The Internet is one of the best devices your company has to target new customers and keep your existing clientele happy. But before you begin reaping the benefits of e-marketing, you must collect and manage a database of e-mail addresses.

This might seem easy at first glance, but the task can be overwhelming if it isn't handled correctly.

You start by collecting the e-mail addresses of every customer, prospective buyer, referral source and anyone else you want to be able to contact electronically. As you start entering the data, however, you'll discover the list doesn't stay current for long because people change their addresses by switching from one service provider or e-mail service to another.

But you can't afford not to keep your lists up to date. The success of e-marketing and sales promotions depends on your database of addresses.

Here are 10 pointers to help you build a solid list of e-mail contacts:

1. Centralize. Assign a specific person in your office to procure e-mail addresses and maintain the database.

2. Prioritize. Based on the number of current and potential customers, establish the number of addresses your business would like to obtain.

3. Solicit Ideas. Send a memo to staff members seeking ways to build the list. Have your e-mail manager get as many customer addresses as possible from your employees. These can be culled from their own e-mail programs, as well as business cards and letterheads.

4. Expand the search. Send a letter to customers, prospects and referral sources explaining what your firm is doing. Ask them to send their current e-mail addresses to you. Include instructions on how to e-mail the information or use a simple form they can fill out and mail back. Be sure to enclose a self-addressed, stamped envelope. In all your mailings, brochures, newsletters and other means of communication, include a response card to request e-mail addresses and any other pertinent information.

5. Fill in any gaps. During slow periods, telephone contacts whose addresses are still missing or out of date. Follow a simple script and try to obtain many addresses from one company at a time. Remember, there's no additional cost for sending more e-mails. Get more traction by sending to as many people as possible.

6. Turn to the pros. Consider hiring an outside telemarketing company to gather addresses. However, one drawback to these services is some of them have a minimum order of, say, 5,000 names.

7. Surf the net. Research websites to obtain addresses — especially from referral sources. Consider purchasing extraction software that automatically searches website pages for e-mail addresses.

8. Bolster procedures. Require staff members to routinely obtain e-mail addresses from prospects and new customers.

9. Add links to your site. If your company operates a website, include a collection system for gathering e-mail addresses and sending newsletters and announcements.

10. Head off trouble. Consider a piece of software that checks addresses before you send mass mailings. This is important since you don't want your ISP thinking you're sending spam if a lot of e-mails start bouncing. And when gathering addresses, keep in mind that e-mail going to free e-mail services is often caught in spam filters and never reaches the recipient. Whenever possible, it's better to get another e-mail address from contacts.



First the old news: Under the Affordable Care Act (ACA), employers with at least 50 employees (or full-time equivalents) are required to provide health benefits and pay for a good portion of the cost. And many smaller employers that aren't required to offer health coverage do so anyway. Why? They may do it to compete successfully for talented employees in today's low unemployment environment or out of genuine concern for the well-being of their workers. What few employers like, however, is being in the time-consuming and complex business of selecting and administering health plans.

And here's the new news: That employer sentiment is why many may be tempted by a radical liberalization of regulations governing health reimbursement arrangements (HRAs), which kicks in next year. Chances are many employers will need some time to digest the 500-plus pages of new HRA rules, so they won't make any big changes immediately. But it's a good idea to be prepared for changes in buying individual health coverage. 

Two HRA Categories 

The regulations deal with two HRA categories: "Excepted benefit" HRAs, and "individual coverage" HRAs (ICHRAs). The latter, as the name suggests, is the type that would enable an employer to give employees some money and then wish them good luck in using it, along with more of their own money to buy the coverage they need. Excepted benefit HRAs, which are already in existence, only subsidize employee spending on benefits like dental and vision services that aren't required by the ACA employer mandate. An employer subject to the employer mandate can't get out from under that obligation simply by helping you purchase such "excepted" benefits. Beginning next year, employers that already sponsor a traditional health plan can also contribute up to $1,800 annually per employee to an excepted benefit HRA. 

