Tim Horan Discuses Taxes and Credits EP 40

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EP40: Transcription – Tim Horan on Taxes and Credits

Radio Host: Thank you Gordon 8:02 back out live DFW Business Today I am Brian Glenn thank you so much for joining us on this very beautiful Wednesday morning and God bless you if you are sitting in traffic and I heard that traffic every time I hear Gordon’s traffic report which I love Gordon by the way and I’ve always said that he delivers
that report in such a comforting way even though he’s telling you, you … is gonna be about a n hour in some cases. He makes me feel good you know. He just makes me feel good but man this is one bad city in to commute, to have a long commute I gotta say. You and I come to here for about 32 miles apart you know we are about the same distance. It doesn’t take us very long to get here because we come here so early. But my goodness you try to be at work at 8 o’clock …
Michael: Some days though it takes me about an hour Brian.
Radio Host: Does it really?
Michael: Yeah. It depends. It really does.
Radio Host: I’d say on average for me 30 – 35 minutes that’s it.
Michael: That’s about how long it takes me to get home. It’s funny because I can take a different route home and there’s no traffic going that direction.
Radio Host: Man, but some days like right now I mean you heard the traffic it’s just bad.
Michael: Exactly.
Radio Host: Quick check of the weather. . .
Michael: Yeah the weather is not affecting traffic at all today. 56 degrees, clear skies, certainly rains right now, actually 0 winds it’s tied down and we are gonna be headed up to 86 today with winds of 10 to 15 miles an hour from the south and 86 would tie the record and that is pretty warm and I’m not enjoying that for mid of November.
Radio Host: I refuse to turn on the air conditioning now just for the record.
Michael: Even if it gets to 86?
Radio Host: No! Not doing that. I can’t do it!
Michael: I’m not coming to your house then.
Radio Host: It feels great downstairs just don’t go upstairs.
Michael: 59 overnight tonight suddenly 220 – 225 miles an hour winds Brian so take down that umbrella you got over there . . .
Radio Host: Or put extra hairspray in your hair.
Michael: Guess that’s what you think about.
Radio Host: See my patio in McKennie they built these homes so dead close there’s hardly a patio
Michael: I got you. Okay, 83 tomorrow but then guess what, 20 degrees difference between Thursday and Friday, 65 is our high on Friday, 59 for a high on Saturday and low on Sunday morning possibly in the 30’s for a lot of people.
Radio Host: Nice. Alright let’s kick of this hour with our good friend Neal McCoy with today’s pledge of allegiance.
Michael: I got you. Okay, 83 tomorrow but then guess what, 20 degrees difference between Thursday and Friday, 65 is our high on Friday, 59 for a high on Saturday and low on Sunday morning possibly in the 30’s for a lot of people.
Radio Host: Nice. Alright let’s kick of this hour with our good friend Neal McCoy with today’s pledge of allegiance. (Neal McCoy recites pledge of allegiance)
Radio Host: Amen and as always you can go to Neal McCoy’s Facebook page, sign up for it, like him and you’ll get to do the pledge of allegiance with him every single day. Yeah. Our good friends from BKM Sowan Horan are always in the studio on Wednesday and I got Tim Horan joining us now, good morning.
Tim Horan: Good morning.
Radio Host: How was the traffic for you coming in?
Tim Horan: My traffic was wasn’t too bad. Actually I used 36 minutes to reach here from my house to your driveway.
Radio Host: Not a bad deal at all. Now you told me before the show you were in Houston last week. Compare the traffic.
Tim Horan: I was in Houston last week, post-election.
Radio Host: Compare the traffic there than it is to here. Neal McCoy… .
Tim Horan: Oh. That’s much worse there. It’s very hard to get around. And if you are in the Galleria area lunch time forgets about it.
Radio Host: That’s where I’m headed to Westheimer right there. Derek Hotel.
