In a couple groups that I participate in, both have recently gone through studies on what it looks like to be a submitted leader. One of the groups was at Heartland Community Church in Olathe this past month. While I was honored to participate on a panel of other Kansas City business leaders in the video, some of their stories and perspectives served as a refreshing reminder to be intentional in my own growth in this area of leadership development.

For your business and current role, how might you define submitted leadership?



One of the attractions of leasing a car is that it generally requires a much smaller upfront outlay of cash compared to what purchasing a car might require.

This preference to minimize an upfront cash payment may mean that some individuals may also roll into the lease payment other associated costs, including the capital-reduction amount (or down payment).

While the predictability of a known payment amount for a set period of time may be convenient, rolling up such costs into the lease payment may create a financial risk in the event that you experience a total loss from an accident or similar misfortune. In some cases, what you owe may exceed the value of the car and the amount of the reimbursement you receive. ¹

You can protect yourself against this potential risk by buying gap insurance, which is designed to cover the difference between what conventional auto insurance covers and what you owe at the time of the loss.

Gap insurance may be added to your existing auto policy or purchased separately.

How Much Gap Insurance Do I Need?

The gap between the value of the car and what you may owe is predicated on a number of variables, such as the depreciation of the car, the number of payments made and even the nature of the deal you negotiated. As you might have guessed, the relationship between these variables means that the amount of gap insurance you may need can vary over time.

To obtain adequate coverage, you should contact your insurance agent and work with him or her to determine the necessary coverage amount.

  1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.



By April 20, 2018, 138 million taxpayers had dutifully filed their federal income tax returns.¹ And all of them made decisions about deductions and credits — whether they knew it or not.

When you take the time to learn more about how it works, you may be able to put the tax code to work for you. A good place to start is with two important tax concepts: credits and deductions.²


As tax credits are usually subtracted dollar for dollar from the actual tax liability, they potentially have greater leverage in reducing your tax burden than deductions. Tax credits typically have phase-out limits, so consider consulting a legal or tax professional for specific information regarding your individual situation.

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Here are a few tax credits that you may be eligible for:

  • The Child Tax Credit is a federal tax credit for families with dependent children under age 17. The maximum credit is $2,000 per qualifying child.³

  • The American Opportunity Credit provides a tax credit of up to $2,500 per eligible student for tuition costs for four years of post-high-school education.

  • Those who have to pay someone to care for a child (under 13) or other dependent may be able to claim a tax credit for those qualifying expenses. The Child and Dependent Care Credit provides up to $3,000 for one qualifying individual, or up to $6,000 for two or more qualifying individuals. 


Deductions are subtracted from your income before your taxes are calculated, and thus may reduce the amount of money on which you are taxed and, by extension, your eventual tax liability. Like tax credits, deductions typically have phase-out limits, so consider consulting a legal or tax professionals for specific information regarding your individual situation.

Here are a few examples of deductions.

  • Under certain limitations, contributions made to qualifying charitable organizations are deductible. In addition to cash contributions, you potentially can deduct the fair market value of any property you donate. And you may be able to write off out-of-pocket costs incurred while doing work for a charity. 

  • If certain qualifications are met, you may be able to deduct the mortgage interest you pay on a loan secured for your primary or secondary residence. 

  • Amounts set aside for retirement through a qualified retirement plan, such as an Individual Retirement Account, may be deducted. The contribution limit is $6,000, and if you are age 50 or older, the limit is $7,000 in 2019 (up from $5,500 and $6,500 respectively in 2018). 

  • You may be able to deduct the amount of your medical and dental expenses that exceeds 10% of your adjusted gross income.¹

Understanding credits and deductions is a critical building block to making the tax code work for you. But remember, the information in this article is not intended as tax or legal advice. And it may not be used for the purpose of avoiding any federal tax penalties.

  1. Internal Revenue Statistics

  2. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

  3. Internal Revenue Service

  4. Internal Revenue Service

  5. Internal Revenue Service

  6. Internal Revenue Service

  7. Internal Revenue Service. The Tax Cuts and Jobs Act of 2017 allows individuals who are married filing jointly to deduct interest on up to $750,000 of mortgage debt incurred to buy or improve a first or second home. Single filers can deduct up to $375,000.

  8. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions.

  9. Internal Revenue Service

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2019 FMG Suite.



Estate planning isn't just for the rich and famous. Many people mistakenly think that they don't need an estate plan anymore because of the latest tax law changes. While it's true that the Tax Cuts and Jobs Act (TCJA) provides generous estate tax relief, even for well-to-do families, the need for estate planning has not been eliminated. There are still numerous reasons to develop a comprehensive estate plan and regularly update it.

How the Estate Tax Has Evolved

Several recent tax law changes, including certain provisions of the TCJA, may help you shelter all or a large portion of your estate from estate and gift tax.

At the turn of the century, the unified estate and gift tax exemption was a mere $675,000. It was increased to $1 million in 2002, while the top estate tax rate was 55%. Then legislation gradually increased the estate tax exemption to $5 million for 2011, indexed annually for inflation, and lowered the top estate tax rate to 35%. (There was a one-year moratorium on federal estate tax for people who died in 2010.)

Along the way, the unified estate and gift tax exemptions were severed and then reunified, as they remain under current law. Therefore, any amounts used to cover lifetime gifts erode the remaining estate tax shelter.

Notably, subsequent legislation also created and then preserved a "portability" provision. This allows the estate of a surviving spouse to use the unused portion of the deceased spouse's exemption. So, it effectively "doubled" the $5 million exemption for married couples to $10 million.

Starting in 2018, the TCJA officially doubled the estate exemption per individual from $5 million to $10 million, with annual indexing for inflation. For 2019, the exemption is $11.4 million for an individual or $22.8 million for a married couple. However, these provisions are scheduled to expire after 2025. For 2026 and thereafter, the law will revert to pre-2018 levels, unless Congress takes further action.

Why Estate Planning Still Matters

Given the dramatic increase in the unified estate and gift tax exemption over the last 20 years, there's a common misconception that federal estate planning is a concern of only the wealthiest individuals. But here are four valid reasons for people with estates below the unified exemption threshold to devise a plan — or revise an existing plan to take advantage of current tax law.  

1.     Family changes. Most mature adults have created a will. Some also have set up trusts to maximize each spouse's exemption and protect assets from creditors and spendthrift family members.

However, circumstances change over time. Is your old list of beneficiaries still complete and accurate? You may need to update your will and estate plan to reflect births and (unfortunately) deaths and divorces in the family.

Who's listed as the executor of your estate? The executor is the quarterback of your estate planning team. Maybe your children were minors when you originally drafted your plan, and now your grown children may be better suited to serve as executors than your aging parents.

Carefully select your executor and successor (to serve as a backup executor in case the appointed executor predeceases you or is otherwise unable to fulfill the duties). To prevent problems after you die, consider meeting with the successor to iron out any potential problems and discuss the challenges that must be met. Even if your first choice is still on board, you may periodically want to "check in" and review matters.

Your estate plan also may need an overhaul if you've divorced, especially if you've remarried and your new spouse has children of his or her own. Along the same lines, one or more of your children may have divorced, requiring adjustments to your estate plan. The need to update your plan could even extend to pets that need care if you should unexpectedly pass away.      

2.     Changes to assets and liabilities. It's a good idea to review your estate plan any time there's a significant change in the value of your estate, including the value of any business interests, real estate or securities you own. A major increase or decrease in the value of one asset could cause you to rethink how your holdings will be allocated among your beneficiaries. Similarly, the sale or purchase of an asset may require adjustments to your plan. 

