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Wednesday, November 30, 2011 Family Lawyer in Houston Says, "Make These Tax Moves Now Before 2012"
As promised, I have compiled some information on expiring tax breaks for 2011, as well as some suggested moves to make before December sees its ball-dropping end.
Filed under: Increased-Deduction Strategy
With one caveat: increasing deductions could cost you if you end up owing under the Alternative Minimum Tax (AMT).
1. Pre-Pay and Accelerate
Mortgage bills, college tuition, property taxes -- all of these can add deductions to your bottom line, so cherry-pick some 2012 bills if cashflow allows, and you will get to mark them against this year's taxes (only January's mortgage payment counts for this, I should hasten to say).
And you can "accelerate" certain expenses like optional medical procedures (dentistry is always a ripe source for procedures to implement, unfortunately ?), again, doing so if cashflow allows.
2. Donate
It is not just because 'tis the season, but often (if we are all honest) because the year-end is so close. So, obviously, when it comes to taxes, giving to a nonprofit can be like a money-saving gift to yourself. If you itemize your deductions, you can claim your charitable donations, both of cash or goods.
In fact, if you are *close* to being able to itemize deductions, making some nice gifts this month can push you over the top into some major tax-savings. And, of course, there is the added benefit of what happens to YOUR mindset when you give. If you need any help on recommendations to worthwhile non profits, please let us know!
Filed under: Buying stuff you already need -- and saving on taxes
3. Energy-Savings and Big Cars
The accountants have been pounding this drum for a while, for the simple fact that (because of the last "stimulus" package) replacing windows, doors, and HVAC systems-- as well as installing new insulation--could net you a $500 tax credit on your 2011 tax bill! Credits always beat deductions. A solar energy system gets a 30% credit with no upper limit.
How about that fancy new vehicle you have been eyeing? Or that energy-sucking flatscreen? Buy it before the end of the year, and you are eligible for a deduction on the state and local sales taxes.
But you can't deduct both state income taxes and general sales taxes, so the deduction is usually most beneficial to our clients who actually live in the no-income-tax states. By the way, this sales tax deduction is scheduled to expire on Dec. 31.
Filed under: Common sense
4. Please stop loaning extra funds to Uncle Sam
Do you intentionally get a big refund each filing season? Quit that! You are providing Uncle Sam an interest-free loan of your money.
Submit a new W-4 now so that your payroll withholding is more closely in line with your future IRS bill. It could even give you a few extra dollars at the end of the year to spend on holiday gifts!
Oh, and just so you know, it is growing very likely that whatever Congress decides on tax law changes, payroll calculators may not have time to update by January 1st. This means that even if you request the changes, your withholding may not reflect things until 2012 ... but making the change will still impact your taxes -- it just might not be obvious until next year.
5. Make your family happy (our specialty)
The clock is ticking on the very generous estate and gift tax exclusions that allow you to give up to $13,000 this year to any number of recipients -- and a total of $5 million over your lifetime -- without owing any federal gift tax. The $5 million lifetime exclusion expires at the end of 2012, and Congress may decide to reset it at a lower level.
While you are at it, you can always do it again on January 1st!
I hope these are easy, and that they give you some good ideas. Remember-- I am in your corner, and not just about generational wealth issues.
Thursday, September 01, 2011 Business Attorney In Houston Answers, "Is It Really Cheaper To Rent?"By Kim Hegwood, Business Attorney In Houston
Long-time renters often cite all the
negatives of home ownership, and there are some to be sure. But many
of these oft-cited reasons have a valid counterargument OR these old
paradigms are no longer accurate:
Current Conception #1: It Is More Expensive to Own Than to Rent
-- This is probably the biggest myth out there that many proponents of
renting continue to propagate. Primarily, at this point in time, with
home prices having crashed and interest rates at record lows, the
rent-to-buy ratio is favoring "buy" in many parts of the country, more
so than at any point in recent history.
Now this is not just a rah-rah "buy a home" Note, and I would concede
that it is entirely plausible that home prices continue to decline for
several more years. But if you are not buying to sell, but rather buying
to live, it can be MUCH more economically efficient to own over rent,
especially at this time.
Here is the data (rent vs buy favors buy in 75% of US cities), aside from the other intangibles listed below: http://money.cnn.com/2011/08/16/real_estate/buy_rent/index.htm
Let me repeat: It is becoming cheaper to own and it is becoming more expensive to rent.
