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The price of a busy career is time away from friends and family. The price of long-term market returns is uncertainty and volatility.

Everything worthwhile comes with a price, and most of those prices are hidden. They’re sometimes worth paying for, but you should never ignore their true costs.

Once you accept this, you’ll start to view things like education, time, relationships, autonomy and creativity as currencies that are just as valuable as cash.

The ability to live with less is one of the most powerful financial levers, because you’ll have more control over it than things like your income or investment returns. 

The person who makes $50,000 per year, but only needs $40,000 to be happy, is richer than the person who makes $150,000, but needs $151,000 to be happy. The investor who earns a 5% return, but has low expenses, may be better off than the investor who earns 7% a year, but needs every penny of it.

Don’t count on getting spoiled. No one can grasp the value of a dollar without experiencing its scarcity, so while your parents will always do their best to support you, they’re not going to spoil you.

Learning that you can’t have everything you want is the only way to understand needs versus desires. This in turn will teach you about budgeting, saving, and valuing what you already have.

Small business owners who got Paycheck Protection Program loans could qualify for big write-offs from their rescue money, amounting to what Treasury Secretary Steven Mnuchin has called a tax-break “double dip.”

The COVID-19 relief package set for a vote in Congress would clarify that business owners can deduct expenses paid for with PPP loans, which can be forgiven by the government without incurring a tax. The deduction benefit could generate more than $100 billion in tax savings for business owners, according to Brookings Institution estimates.

The legislation would override Mnuchin and the IRS, who have blocked businesses from writing off rent, utilities and other business expenses paid for with tax-free money. The agency says the Tax Code prohibits that sort of doubling up of tax benefits.

Lawmakers from both parties, including the top-ranking Democrats and Republicans on both the House and Senate tax committees, said they intended for business owners to qualify for those write-offs when they created PPP loans. The IRS said the law didn’t specify that. Congress could pass the new legislation as soon as Monday.

The provision amounts to a huge win for small business owners, with some firms potentially ending up with a negative tax rate on their PPP money — meaning the tax benefits outweigh the amount of the loan. For business owners paying the top tax rate, it generally means they can save as much as $37 on their taxes for every $100 of tax-free PPP money they received.

Second round

The $2.3 trillion bill providing COVID-19 relief and government funding for the fiscal year into 2021 includes $284 billion in additional funding for PPP loans, which were designed to limit a wave of small-business failures that could cripple the economy. The plan lets some businesses apply for a second round of funding if they can show losses during the pandemic. Deductions are allowed on second-round loans as well.

Kevin Kuhlman, vice president of federal government relations at the National Federation of Independent Businesses, said the move by Congress to make the break explicit will help PPP recipients cope with “significant cash flow problems” when tax filings are due in April.

Many small business owners may by then be scrambling to establish reopening plans as the COVID-19 vaccine distribution expands. Trying to determine what can and cannot be deducted from income with regard to PPP loans is “the last thing they need,” Kuhlman said.

Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, said that the IRS made the right policy decision, and that Congress is off base. It makes “no sense” to allow a deduction for a reimbursed expense, because the business ends up in a better position tax-wise than if it had never incurred the cost, he said.

‘Huge giveaway’

Allowing the deduction is a “huge giveaway to the richest Americans and there is no one pushing back on this — it’s really quite absurd,” he said. He calculated about $120 billion in extra tax write-offs.

That amount isn’t reflected in the COVID-19 relief and U.S. government funding legislation currently under consideration. That’s because, for budget counting purposes, it’s considered to be a fix to old legislation, rather than the establishment of a new tax break.

Rosenthal said there are some sympathetic cases of small businesses, but the best way to help them is through more direct aid, rather than an “artificial incentive through an extra deduction.”

Tax consultants said the move will help clients stay in business.

Brian Newman, a partner and practice leader of CohnReznick’s Federal Tax Services, said those include a restaurant-equipment manufacturer. Without PPP money, many “may have either been shut down for a period of time, or shut down completely,” he said.

For small farmers in Iowa that Kent Vickre, state coordinator for the Iowa Farm Business Association works with, the provision will help lower their tax liability.

“Every dollar helps. I think people with adjusted cash flow, this would be a wonderful, wonderful gift,” Vickre said.

Giving someone the opportunity to work may result in a business tax credit. Check out the IRS Work Opportunity Tax Credit before it expires at the end of the year.

January 5, 2021 6:00pm-8:00pm

Do you own a Property Management company? If so, you face a lot of unique bookkeeping scenarios. Following these 5 tips can make a world of difference.

1 - Anticipate Changing Cash Flows.

Let’s face it, every business has to deal with the ebbs and flows of cash. This can be even more pronounced for property management companies. For example, if you only manage 10 units and four are empty, you’ll have 40% less cash rolling in monthly. Additionally, you have to deal with late rent payments, emergency repair bills as well as other potential hits to your cash flow. To ensure you always have cash on hand to cover the basics, you should have a savings account, open credit card balance or a line of credit waiting in the wings. To assess how much you may need, imagine a few worst-case scenarios and crunch the numbers. What would happen if one tenant breaks the lease and moves out unexpectedly right when the hot water heater breaks in another unit? Once you take “what-if” scenarios into account, make sure you’re ready to respond financially.

2 - Consider an Online Portal.

To reduce ebbs in cash flow, it can help to make sending money easier for your renters and your property owners. To facilitate rent payments and management fees from owners, consider letting us send out electronic monthly invoices with an online payment option built into the platform.

3 - Plan for Purchases.

As a professional property manager, you tend to deal with a lot of the same issues repeatedly (ie. leaky sinks, dirty carpet, painting and lock changes). Develop a listed of preferred vendors so you always know who to call for a solution to your problems. Work out a volume discount with local plumbers, cleaners, landscapers, lock smith and other professionals. You may also want to craft a list of appliances that are the most efficient and cost-effective to help save time when you need to replace something in a property.

4 - Separate Records by Property.

While you need to track revenue and expenses for your business as a whole, it’s also critical to maintain separate records for each property. At BOSSED Financial we use accounting software such as QuickBooks Online to set up multiple accounts for you. If you also want to track overhead on a per-property basis, we use time tracking software such as Classes, Project Tracking and/or TSheets Time Tracking which allows your employees to note which project or property they are working on.

5 - Generate Financial Reports for Owners.

You may want us to generate reports to keep owners up-to-date (ie. monthly reports of the income and expenses of their individual properties). Income typically consists of rent, while expenses include maintenance, management fees, and other costs. You may also want us to provide information on marketing activities, late payments, renter profiles, and upcoming maintenance expenses. Juggling multiple properties and keeping tenants and owners happy can be challenging. However, with the right tools and a bit of preparation for all kinds of scenarios, you can watch your property management company flourish with positive cash flows.

Visit www.BOSSEDfinancial.com to learn more.