How to Get Your PPP Loan Forgiven

How to Get Your PPP Loan Forgiven

We’re now about six weeks into the CARES Act and in round two of the Paycheck Protection Program.  The $310 billion allotted to the program in round two is beginning to dwindle, but has lasted longer than most bankers expected.

There could be another round of stimulus that replenishes the program over the next few months, of course.  There seems to be widespread effort in Washington to ensure that businesses that need PPP funds are able to get them.  Who knows whether that will eventually happen.

For many of the businesses the most pressing question is no longer how they can access the program & obtain funds to keep their operations going.  It’s what must I do to have this loan forgiven?  This post will cover what we know so far.

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My Top 5 Year End Tax Planning Tips

My Top 5 Year End Tax Planning Tips

Happy holidays!

It’s now December, and if you blink hard enough (or drink enough egg nog) you’ll wake up & find yourself in January of a new year.  For many people, holiday office parties & Christmas shopping comes hand in hand with a few year end financial chores.

There are plenty of these financial “chores” you could occupy yourself with if you chose.  But since December 31st coincides with the end of the tax year, today’s post will cover my 5 favorite year end tax planning tips.  These are five of the most common year-end opportunities I see to reduce your long term tax liability.

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The Home Office Deduction 101: Simplified Method vs. Actual Expense Method

The Home Office Deduction 101: Simplified Method vs. Actual Expense Method

Even though we don’t currently prepare tax returns for clients at my financial planning firm, tax is a topic that comes up a lot.  Many of our clients own businesses, and most of them share two opinions:

Alongside that there are several tax related questions that come up fairly frequently with our clients.  One of them is the home office deduction.  How can you take it?  Are you even eligible?  What can do to take a larger home office deduction this year?  What are your options?

Whereas employees and small business owners alike were eligible to take the deduction prior to 2018, the Tax Cut & Jobs Act eliminated home office expenses as a miscellaneous itemized deduction.  That means that rather than deducting home office expenses on Schedule A as an itemized deduction, they’re now claimed on Schedule C.  And since Schedule C only contains information related to self-employment, the tax law change essentially means that employees are no longer eligible to take the deduction.

For business owners still eligible to take the home office deduction, there are two options for calculating the amount: the simplified method and the actual expense method.  This post will cover both in detail, and explain what you need to know to take the deduction yourself.

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How to Evaluate Real Estate Investments

How to Evaluate a Real Estate Investment

The concept of acquiring rental properties as a means to build passive income has become exceptionally popular recently.  In fact, it’s difficult to peruse the internet for content on personal finance without bumping into videos/podcasts/blogs/courses on how to build passive income through real estate investing.

My take on real estate investing is that it can indeed be a wonderful complement to your investment portfolio.  But the conditions need to be just right.  And given how quickly housing prices have risen since the depths of the financial crisis in 2009, the circumstances today are rarely compelling.

As you can imagine, this is a conversation I have with clients frequently.  Some have an existing property we need to evaluate.  Others fall in love with the idea of putting in sweat equity now & building an empire of properties that kick off income over time.  This sounds nice in theory, but in my experience rarely pencils out.  (At least of the opportunities I’ve seen recently in California & Oregon).

This post will explore how to evaluate real estate investing opportunities.  We’ll cover cash flow, return on investment, and go through a real life scenario of a property I pulled from Zillow.com.

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72(t) Distributions: The Ultimate Guide to Early Retirement

72t Distributions: The Ultimate Guide to Early Retirement

What’s the most common piece of retirement advice you’ve ever heard?  I bet it has something to do with tax advantaged retirement savings.  Most people are inundated with voices telling them to start saving early and take advantage of tax deferrals.  It’s solid advice.  Saving tax deferred money through IRAs, 401(k) plans, and other retirement vehicles is a wonderful way to grow your wealth over time.

The downside?  Those pesky withdrawal penalties.  The IRS will typically ding you 10% if you withdraw from these accounts before turning 59 1/2.  This can pose a problem if you’re considering an early retirement.  Fortunately there are a few loopholes.  eight of them, in fact:

  1. Roll withdrawals into another IRA or qualified account within 60 days
  2. Use withdrawals to pay qualified higher education expenses
  3. Take withdrawals due to disability
  4. Take withdrawals due to death
  5. Use withdrawals for a qualified first-time home purchase up to a lifetime max of $10,000
  6. Use withdrawals to pay medical expenses in excess of 7.5% of adjusted gross income
  7. As an unemployed person, take withdrawals for the payment of health insurance premiums
  8. Take substantially equal periodic payments pursuant to rule 72t

For those of you interested in an early retirement, the final loophole is likely the most interesting to you.