Tim Horan: Yeah. It’s amazing. It’s always been tough. I love Houston. It’s a great business town but like I’ve always said, you never more than an hour and a half away from anything.
Radio Host: That’s true. I like that. We’ll go out to dinner? Hour and a half. And the traffic right there around the Galleria is a nightmare. And they’ve done a lot of construction, I know they tried to make it better but. ..
Tim Horan: Well, they will say it’s statistics about how that’s the busiest intersection, two highways in the country.
Radio Host: Do you have clients in that area?
Tim Horan: I think we have. Actually we do have a really big client down in Houston, in Silsbee.
Radio Host: Yeah I know where Silsbee is at.
Tim Horan: And they have plants in Silsbee, in Pasadena.
Radio Host: Yeah I’ll turn the mic off and you tell me who it is.
Michael: They are discussing right now and so I’m sitting here waiting them to figure out what to say.
Radio Host: I didn’t wanna sit there and say on the air so there you go. I know that area fairly well. There’s a lot of big businesses in industrial, I think there’s paper mills right there in that way and good stuff but I just trying to get a feel of what the pulse is in Houston compare to what the pulse is here. And I know they’ve heard with the oil dropping like it is. I know people. . .
Tim Horan: Yeah. It’s amazing. Houston has become, I know it’s kind of hard to say but they will tell you and everybody says the same thing, I want more diversified. Real more diversified economy. You know I could not tell that things were as bad that I think I believe their economy is a lot stronger than the last long term. So I think things look good there. Nobody that I talk to felt that they had pressure to you know they were worried about the future.
Radio Host: There you go. Alright post-election, one topic that’s on everybody’s mind is taxes. What does the tax situation look like with the new administration?
Tim Horan: Well it’s very interesting. I was in Houston on Wednesday. If you recall I brought Michael Siegel one day to talk about research and development tax credits and his group is called The Alliant Group in Houston. They have this post-election tax summit to talk about what you see for the future and it was as you can imagine, Wednesday the day after the election, that conference took a big left turn or right turn as you might say. But what they talked about is very interesting, because the speakers were all former IRS commissioners, congressmen, finance committee councils of very good, very bright people that spoke in actually the lead speaker was a guy by the name of Patrick McHenry who is the Republican whip picks him like fourth in line in the house representatives and everybody talked about what’s gonna happen now. Now that’s Trump’s elected what’s gonna happen to the affordable Care act, what’s gonna happen to taxes. And they talked a lot about this budget reconciliation process which is a one time vote that you get to do by actually how the affordable care act has passed the first time. You don’t have to have .. . all you have to have is the simple majority in the senate. Usually you have to have 60 and they think through this budget resolution process several things are gonna happen. One is there’s gonna be something happening to the affordable care act. They feel very confident that the three big taxes that they had in that which were the net investment income tax of 3.8%, the additional Medicare tax of 0.9% on wage earners or earned income in the medical device tax. They think that’s gone. They think there’ll be replacement for the Affordable Care Act. You know the problem with the Affordable Care Act is that there are pieces of it that everybody likes. They like keep their kids on there until they are 26. They like being able to have portability with their insurance. They don’t like not having to worry about existing conditions. The only problem is that they took something that was the purview of the states. Insurances have always been a purview of the states and made it federal item. So to be able to get insurance sales across state lines to make sure that all states comply with existing conditions and all these other rules, that’s gotta be kind of a tough nut to crack but they’ve done enough work on it that it looks like there are … I think to have deduction on a row and everything will work out. And then tax reform everybody there says there will be tax reform.
Radio Host: Do you like three, was it three layers of taxes?
