Blog

The Impact of Small Business Retirement Plans on QBI

The qualified business income deduction (QBI) can be a mystery to many small business owners and entrepreneurs. In a nutshell, this is a 20% deduction on qualified business income for self-employed professionals, S Corp owners, partnerships, and business owners. ‍Something that many folks miss is that retirement plan contributions can significantly influence this deduction. This is why for many entrepreneurs, it can be important to maximize this deduction in alignment with your personal financial strategy, particularly when considering retirement contributions.

4 Steps to Calculating Estimated Taxes

For self-employed professionals or those who recieve income as a 1099 independent contractor, estimated taxes payments are a method to pay taxes throughout the year. However, it’s up to the taxpayer to calculate and pay their tax. Therefore, understanding how to calculate these taxes is essential to maximize your money!

LLC or S Corp for My Business?

There’s a common question to address working with entrepreneurs and small business owners: Should I be an LLC or make an S corp election for my business to reduce taxes? We’re going to walk through the framework of this decision with real-life examples, so you can understand if it’s worth pursuing.

Optimizing QBI With the 2/7 Rule

QBI is a 20% deduction for pass-through entities. For a basic refresher and how to use this deduction, here is what to know about QBI. The qualified business income deduction may be phased out entirely for higher-earning business owners. The phase-out creates tax planning snags for businesses owners needing to maximize deductions. In short, there is no QBI deduction for those businesses that fall under a specified service trade or business (SSTB) when taxable income is above the top income threshold of $440,100 (Married Filing Joint) and $220,050 (Single).

What to Know About the QBI Deduction

While the beginning of a new year is when taxes are top of mind, tax planning is a year-round event, especially for those who want to minimize their lifetime tax bill, not just the current year. Part of having a proactive tax planning strategy is knowing what deductions apply and how to qualify for them. A deduction that every business owner needs to be aware of is the qualified business income deduction (QBI)—also known as the 199A deduction.

Cash Flow Management For Solopreneurs

60% of small businesses have experienced a cash flow issue at some point, according to Quickbooks. As a result, cash flow management for solopreneurs and small business owners is a common pain point. However, with a cash flow system in place, it drives the ability to make proactive business decisions, creates opportunities, and allows your business to run at peak performance.

Self Employed? An Intro to the Solo 401k

When you think of a 401k plan, you likely think of a retirement plan offered by large corporations. But did you know as a self-employed person, you can have your own 401k plan? A Solo 401k, also referred to as a Uni k, Solo k, one participant 401k, and an individual 401k can be a valuable wealth-building tool for the self-employed.

Business Formations for the Self Employed

What business formations are best for the self-employed or small business? What do the different formations mean? How do I choose a business formation? Whether you’re just starting your self-employment journey or having owned a small business for years, choosing a formation that fits your business is important. The answer will vary depending on your particular business — things like your business goals, legal protections, risk tolerance, and revenue.

The Fundamentals of Self-Employed Retirement Plans

Think of a self-employed retirement plan as a ”work optional” plan. You may never want to retire, or maybe it’s something you haven’t planned for, or maybe it’s too far down the road to think about. Either way, optionality is key.

What To Know About Estimated Taxes

The United States is a pay-as-you-go tax system. In other words, when you make money, Uncle Sam wants his cut.This is where quarterly tax payments come in. As you make money throughout the year, taxes are due each quarter. So if you expect to owe $1,000 or more in taxes, you need to make quarterly payments. Not only do you have to pay income tax, but self-employment taxes are also part of estimated tax payments.

7 Tax Deductions For The Self Employed

Whether you are a sole proprietor, single-member LLC, partnership, independent contractor, or freelancer, you’re running a business. That means you wear multiple hats and have daily tasks outside of doing that thing you love.A commonality with all self-employed folks? They don’t want to pay more tax than they need to. Period.As a self-employed person, you deserve all the tax deductions you are entitled to. There are several valuable tax deductions to be aware of.