According to rule 72t, you may take withdrawals from your qualified retirement accounts and IRAs free of penalty, IF you take them in “substantially equal period payments”.

This post explores how.

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Case Study: Retiring With $1,000,000

Case Study: Retiring With $1,000,000

Those of you who know me know that I’m a massive baseball fan.  And when it comes to famous quotes from baseball players, one person comes to mind more than any other: Yogi Berra.

Yogi Berra was a long time catcher for the Yankees and had an incredible hall of fame career.  He was equally known for his head-scratching quotes, which the world has affectionately termed “Yogi-isms.”  Yogi didn’t comment often on financial topics, but he does have one quote that applies nicely to retirement planning:

“A nickel ain’t worth a dime anymore.”

When we think about retirement planning, many people consider $1,000,000 as kind of a “golden threshold.”  They think of a million dollars as the minimum nest egg they’ll need in order to retire comfortably.  But as Yogi pointed out, being a millionaire doesn’t amount to what it used to.

So is it even possible to retire with $1,000,000 these days?

Let’s find out.  In this post we’ll explore a hypothetical couple named John and Jane.  They’ve saved $1,000,000 and want to retire, which is a very common situation for many Americans.

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How to Calculate Solo 401(k) Contribution Limits

How To Calculate Solo 401k Contribution Limits

Solo 401k plans have many aliases: solo-k, uni-k, and one-participant-k, among others.  Whatever you want to call it, the retirement plan is one of my very favorite for small business owners without eligible participants.  They’re easy to set up, inexpensive to operate, and simple to maintain.

One of the few downsides of solo 401k’s is that they do have one murky intricacy: determining the maximum amount you can contribute in a given year.

This post will cover how to calculate solo 401k contribution limits.  We’ll cover the contribution calculations, the deadlines, and everything else you need to know about the accounts.

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A Beginner's Guide to Cash Balance Plans

A Beginner’s Guide to Cash Balance Plans

In my financial planning practice I work with a good number of business owners who want to make aggressive contributions to their tax deferred retirement accounts.  This helps put them on strong footing for retirement, but also provides a generous tax deduction.  While the 401k plan is the primary retirement plan most business owners are familiar with, a cash balance plans is one I often recommend in addition.  In fact, cash balance plans can actually allow for far greater contributions & tax advantages.

A cash balance plan could be a good fit if you’d like to contribute over $50,000 per year to a tax advantaged retirement plan.  They don’t come without their nuances though.  This guide will explain how cash balance plans work and whether they might be a good fit for you.

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What You Need to Know About the SECURE Act Retirement Bill

What You Should Know About the SECURE Act Retirement Bill

Every now and then, lawmakers in Washington make noise about changing various sections of the tax advantaged retirement accounts I’m so fond of recommending to my clients.  Now that we’re living substantially longer, and a greater portion of our lives is actually spent in retirement, there’s a good argument that we should increase age limits, mandatory distributions, and other rules governing IRAs, 401(k)s and other types of accounts.

I usually don’t pay much attention to this speculation until there’s a bill on the floor that has a strong chance of becoming law.  The majority of the legislation drafted in this area doesn’t get far, and often doesn’t even get out of committee.

Nevertheless, the house and senate have both recently introduced bills that would change how retirement accounts work.  I’m no political expert, and don’t have the foggiest idea what the chances are of one of these bills passing.  But from what I’m reading there’s more momentum for retirement reform now than there’s been in the last several years.  Plus, more than one client asked my thoughts on the subject recently so I felt a summary post would be appropriate.  This post will cover what happened & why it might be important to you.

 

Pending Legislation

In February the senate introduced a bill called the “Retirement Enhancement and Savings Act” (or RESA), aimed at fixing America’s retirement savings problems – both in the public and private sectors.  This isn’t the first bill on retirement reform that’s been introduced recently.  Multiple versions containing similar provisions have been introduced since 2016, which speaks to the growing interest in helping Americans save for retirement.

Meanwhile, the house passed the SECURE Retirement bill (Setting Every Community Up for Retirement Enhancement Act) about a week and a half ago in a 417-3 vote.  This bill contains many of the same provisions as RESA, and the bipartisan support on both sides of congress could mean one of the bills may actually make it into law sometime soon.

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