Archives for December 2019

I stole this article from David Trent from Trent Capital Management in Little Rock. He published this article as part of his weekly newsletter.

Ironically, I received this newsletter on Monday, two days after I failed on my second attempt to climb a 100′ cliff at Crowder’s Mountain in Gastonia, NC. While I didn’t reach my goal, the experience taught me a lot more about myself. This article reinforces the point.

“One of the ” First things that happened when we set any goal is it the brain seizes up and tells us why it’s a bad idea and won’t happen.”

Often, when setting a goal, we start out with a big goal and then immediately scale that goal back to make it more realistic and reasonable. We repeat this process until we end up making very little progress with any of our goals. This is the very reason why many of us shy away from goal-setting. We don’t want to be uncomfortable and ultimately disappointed, because we know we won’t follow through. However, when you start the goal with a different way of thinking about it, your brain loses its ability to “scale back to comfort.“ You already know that the goal is “impossible” and that you will fail, so, now what? What does your brain argue with now? Your brain might say, “if you know you’re going to fail, why in the world would you do it?” Because the alternative is also failing. We set a goal and then defeat ourselves before we even give it a solid effort. We think this type of failure is better because “nothing has been lost.” But that’s a lie. You are losing out on the learning, you are losing out on the knowing, and you have no idea what your last opportunity could have been. I think a lot about the goals I have accomplished. If I had decided that they were “too hard“ and failed ahead of time, it would’ve cost me my current life and the amazing clients I now have. So even though we believe that if we don’t try, we can’t fail – I think that’s a lie. Failing ahead of time is still failure, but you learned nothing and as a result, stole your evolution and growth. If you think about it, failing repeatedly is how we accomplish most great things. Instead of failing only to win, I’m also encouraging you to also fail in order to learn how to fail and as well as learning from that failure. I’m convinced that this is the most important skill I could ever teach you. You never know where your failures might lead you. But your failures ahead of time are guaranteed to lead you nowhere. They will just have you repeating the life you already have by believing your excuses, which give you evidence for why you can’t progress.

Source: Self Coaching 101

“So do not throw away your confidence; it will be richly rewarded. You need to persevere so that when you have done the will of God, you will receive what he has promised. ” – Hebrews 10:35-36

I wrote this article earlier this year, and after a year of practical application have gained a few insights. I highlighted those in italics.

The IRS released updated guidance on January 18, 2019 of one of the more complex, and possibly beneficial tax breaks for small pass-through businesses.

The first question most people ask, am I a pass-through? If you are a partnership, S-corporation, trust or estate, a single member LLC or sole proprietorship than you have pass through income.

What the IRS is allowing us to do is exclude from taxation 20% of our business income, sounds great, right? Well it gets complicated.

As long as you are not an accountant, attorney, doctor, consultant, athlete, stock broker or a member of several other specified service trade or businesses you are ok. If you are one of these unlucky professionals, you may be limited on what you can deduct based on your income, if your income exceeds $315,000 for married filing joint or $157,500 for all others.

But wait, there’s more. Even if you are not one of the unlucky professionals, your deduction could still be limited. If you have taxable income over $207,500 or $415,000 if married, the deduction is limited as well. It is limited by the sum of 25% of the W-2 wages your pass through pays to employees plus 2.5% of the property on your books that you are currently depreciating.

My analysis of this deduction is the intent of Congress was to reward those small businesses that have a large investment in employees or have recently purchased equipment; both activities that further stimulate the economy. It makes sense and it follows the logic of President Reagan’s supply side economic approach.

It also brings up a planning point for CPA’s to consider, if your client takes the section 179 deduction (immediate expensing of equipment) then the 199a deduction would not be available for those assets, hence no “double dipping”. I give a lot of credit to people writing the code, they put some thought into all the alternatives.

I was able to recently use the W-2 wage limitation to save a client an additional 10%, by paying an owner of a closely held entity a salary, you can increase the W-2 limitation that is placed on high income individuals, therefore making more of the credit available to the taxpayer. Again, I caution you, this works for some and not all, so you really need to consult with a knowledgeable tax practitioner to do a thorough analysis of your tax position.

There are other limitations with the 199a deduction and everyone’s situation is different, so it is best to consult with your tax professional to get it right.