The bigger story is around the ICHRA. Previously, only small employers could offer them. Those were called "qualified small employer HRAs." The maximum amount that employers can funnel into an ICHRA this year is $5,150 for single coverage and $10,450 for family coverage. Under the new regulations, there are no caps on employer contributions, and both large and small employers can offer them. 

In fact, ICHRAs of employers with at least 50 employees are still subject to the same basic ACA rules as conventional health plans, including the breadth of coverage and satisfying affordability tests. 

Tax Benefits 
Also, if your employer has a "cafeteria" style plan that lets you park payroll-deducted money into it on a pre-tax basis, you can tap your cafeteria account to pay the difference between what your employer contributes to your ICHRA and the premium amounts. That keeps you from being taxed on any of the value of your health plan. (Note: This wouldn't be the case if you bought a health policy through an ACA "public exchange.") 

Employers are given considerable leeway in how to set up an ICHRA in terms of how much to contribute to employees. For example, the regulations allow contribution amounts to vary by employees' ages. Older people generally face higher premiums than younger ones when buying health coverage on the open market. This is also generally the case if they have ICHRAs. For that reason, employers can contribute up to three times as much to the oldest employee age bracket as they do to the youngest bracket that they establish. 
Along similar lines, employers can contribute varying amounts based on the number of dependents that employees have. Contribution distinctions can also be made by employee job classification. For example, an employer can contribute more to salaried employees' accounts than to hourly workers. 

However, the regulations do limit small employers from creating lots of different employee classes with only a handful of employees in each. The reason is that an employer can choose to only require some employee segments to get their health benefits via an ICHRA, and not others. The rules are designed to keep employers from creating small employee categories that would be dominated by groups with actual or expected higher health costs than others, and forcing those groups to go the ICHRA route. (That's known as "adverse selection.") 

Employer Flexibility 

However, an employer can let employees within a classification stay in the original health plan, but require newly hired employees who fall within the same classification to receive their health benefits through an ICHRA. 

Also, employees within each classification can't be given the choice of staying in a conventional health plan or opting for an ICHRA. Your employer must require that employees within each category be all in, or not offer it to them at all. 

What if you're an employee and are forced to take an ICHRA? What if you wind up not liking the coverage you can buy that way on the open market? The regulations include a requirement that your employer allow you, prior to your enrollment date, to opt out of participating in the ICHRA (and thus employer health coverage) entirely. That would make you eligible to participate in the ACA public exchange. 

Odds are, however, that if your employer is large enough to be covered by the ACA mandate, it wouldn't make economic sense for you to do that. That's because employers subject to the mandate face penalties if employees wind up getting their benefits via the public exchanges. In fact, that's the basic enforcement mechanism behind the employer mandate. 

Finally, if you're thinking you might just accumulate dollars in an ICHRA and not bother to actually buy insurance in the private marketplace, think again. Under the regulations, your employer is required to check up on you and make sure you do buy coverage. 

Health insurance can be a confusing topic, and it's not one where you want to risk choosing the wrong option. If you have questions, your employer's human resources advisor may be able to clear up any confusion. Employers should contact their employee benefits advisors with questions. 



High profile financial scandals in today's business world pop up in the media regularly. Often at the root of such scandals are incentive compensation systems that went awry. The problem might be with the program's initial design or a loophole that participants discover and take advantage of. Even if a poorly designed incentive program doesn't run afoul of the law, it may cost its sponsors a bundle without delivering desired results. Or, it might really jump the tracks, as one foreign city government found out.

The phrase "perverse incentives" is used to describe an incentive that has unintended — and generally expensive — consequences. An illuminating example is the case of the municipal government of Hanoi when that city was combating a surge in its rat population. The city decided to pay its citizens a bounty for each rat they killed and turned in. The upshot: Hanoi residents found it much easier to breed rats than capture them in the wild and collected their awards with no net impact on the city's rat population. Now that's an expensive failure!