In my analysis, this trend will continue for years.
Why? First off, the Fed's policy has been to reward debt holders and
punish savers with the unprecedented a) zero interest rate policy and b)
projecting out through 2013 that rates will stay low. This in turn, is
pushing up gold prices and equities prices, and investors are pricing in
future inflation. This bodes well for landlords, and poorly for renters.
See, this interest rate/inflation phenomena mixed with the new ratio of
renters over owners is flooding the market with renters and starving
the market for buyers. This makes homes more affordable, while landlords
are embarking on higher annual rent increases.
Current Conception #2: Homeowners Have to Pay to Maintain a Home Instead of the Landlord. Put
aside the premium you might pay if you got in a bidding war over a home
or made some upgrades to your home that weren't necessary. Simply
baseline the same property and look at renting versus owning it.
Everything you pay for as a homeowner, the landlord has to pay for as
well. Who do you think pays for that? Do you think the landlord pays for
snow removal, replacing carpets, fixing leaks and a new roof every 15
years out of the goodness of their heart? No -- you pay for it! It is
all priced in over long-term rent trends. Landlords are in this business
to make money and if they were not making money they would not be
landlords. You are paying to put their kids through college and for
their Caribbean vacations.
Basic economics dictate that over a long period of time, you are losing
money by renting, not just because you are not building any equity,
getting a mortgage tax deduction, etc., but because you are paying for
the upkeep, depreciation expense and maintenance of the home in your
rent -- PLUS a tidy profit to the landlord.
Many renters are convinced they are "beating the system" because they do
not have to pay for these things, but they are -- it is just not
itemized out in tidy fashion for them. It is all in the rent. This is
logic -- and reality.
Current Conception #3: Renting Provides for Much More Flexibility to Move.
This is a major (and legitimate) reason NOT to own. After all, closing
costs, transfer taxes, realtor fees and such are nothing to sneeze at.
However, what a lot of renters end up doing is deciding to rent instead
of own, but then they never move! They end up renting for years on end
when they could have owned.
And that flexibility? Well, the landlord also has the flexibility to
keep increasing prices year over year at whatever rate they so choose --
which then requires a calculus on your end as to how much of an
increase makes it worth moving out, in order to just rent somewhere
else. Additionally, you are often locked into an annual lease (which
isn't very flexible), they can sell the home or put new tenants in each
lease cycle (which is not very flexible), and you can't do many things
to the place you live in without their permission or perhaps not at all
(not very flexible). So, you are trading the slight mobility
flexibility for a lack of flexibility in virtually everything else that
the landlord controls.
To reiterate, if you are a current renter, you may feel this Note is
critical of your situation. It is not. It is an economic reality that
many Americans never have had, or never will have the economic means to
be a homeowner. This is a mathematical certainty. The point here is to
get my clients and friends thinking who DO have the means to save for a
down payment, and who may be better off financially as owners than
renters ... but who continue to muddle along in complacency because
they've convinced themselves that homeowners get hosed and renters have
all the perks.
If you are especially interested in math, here's a helpful exercise for you to consider.
http://www.khanacademy.org/video/renting-vs--buying-a-home?playlist=Finance
Lastly, I am here to HELP you, only and always. When we make plans and advice on financial decisions in your life, it requires taking a holistic view of ALL of the costs.
And that's what we always do.Wednesday, August 24, 2011 Houston Business Attorney Offers More Tips to Avoid a Downgrade For Your FamilyBy Kim Hegwood, Houston Business Attorney
Last week, we were all reeling a little from the S&P downgrade and
all of the other chaos flying around the "body politic" (and economic,
to boot).
After the cool light of a week's news has passed, businesses and
families seem to be adjusting to a new normal. Consumer confidence is at
its lowest in decades and the political future seems murky -- will
these serious budgetary problems be addressed with any kind of
certainty?
It remains to be seen.
But, I will blush a little to say that my advice from last week seems to have proven wise. I will rehash it here with a few expanded comments:
Hegwood's Key Reminder #1: The only thing certain about the stock market is that it's volatile.
I believe you saw the truth in this statement? Even today, as I write,
we are north of 100 points higher ... and that is after a wild
roller-coaster ride of down, and up, and down, and now up and up. Hold fast --
sure, the short-termers may have profited from any of these gyrations,
but what is most important, for your family's financial future, is that
you keep the loooong view. Which, of course, leads me to my second
reminder...
