Author Archives: Janice

How Can You Build Wealth by Doing More with Less?

Posted on May 16th, by Janice in Business No Comments

By Janice S. Vanderbilt, Vanderbilt CPA Group

Leverage is doing more with less and it is one of the most important elements in a wealth strategy. Developing your leverage is something you can start doing right now. Many people wait until they are ready to invest to develop their leverage when, in fact, they should start developing their leverage long before they start investing.

I’ve been able to take advantage of many great deals because I’ve been developing my leverage for years. In fact, one of my best deals came up on a Friday and I closed on the property the following Monday. Because I was able to act quickly, I ended up with instant equity. While the deal happened quickly – practically overnight, the preparation for it had been taking place for several years.

The preparation involved developing several types of leverage:

People – Developing Relationships
I had been developing relationships with people who I helped whenever I could to make their financial life better. This included my nephews who made money on every real estate deal they found for me, my business partners, who encouraged and helped me with all of the details of the deal, and friends, colleagues and others who provided all sorts of resources and information.

Developing relationships is something I continue to do on a regular basis.

Belief in Possibilities
I believed that the deal was possible even when I didn’t know how I would get it done. Belief in what’s possible is one of the greatest forms of leverage available to us.

Education
I had been developing my knowledge of real estate, of how loans work and how to close a deal. I attended seminars, read books, and participated in many real estate groups. I still continue to pursue education so my leverage will continue to increase. Plus, when you increase your knowledge, your risk goes down.

Money
On the particular deal I’m referring to, I had $0 of my own money in the deal. I don’t like using my own money for deals. The only way I have been able to make this happen is by developing the other types of leverage listed above.

Start Now and Don’t Stop
Developing your leverage is an ongoing process. The more you develop it, the better you become at using and implementing it.

Measuring What Makes Life Worthwhile

Posted on April 15th, by Janice in Business No Comments

Business owners spend a considerably amount of time in their business working and planning. Are we really measuring the things that really make life meaningful? Perhaps we should revisit some of the things we are measuring.

Ted Talk – Chip Conley – Measuring What Makes Life Worthwhile
When the dotcom bubble burst, hotelier Chip Conley went in search of a business model based on happiness. In an old friendship with an employee and in the wisdom of a Buddhist king, he learned that success comes from what you count.

Chip Conley creates joyful hotels, where he hopes his employees, customers and investors alike can realize their full potential. His books share that philosophy with the wider world

Deducting Business Expenses: Expensed vs. Capitalized

Posted on March 31st, by Janice in Business Taxes No Comments

Business owners, including real estate investors, often come across this situation:

You make a purchase of property for your business – maybe it’s a printer, tablet, appliance or furniture – and the question becomes: is this a cost that can be expensed right away or does it have to be capitalized?

If a cost is capitalized, it means the expense (depreciation) is taken over a number of years which is usually less desirable than expensing it all at once.

The general rule is that costs must be capitalized if the useful life is more than 12 months. This can become a bit impractical in real-world application.

Fortunately, the IRS has released much needed guidance on when costs for property must be capitalized. This new guidance is effective for tax years beginning after December 31, 2013.

With this new guidance comes an important opportunity that allows businesses (which includes real estate investors) to immediately expense certain property that would otherwise have to be capitalized.

This can mean big tax savings but action must be taken now in order to take advantage of this opportunity.

How to Qualify for this Tax Opportunity
To qualify, businesses must have “non-tax accounting procedures” in place at the beginning of the year.

The purpose of these accounting procedures is to indicate that amounts paid for property that are less than a specified dollar amount or that have a useful life of 12 months or less will be expensed.

The amount that can be expensed depends on whether the business has an Applicable Financial Statement (AFS). An AFS includes financial statements filed with the SEC or provided to a federal or state government or agency (other than the IRS) and certified audited financial statements.

Businesses with an AFS must have written accounting procedures and can expense property that costs up to $5,000 (per item) if it is in accordance with their written accounting procedures.