Tim Horan: Yeah they talked about that, that there will be these three layers and they talked about minimum tax reforms for individuals and minimum tax reform for corporations. What that looked like, I don’t know they have a plan. They were very complimentary of the Speaker of the House Paul Ryan that everybody that spoke said that
this guy gets it. He understands that him and Charles Schumer who will be the minority leader in the senate are good friends. They get along very well. And they said he was a Deal guy. So the big question is what are you gonna do with tax reform, are you gonna try to pass it in reconciliation or are you gonna try to get more bipartisan. And they think that they’ll be able to do a more bipartisan approach which I really don’t think they will get done in reading what they were telling me. This is a move the tax reform outside the budget reconciliation process and make that more inclusive which I think is the best idea for everything.
Radio Host: I do too.
Tim Horan: Making sure that we’ve ensured that we provide medical care to everybody in the United States is a noble cause and it should be everybody’s priority to get straight. It’s just that the Affordable Care Act was a bad act and they had no way to pass it unless they did it in the reconciliation process and you have no bipartisan support. So we’ve come together you know that’s the one thing this country needs a lot of coming together now in this election you’ve seen what the division looks like. I would like to see him do the tax reform act that reform that way but I think he’ll get it done enough that you may see rates better in 2017. I’m holding up hope and I think that’s gonna happen. But again, there are some tax moves to make before the end of the year and might be a good time if you can defer as much income as possible to be very correct.
Radio Host: Hahaha! Hey Michael we just gotta not take paychecks for the rest of the year. Let’s just go ahead and tell HR to hold our payroll taxes.
Michael: Sure.
Radio Host: Yeah right. That would work out.
Tim Horan: They can give you a short term loan.
Radio Host: There you go. Companies still do that by the way? I remember 20 years ago a company would loan an employee.
Michael: Yeah. I’ve heard that recently.
Radio Host: Interesting. Alright Tim Horan in the show from BKM Sowan Horan. It is 8:13 we are still waiting for Rick. Rick’s in traffic probably I don’t know. We are talking taxes, we are talking affordable care and we’ll see what that means to you as a business owner and as an individual. Stick around have some fun.
Radio Host: Alright we are back we may get some of that cold November rain come on Friday morning.
Michael: Thursday night, Friday morning yeah.
Radio Host: Temperatures about to 20 degree drop. First time you’ve been in the 30’s maybe.
Michael: By yeah, Sunday morning for sure.
Radio Host: There you go. Rick Sowan joining us on the show. Caught up in the Loop 12 mess. Not fun.
Rick Sowan: Good morning.
Radio Host: Not fun at all.
Rick Sowan: Glad to be here.
Radio Host: I’m glad you are here. Are you frustrated at all?
Rick Sowan: Not at all. Not at all.
Radio Host: Sometimes when you get to a point and if you’ve been fighting traffic for a while you are just get me the hell out the car. I’m just …
Rick Sowan: No I’m just glad to be here.
Radio Host: Busy time. Post election, a lot of business owners, a lot of people just wondering hey what’s gonna happen with my taxes, what’s gonna happen with my healthcare and you know our enrollment just ended on the 14th here at work. And I know what Michael pays a month and his benefits and I never thought a day would come where your health benefits almost rival what you pay in a mortgage per month which is sad. But hopefully that gets restructures we talked a little bit earlier with Tim about and maybe tweaked a little bit. I mean there’s elements of the affordable care act that I like.
Tim Horan: Oh yes. There are very good elements of it trying to make you know prior to the Affordable Care Act Blue Cross Blue Shield had 32 plans that you can choose from the state of Texas. So you could get the insurance that fit you. Whether it’s a high deductible, low deductible, cover, you know maternity care, whatever you can get
32 different plans and after the Affordable Care Act they went down to four. And when you try to wrestle, you try to take over you know what they say medical is like 1/7 of our economy then you try to just go right after it, it’s hard. You look at it we are a nation at 320, 350 million people and you try to govern them all to four different ways with
four different plans it just doesn’t work.
Radio Host: And I’ve talked to several business owners in the last couple of weeks about healthcare and you know we had one gentleman on this show and said look Brian I’d rather pay the fee or the fine it’s cheaper for me to pay the penalty than it is to ensure all of my employees and this is kind of sad because I want to and offer it to it and it’s a lot of hard working people they need.