3.     Change in residence. State law generally controls estate matters. Therefore, the state where you legally reside can make a big difference. The differences may range from the number of witnesses required to attest to a will to the minimum amount a spouse must inherit from an estate. Furthermore, the legal state of residence may affect other estate planning documents besides your will, such as a power of attorney, living will or advance medical directive.

If you're moving to another state, or you've already moved, meet with a local estate planning advisor to review your current plan and determine whether changes are needed. This is especially important when you have a substantial estate for tax purposes. Sometimes, an old home state may assert that a person didn't change his or her legal residence and continue to pursue state death tax obligations.

4.     Estate tax changesIf you haven't updated your estate plan since the TCJA passed, it's worth checking in with your estate planning advisor to ensure your plan reflects current tax law. The wealthiest individuals may still set up complex estate planning strategies to shield their estates from federal estate tax. But simple trusts may still be used to protect assets from creditors and guard against spendthrift family members.

Also, beware that the estate tax provisions of the TCJA are in effect only through 2025 — and there are no guarantees the current estate tax levels will remain in effect until then. Congress could change the law again before 2026 — or make it permanent.

Moreover, the federal tax law changes don't provide protection on the state level. So, it's important for your estate plan to take any applicable state death taxes into account.

Time to Update

Too often, well-intentioned taxpayers create an estate plan, including a will, and then stick it in a drawer or safe deposit box where it gathers dust. This can potentially leave a legacy of estate tax complications and frustrations for your family members when they can least afford it, financially and emotionally. To ensure your final wishes are kept and your assets are preserved, work with an estate planning professional to devise a flexible, comprehensive plan and then review it on a regular basis.



When the owners of a family business are ready to sell, there are numerous considerations. One of the most important is handling the sale in a tax-wise manner.

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In most cases, the buyer wants to make a direct purchase of the business's assets — as opposed to buying all the ownership interests in the legal entity used to conduct the business. A direct asset purchase allows the buyer to "step up" the tax basis of the acquired assets to reflect the purchase price. That means bigger post-purchase tax write-offs for depreciation, amortization, cost of goods sold and so forth.

A specific set of federal income tax rules applies to these transactions. Sellers who plan ahead can minimize their tax bills. Those who don't often pay too much to Uncle Sam and their state tax collectors.

Ground Rules

When assets that constitute a business are sold, the IRS requires the seller and buyer to use a certain method to allocate the total sale price to the specific assets involved.

On the seller side, this allocation assigns the total sale price to specific items to allow the seller to calculate taxable gains and losses asset by asset. On the buyer side, the allocation establishes the buyer's tax basis in each acquired asset.

The following basic procedure is used by both seller and buyer to allocate the purchase-sale price for tax purposes:

Step 1. First, allocate the price dollar for dollar to any cash and CDs included in the deal. Next, allocate the remaining price to government securities, any other marketable securities and any foreign currency holdings — up to the fair market values.

Step 2. Allocate the price remaining after Step 1 to any receivables — up to fair market values.

Step 3: Allocate the price remaining after Step 2 to any inventory or other assets held primarily for sale to customers in the ordinary course of business — up to fair market values.

Step 4. Allocate the price remaining after Step 3 to generic business assets, including "hard assets" such as equipment, furniture and fixtures, buildings and land. The amount allocated to each asset must be proportional to the asset's fair market value, but not in excess of that amount.

Step 5. Allocate any price remaining after Step 4 to amortizable intangible assets other than goodwill. This category generally includes purchased intangibles that can be amortized for federal income tax purposes over 15 years. The amount allocated to each specific intangible asset must be proportional to the asset's fair market value, but not in excess of that amount.

Step 6. Any price remaining must be allocated to goodwill.

Insist on an Appraisal that Delivers Acceptable Tax Results

The allocation outlined above seems cut-and-dried. But it really isn't because the process of determining the fair market value of business assets is more of an art than a science. As a result, there can be two or more legitimate appraisals for the same business assets — and one may give you significantly better tax results.

Example: Let's assume you and the other shareholders of the family S corporation agree to sell the company's assets for $3,000,000. For the sake of simplicity, assume the assets consist of inventory, machinery, a building, land and goodwill. You want to minimize amounts allocated to inventory and machinery, because gains from those assets are passed thorough as "ordinary income" to you and other shareholders and taxed at regular rates of up to 37%.

On the other hand, you want to maximize amounts allocated to the land and goodwill because gains from those assets are taxed at no more than 20% (not counting the 3.8% Medicare surtax on net investment income that will be owed by some upper-income individuals). As for the building, gain up to the cumulative amount of depreciation deductions will be taxed at a maximum rate of only 25%. Any additional profit qualifies for the 20% long-term capital gains rate. So a relatively high allocation to the building is likely to be preferable to you and the other sellers.

The buyer hires a professional appraiser to estimate specific fair market value figures for the assets included in the deal. Of course, the buyer has a tax incentive to maximize amounts allocated to inventory (which will be sold quickly), machinery (which can be depreciated over seven years) and goodwill (which can be amortized over 15 years). The buyer also has a tax incentive to minimize amounts allocated to the building (which must be depreciated over 39 years) and the land (which must be permanently capitalized for tax purposes). The appraiser comes up with the following fair market values:

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The buyer likes this appraisal because it allocates 65% of the purchase price to assets that can be written off relatively quickly (inventory, machinery and goodwill) and allocates only 13% to the land. However, as the seller, you are disappointed, so you hire another professional appraiser for a second opinion. This appraiser comes up with the following fair market values:

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You're satisfied with the second appraisal because it assigns 75% of the sale price to the building, land and goodwill, which are all low-taxed capital gain assets. By doing so, the second appraisal delivers much better tax results for you and the other sellers. So the next step is to negotiate a set of appraised values that deliver tax results you and the buyer can live with. There are bound to be differences, but once you have those valuations you can use them to allocate the purchase-sale price according to the six-step procedure explained above.

Remember: The appraisal work and any negotiations regarding appraised values should occur before the terms of sale are finalized. Contact your tax advisor for more information about arranging a tax-smart sale of assets for your family business.


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While some employers are determined to hire young workers, many smart business owners and managers have noticed older individuals have work skills and habits that make them especially valuable in the workplace.

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The percentage of older employees in the U.S. workforce is increasing. In the ten-year period ending in 2016, the Bureau of Labor Statistics projects the number of those in the workforce age 55 to 64 will rise by 36.5%. For those over 65, the projected rise is at least a whopping 83%.

As the percentage of younger workers continues to shrink, it becomes even more important for employers to consider how they can attract and retain mature employees who have the skills needed. Given the changing demographic of the workforce, this is true regardless of the economy.

To help employers achieve the goal of attracting and keeping older employees, the AARP released what the association calls the "Employer Best Practices for Mature Workers." This report is based primarily on an extensive review of the applications submitted by the 35 winning companies named in recent years as "AARP Best Employers for Workers Over 50."

These Best Practices firms include 12 hospitals, four financial services firms, and three insurers. Among the 35 winning firms are Deere & Company, Lincoln Financial Group, Minnesota Life, New York University Medical Center, Pitney Bowes, Principal Financial Group, Sonoco, Volkswagen of America, West Virginia University Hospitals and Zurich North America.

From the AARP study, here are nine "Best Practices for Mature Workers" revealed by the AARP study:

  • 1. Have a self-nomination process for job openings for career movement. Encourage employees to seek advancement and special assignments. Also, encourage managers to seek out opportunities with employees as part of the annual performance review process.

    2. Offer a phased retirement option. For example, allow employees to collect their full retirement benefits while continuing to work part-time or reduced hours while also allowing health and ancillary benefits. 

    Allow long-tenured and older employees to stagger or reduce their work hours, even to part-time or per-diem status, without jeopardizing benefits otherwise not available to part-time employees.

    3. Rehire retirees as temporary and replacement employees. Provide retirees with re-entry training and flexible schedules.