Common Hazards

Let's hope you don't have a rat problem. Every incentive to perform, it's said, is an incentive to cheat. Some people see the offer of an incentive as a challenge to find a way to get it without doing the work. Cheating isn't inevitable, however. Perhaps the most typical incentive pay problem occurs when an employee's bonus potential is too high relative to fixed compensation.

Many self-directed salespeople thrive on having a large part of their pay based on the revenue they generate. Yet most also crave financial stability and predictability. With fixed financial obligations like home mortgages, car loans and student debt to worry about, this is easy to understand.

So, depending on the performance metrics, an ambitious employee whose compensation primarily is based on commissions or bonuses could be motivated to game the system. Alternatively, an honest but lower-performing employee might fail to earn much and become frustrated, disengaged or unproductive.

Another common hazard of incentive compensation: The pressure-cooker atmosphere that leads to high employee turnover. This can happen when the incentive compensation potential of front-line managers is substantial and linked directly to the performance of employees they supervise. Such managers can be driven to go overboard in pressuring their subordinates to perform, causing many employees to quit. When that happens, department productivity suffers.

Focusing on the Achievable

In these scenarios, the aggressiveness of the goals is as critical as compensation that's at risk if the goals aren't met. If meeting the goals doesn't require heroic effort the hazards are reduced, of course. Deciding what's achievable can involve some subjective assessment initially, but history can become your guide over time if you're willing to adjust your expectations.

If it becomes apparent that you have overestimated what's actually achievable due to changing circumstances beyond employees' control, it can be highly de-motivational to them to know their extra efforts will not be rewarded. If so, your incentive plan may not only fail but backfire. The last thing you want is for employees to conclude that their extra efforts won't be rewarded. So, although you don't want to make it a habit, sometimes you need to modify the targets you've set, mid-course.

One way to avoid aiming too high or too low is to use a multi-tiered plan. Consider establishing a bonus formula that allows all employees to qualify for something if they meet a minimum performance threshold. For example, you might require that they achieve at least 25% — or even 50% — of the performance target before they earn a pro-rata bonus.

What about those perverse incentives mentioned earlier? Here's an example of how a well-intentioned incentive program that lacks proportion can fail. Not long ago, a large bank gave branch managers high targets for new account openings. Employees believed, with good reason, that if they didn't meet their quotas they'd lose their jobs.

Sales soared. However, it was later discovered that many of these sales were generated by managers opening accounts for customers without their knowledge or consent. The unintended consequence: a massive public relations fiasco for the bank, along with financial penalties and legal costs that far exceeded any revenue increases.

Intrinsic Motivation Matters

Aside from the obvious problems associated with an overly aggressive incentive program is the fact that such a plan pushes employees to perform because of extrinsic — rather than intrinsic — motivators. In other words, employees are driven by the prospect of a cash reward more than by the desire to surpass their own personal best or out of pride in a job well done.

Of course, there's nothing wrong with financial incentives as long as they don't override your company's values. Superlative employee performance ultimately breeds success for the entire organization. However, academic research suggests that intrinsic motivation is associated with greater creativity than extrinsic motivation.

Finally, whatever the incentive structure within your compensation plan, there's no substitute for careful monitoring of how employees respond to those incentives. Work continually to find a happy medium between too-modest and too-ambitious an incentive formula.



For many couples, summer is the quintessential time to tie the knot. The weather is warm, the flowers are blooming and nature offers plentiful backdrops for photos. But there's more than the ceremony to consider when a couple merges their lives, including taxes and other financial issues.

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Though finances aren't necessarily a romantic topic, some issues are important to address before you say, "I do!" Let's start with how marriage changes your tax situation.

To File Jointly or Separately?

Your marital status at year end determines your tax filing options for the entire year. If you're married on or by December 31, you'll have two federal income tax filing choices for 2019:

  • File jointly with your spouse, or

  • Opt for "married filing separately" status and then file separate returns based on your income and your deductions and credits.

There are two reasons most married couples file jointly.

