11 Traits of the Financially Secure
+ 4 Ways to Safeguard Your Tax Records +
7 Guidelines for Deducting Business Expenses
of my early-Monday news scan this week brought me this story:
One of the "highlights": almost
half of all US households could not
come up with $400 to cover an emergency expense.
They would need to sell something or borrow cash to do so.
If you find yourself belonging to that category, I'm going to
help you today, I think. And if you don't, I urge you to
continue to live your financial life in such a way that you
remain there. I have some ideas (11 of them, in fact) for you.
In my experience, if you want to get out of a hole, you study
the behavior of those who have already made it out. And you do
everything you can to copy that behavior.
Yes, some people have been fortunate enough to inherit wealth,
etc. But many, MANY more of those who have wealth came about
it in a different way.
get there, a big tax reminder: 2nd quarter estimated
taxes are due on June 15th. Make sure to mail your
Federal estimate with voucher #2 (1040-ES) and your
check payable to the United States Treasury. Include
your social security number and the words "2015 Form
1040-ES" on your check. Mail by June 15, 2015.
If you have state estimated taxes due, the procedure is
very similar, except you are perhaps-obviously not
paying the "US Treasury", but rather the Department of
Revenue for your state of income.
Now, so that YOU do not find yourself in the unfortunate place
of not being able to scrape up $400 in an emergency, read this
cannot control what happens to you, but you can control
your attitude toward what happens to you, and in that,
you will be mastering change rather than allowing it to
master you." – Brian Tracy
Becoming a household that will be able to ride through
instability and uncertainty is only going to become MORE
important in future years, not less.
So, that being the case, here is a portrait of those who are
able to achieve this status.
You'll notice that these are just as significantly about your
mindset as you relate to your finances, as about your
what the Financially Secure look like:
He always spends less than he earns. In fact, his mantra is
that over the long run, you're better off if you strive to be
anonymously rich rather than deceptively poor.
She knows that patience is truth. The odds are you won't
become a millionaire overnight. If you're like her, your
security will be accumulated gradually by diligently saving
your money over multiple decades.
He pays off his credit cards in full every month. He's smart
enough to understand that if he can't afford to pay cash for
something, then he can't afford it.
She realized early on that money does not buy happiness. If
you're looking for financial joy, you need to focus on
attaining financial freedom.
He understands that money is like a toddler; it is incapable
of managing itself. After all, you can't expect your money to
grow and mature as it should without some form of credible
She's a big believer in paying yourself first. It's an
essential tenet of personal finance and a great way to build
your savings and instill financial discipline.
She also knows that the few millionaires that reached that
milestone without a plan got there only because of dumb luck.
It's not enough to simply "declare" to the universe that you
want to be financially free. This is not a "Secret".
When it came time to set his savings goals, he wasn't afraid
to think big. Financial success demands that you have a vision
that is significantly larger than you can currently deliver
He realizes that stuff happens, and that's why you're a fool
if you don't insure yourself against risk. Remember that the
potential for bankruptcy is always just around the corner, and
can be triggered from multiple sources: the death of the
family's key breadwinner, divorce, or disability that leads to
a loss of work.
She understands that time is an ally of the young. She was
fortunate (and smart) enough to begin saving in her twenties,
so she could take maximum advantage of the power of
compounding interest on her nest egg.
He's not impressed that you drive an over-priced luxury car
and live in a McMansion that's two sizes too big for your
family of four. Little about external "signals" of wealth
actually matter to him.
And a little bonus, if you will: She doesn't pay taxes which
could have been avoided with a simple phone call to her tax
professional. She plans ahead, before tax time. Give us a call
today: (502) 426-0000
4 Ways to Safeguard Your Tax Records
is tornado season here in the Midwest and hurricane season recently started
so the Internal Revenue Service advises individuals and businesses to
safeguard their records against natural disasters by taking a few simple
Create an Electronic Additional
Set of Records
Taxpayers should keep a duplicate set of records including bank statements,
tax returns, identifications and insurance policies in a safe place such as
a waterproof container, and away from the original set.
Keeping an additional set of records is easier now that many financial
institutions provide statements and documents electronically, and much
financial information is available on the Internet. Even if the original
records are only provided on paper, these can be scanned into an electronic
format. This way, taxpayers can save them to the cloud, download them to a
storage device such as an external hard drive or USB flash drive, or burn
them to a CD or DVD.
Another step a taxpayer can take to prepare for a disaster is to photograph
or videotape the contents of his or her home, especially items of higher
value. The IRS has a disaster loss workbook, Publication 584, which can help
taxpayers compile a room-by-room list of belongings.
A photographic record can help an individual prove the fair market value of
items for insurance and casualty loss claims. Ideally, photos should be
stored with a friend or family member who lives outside the area.
Emergency plans should be reviewed annually. Personal and business
situations change over time as do preparedness needs.
When employers hire new employees or when a company or organization changes
functions, plans should be updated accordingly and employees should be
informed of the changes.
Make your plans ahead of time and practice them.
Check on Fiduciary Bonds
Employers who use payroll service providers should ask the provider if it
has a fiduciary bond in place. The bond could protect the employer in the
event of default by the payroll service provider.
