Question: So, is it fair to say that the biggest problem that a business owner faces with filing their taxes on time is due to their lack of focus? Is that the most common problem?

H.A. Beasley: I think any aspect of compliance with the government is an issue for a first time business owner or a small business operator whether it is taxes or some other aspect of regulation. Most entrepreneurs are good at the business part of what they do.  They don’t know where to start when it comes to addressing the necessary aspects of filing with tax laws.

Question: So if they don’t comply or if they are late, what are some of the consequences that occur?

H.A.: Well you know that is one of the interesting things; there are a lot of popular misconceptions about income tax compliance. Just talking for a minute solely about federal taxes, the late filing aspect of non-compliance is more expensive that late payment today.

For example let’s say I owe $50,000 worth of taxes because I have had a great year of business.  Say that April 15^th rolls around and I don’t file my federal tax extension paperwork or my federal return. I don’t send any money, I don’t do anything. The most expensive aspect of that is the fact that I didn’t file an extension for a return.   The IRS will begin immediately assessing 5% a month up to 25% in 5 months, from that $50,000 of tax that I owe, and that will become $62,500, just because I didn’t send in some paperwork.

Meanwhile the penalty for not paying taxes is dramatically less than that. It is a lot like working with a finance company, for the interest of penalties for not paying.

If we can help our clients to get used to the idea that they have got to file the paperwork, and if they can’t pay it immediately it is like dealing with any other creditor. We have got to be good with our paperwork and do what the creditor requires so that we can either get a payment plan or demonstrate that we aren’t presently able to pay.

We’ve found the IRS is very willing and able to work with people that are very good at communicating with them. The biggest penalty, to summarize, is they get people for not doing the paperwork. It may take a business to get on his feet; once he gets behind on his taxes it may take 2 or 3 years to pay those taxes. It would be relatively inexpensive to be late on payment so long as he has not failed to file all the required filing within the extended few days.

Question: How does the extension process work with the IRS?

H.A.: IRS Extensions are “automatic.”   Individual taxpayers are entitled to get one automatic extension that is good until October 15^th.   My understanding is that technically the IRS can challenge an extension with a tax is not fully paid but in my practice, I’ve never had them do that, that I can recall. So, an extension with the IRS does not require payment to be valid.

So in my prior example of the guy who owed $50,000, if he’s our client we’re going to send the extension off on April 14^th whether we know how much he owes or not. We’re going to get that extension ready and send it registered or certified or otherwise well known to the IRS that he’s filed his extension on time. That gives him the initial six months not only to determine how much tax he owes if he doesn’t know. But if the IRS doesn’t know how much he owes, they really can’t begin the collections process.

Filing an extension is also important because oftentimes for business owners that have had a great year and he would like to contribute to, lets say, a SEP IRA plan or some retirement program like that. SEP’s are one of the plans where, so long as you have filed valid extensions, you can make a contribution later…so…You can actually do after a year end tax planning with proper use of the extension.

Let me add that for Tennessee residents, Tennessee is a little more narrow-minded when it comes to the extension process. We’ve found that in order to get an approved extension you’ve got to pay the appropriate payment along with the extension.  That puts a great deal more pressure on taxpayers, especially business owners.

Stay tuned for next Thursday as we share Part Three of the interview with H.A. Beasley.

Lawyers from the ICS Law Group—and their guests—publish articles for business owners and successful individuals on a regular basis.  The articles are not a substitute for legal or other professional advice.

Lots of great events this week, It’s gonna be a busy one!!!

MONDAY

8 off 8th: East Nashville Underground Preview Party @ The High Watt

Check it out HERE for more info

Whiskey Jam @ Winners Bar & Grill

Check it out HERE for more info

TUESDAY

YEP Presents: Classic Country Revival May 15th @ 3rd & Lindsley

Check it out HERE for more info

WEDNESDAY

SOLID 15th Annual Crawfish Boil

Check it out HERE for more info

THURSDAY

The Trews Live @ The Rutledge

Check it out HERE for more info

FRIDAY AND SATURDAY

EAST NASHVILLE UNDERGROUND: Spring 2012

Check it out HERE for more info

Lawyers from the ICS Law Group—and their guests—publish articles of interest for business owners and successful individuals on a regular basis.  If you want advice you can rely on in your situation, please hire a competent professional.