1. It's simpler. You only have to file one Form 1040, and you don't have to worry about figuring out which income, deduction and tax credit items belong to each spouse.

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2. It's often cheaper. The married filing separately status makes you ineligible for some potentially valuable federal income tax breaks, such as certain higher education credits and, generally, the child and dependent care credit. Therefore, filing two separate returns may result in a bigger combined tax bill than filing one joint return.

2. It's often cheaper. The married filing separately status makes you ineligible for some potentially valuable federal income tax breaks, such as certain higher education credits and, generally, the child and dependent care credit. Therefore, filing two separate returns may result in a bigger combined tax bill than filing one joint return.

Risks of Filing Jointly

Filing jointly isn't a sure win for one big reason: For years that you file joint federal income tax returns, you're generally "jointly and severally liable" for any underpayments, interest and penalties caused by your spouse's deliberate misdeeds or unintentional errors and omissions.

Joint-and-several liability means the IRS can come after you for the entire bill if collecting from your spouse proves to be difficult or impossible. The IRS can even come after you after you've divorced. 

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However, you may be able to claim an exemption from the joint-and-several-liability rule under the so-called "innocent spouse" provisions. To successfully qualify as an innocent spouse, you must prove that you:

  • Didn't know about your spouse's tax failings,

  • Had no reason to know, and

  • Didn't personally benefit.

If you file separately, you won't have liability for your spouse's tax misdeeds or errors. So, if you have doubts about a new spouse's financial ethics, the best policy may be to file separately.

Penalty vs. Bonus

You've probably heard about the federal income tax "penalty" that happens when a married joint-filing couple owes more federal income tax than if they had remained single. The reason? At higher income levels, the tax rate brackets for joint filers aren't twice as wide as the rate brackets for singles. This is still true under the Tax Cuts and Jobs Act (TCJA) for some high-income individuals in 2019. The marriage penalty is usually a relatively modest amount, so it's probably not a deal-breaker.

On the other hand, many married couples collect a federal income tax "bonus" from being married. If one spouse earns all or most of the income, it's likely that filing jointly will reduce your combined tax bill. For a high-income couple, the marriage bonus can amount to several thousand dollars a year. 

Important note: The preceding explanation of the marriage penalty and bonus is based on current tax law. Under prior law, the marriage penalty adversely affected more dual-income households. The revised tax rates and brackets under the TCJA are scheduled to expire in 2026, unless Congress passes legislation to extend them. So, even if you're not affected by the marriage penalty under current law, it may affect you when the individual tax rates and brackets revert to their pre-TCJA levels.

Home Sales

When people get married, they often need to combine two separate households before or after the big day. If you and your fiancé both own homes that have appreciated substantially in value, you may owe capital gains tax.

However, there's a $250,000 gain exclusion for single taxpayers who sell real property that was their principal residence for at least two years during the five-year period ending on the sale date. The gain exclusion increases to $500,000 for married taxpayers who file jointly.

Suppose you and your fiancé both own homes. You could both sell your respective homes before or after you get married. Assuming you've both lived in your respective homes for two of the last five years, you could both potentially claim the $250,000 gain exclusion. That's a combined federal-income-tax-free profit of up to $500,000.

Conversely, let's say you sell your home and move into your spouse's home. After you've both used that home as your principal residence for at least two years, you could sell it and claim the larger $500,000 joint-filer gain exclusion.

In other words, you could potentially exclude up to $250,000 of gain on the sale of your home. Then you could later claim a gain exclusion of up to $500,000 on the sale of the house that your spouse originally owned. With a little patience and some smart tax planning, you could potentially exclude a combined total gain of $750,000 on your home sales.

Check Withholding and Estimated Payments

Employees should check the amount of taxes that are being withheld from their paychecks anytime there's a change in personal circumstances. Marriage is one such situation.

Getting married not only can change your income level and tax bracket, but it also may affect whether you decide to itemize deductions or take the standard deduction for 2019. Blending your families also might qualify you for child-related deductions and credits that you weren't eligible for as a single taxpayer. So, it's important to perform a comprehensive review of your combined tax situation before year end.

