business income planning who can benefit ? any one who gets 1099-misc. or reports income on sch. c,...

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Business Income Planning Who can benefit ?Any one who gets 1099-Misc. or reports

income on Sch. C, Partnership, S-corp., LLC, LLP K-1

Different planning optionsAction must be taken by you ! Government has there own Plan - “ Take All

We Can !”


Bad News, Good News!Bad News – Taxes have already gone up - CA

State tax rates are 4%, Federal tax rates went up in 2013 as well.

Good news – you can choose to keep your taxes low. Only if you do proactive planning and take action before it’s too late.


Traditional Planning Ideas

Accelerate deductions -- pay property tax earlier

Convert regular income into capital gainsContribute to SEP IRA, PSP , IRA, 401(k), 403bCharitable contributionsCharitable Giving - CRT, Donor-advised fund


Usual Recommended Planning IdeaDB Plans for business / professional incomeGrowth inside the DB plan is tax-deferred Withdrawals or Income from DB plan is

taxed as Ordinary income Govt. requires the income distribution (RMD)

after age 70.5 yrs even if no income is required in retirement

Balance in DB Plan is subject to estate tax


Better Cutting Edge Planning Idea S.79 PlanTax Deductible to C CorpIt is a Group Benefit plan Get Tax Free Income


What is S 79 Plan?It is an IRS-approved group benefit plan for

all eligible employees of a corp. provided it is offered on non-discriminatory basis

Tax-free benefit up to a prescribed limitBenefit over the limit is taxable based on

calculation of economic benefit formula


Characteristics of the PlanIt is a corporate-sponsored planPlan is NOT owned by corporationPlan is individually-ownedIt is a compromise between traditional qualified plan

and Roth IRA …But Best of Both !Contributions are partially deductible Growth is tax-deferredDistributions are Tax-freeTransfer is Estate Tax-freeNo RMD’s required NO age restrictions for distributions from the plan


Salient Features of the Plan

For less than 10 employee company, the contributions are limited

For more than 9 employees company, there is no limit

It is a 5-year planTwo plans can be done in parallel Every 5 years, a new plan can be done


Salient Features – contd.Plan is administered by TPA appointed with

IRSPlan is only offered by two insurance

companies IRS has pre-approved the plans of both the

insurance companiesInvestments choices available to participants

from a menu of choicesNO downside market risk, only Upside

potential up to cap limits

business income planning who can benefit ? any one who gets 1099-misc. or reports income on sch. c,...

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