If you’re looking for additional retirement investing opportunities and you have a large chunk of cash that you can invest all at once, an annuity might be the product you’re looking for. Give that money to an insurance company and get checks every month in return; sounds nice, doesn’t it? Depending on the type of annuity you choose, you could be adding a stable source of income to your life — or you could be tying up money and getting very little in return. Here are four things you need to know about buying an annuity for your retirement.
Simpler Is Better
Some annuities are straightforward and stable, like souped-up certificates of deposit. For example, with a fixed-rate annuity, you deposit the money with the insurance company, and each month, the company pays you part of the principal along with some interest. No matter what happens in the world, you get that interest rate every month. You can have the money distributed now, or place it on hold until you’re closer to retirement.
Other forms aren’t so simple. Some annuities are linked to equities and have rates and returns that vary wildly. These might be good if you have cash to burn and are purposefully looking for a financial thrill ride. But if you’re trying to supplement your income, a steadier, albeit potentially lower, fixed rate would be better.
Distributions from the annuity typically lower the annuity’s principal amount. In other words, the annuity can run out, depending on how you have it set up. If you’re relatively young, taking payments now could mean that later in your retirement, you would see the annuity income stream end. Waiting until later to take distributions or even buy the annuity in the first place could be a better choice.
You’ll Still Owe Taxes
Annuities aren’t tax-free. They can be tax-deferred, meaning you wouldn’t pay taxes on the gains until you actually got them, but you’d still have to take taxes into account when calculating your income from the annuity. You wouldn’t be able to use everything you got, and that could really affect your bottom line.
Death Benefits Aren’t Guaranteed
If the annuity outlives you, it isn’t guaranteed to go to your beneficiaries. You can add a death rider that states the remainder of the annuity will go to your heirs, but you have to specifically discuss that with the insurance company. Often a remaining annuity will go to the insurance company after you die. This can also vary by the state the annuity is in; for example, an annuity that you’re taking distributions from might go to the insurance company, but an annuity that’s on hold and waiting for you to authorize distributions could go to your heirs if you die before you start taking the funds.
If you’re interested in annuities, you should talk to a financial advisor to find the best combination of riders and rates for you. Annuities can be a very handy place to park some money, but you want to be sure that you’re getting the best — and safest — possible return on the money.
Business owners have a ton of tasks on their plates. They are responsible for everything from making sure there is enough inventory to employing the right people. Many of these tasks can be outsourced or delegated to ensure the business owner does not get too overwhelmed. Payroll is a large task that all businesses have to deal with when they hire employees. It can be very confusing for those who are inexperienced in payroll processes. With the laws changing all the time surrounding taxes and wages, the task of payroll processing can require a lot of work. Additionally, you could encounter large fines from the government if done incorrectly. This is why many business owners choose to outsource their payroll. Here are some reasons why you should consider doing it as well.
Frees Up Time
As a business owner, you have a lot to worry about. If you can outsource something that is taking too much of your company’s time, it can be worth the investment. This leaves you and your employees to focus on what your skills are best matched up with. Additionally, you do not have to worry about hiring someone specifically for payroll processing. Instead of hiring someone to handle just one job, it is always a good idea to have someone with multiple skills so you can utilize them in various areas. Since payroll can be so time consuming, your employee may not have time to work on other jobs. When outsourcing the payroll, many payroll processing companies do all the legwork for you so all you have to do is sign into a portal and its all ready.
Saves You Money
It is always a good idea to have a certified public accountant handle your payroll. Hiring a CPA can be very expensive as the average annual salary for a CPA runs about $73,800. For a fraction of the cost, you can hire a payroll processing company to handle your payroll tasks. As a result, you could put the savings back into the company to help you grow your business.
Avoid IRS Fees
About 40% of businesses incur an average of $845 a year in penalties from the IRS for improper payroll processing. This can accumulate into quite a bit of money and create a hardship on a business that is already struggling. With the tax and payroll laws constantly changing, you could end up doing your payroll wrong without even knowing it. Staying on top of the laws can be very time consuming and requires a lot of continuing education. When you outsource it to a payroll processing company (such as Waggoner Frutiger & Daub CPA’s), you can skip the continuing education courses and feel confident they are handling your payroll according to the law.
