financial insight and considerations for individualsandsmall business owners
DESCRIPTION
Information or opinions expressed today are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sale of any security or offering of individual investment advice. Past performance does not guarantee future results. Please consult a financial advisor to assess your individual situation. Securities America and its representatives do not provide tax or legal advice. Any tax or legal information provided here is merely a summary of our understanding and interpretation of some of the current income tax regulations and is not exhaustive. Tax-law is subject to frequent change; therefore it is important to coordinate with your tax advisor. Securities offered through Securities America, Inc., Member FINRA/SIPC, Advisory services offered through KFG Wealth Management, LLC dba Korhorn Financial Group. Mike Bernard Representatives. KFG Wealth Management, LLC is not affiliated with the Securities America companies.TRANSCRIPT
KORHORN FINANCIAL GROUP, INC.
Financial Insight and Considerations for Individuals
andSmall Business Owners
Michael Bernard CFP®, ChFC, CIC, EAKorhorn Financial Group, Inc.
Granger, IN
KORHORN FINANCIAL GROUP, INC.
DisclosuresDisclaimer:
Information or opinions expressed today are subject to
change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sale of any security or offering of individual investment advice. Past performance does not guarantee
future results. Please consult a financial advisor to assess your individual situation. Securities America and its representatives do not provide tax or legal advice. Any tax or legal information provided here is merely a summary of our
understanding and interpretation of some of the current income tax regulations and is not exhaustive. Tax-law is subject to frequent change;
therefore it is important to coordinate with your tax advisor. Securities offered through Securities America, Inc., Member FINRA/SIPC, Advisory services
offered through KFG Wealth Management, LLC dba Korhorn Financial Group. Mike Bernard Representatives. KFG Wealth
Management, LLC is not affiliated with the Securities America companies.
KORHORN FINANCIAL GROUP, INC.
Korhorn Financial Group, Inc
KFG Insurance Agency, LLCKFG Wealth Management, LLC KFG Tax & Business Services, LLC
First State Investment Center Granger Tax & AccountingHarbor Country Tax & Accounting
Harger Accounting & Tax
Stonegate Insurance AgencyJohnson Insurance Agency
Core Services:Individuals:
Comprehensive Financial PlanningInvestment Management
Businesses:Retirement Plans
Financial EducationComprehensive Financial Planning
Core Services:Individuals:
Personal Tax PreparationTax Planning
Businesses:Corporate Tax Preparation
PayrollAccountingConsulting
Core Services:Individuals:
Home, Auto, Life, Health, Disability, LTC, Medicare Supplement
Businesses:Commercial Insurance, Work Comp
Health Insurance and Benefits
KORHORN FINANCIAL GROUP, INC.
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory services offered through KFG Wealth Management, LLC., KFG Tax & Business Services, LLC and KFG Insurance Agency, LLC are subsidiaries of Korhorn Financial Group, Inc. Korhorn Financial Group and its subsidiaries are not affiliated with the Securities
America companies. Securities America and its representatives do not provide tax or legal advice. Those services are offered in conjunction with qualified professionals. Tax services are offered through KFG Tax & Business Services, LLC..
KORHORN FINANCIAL GROUP, INC.
6 Areas of Financial Planning
Estate Planning: Educating on how assets pass and the documents that are recommended for a proper estate plan, reviewing current estate plan to ensure it is consistent with wishes, and completing the implementation of beneficiaries to ensure consistent with the will.
Present Financial Position: Organizing assets and liabilities into a format that allows for monitoring of progress and
establishing, when necessary, a spending plan that if followed will help pursue
financial goals and work towards financial peace.
Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory services offered through KFG Wealth Management, LLC. KFG Wealth Management, KFG Tax & Business Services, LLC and KFG Insurance Agency are subsidiaries of Korhorn Financial Group, Inc. Korhorn Financial Group and its subsidiaries are not affiliated with the Securities America companies.
Securities America and its representatives do not provide tax or legal advice. Those services are offered in conjunction with qualified professionals. Tax services are offered through KFG Tax & Business Services, LLC.
Retirement Planning: Defining retirement goals/needs, evaluating current position, and adjusting variables in an effort to help ensure the successof the plan.
Investment Planning: Reviewing the existing structure of investment accounts and the appropriateness of current investment tools and making recommendations to ensure the structure and tools are consistent with retirement needs and personal tax situation.
Protection Planning: Reviewing financial risks and
how they are managed to ensure it is consistent with
Net Worth and need. Often entails a complete insurance
review.
Tax Planning: Analyzes current tax situation and determines opportunities to optimize situation in
light of all areas of your financial life.
Present Financial Position
Protection Planning
Tax PlanningInvestment
Planning
Retirement Planning
Estate Planning
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
3 Habits of Financially Successful
Business Owners
KORHORN FINANCIAL GROUP, INC.
