Month: April 2022

Preface: “Vision without traction is merely hallucination.” “Most people are sitting on their own diamond mines. The surest ways to lose your diamond mine are to get bored, become overambitious, or start thinking that the grass is greener on the other side. – Gino Wickman

EOS Workshop Report for Entrepreneurs

Credit: Donald J. Sauder, CPA | CVA

Friday, April 29th, the firm sponsored an EOS Workshop at Shady Maple Smorgasbord with local EOS Traction Implementors Brian White and Rodney Nolt. The Entrepreneurial Operating System (EOS) is a set of simple concepts and practical tools used by more than 130,000 companies worldwide to clarify, simplify, and achieve their Vision. Look at your business in a whole new way – through the lens of the Six Key Components.

Brian began the EOS workshop by asking the attendees to take a moment to visualize their businesses from an objective perspective. The heart of a company is its team, and the healthy heart of a healthy business is a healthy team. Unfortunately, too many entrepreneurial companies have a mind of their own, but for the select few, but growing number, who implement EOS Traction, often obtain more profitability, gain more significant market share, and have increased work-life balance. Going from good to great in entrepreneurism is as simple as implementing EOS.

EOS is built around six elements. 1) Vision. You know where you’re going, and everybody else on the team does as well. 2) People. Great people on the team. This definition is different for each business. For instance, an auto repair shop hires different talent than a delivery service. 3) Data. Quantifiable facts and figures are better than opinions.4) Issues. All businesses have issues. The Best know how to solve them successfully. (or get an EOS implementor to help) 5) Processes. Processes are the key to freedom and bring practical, consistent profitability. 6) Traction. The Traction element is to integrate and implement the previous five ingredients in a system.

Vision begins with Core Values. You need to define and articulate what your business lives and breathes daily—your business purpose. The purpose is what you do that feels good and is what you’re great at. The more you work towards your goal and Core Focus, the easier work (and life) will be for you. Set targets. Where will you be in ten years or three years, perhaps? Vision also incorporates a marketing strategy that culminates in More Better Customers. Vision is achieved when all your people know where you are going.

The Vision includes a 1 Year Plan with measurables. Rocks are an EOS term similar to goals that help you achieve your plans. IDS is when you identify, discuss, and solve issues. Again, all businesses have issues. The best get past discussion to ideal solutions. It’s okay to have problems. The ultimate companies give their team the tools to solve them.

The People Analyzer includes a graph where you rate each team member based on their adherence to core values and GWC. Get it; Want it; Capacity to do it. The most important feature of any business is its culture. Does your team adhere to the core values? Do they “get” what they are supposed to do, want to do it, and can excel at the role.

Data is when you integrate scorecards and measurables in decision-making instead of varying opinions. Data measures the vital signs in your business’s health and successfully guides the team’s health.

Processes are the recipes that guide you; if you’re going to follow recipes, you need to know how to cook—simply giving recipes or processes is futile if you don’t train your team your team how to “cook.” Processes succeed when you have coached your team on the ideal way to follow the process. As everyone likes a great recipe implemented successfully, similar is implementing (and training) on processes.

Traction is obtained when you have a developed a Vision following the ESO Vision Traction Organizer, have the right people in the right seats, with scorecards and measures to track performance trends from Data, Solve all issues successfully, and develop processes that successful host a great team, culminating in implementation success.

All entrepreneurs need A) a coach, B) a Peer Group C) System (EOS).

Among the concluding questions from attendees was if EOS can be implemented for successful family relationships. The word is that, yes, some families do implement EOS for their homes. You can contact Brian White or Rodney Nolt for additional details on EOS.

brian.white@eosworldwide.com

rodney.nolt@eosworldwide.com

https://www.linkedin.com/in/rodneynolt/

 

Preface: “There is no such thing as a self-made man. You will reach your goals only with the help of others.” – George Shinn

2022 Tax Planning: Independent Contractor vs. Employee

Today more and more businesses are making increasing use of outside workers to cut costs, including payroll tax costs. Unfortunately, this trend has caught the attention of the IRS. What the IRS is looking for are workers who are treated as independent contractors but who actually are employees.

When the IRS is successful in reclassifying workers, there is the potential of a substantial tax bill, consisting of, just for starters, the employer’s back social security taxes and FUTA taxes, plus possible penalties and interest.

The amounts involved are significant. For 2022, in addition to income tax withholding, the employer is required to withhold 6.2 percent from taxable wages up to a wage base of $147,000 for the Old Age, Survivors and Disability and Insurance (OASDI) portion of the Federal Insurance Contributions Act (FICA). The Hospital Insurance (HI, or Medicare) portion of the tax has no wage cap.

Despite the high stakes, classifying a worker as either an independent contractor or an employee is not straightforward. The determination depends on a number of factors and can be quite complex. Control of how and when the worker gets the job done may or may not be the most important factor.

Some workers are employees no matter how little or how much they are supervised. Others are independent contractors no matter how tightly a business controls them. For many years, the IRS applied a 20-factor control test as an analytical tool. The IRS has attempted to simplify this test by examining evidence of the degree of control and independence based on three categories:

(1) behavioral control,

(2) financial control, and

(3) the relationship of the parties.

There is some good news in all this intricacy. First, taxes due may be reduced if the misclassification is unintentional. Second, in some cases, if you have always treated workers as independent contractors the IRS may let you go on doing so. You cannot take advantage of this safe harbor unless there was a reasonable basis for not classifying the individual as an employee in the first place and unless you have filed all returns required for nonemployees, such as Form 1099 information returns.