If you withhold too much, you're effectively giving the IRS an interest-free loan to use your money until it's refunded after you file your 2019 return sometime next year. Conversely, if you withhold too little, you'll face a stiffer tax bill (and possibly even owe penalties and interest) when you file the return.

To adjust your withholding, request a new W-4 form from your employer, fill it out and then submit it. Any withholding change will show up in the next payroll calculation.

On the other hand, if you're self-employed or you report investment income or retirement account withdrawals, you should check whether your quarterly estimated payments will be enough to cover your tax liability for 2019.  

The due dates for the quarterly estimated payments for a tax year are:

  • April 15,

  • June 15,

  • September 15, and

  • January 15 of the following year.

These dates are adjusted for weekends and holidays. So, the next quarterly installment for income earned in 2019 is due Monday, September 16, 2019. If your year-to-date withholding hasn't been sufficient, consider paying more for the third and fourth quarters to cover the shortfall.

The IRS offers worksheets for calculating the "right" amount of withholding and estimated payments. But these worksheets are no substitute for having a face-to-face meeting with an experienced tax professional, especially for people with complicated tax situations. 

For More Information

Getting hitched may open up new tax risks and planning opportunities. It pays to be well informed. Contact your tax advisor for guidance on how getting married could change your tax situation in 2019.



Let's say your family company includes a great group of employees and business couldn't be better. You know that much of your success is due to one or two people with skills and personalities that are hard to match. Suppose they were injured and out of work for a while? Or worse, suppose they died unexpectedly? Would your company survive?

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When an owner or a key employee of a closely held business dies or becomes disabled, there are five separate groups that are concerned about the immediate financial health and future of the operation:

  • Employees who are anxious about the continuation of their jobs.

  • Creditors who are worried about the earning power of the business and its future ability to repay any outstanding debts.

  • Suppliers who fear losing a customer.

  • Customers who wonder about the ability of the business to continue furnishing its products and services. Will they need to look elsewhere to satisfy their needs?

  • Tax collectors may also be interested, but only to the extent that there are sufficient funds to pay various taxes, even if it means the ultimate sacrifice of the business.

One way to help soften the impact of these concerns is with key employee life and disability "buy out" insurance policies.

Typically, your business purchases a life insurance policy on a key employee, pays the premiums, and is the beneficiary in the event of the employee's death. As the owner of the policy, the business may surrender it, borrow against it, and use either the cash value or death benefits as it sees fit.

To determine how much insurance you need, it may be difficult putting a dollar value on a key employee's economic worth. Although there are no rules or formulas to follow, several possible methods to determine the insurance amount may be used. 

The appropriate level of coverage might be the cost of recruiting and training an adequate replacement. Alternatively, the insurance amount might be the key employee's annual salary times the number of years a newly hired replacement might take to reach a similar skill level. Finally, you might consider the key employee's value in terms of company profits. The level of insurance coverage might then be tied to any anticipated profit or loss.

Key Employee Disability Insurance

The death of a key employee isn't the only threat to your business. Suppose a key employee is injured, or becomes ill, and is out of work for an extended period. Disability insurance on such a key employee is another way you can protect your business against financial loss.

A critical part of key employee disability insurance policies is the definition of disability. Usually, these policies define it as the inability of an employee to perform his or her normal job duties due to injury or illness. As with life insurance, your business buys a disability insurance policy on the employee, pays the premiums, and is named the beneficiary. If the employee becomes disabled, the insurance coverage pays monthly disability benefits to your business. These benefits can equal a certain percentage of the key employee's monthly salary, up to either a maximum monthly limit or 100% of their salary. The benefits can be used to pay business operating expenses and cover the expenses of finding a temporary or permanent replacement for the key employee.

The policies typically offer elimination periods (the waiting period between the disability and when the benefits begin) ranging from 30 to 365 days. Depending on the policy, your business may receive benefits for 6 to 18 months, which would be long enough to allow the key employee to return to work or for the company to replace the person.