Habit #1: Choose how you want to be taxed
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
• Taxed as a Sole Proprietor:– No formal organization or as a single-member LLC– File on Schedule C of your individual tax return– Revenue – Expenses = Business Net Income– Net Income taxed:• Federal Income Tax• State and Local Income Tax• Self Employment Tax
Habit #1: Choose how you want to be taxed
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
What is Self Employment Tax?6.2% Social Security Tax
6.2% Social Security Tax
1.45% Medicare Tax
1.45% Medicare Tax
15.3% Self Employment Tax
KORHORN FINANCIAL GROUP, INC.
Self Employment Tax - Example
• Let’s assume your business makes $125,000 and has $75,000 in expenses, making your net income $50,000
• Assume 25% Fed Tax and 5% State Tax
• Fed Tax: $50,000 x 25% = $12,500• State Tax: $50,000 x 5% = $2,500• Self Employment Tax: $50,000 x 15.3% = $7,650• TOTAL TAX = $22,650• Meaning you only get to keep $27,350 of your $50,000 income!
KORHORN FINANCIAL GROUP, INC.
Is there a better way for you to be taxed?
Consider being taxed as a corporation
KORHORN FINANCIAL GROUP, INC.
• Taxed as a S Corporation:– As a single-member LLC or a S Corp– File an 1120 S in addition to your individual tax return– Pay yourself a salary just like other employees– Revenue – Expenses = Business Net Income– Net Income taxed:• Federal Income Tax• State and Local Income Tax• NO Self Employment Tax
Habit #1: Choose how you want to be taxed
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
What is Self Employment Tax?6.2% Social Security Tax
6.2% Social Security Tax
1.45% Medicare Tax
1.45% Medicare Tax
15.3% Self Employment Tax
Employee Portion
Employee Portion
Employer Portion
Employer Portion
FICA
Payroll Tax
KORHORN FINANCIAL GROUP, INC.
Taxed As S Corp - Example• Let’s assume your S Corp makes $125,000 and has $75,000 in
expenses, and in addition you take a $25,000 salary, making your net income $25,000
• Assume 25% Fed Tax and 5% State Tax
Your $25,000 Salary is taxed:Fed Tax: $25,000 x 25% = $6,250State Tax: $25,000 x 5% = 1,250
FICA: $25,000 x 7.65% = $1,912.50Payroll Tax: $25,000 x 7.65% = $1,912.50
Total Tax = $11,325
Your $25,000 Net Income is taxed:Fed Tax: $25,000 x 25% = $6,250State Tax: $25,000 x 5% = 1,250
Total Tax = $7,500
Total Tax = $18,825 $3,825 less tax!
KORHORN FINANCIAL GROUP, INC.
Taxed As S Corp - Example• Let’s assume your S Corp makes $150,000 and has $75,000 in
expenses, and in addition you take a $25,000 salary, making your net income $50,000
• Assume 25% Fed Tax and 5% State Tax
Your $25,000 Salary is taxed:Fed Tax: $25,000 x 25% = $6,250State Tax: $25,000 x 5% = 1,250
FICA: $25,000 x 7.65% = $1,912.50Payroll Tax: $25,000 x 7.65% = $1,912.50
Total Tax = $11,325
Your $50,000 Net Income is taxed:Fed Tax: $50,000 x 25% = $12,500
State Tax: $50,000 x 5% = 2,500
Total Tax = $15,000
Total Tax = $26,325 $7,650 less tax!
KORHORN FINANCIAL GROUP, INC.
• Be Aware…– To be taxed as a corporation subjects you to other tax
filings and other requirements (940, 941, UC1, etc.)• Thus you probably should not choose this if your business
income is less than $50,000
– You must set your salary at a fair and reasonable level– Use an attorney to help you select the right entity and
get it established– Use a CPA firm to help with your taxes and filings
Habit #1: Choose how you want to be taxed
KORHORN FINANCIAL GROUP, INC.
Habit #2: Set up a retirement plan for the business
KORHORN FINANCIAL GROUP, INC.
1) Tax Sheltered Saving2) Help you take money out of the
business
Why start a retirement plan for the business?
KORHORN FINANCIAL GROUP, INC.
1. SIMPLE IRA2. 401(k)3. SEP IRA
What are your options
SIMPLE IRA• $12,000 max contribution• $2,500 additional contribution if
50 or older• 3% company match contribution• Easy to administer, no annual
filings• Must cover employees that work
more than 1,000 hours per year
KORHORN FINANCIAL GROUP, INC.
1. SIMPLE IRA2. 401(k)3. SEP IRA
What are your options
401(k)• $17,500 max contribution• $5,500 additional contribution if
50 or older• Various company match
contribution options• Difficult to administer, annual
filings required• Must cover most employees who
are at least 21 years old
KORHORN FINANCIAL GROUP, INC.
