Planning

July 9 2021

Does your Business have a Succession Plan?

How many family businesses can you name that have been around for many generations? Have you ever wondered what they have in common? Most businesses that continue to prosper as they pass from generation to generation have a common denominator – a business succession plan.

Regardless of what you may have heard, recent estate tax law changes haven’t made business succession planning obsolete.

A succession plan allows your business to continue if you leave the business for any reason: your retirement, disability, death, or just your decision to move on.

Here are some basic steps you should take to help ensure the survival of your business.

Determine who will succeed you. Will it be family members, your business partners, your employees, or an outside buyer? Each choice requires a different plan. For example, if you are not the sole business owner, a buy-sell agreement may allow a smooth transition when a co-owner leaves.
Prepare a timeline. Barring death or disability, when and how do you plan to exit the business? Well in advance of your planned departure, equip your successors with the skills and experience necessary to take over.
Maintain complete and accurate financial records. Your company’s financial history is essential to preparing a fair business valuation. An accurate valuation is important for several reasons. First, you deserve a fair price for your business. Second, a buyer and his creditors will want evidence that the purchase price is fair. Finally, your company’s valuation may have to withstand IRS scrutiny.
Create a financing plan. Your plan might include life and disability insurance, an employee stock ownership plan, or a stock redemption plan. Whatever your plan, it should take your future financial needs into account and provide a method for your successors to meet those needs.
Surround yourself with a team of advisors. Your accountant, your attorney, your banker, and your insurance agent can each have an important role to play in completing your plan.

Business succession is a process, not an event. Failure to plan for an orderly transition can result in financial losses or even the loss of your business. A well-designed plan, on the other hand, can protect your family, your employees, your co-owners, and your customers.

July 6 2021

Creating financial goals as a couple

Planning

Financial goals make it possible for you and your partner to achieve the things you dream about. Here are three things you can do to create – and achieve – financial goals as a couple:

Start talking sooner rather than later. Finances can be hard to talk about. People sometimes feel guilty about debt or ashamed that they don’t make more money than they do. More than that, many people consider money to be a private thing that shouldn’t be discussed with others.

However, the first step to setting financial goals as a couple is to start talking. And the sooner you start talking with your partner, the better prepared you’ll be to make positive financial decisions. Saving for big purchase, for example, takes time and planning. Having a discussion early gives you more time to start saving.
Don’t just agree on goals – agree on how to achieve them. Once you’re talking about your finances, you’ll want to discuss your goals. Would you like to pay off your credit card debt? Save for a big family vacation? Have more of a financial safety net?

After you’ve agreed on what you’d like to achieve, start talking about how you’ll work together to achieve it. The best financial plans require both partners to contribute to the financial goal – whether that means each agreeing to contribute monthly to a savings account or just give up your gourmet latte habits.
Keep the conversation going. Plans need maintenance to succeed. That means continuing to talk about them, checking progress on a regular basis. It’s important for both partners to know all the numbers, even if one partner manages the finances.

Scheduling a regular financial conversation is one way to keep you and your partner on track to achieving your goals. This “financial date night” is a good way to ensure that things are going as planned. It’s an opportunity to check in and adjust the numbers accordingly.

With open communication and commitment from both partners, you’ll be well on your way to reaching your financial goals.

June 25 2021

Disaster-proof your business

Business Tips, Planning

Every business is vulnerable to natural disasters such as fires, floods, tornadoes, hurricanes, and earthquakes. However, advance preparation can minimize your exposure in several ways. For example:

Physical assets. Buildings, equipment, furniture, inventories, and supplies should all be protected by adequate property and casualty insurance. Be sure to review each policy for “named perils,” which are the disasters covered (such as floods or earthquakes). If your location is prone to one of the “perils” not listed, consider expanding your coverage or buying an additional policy to include it.
Income. Business interruption insurance will reimburse you for lost profits, which will be computed from your financial records. Your policy should allow a realistic time period for recovery, even if it costs a little more.
Records. Missing records can cause a host of problems, including making it hard to quantify your disaster losses. Duplicates of financial statements, customer lists, asset inventories, and other important data should be maintained in a secure off-site location and updated regularly. Important on-site documents should be stored in a fire-proof safe or vault.
Computers. Critical computer data should be duplicated regularly on portable hard drives or other storage media. Updated copies should be stored off-site.
Recovery. Consider buying “extra expense” insurance to cover relocation costs for a quick post-disaster recovery. Also, you should identify alternative sources of operating assets (such as furniture and equipment lessors), and investigate other possible business locations. Look into government disaster relief programs available to businesses in general and your industry in particular.