Tim Horan: The worst thing was that all you had to do was offer a plan to an employee that was not more than 9.5% of his gross income. So you take a guy that’s making $30,000 dollars a year and you are gonna try to say hey all you have to do is come up with $250 more and you can cover yourself. Nine times out of ten, 95 times out of 100 probably that guy is gonna say no.
Radio Host: I would agree with you on that.
Tim Horan: But what that does is your employer offers it. He’s shut out of the subsidies for him and his families.
Radio Host: Because he offered it.
Tim Horan: Correct. And so in some cases, some industries you are doing your employees a favor by not offering and paying …
Radio Host: Good point. That’s the first time I’ve heard that argument.
Tim Horan: Yeah we’ve seen a lot. And we went from people working 40 hours a week to 29.5 and it’s crazy. Why do you have to manipulate everything so badly that way. And at the end of the day all you did was move a bunch of people to Medicaid and people that had chronic problems were able to get insurance and that’s what’s crushing the exchanges right now. So hopefully we get this thing fixed, hopefully there’s something there and as a business owner myself, we’ve been able to manipulate the process ourselves by moving our start dates of our insurance. It’s still expensive you know full family coverage for our employees, it’s like 1400 for a family. Right Rick?
Rick Sowan: Yeah.
Tim Horan: 1300, 1400 dollars a person.
Rick Sowan: That’s our cost.
Tim Horan: We don’t pass that to our employees.
Rick Sowan: We don’t pass that to our employees.
Tim Horan: But you know partnership paying that. So the . . .and it was gonna go higher. And we’d be happy to get that number because it was gonna go higher once we got … rating.
Radio Host: Isn’t it kind of sad that “hey we want that $1400.”
Tim Horan: And we are a healthy group. So but once you know if our group rating stays in place, what will happen is that instead of being able to use .. rating we’ll go to our community rating which will be a lot higher. So now we’ve been able to dodge that bullet and hopefully we’ve permanently dodged it if they get this thing taken care of.
Radio Host: Yeah when Michael showed me what is payment was a month and I have mine off the Colon county because my spouse works at Colon county so I can’t complain. It’s like going to a government medical facility, it’s not that fancy but you go out and it’s affordable. But when Michael showed me I was like how do these people,
how do a lot of people do it? Something has to go on your budget and something has to go on your business if you have to offer this to employees. I mean you are not buying something, you are cutting something out to build in order to offer this.
Tim Horan: You know it’d be okay if that was all you had to pay. Then you start talking about deductibles that have gone up. I mean Michael what’s your family deductible?
Michael: $2,600.
Tim Horan: That’s decent.
Radio Host: That’s decent. Mine was 5 grand. 5 grand. Outside of brain surgery or you know something crazy, I would never…
Michael: When I first got into radio through, 18 years ago, there was no deductible.
Radio Host: Yeah it was like $500. I actually remember $500.
Michael: I remember that one too.
Radio Host: And then copay $10 office visits. Boys things changed. Umm, let’s talk taxes for a second you know, we were talking in the break about this straight forward teared tax plan and you brought up a great example how you initially off … and then all of a sudden okay so you don’t want to be able to write off the interest you have in your mortgage. Well, well well okay so it does get kind of complicated.
Tim Horan: All your charitable contribution there’s a lot of I mean even being able to take the deduction for a sales taxes or state income taxes is helpful for everybody. So yeah that’s a lot of hard work you now the thing that they talked about at this conference in …
Radio Host: Did Rick go to that conference as well?
Radio Host: And then copay $10 office visits. Boys things changed. Umm, let’s talk taxes for a second you know, we were talking in the break about this straightforward teared tax plan and you brought up a great example how you initially off … and then all of a sudden okay so you don’t want to be able to write off the interest you have in your mortgage. Well, well well okay so it does get kind of complicated.