Most businesses do not have an AFS. For those businesses without an AFS, they must have accounting procedures and can expense property costing up to $500 (per item) if it is in accordance with those procedures. At this point, the procedures for these businesses do not need to be written. However, we strongly recommend that all businesses put their accounting procedures in writing.

The following is a sample procedure:

It is the policy of the business to capitalize assets that cost $500 or more individually. All capitalized assets will be depreciated based on the appropriate depreciation rules. Assets that cost less than $500 individually will be expensed in the period purchased.

Once the above is in place, the business must follow this procedure when recording costs to purchase property. This then qualifies the business to make an election on their tax return to have these items treated the same way on its tax return.

The Bottom Line
Businesses that take advantage of this new opportunity will be able to immediately expense items that would otherwise have to be capitalized.

To take advantage of this new opportunity, businesses need to do the following:

#1 Document the accounting procedure for the business by January 1, 2014.

#2 Follow the accounting procedure when recording purchases of property in the bookkeeping for the business.

#3 Make the election on the business tax return.

If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or call us for an appointment to get started today.

Big Tax Savings When You Purchase New Equipment For Your Business

Posted on March 30th, by Janice in Taxes No Comments

Business owners, including real estate investors, often come across this situation:

If a cost is capitalized, it means the expense (depreciation) is taken over a number of years which is usually less desirable than expensing it all at once.

The general rule is that costs must be capitalized if the useful life is more than 12 months. This can become a bit impractical in real-world application.

Fortunately, the IRS recently released much needed guidance on when costs for property must be capitalized. This new guidance is effective for tax years beginning after December 31, 2013.

This can mean big tax savings but action must be taken now in order to take advantage of this opportunity.

How to Qualify for this Tax Opportunity
To qualify, businesses must have “non-tax accounting procedures” in place at the beginning of the year. This means by January 1, 2014 for calendar year taxpayers.

The purpose of these accounting procedures is to indicate that amounts paid for property that are less than a specified dollar amount or that have a useful life of 12 months or less will be expensed.

Businesses with an AFS must have written accounting procedures and can expense property that costs up to $5,000 (per item) if it is in accordance with their written accounting procedures.

The following is a sample procedure:

The Bottom Line
Businesses that take advantage of this new opportunity will be able to immediately expense items that would otherwise have to be capitalized.

To take advantage of this new opportunity, businesses need to do the following:

#1 Document the accounting procedure for the business by January 1, 2014.

#2 Follow the accounting procedure when recording purchases of property in the bookkeeping for the business.

#3 Make the election on the business tax return.

If you want to learn more about how to take advantage of these tax strategies, sign up on our web site or email us for an appointment to get started today.

Maximizing the Benefits of an LLC in Your Tax Strategy

Posted on March 16th, by Janice in Uncategorized No Comments

The Limited Liability Company (LLC) is a terrific tax entity because of its flexibility, specifically being able to choose how it is taxed.

An LLC can be taxed in many different ways

An LLC is not a tax entity, it is a legal entity. As such, an LLC can choose how it wants to be taxed.

An LLC can be taxed as:

– A sole proprietorship
– A partnership
– A C corporation
– An S corporation

Do you know how your LLC is taxed?

If your LLC did not make an election, then it is taxed as the “default classification.”

The default classifications are:

If your LLC has one member (owner), then it is disregarded for tax purposes. This means that all the LLC activity is reported by the owner and the LLC files no separate federal tax return. However, some states require disregarded LLCs to file a state tax return.

If your LLC has more than one member, then it is taxed as a partnership and files a partnership tax return.

Special rule:
If you and your spouse are the only owners and are in a community property state, then you can choose which of the two classifications you want to use.

If your LLC made an election, then your LLC is taxed as a C Corporation or an S Corporation. This election is typically recommended for operating businesses that are profitable. This election is typically not recommended for LLCs that hold investments, such as stock or real estate. LLCs that hold investments are typically best left in their default classification.