June 22 2021

Cost-cutting ideas for your upcoming vacation

Planning

Summer is often a time for vacations reunions. But it can sometimes be hard to justify spending the money to take one. Fortunately, with a little planning and ingenuity you can trim the cost of that summer getaway without cutting back on fun and relaxation. Here are a few ideas:

Consider package deals. By bundling airfare, hotel and car rental together, travel companies sometimes offer cheaper rates. Just be sure to read the fine print.
Eat in your room. Just because you’re on vacation doesn’t mean every meal needs to be expensive. For some dinners, try buying some staple items at the local grocery store. Sleep late and reduce your food intake to a brunch and a dinner. You’ll eat less and possibly spend less on food, too.
Travel in the off-season. Christmas in Mexico is great, but it’s also more expensive. By choosing the days just before or just after the busy season, you’ll often find cheaper rates without much difference in climate. You’ll also avoid some of the hassles that result from too many tourists in too little space.
Do some research before you go. You can often find info on local customs, authentic eateries, free events and the best times to visit museums online or in inexpensive guidebooks. Some also offer coupons.
Vacation nearby. Tourists visit your home state and marvel at its attractions. For a week, become one of them. You’ll save on the cost of accommodations but still have the chance to explore the area around you through day trips.
Plan ahead. Instead of financing your getaway with a credit card (then struggling to pay off the balance and accumulated interest later), plan ahead. Every month or every paycheck, set aside money. Make it a family activity. If everyone wants to visit Disneyland, research the best airfares and hotel rates and let your kids do the math. The earlier you start, the more you’ll be able to accumulate for that dream trip.

January 1 2021

Are You Taking Advantage of the Time Value of Money?

Planning

If you were offered the choice of being paid $100 today or $100 a year from now, you would probably choose $100 today. After all, even at today’s low interest rates, your $100 might earn a small return over the next year. This simple example illustrates an important concept: that the value of money changes with time. A dollar received today is worth more than a dollar received a year from now – and is worth even more than a dollar received five years from now.

There are at least three reasons why today’s dollar is more valuable.

First, it can be invested to earn interest or dividends, as in the example above.

Second, future dollars may have their value eroded by inflation.

Third, the further into the future a payment is due, the greater the risk or uncertainty associated with receiving it.

The concept of the time value of money is important in many personal and business financial decisions. For example, you may have to choose between receiving a lump sum from a pension plan or a stream of payments in the future. In your business, you may be deciding whether to buy a new piece of equipment which will bring increased revenues in future years. Both of these decisions involve comparing the value of present and future dollars.

Finance professionals have developed a technique called present value for making such comparisons. The technique involves “discounting” the value of future dollars to reduce them to their equivalent value in current dollars. If you are faced with a decision that involves the time value of money, contact our office for assistance.

December 29 2020

Take an IRA Deduction Now. Pay Later.

Planning

Here is a tax planning tip for those who file their tax returns early and wish to contribute to a tax deductible IRA, but do not have the funds to do so.

Say you want to pay into an IRA to get a tax break but you don’t have the money? Take heart, there are ways to get around this. The IRS allows you to take the deduction now and pay later when you get your refund.

How it works

Step 1: Prepare your tax return early in the year (early February). Run the tax return considering an income reducing contribution to a tax deferred IRA. If you do not have the funds to put into the IRA, but your tax return has a refund that can fund your contribution, you are ready for step 2.

Step 2: File your tax return with the IRA contribution noted. File the tax return as early as possible to ensure your refund gets back to you prior to April 15th. E-file the return if at all possible.

Step 3: Fund your IRA prior to April 15th. Tell your IRA investment firm you wish your IRA contribution to be for the prior year.

That’s it. You have now effectively had the income reduction benefit of your IRA contribution help fund the account through your tax refund.

The risks

Timing is everything. If you use this technique it is critical that the IRA is funded on or before April 15th. If it is not, your tax return will need to be amended.
Refund not received in time. If you do not receive your refund in time, you may not have the funds to make a timely IRA deposit. In this case, you may need to borrow funds on a short-term basis until the refund is received.
No extensions. The IRA contribution for the prior year must be made by April 15th of the following year (the original filing due date). This is true even if you file your return under an approved extension period.

While not for everyone, this tax tip could help you fund more of your retirement on a tax deferred basis.

September 11 2020

Is a Roth IRA Right for You?

Planning

Is an IRA an option worth considering for you? If so, which is better?

Traditional IRA

A Traditional IRA is an individual savings account that allows you to contribute money for your retirement. Depending on your income level, you may deduct the contributions from your taxable income. Any earnings made in a Traditional IRA account remain tax-deferred until the money is withdrawn from the account. Tax is only paid on the money once it is withdrawn. After the account holder reaches age 70 1/2 you may no longer make contributions into your Traditional IRA and minimum required distributions must be taken from the account each year. Anyone with earned income can create a Traditional IRA, but if you also have a retirement account with an employer, there are income limits to the amount you can contribute to your IRA in pre-tax dollars.