IRS Ready to Help
If disaster strikes, an affected taxpayer can call 1-866-562-5227 to speak
with an IRS specialist trained to handle disaster-related issues.
Back copies of previously-filed tax returns and all attachments, including
Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax
Alternatively, transcripts showing most line items on these returns can be
ordered by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form
Request for Individual Tax Return Transcript or Form 4506-T, Request for
Transcript of Tax Return.
Last May I
hosted a live webinar on Social Security Strategies and
Secrets you should understand and use as you contribute
and eventually take distributions from this program.
If you are interested in watching the VIDEO REPLAY you
click here. Kevin
for Deducting Business Expenses
expenses are the cost of carrying on a trade or business.
These expenses are usually deductible if the business operates
to make a profit.
- What Can I Deduct?
- Cost of Goods Sold
- Capital Expenses
- Personal versus Business Expenses
- Business Use of Your Home
- Business Use of Your Car
- Other Types 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.
It is important to separate business expenses from the
- The expenses used to figure the cost of goods sold,
- Capital Expenses, and
- Personal Expenses.
Cost of Goods Sold
If your business manufactures products or purchases
them for resale, you generally must value inventory at the
beginning and end of each tax year to determine your cost of
goods sold. Some of your expenses may be included in figuring
the cost of goods sold. The cost of goods sold is deducted
from your gross receipts to figure your gross profit for the
year. If you include an expense in the cost of goods sold, you
cannot deduct it again as a business expense.
The following are types of expenses that go into
figuring the cost of goods sold.
- The cost of products or raw materials, including
- Direct labor costs (including contributions to
pensions or annuity plans) for workers who produce the
- Factory overhead
Under the uniform capitalization rules, you must
capitalize the direct costs and part of the indirect costs for
certain production or resale activities. Indirect costs
include rent, interest, taxes, storage, purchasing,
processing, repackaging, handling, and administrative costs.
This rule does not apply to personal property you
acquire for resale if your average annual gross receipts (or
those of your predecessor) for the preceding 3 tax years are
not more than $10 million.
For additional information, refer to the chapter on
Cost of Goods Sold, Publication 334, Tax Guide for Small
Businesses and the chapter on Inventories, Publication 538,
Accounting Periods and Methods.
You must capitalize, rather than deduct, some costs.
These costs are a part of your investment in your business and
are called capital expenses. Capital expenses are considered
assets in your business. In general, there are three types of
costs you capitalize.
- Business start-up cost (See the note below)
- Business assets
Note: You can elect to deduct or amortize certain
business start-up costs. Refer to chapters 7 and 8 of
Publication 535, Business Expenses.
Personal versus Business Expenses
Generally, you cannot deduct personal, living, or
family expenses. However, if you have an expense for something
that is used partly for business and partly for personal
purposes, divide the total cost between the business and
personal parts. You can deduct the business part.
For example, if you borrow money and use 70% of it for
business and the other 30% for a family vacation, you can
deduct 70% of the interest as a business expense. The
remaining 30% is personal interest and is not deductible.
Refer to chapter 4 of Publication 535, Business Expenses, for
information on deducting interest and the allocation rules.
Business Use of Your Home
If you use part of your home for business, you may be
able to deduct expenses for the business use of your home.
These expenses may include mortgage interest, insurance,
utilities, repairs, and depreciation. Refer to Home Office
Deduction and Publication 587, Business Use of Your Home, for
Business Use of Your Car
If you use your car in your business, you can deduct
car expenses. If you use your car for both business and
personal purposes, you must divide your expenses based on
actual mileage. Refer to Publication 463, Travel,
Entertainment, Gift, and Car Expenses. For a list of current
and prior year mileage rates see the Standard Mileage Rates.
Other Types of Business Expenses
- Employees' Pay: You can generally deduct the
pay you give your employees for the services they perform for
- Retirement Plans: Retirement plans are savings
plans that offer you tax advantages to set aside money for
your own, and your employees' retirement.
- Rent Expense: Rent is any amount you pay for
the use of property you do not own. In general, you can deduct
rent as an expense only if the rent is for property you use in
your trade or business. If you have or will receive equity in
or title to the property, the rent is not deductible.
- Interest: Business interest expense is an
amount charged for the use of money you borrowed for business
- Taxes: You can deduct various federal, state,
local, and foreign taxes directly attributable to your trade
or business as business expenses.
- Insurance: Generally, you can deduct the
ordinary and necessary cost of insurance as a business
expense, if it is for your trade, business, or profession.
This list is not all inclusive of the types of business
expenses that you can deduct. For additional information,
refer to Publication 535, Business Expenses.
If you have comments or
questions on the information in these articles, as usual feel
free to call our offices at 502-426-0000.
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on Our Hotline at 800-609-9006 ext.
Hey it’s Kevin Roberts and I
wanted to ask you a favor. We’ve just installed a toll-free
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Remember you can call our offices if you have any
questions about these or any other bookkeeping, accounting, tax,
financial planning or insurance related issues, at
Regards, Kevin Roberts, CPA
President, Roberts CPA Group