Hegwood's Key Reminder #2: What you choose to "ingest" over these next few days will greatly impact your state-of-mind. If you chose to ignore this advice, it is likely your blood pressure felt the consequences. Truly -- the "mass" media do better
(financially) when there is chaos, so there is a very real, monetary at
least, incentive for them to highlight turmoil. If you are wise, you
steer clear. I am not suggesting that you stick your head in the sand,
just ... use a strong filter.
Hegwood's Key Reminder #3: The only thing you can truly control is yourself.
With every passing week, I see the growing truth of this statement. The
economy, your job situation, your retirement -- it's all out of your
hands, in a very real sense.
Which is why I am giving you one more chance on what I suggested last week:
Call my office this week: 281-218-0880 (or reply to this email) and request one of our limited Estate Planning Saver Sessions.
During this session, we will analyze your current situation and
identify the most tax-advantaged, wisest and effective plan for your
estate, no matter what happens with the economy, or with other outside
factors.
After all, you CAN control your estate strategy... and we can help.
In fact, here is one more incentive for you...
+++++++++++++++++
Downgrade Avoidance Special Gift Certificate
$250 Towards Any Estate-Planning Service
"Yes, I Want to Protect Myself and my Family from All the New Tax Laws
and Ensure That My Family is As Prepared and Protected As Possible With a
Rock-Solid Estate Plan."
Deadline: August 23rd OR we reach our limit
Limit: First 4 respondents only (just a few spots left)
Email or call us (281-218-0880) now!Tuesday, August 16, 2011 Houston estate planning attorney helps you avoid a downgrade for your familyWhat a messy few weeks. Heartbreaking news from Afghanistan, the S&P
downgrade -- and now all of the resultant (and gruesomely predictable)
political posturing. Oh, and as I write this, it is no surprise that the
stock market is "reacting" a bit.
Hegwood's Key Reminder #1: The only thing certain about the stock market is that it is volatile. So those of you with many assets resting there, do not make moves out of panic. Sit down with your advisor to discuss a tax-advantaged strategy ... not a knee-jerk fear response.
Hegwood's Key Reminder #2: What you choose to "ingest" over
these next few days will greatly impact your state-of-mind. Garbage in,
garbage out, as they say. And, of course, the opposite is true--when you
surround yourself with excellence and clear-eyed determination, you
find that your heart and mind carry much greater strength. Temper your
media intake this week, as they are (quite literally) merchants of fear.
Hegwood's Key Reminder #3: The only thing you can truly control is yourself.
You can't control the market, you can't control the US debt rating
(unless, of course, Messrs. Geithner and Bernanke are reading this --
perhaps you guys can!), and there is a real sense in which you can't
even, really, control your salary and income.
So, with those key reminders in mind, here is what I suggest:
Call my office this week: 281-218-0880 and request one of our limited Estate Planning Saver Sessions.
During this session, we will analyze your current situation and
identify the most tax-advantaged, wisest and effective plan for your
estate, no matter what happens with the economy, or with other outside
factors.
After all, you CAN control your estate strategy... and we can help.
In fact, here is one more incentive for you...
+++++++++++++++++
Downgrade Avoidance Special Gift Certificate
$250 Towards Any Estate-Planning Service
"Yes, I Want to Protect Myself and my Family from All the New Tax
Laws and Ensure That My Family is As Prepared and Protected As Possible
With a Rock-Solid Estate Plan."
Deadline: August 23rd OR we reach our limit
Limit: First 8 respondents only (we're limited by capacity)
Email or call us (281-218-0880) now!
Tuesday, August 09, 2011 Houston Business Attorney Helps You to Deal With Media-Driven Money Hysteria
By: Kim Hegwood, Houston Business Attorney
With all of the news about spiraling federal debt, it is natural that Americans are taking a hard look at their own situation, and it sometimes leads to worry--even for those who are relatively secure.
Interestingly, my clients who have MORE cash in the bank often worry more! Funny, right? But it is normal human nature....
You see, under all guidelines and measures, my finances are very solid. I have got a thriving Houston estate and business planning firm which is more secure than most people's jobs. I work with numbers and am very good at taming balance sheets.
Yet, I still sometimes worry about money.
After a lengthy time of thinking, discussion and some more thoughts into the matter, below are a few techniques I have settled on which can help us ALL reduce our worries over money.