    4. Establish pools of retirees who can be called in times of increased labor demand.

    5. Give mature employees individual accommodations. Some examples:

    • The Principal Financial Group purchased a magni-cam to help an employee who developed vision difficulties. This way the employee, placing paper documents under a camera, could view them on a TV monitor.

    • Pitney Bowes retrained a mature employee who developed a chronic heart condition. The employee, previously in a strenuous job, transitioned to a less strenuous job that required computer skills.

    • At Adecco Employment Services, Melville, NY, a blind IT Help Desk Analyst got help to perform his job. The help included special hardware and software, and a workstation large enough to accommodate his dog. A buddy system helped the employee navigate through the building.

    6. Partner with local educational institutions. Bring classrooms into the workplace to make it convenient for current employees to receive training and upgrade their skills.

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7. Commit to a Lifelong Learning policy. Not only encourage employees to continue their learning, but actually hold them accountable for upgrading their knowledge and skills throughout their careers.

8. Have a job-sharing program.Allow employees who want to work part-time or fewer hours to share the same job.

9. Have a Flexible Spending Account program for employees. Allow employees to put away money for elder care, pretax. 

Example: Volkswagen of America allows employees to allocate $5,000 in pretax earnings to a Flexible Spending Account.



If rising health care costs have sent your company searching for ways to reduce expenses, you should know there are alternatives to standard medical insurance plans. Your choices are not limited to either paying the higher costs yourself or transferring the burden to your employees. Tax-advantaged strategies are available which can mitigate the effect of rising costs for you and your staff members. Here are three ideas to consider.

1. Establish a Health Insurance Premium-Only Plan (POP) 

This super-simple option is often a good choice for small employers. With a POP, your employees are charged via payroll withholding for their share of health premiums. These withholdings are considered salary reductions for federal income tax, Social Security tax, and Medicare tax purposes. In other words, the POP allows your employees to pay their share of health insurance premiums with pretax dollars, which can save them a substantial amount of taxes over the course of a year. 

At the same time, your company's taxes are also reduced. Reason: the salary reduction amounts are exempt from the employer's share of Social Security tax and Medicare tax. For 2019, the employer's share of these taxes is 7.65% of the first $132,900 of each employee's salary, including bonuses, plus 1.45% of compensation above $132,900 (up from $128,400 for 2018). Individuals with earned income above $200,000 or married couples with earned income above $250,000 must also pay an additional 0.9% in Medicare tax (no limit).  

Because a POP is considered a "cafeteria benefit plan," it's governed by Section 125 of the Internal Revenue Code. This means your business will need to install a written plan and employee enrollment procedures when setting up the program. The POP cannot discriminate in favor of highly compensated employees or key employees. Despite these restrictions, it's generally easy and inexpensive to establish a POP with professional help. 

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Basic cost-reduction strategy:First, shift a higher percentage of premiums for employee health coverage to your employees. This reduces your company's costs. Then set up a POP to give your employees an offsetting benefit in the form of reduced income tax, Social Security tax, and Medicare tax. The same strategy also cuts the company's tab for Social Security and Medicare taxes.

2. Set Up a Flexible Spending Account Plan

Setting up and operating a Flexible Spending Account (FSA) is more complicated than the POP option. Therefore, these plans are probably best suited to businesses with a larger number of employees. 

Here's how FSAs work: Your company sets up a health care flexible spending account for each participating employee. Then, the employee makes an annual election to contribute a specified dollar amount of his or her salary to the FSA and these contributions are withheld from the employee's paychecks. To be reimbursed, the employee submits a claim for his or her share of health insurance premiums and uninsured medical expenses (up to the annual amount contributed to the FSA). The reimbursements are tax-free to the employee.

Employee FSA contributions are considered salary reductions, which means they are exempt from federal income tax, Social Security tax, and Medicare tax. So they allow your employees to pay out-of-pocket medical expenses (including their share of health premiums) with pretax dollars. Your company's taxes are also reduced, because the salary reduction amounts are exempt from the employer's share of Social Security and Medicare taxes.

Like POPs, FSA plans are considered "cafeteria benefit plans" under Section 125 of the Internal Revenue Code. Therefore, your business will need to install a written plan and employee enrollment procedures. The plan cannot discriminate in favor of highly compensated employees or key employees. An FSA plan also requires significant administrative effort to enroll employees, handle the necessary payroll withholding, and process reimbursement claims. Many companies find it cost-effective to hire a third-party plan administrator to take care of all the details. 

Finally, many companies place an annual lid on the amount an employee can contribute to the health care FSA. This is important, because employees can request reimbursement for expenses up to their annual contribution long before the contributions have actually been collected through the payroll withholding. Under the Patient Protection and Affordable Care Act (PPACA), the limit is $2,700 for 2019 ($2,650 for 2018). This limit will be adjusted for inflation in subsequent years.

Basic cost-reduction strategy: First, shift a higher percentage of employee health premiums to your employees, or increase the insurance plan deductibles. Or take both actions. Your company's costs will be reduced. Then, set up an FSA plan to give your employees an offsetting benefit in the form of reduced income, Social Security, and Medicare taxes. The FSA also cuts the company's Social Security and Medicare tax bills.

3. Install a Health Reimbursement Arrangement (HRA)

The option to set up an HRA can be attractive to larger employers. Here's how it works: Every year, the company agrees to contribute a fixed amount to each eligible employee's account. Employee contributions are not allowed. The company deducts the HRA pay-ins. However, the contributions are tax-free to employees (no federal income tax, Social Security tax, or Medicare tax). Your employees can then submit claims to be reimbursed for uninsured medical expenses, including their share of health insurance premiums, if applicable. Reimbursements are tax-free. In effect, the employee is able to pay for out-of-pocket medical expenses with pretax dollars, up to the amount contributed to the employee's HRA account. 

Since your company must pay for all HRA contributions, this arrangement only saves money when it's combined with a much-less-generous employee health insurance program. The idea is that your company's health insurance costs will be drastically reduced, which allows you to return some of the cost savings to employees in the form of HRA contributions.

Basic cost-reduction strategy: First, switch your health insurance plan to one which greatly reduces your company's premium costs, which of course, means it provides less benefits to employees. Then, return a portion of the savings to employees via the tax-favored HRA arrangement.

Conclusion: Finally, note that employers will face a wide array of responsibilities and requirements under the PPACA. Your employee benefits adviser can help you explore the options available to your business.



Congratulations to the graduating class of 2019! As soon as a new graduate switches his or her tassel to the other side of the cap, it's time to plan for the future — and there's more to do than finding a good-paying job. Smart financial planning in the first few years after graduation can make a big difference in the years ahead. Here are five tips to help new grads prosper. Smart financial planning in the first few years after graduation can make a big difference in the years ahead. Here are five tips to help new grads prosper.

1. Make (and Follow) a Budget

You don't have to be an economics major to know that you shouldn't spend more than what you earn. However, if you really want to get ahead, do an inventory of your income and expenses. Differentiate needs from wants. For example, eating is a necessity, but eating out at restaurants should only be an occasional splurge.  

When drawing up your budget, figure out how much you need to live on. Give yourself an "allowance" for discretionary items and set a monthly savings goal. Beware: You don't want to overextend yourself and then live paycheck to paycheck.

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This can cause stress if you unexpectedly lose your job, become disabled or incur a major medical bill or car repair. Allocate a predetermined amount from each paycheck to go directly to a separate savings account. By keeping your savings separate, you won't be tempted to spend that amount on discretionary items, like a new jacket, concert tickets or a trip to Europe.

As a rule of thumb, you should have a "rainy day fund" of three to six months of net take-home pay. If an emergency happens, you'll be grateful for your savings.