4 Steps to Calculating Estimated Taxes

How Incentive Stock Options Can Trigger AMT

Because incentive stock options come with favorable tax rules, they can become subject to the mysterious AMT in the year of exercise. This creates “phantom income” that factors into the calculation for the alternative minimum tax. Therefore, you may be subject to AMT in the year of exercise unless you exercise and sell the ISOs in the same calendar year. Nevertheless, you’ll want to familiarize yourself with how AMT can impact your financial planning decisions so you can create a proactive equity compensation strategy.

Restricted Stock Units vs. Restricted Stock Awards

Restricted stock is one of the more popular forms of employee stock compensation. These two forms of restricted stock you’ll see are restricted stock units and restricted stock awards. Both are used in addition to cash compensation to reward and hang on to employees through a vesting schedule.While the names of these types of restricted stock are similar, there are important distinctions to know. If you want the TLDR version, here is an infographic comparison for you.

5 Ways To Use Your ESPP

You’re probably used to contributing to your employee stock purchase plan (ESPP) and accumulating stock in your company. Or you may wonder if you should even contribute to your ESPP along with your 401k and other forms of equity compensation. An employee stock purchase plan can be a valuable tool and used in many ways to increase your financial flexibility.

A Look At Taxes On Nonqualified Stock Options

Stock options are a popular form of equity compensation and a powerful tool for building wealth. Companies can offer two types of stock options — non-qualified stock options (NSO) and incentive stock options (ISO). The taxes on nonqualified stock options are fairly easy to understand and don’t carry the complexities of incentive stock options. While they offer simplicity, it’s important to understand the tax implications for your financial plan.

Should You Make An 83b Election?

An 83b election lets the IRS know you want to pre-pay tax when the restricted stock is granted rather than the vesting date. If you expect the stock to be much higher when it vests, this can be a lucrative deal — paying taxes on a much smaller amount. This can also maximize the capital gains treatment, which is typically more favorable than ordinary income tax. However, while 83b might seem like a great deal, it does come with drawbacks.

ESPP Taxes Explained

Employee stock purchase plans are one of the better perks within an equity compensation plan. They can be fairly straightforward on the surface, but there are unexpected tax complexities when you open up the hood. Spending time to understand the tax implications that can occur when you sell ESPP shares can better prepare you for surprises from Uncle Sam.

How Are My Incentive Stock Options Taxed?

Incentive stock options are a form of equity compensation granted to employees of public and private companies. Unlike non-qualified stock options, restricted stock units (RSUs), and employee stock purchase plans (ESPP), incentive stock options carry a few more complexities. However, in exchange for these complexities is the ability to participate in the future growth of your company, generate wealth, and receive preferential tax treatment.

Your Guide To Equity Compensation

Equity compensation comes in many different forms. From those that work in the oil & energy industry to tech companies and beyond, equity compensation is a valuable form of non-cash pay. Because of the complexities involved, it’s important to know the mechanics and especially the impact of taxes.

5 Restricted Stock Unit Strategies

Restricted stock units (RSUs) are straightforward compared to other forms of equity compensation. But don’t let the simplicity of RSUs cause you to look past savings opportunities. For a basic refresher on restricted stock units, start here. RSUs are gaining popularity as a form of stock compensation, which raises the importance of planning for them.

An Intro to Employee Stock Purchase Plans (ESPP)

Everyone loves free money and buying things at a discount. This is how an Employee Stock Purchase Plan (ESPP) works. It’s essentially free money. Like how a 401k match is referred to as free money (well, actually part of your compensation, but free sounds better), the stock discount in an ESPP is like free money. An ESPP is one of the better benefits of a compensation plan.

What You Need to Know About Restricted Stock Units (RSU)

From an employer’s view, restricted stock units are a future promise. It’s a way to retain key employees, keep them motivated and ultimately stay with the company. This can be a win-win for both the employer and the employee. The employer is promising a future benefit in return for the employee to help the company grow. On the flip side, if the employee leaves before vesting, the stock is forfeited.

Net Unrealized Appreciation (NUA) For Company Stock

Don’t elect for NUA treatment simply because of taxes. Give priority to what’s best for your financial goals. Align your asset allocation to your risk preference and capacity. Then determine the best course of action from a tax planning standpoint.

The Kinetix Blog