Question: Let me start by asking you why people have such a hard time filing their taxes on time?

H.A. Beasley: There’s no doubt that there are many reasons, but one that I think is common and avoidable is that business owners don’t have the right method of tracking tax deductions and otherwise keeping their business books.

We work for a lot of small business owners who don’t have an experienced bookkeeper on staff.  Most of our clients who have hired an accountant or bookkeeper are so involved in other aspects of the business that they aren’t really in a position to know whether the records are complete and adequate. Tax time is when they usually finally discover that their records aren’t up to speed.  At that time they struggle with how to solve that problem on time once they’ve discovered it.

I think another related reason is, tax time comes around and business owners do get help from outside professionals and the experience doesn’t go all that well. Many business owners have had bad experiences in trying to get outside help.

Sometimes the combination of difficulty in keeping records and having to work with an outside professional puts a business owner in a spin.  Sometimes they don’t file needed tax returns for years. It’s common for us to new business owner clients come in to our office two, three, four or sometimes five years because of the bad experiences that started them down the road of not getting them filed.

Question: Five years of unfiled returns?

H.A.: It’s not uncommon. We’ve worked with entrepreneurs who had a bad experience with an inside person that they thought was keeping the records—and wasn’t.  We’ve also worked with owners whose businesses just took off so much that they were unable to get tax and financial work done in the office.

Whatever the reason is, it’s just not that uncommon. I am talking about very small businesses that don’t have a large staff that keeps things going for them. They don’t really have the time and intonation to supervise that staff.

Question: Would it be fair to say based on what you just said that it is the smaller businesses that are the biggest procrastinators when it comes to taxes?

H.A.: I think so. We are here in here in Middle Tennessee where so many effective business people are running their businesses out of a vehicle while using a cell phone, they don’t know where to start when it comes to gathering records as they go through their business year. They often will hire a person who says they can come in and sit down in the office and take care of it for them. But they are not really well equipped to evaluate how well the job has been done until the end of the year comes and they sit down and do taxes. And if things are missing it is very hard to gather those things after the fact.

Stay tuned for Part Two of our interview with H.A. Beasley, next Thursday.

Lawyers from the ICS Law Group—and their guests—publish articles for business owners and successful individuals on a regular basis.  The articles are not a substitute for legal or other professional advice.

Two important bills in the Tennessee estate planning world have recently passed both the house and the senate, and now just await expected signatures to become law.

The first bill, Senate Bill 2777, was introduced on January 23, 2012.  This bill, in its final version, eliminates the Tennessee gift tax retroactively to January 1, 2012.  Tennessee is one of the last states to retain a stand-alone gift tax.  A stand-alone gift tax is a tax that applies regardless of when the gift was made, as opposed to a gift tax on transfers made in contemplation of death.  If repealed in Tennessee, Connecticut will be the only state remaining that imposes a gift tax.  Currently, Tennessee imposes a tax at the graduated rate of 5.5% to 16% on gifts from one individual to another in excess of $13,000 in any calendar year.

The second bill, House Bill 3760, was introduced on January 30, 2012.  When introduced, this bill proposed increasing the maximum allowable inheritance tax exemption from $1 million to $1.25 million.  Since its introduction, the bill was amended to raise the exemption to $1.25 million for those dying in 2013; to $2 million for those dying in 2014, and to $5 million for those dying in 2015. For those dying in 2016 and thereafter, no inheritance tax will be levied.

Both of these bills were introduced with the objective of retaining wealth in Tennessee.  With the expected passage of these bills, there will be new wealth transfer planning opportunities for many Tennessee residents.

We’ll blog about some of these opportunities when bills become law.  Stay tuned!

Lawyers from the ICS Law Group—and their guests—publish articles for business owners and successful individuals on a regular basis.  The articles are not a substitute for legal or other professional advice.

In today’s blog we are looking at the cold hard facts of being in the music business in the 20th Century. Check out this article from American Songrwriter Magazine by clicking below:

Dream Big: How To Succeed In Today’s Volatile Music Biz

Lawyers from the ICS Law Group—and their guests—publish articles of interest for business owners and successful individuals on a regular basis.  If you want advice you can rely on in your situation, please hire a competent professional.