2. Build Your Credit

Following a budget doesn't mean you have to live an austere lifestyle. It should include a little "mad money" for fun and for discretionary spending, such as vacations, dining out, pets, clothing and personal pampering. Credit cards can be a convenient way to pay for these items and track the expenditures. Plus, credit cards often accrue rewards points that can be redeemed in the future.

Most college students already have a credit card in their names. If you don't have a card yet, sign up for one immediately and pay the charges on time every month. Doing so puts you on the road to establishing a solid credit score, which will come in handy when you apply for a car loan or mortgage.

Never let your credit card balances spiral out of control. If you continue to pay off your balance every month, you'll avoid high interest charges on outstanding amounts.

You can also establish credit by:

  • Renting an apartment or home (instead of living with your parents),

  • Paying monthly bills (such as utilities, phone and cable Internet), and

  • Buying or leasing a vehicle.

Another financially savvy way to save money and build credit is to take advantage of interest-free financing offers on large purchases. These are often available for furniture, electronics and major appliances. But there's a catch: Pay off the balance in full before the deal expires or you'll likely incur high interest charges going back to the date of purchase.

3. Save for Retirement

How soon should new grads start saving for retirement? The sooner, the better. So, when you start your full-time job, take advantage of any employer retirement program as soon as you're eligible. If you're lucky, your employer might also contribute funds to your retirement up to a predetermined matching limit.

Most employers allow workers to participate in a qualified retirement plan, such as a SEP or 401(k) plan. These programs allow you to contribute pretax dollars to the account and allow them to grow, tax free, until you withdraw funds during retirement. You also may supplement your company's plan with IRAs and other tax-favored retirement accounts and investments.

4. Find a Place to Live

Deciding where to live is tied to many variables, including your job, family and personal preferences. But finances are the top consideration.

Depending on where you live and how much you earn, you probably can't move into your dream home right away. This is especially true if you work in a high-cost area. For instance, the cost of a studio apartment in a major city could be the same or even more than that of a 3-bedroom, single-family home out in the country.

Be realistic about how much you can afford. As a rule of thumb, you generally can spend up to a third of your monthly net pay on housing. If your starting income is modest, you may have to pay a higher percentage of your take-home pay.

When you have enough money for a down payment, consider buying a condominium, townhouse or single-family home. Interest rates are currently near historic lows. Plus, home ownership still offers tax benefits, especially if you expect to itemize deductions on your tax return after a purchase.

Warning: The Tax Cuts and Jobs Act (TCJA) limits itemized deductions for mortgage interest and property taxes for homeowners for 2018 through 2025. The state and local tax (SALT) limit is most likely to affect taxpayers in states with high tax rates and/or those who have significant taxable income.  

Other options, such as sharing an apartment with a roommate, may allow you to save more money until you can afford a place of your own. Alternatively, if you can, you might live with your parents for a while and accumulate even more savings until you're ready to move out.

5. Get Your Wheels

Depending on where you live and work, a vehicle may be a necessity or a discretionary purchase if you can get from place to place by walking, bicycling or using public transportation. Often, recent grads can't afford their dream cars right away. So, some may lease; others choose an economical vehicle that they can finance at a reasonable interest rate. To facilitate a car loan application, follow these steps:

  • Check your credit to ensure that you're entitled to a favorable rate.

  • Obtain quotes for loans. Get at least three rates at banks, credit unions and car dealerships.

  • Find a willing co-signer, such as a parent or grandparent, if your credit rating is subpar or you haven't established any credit yet.

If you end up financing through a dealership, mainly because it's convenient, you may decide to pay off the original loan rate later with a loan at a lower rate. If you choose this path, make sure the original loan doesn't include any prepayment penalties.

When budgeting for a new or used vehicle, remember that expenditures extend beyond the original purchase price. That is, you'll have to pay for auto insurance, gas, maintenance and repairs. These costs can quickly add up — and may eat away at your savings.

Need Help?

From credit scores and retirement to housing and transportation, there are a lot of major decisions to make soon after graduation. Fortunately, your financial advisors can mentor you as you enter the workforce and later as you progress in your career and personal life.


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If your family business operates as a C corporation, watch out for double taxation whenever you withdraw cash from the company. If the corporation has current or accumulated earnings and profits, the IRS generally considers payments to shareholders to be taxable dividends -- unless there's proof they were for another purpose (such as compensation for services or payments on a loan to the company).

The problem: Dividends mean double taxation. Your corporation gets taxed once on the income that produces the dividend and you get taxed again upon receiving it. Fortunately, there are strategies to prevent double taxation. Here are five to consider.

1. Include Third-Party Debt in the Corporation's Capital Structure

Occasionally, your company may need cash to pay for capital improvements or to finance growing levels of receivables and inventory. You generally have two choices. You can inject your own cash into the company or arrange for the company to borrow the money from a third-party lender. From a tax perspective, it's usually better to go the loan route. Why? There's less chance you'll need to withdraw double-taxed dividends later on because you have less of your own cash tied up in the business.

Tip: Be sure third-party loans are taken out in the corporation's name and not in your name. If you borrow personally and then contribute the loan proceeds to the company's capital, you may be forced to withdraw taxable dividends later on to pay the interest and principal on the personal loan.

2. Don't Contribute Capital -- Make Company Loans Instead

Let's say you and the other shareholders have more than enough cash to personally fund your family C corporation's growing capital needs. In that case, it's generally wise to include debt in the company's capital structure (as opposed to contributing more equity capital). Arrange for the debt to be owed to you and other shareholders personally, rather than to a third-party lender. This way, you'll receive taxable interest payments on the loan without double taxation because your corporation receives an offsetting interest expense deduction. You'll also collect tax-free principal payments on the loan. In contrast, if you make a capital contribution and then need to withdraw cash from the business later on, the withdrawals may effectively be double taxed.

3. Charge Your Corporation for Guaranteeing its Debt

As a shareholder of your family C corporation, you may be required to guarantee company debt. When this happens, consider charging the company a fee. You deserve to be compensated for issuing a guarantee that puts your personal assets at risk. (The guarantee fee is a deductible expense for the company.) Of course, you are taxed on the fee you receive and it must be reasonable, but double taxation is avoided because the company gets an offsetting deduction. You can continue charging the fee as long as the guarantee remains in force. (Source: Tulia Feedlot, Inc. v. U.S.,Ct. Cl. 1982)

Tip: Corporate minutes should reflect that you demanded a guarantee fee.

4. Lease Assets to the Company

It's generally not a good idea for your family C corporation to own assets that are likely to appreciate in value. Why? If the company later sells an appreciated asset and distributes the profit to you, it may be treated as a double-taxed dividend.

A smarter tax alternative is to keep personal ownership of business assets that are expected to appreciate (such as real estate). Then, lease the assets to your C corporation. If other family members are also shareholders, set up a partnership or LLC to own the assets and lease them to the company. The payments are a deductible expense for the corporation so cash comes to you in the form of lease payments, without double taxation.

For you personally, the lease payments are taxable income, but you may be able to claim offsetting deductions for depreciation or amortization, interest expense on mortgaged assets, property taxes and so forth. Even better, if the asset is eventually sold for a profit, it won't be hit with double taxation.

5. Collect Generous Company-Paid Salary and Perks

Two more ways to avoid double taxation are with:

  • Salary and bonus paid to you as a shareholder-employee of your family C corporation.

  • Company-paid fringe benefits provided to you as a shareholder-employee.

As long as the salary, bonus and benefits represent reasonable compensation for your services, the company can deduct them as business expenses. Therefore, double taxation is avoided. Plus, some company-paid benefits are tax-free to you (such as contributions to a qualified retirement plan and health insurance coverage).