Planning ahead can prevent a family business from having to liquidate to raise cash and can assure families, employers, creditors, suppliers, and customers that the future of the business is not in jeopardy. By purchasing life and disability "buy out" insurance on owners and key employees, a business lets everyone know the financial condition of the operation will remain sound, no matter what happens.



Employee morale is a measurable, controllable expense. That's the position of Carol Hacker, author of "The High Cost of Low Morale." And according to Hacker, employers and workplace leaders "can beat the negativity that saps employees' energy."

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Employee morale involves the attitudes of individuals and groups toward their work, their environment, their managers, and the business or organization. This morale is not a single feeling, but a composite of feelings, sentiments and attitudes. So, why should an employer be concerned about employee morale? Hacker's response: "Because it's tied to profitability."

Consider the downside of low employee morale. The primary sign that a business or organization has a morale problem is the number of people leaving. High turnover is a sign that there most likely is also a morale problem. And along with the morale problem comes lower productivity, inefficiency, poor quality, lack of cooperation, bad attitudes, and a lot of stress generated for both managers and employees. In the worst cases of low morale, there can even be instances of sabotage.

Check out these eight problems that can undermine morale:

  • 1. A lack of orientation and training of new employees. "When you're bringing people in and they don't know what's expected, immediately you've got problems, and that can get worse," said Hacker.

    2. Insufficient opportunities for advancement for employees.

    3. Managers failing to praise and appreciate their people or show an interest in employees' ideas.

    4. Management not being honest with employees and not keeping them informed.

    5. Unfair promotion practices and management not promoting from within.

    6. Not addressing behavior and performance problems as they arise.

    7. Management not getting rid of the "bad apples."

    8. Actually getting rid of the "bad apples." Unfortunately, said Hacker, "if you fire someone, you fire their entire family. But there are times, for the sake of the business, that some people have to be moved out of the organization." Also, terminations can create morale problems for the remaining people in the organization. Explained Hacker: "Terminations are hard on morale when employees don't know the whole story."

Hacker offers these suggestions to help keep employee morale high:

  • Keep compensation competitive.

  • Look for other ways to reward people. For example, have a fun work environment, or give employees flexibility in scheduling their time.

  • Delegate whenever possible. "When you do, you let people know you believe in them. It gives employees a chance to grow and learn and develop."

  • Let people know that they count, that they're appreciated. You can do that with a simple thank-you or with other perks that are meaningful to them.

  • Learn to give feedback without causing defensiveness. You can turn someone off with a negative comment and never regain their support.

  • Promote from within first. It's a real morale-buster if you don't.

  • Celebrate success with a potluck, gift certificates or time off, for example.

  • Hire right.

  • Build fun into your organization.

  • Address problems as they arise.

It's easy to dismiss the feelings of your workforce when you are focused on trying to turn a profit. Just keep in mind that while you're not responsible for your employees' feelings, their attitudes towards their work are tied to productivity and profitability.



Q.  Our group health plan has a gatekeeper feature that requires participants to coordinate their health care through a primary care provider. We understand that there is a special notice requirement if our plan has this feature. What is the notice, and when and how do we give it? 

A.  Group health plans that require designation of a primary care physician must provide a notice describing the plan's requirements and the related rights of participants and beneficiaries. As background, a group health plan that requires designation of a primary care physician must permit each participant or beneficiary to designate any available participating primary care physician.

For a child, it must permit designation of any available physician (allopathic or osteopathic) who specializes in pediatrics. Furthermore, a group health plan may not require preauthorization or referral (by the plan or any person, including a primary care physician) for a female participant or beneficiary seeking obstetrical or gynecological care from a participating provider who specializes in obstetrics or gynecology. Plans may include reasonable and appropriate geographic limitations when determining whether primary care providers are "available."