If there is one piece of advice most commonly offered by financial planners, it is to diversify your portfolio. A strong portfolio is one that includes a healthy mix of traditional investments as well as fixed income investments, passive income streams, and investments in a company or project you are passionate about.
Build Your Portfolio over Time
One method of diversification to consider is investing your funds over a period of time. Lump sum investing could cost you in future returns, as the market is plagued with peaks and valleys as a result of economic volatility. Decide on an amount you want to invest and use dollar-cost averaging to make contributions to your investment on a regular basis, rather than all at one time.
Build Passive Income Streams
For an investment portfolio to be strong, investors should consider adding some passive income streams into the mix. Passive income steadily builds in equity after an initial investment. For accredited investors, this can be a prime opportunity to build wealth. Real estate, and pensions can significantly reduce risk while also diversifying investments.
Fixed Income Investments
Fixed income investments are available in a variety of forms and are more commonly known as bonds and money market securities. These are loans made by an investor to a corporate or government borrower. The borrower then agrees to pay fixed interest regularly until a maturity date that is established in advance. As the maturity date nears, the borrower promises to return the principal amount of the bonds to the investor. The following are examples of fixed income investments:
· Government treasuries: The federal government issues these with maturities ranging from months to 30 years. Treasuries are backed by government credit, making them the highest quality fixed income investment.
· Municipal bonds: These are issued by states, cities, and local municipalities. They finance projects run by these entities and offer a tax-efficient way of generating income.
· Corporate bonds: these are debt issued by corporations for a variety of investments. Corporate bonds are often more risky than other fixed income investments because they are debt issued by higher-risk companies with lower credit quality but having higher yields.
Remove Investments That Aren’t Performing
From time to time, it may be necessary to remove investments that are under performing. It is ideal to pay attention to market conditions and remain current with your investments. There is no reason to hang on to investments that are too risky, not providing a high yield, or are backed by companies in turmoil. Diversifying your portfolio in this way can have a positive impact on building your wealth.
Establish a diversification strategy even when the market is booming. However, since you can never predict how the market will behave, having a solid mix of investments in your portfolio is crucial. For more information, contact a business such as Amos Maney & Payne CPA’s LLC.
Becoming a landlord is an excellent way to invest in your future and create a separate stream of income. But whether you’re simply renting out your old home or you buy a building full of units, it’s vital to make sure you take all the tax deductions you can so you don’t spend all your hard-earned money on taxes. But first-time landlords often do not know what deductions are available and how to claim them. To help get you started, here’s a handy guide to the 6 most commonly available deductions.
By knowing what receipts to keep and what to track during the year, you and your accountant can be certain that you haven’t left any money on the table when tax time comes. To find out more, speak with someone like Carmines Robbins & Company PLC.
For anyone who is new to investing or is looking for ways to increase net worth, it is quite important to understand some of the basics of investing in order to build wealth. There is a lot involved with investing, and it can be confusing deciding what type of investments to choose. Do you want to remain traditional with stocks and mutual funds, or do you want to be “radical” and go with forms of passive income such as investing in films? Whatever you choose, the following are some basics that will help you build your net worth.
If you are young and just entering the world of investing, it is important that you get started as soon as you have an income. The earlier you begin, the more time you have to make money. This is due in part to compounding interest. Basically, you invest your money in an account that pays you interest. Over the years, the amount of interest compounds on a monthly or annual basis, depending on the type of account you choose. This means that the interest on your money continues to increase as time goes by, as long as you do not touch the money in the account. By the time you are ready to retire, you will be sitting on a really nice amount of money, depending on the type of retirement accounts in which you choose to participate.
Diversify Your Portfolio
One of the first tips you will receive from an investment advisor is to spread the wealth around a diversified portfolio. You need to have a healthy mix of stocks, bonds, mutual funds, and retirement savings plans in your portfolio. Another important component of your portfolio should include some passive income streams. Passive income comes from an investment that you make one time, and then you continue to see a stream of income from it on a regular basis, whether that is monthly, bi-annually, or annually.
