The Insurance Doctor

Tag: taxes

  • The Pros and Cons of Self Employment

    The Pros and Cons of Self Employment

    There is no doubt we are in unique times and uncharted territory!  To put this into context, over 47 million people voluntarily quit their jobs in 2021.  In total, 68.9 million either quit, were laid off, or were discharged.   According to the Bureau of Labor Statistics, in December 2021 alone, 4.3 million Americans quit their jobs, down slightly from the record 4.5 million quits in November 2021!

    While millions resigned for cash incentives, better pay or better benefits, many people also left the labor market to care for children or elderly relatives during the pandemic.  Many older workers either retired early or were forced out of the labor market because of age discrimination.

    Keep in mind that we have roughly 330 million residents in the United States, which includes underaged non-working children, and retirees.  68.9 million people leaving their jobs has created a huge workforce void in the restaurant, hospitality, trucking, and many other fields.  This is known as “The Great Resignation!”

    According to the Census Bureau, a record 5.4 million new business applications were filed in 2021.  What does this mean?  This means that there are millions of people that have gone from working for small, medium, and large corporations to being self-employed. 

    Having done this myself, I know this can be a difficult transition.  I went from working as an Agent for The Prudential Insurance Company of America, (The Industry Leader at the time) who recruited me while at Lehigh University, to the President and Founder of Intelisano & Associates, Inc. back in 1999. 

    As an employee of The Prudential, the company took care of many things for me such as office expenses, supplies, advertising, back-office support staff management, and W-2 employee tax record keeping, just to name a few. 

    As a newly self-employed fully independent Broker and S-Corporation business owner in February of 1999, I was then left to fend for myself in those areas, as well as to rethink how to acquire new clients and run my insurance agency and back office.

    An insurance “Agent” works for and represents an insurance company where they must place ALL or a significant majority of the agent’s business.  An independent “Broker” represents you, the client, and shops the market for the most suitable product available. Because I left Prudential, I was forced to leave ALL my clients and renewals with Prudential Insurance and start from scratch.  Many of the 5.4 million new business owners will now be in a similar situation. 

    Like anything else, there are pluses and minuses to running your own business.  The Pros include but are not limited to:

    1. Qualifying For Tax Deductions Traditional Employees Do not: If working from home, you are able to deduct a portion of your rent or mortgage payments as well as home office expenses such as phone, office supplies, and utilities.  You can deduct car expenses such as gas, maintenance, parking fees, tolls, and depreciation. 
    2. Job Security: You have the coolest boss (yourself), so you never have to worry about getting fired or getting your pay docked.
    3. Time Freedom: No more checking with your boss or putting in for time off when you want to book a family or personal vacation.
    4. Family Time: You can schedule your work around special occasions, proms, birthdays, plays, anniversaries, and sporting events.

    The Cons of Running Your Own Business Include:

    1. Submitting Two Tax Returns: When you are self-employed, you must file both a personal tax return (usually due on April 15th annually) and a corporate/business return (usually due March 15th annually). 
    2. Quarterly Tax Payments and a Higher Rate: Two of the biggest cons are that you must make estimated quarterly tax payments for the estimated taxes you owe and pay a higher tax rate.  Consult with your CPA first!
    3. Social Security and Medicare 15.3% Tax on Income: All workers are required to pay a 15.3% tax (up to the first $142,800) of net income.  As a W-2 employee (you work for an employer) you are responsible for only half the tax as your employer pays the other half.
    4. Health Insurance Sticker Shock: A large group (50-100+ employees) health insurance policy can cost between 20%-30% less than an individual health insurance policy for the same person.  Also, many employers subsidize a portion (often between 25%-50%) of your monthly health insurance premiums.  This results in what I call “sticker shock” when people see the “Actual” cost (which can be double) of staying on your former company’s health plan by going onto Cobra. 

    In certain situations, my firm can help with Con #4!  If you own your own business with an active employee identification (EIN) number and are working full-time, we have access to large company plans where we can link a smaller company or “SOLO-PRENEUR” to a larger company plan therefore, you will benefit from economies of scale.

    If you are feeling health insurance “sticker shock,” feel free to reach out to me at Rob@InsuranceDoctor.us.  To be added to our monthly e-newsletter list, email “Add Me” to the same email above.