The required notice must be provided to each plan participant describing the plan's primary care physician requirement and the rights explained in the preceding paragraph. It must be provided whenever a summary plan description (SPD) or other similar description of plan benefits is provided to a participant. It is unclear what the phrase "similar description of plan benefits" means for this purpose. Cautious employers will want to assume an expansive meaning until this is clarified.

The agencies have provided model language that can be used to meet this notice requirement. It includes a mention of any automatic designation that may occur if a participant doesn't choose a primary care physician, as well as an explanation of how to obtain a list of participating primary care physicians.



Pop-up retail stores, restaurants and events promise numerous benefits. They can be less expensive and more flexible to operate than traditional brick-and-mortar operations. And they may appeal to consumers who crave fun, memorable events. They're also great for seasonal retailers and online boutiques that want to expand or unload inventory.

But will the here-today, gone-tomorrow trend last? Here's what you should know before opening or investing in a pop-up shop.

Reinventing Pop-Ups

The concept of pop-ups has been around for decades. Think of ice cream trucks that cruise down suburban streets during the summer. And don't forget costume retailers that drop anchor in vacant strip malls in the fall, and flower kiosks that appear in train stations for forgetful spouses on Valentine's Day.

In the 21st century, however, the pop-up concept has transitioned. It's evolved from a seasonal sales model into a marketing tool to:

  • Test innovative consumer products and services,

  • Build awareness for established brands, and

  • Create buzz about trendy consumer "experiences."

Modern pop-ups — like nightclubs in vacant warehouses, food trucks at local breweries and vintage jewelry displays at boutique hotels — offer fun, lifestyle events that are typically spread via word-of-mouth and social media (rather than radio or print ads). They give people the opportunity to touch, taste or try products and services before making a purchase.

Building Popularity

The pop-up market is currently valued at roughly $50 billion. (See "Pop-Up Stores" below.) And it's expected to continue to grow as Millennials and Generation Z gain even more purchasing power. Younger generations have a different approach to shopping than previous generations. They tend to be more brand loyal, budget-conscious and linked by social media. And these characteristics lend themselves to today's pop-up model.

What makes a pop-up successful? Value drivers for pop-up shops include:

Costs. Countless brick-and-mortar stores have shuttered in recent years, often due to burdensome overhead costs and emerging competition from online stores. Temporary pop-up locations don't require long-term leases, costly build-outs or substantial inventory investments.

Pricing strategy. Often, a pop-up storefront allows customers to physically interact with the merchant or service provider, and then make purchases online. This distribution model requires minimal investment in inventory, which, in turn, helps pop-up merchants charge a lower price than traditional brick-and-mortar stores.

Conversely, the novelty of a pop-up concept may enable a merchant to charge a premium price. With a limited supply of inventory on hand, consumers may be willing to pay extra for impulse purchases at a pop-up location — or to be seen as trendsetters.

Location. It's important for pop-ups to identify their target market and understand its habits and needs. When and where will customers shop? In most cases, pop-ups need a visible space with significant foot traffic. But sometimes, a hidden location can create brand magic. For example, foodies might track a well-known food truck to its latest spot across town using Twitter or Instagram.

To maximize headcount, coordinate your pop-up's appearance based on favorable weather conditions and local events that will be attended by your target market. You also might consider joint venturing with another vendor who offers a complementary product or service. For example, an activewear clothier might share space with a smoothie vendor to help lower lease costs and leverage off each other's customer base.

Downsides of Pop-Ups

There are limits to the value of the pop-up concept — and, like anything trendy, the novelty may eventually wear off. Because it's hard to maintain a creative edge, many pop-up shops are used to test, grow or supplement an existing online or brick-and-mortar business.

Pop-ups also face capacity issues. That is, they're small and can serve a finite number of customers. To fully serve your target market's needs, you may need to open additional pop-up locations or settle down in a permanent location.

Ready to Join the Bandwagon?

If you're interested in opening or starting a pop-up shop, contact your financial advisors to evaluate your business plan, estimate costs and develop pricing strategies. An experienced professional can help you work through the logistics and maximize your venture's potential long-term value.

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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.