rate, if your income exceeds $1 million.  The gain would be subjected to a 39.6% rate.  Additionally, there are other taxes for Medicare and state, potentially yielding a combined tax rate of approximately 50%. Limits to Itemized Deductions If your income is over $400,000, and you’re itemizing, some of the deductions currently protected under the Pease limitation would be eliminated. Estate Tax Changes If your estate is more than $11.58 million, you could be subject to an estate tax (“death tax”).  The Biden proposal is to lower that threshold to $3.5 million per spouse.  This can be a significant factor for a family business or family farm.  One option for someone who’s concerned about the estate tax may be to consider setting up a Spousal Lifetime Access Trust (SLAT).  The trust would own the assets, but it removes them from the estate, thus reducing tax exposure.  Your spouse would still have access.  There are many options and some may have income considerations.  You should always consult your CPA when making this type of decision. Elimination of the Step-Up in Basis This is related to the estate tax.  Assume you purchase stock and it appreciates in value.  Upon your death, the asset becomes part of your Estate.  Your Will or other arrangement passes ownership of that stock to an heir(s).  Currently, they receive a step-up in the basis.  The asset passes to them at the current level, not at the level it was when you originally purchased it.  This can have a dramatic impact on any capital gains your heirs may incur, should they decide to sell some or all of the shares.  The Biden proposal is to eliminate the step-up protection.  The step up applies to any capital gain asset, not just stock. One income tax mistake people often make is gifting appreciated stock to your kids, while you are still alive.  If you were to do so, they get your basis from a capital gains standpoint.  It would be better to allow them to inherit the stock, assuming the step-up in basis rule were still valid. Child Tax Credits The Biden proposal is to expand and increase the child tax credit for a period of years and then reduce them to lower levels.  Joe Biden also proposed a $5,000 tax credit for care-givers of individuals with specific needs (e.g. a special needs child who is older than 18 years of age). Elimination of Carried Interest It’s not a new proposal, but it’s back.  This proposal would impact some people who work in private equity and hedge funds. This would impact how those individuals report income vs. capital gains.  Payroll Tax Increase If your pay is above $400,000, the Biden campaign has proposed increase your payroll tax.  It could actually double.  This could also hit the employer’s side as well. Corporate Tax Rate Increase The Biden campaign is proposing raising the corporate tax rate from the current 21% to 28%.  In previous years, the rate was 35%.  QBI Phase Out To help small businesses (e.g. LLCs, S-Corps, Partnerships, etc.), the Tax Cut and Jobs Act of 2017 created a pass-through deduction (Qualified Business Income).  Currently there is an elimination of 20% of net profit for tax purposes.  It’s basically a deduction.  If your income goes over $400,000, the QBI would phase out under the Biden proposal. Certain service industries are already subject to phase-outs at lower levels.  So far, it hasn’t been determined how this QBI phase out would impact these service industries (including financial service professionals, accountants, physicians and many other job types).  Advice to Business Owners and Individuals This isn’t the first time we’ve gone into a new year with a lot of unknown variables.  While it complicates your planning, there are steps you can take. Start with having good information about your current situation.Be flexible. Have a plan, but remember to have contingency plans ready. QuickBooks is a very good accounting software.  Steve King and his business partner, Victor ...
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    29 mins
  • End of Year Tax Moves for 2020