On May 9th FranNet, SCORE, TN Small Business Development Center and ICS Law Group will be hosting a one-day event for those wanting the freedom and control of owning their own business.  Presentations will be made by national franchise companies looking to expand in the Nashville market, as well as business experts who can assist in buying and growing a business.

If you know someone in career transition or looking for a semi-absentee opportunity, please feel free to forward this information on to them.

Wednesday, May 9, 2012
1:00 PM to 4:00 PM
Pre-registration at 12:30 PM

No Cost to attend with pre-registration.  $10 at the door.  Seats are limited.

Franchise Models
Learn about different franchise business models including:  Semi-Absentee Models, Business to Business (B2B), Business to Consumer (B2C), Executive-Level, as well as the latest developments in franchise financing, single and multiple territory options.

Featured Franchise Categories
Senior Care, Power Solutions & Distribution, Aging in Place/Healthcare Accessibility, Personal Care, Digital Marketing, Retail/Food and Therapeutic Massage.

Who Should Attend This Event?

• Business professionals in career transition
• Business professionals looking for semi-absentee owner models
• Individuals interested in learning about business ownership as a career option
• Individuals interested in learning about different financing options

Registration and raffle sign up begin at 12:30 pm.  An informative panel discussion with Q&A and presentations is provided by leading franchisors and business experts beginning at 1:00 pm.  At 3:00 pm travel from table to table and meet the franchise companies that interest you.  American Express Gift Cards and several copies of the book, “The E-Myth Revisited“, will be raffled at 3:50 pm.

This event is free, educational and has no strings attached.  However, there is LIMITED SEATING.

To pre-register for this event, visit: HERE

For additional information, email Dan Aronoff at DAronoff@FranNet.com or call 615-202-0225.  FranNet provides FREE guidance and support to individuals who are interested in purchasing a franchised business. FranNet consultants specialize in helping their clients find the right franchise through their exclusive matchmaking process.

With the summer approaching soon, has your business considered hiring an unpaid summer intern? Have college students approached your business inquiring about an unpaid summer internship? If your business is considering hiring an unpaid summer intern, beware, there is a risk that your “unpaid” summer intern might really be an employee. This means that your intern will be owed minimum wage and overtime.

Check out our Spring 2011 Newsletter for good information and helpful tips: HERE

 

Download the Spring Newsletter

Basic Estate Planning Considerations after Divorce

The divorce process unwinds and restructures of many aspects of two lives.  There is an unwinding of assets accumulated during the marriage.  The assets and allocation of income are frequently restructured to ensure that both spouses and minor children are provided for going forward.  Care and custody of any minor children is divided between the parents.

There also needs to be a re-thinking of plans put in place for taking care of loved ones, and of oneself, during life and at death.

Individuals finding themselves recently divorced should evaluate their estate plans, and in most cases, will need to make some updates.  Family law attorneys are not always well versed on the impact that divorce has on the estate plan of their client.  The following is a summary of the basic issues that everyone should be review with an estate planning attorney after divorce.

Beneficiary Designations.   Retirement accounts, life insurance, annuities and health savings accounts are among the types of accounts on which a beneficiary may be named.   In many cases, an individual names his or her spouse as primary beneficiary on these accounts.  Divorce does not automatically revoke an ex-spouse as beneficiary in all states, so a new beneficiary designation should be made.

In some cases, however, an alimony paying spouse may be required by the court to maintain an amount of life insurance equating to the value of future alimony payments, and name the alimony recipient spouse as beneficiary.  The beneficiary designation on the policy will then need to be worded correctly to direct who should receive the relevant portion of death benefit

One or both spouses may also be required to maintain a certain amount of life insurance for the benefit of their minor children.  For any required life insurance, and for any additional assets to be left to a minor child, it is wise to establish a testamentary trust to receive the funds.  A testamentary trust is one that comes into existence after death according to the terms set forth in a will.  There may be a requirement in the divorce agreement to name the ex-spouse as trustee, or another trustee may be named.  The trustee will be required to manage the assets according to the terms stated in the will.  That individual, in his or her capacity as trustee, should be named as the beneficiary on any asset intended to become part of the trust.

Guardianship.  Provided that neither parent has had their legal parental rights terminated, upon the death of one parent, the surviving parent typically becomes the sole guardian.  But if both parents die, or if one parent has had their parental rights terminated, or should be later deemed unfit, it will be necessary for the court to appoint a legal guardian of any minor children.  The court will look to the parent’s will for guidance in naming the guardian, so it is wise to include in the will as much direction in this regard as possible.