Some examples of passive income include investing in films, rental property, and peer-to-peer lending. Keep in mind that passive income is not always a get-rich-quick component of a portfolio. Many times, you have to invest both money and time into a project before you can see any significant return. However, having some passive income in your portfolio can provide a nice side income in addition to your other investments and build your wealth more quickly.
In order to build wealth, it is ideal that you avoid debt as much as possible. This is one of the most important components to building wealth. Avoid taking on a mortgage that is too big for your budget. Also, do not invest in anything that does not use your own money. For instance, you may be interested in investing in films. Let’s say you have a friend who wants to make an independent film and has come to you for financial assistance. You think it is a good idea and want to be a part of the project. Once the film is made, it flops and makes absolutely no money.
If you paid for the project using your own funds, you can have an advantage on your tax return by taking it as a capital loss on investment. If you paid for the project using your credit card, you may find yourself in a bit of a pickle. Credit card debt is not something you can write off on your taxes. You not only will be responsible for the money you spent on the film, but also any accrued interest. Furthermore, depending on your debt to income ratio and the cost of the project, you seriously risk your credit score by investing using credit.
By keeping these tips in mind, you are well on your way to increasing your net worth. Whether you choose investing in films or other forms of passive income, or you mix it up with other forms of investment, just getting started is over half of the battle. Contact an accountant, like Teri J Henderson, CPA, P.A., for more help.
Like many new business ventures, the process of buying, renovating and selling a house for profit — so-called “flipping” a home — is both exciting and fraught with potential pitfalls. If you’re looking to get into the flipping business, it’s important to understand the taxes involved so that you ensure your best profit. Here is a quick primer on home flipping tax treatment.
Business or Investment
There are two major questions that determine how your profit from home flipping is taxed. The first such question is, “is it a business or an investment?” While the difference may not matter much to you, it matters a lot to your taxes. This is because business income is taxed at your normal tax rate and is subject to the self-employment tax (15.3% in 2014). Investment income, in contrast, may be taxed at a lower rate and is not subject to the additional self-employment tax. Additionally, business losses can count against your other income at tax time, whereas investment losses are limited to $3,000 annually.
How do you decide if your flipping is a business or an investment? Unfortunately, there’s no strict set of rules by the IRS. Generally, if your flipping is your primary source of income, you flip multiple houses at a time or it takes up most of your time, the IRS is more likely to consider it your business. If it’s merely something you do once in a while, you spend little of your own time and energy on the project or you hold the homes longer, it’s probably an investment.
Length of Holding
If your income is considered an investment, how long you own the home will determine the rate at which it’s taxed. If you hold the asset for less than a year, the profit is a short-term capital gain and is taxed at your normal rate. Holding it for longer than year results in a long-term capital gain and may be taxable at as little as 0% depending on your tax rate for your other income.
How to Report It
So, now that you know what taxes you’ll be paying, how do you go about reporting the income and paying them? Again, it depends on whether you’re reporting the profit as a business or an investment. Business flippers file Schedule C with their personal income taxes and investors file Schedule D.
If you’re still unsure whether to file your flipping adventure as a business or investment or how to calculate the profit or taxes, it may be best to work with a qualified tax accountant, like Hy Appelbaum CPA. This will allow you to sit back, relax and focus on the fun part of home flipping rather than the necessary but complicated taxation part.
If you are ready to start a business but you aren’t sure where to begin, there are three professionals you want to meet with and hire before you open your doors for business. You want to make sure that you have everything in line legally and financially, and you need to be protected with proper insurance. Here are a few professionals you want to interview and hire when you are ready to be a business owner.
There are many types of insurance you need combined into your business policy, and you want an experienced business insurance agent working for you. You need to be covered against any type of potential liability problems where you could be sued, and you need insurance to protect you from worker’s compensation, theft, natural disasters and more. The expert will assess your business and the industry you’re in to put together your policy.
As soon as you start collecting, you have to pay taxes, you have to pay your staff and taxes need to be taken out, and you have to be incredibly responsible and detailed with your finances. This is a lot for new business owners to handle, and often it’s best left to the professionals. Find a business accounting professional that works with businesses your size, and who you can afford to do the work. It will pay off having expert help when it comes tax time, and they can also give you great financial business advice.