Tim Horan: All your charitable contribution there’s a lot of I mean even being able to take the deduction for a sales taxes or state income taxes is helpful for everybody. So yeah that’s a lot of hard work you now the thing that they talked about at this conference in …
Radio Host: Did Rick go to that conference as well?
Tim Horan: It’d 34% or 35% for these companies or be at least 35% . . .
Radio Host: Have you been keeping up with the peso what’s going on with that?
Rick Sowan: Plunging. Good time to go to Mexico right now.
Radio Host: I was talking to a buddy he’s in Television in Mexico City and he’s an actor. He goes Brian, peso to start plunging because everything gets converted and I’m not making as much and my dollar is not going as further but he told me the number one revenue source of Mexico I mean take away tours is the people sending money across the border. He thinks that’s how Trump’s gonna have them pay for that wall. Essentially we you are paying for it, you are not just directly paying for it. But wow the with the just looking at that …
Rick Sowan: Yeah when I was there at just the end of October it was 18 to the dollar now it’s twenty.
Radio Host: Twenty wow.
Tim Horan: Seventeen when I was there in the summer.
Radio Host: Alright we gotta take a break, hanging out with the big dogs today Michael. Rick Sowan, Tim Horan, BKM Sowan Horan for more information about BKM Sowan Horan go to …
Michael: http://bkmsh.com/ or you can 855-545-4CPA.
Radio Host: Yeah how’s biz by the way. Good?
Rick Sowan: Good.
Tim Horan: Very busy.
Radio Host: Very busy. Thank God for the holidays right?
Rick Sowan: Thank goodness for the holidays. 8:28 Give us a few minutes we’ll come right back you are listening to KEXB your experts in business.
Radio Host: I remember the first time I first I ever got a sizable paycheck and I say sizable and it was late in my career actually. I remember one month I made $25,000. In one month and I was in sales.
Michael: That was impressive.
Radio Host: Yeah it was nice and I did that for about three months in a row and then I did my taxes and then I realized just how much money. . .
Michael: How little money …
Radio Host: How little money I had left and it really was an eyeopener and if that wouldn’t have happened to me, I may not have understood that when you work hard and you try to achieve financial success that you are gonna get hit with tax and what a big issue it is. So anyway that’s my little story I shared with you this morning. Do you
remember your first sizable income as growing up and then all of a sudden bum you got hit with your tax bill and …
Tim Horan: Yeah I’ve never received a bonus that big, close but you know being a tax person you are always ready for it anyway.
Radio Host: I wasn’t. I was on a skateboard still with something on my hand everyday at 3 o’clock.
Tim Horan: It’s tough. At least if you are doing that as a sales person there’s a good chance withholding taking out of it so at least you won’t be in trouble with the government and it’s what happen with the people and independent contractors get that big bonus and then if they don’t have the money when it comes April 15th …
Radio Host: I still have that money to this day put it in my fidelity account.
Rick Sowan: Good for you.
Radio Host: It’s just rotting away. Didn’t move much. But it didn’t go away.
Rick Sowan: Never goes away but as a employer principle that’s okay.
Tim Horan: But as an employer you always wanna go hey I wanna give you this bonus you did really a good job and you just don’t want them to go well that’s ten thousand dollars but it’s only 6 after taxes for 401(k) just don’t want them to feel that bad when they hit him so I just say hey I can’t control the back part.
Radio Host: I am married to a woman if I won a hundred million powerball and after taxes it came down to 43 million, she would complain that why did we lose that much? But the taxes are what everybody is faced with now for a year in planning. You know if you wanna buy equipment we talked with Dr. Harrison from Mint Dentistry a couple of weeks ago I guess and we talked about you know acquiring equipment and making purchases before the end of the year and . . .