The guardian will, in most cases, also be responsible for the management of the assets of the minor unless other specific plans are made.  As previously stated, the guardian will likely be the ex-spouse, and most recently divorced individuals aren’t thrilled about the idea of their ex-spouse getting their hands on any of their assets.  Establishing a testamentary trust for the benefit of the child that sets forth rules as to how much may be spent and for what purposes is one way to take some of that control out of the surviving parent’s hands.  The named trustee is required to follow the rules put in place, and distributions to the guardian will be limited to those needs.  A testamentary trust can ensure that the assets are used solely for the benefit of the children.

Powers of Attorney.  A complete estate plan will include medical and general durable powers of attorney.  Most married couples grant each other the authority as their primary agent to act on his or her behalf.  After a divorce, most do not wish to have their health care and financial decisions in the hands of their ex-spouse.  The general durable power of attorney gives the agent authority to act over a very broad range of matters, and it is frequently written so that it is effective upon signing, not incapacity, so it is imperative to revise that document as soon as it becomes evident that the agent may not act in the grantor’s best interests.  In many cases this should be done well before the divorce is final.

Remarriage.  When a parent remarries, it is extremely important for that individual to assess the impact on his or her estate.  In Tennessee, when a spouse dies without a will, the surviving spouse is entitled to an intestate share, which is at least one third of the probate estate.  When there is a will, Tennessee law provides that surviving spouse is automatically entitled to what is called an elective share, which is a percentage of the estate based on years of marriage, and surviving spouse can elect to take that share in lieu of what was provided for the surviving spouse in the will.  This is available to the surviving spouse, even if under the will gives the surviving spouse nothing.

There are ways to avoid or limit these automatic rights.   A prenuptial agreement can spell out exactly what interests both parties will have to each other’s assets in the event of divorce or death.  When properly drafted and executed, these agreements can also waive any right to elective share. A properly drafted will or trust, along with a coordination of beneficiary designation on assets, can also ensure that all loved ones are provided for exactly as intended.

Unintended consequences can occur if the issues raised in this article are not examined after divorce.  It is important to consult an experienced estate planning attorney after a divorce to think through the details, and to ensure that those who are intended to be taken care of, in fact, are.

Lawyers from the ICS Law Group—and their guests—publish articles for business owners and successful individuals on a regular basis.  The articles are not a substitute for legal or other professional advice.

For this weeks Music Monday, we are sharing an article from JamMobLog on how much mobile devices have influenced the music industry and has the impact been a positive or negative one? Check out the article below:

The Impact of Mobile on the Music Industry

Lawyers from the ICS Law Group—and their guests—publish articles of interest for business owners and successful individuals on a regular basis.  If you want advice you can rely on in your situation, please hire a competent professional.

Question: What are the asset protection characteristics of Section 529 accounts?

Answer: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created special bankruptcy protections for Section 529 plan accounts.

A full federal bankruptcy exemption is provided only for funds contributed to Section 529 plans more than two years prior to the bankruptcy filing. The protection is limited to $5,000 for funds held for one to two years, and funds seasoned for less than one year are not protected at all.

The protections apply only where the account beneficiary is a child or grandchild of the debtor.  Step relatives are included in those categories.

In addition to the federal bankruptcy protections, individual state laws may also protect their residents’ in-state Section 529 accounts from the claims of the account owner’s (or beneficiary’s) creditors.  A few states, such as Tennessee, extend their protection to all Section 529 plans.  Here’s an excerpt from Tennessee Revised Codes Section 49-7-822:

Notwithstanding any law to the contrary, all assets, income and distributions of college education savings plans authorized by federal law…shall not be subject to execution, attachment, garnishment, the operation of bankruptcy, the insolvency laws or other process whatsoever, nor shall any assignment thereof be enforceable in any court. This exemption shall include, but is not limited to, plans defined in § 529 of the Internal Revenue Code, codified in 26 U.S.C. § 529….

Lawyers from the ICS Law Group—and their guests—publish articles of interest for business owners and successful individuals on a regular basis.  If you want advice you can rely on in your situation, please hire a competent professional.