    End of Year Tax Moves for 2020
    Dec 15 2020
    Episode 4:  Louisville CPA Steve King discusses end of the year tax moves you may want to consider.  This was a challenging year both for individuals and businesses.  Today’s conversation is going to cover issues for both, so let’s jump in. The PPP program injected a tremendous amount of money into the economy.  There are ongoing discussions in Washington DC about additional stimulus, but let’s deal with what we already know (or don’t). If you used PPP proceeds to pay for specified business expenses, you may not be able to also use those expenses as deductions.  This could change, but for now the expenses you covered with the PPP money aren’t deductible.  The $1,200 stimulus checks ($2,400 for married couples) were dispersed, but some people may not have received them.  The funds may be accounted for when you file your taxes.  Based on your 2020 income, if you received funds but shouldn’t have, it looks as if you will not have to pay back the $1,200. 1099 NEC Form There’s been a change for 1099 reporting.  Businesses would normally check Box 7 for independent contractors or subcontractors.  However, there have been multiple deadlines for Box 7 and the other options on the form.  There's a new form 1099 NEC which will eliminate the confusion over multiple deadlines.  The 1099 NEC will basically take the place of Box 7. Donations The standard deduction has been raised to approximately $24,000 (married filing jointly).  However, this doesn’t mean they’ve eliminated the charitable giving deduction.  If you itemized total is less than $24,000 you’ll simple take the standard deduction in lieu of your itemized deductions.  If your itemized deductions exceed $24,000, then use the itemized deductions.  The CARES Act added a $300 deduction, over the $24,000 standard deduction.  Interestingly, in previous years there has been a 60% of your income limit on your charitable deductions.  For 2020, that limit has been removed.  Net Operating Losses (NOLs) If you’ve had a net operating loss at the bottom of your 1040, your taxes would be zero.  There’s a new carry-back rule, as part of the CARES Act.  You can go back 5 years, an apply those losses to previous years.  This may result in a refund from prior years, which could quickly put money back into your operations.  It may be more beneficial than carrying the loss forward as future offsets.  You’ll use Form 1045.  Qualified Improvements The 2017 Tax Cuts and Jobs Act (TCJA) had an oversight that’s now been corrected.  The way the Act was written treated qualified improvements in a way that required you to spread the depreciation over 39 years.  The error meant you couldn’t depreciate it over 15 years, or use the bonus depreciation option of taking it all in 1 year.  This glitch has been fixed.  You can now amend your previous returns.  NOTE:  If you amend previous returns and it creates an NOL (see above), you may be able to recoup dollars you’ve already paid in previous years.  Required Minimum Distributions (RMDs) At age 72, you’re required to begin taking minimum distributions.  This has been suspended for 2020, so you can leave the money in place if you prefer. Early IRA Distributions If you make early distribution from your IRA, you would typically be subjected to taxes and a 10% penalty.  In a move to help people who need to access these funds, Congress opened the door.  You’ll need to make a case that you’ve been adversely impacted by COVID.  There are 2 forms of relief.  First, you’ll be able to that distribution without incurring the 10% penalty.  The second form of relief is that you have 3 years to pay the taxes you incurred.  Related to this is the option to pay back the funds you withdrew within 3 years and you won’t have to pay taxes.  It’s important that you have solid documentation of the transactions to avoid problems.  The IRS may ask for the backup, so have your paperwork in order and make sure you haven’t missed your deadlines. Kiddie Tax Rule In the 2017 Tax Cuts and Jobs Act, unearned income for minors was negatively impacted.  It eliminated the Kiddie Tax Rule and taxed that unearned income at Trust rates.  This was unfair and has now been addressed.  As of now, the option of using the Kiddie Tax Rule (taxing the unearned income at the parent’s rate vs. the Trust rate), is back.  This applies mainly to dividends, capital gains and interest, not regular income. General End of Year Planning Opportunity Zones were part of the 2017 Tax Cuts and Jobs Act.  If you had a capital gain, you were given the option to invest some of that gain into an Opportunity Zone, as defined by the government and receive a tax benefit for doing it.  A 180-day window was established during which you were supposed to have invested the gains.  If you sold an asset in 2020, you have to reinvest in an Opportunity Zone within 180 days or by 12/31/20, whichever is later. Extenders...
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    36 mins
  • Time for a Mid-Year Business Assessment

    Time for a Mid-Year Business Assessment
    Jun 4 2020

    Episode 3:  Louisville CPA Steve King addresses the need for a mid-year business assessment, as we begin to come out of the COVID-19 lockdown and look toward the second half of 2020.  Steve is a partner in MK CPAs and Advisors.

    This year, a mid-year review is critically important for your business.  If you’ve made it this far, there’s a good chance the worst if behind you.  The adjustments you made worked.  Now, let’s discuss how to maximize your upcoming performance.

    You may have changes in 3 primary areas:  Internal (including staff), Vendor or Supply Chain and your Market.  There are a lot of unknowns you need to be analyzing. 

    There are going to be opportunities to add staff.  You might have a stronger negotiating position with your vendors.  Some companies may not have survived, but have assets they’d like to liquidate.  You may be able to make some capital purchases at really attractive levels.

    Core Areas to Review

    Cash-on-hand and your accounts receivables (A/R) balance.  If your A/R balance is higher, you should reach out to your clients to see if alternate payment plans can be negotiated.  Some cash flow is always better than none.

    This is a good time to begin reviewing expenses to see if additional reductions can be made.  Assess every line on your P&L statement.

    Also, review your banking relationships.  Do you have access to additional financing to make important purchases or to take advantages of reduced pricing for specific items. 

    If you received funds via PPP or EIDL, remember that this was a 1 time infusion.  It won’t repeat.  How are your revenues looking in the upcoming months?  Do you have the cash you’ll need to cover current expense and move forward?

    Did the lockdown force you to develop new products or services (i.e. distilleries and hand sanitizer)?  Develop a plan for growing these new lines.  Consider a SWOT analysis to look for new opportunities for your business to secure incremental growth and expansion.

    Emerging from Survival Mode

    Now is the time to begin working on your business, instead of in your business.  As we emerge, there are still threats, but you need to reorient your thinking and your balance sheet.

    Engage in local business organizations.  Make sure you and your team is reading information from various sources.  This allows you to synthesize the information and use it to your competitive advantage.

    Be Visible in the Market

    Make sure your sales team and managers are reaching out to key customers to see how they are doing, if their needs have changed and are there new opportunities for you to provide more or additional products/services.

    Many of your competitors may have pulled back on their marketing/advertising expenditures.  Now is the time to amp up your exposure.  There’s less competitive noise, so you may be able to break through even faster.  There are always clients looking for your particular capabilities.

    Other Areas to Assess

    Are you meeting your objectives and key performance metrics?  How are same store performance indicators looking?  Have unexpected expenses increased pressure on your operating funds?

    Challenge your traditional baseline assumptions about important areas of your business.  You may find additional opportunities.  Do your comp plans need to be updated to address the current environment? 

    How is your messaging to your team?  As we emerge, the focus of your communications needs to adapt to a forward-looking objective.  Begin looking 3 months, 6 months and toward 2021.  Your internal discussions need to reinforce your updated perspective. 

    Use this crisis to make your business better.  You’ve probably learned a lot over the previous several months.  Put that knowledge to good use as you begin to move forward.

    For more information, contact Steve King, Partner at MK CPAs and Advisors, at 502-587-9833.  They’re here to help you to Make the Numbers Work.

     
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    26 mins
Management Economics
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