Tim Horan: Right he was buying too much equipment and he hit the 2 million dollar we make for the section 179 deduction but the point we explained to him is that you know there is still under the new capitalization rules which are 2 or 3 years old now that every property, like you look at property you. So like your computer right here would be a unit of property. And so if you bought 10 computers at $25,000 worth of computers and bought 10 computers there are less than $2500 apiece as you know if property goes you can expense that as long as you are expensing the money in your financial statement so that’s one of the items that gonna help him. So even if you may hit limits on section 179, what other things there’s still some items out there that may help you so that’s one of the things we talked a little bit earlier on the show that if there ever was a year to defer income, this is kind of the year to defer income and I’m starting to wonder I’m starting to hear anecdotal evidence that some deals are being put off until January because hey you can save 3.8% on that investment income tax.
Rick Sowan: Corporate rates are gonna drop to 15% you better be thinking about how you are gonna delay your US domestic income rate to January.
Tim Horan: Domestic income rates are not going up. I don’t think they will go that low. The lowest I see them go is 34% to 25%. But it’s you know again if they do that . . .
Radio Host: Still 10%
Rick Sowan: That’s a lot.
Radio Host: Yeah, we saw that Yahoo/Verizon deal got put off a little because of that hack lawsuits costs them a bunch of money and that’s because of the hack that potential class action lawsuits which would cost them so much money which .. . let’s just not do that now. Let’s just hit back on that. Switching gears a little bit, if you wanna buy a vehicle, let’s just say you wanna add a vehicle to you fleet, is it best to do it before the end year or it does it matter if you pick that asset up after the year.
Tim Horan: You know for this year, I can’t imagine it wouldn’t be better for most people to do it now. There are some rules on depreciation for your tangible personal property that under the depreciation rules that if you put in service more than 40% of your additions in the last quarter of the year you are gonna change the way you
depreciate all your current year additions. So we were operating under regime mostly that property, whenever you buy property it’s assumed that it’s put in place in the middle of the year and that’s how they kind of do all the depreciation schedule so if you bought a car, all I’m saying is it may change the way you do depreciation for some people but for most folks, that’s not gonna be an issue, the issue is going to be that hey I could take advantage of section 179 deduction if this is a work vehicle that is not a passenger car. So you know trucks, things like that and then for some people …
Rick Sowan: Range Rovers. . .
Radio Host: 6,000 pound it’s the weight though.. ..
Tim Horan: It’s leading up to the 6,000 pounds for vehicle weight.
Radio Host: That’s why your local Land Rover dealer will blow through Range Rovers in the month of November, December. It’s a great time to buy one.
Rick Sowan: It’s also you know if they reduce rates you know you are buying it at 35% tax so next year if it goes down to 20%, 25% then your benefit you get is 30% less.
Radio Host: It’s better to lease or buy or something like that.
Rick Sowan: It’s hard to tell right now.
Tim Horan: That depends on a lot of different things. There two types of leases. There’s the financing lease and an operating lease for tax purposes. And if it’s a financing lease, you know generally that means there’s a bargain purchase price or you own property at the end of the lease. That is like going to the bank and borrowing money to
buy property. You know you don’t look to as your lease …deduction payment it means that you bought it, you depreciate it, expense and no payments. If you are doing an operating lease then the your lease payment and certainly your deductions. So when you look at leasing equipment versus buying equipment it all depends on a lot of factors like how long will you use the property, how long do you normally keep your property, it’s just a lot of different things that come into play.
Rick Sowan: Well the evaluation of a deduction too on the timing of the tax deduction because it’s 179 tends to tip the scale towards purchase versus lease. Now I don’t know. It’s gonna be .. it’s tough. I mean we are in a low interest rate environment so there’s perpetually no cost but it’s really a matter of whether they disturb the 179
deductions and their accelerated deductions whether the present value works out to be better.