1. Realize that It Is Exaggerated - Worry is a funny feeling - it seems to exaggerate any problem. While there are certainly many people who actually run out of money, those are usually not the people that tend to worry.
2. Spend the Same Time Making Money Instead - If you are going to spend time worrying about money, why not use that time and get a side job instead? Maybe start a website (or two, or three). I know it is easier said than done, but the more you work at it, the easier it gets.
3. Confidence - Part of the reason why we worry about money is because of the lack of confidence in our own abilities to earn an income. How can we boost our confidence you ask? Confidence comes from success, and success starts from taking action. So try a few low-risk entrepreneurial ventures. If they bomb, see it as a laboratory: learn from it and try again.
But never (never) allow it to touch your identity as a person.
4. The workplace plays a big role in worry. Are your colleagues encouraging? Is your boss supportive? If not, then do something about it. Don't get into the thinking of "I can't find another job". Yes you can -- especially if you HAVE a job right now. If you got this job, you can get another one!
5. Worrying is Actually Good - A little, measured worrying is actually healthy for us. It is what drives us to be better. It is what turns our energy switch to the "On" position. The right way to deal with it is to channel it into your work ethic, and your desire to be better.
How Do You Deal with It?
Of course, what I listed above is just the tip of the iceberg. How do you deal with worrying about the lack of money? Or do you? What has worked for you? I would be interested to hear. Wednesday, October 27, 2010 Harris Count Estate Planning Attorney Discusses 5 Facebook Posts You May End Up Regretting
By Kim Hegwood, Harris County Estate Planning Attorney
Did you see the news recently when it was revealed that personal data of millions of Facebook users had been posted to a database open to everyone? Naturally, Facebook users, were concerned about their privacy. And then, of course, there was the news that certain Facebook applications were also leaving users extremely vulnerable.
Yet, people using Facebook, Twitter and other networks (even those with serious privacy controls) are thoughtlessly giving actionable intelligence to thieves. Adam Levin, the chairman of Identity Theft 911, says, "An awful lot of people think when they get online and communicate with their friends that they are invincible." A seemingly benign post or piece of information could make you a target of identity thieves and traditional crooks.
So, to protect yourself, here are five things I advise as a Harris County Estate Planning Attorney that you should avoid posting online.
1. Date of birth. Really? Must you get random birthday greetings from elementary school friends? Almost 60% of social networkers post their date of birth, according to a survey by Identity Theft 911. But resist the urge to post your complete birth date -- including the year -- on your Facebook profile just to get a lot of messages on your big day. This is extremely valuable information for identity thieves. I know -- you are thinking only your friends see what you post. But if someone does a search for your name, that person will see often your birth date if it is listed in your profile.
2. Child's date of birth. When you post "Happy Birthday to my sweet Maddie, who turns 5 today," you are giving identity thieves valuable information about your child. When it comes to your kids, resist the urge to post any information about them. In fact, there are even more malevolent actors out there who can use this information for more than just identity theft.
3. Travel plans. I bet you have seen Facebook posts like this: "We are going to the beach next week. Can't wait!" In fact, you may be guilty of it yourself -- 18% of social network users post travel times. Guess what? You have just extended an invitation for people to burglarize your home. In fact, recently three men in New Hampshire burglarized more than 18 homes by checking Facebook status updates to see when people wouldn't be home. Yikes!
4. Address. If your address is on your profile AND you let people know when you're going out of town, well, you know where I am going with this. Nonetheless, 21% of social network users post their address.
5. Mother's maiden name. It may seem like common sense not to post your mother's maiden name on a social networking site, but about 11% said they did. Identity thieves will hit the jackpot if you reveal this bit of information online.
Not only should you avoid posting any of this information, but also you should fix your Facebook settings to control who sees what on your page. Further, use different passwords for social media sites than you use for financial sites, such as your bank or credit card site.
I hope I didn't scare you too much, but that, instead, this actually helps. Tuesday, August 31, 2010 Harris County Probate Attorney Discusses Protecting The Hearts (and Wallets) of Your Kids
By Kim Hegwood, Harris County Probate Attorney
As a Harris County probate attorney, I know that when a close friend or family member loses their home, or their job (or both), it can be frightening on several levels. You begin to wonder if the same could happen to you. And, as you are probably aware, this fear of economic uncertainty causes anxiety in many children, too.