Understanding the fundamentals of entities, particularly LLCs, is a key part of building a successful tax strategy.

If you want to learn more about how to take advantage of these tax strategies, sign up for our updates or email us for an appointment to get started today

How is Health Care Reform Going to Affect You?

Posted on March 6th, by Janice in Business No Comments

The new health care reform or Obamacare was rolled out on October 1, 2013. Unless you have been hiding under a rock for the last couple months you probably have some knowledge of this new change. What most people don’t know is the basics of how it affects you.

The uninsured will have affordable options. With the open enrollment starting October 1, 2013 uninsured Americans can start shopping for affordable health insurance using any of the online health insurance marketplaces.
Insurance will be expanded. Pre-existing conditions will no longer exist. The reform makes it so that no individual can be denied health insurance because of pre-existing conditions. Young adults can also stay on their parents’ insurance plan until age 26.
You may be eligible for a government subsidy. If you purchase health insurance through an online insurance marketplace or exchange and your yearly income is no more than $45,960 for individuals, or $94,200 for a family or four you may be eligible for a government subsidy to help pay for insurance. The subsidy will come in the form of a tax credit.
You may receive a penalty if not insured by March 31, 2014. If health insurance isn’t purchased by this date you will receive a penalty on your 2014 tax return (filed in 2015). The penalty for 2014 is $95 per adult and $47.50 per child, and the fee is capped at $285 or 1 percent of household income. Every tax year the penalty will increase.
If you have health insurance, you are already covered under the law. Not everyone needs to purchase health insurance through the online marketplaces. If you already have eligible health insurance you are all set.

Do You Have the Right Tax Advisor?

Posted on February 13th, by Janice in Blog Taxes No Comments

The real question most people want answered is this: Is my tax advisor doing everything (legally) possible to reduce my taxes?

Without the right tax advisor, most people have the following thoughts about taxes:

Taxes are a necessary evil
There is no way I will ever understand my taxes
All my hard earned money goes to pay my taxes

What is scary about falling into this type of thinking is it can lead to overpaying your taxes. The perceived complexity of the tax code plays right into how most people are taught to think about taxes – that they are just too complicated to even try to understand.

Because of this, most people don’t bother to understand how their taxes work. This can lead to dangerous results – like not knowing if their taxes are overpaid, underpaid or legally minimized.

With the right tax advisor, the thinking changes to:

Taxes help me stay in touch with the performance of my business and investments
I know exactly what I need to do to legally reduce my taxes
My tax savings can supercharge my wealth building

Thinking about taxes differently is not the same as being a tax expert. You don’t have to be a tax expert. You’ll want a tax expert on your team. This is where the right tax advisor comes into play.

Below are a few key qualities I think every tax advisor should have. (I’ve shared this list before and I’m sharing it again now because I think this is essential information).

#1 Your Tax Advisor Should Ask You Questions (Lots of them)
If you have to ask all the questions, then you have the wrong tax advisor.

It is a necessity for your tax advisor to ask you a lot of questions. Questions enable your tax advisor to understand your situation and goals.

Here are just a few examples of questions your tax advisor should ask you:

What is your role in your business or investing activities?
What is your family’s role in your business or investing activities?
What are your personal and professional goals?
How do you track your expenses (not just your business and investing expenses, but ALL of your expenses)?

Remember, taxes are based on facts. The more your tax advisor understands your facts, the more opportunity there is to change your tax.

#2 Your Tax Advisor Should Reduce Your Taxes…Legally
I have been asked more than once if the tax strategies I use are legal. That is one of the easiest questions I ever get to answer – Yes.

The question indicates that there are tax advisors who will reduce your taxes by cheating.

Your tax advisor should know the tax law well enough to know how to be creative within the law, without having to bend any rules.

If your facts don’t fit within the law, then your advisor should be able to tell you what you can do differently so your facts do fit within the law.