Beware: When a shareholder-employee receives a generous package of salary, bonuses and benefits from a closely held corporation, the IRS might claim the compensation is unreasonably high. The tax agency can then argue that excess amounts are actually disguised dividends subject to double taxation.



Saving for retirement on a tax-advantaged basis should be on nearly everyone's financial "to do" list. Making contributions to a Roth IRA is one tax-wise way to save, because you can take withdrawals after age 59 1/2 that are free from federal income tax, assuming you've had at least one Roth account open for more than five years. Of course, Roth contributions are nondeductible, but they are valuable because you reap tax savings on the back end of the deal. 

However, if you're self-employed and fairly affluent, you may have dismissed the idea for two reasons:

1. You figure your income is too high to qualify for Roth contributions. 

2. You figure a Roth IRA is not that attractive because you believe you're in a higher tax bracket now than you'll be in during retirement. Instead, you make maximum deductible contributions to a traditional tax deferred retirement arrangement such as a simplified employee pension (SEP) plan, solo 401(k), or a defined contribution or defined benefit Keogh plan.

In this article, we'll examine why both assumptions may be wrong and why a Roth IRA is a smart way to build a substantial federal-income-tax-free retirement fund -- even if you have another retirement plan.

Think Your Income Is Too High? You May Be Wrong

It's true that the ability to make Roth IRA contributions is phased out, or completely eliminated, if your modified adjusted gross income (MAGI) exceeds certain levels. For 2018, the phase-outs start at the amounts listed below. MAGI is the adjusted gross income (AGI) amount reported on the bottom of page one of your Form 1040 with certain add-backs that may or may not apply in your situation.

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At first glance, these figures do make it look like a self-employed person with a robust income is unlikely to be eligible for contributions. But take another look.

A self-employed individual's modified adjusted gross income is likely to be considerably lower than the MAGI of another person who is in roughly equivalent circumstances and who is an employee. Reason: Successful self-employed taxpayers usually have hefty deductions for:

  • Certain expenses incurred in the business (such as deductions for rent, an office in the home or a computer system).

  • Contributions to a tax-deferred retirement plan (typically, a SEP, a defined contribution Keogh plan or a solo 401(k) plan).

  • Health insurance premiums.

  • The write-off for 50% of self-employment tax.

These deductions, along with others, are available to self-employed people and are subtracted in arriving at MAGI. Therefore, a self-employed person can have relatively high gross income from his or her business while having a much lower MAGI.

Bottom Line: Many self-employed individuals qualify for Roth IRA contributions without even realizing it.

Think a Deductible Plan is the Only Way to Go? You Could be Wrong

Clearly, it's a good idea to deduct contributions to a tax-deferred retirement plan (such as a SEP) set up for your self-employed business. However, that doesn't necessarily mean such contributions are preferable to contributing the same amounts to a Roth IRA. The best way to evaluate the issue in your situation is to look at two assumptions:


Assumption #1: You will always take the tax savings from making a deductible retirement plan contribution and either invest the money in a taxable retirement savings account or use the money to make a bigger deductible retirement plan contribution. 

Assumption #2: You expect to be in a lower tax bracket during your retirement years, which means you're generally well advised to make a deductible contribution to a tax-deferred retirement plan, instead of a Roth IRA.

In real life, though, you may not be disciplined enough to follow through with the first assumption. And the second assumption can also be problematic when you consider the federal budget deficit and politics. If it turns out that you will actually pay higher tax rates during your retirement years because tax rates go up, you'll wish you had made Roth contributions when you had the chance.

Key Point: Even if both of the above assumptions are true, you should still make Roth IRA contributions if you have cash left over after making the maximum deductible contributions to a tax-deferred retirement plan. In other words, don't just do one or the other. Contribute to both!


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Small business owners who are trying to build up their companies typically can't afford to pay generous executive-level salaries. But the idea of giving away company stock is also usually unappealing, unless the game plan is to take the company public within a few years. 

A middle ground is provisionally granting one or both of these alternate forms of ownership: 

  • Phantom equity units (PEUs), which represent an economic interest whose value is equivalent to a share of the company's stock — but isn't actually stock, or 

  • Equity appreciation rights (EARs), which are the equivalent of a stock option whose value is determined by the increase in the value of the company's stock after the date the EAR is granted. 

Caution: Like stock options, EARs can become worthless if the value of your company and its stock declines. Because of that risk, and the fact that the employees' holding gains value only if your holdings do, you might be inclined to be more generous with EARs than PEUs. 

Non-Qualified Plans 

Phantom stock-based arrangements are non-qualified plans, which means they're not governed by the Employee Retirement Income Security Act which regulates "qualified" plans such as 401(k)s and profit-sharing arrangements. Non-qualified plans also give you a lot of flexibility in how they are set up. But the flip side is that the tax and security features aren't quite as attractive.   

Note: Non-qualified plans are subject to Section 409(a) of the Internal Revenue Code, which covers, among other issues, the timing of deferrals and distributions. 

You would only want to grant PEUs or EARs to managers who you have full confidence in and want to keep on board for the long haul. Plus, the recipient should be someone who is privy to all the financial ins and outs of your company. 

The Details 

Here are some key features of PEUs and EARs: 

  • Distribution timing. You can distribute PEUs and EARs whenever you want, but annual distributions are typical.

  • Conditions. You can decide yearly whether to grant any PEUs and EARs, and how many. Although they're intended as long-term compensation and they aren't a substitute for an annual incentive bonus, you can vary the grants based on the company's financial performance.

  • Vesting. You can (and most companies do) establish a vesting schedule that delays the time when actual ownership of the PEUs or EARs is deemed to occur. Retirement plans use a similar schedule for vesting, which is generally based on time. A vesting schedule for PEUs or EARs may be based on performance metrics of the company or the executives involved.

  • Payout timing. In keeping with the goal of making grantees think like owners, PEUs and EARs typically aren't paid out until the executives reach retirement age, or after a relatively long period of service, for example,15 or 20 years. However, some circumstances could trigger a payout obligation. Among such potential triggers are the sale of the company or change of control, termination of the senior manager "without cause" or the inability of the manager to work, such as becoming disabled.

  • Benefit forfeiture. You can stipulate that the grantee forfeits accumulated PEUs and EARs for such reasons as a termination for cause or violation of a non-compete agreement.

  • Tax treatment. The company takes a tax deduction when cash payouts are made and the executives are taxed on the amounts as ordinary income.

  • Stock valuation. This is an area where you have flexibility. You could do an annual appraisal or choose a formula such as a multiple of earnings before interest, taxes, depreciation and amortization — including a rolling average to smooth out upward or downward spikes. You could even have your board of directors make a good faith estimate every time PEUs and EARs are granted. But the more predictable the formula, the more tangible the benefit will appear to grantees, and thus the more motivational.

  • Funding. The better your company performs, the larger the ultimate cash payment you'll need to fulfill your end of the bargain. But because these are nonqualified plans, you can't salt away funds every year in a trust that's tax-sheltered and impervious to the claims of creditors. Also, even without creditors to worry about, you'll need to be able to have plenty of cash on hand to make the payouts. And for PEUs and EARs to be motivational, their recipients will need to be confident that they'll ultimately get their payout. Certain insurance contracts and a "Rabbi trust" can help to mitigate the funding issue to some degree. Ask your insurance advisor for details about this specific tax-deferred, irrevocable trust, which is similar to a 403(b) plan. 

As you can see, phantom equity programs give you a lot of flexibility. And that's a good thing, because what makes sense both in terms of the plan design itself, and how generous you need to be to provide the necessary motivation, will vary from one company to the next. 

Different Strokes 

Keep in mind that not every highly valued top manager will be motivated in the same way. The prospect of a big future payout based on your company's financial success could be enticing and inspiring to one executive and not so much to another. 