While it is impossible to shield kids from all that goes on around them, I happen to believe money worries are one of those things we should not share with kids. There are a number of ways to do that -- some very specific, and some more subtle.
Don't Argue About Money in Front of Kids
This one seems the most obvious. When it comes to transferring anxiety over money to your children, there is no faster way than to fight over it with your partner. Asking couples not to argue over money at all is a little unrealistic, so when differences arise, at least try to do it in private and out of earshot of your kids.
Spenders and savers are bound to clash, but when they fight in front of kids they give kids something to worry about beyond Mom and Dad fighting. Will we run out of money? Is Dad losing his job? Will we have to move? Will we have money for food? Even if parents are unsure about the answers themselves, they owe it to their kids to exude confidence when it comes to money. If things really do get bad, emphasize that no matter what, you will all be together and that home is where you make it -- wherever that may be.
Avoid These Phrases: "We Can't Afford That" or "We're Poor"
When kids ask to buy things, and money is tight, try to rationalize with them instead of simply saying, "we can't afford it." Tell kids that instead of spending money on toys this week, you need to focus on buying some basic things like food and gasoline for the car. Ask them to come along to the grocery store to help pick out a few favorites. If you simply say you can't afford something, kids will begin to wonder what else you can't afford, and that is a psychological slippery slope for young minds.
In fact, I, as a Harris County Probate attorney, would go so far as to say this: Don't allow anyone in your house to use the word "poor" when describing your economic situation -- even when times are pretty lean in the household. Families might be broke-- but that does not mean they are poor! It's more than semantics. The word "poor" seems to connote inferiority, or having some unfortunate circumstance. We do not have to accept that paradigm. Sometimes, families simply spend more money than they earned and have to live on far less to turn things around. They may have been foolish, but they do not have to be poor!
Now, let's shift away from things not to do around kids, and focus on some positive things to teach kids to help them with their own financial futures.
Teaching Kids About Money
When I was growing up, money was taboo. Parents would no more talk about money with their children than their love life. While this is still true to an extent, I think most of us have recognized that kids need to be more aware about the potential financial pitfalls out there than we were.
Start giving kids an allowance to budget their savings, spending and giving. Help them open a savings account and begin to teach the mechanics of a bank account -- completing deposit slips, balancing a checkbook and explaining how compound interest works. As kids get older, introduce them to increasingly more complicated topics like investing, borrowing money, insurance, etc. By the time they are teenagers they should have a good grasp on Personal Finance 101 topics to better prepare them for life.
Encourage Saving Over Spending
As adults, we know it is prudent to put back a sizable emergency fund of several months (I actually recommend a full year) of basic, household expenses. Because kids are not responsible for everyday expenses, it can be hard to get this message across to them. Instead of focusing on saving money for emergencies, teach kids to save money for opportunities.
Foster Entrepreneurialism in Your Kids
My parents and grandparents were probably a lot like yours -- they worked 40-50 hours a week, punched a clock and recharged over the weekends. After doing this for several decades they were given a cheap retirement gift, maybe a small pension, and a retirement send-off.
Well, times have changed.
The recession has underscored the importance of developing an entrepreneurial streak at a young age. Chances are very slim that your child will graduate college, pick one job and stay there for 40 years. More likely, there will be many jobs with many employers, and many periods of being "between jobs" in their lifetime. Wouldn't it be great if they developed a "side hustle" to get them through those periods of unemployment, or to supplement their full-time income all along?
Perhaps you enjoy building things and have turned your one-time hobby into a side hustle building decks and fences on the weekends. Get your kids involved in the process as they grow older, and perhaps you can pass along a valuable trade. Even if they become accountants or fire fighters, having the knowledge and experience of a trade to fall back on could be incredibly valuable to them over a lifetime.
The point is not to stifle your kids' ideas by forcing them into some ideal career path you have selected for them. Allow them to cultivate their own ideas. Over the next few decades, personal branding, and the branding of individual ideas will likely be hotter than any particular industry. Think about it -- iPhone apps may be the next lemonade stand!
In a way, social media, and new media, have greatly expanded the opportunities for kids to create new products, explore new ideas and push new content into the mainstream. There has never been a better time to have an entrepreneurial mindset, and fostering that in your children at an early age is invaluable.
As a Harris County probate attorney, I am personally dedicated to the success of your family-- and your state of mind! Can other lawyers say that?