Tim Horan: And for like us, we lease our equipment because we lease them as offering leases we know that our equipment has a useful life to us and that we would rather just pay for the use of that equipment while we are using it instead of paying for all of it then trying to see how we are gonna dispose off the equipment, see how we
are gonna replace it we keep it longer than we should have under our operating leases on our equipment we are moving it out every two and a half to three years. So it’s a good way to keep your equipment fresh and . ..
Radio Host: It gets inadequate behind something that’s just inadequate to technology and what you use it for absolutely. Umm, Tim Horan, Rick Sowan joining us from BKM Sowan Horan we gotta take a break we come back. Quick check of the markets with Dow just 3.2 and Nastec pretty much flat and SMP down, well flat as well. There’s just not a whole lot of action now we check the volume as well, 8:42 stick around we got plenty ahead.
Radio Host: Alright we are back. Yeah don’t you love the conversation that takes place in here. You know what if we had a camera here in the breaks we could solve all the world’s problems without a doubt and come up with a great Spotify playlist too by the way. How’s your son doing?
Rick Sowan: He’s great.
Radio Host: What continent is he on right now?
Rick Sowan: He’s in the States. He’s just touring around.
Radio Host: Love it. We gotta put his music on the show.
Rick Sowan: Nikki Lane
Radio Host: You gotta look that up in Google?
Rick Sowan: I’m going to try to do that.
Michael: Okay yeah.
Radio Host: Real quickly on the retail front, Target hits the mark and really impresses investors as far as saying kind of the outlet for the holiday season. The stock is nearly 2% pre market trading today so we’ll take a look at that still struggling overall but they are very optimistic on this holiday season which is kind of I don’t know if it’s going out of the limit or not because there typical Amazon. Your web based retailers have been outperforming your brick and mortar retailers. And so. . .
Tim Horan: Did I see that Garth Brooks is gonna be a Target spokesman?
Radio Host: Did you see that? That would be pretty cool. We were just talking the other day at how a guy like Garth Brooks is not on iTunes. You know he does Spotify, I gotta look him on Spotify, I doubt he’s on Spotify.
Michael: However, he is on the most recent box of Raisen Brand and he will give you a download code for his new single.
Radio Host: And he partnered up for his new single about a month ago and did this special open a bag Doritos and you could win a little nice fun time with .. and download his latest single for free using his a promo code on there. So you mean that is some really cool stuff I like that. But you look at Target you look at Wal-Mart and they
are optimistic about this holiday season and it doesn’t have anything to do with the election I think. Consumers are like “Fyuu! Alright it’s over, I can now go out and spend my money I know I’m not gonna have an administration that’s gonna take every bit of my money”. I don’t know if that’s psychological.
Rick Sowan: Could be a psychological issue.
Radio Host: Yeah. Let’s talk taxes some more, you guys were having a conversation in the break and I kind of want to continue that but you know about what is happening with some of the corporate taxes that could be coming up.
Tim Horan: Well you know at the conference that we were in last week brought up this concept of how do you tax the pass throughs and we’ve always had in this country the four different businesses entities you could be a sole proprietorship purport the income on your individual return. You could be a partnership of more than one partners
so more than one person of a partnership. You could be a C corporation that pays its own taxes or you could be a C Corporation that makes a next selection. Its income that’s passed through the individuals they are kind of limited to the number of people. You can have the shareholders, you can have more than a hundred but and so everybody understands this
concept to double taxation if you are a C Corp you are the only entity that gets taxed twice. So you pay a federal tax, there’s the state tax on your income and then you distribute dividends to your shareholders and they are taxed again too so this whole idea of partnerships you know we have publicly traded partnerships, we have all these items that they’ve elected pass through status and as you try to deal with those entities that have thousands and thousands of partners it starts to make the whole process breakdown, it’s a little tedious especially if you are gonna have some tax examination changes that changed the income then you have to change thousands and thousands of tax returns. And so they’ve kind of come up with this concept with these new audit rules which we are gonna start during the filing season next year. With that filing season or actually the 16th filing season are
actually next year. But when they do make changes to partnerships if you don’t qualify and haven’t made the election then the tax changes are gonna be at the partnership level. They are just gonna tax partnership level. So now they are starting to look at this concept at these other larger partnerships that hey maybe we should just collect the tax there
though I don’t know what’s gonna happen with it. I mean we’ve dealt with public trading partnerships. It will be interesting to see what they do with this concept if they are going to try to …
Rick Sowan: But there’s a small business concept to it because you know the benefits will pass through to possibly to the small business owners and they shouldn’t have to pay a higher rate than the corporation ship pay.