Finally, if you launch a phantom equity program, you aren't obligated to keep it going forever. If it doesn't seem to be working, you can always pull the plug, although you'll still be contractually obligated to deliver on any future payout grantees are already vested in. 

Talk to a specialist in non-qualified executive compensation for a more in-depth briefing on phantom equity, as well as alternative motivational pay systems.



It's almost Tax Day! But don't despair; there still may be time to make some moves that will save taxes for your 2018 tax year. Here are five tax-saving ideas to consider. 

1. Choose to Deduct State and Local Sales Taxes 

If you live in a jurisdiction with low or no personal income tax or you owe little or nothing to the state and local income tax collectors, you might consider deducting state sales taxes instead of state income taxes.


However, this option only applies if you have enough itemized deductions to exceed your allowable standard deduction. (See "Itemizing vs. Taking the Standard Deduction" at right.) If you can benefit from choosing the sales tax option, you have two options to calculate your allowable sales tax deduction:

  • Add up the actual sales tax amounts from 2018 receipts, or

  • Use the amount from IRS tables based on your income, family size and state of residence.

You can deduct the larger of these two amounts. But remember, your deduction for all state and local taxes (including property taxes and income or sales taxes) is limited to only $10,000 (or $5,000 for married people who file separate returns).

Important: If you use the IRS tables, you can add on actual sales tax amounts from major purchases. Examples include purchases of motor vehicles (including motorcycles, off-road vehicles, and RVs), boats, aircraft and home improvements. In other words, you can deduct actual sales taxes for these major purchases on top of the predetermined amount from the IRS table.

2. Claim an Itemized Deduction for Medical Costs

If you itemize deductions for 2018, you can potentially claim a deduction for qualifying medical expenses, including premiums for private health insurance coverage and premiums for Medicare health insurance.

The catch is that your total qualifying medical expenses must exceed 7.5% of your adjusted gross income (AGI) for the 2018 tax year. For 2019, the deduction threshold is scheduled to rise to 10% of AGI unless Congress extends the 7.5%-of-AGI deal.

Key Point: If you're self-employed or an S corporation shareholder-employee, you can probably claim an above-the-line deduction for your health insurance premiums, including Medicare premiums. In this case, you don't need to itemize to get the tax-saving benefit of deducting health insurance premiums.

3. Make a Deductible HSA Contribution

If you had qualifying high-deductible health insurance coverage last year, you can make a deductible contribution to a Health Savings Account (HSA) of up to $3,450 for self-only coverage or up to $6,900 for family coverage. For 2018, a high-deductible policy is defined as one with a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage.

If you're eligible to make an HSA contribution for last year, the deadline to open an account and make a deductible contribution for your 2018 tax year is generally April 15, 2019. However, for taxpayers in Massachusetts and Maine, the deadline is April 17 due to holidays. (April 15 is Patriots' Day in Maine and Massachusetts; April 16 is Emancipation Day in Washington, D.C., where the IRS is located.)

The write-off for HSA contributions is an above-the-line deduction. That means you can take it even if you don't itemize. In addition, this privilege isn't phased out based on your income level. Even billionaires can contribute to an HSA if they have qualifying high-deductible health insurance coverage and meet the other eligibility requirements. 

4. Make a Deductible IRA Contribution

If you qualify and haven't yet made a deductible traditional IRA contribution for the 2018 tax year, you can do so between now and April 15 and claim the resulting write-off on your 2018 return. Qualifying taxpayers can potentially make a deductible contribution of up to $5,500 or up to $6,500 if they're 50 or older as of December 31, 2018. If you're married, your spouse can also make a deductible IRA contribution.  

However, there are a few caveats. You must have enough 2018 earned income to equal or exceed your IRA contributions for the tax year. If you're married, either you or your spouse (or both) can provide the necessary earned income. In addition, deductible IRA contributions are phased out based on your income level and participation in tax-favored retirement plans last year. (See "Ground Rules for Deductible IRA Contributions" below.)

5. Make Charitable Donations from Your IRA to Replace Taxable RMDs

After reaching age 70½, you can make cash donations to IRS-approved charities out of your IRA. These qualified charitable distributions (QCDs) aren't like garden-variety charitable donations. You can't claim itemized deductions for them, but that's OK. The tax-free treatment of QCDs equates to a deduction, because you'll never be taxed on those amounts.    

If you inherited an IRA from a deceased original account owner and you're at least 70½, you can use the QCD strategy with the inherited account, too. 

There's a $100,000 limit on total QCDs each year. But if you and your spouse both have IRAs set up in your respective names, each of you is entitled to a separate $100,000 annual QCD limit.  

QCDs taken from traditional IRAs count as distributions for purposes of the required minimum distribution (RMD) rules. Therefore, you can arrange to donate all or part of your annual RMD amount (up to the $100,000 limit) that you would otherwise be forced to receive and pay taxes on.

There's still time to implement the QCD strategy for the 2018 tax year if you turned 70½ last year and haven't yet taken your initial IRA RMD. You have until April 1 of the year after you turn 70½ to take your first RMD. If you miss the April 1 deadline, you'll face a 50% penalty on any shortfall.

Important: If you take your first RMD on or before April 1, 2019, you also must take another RMD for the 2019 tax year by December 31 of this year. In this situation, not taking advantage of the QCD option to fulfill your 2018 and 2019 RMD obligations would mean having to take two taxable RMDs this year. However, if you use the QCD strategy, you can replace those taxable RMDs with tax-free QCDs.

Act Fast

These are some of the more widely available last-minute tax-saving maneuvers that you should consider before Tax Day. Contact your tax advisor to determine whether these or any other last-minute strategies might work for your specific situation.




Did you know that there are more millionaires in the United States than ever before? Recently, I had the opportunity to read Chris Hogan's latest book "Everyday Millionaires: How Ordinary People Built Extraordinary Wealth-and How You Can Too". In the book, Chris Hogan destroys millionaire myths that are seemingly keeping everyday people from achieving financial independence.

You don't have to inherit family assets or have a high paying job. In fact, most millionaires have achieved their wealth through ordinary tools, discipline and determination.

If you are looking to be a better steward of your personal cash flow or know of someone that could benefit from an easy to understand plan, check out "Everyday Millionaires". – Rusty Fulling


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Financing a family-run enterprise can bring out the worst in some people. So handling the transactions carefully can go a long way toward keeping the peace.

Common sources of financing family firms can include personal savings, credit cards, home equity loans, second mortgages and personal loans -- sometimes from relatives not directly involved in the business.

Here are some financing considerations for family businesses:

1. Plan the financing with your spouse and other relatives involved. This includes the type of financing, repayment schedules and the realistic expected returns from the business.

2. If you borrow from a family member, put the agreement in writing to ensure the repayment schedule is understood, to help secure tax benefits and to promote family harmony.

3. Weigh the charges and risks of various loans: For example, rates are higher when you borrow against a credit card than on a home equity loan, but you don't risk foreclosure on your property.

4. Investigate taking out a loan in the company's name. The rates might be a little higher, there's more paperwork and the qualifications are more rigid, but it helps establish credit for the business, makes it easier to borrow in the future and eliminates strain on the family's finances.

5. If you borrow from traditional lenders or a government agency, such as the Small Business Administration, keep in mind that they insist that business and family finances are kept separate. The IRS also demands this.

Like all lenders, family lenders expect a return on their money. This could come in the form of increased equity in the company. Or it could involve principal and interest payments from the business back to the family member. In either case, keep written documentation. This protects the company at tax time and helps alleviate questions about future payments as the business expands beyond the family. In addition, documentation is important if you seek additional funds from traditional lenders or the government.

Tax Consequences

Family loans must be properly structured for several reasons:

  • The lender must charge an interest rate the IRS considers adequate or there can be negative tax consequences.