  • Covid Briefing #21

    Covid Briefing #21

    There is an old saying, “Ignorance is Bliss!”  My new saying during this Covid-19 era is “Ignorance is Super-Expensive!”  In my 30-year career, I have never seen more advisor ignorance and malpractice.  Keep this in consideration if this is the first you are hearing about this.

    There have been MAJOR CHANGES in tax deadlines and proposed changes in tax, gifting, and estate planning rules, proposed on March 29th by Bernie Sanders, which I will review below.  My “Elite 8” list of changes to be concerned about are:

    1. The Federal CARES Act One Year Hiatus on Required Withdrawals from IRA’s and Most 401k’s is Over in 2021:  This means the RMD (required minimum distribution) must be taken in 2021.  The amount is based on the age of the account holder.  For example, a 72-year-old with an $100,000 IRA must withdraw $3,906 this year.  A 75-year-old is required to withdraw $4,367 this year. 
    2. Obamacare Health Insurance Exchange Enrollment Date Extended Again: This means the health insurance open-enrollment period now is extended to Sunday, August 15th for those individuals who want to enroll.
    3. The Federal and New York State Income Tax Return Deadline was Extended: These 2 deadlines were extended from April 15th to Monday, May 17th. 
    4. Stimulus Payments Were Deemed Not Taxable: This is major news for Americans who have received one or more stimulus payments.  They are technically considered an advance on a tax credit known as The Recovery Rebate Credit.
    5. What Happens if You Missed a Stimulus Payment? You can recover it through the Recovery Rebate Credit when filing your 2020 tax return.  It can be found on line 30 of Form 1040 or 1040-SR.  Consult with your CPA or tax advisor on this.
    6. The PPP (Paycheck Protection Program) Application Deadline Extended: Eligible business owners may apply for needed funds through Memorial Day, Monday, May 31st.  For questions regarding the PPP, email me at Rob@InsuranceDoctor.us.  We can assist and connect you to banks who want to help at no cost for my Wave readers!
    7. The CDC (Centers for Disease Control) Extended the Eviction Moratorium Date: The nationwide ban on certain residential evictions was extended to at least Wednesday, June 30th!
    8. On March 25th, 2021, Senator Bernie Sanders Introduced the “For the 99.5 Percent Act”: These sweeping changes, if enacted into law, would change the way families pass money down to their children, and dramatically increase the taxes children must pay within 9 months from their parents’ death!  Proposed changes include but are not limited to: A. Reducing the current $15,000/ per person unlimited gift tax exclusion to a maximum of $20,000 per year in total.  B. Reducing the current $11,700,000 per person estate tax exclusion to $3,500,000 per person. C. Limiting lifetime gifts to $1,000,000 per person in total.

    Are you confused yet?  There has never been a more important time to rely on your advisors.  Reach out now to your CPA, Attorneys, Insurance Broker, Investment Advisor and Financial Planner to review these monumental changes.  This is what you pay them for, and your money-moves now will have an impact on your family for many years to come!  Feel free to reach out to me for guidance at Rob@InsuranceDoctor.us.

    Be Positive, Test Negative and Keep the Faith!

  • 6 Interesting Income Tax Facts You Didn’t Know

    6 Interesting Income Tax Facts You Didn’t Know

    When we were founded in the 1700’s there were very few taxes at all!  Up until 1802, the USA was mainly supported by taxes on goods like tobacco, sugar, and spirits.  War is what initiated the need for funds and taxes.

    1. War of 1812: A sales tax was first introduced in 1812 to cover war costs.
    2. 1862, middle of the Civil War: Congress introduced a personal income tax for the first time. People earning between $600-$10,000/year paid a 3% tax and those over the threshold paid a higher percentage.
    3. 1862 IRS Commissioner’s Office established: This gave the Commissioner powers to assess, levy and seize assets for those who didn’t pay their taxes.
    4. 1913 Income Tax System became permanent: Thanks to the 16th  By 1918 annual collections reached over $1 billion.
    5. 1986 Ronald Reagan signed the Tax Reform Act: This bill severely reduced personal income taxes and raised corporate taxes.  The maximum rate was reduced from 50% to 28%.
    6. 2001 George W. Bush signed the Tax Relief Reconciliation Act: One of the biggest tax cuts in history, this act introduced a new low bracket of 10%, increased the child tax credit, adjusted brackets for married folks and reduced the top 4 tax brackets.

