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When you begin a new business endeavor, it may take some time before you are “in the black” earning taxable income form your efforts. Once you are, however, your earnings will be subject to self-employment tax, as well as income tax. Self-employment tax is the tax a business owner must pay on income that parallels FICA, the Social Security payroll tax.

FICA tax is paid only on employees. If you are a sole proprietor, or shareholder in an S Corporation of LLC, it is unlikely that you are treated as an employee. In these situations, the income you derive from your business is passed directly through the business to you as the owner, and you are not subject to payroll taxes. Instead, the IRS requires you to make up for this difference via the self-employment tax.

An exception to this requirement applies to owners of corporations, typically called “C-Corporations”, that do not pass through income directly to their owners, but are taxed as a corporate entity. In this case, there is no self-employment tax. Income passed through a C Corporation to an owner is either in the form of a taxable dividend or to the owner as an owner-employee. In the latter case, payroll taxes must be withheld just as they are for any other employee. In either case, there is no self-employment tax to pay.

When self-employment tax is due, the tax is calculated as follows:

Social Security: 12.4% of the first $97,000 of self-employment earnings; Medicare: 2.9%: on all self-employment earnings. There is no cap on the Medicare portion of the self-employment tax

By: Frank W Ellis

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The economy has hit taxpayers pretty hard over the last few years and many have had to negotiate with lenders to reduce their debts. In many cases, these lenders have allowed taxpayers to settle their debt for much less than what was owed. However, any cancelled debt over $600 may create a tax bill to the taxpayers. This includes mortgage forgiveness in the case of foreclosure or short sale.

Generally any time you have a foreclosure or a cancelled debt you are hit with a second hardship – a tax bill. Lenders who have forgiven a debt issue a Form 1099-C, Cancellation of Debt, which shows both the taxpayer and the IRS the amount that was forgiven. The IRS considers this to be taxable “other” income since that amount is money the taxpayer received but is no longer required to pay back to the lender. But in 2007, the Mortgage Debt Relief Act was passed to help homeowners avoid the double-edged sword of losing their house and having to pay taxes on the forgiven debt amount. The Act is in effect for mortgage debts cancelled from 2007 through 2012.

How Does the Mortgage Forgiveness Debt Act Protect Me?

The Mortgage Forgiveness Debt Act allows taxpayers to exclude from their taxes certain cancelled debts on their principle residence. The debt must be secured by their home and can apply to a first mortgage, funds secured to substantially improve the residence or a refinance. This includes debts reduced through mortgage restructuring or forgiven due to foreclosure.

The maximum amount of debt that qualifies for this exclusion is $2 million or $1 million if married filing separately. You will still have to pay taxes on any amount forgiven over this limit. Additionally, the Act does not allow you to exclude cancelled debt from a second home, credit cards or car loans.

How Do I Exclude Cancelled Debt From My Taxes?

Any forgiven mortgage debt will still need to be reported on your taxes. You will receive a Form 1099-C which will tell you the amount of debt that was cancelled. You must then fill out IRS Form 982 with your taxes. If you are only using this form to report your cancelled debt (it is used for other purposes as well) you will only need to fill out a portion of the form. Whether you kept ownership of your home will determine how many sections of the form you will need to complete. Using an online tax preparation site, like www.efiletaxreturns.com, will help you fill out the appropriate sections and will automatically submit the correct forms with your return.

What Can I Do if My Cancelled Debt Doesn’t Qualify Under the Act?

There are other exceptions that allow cancellation of debt to be non-taxable. In addition to mortgage forgiveness, other reasons include:

o Bankruptcy. Debt forgiven through bankruptcy is not taxable as income.

o Insolvency. If you are insolvent, meaning the total of your debts before the cancellation is more than the fair market value of your assets. You may only exclude the amount of your cancelled debt that does not exceed the amount of this difference. So, if your assets are worth $25,000 and your debt totals $35,000 the difference is $10,000. If a lender forgives $15,000 of debt, $10,000 will be excluded and $5,000 will be taxable.

o Non-recourse loans. If the loan is secured by personal property and the only recourse for default of the loan is repossession of that property, the lender cannot pursue you personally for the defaulted amount.