PS--If you would like to discuss this or other aspects of your plan, we have space for three families to meet with us to review their plans. Call our office right away (281-218-0880) or send me an email to set up one of these special sessions. You will NOT be sorry!
Thursday, August 12, 2010 Houston Elder Lawyer Reveals Your Most Critical Skill In This Economy
By Kimberly Hegwood, Houston Elder Lawyer
How can you maintain your sense of personal peace in this environment...while NOT simply "ignoring" everything? I've got four suggestions for you.
1) Firstly, DO be very selective about (even, yes, choosing to ignore) certain media elements that have an agenda of spreading fear. 24-7 news would make no money if it stopped preying on people's fear. (You realize the news networks are not a public service, right? They are in the business of getting ratings to sell advertising. Period.)
Have you ever noticed your feelings after watching just 20 minutes of CNN Headline News? Everything is going to pot. You'll find negative stories on the environment, war, disease, crime, and of course... the economy. It is laughable what they will come up with just to broadcast some bad news. A few weeks ago I spotted this "headline" story on the tube along with some sad-faced puppies: "PETS: Feeling the Foreclosure Boom!"
Everyone is selling crisis! This is true, from the media to the politicians. So stop watching CNN all day, refuse to participate in this circus, and instead start planning your first (or next) million. Seriously.
2) Look for the good news. Now, I am very careful here, because I am aware that some of my Houston estate planning clients and friends really are feeling the pinch, but let's ALSO look at the bigger picture, especially in comparison to the early 80's or 30's.
This was the topic of last week's p0st, and, again, I can send to you if you missed it. Short version: We are NOT in the Great Depression (by the numbers).
You can always find doom and gloom if you want to. So turn off your TV and focus on other activity. It will significantly help your inner peace!
3) Get out and do something profitable. That may mean actually starting that exercise regime you've been putting off. Take up a new hobby. ANYTHING to get your mind in a more "profitable" mode! Go do it.
These steps will NOT solve the problems in your wallet, and in the economy. However, how you choose to respond will affect your peace, and, actually...this WILL impact how you spend your money. Please, for your sake, tune OUT the fear, and tune IN to smart preparation.
4) Stave off fear by knowing actual numbers. The great problems many businesses and families face when money's "tight" is SIGNIFICANTLY compounded by not knowing. Any number of pessimistic scenarios play out in your head.
So here is how to fix that. Sit down with an advisor, get the real facts-and if they are bad, you can still come up with a plan. You will find that laying out action steps with somebody competent changes everything.
And, of course, we can sit with you, if you would like in this process--or point you in the direction of a highly-competent advisor.
I am personally dedicated to the success of your family -- and your state of mind! Can other lawyers say that?
Warmly,
Kimberly Hegwood, Houston elder lawyer
PS--If you are wondering if your Houston estate plan is up to date, we have space for TWO families to meet with us to review their plans. Call our office right away (281-218-0880) or send me an email to set up one of these special sessions. You will NOT be sorry!
PPS- Read more on Houston Elder Law here. Thursday, July 29, 2010 S Corporations in the Cross Hairs
According to my accountant, rumors in the accounting community are flying lately that the IRS has eliminated the ability for professionals who operate their business as an S Corporation to receive distributions from their companies in lieu of a wage or salary.
On May 28th, 2010, The House passed The American Jobs and Closing Tax Loopholes Act of 2010 which contains a provision that proposes to raise over $11 billion by tacking on payroll taxes to certain service professionals who currently split income as wages and draws.
And by certain service professionals, Congress specifically means those in "health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management, or brokerage services." If this change becomes law, it can add a 15.3% surcharge to the distribution portion of the income that S Corporation owners pay themselves. The Senate has taken this issue up in its June session.
S Corporations are entities where the net income from the corporation passes to the shareholders and gets taxed at the shareholders marginal rate of taxation. S Corporation
owners typically receive income from their businesses in two forms:
1) A salary or wage and 2) A distribution.
The salary/wage income component is subject to Social Security, Medicare and unemployment taxes. The distribution component, however, is not subject to these payroll taxes, which in many cases allows the business owner to avoid 15 percent or more in payroll taxes. Here lies the problem.
So what should professionals do today who are potentially affected by this change? We will see what happens with the legislation, but if you fall into this category, you must take immediate steps to get in compliance with the existing laws relative to the compensation you receive from your businesses. The IRS requires S Corporation owners to pay themselves a "reasonable salary" from their business. Unfortunately, there is no clear standard from the IRS that the business owner can rely upon to make this determination.