  • If the business never pays the lender back, the lender can claim a bad debt deduction. First, a good faith attempt to collect must be made. (Under the tax code, business bad debts are more advantageous than personal bad debts.)

  • If a loan isn't properly documented and the lender is audited, the IRS may say the family loan was a gift and disallow a bad debt deduction. And there could be problems because a gift tax return was filed.

You Might Not Want Funds From Family Members If. . .

  • You qualify for other financing.Higher interest rates may be a small price to pay to maintain independence in the family.

  • It involves a big sacrifice. Be aware of relatives' capabilities and take money only if they won't be hurt by a failure.

  • There's already friction in the family.

These sources can cause the success or failure of the business and put family finances in jeopardy.

Assuming your family business is a success, there shouldn't be any major problems with family loans. However, let's say the business falters and your spouse is providing income for the family. You wind up supporting the business rather than the other way around.

This can work for a while, but if the money-losing venture can't eventually support itself, you need to answer some tough questions:

  • Is the problem temporary? For example, does the business need more time to become stable or is it suffering from a slump in the economy?

  • Is the problem permanent, perhaps the result of unrealistic business expectations or long-term market changes, such as the failure of major customers?

  • What changes can you make to improve cash flow and profits?

In the above scenarios, your accountant can help determine financing alternatives for family-run businesses.



Q. An employer asks: "I want to set up an 'Employee of the Month' program, but I don't know where to start. How do I go about doing this?"

A. Start with the things you need to consider and, with your answers, decide on what you will do. Here are questions to consider:

  • What's motivating you to want to have an employee of the month program? What do you want to accomplish? If your reason is that you think it's a good idea or because a competitor is doing it, that's not good enough. What are the specific benefits to your organization if you have a program? If you can't define specific benefits, why waste time and money on this?

  • How many employees would be eligible for the award? Are they in one location or more than one? How many locations? Will you have an employee-of-the-month at each location? Will you have a winner in each department?

  • Which employees will be eligible? Only employees in some departments? Only the nonexempt (usually the hourly-paid) employees? All employees except top management?

  • Who will select the winner? Will you have employees nominate candidates? Who will vote on them? Who will make the final selection? Will a team of management people make the selection? Will the top executive make the selection?

If one of your purposes is to encourage employees to improve their performance or the quality of their work, consider having employees recognize coworkers who exhibit outstanding performance or who "go beyond the call of duty."

You could give employees outstanding service certificates or thank you memos they would fill in with a coworker's name, the reason for giving the certificate or memo, and the date. The employee or employees with the most certificates or memos in a given month would be the winner or winners for that month.

  • What criteria/standards will you use to select the winner?

  • What is the form of recognition you will use? The typical recognition is a plaque on the wall with the employee's photo and/or name, or a paper certificate presented at a meeting of employees. An award also could be, or include, cash or a gift.

Here are some characteristics to look for in a winning "Employee of the Month." They are adapted from guidelines used in a program at Stanford University:

  • The employee demonstrates excellence in performance and customer service, actively builds partnership with colleagues, and contributes new ideas for the benefit of the University.

  • The employee is dedicated to accomplishment, is venturesome, takes responsibility and gets things done.

  • The employee is committed to people, and involves, challenges and supports others.The employee is enthusiastic.

  • The employee inspires others with a positive attitude, is energetic, motivates others into action, is friendly, and goes out of his or her way for others.

Q. Will an "Employee of the Month" award promote competition vs. cooperation and teamwork?

A. It is more likely to promote competition than cooperation. You have to decide which it is that you want: competition between individuals or cooperation within a team. An "Employee of the Month" program works, for example, to motivate individual sales people to excel. It can be counter-productive in a team environment.

If you want to use this type of award, consider offering it to teams or departments. Such as a "Team of the Month" Award. You'll have less resentment against the winners if the employees are on teams, or in departments, competing with other teams or departments.

Q. Is it advisable to have staff or management pick the award winners?

A. The answer depends on your current workplace culture and the kind of culture you want to encourage. Where does the power reside now? How much authority and responsibility do you place with employees? Do you want to encourage employees to accept more authority and responsibility? Answers to these questions will help you decide.

In addition, if you choose to go with a "Team of the Month" Award, it's pretty difficult to have the employees select or vote for the winning team.

One approach some employers use in selecting winners is to have the customers or clients do the voting. Typically, in this approach, the focus is on delivering quality customer service or achieving high customer satisfaction. Employees give the customer or client little ballots or coupons on which the customer or client can write in the name of the employee who gives them quality service or high satisfaction. The employee or employees who receive the most "votes" from the customers or clients in a given period are the winners.

Q. What are some negatives associated with "Employee of the Month" programs?

A. Following are three reasons this type of well-intentioned recognition program becomes counter-productive or fails:

  • The monthly award becomes routine. Employees eventually ignore it.

  • Employees come to view the monthly winners as the recipients of favoritism, even as the "boss's pets." If the Employee of the Month isn't selected by some objective system or measurement, in time employees see the selection of the monthly winners as the result of favoritism by someone in management.

  • The program eventually damages employees' morale. When the monthly winners do not actually deserve the recognition, the program can damage the morale of other employees.


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Q.  Our company maintains a premium-only cafeteria plan (POP) under which employees who elect company-sponsored major medical coverage can pay their share of the premiums with pre-tax dollars. We are thinking of amending our cafeteria plan to add some other benefits. We know that health flexible spending accounts (FSAs) and dependent care assistance programs (DCAPs) can be offered under a cafeteria plan, but what other benefits can we offer?

A.  Employer-sponsored group major medical coverage, health FSAs, and DCAPs are the most common cafeteria plan benefits. Other common benefits that can be offered under a cafeteria plan include the following:

  • health savings account contributions;

  • group-term life insurance on the life of an employee (although the cost of coverage in excess of $50,000, less any amount paid after-tax, is includible in the employee's gross income);

  • long-term or short-term disability coverage;

  • coverage under other arrangements that qualify as accident or health plans under the law (for example, employer-sponsored group dental or vision coverage); and

  • purchase or sale of paid time off (PTO), for example, vacation, sick, or personal days.

Of course, various rules and issues may need to be addressed before offering these benefits under the cafeteria plan. For example, specific requirements must be met when the purchase or sale of PTO is offered as a benefit under a cafeteria plan. And cafeteria plans generally cannot be used to pay or reimburse premiums for individual insurance policies that provide major medical or other non-excepted coverage. Reimbursing premiums for other types of individual insurance coverage raises issues under ERISA, COBRA, and other laws.



Health care costs have skyrocketed over the last few decades. Fortunately, health savings accounts (HSAs) allow qualifying individuals to pay for certain medical expenses with pretax dollars. Here is what you need to know to put an HSA to work for you. 

Healthy Growth

Over the last decade, many people have jumped on the HSA bandwagon. HSA assets exceeded $51 billion as of June 30, 2018, according to a recent survey conducted by HSA investment provider Devenir. That's an increase of 20.4% compared to the previous year.

In addition, the total number of HSAs grew to 23.4 million as of June 30, 2018, up 11.2% compared to a year earlier. Devenir projects the number of HSA accounts to increase to 29 million by the end of 2020 with assets approaching $75 billion.

The Basics

With HSAs, individuals must take more responsibility for their health care costs, instead of relying on an employer or the government. The upside is that HSAs offer some tax benefits.

Under the Affordable Care Act (ACA), health insurance plans are categorized as Bronze, Silver, Gold or Platinum. Bronze plans — which have the highest deductibles and least generous coverage — are the most affordable. Platinum plans have no deductibles and cover much more, but they're also significantly more expensive.

In many cases, the ACA has led to premium increases, even for those with less generous plans. However, these less generous plans also might make you eligible to open and contribute to a tax-advantaged HSA.    