Again, for any amount of debt that’s been cancelled or forgiven, you will receive a Form 1099-C from the lender. You must apply these rules against the debt to see if it qualifies to be excluded under the Mortgage Forgiveness Debt Relief Act.

By: Karin Velez

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Knowing when you want to sell your business, and how you want to do it, can help you to ultimately achieve its maximum value.

Even if you’re not planning to sell your business right now, it’s important to understand how to value your company, and take the necessary steps that will make it worth more to potential buyers.

This is where your business strategy comes in.

What is it?

Your exit strategy is your unique plan of how and when you will leave your business. When you’ll sell your company. Who you’ll sell it to. And whether or not you’ll still be a part of the business as it moves forward.

Why you should always have an exit strategy

Whether its a detailed plan or a summary overview it is a good idea to have an strategy for exiting your business.

Why? For three key reasons.

Firstly, it gives you a road map. How are you going to get there if you don’t know where ‘there’ is? It doesn’t need to be too detailed but a rough idea can be very helpful so you can head in the right direction.

Secondly, your exit strategy can be a very powerful motivator to keep going. The daily problems of running a small business are put in to perspective when there is an end goal in sight. For me this is a key one because, as the head of your business, your team will look to you to lead them, having this motivating factor can help you inspire the people that are around you.

And the third reason? Money. An exit strategy will make sure you get the best possible price for your company. Being aware of the prospect of selling your business allows you to focus on the activity that will achieve the greatest value at the point you intend to sell.

Adapting your exit strategy

Of course, like all best-laid plans, you may not exit from your business exactly as you thought you would.

You can always review and change your exit strategy, taking advantage of new opportunities when they come along. Continuous planning will give you something to work towards, exiting your business how and when the time is right for you.

For tips and further information about planning a business exit strategy, head to my blog, where you’ll find practical advice on this and every aspect of selling your business.

By: Daniel Atherton

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Borrowers in need of money urgently can benefit from the services of instant payday loan company. These companies can help borrowers in need of urgent cash get the required amount of money soon. These loans come in handy in times of need. The best feature of this type of loan is that these loans are approved without any credit check.

Basically, instant payday loans are meant to serve the short term needs of a borrower. These loans can be repaid fast. However, they carry slightly higher rate of interest on the loan as compared to other types of loans. Doing some research can help a borrower avail loan at a lower rate. The process of loan approval is also very fast. Seeking help from these companies can help a borrower get the loan approved fast.

One can even look online to avail loan quickly. This service is free of cost. The borrower is free to choose the loan of his choice. One can also get a lower rate of interest on the loan. The online mode offers a wide variety of choice to borrowers. One can also compare the various types of loans online.

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Loan Immediate Decision

Loan immediate decision comes as a boon those who are looking forward for faster approval of loans. Whatever be the financial situation of the borrower – credit challenges, poor credit score, CCJ’s, IVA’s, etc. Any kind of borrower can make use of these loans. The loan specialists can help such borrowers overcome nay kind of financial predicament. A borrower can look forward to fast and guaranteed finance in spite of all credit challenges.

These loans serve a host of needs like, immediate cash for home or buying a car, meet wedding expenses, pay urgent bills, plan a holiday, fulfill educational needs, consolidate debts, etc. The borrower is free to use the loan as per his needs. Moreover, those with a bad credit score can easily avail these loans. They need not pledge any asset as collateral against the loan.

Generally, poor credit scorers find it very difficult to avail loans quickly. Due to their credit status, their loan applications are turned down. Such borrowers can find respite in no credit check loans. These loans also enable a borrower better their financial situation quickly.

By: Sadhana Dhanyal

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Blue Ocean, Red Ocean. Why all the fuss? And how do we look at strategy development from a Blue Ocean perspective? And why do we even want to?