This is where a consultation with your accountant may be in order. Because here is the thing: Professionals with S Corporations that pay themselves a nominal salary are going to get selected for audit.
Due to the increased emphasis on employment tax issues by the Service, businesses must take the following immediate steps to ensure their compensation formulas are in compliance:
1. Document the compensation plan in your corporate records. S Corporations should hold a board meeting at the beginning of the year with resolutions prepared that approve the compensation plan for the officers.
2. Professionals should pay themselves a reasonable salary on the same cycle that their employees are paid on. No more grossing up the salary at year end.
3. Professionals can have a compensation study performed that identifies what other similar professionals are being paid with consideration given to each of the following factors:
a. National and local economic conditions.
b. Size of the practice.
c. Geographical factors.
d. Amount of time the professional devotes to the practice.
e. Experience level of the professional.
f. Whether the professional acts in a managing capacity or actually performs the work.
The bottom line is that across all levels of government we are in an environment of increased regulation and enforcement. For the professional that means higher income taxes, increased chances of audit and higher levels of scrutiny in all areas of business.
Monday, July 19, 2010 "When To Buy" Guide from Your Neighborhood Houston Estate Planning Lawyer
From the desk of Kim Hegwood: Houston Estate Planning Lawyer
The lazy days of summer may be in full swing, but if you know where to look, there are quite a few deals to be had for those willing to plan ahead on major purchases. Knowing the best time to buy that new car, house or lawn mower could be the difference between saving hundreds (if not thousands) of dollars every year.
Read on for your best bets in July and August--use them wisely, and then kick back with the knowledge that while temperatures may rise, your bills don't have to.
Broadway Tickets
New Yorkers flock to new shows in the fall and consider summer performances "tres gauche." That means theaters are more likely to fill empty seats in July with cut-rate tickets. On the other hand, some truly good theater closes quickly, so availability depends on a show's popularity.
Best time to buy Broadway tickets: July
Furniture
New furniture is typically released bi-annually. Retailers like Crate and Barrel slash prices in January with anticipation of new furniture arriving in February. Prices are lowered again in July for the arrival of new furniture in August.
Best time to buy furniture: January and July
Computers
Computers have become essential items for students--which is why most retailers have big back to school sales in August. You can also get a good deal on a computer during the run up to Christmas.
Best time to buy a computer: August and December
Garden Plants and Flowers
Prices on plants and flowers fall drastically after midsummer when nurseries and garden supply stores are trying to clear inventory.
Best time to buy garden plants and flowers: August
Lawn Mowers
Once summer is over stores begin preparing for Fall products, which means big sales on lawn mowers. Stores need to make room for new inventory and lawn mowers take up plenty of space.
Best time to buy a lawn mower: August
Swing Sets
Swing sets go on sale at summer's end, when children have abandoned outdoor play for indoor pursuits. Swing sets also take up a lot of floor space merchants are just itching to fill with holiday merchandise.
Best time to buy a swing set: August
As your local Houston estate planning lawyer, I am personally dedicated to the success of your family and your finances! Can other lawyers say that?
Warmly,
Kimberly Hegwood
PS-- July/ August is also the perfect time to get your estate planning done! Call us at 281-218-0880 to book your free Lifetime Legacy Planning Session (normally $750) with the mention of this article! However, this offer is limited to 10 appointments per month so call today!
https://hegwoodlaw.infusionsoft.com/in/i7a120/643fc25e3e8f805aeeb7e92e7438dfdc9ffa64e8caa8f6a38589ca6a05d948b3&e=na?i=16658&m=4980
Kim Friday, June 11, 2010 There Is No Replacement For The Personal Touch, Warns Harris County Probate Lawyer
From the desk of Kim Hegwood, Harris County Probate Lawyer
A class action against a particular (and highly-advertised) online legal document preparation service alleges that it uses unfair and deceptive business practices. According to the suit, it claims to "customize" its documents, but all it does is change the name and identifying information.
A woman named Katherine Webster, who is the executrix for the estate of Anthony Ferrantino and trustee of the Anthony J. Ferrantino Living Trust, bought estate planning documents from this service and later had to hire an attorney to fix the documents. She sues, claiming the service makes the following misrepresentations:
* When it says that the documents are reviewed for accuracy and reliability, it means that there is absolutely zero attorney support. This gives customers a false sense of security.