Third, if you are unable to meet all the requirements but have filed returns, the IRS may let you settle for a fraction of the cost. Of course, there are times when the IRS is incorrect in its demands for reclassification and litigation, rather than quick settlement, may be the better course of action.

Please do not hesitate to call us. We can analyze existing payment arrangements, help you with future plans and advise you what, if any, action is necessary. We may even find workers are actually independent contractors who have been misclassified as employees. One last word: Congress is aware that reform is necessary. We will let you know promptly of any action from the Administration.

Jesus said to them, “Bring some of the fish you have just caught.” So Simon Peter climbed back into the boat and dragged the net ashore. It was full of large fish, but even with so many the net was not torn. Jesus said to them, “Come and have breakfast.” None of the disciples dared ask him, “Who are you?” They knew it was the Lord. Jesus came, took the bread and gave it to them, and did the same with the fish. This was now the third time Jesus appeared to his disciples after he was raised from the dead. John 21: 10-14

This is the disciple who testifies to these things and who wrote them down. We know that his testimony is true. Jesus did many other things as well. If every one of them were written down, I suppose that even the whole world would not have room for the books that would be written. John 21: 24-25

The Word Is He Is Risen.

God Bless you and yours,
Sauder & Stoltzfus, LLC

Preface: “It is amazing what you can accomplish if you do not care who gets the credit.” – Harry Truman

2022 Tax Planning: Hiring Family Members

One of the advantages of someone running their own business is hiring family members, which can provide a tax deduction for compensation paid. When including family members in business enterprises, certain tax attributes and employment tax rules apply.

Both spouses carrying on a trade or business

If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. There are different filing requirements for a sole proprietor vs. a joint venture as a partnership. The spouses can elect not to treat the joint venture as a partnership by making a qualified joint venture election.

Qualified joint venture

Spouses may elect treatment as a qualified joint venture instead of a partnership. A qualified joint venture conducts a trade or business where:

• The only members are a married couple who file a joint return,

• Both spouses materially participate in the trade or business, and

• Both spouses elect not to be treated as a partnership.

Only businesses owned and operated by spouses as co-owners and not in the name of a state law entity, such as a limited partnership or limited liability company, are eligible for the qualified joint venture election.

Employment taxes. If the business has employees, either of the spouses as sole proprietors may report and pay the employment taxes. The spouse, as an employer, must have an EIN for their sole proprietorship. If the business filed or paid employment taxes for part of the year under the partnership’s EIN, the spouse may be considered the employee’s “successor employer” for purposes of figuring whether wages reached the Social Security and federal unemployment wage base limits.

The wages for the services of an individual who works for their spouse, or parent employed by a child, are subject to income tax withholding and Social Security and Medicare taxes, but not the Federal Unemployment Tax Act (FUTA).

Additionally, there are special rules for children employed by parents. Children under the age of 18 are not subject to Social Security and Medicare taxes on their wages if the business is a sole proprietorship or a partnership in which each partner(s) is a parent of the child. Additionally, the payments for wages to a child under age 21 are not subject to FUTA.

Preface: “If you want happiness for an hour, take a nap. If you want happiness for a day, go fishing. If you want happiness for a year, inherit a fortune. If you want happiness for a lifetime, help somebody” – Chinese Proverb

2022 Tax Planning: Charitable Giving

You probably appreciate that you can get an income tax deduction for a gift to a charity if you itemize your deductions. But there is a lot more to charitable giving. For example, you may be able give appreciated property to a charity without being taxed on the appreciation. Or charitable giving may be part of your overall estate planning. These benefits can be achieved, though, only if you meet various requirements including substantiation requirements, percentage limitations and other restrictions. We would like to take the opportunity to introduce you to some of these requirements and tax saving techniques.

First, let’s look at the basics: Your charitable contributions can help minimize your tax bill only if you itemize your deductions. Once you do, the amount of your savings varies depending on your tax bracket and will be greater for contributions that are also deductible for state and local income tax purposes.

Itemizers

Under the 2017 Tax Cuts and Jobs Act, the percentage limitation on the charitable deduction contribution base is increased from 50 percent to 60 percent of an individual’s adjusted gross income for cash donations to public charities in 2018 through 2025. There is an even greater benefit, because in addition, the phase-out of allowable itemized deductions is repealed for tax years 2018 through 2025.

Contributions to certain private foundations, qualifying organizations and  approved societies are limited to 30 percent of adjusted gross income. A special limitation also applies to certain gifts of long-term capital gain property.

Taxpayers over 70 ½ years of age are allowed an exclusion from gross income for distributions from their IRA made directly to a charitable organization of up to $100,000 ($100,000 for each spouse on a joint return). A qualified charitable distribution counts toward satisfying a taxpayer’s required minimum distributions from a traditional IRA.

Contributions must be paid in cash or other property before the close of your tax year to be deductible, whether you use the cash or accrual method. Your donations must be substantiated. Generally, a bank record or written communication from the charity indicating its name, the date of the contribution and the amount of the contribution is adequate. If these records are not kept for each donation made, no deduction is allowed. Remember, these rules apply no matter how small the donation.

However, there are stricter requirements for donations of $250 or more and for donations of cars, trucks, boats, and aircraft. Additionally, appraisals are required for large gifts of property other than cash. Finally, donations of clothing and household gifts must be in good used condition or better to be deductible.

There are other special charitable giving techniques beyond the usual gifts of cash. These include, among others, a bargain sale to a charity, a gift of a remainder interest in your residence and a transfer to a charity in exchange for an annuity.

Please do not hesitate to contact us if you have any questions about any of the themes raised in this letter.