This may be old news for some, but I was recently asked about Blue Ocean Strategy, hence this article.

There’s nothing new to report here – just as the concept wasn’t new when it made the news when Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant was published in 2005.

W. Chan Kim and Renée Mauborgn, authors of the book, articulated something that good marketers have always known.

Specifically, that an excellent way for companies to realize strong growth and achieve above average profits is by carving out a new niche for themselves and creating demand in what may, for a while, be uncontested market space.

Kim and Mauborgn dubbed this Blue Ocean Strategy. Red Ocean is the term they associated, somewhat disparagingly, with the more traditional approach of competing head-to-head with direct and indirect competitors for a larger share of a fixed size pie, (i.e. known customers in an existing industry). This traditional approach should not be dismissed out of hand, however, because many organizations achieve excellent results the Red Ocean way by offering a product or service that has a higher perceived value than other market options, and marketing it creatively.

Red Ocean Strategy is viewed as a zero-sum game where one company’s gain reflects another company’s loss. “Stealing market share” is a key element of this approach – and in some cases is the right way to approach the problem at hand.

There are times, however, when it’s tough to steal share and to realize sufficient gains to achieve double digit increases. This is especially tough when…

• the market is saturated,
• consumers are bombarded with too many choices,
• supply exceeds demand and prices plummet, etc.

In these circumstances, the only way to leap ahead of the pack is to challenge the underlying assumptions in the industry – and for senior executives to question the way their company competes in their vertical and how it conducts business in general. Unfortunately, this happens all too infrequently.

In this kind of tough market situation I advise clients to….

• Look beyond their current market boundaries – to see if there are complementary industries that could use their products or services (perhaps with a little tweaking)
• To focus on ways their products can solve myriad consumer problems (retail or corporate) – not just the ones of the current target audience
• Determine if there are easily-incorporated changes to the product that could stimulate demand in the existing market segments
• Pursue a reasonable cost strategy (it’s necessary to offer the perceived value – it is not necessary to be the lowest cost provider).

For many companies this will highlight ways of doing business, and identify previously ignored markets. Creating strategies to successfully sell to these segments will usually represent a paradigm shift… and this is really what the Blue Ocean approach is all about.

Over the past 100 years or so (as I said, the concept is not new), it was this kind of thinking that led to…

• Ford introducing the Model T in 1908
• Sunflight Holidays giving Canadians cheap Caribbean holidays with charted flights in the 1970s
• Fred Smith founding FedEx in 1971 and brining the world overnight delivery 2 years later
• CNN bringing us in 1980 with 24/7 news in 1980
• Starbucks giving us coffee bars and the +$5 cup of joe to go
• Cirque de Soleil with its sold out yet lion-less circus acts

Not to mention mutual funds, cell phones, discount retail, minivans, snow boards, home “video” and more.

There are multiple benefits to having this “new mover advantage” (a.k.a. “first to market” advantage). Among them:

• Higher margins in the early days;
• An opportunity to become the dominant player; and
• The opportunity to set the standard (think iPod, iPhones, etc.).

The principle of looking for the sweet spot where your company’s products and/ or services are truly differentiated from those of anyone else doing business in the sector, is simply one of the key pillars for developing good business strategy.

What are the other ones?

From my perspective, there are 15 business strategy pillars:

1. Being consistent in what the brand represents – or making one major change to the brand’s positioning, and being prepared to stick with the new image (i.e. don’t destroy your brand by repeatedly changing what it represents).
2. Acting with integrity and in keeping with a set of established core values.
3. Developing a long range vision based on customer input, internal and macro-environment assessment and trend analysis.
4. Being brutally honest about your company’s strengths and weaknesses.
5. Actively formulating and exploring options that break with industry tradition. (The Blue Ocean part)
6. Finding the sweet spot where your company’s products and/ or services are truly differentiated from those of anyone else doing business in the sector. (More Blue Ocean)
7. Being willing to take calculated risks and go out on a limb. (Even more Blue Ocean).
8. Being open to the tried and true (sound like a contradiction, but both approaches are needed to develop sound strategy).
9. Getting input from experts outside your company and industry who have faced similar challenges (different industries tend to solve problems in different ways, and can provide valuable insight).
10. Getting input (and buy-in) from all key functional areas of the company as the strategy is developed.
11. Ensuring that the methods/ path chosen to achieve the vision are sustainable over the long term.
12. Modelling the ‘best’, ‘worst’ and ‘most likely’ scenarios – and making sure that each assumption in the model is based on research, not pure gut
13. Testing the bold idea before bringing it to market.
14. Making sure all company personnel are brought up to speed on what is happening (good internal communications and training are essential here).
15. Promoting the change(s) creatively in ways that have impact (impact and marketing vehicle choices).

Going back to the original question, I would have to say that Blue Ocean strategy is not a new concept, but the authors of the book labelled what has always been a sound business practice, making it easier to a) explain the concept and b) get corporate buy-in.

How do you go about finding your Blue Ocean/ Sweet Spot will be the subject of another article.

In the meantime, if you would like clarification on anything, please feel free to contact me: jmc@theQgroup.com

Otherwise, remember to have fun and be prepared to “go out on a limb because that is where the fruit is.”
Jane-Michele Clark

By: Jane-Michele Clark

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Current info about structured settlement and reverse mortgage is not always the easiest thing to locate. Fortunately, this report includes some interesting information on structured settlement and reverse mortgage.

Both a structured settlement and a reverse mortgage allow recipients to draw income from sources that will give them the opportunity to outlive their financial obligations and maybe pass on a bit to relatives. It’s about peace of mind. With both, issues are involved that need to be understood in order to make the wisest decisions.

How a Structured Settlement Works

A structured settlement is an award of money resulting from an injury or illness suffered because of a company’s legal culpability or responsibility. Depending on how the recipient decides to get the payment, it can be paid over several years in a fixed annuity, invested in a mutual fund, or sold outright for one lump sum payout.

The most common choice is to place a structured settlement award into an annuity. The payments are set in stone up front and paid out on a regular basis, making it entirely predictable and stable. In most cases, the payments from a structured settlement fixed annuity are entirely tax-free, as long as the money was awarded as the result of physical injury or illness. An insurance company provides and manages the annuity, which keeps the money in its ‘in house’ account.

How a Reverse Mortgage Works

How can you put a limit on learning more, especially when the topic is about about structured settlement and reverse mortgage? The next section may contain that one little bit of wisdom that changes everything.

The federal government’s Dept. of Housing and Urban Development (HUD) concocted the most common form of reverse mortgage – the reverse annuity mortgage. To qualify, you must be at least 62 years of age and live in the home in question. The mortgage must be paid in full or have a large amount of equity built up. The government insures your reverse mortgage, so it’s fully protected. The purpose in establishing reverse mortgages set up around annuities is to give aging folks the opportunity to draw income from the equity in their homes.

Once approved for a reverse annuity mortgage, the homeowner receives regular, tax-free monthly payments. This type of mortgage is later paid when the home is sold or passed on to surviving relatives. In some cases, reverse mortgages can be paid in one lump sum to the homeowner. Qualified people can even open up a line of credit that is secured by the reverse mortgage. Basically, the amount a homeowner qualifies for is determined by age, credit rating, amount of equity, and the interest rate for which they qualify.

Structured Settlement and Reverse Mortgage Scams

Unfortunately, both structured settlements and reverse mortgages – because they deal with large sums of money – are rife with scammers seeking to make a quick buck off unsuspecting people. To avoid this unattractive possibility, it’s smart to hire a competent attorney who is well versed in these aspects of the law. You should also educate yourself fully about all the options available to you before you make any firm decisions.

When word gets around about your command of structured dettlement and reverse mortgage facts, others who need to know about structured settlements will start to actively seek you out.

By: Ken Austin

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