* When it claims to be great in so many ways, it means that you should click all the links until you come to the disclaimer page. This page, which is in much smaller font, negates many of the promises made.
* When it says that virtually anyone can use its product, it means that some problems are too complex for it to address, but it does not tell customers which ones.
The company has indeed responded, and it is only fair that I share some of it, and then I have a thought or two.
First, a portion of their response:
We are confident that the lawsuit filed in Los Angeles last week is without merit, and that [Company] will be vindicated in a court of law. [Company] does not provide legal advice or misrepresent our products and services in any way. Despite the lawsuit, [Company] continues to operate in California and all 50 states, providing more than 100 products and services to those seeking affordable help.
[Company] has been reviewed by legal authorities in California, and in many other states, and we have never been found to be in violation of the law. Visitors to our web site with more complex problems can find a listing of attorneys through [Company]'s Attorney Connect service, which is featured on our home page.
Now, it is perhaps too much schadenfreude to pile on much more than what the suit already lays out...and the response speaks for itself.
But I WILL say this: There is no substitute for a Harris County probate lawyer who digs deeply into what you care most about as a family, and acts accordingly. Yes, it is tempting to go with the "cheapest" option to ensure your family is well-prepared for the future, but "cheap" does not always mean "best option", especially when it comes to protecting your family's wealth and legacy.
Do not get seduced by the allure of "cut and paste". It is not what your family deserves.
And of course, if you have already completed your estate planning documents through an online service such as the one described above, call our Harris County Probate law firm at 281-218-0880 to recieve a complimentary Lifetime Legacy Planning Session ($750 value), which includes a full estate plan review. These session are limted to 10 appointments a month so call today!
Tuesday, April 13, 2010 Remembering Terry Shiavo: How Two Simple Documents Can Protect You From Unwanted Medical Intrusions in Texas
Last week, the nation stopped to remember Terry Shiavo, a 41-year-old woman who was removed from her feeding tube and tragically left to die against the wishes of her family and friends.
Shiavo, who was in a permanent vegetative state after suffering heart failure in 1990, did not have advanced health care directives allowing her parents to intervene medically on her behalf. Sadly, her estranged husband and the U.S. Court system made the final decision to remove Shiavo from her tube in which she ultimately starved to death over a two-week period.
Sadly, very few lessons were learned by Shiavo’s high profile death, as many Texans are still without necessary medical directives which state their end-of-life wishes and who can legally intervene on their behalf.
As a Houston estate planning lawyer specializing in medical directives and living wills, I deal with the unfortunate consequences of this every day in my practice.
Many times families come to me after a loved one is incapacitated or in a vegetative state following an accident. By the time they get to my office, the family is torn apart and battling over issues such as life support, long-term care, what he or she “would have wanted” if they could speak, how to access the injured’s finances to pay for their expensive treatments….and the list goes on.
And of course it breaks my heart to tell these families that their options are now very limited because the injured party did not properly protect themselves or document their wishes in the event of an accident (and I’m not talking about documenting with a will either…a will does not help your family if you don’t actually die).
But the good news is that every Texan over 18 years of age can protect themselves from such unwanted intrusions into their medical care (whether that be from family members or the courts) with two simple documents:
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A medical power of attorney—which gives the appointed guardian of your choice permission to make medical decisions on your behalf; and
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A directive to physicians – which allows you to instruct physicians not to use artificial life-saving methods if you are severely injured in an accident.
If you haven’t already executed these directives and would like to properly document your end-of-life wishes once and for all, please call our office to talk about setting up advanced medical directives and a medical power of attorney in Houston, TX.
These planning sessions typically cost $750, but if you mention this article when you call, we’ll waive the fee, as you’ve already taken a big step in the right direction of educating yourself on proper end-of-life care.
So don’t wait—call me, your personal Houston will and trust lawyer Kim Hegwood at (281) 218-0880 to get started. | |
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Hegwood & Associates assist clients with Estate Planning, Wills, Trusts, Pet Trusts, Special Needs Planning, Asset Protection, Elder Law, Veterans Benefits and Probate/Estate Administration in Houston, Texas as well as Webster, League City, Seabrook, Kemah, Pasadena, Friendswood, Dickinson, Bacliff, La Porte and Deer Park in Harris County and Galveston County.
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