1. SIMPLE IRA2. 401(k)3. SEP IRA
What are your options
SEP IRA• No employee contribution• Employer contribution only• Must contribute the same
percentage to each employee• Easy to administer, no annual
filings• Can make contribution up to tax
filing deadline
KORHORN FINANCIAL GROUP, INC.
Taxed As S Corp WITH SIMPLE IRA• Let’s assume your S Corp makes $150,000 and has $75,000 in
expenses, and in addition you take a $25,000 salary, making your net income $50,000
• You contribute the maximum $12,000 to your SIMPLE IRA
Your $25,000 Salary is taxed:Fed Tax: ($25k - $12k) x 25% = $3,250
State Tax: ($25k - $12k) x 5% = 650FICA: $25,000 x 7.65% = $1,912.50
Payroll Tax: $25,000 x 7.65% = $1,912.50Total Tax = $7,725
Your $50,000 Net Income is taxed:Fed Tax: $50,000 x 25% = $12,500
State Tax: $50,000 x 5% = 2,500
Total Tax = $15,000
Total Tax = $22,725 $3,600 less tax!$11,250 less tax than
original example!
KORHORN FINANCIAL GROUP, INC.
Habit #3: Work with a Comprehensive Financial Planner
KORHORN FINANCIAL GROUP, INC.
They can help you with…• Reviewing financial statements• Budgeting and forecasting• Guidance on insurance coverage needs• Tax planning for when things go right, and
when they don’t• Starting and managing a retirement plan• Corporation (filings, establishing salary, etc.)• Etc.
Why work with a Comprehensive Financial Planner?
KORHORN FINANCIAL GROUP, INC.
3 Habits of Financially Successful Individuals / Families
KORHORN FINANCIAL GROUP, INC.
Habit #1: Have a spending plan
KORHORN FINANCIAL GROUP, INC.
Budgets are restricting!
KORHORN FINANCIAL GROUP, INC.
Budgets are freeing!
KORHORN FINANCIAL GROUP, INC.
• Purposes of a budget:– Tracking• Knowing where your money is going
– Discipline• Awareness of how much you can afford to spend in an
area, and when you’ve reached that level
Habit #1: Have a spending plan
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
KORHORN FINANCIAL GROUP, INC.
• Best Practices– Update your actual spending compared to budget
once a week• Helps you monitor whether you’re over or under for
the month
– Embrace technology• Consider using Mint.com, Quicken, etc to help with
monitoring, categorizing, alerts
Habit #1: Have a spending plan
KORHORN FINANCIAL GROUP, INC.
Includes the right bank account structure
Habit #1: Have a spending plan
KORHORN FINANCIAL GROUP, INC.
ImmediateSpending
DelayedSpending
EmergencySpending
#1 #2 #3
The 3 Bank Account System
KORHORN FINANCIAL GROUP, INC.
Habit #2: Use tax sheltered accounts to save up for retirement
KORHORN FINANCIAL GROUP, INC.
Types of tax shelter account…
Traditional IRA
Roth IRA
401(k)
SIMPLE IRA
KORHORN FINANCIAL GROUP, INC.
Habit #2: Use tax sheltered accounts to save up for retirement
Pre-Tax Post-Tax
Traditional IRA Roth IRA
Taxable
Withdrawals Tax Free
WithdrawalsAfter Tax
ContributionsTax
Deductible
Contributions
KORHORN FINANCIAL GROUP, INC.
Is it really that important?
Insert Guide to Retirement Slide
KORHORN FINANCIAL GROUP, INC.
• Best Practices– Use your 401(k) to get a match from your
employer– Use the Roth IRA if you’re in a low tax bracket– Consider a Roth Conversion if you’re in a low tax
bracket– Beware of contribution limits and eligibility limits
Habit #2: Use tax sheltered accounts to save up for retirement
KORHORN FINANCIAL GROUP, INC.
Habit #3: Have a plan
KORHORN FINANCIAL GROUP, INC.
The right plan and planning process gives you:
Habit #3: Have a plan
CONFIDENCE CLARITY
KORHORN FINANCIAL GROUP, INC.
The right plan and planning process answers…• Am I saving enough for retirement?• Can I afford that much house?• Will my family be taken care of when I die?• Should I pay off my mortgage early?• Can I pay for my kids college?• Should I use an IRA or Roth IRA?• Am I missing tax deductions?
Why have a financial plan?
KORHORN FINANCIAL GROUP, INC.
Habits for financially successful…
Businesses1. Choose how you want
to be taxed2. Set up a retirement plan
for your business3. Work with a
comprehensive financial planner
Individuals1. Have a spending plan2. Use tax sheltered
accounts to save up for retirement
3. Have a plan
KORHORN FINANCIAL GROUP, INC.
Thank You!
Questions?