    As we know, it was just changed again by President Trump.  No matter what happens going forward, taxes are here to stay!

  • 6 Facts Nobody Knows About The 2018 Trump Tax Reform

    The Trump Tax bill has affected individuals and businesses both in the USA and abroad.  It’s still being dissected.  Check out these facts:

    1. Eliminates health ins tax penalty in 2019: The 12/22/2017 tax bill signed into law eliminates the tax penalty for individuals who fail to maintain (MEC) minimum essential coverages as of 1/1/2019.
    2. The Employer Mandate still applies: Applicable large employers (ALE) will continue to face penalties for failure to offer affordable coverage providing minimum value to their full-time employees.
    3. Individual Mandate Penalties are still in force in 2018: Individuals who go without health coverage for 3-month or longer in 2018 will still have to pay a penalty (unless they qualify for an exception)!
    4. More options are available for 529 monies: Families can withdraw up to $10,000/year tax-free to use for public, private or religious elementary or secondary school expenses
    5. Home Equity Loans (HELOC’s) may no longer be deductible: HELOCs (home equity lines of credit) and 2nd mortgages are ONLY deductible if used for “substantial improvements” to the home and the combination of the 1st mortgage and HELOC or 2nd mortgage doesn’t exceed the new cap of $750,000. (previously $1.1m)
    6. Pro athletes can no longer deduct agent fees in 2018: The NFL explains it by saying since players pay agents directly and agent fees are not deducted from game checks, they will no longer be deductible under the Trump Tax Reform.
  • 5 reasons seniors should sell their life ins. policy in 2018

    5 reasons seniors should sell their life ins. policy in 2018

    Many seniors are creatures of habit and are holding onto their large life insurance policies with expensive premiums that they may no longer need or afford.  Based on the new Tax Law Reform, 2018 could be the best time to sell their policy.

    1. The Estate Tax has been increased: The tax exemption has been raised to $11,200,000 per person, $22,400,000 per couple hence the policy may no longer be needed to pay any estate tax.
    2. Tax law change on selling life insurance policies: People who sell their policies will now receive the same treatment as those who cash surrender their policy. In many cases, selling the policy can net 2-4 times more than the current cash value!
    3. 20+ settlement companies bid on your policy: We have access to 20+ settlement companies that will bid on buying your policy for much more than the current cash surrender value.
    4. Term policies can also be sold: Even term policies with zero cash value can often be sold for cash.
    5. Receive money instead of paying expensive premiums: Many seniors are on a fixed income and struggle to pay premiums. This way they can receive a lump sum of cash and no longer have to pay those premiums which should improve their quality of life.

    Reach out to us to find out how it works and to obtain a no cost, no obligation quote on how much money you, your parents and/or grandparents can get by selling their policy!

     

  • Tips on what to do with your Tax Refund

    Tips on what to do with your Tax Refund

    Other than folks who receive an annual bonus this is the only time of year when some people will receive a lump sum of money. Instead of squandering your money consider the following options:

    • Add to your IRA: you can contribute up to $5,500/year to a traditional and/or Roth IRA or $6,500 if you are 50 or older by the end of 2014taxrefund
    • Pay off debt: If you are carrying more debt than you are comfortable with, consider paying it down. It’s like investing at the same interest rate being charged on the loan. Try to pay off your credit cards with the highest interest rate first.
    • Top off your emergency fund: You should have 6 months salary liquid in case of an emergency. Keep the money in an interest earning account.
    • Boost retirement savings: If you aren’t contributing enough to a company retirement plan to capture 100% of the company match, you are walking away from free money! Use the extra cash to increase your contribution.
    • Keep the money in a side fund for college: Putting the money in a 529 plan decreases what your student can qualify for in endowment “Free money”.
    • Prepay your summer vacation: Use some of the cash to pay off your vacation in advance so you don’t have to take it from your income in the summer.

    Do yourself a favor by choosing one of these options instead of wondering where all the money went at this time next year! Contact Rob today for a free consultation on this and other concerns you have here.