Getting Cash Out Of Your Business - 24 CPE Credits
This course examines the various ideas, methods, and techniques capable of optimizing the overall compensation package for key employees and principals in small to medium sized businesses. Qualified and non-qualified deferred compensation, benefit targeting, insurance programs, statutory fringe benefits, interest free loans, and investment planning are investigated. Effective pay plans essential to attract, motivate, and retain key people are defined and evaluated. Consideration is given to indirect compensation in the form of business entertainment, expense accounts, auto use, travel, and transportation. Equity participation is explored through stock sales, repurchase agreements, incentive stock options, ESOTs, stock options, and bonuses. The new field of professional services is probed to provide tax, financial and estate planning to the key executive.
Completion Deadline & Exam: This course, including the examination, must be completed within one year of the date of purchase. In addition, unless otherwise indicated, no correct or incorrect feedback for any exam question will be provided.
Course Level: Overview. This program is appropriate for professionals at all organizational levels.
Field of Study: Taxes
Prerequisite: General understanding of federal income taxation.
Advanced Preparation: None
Learning Assignments & Objectives
As a result of studying each assignment, you should be able to meet the objectives listed below each assignment.
Chapter 1 Tax Economics
At the start of Chapter 1, participants should identify the following topics for study:
* Financial fundamentals
* Tax planning elements
* Taxable income
* Tax-free income
* Tax-deferred income
* Tax-sheltered income
After reading Chapter 1, participants will be able to:
1. Name four financial and tax income types noting how cash management is used to acquire and operate assets in an effective investment plan. List at least four significant changes recently made to taxable income, state how the passive loss rules also categorize such income and identify three major income splitting formats that can reduce tax.
2. Recognize basic cash management techniques by stating how to generate tax-free income, list seven current ways to and one repealed method to defer income, and name four current techniques and one repealed method of sheltering income.
3. Identify the importance of budgeting by naming four budgeting rules, listing several cash usages, outlining financial acquisition guidelines for tax-advantaged investments, and stating multiple asset management rules.
After studying the materials in Chapter 1, answer the exam questions 1 to 9.
Chapter 2 Business Planning
At the start of Chapter 2, participants should identify the following topics for study:
* Financial and compensation planning
* Periodic review & goal setting
* Team concept
* Individual and corporate income tax rates
* Capital gains & personal exemptions
* Passive loss rules
* Deferral of income
* Acceleration of deductions
* Avoiding taxable income
* Unreasonable compensation
After reading Chapter 2, participants will be able to:
1. Recognize compensation strategies by showing employer vs. employee perspectives, identifying parties’ goals and objectives, and selecting compensation techniques to accomplish such goals using different members of a planning team.
2. Identify economic and tax trends particularly recent capital gain complexity naming at least of four rate “baskets” noting their varying taxation. In contrast, list the three “buckets” of income and loss under §469 that can influence what a taxpayer can deduct against other income.
3. Name several ways to defer income and accelerate deductions, and thereby expand business cash flow and planning opportunities.
4. Recognize the dangers of unreasonable compensation and their impact on deductions and distributions, and identify ways to avoid unreasonable compensation.
After studying the materials in Chapter 2, answer the exam questions 10 to 24.
Chapter 3 Deferred Compensation Plans
At the start of Chapter 3, participants should identify the following topics for study:
* Types of deferred compensation
* Advantages of nonqualified deferred compensation
* Economic benefit of nonqualified deferred compensation
* Tax consequences
* Qualified deferred compensation – retirement plans
* Basic requirements of a qualified pension plan
* Basic types of corporate plans
* Self-employed plans - Keogh
* Individual plans - IRAs
* SEPs and SIMPLE plans
After reading Chapter 3, participants will be able to:
1. Define “deferred compensation plan”, list questions for assessing deferral usage, and recognize six deferred compensation types so clients may properly structure compensation.
2. Identify client compensation decisions by listing at least four qualified deferred compensation restrictions, stating the purposes, benefit formulas, and necessary contractual provisions for nonqualified plans. Recognize the IRS’s position on nonqualified compensation, define “constructive receipt” and “economic benefit”, and show the differences among unfunded bare contractual promise plans, funded company account plans and segregated asset plans to obtain tax compliance.
3. Define qualified deferred compensation plans and nonqualified plans, recognize the major benefit of the qualified deferred plans, and state the basis of the benefits and contributions enabling the client to choose plan type and benefit. List the current and deferred advantages and the disadvantages of corporate plans noting fiduciary responsibilities and prohibited transactions.
4. State the requirements of the three basic forms of qualified pension plans permitting clients to elect among such plans.
5. Define defined contribution plans and defined benefit plans, show the differences among the five types of defined contribution plans, and state their effect on retirement benefits.
6. List the differences between self-employed plans and qualified plans for other business types and owners identifying key choice of entity factors.
7. Outline the requirements of IRAs, SEPs, and SIMPLEs, and define tax-free Roth IRA distributions noting where changes may be necessary to maximize plan benefits.
After studying the materials in Chapter 3, answer the exam questions 25 to 53.
Chapter 4 Basic Fringe Benefits
At the start of Chapter 4, participants should identify the following topics for study:
* Benefit mechanics
* Employee achievement awards
* Group term life insurance
* Self-insured medical reimbursement plans
* Medical insurance
* Meals & lodging
* Cafeteria plans
* Employer-provided automobile
* Adoption assistance program
* Interest-free & below-market loans
After reading Chapter 4, participants will be able to:
1. Recognize basic fringe benefit planning by defining “income” under §61, and state the differences between former nonstatutory and current statutory fringe benefits created by recent cases, rulings, and tax law changes.
2. Outline the basic mechanics of typical fringe benefits, state the fair market value of a fringe benefit under the general valuation rule or the special valuation rules, and identify the general accounting rule and the special two-month pour-over accounting rule to assist taxpayer compliance and improper reporting.
3. Define “employee achievement award” under §274, and list the rules for group term life insurance under §79 noting how to implement proper coverage.
4. Outline the mechanics of self-insured medical reimbursement plans under §105, and state the requirements of medical insurance under §106 noting differences between the two Code sections.