For the 2018 tax year, you could make a tax-deductible HSA contribution of up to $3,450 if you have qualifying self-only coverage or up to $6,900 if you have qualifying family coverage (anything other than self-only coverage). For 2019, the maximum contributions are $3,500 and $7,000, respectively. If you're age 55 or older as of year end, the maximum contribution increases by $1,000.

To be eligible to contribute to an HSA, you must have a qualifying high deductible health insurance policy and no other general health coverage. For 2018, a high deductible health plan was defined as one with a deductible of at least $1,350 for self-only coverage or $2,700 for family coverage. For 2019, the minimum deductibles are the same. 

For 2018, qualifying policies must have had out-of-pocket maximums of no more than $6,650 for self-only coverage or $13,300 for family coverage. For 2019, the out-of-pocket maximums are $6,750 and $13,500, respectively.

Important note: For HSA eligibility purposes, high deductible health insurance premiums don't count as out-of-pocket medical costs. 

Deductible Contributions

If you're eligible to make an HSA contribution for the tax year in question, the deadline is April 15 of the following year (adjusted for weekends and holidays) to open an account and make a tax-deductible contribution for the previous year.

So, there's still time for an eligible individual to open an account and make a deductible contribution for 2018. The deadline for making 2018 contributions is April 15, 2019.

The write-off for HSA contributions is an "above-the-line" deduction. That means you can claim it even if you don't itemize.

In addition, the HSA contribution privilege isn't tied to your income level. Even billionaires can make deductible HSA contributions if they have qualifying high deductible health insurance coverage and meet the other eligibility requirements. 

Important note: Sole proprietors, partners, LLC members, and S corporation shareholder-employees are generally allowed to claim separate above-the-line deductions for their health insurance premiums, including premiums for high deductible health plans that make you eligible for HSA contributions.

HSAs in the Real World

To show the tax perks of HSAs, consider the following example: Albert and Angie are a married couple in their 30s. They're both self-employed, and both have separate HSA-compatible individual health insurance policies for all of 2019. Both policies have $2,000 deductibles.

For 2019, Albert and Angie can each contribute $3,500 to their respective HSAs and claim a total of $7,000 of write-offs on their 2019 joint return. If they're in the 32% federal income tax bracket, this strategy cuts their 2019 tax bill by $2,240 (32% × $7,000). Over 10 years, they'll save $22,400 in taxes, assuming they contribute $7,000 each year and remain in the 32% bracket.

Tax Treatment of Distributions

HSA distributions used to pay qualified medical expenses of the HSA owner, spouse and dependents are federal-income-tax-free. However, you can build up a balance in the account if contributions plus earnings exceed withdrawals for medical expenses. Any earnings are free from federal income tax unless you withdraw them for something other than qualified medical expenses.

So, if you're in very good health and take minimal or no distributions, you can use an HSA to build up a substantial medical expense reserve over the years, while earning tax-free income along the way. Unlike flexible spending accounts (FSAs), undistributed balances in HSAs are not forfeited at year end. They can accumulate in value, year after year. Thus, an HSA can function like an IRA if you stay healthy.

Even if you empty the account every year to pay medical expenses, the HSA arrangement allows you to pay those expenses with pretax dollars. But there are some important caveats to bear in mind:

  • HSA funds can't be used for tax-free reimbursements of medical expenses that were incurred before you opened the account.

  • If money is taken out of an HSA for any reason other than to cover qualified medical expenses, it will trigger a 20% penalty tax, unless you're eligible for Medicare.

If you still have an HSA balance after reaching Medicare eligibility age (generally age 65), you can drain the account for any reason without a tax penalty. If you don't use the withdrawal to cover qualified medical expenses, you'll owe federal income tax and possibly state income tax. But the 20% tax penalty that generally applies to withdrawals not used for medical expenses won't apply. There's no tax penalty on withdrawals after disability or death. 

Alternatively, you can use your HSA balance to pay uninsured medical expenses incurred after reaching Medicare eligibility age. If your HSA still has a balance when you die, your surviving spouse can take over the account tax-free and treat it as his or her own HSA, if he or she is named as the account beneficiary. In other cases, the date-of-death HSA balance must generally be included in taxable income on that date by the person who inherits the account.

For More Information

HSAs can provide a smart tax-saving opportunity for individuals with qualifying high deductible health plans. Contact us to help you set up an HSA or decide how much to contribute for 2019. And, remember, there's still time to make a deductible contribution for your 2018 tax year, if you're eligible. 


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I had to smile as my vehicle hit 220,000 miles this week.  Eighteen years ago, with title in hand, I drove this brand new truck right off of the new car lot.  It was the first vehicle that I had saved up and paid cash for.  While our family has bought and sold other vehicles since that time, we made a decision in 2001 not to make car payments a priority in our monthly budget.  

Paying cash rather than financing has been taught for years by budget experts like Larry Burkett, Ron Blue and Dave Ramsey.  Most likely they were taught by their grandmothers with the trusty envelope system which has been around for decades. The envelope system limits you to only spend the amount that is placed in the envelope. Advantages of using this system creates a sense of discipline and accountability with your spending, along with making it challenging to overspend.

Although it may be unpopular to wait and save in our "instant gratification" society, the absence of financing can truly free you up from the burden of debt.  One of my favorite quotes from Dave Ramsey says...

"If you will live like no one else, later you can live like no one else."

What small decisions are you making today to make a positive difference in your future? - Rusty Fulling


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The Fulling Management & Accounting team along with one of our clients, IntelligeneCG, had the opportunity to serve at the Kansas City Rescue Mission Men's Center this past weekend. Always such a humbling experience and a great reminder to "...continue to remember the poor." Gal 2:10


KCRM is a Christ-centered community offering freedom (from the past) & hope (for the future) to the poor and homeless, empowering them to reach their full potential. The community offers Relief Services, Recovery Services & Reentry Services.


Be a part of something you believe in that is bigger than yourself!


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One of the most effective and inexpensive ways of building employee loyalty is to hold regular outings and get-togethers. By holding staff gatherings, you build loyalty and form bonds outside the workplace. Plus, you get a major tax break.

You can hold a staff party at a restaurant or treat your entire staff and their families to a day at a local ball game or amusement park. Most places offer discount rates for groups.

When planning an event, here are four cues to keep the emphasis on fun:

Take it outside. Hold your outings away from the office, if possible. This creates a more relaxed atmosphere and lets staff members feel free to put work aside and just have a good time. They are more likely to bond if the focus is off the workplace.

Involve families. This lets everyone feel a part of the workplace community and opens the way for more personalized relationships. In addition, spouses and family members play a major role in employees' longevity with your company.

Make it enjoyable. Come up with a theme and hold a contest. For example, if you're going to a ballpark, the employee who can name the team's highest scoring player wins a baseball cap. Or if you're headed to the beach, a beach towel can be awarded to the family that comes up with the longest list of songs from Annette Funicello and Frankie Avalon movies.

Keep it regular. The more often you hold company-wide events, the more your staff members feel part of a community that works and plays together. Send out invitations at least a month before each outing and get everyone involved in a countdown.

By investing a little time and money in showing employees and their families a good time, you build loyalty that can help retain your staff.

Now, here's the tax bonus:  Under prior law, businesses could deduct 50% of the cost of its entertainment and meal expenses, with certain exceptions. For example, you could write off 100% of the cost of a company outing for employees, such as a 4th of July barbecue or company picnic. This special tax law provision wasn't touched by the 2017 Tax Cuts and Jobs Act. 

However, there has always been a catch to claim this tax break: You must invite the entire staff. In other words, you can't restrict the get-together to just the higher-ups. Inviting a few friends or family members won't jeopardize the deduction, but you can't write off the costs attributable to those social guests.