#3 Your Tax Advisor Should Increase Your Tax Awareness
Your tax advisor should be excited to share new information with you about how to reduce your taxes and provide you with a clear understanding of the tax rules.

Understanding the rules doesn’t mean you have to be an expert on the tax rules. Your tax advisor should be the expert. Understanding the rules simply means you know what to look for so you can identify potential opportunities and discuss them with your tax advisor.

You are the one who is best able to identify potential opportunities because you are the one who is in the day-to-day activity of your business or investing and that is where the opportunities are.

While your tax advisor can identify some opportunities after-the-fact, the results are much better and faster if you are able to identify them as they occur. And quicker results most likely mean you can start reducing your taxes sooner.

This is why it’s important for your tax advisor to increase your tax awareness – once you know what to look for, it is much easier to identify your tax saving opportunities.

#4 Your Tax Advisor Should Prepare Your Tax Return
One more item to mention here is to never use a tax preparer who isn’t also your tax advisor. You may otherwise get great advice that is never used and lose out on great tax savings.

On the flip side of that, your tax advisor shouldn’t only prepare your tax return. Your tax advisor should be able to help you create and implement sound tax strategies, in addition to preparing your tax return.

Remember: The more passionate your tax advisor is about reducing your taxes, the lower your taxes will be.

Tips for Making Your Tax Return Preparation a Smooth Process

Posted on January 30th, by Janice in Taxes No Comments

You’ve probably already started receiving letters or emails labeled “Important Tax Return Documents”. While it may seem a little early to start thinking about your tax returns that are not due for a few more months, it’s the ideal time to start planning for a smooth tax return preparation process.

Here are some tips to get you started:

#1 Contact your tax advisor now
Map out the steps and timeline for your tax return preparation with your tax advisor. Find out when you need to have information to your tax advisor and when you should expect your tax return to be completed. Most importantly, get a list of the information you need to provide.

#2 Clean up your bookkeeping
Accurate bookkeeping can be one of the biggest obstacles in the tax return preparation process.

For starters, make sure your balance sheet accounts have been reconciled through the end of the year. For example, if you have a mortgage, makes sure the mortgage balance that shows on your balance sheet agrees to the mortgage statement received from the lender.

Review your balance sheet and profit & loss statement. While you may not be an expert at financial statements, you’re likely to catch something that is blatantly wrong.

#3 Note any changes to your entities
Did you add an entity last year? Or maybe you removed an entity, or perhaps the ownership of your entity changed. This information can have a major impact on your tax return preparation.

#4 Identify major purchases or sales of property
If you purchased a rental property, a new piece of equipment, a new business vehicle or something along those lines, have the details of those purchases available. Then do the same for any sales of property.

#5 Gather up your documentation
When it comes to permanent tax savings, the 3 most important words are: Documentation, Documentation, Documentation!

Proper documentation increases the accuracy of the information you provide to your tax advisor. This helps your tax advisor do more for you because they have good information.

Proper documentation also provides the support the government will want to see if you are audited.

Best of all, when you keep proper documentation, you do a better job of identifying all of your deductions so it’s a great way to reduce your taxes.

Documentation may include:

Receipts
Meeting minutes for your businesses / entities
Loan documents between you and your businesses / entities
Agreements between you and your businesses / entities
Mileage logs

Activity logs (particularly in the U.S. for those who claim “real estate professional” status)

#6 Make a list of your questions.
As you are gathering your tax return information, you are going to run into questions for your tax advisor. Start writing down those questions and keep a running list. Then when you meet with your tax advisor, you’ve already got your questions ready and won’t forget any.

Start today.
The small things add up. Identify one small thing you can do today to pave the way for a smooth tax return preparation process. It can be one very small thing. For example, start a folder (either a paper one or an online one) and put all the tax documents you are receiving in that folder. Then, build on that every day.

If you enjoyed this article, you might also like “Maximizing the Benefits of an LLC in Your Tax Strategy”.

Do You Need a Wealth Strategy?