Roth IRA

A Roth IRA is an individual retirement account that allows you to contribute income that has already been taxed (“after-tax” dollars). Withdrawals of earnings on contributions from Roth IRA accounts are federal income tax-free so long as a 5-year holding period has been met and the account holder is at least 59 1/2 years old, disabled, or deceased. Withdrawals of contributions are always tax-free since you already paid the tax on the contributions. There are no required minimum distributions nor are there age limits for contributions.

Traditional IRA contributions that qualify for pre-tax treatment will allow a larger beginning investment to compound over time versus a Roth IRA.
Roth IRA contributions, though smaller because of tax treatment, could create earnings that are never taxed.
Roth IRA accounts have more flexible contribution and withdrawal rules.

So the answer is. . .it all depends. If you think tax rates will be significantly higher when you withdraw your retirement savings, then think seriously about a Roth IRA.

If you think your retirement account investments will perform well, then perhaps the earnings growth in a Traditional IRA will more than pay for the additional tax at time of withdrawal.

June 2 2020

Keep track of your digital assets during estate planning

Estate, Planning

An important step in estate planning is creating an inventory of your assets. Your executor, or the person you designate in your will to carry out your last wishes, uses the inventory to make sure all of your property passes to your heirs.

It’s likely that some of your assets exist in digital form. Documenting your digital assets along with your physical belongings can help ensure your final wishes are honored and your estate is administered correctly.

Here are a few items to keep in mind as you compile a list of your digital assets:

Create a list of passwords. In order to review financial accounts with banks, brokerages or other businesses, your executor will need your current passwords. If you protect passwords with additional encrypted apps, include the master access info. Most importantly, keep your list updated when you change passwords.
Be comprehensive. Add URLs, usernames and passwords for nonfinancial accounts (such as your email and online storage sites) to your inventory. Why? These accounts can be essential for retrieving invoices, statements and other paperwork for which you’ve chosen electronic-only delivery.
Don’t forget device access. The physical assets you use to access your digital data include your phone, tablet and computer. That means your executor will need passwords and file names to access those devices. Also, list the location and encryption information for offsite or standalone storage devices, like external drives.

When it comes to planning, keeping track of your online assets can be vital. Call if you have questions how your assets may be affected by state and federal estate tax laws.

January 17 2020

Make your business meetings worth the time

Business Tips, Planning, Uncategorized

Are your organizational meetings dull, uninspiring, and inefficient? Do they drain morale, waste time, and focus on the past? Would you like them to be vibrant, engaging, productive, and future-focused? If so, here are some suggestions to supercharge your business meetings.

Assess your current situation. Be honest. Determine what is and isn’t working and commit to improvement.
Raise your expectations. Demand more from your sessions. Agendas should be circulated in advance. Attendees should be on time, prepared, and ready to actively participate.
Set ground rules. No Web surfing or crossword puzzles. Keep your sessions disciplined and business-like. But don’t forget the benefits of humor to lighten things up and reduce stress.
Have an agenda, but be prepared to leave it. If a stimulating and productive discussion develops, exploit it. Harvest those creative ideas. You can always revisit less important matters.
Challenge your meeting time and formats. If your meetings get in a rut, try something different. Don’t underestimate the power of mixing things up.
Know when to quit. If you hit a big breakthrough, consider stopping. End on a high note.
Avoid the trivial. Handle routine updates via memos or e-mail.
Stretch and challenge the team. Your meetings are valuable personal and organizational development opportunities. Treat them that way.
Recognize excellence. Praise and reward performance.
Focus on the positives and keep future-focused. Maintain a positive tone. Discuss your yesterdays only to improve your tomorrows.
Recap and take action. Resolve issues, determine a course of action, and assign action steps. It’s important to make recognizable progress.
End on a unifying note. Reinforce the common bond and move forward together.

You can make your business meetings more productive. Commitment and discipline will make it happen.

August 23 2019

Debt reduction may be your best investment

Money Management, Planning debt, financial planning, investments

Investors are increasingly uneasy about the ups and downs of the stock market. If you’re worried about your investments and want to reduce your debts, you’re in luck. Debt reduction gives you a guaranteed rate of return. By paying off a typical credit card, you’ll save about 18 percent interest on the amount you retire. Where else can you earn a guaranteed return of 18%?

Debt reduction also buys security. A low-debt family earning $80,000 a year can be financially stronger than many high-debt families earning twice as much. If you lose your job, your level of debt can make the difference between temporary discomfort and financial ruin.

To reduce debt, you should first avoid buying anything you can’t pay for in 30 days. Then start working on your existing debts. Each month, pay as much as you can on the debt with the highest nondeductible interest rate, covering only minimum payments on the others. When you’ve retired the first debt, start on the one with the next highest rate. Continue the process until you’ve paid off everything but your home mortgage.

Naturally, this is a simplified approach, and individual circumstances vary. A professional can help you set realistic goals and work with you at achieving them.

Gilliland & Associates, P.C. is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in McLean and Tysons Corner, VA. Gilliland & Associates is known for our superior knowledge and aggressive interpretation and application of tax laws. We help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.