Written by: Michael E. Harter, CPA/PFS, CFP®

Making consistent money in the financial markets has been challenging to say the least since the 2008 meltdown.

Interest rates returns continue to plummet as rates remain at historical lows in an effort to revive the economy.    New money from maturing CD’s and bonds are met with nearly non-existent returns.    The stock market looks to build momentum as companies are showing stronger balance sheets, amble cash and leaner cost structures.   However events such as the European debt crisis and our own debt ceiling showdown this past summer keep pushing the markets down.    Now the gas prices have taken center stage to wear down consumer confidence.

Instead of becoming outraged about current events, we accept what is given to us and say “Well at least I did not lose any money”?     Since when did we become so passive or accepting of mediocrity?

We should be engaged in dialogue with policy makers and regulators to get out of the way and stop putting in gimmicks and artificial barriers that prolong the natural process.    We have fiddled with the fundamentals of our capitalistic systems to the point that they can not operate properly and efficiently.    Sure, maybe the intentions had merit, but the unintended consequences need to be examined as in many cases they outweigh the short term benefits.

Too many cooks spoil the broth!  

What say you?

Written by: Keith O. Frame, CPA

It seems I continually still see newspaper articles, editorials and letters to the editor in various publications referring to the Michigan tax overhaul as a “$1.8 billion dollar give-a-way to business”. Let’s investigate this claim.

If you work in Michigan as an employee of a business in Michigan, you pay State of Michigan income tax on your wages. It doesn’t matter if you make minimum wage or $1,000,000 per year, you pay tax at the statutory rate on the Michigan Form MI-1040 (currently 4.35%).

However, if you start your own business, grow it into a success, hire others and otherwise prosper, you have had the privilege of paying extra tax to the State of Michigan. The Michigan Business Tax (MBT) is (was) calculated in two different ways, generally applying a more favorable calculation to smaller businesses, but having an absolute cliff for larger or more profitable businesses where the tax liability, depending on several factors, could increase exponentially for a small increase in income. The more favorable calculation is a 1.8% tax on the taxable income of the business plus all wages and benefits paid on behalf of the owner and his family members.

Here is where businesses have been getting double taxed for years: most small businesses are organized as pass-through entities (S corporations, partnerships, LLC’s). These entities pay no tax at the federal level – their income is passed through and taxed on the tax returns of their owners. This treatment at the federal level has effectively been ignored in Michigan. These businesses still had to prepare an MBT return and pay any applicable tax.  

These pass-through entities prepare their federal tax return, passing the income through to their owners who include it on their federal tax returns. These same owners prepare their Michigan MI-1040 by starting with Adjusted Gross Income on their federal return which, of course, includes the income from the pass-through entity.

So, the unsuspecting business owner, perhaps in the same economic circumstances of someone in a similar field working as an employee for someone else, has had the privilege of paying a significantly higher tax rate. Two taxes on the same income – seems like that should be unconstitutional!

The tax overhaul eliminates the filing requirement for most pass-through entities and no longer results in double taxation in the State of Michigan. Only C corporations are subject to the new corporate income tax – all pass-through entities and individuals will pay tax at the Michigan individual income tax rate only. This creates basic fairness in the tax system that has not existed for 35 years.

Michigan has recently vaulted from near the bottom to near the top of best places to do business in the U.S. as a result of these changes according to the Tax Foundation. This is obviously great news for the State and will ultimately result in more revenue flowing into the State Treasury.

Basic economics still rule – if you want more of something – tax it less.

September 9th is National 401(k) Day!  This day is an annual celebration to promote the importance of participation in employer-sponsored profit sharing and 401(k) plans.  Ignoring these plans should  not be an option!  Do you stop for a coffee everyday?  Put that money towards your retirement instead!  Would you like to reduce your income taxes?  Participate in the retirement plan and do just that as the contributions are deducted before your taxes are calculated (except for Social Security taxes).  Does your employer offer a match?  If the answer is yes, realize you are throwing free money away by not  participating!  Do you have an old 401(k) from a previous employer?  Most employers allow you to roll your 401(k) balance into their plan and if they do not, you can open an IRA to capture those assets. 

Contact us today to discuss these options or for any assistance you may need!!

Have you ever commented on a person’s status on Facebook or sent out a Tweet that was a tad unprofessional? In today’s technological age, your snide comment or inappropriate picture on Facebook, Twitter or any other social media site could cause you to not be hired for a new position, or could potentially harm your current employment. More mature users of social media are more aware of how this can affect them, the main concern are your children or grandchildren, the up and coming high school and college age kids that are not thinking clearly when they post. More and more employers are doing a virtual background check before they hire new employees. What would they find if they did a background check on you?

There is an excellent article from Bloomberg regarding this topic. Click here to read the full article.