Posted on January 14th, by Janice in Blog Business Uncategorized No Comments

Most people dream about being wealthy or playing the lottery in hopes of winning millions, but few people actually have a strategy to achieve their dreams of wealth.

I hear many reasons why someone doesn’t have a wealth strategy:

They don’t really know what a wealth strategy is.
They don’t know how to get started.
They think they need to wait to get started because they don’t have any money.
They think they need to get out of debt before starting their wealth strategy.
A wealth strategy is a plan of action intended to achieve specific wealth goals.

The fact is, everyone needs a wealth strategy, regardless of goals, age, wealth, income or debt.

The First Step to Creating a Wealth Strategy
The first step to creating a successful wealth strategy is knowing where you are going. I call this Your Wealth Vision.

Your wealth vision is your picture of your ultimate lifestyle. Where do you live? How do you spend your time? What are the possibilities?

Now, we can all close our eyes for a few seconds and imagine the lifestyle of our dreams. But to truly define your wealth vision means being very detailed and specific.

For example, in just a few seconds time, we may imagine our ultimate lifestyle to include traveling. In those few seconds, we may imagine the excitement that goes with traveling, and a snapshot of a place we’d like to go, but the details probably aren’t more specific than that.

This is much different than someone who takes the time to specifically define how they see traveling in their wealth vision. For example,

– How often will they travel?
– Who will they travel with?
– Where will they travel to?
– How long will each trip be?
– Will they fly coach or first class?
– Will they stay at a hotel, rent a home or buy a home?
– What activities will they do when they travel?

The more detailed and specific the wealth vision, the more likely it is to be reached.

Avoid This Mistake When Creating Your Wealth Strategy
Many people skip this first step.

I think it’s because many people think that their wealth vision is simply to have lots and lots of money, so defining it is a waste of time. Plus, they are eager to move on to the next step. But, this first step is critical because you can’t get to where you’re going if you don’t know where it is you are headed.

Once your wealth vision is defined, key pieces of your wealth strategy can come together.

For example, when you know your wealth vision, you can determine your target cash flow and your target net worth. These targets can be used to develop investment criteria so your investments work toward your wealth vision and not against it.

Your Wealth Vision
Really think about your wealth vision and the specific details. Then, put it in writing. This is the first step I always take with any wealth strategy I create.

If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or email us for an appointment to get started today.

Maximizing the Benefits of an LLC in Your Tax Strategy

Posted on January 2nd, by Janice in Uncategorized No Comments

The Limited Liability Company (LLC) is a terrific tax entity because of its flexibility, specifically being able to choose how it is taxed. An LLC can be taxed in many different ways. An LLC is not a tax entity, it is a legal entity. As such, an LLC can choose how it wants to be taxed.

An LLC can be taxed as:

– A sole proprietorship
– A partnership
– A C corporation
– An S corporation

Do you know how your LLC is taxed?

If your LLC did not make an election, then it is taxed as the “default classification.”

The default classifications are:

– If your LLC has one member (owner), then it is disregarded for tax purposes. This means that all the LLC activity is reported by the owner and the LLC files no separate federal tax return.

Important note: Some states require disregarded LLCs to file a state tax return.

– If your LLC has more than one member, then it is taxed as a partnership and files a partnership tax return.

Special rule:
If you and your spouse are the only owners and are in a community property state, then you can choose which of the two classifications you want to use.

If your LLC made an election, then your LLC is taxed as a C Corporation or an S Corporation. Do you need to make an election for your LLC to be taxed as a C Corporation or an S Corporation?

This election is typically recommended for operating businesses that are profitable.This election is typically not recommended for LLCs that hold investments, such as stock or real estate. LLCs that hold investments are typically best left in their default classification.

Understanding the fundamentals of entities, particularly LLCs, is a key part of building a wildly successful tax strategy.
If you want to learn more about how to take advantage of these tax strategies; sign up on our web site or email us for an appointment to get started today.