51 WAYS TO PAY YOURSELF(when you own a Business)

Merra Lee Moffitt, AWMA, CMFC, CFPGood Life Financial Group

Wealth Strategist, Senior Partner610-488-7353

MerraLee.Moffitt@lpl.com

FIRST THE DISCLAIMER I do not do taxes,

therefore… I cannot calculate exact

tax amounts I do not report your

“creativity” to IRS or your accountant

I DO help you figure out what will help you, your business & your family for life (a good life )

YOUR ACCOUNTANT “That really

depends on….” “We probably

should talk about that….”

“The IRS frowns on that…”

“Did you keep good records on…”

Mark Poserina, CPA

“It’s all hypothetical and off the record today.”

WHAT ARE WE TALKING ABOUT Having your business pay for things you

(and your family) care about Paying from the business coffers Reducing household costs Increasing business “profits” Keeping the lifestyle you deserve Control over when, why, how much

you spend Keeping the little pleasures in life Creating a new awareness

BENEFITS OF CHOICE You decide what’s important You control the choices You control the timing You control the budget You control the form of your company You control changes

WHAT IS A BUSINESS EXPENSEAnd why does it matter

Definition of 'Business Expenses' To be deductible, a business expense must

be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

Read more: http://www.irs.gov/businesses/small/article/0,,id=109807,00.html

FISCALLY FIT ENTREPRENEUR SUMMER CHALLENGE

I’ll help you find $400/mo to put towards your next project (expansion, office remodel, advertising, Web services) or you’ll get $400 in gift certificates to:Remodeling projectAccounting/tax reviewWebsite package…

IS IT WORTH IT?

A Dollar of Business Income Income into your pocket

Business Income $100,000 SE tax (10.4% x 92.35%) $9,604 Medicare Tax (2.9% X 92.35%) $2,678 Federal Inc Tax $10,731 State Tax (3.07%) $3,070 Unemployment $69 Local Tax (1%) $,1000 Your family gets to spend: $72,848 Would you rather have 73 ₡ or a $1?

Special thanks to Mark Poserina CPA of C. Malcolm Smith & Co. for doing the tax math!

WITH YOUR 73 CENTS - YOU THEN GET TO BUY:

MUST HAVE: Rent/mortgage Utilities Food Gas Cars Kids (school, etc)SHOULD HAVE: Healthcare Disability Ins

WANT TO HAVE: Restaurants Clothes Vacation “Toys” Retirement Time off

WHAT FORM DO YOU TAKE?

Example: changing from Sole Proprietor to ‘S’ Corp

Sole Proprietor - simple

‘S’ Corp – reduce SSI tax on portions of income

LLC – limit your family liability

C Corp – retain earnings for expansion

LLP – special partnerships

ON TO THE “SECRETS” Your mileage

may vary You can be very

creative Get to know

your tax preparer

Substantiation made “Easy” –evidence Receipts with

notesCredit Card

statementsCalendarLogs

RENT / MORTGATE Home office

deduction Pay yourself

office rent Business owns

the building?

UTILITIES Direct Home office

deduction Direct IndirectIf you could rent your

unused space (garage, guest room, closet, basement) to a great tenant you loved, wouldn’t you?

TRAVEL When/Where/How

Conference in Detroit? or Hawaii?

Per Diem Travel over

weekends Don’t forget: dry

cleaning, travel agent

Group travel

FOOD/GROCERIES Employee lunches

(including you) Office Incidentals

Coffee, snacks, breakroom supplies

You choose your favorites

“Presentation” expense Vs M&E

Meals 50% Meals 100%

Party “Leftovers”

ENTERTAINMENT Sporting events Concerts Golfing Theatre Hunting Fishing Group Vacation

Don’t forget to include:TipsParkingDrinksTaxes

AUTO: MILEAGE Creative use of mileage

deduction(55.5cents/mi)

Extra: Tolls, parking, Places on my route: grocery, drugstore, pet

store, clothing store

TWO OFFICES EXAMPLE DEDUCT virtually all your mileage,

including the miles you log from your home to the office or other place of business, IF:

You have two offices or work locations: one outside the home (Office #1) and one inside the home (Office #2).

AUTO: DIRECT EXPENSES Total expenses of vehicle Can be more than mileage, easier to

substantiate (receipts) Fuel Tax Credit - for off-road fuel usage

Tax Credit up to 4x more valuable than deduction

TAX CREDITS – WE LOVE CONGRESS! A tax credit is about 4x more powerful than a

deduction Affordable Care Act

– partial cost of health coverage for employees 100% cost for yourself & Family

Retirement Plan Tax credit 5-Year carry back of general business credits Fuel tax credit

Not just for business owners: American Opportunity Tax Credit (kids in college) Child and Dependent Care Credit Child tax credit Earned Income Credit – really bad year! Energy credit (it may come back)

RETIREMENT PLANS You get to choose

Which benefits you the most now

Which costs the least

Which helps you the most later

Choice can change each year

Payroll deduction IRA

Individual K Roth K SIMPLE SEP 401(K) PSP

HEALTH CARE PLANS HSA

tax deductibleTax Free

Dental Medical Vision LTC

KIDS / FAMILY Hiring your kids

Must be age appropriate

Best if you have a job description

Great if your kids have expenses you would otherwise have to pay for

Hiring your spouse

Scanning Cleaning Party help Filing Mailing Errands

A FEW MORE MINOR ITEMS Logo’d clothing Personal Tax

Prep Toys

GPS, iPAD, Computers, Cameras, Video, Office TVs

Internet

“unlike home office these are not subject to exclusive use”

YOUR HIDDEN PAYCHECK

Ernie EmployeeMakes $75,000 /yr

Eli Entrepreneur Makes $50,000 /yr

Who is better off?

HIDDEN PAYCHECK Buys:

Internet Cell phone Vacation Visits parents Kids stuff …

Ernie EmployeeMakes $75,000 /yr

Eli Entrepreneur Makes $50,000 /yr

JUST FOR FUN Dog as deduction? Bad loans to your brother? Credit card interest? Interest on money you loaned the

company? Throwing a party?

IN SUMMARY Dollars in your pocket are not the only way

to pay yourself!! There are many things your business can

pay for that your family already wants and needsMerra Lee MoffittAWMA, CMFC, CFP610-488-7353711 Spring StWyomissing, PA 19610

www.GoodLifeFG.com/Merra-Lee MerraLee@Moffitt.comMerraLee.Moffitt@LPL.com