You need to have a business attorney even if you haven’t had any troubles or you don’t expect any, because there are many deals, transactions, and issues that can come up that need legal advice and assistance. Your lawyer will want to look over your business insurance coverage before you open. You want someone whom you can trust and who can give you the legal business advice that’s needed to be successful. Many law practices focus on business law, so you can find a group of lawyers if needed.
Starting a business is a risk, but when you hire the right professionals to help you won’t have to worry about making risky decisions on your own, and you’ll have people looking out for the best interest of your business. Make sure that you have consulted with all three of these experts before you expect payment or provide a service or item to anyone.
For business accounting services, contact a company such as Broutman & Co., P.C.
If you’re the owner of a small business and have been wearing all of the hats involved in running said business, you may be reluctant to give up control to an outside individual. There comes a time, however, when your business could benefit from the hiring of an accountant. Below are three signs that your business needs an accountant and how that accountant can help you.
1. You’re Spending More Time “In” Your Business Than “On” It
If you find yourself spending more and more time balancing the books and collecting payments than you do working on further growing your business, it’s time to call in some help.
As your business grows, you may find yourself dealing with more of the specifics than you like. While you could be out there promoting your business and acquiring new clients, instead you’re spending long hours poring over the balance sheet. At this point in your business’s life, it’s time to turn your finances over to an accounting professional.
2. You’re Looking to Expand Your Business
If you’re considering taking a step towards expanding, it wouldn’t hurt to hire a knowledgeable accountant to walk you through the financial side of the expansion.
Whether you’d like to buy more property, move across state lines, hire more employees, or attract more investors, you’ll need the experience of an accountant to keep your business’s finances and legal status in check. Accountants are more than just number crunchers – they’re also highly skilled in tax law and understand the implications of different business decisions.
3. Your Business’s Profits Aren’t Increasing As They Should
If your business is doing better than it ever has but you aren’t seeing an increase in profits, it’s time to bring in an accountant to take an objective look at the situation.
There are two major aspects of business finances that indicate success: revenue and profit. If your revenue is increasing (you’re selling more goods or rendering more services) but your profits aren’t, then it’s likely that your business is spending more on overhead costs or other costs of business than it needs. An accountant can come in, take a look at the overall situation, and offer you some useful tips on decreasing your costs so that you can finally see an increase in your profits.
To learn more about the benefits of hiring an accountant for your business’s needs, consult with a qualified accountant, like those at Bliss & Skeen CPAs, today.
When you are trying to manage your small business, one of the things that you should do is make sure that you hire an accountant to handle your finances. Doing that means that you have one less thing to worry about. There are some easy things that you can do in order to make your accountant’s job easier.
Keep Track of Your Receipts
Keeping track of your receipts doesn’t mean just tossing them in a box and letting them sit there. What you need to do is make sure that they are all organized. Setting up an organization system doesn’t have to be hard. You don’t have to break it down in several categories. It can be as easy as putting receipts in folders marked by month, alphabetically, or by type of purchase. The hardest part of the organization program is going to be actually setting it up. Once it’s in place, all you need to do is make sure that you put each receipt in its proper place when you get it.
Keep Track of Your Invoices
You need to know who is sending you money. That’s the lifeblood of your business. Without any money, your business doesn’t run. So, keeping track of your invoices and billables will make it easier for you to know who owes you money, and make it easier for your accountant to track down your income. This organization system will probably need to be a little more complex than organizing your receipts. For example, you may want to put each invoice into several categories so that you can cross-reference as necessary. Those categories may include what month the invoice was generated, who generated it, what the invoice was for, and when it is due. That way you can just pull out what you need by category and easily get what you need.
Keep Track of Available Cash
Many businesses keep some kind of petty cash around. That petty cash is for things like treating your employees to something, getting some necessary, forgotten supplies, or any other small expenses. It’s easy to forget to keep track of who took how much out and how much is there. Doing something as easy as keeping a written log so that people can write down how much they took out, when, and what it was for.
Your accountant is a necessary part of your business. They will make sure that you get the money you are owed and that your taxes are handled. Making their life easier means that your life will be easier too. Contact one today, such as one from Don Lamb CPA Inc P.S., for further assistance.