Tim Horan: How are you gonna get ..
Rick Sowan: How do you rectify?
Tim Horan: How do you take care of that yeah. So again we’ll see what happens. I mean you always get better rate. it’s still gonna be cheaper than being taxed twice so we’ll see how all that goes. But that’s just one of the concepts to be looking for when the ..
Rick Sowan: As old as we are, as long as we’ve been around we know that there’s been situations in the tax regime where corporations pay lower taxes and individuals will pay lower taxes and corporations so you know it’s not a new kind… it’s just a new anomaly so it’s been around for quite a long time. But when they do make changes to partnerships if you don’t qualify and haven’t made the election then the tax changes are gonna be at the partnership level. They are just gonna tax partnership level. So now they are starting to look at this concept at these other larger partnerships that hey maybe we should just collect the tax there though I don’t know what’s gonna happen with it. I mean we’ve dealt with publicly trading partnerships. It will be interesting to see what they do with this concept if they are going to try to …
Rick Sowan: But there’s a small business concept to it because you know the benefits will pass through to possibly to the small business owners and they shouldn’t have to pay a higher rate than corporation should pay.
Tim Horan: Yeah and in 1986 before they passed the tax reform act of 1986 corporate rates were 46%. And individual rates were as high as 50 I think. Pretty close and then they dropped to this .. and you are gonna pay 23% will never raise their rates again will drop the corporate tax rate at 34% and when they did that then a lot of escort persons came out and of course nobody kept that promise but never raising their rates again yeah so they come in they come out you know the only thing we know is we are always be changing always have to stay up with them in you know we always try to tell business people not to make decisions based on taxes but you know there are certain times and it’s good to make a decision based on taxes.
Radio Host: It kind of brings up my next topic if someone is in a transition of kind of like you know what I need to switch accounting firms or you know what I need to stop trying to do this myself need to partner up with a professional is now a good time of the year to have that dialogue?
Rick Sowan: Absolutely.
Radio Host: I mean better to get the plans of 2017.
Rick Sowan: Correct. There’s still time.
Tim Horan: Yeah, now’s the good time to talk. We’ll be spending a lot of time between now and the end of the year talking to our clients about what moves you need to make for this year,what’s the plan for 2017. Yes a very good time.
Radio Host: Good time last week with Kevin Rockecharlie who was on the show.
Rick Sowan: Cyber security.
Radio Host: Do not get hacked. You know we talked about Adult FriendFinder. The latest 420 million user. It’s safe to say that not of us in this building have been on Adult FriendFinder. I haven’t at least not in the past …
Michael: And you say 420 million but I’m thinking maybe those are duplicates.
Radio Host: Probably. And I don’t know anybody would go to a site like that. But if you go why in the world would you put your email address on there. But he was a great guest. And we talked about cyber security and how your office could be to getting hacked.
Rick Sowan: The phishing schemes are very sophisticated and you know one thing that some companies might wanna consider is just how vulnerable they are to those phishing acts because people and professionals like Kevin can set up a process where you can see how willing and able your people are to make this type of mails because when they did as we’ve seen in this election, they’ve opened the keys to the kingdom.
Tim Horan: Talked about last week. You know what happened to him was that he got a phishing email to change his Gmail password and he sent to his IT person that said oh absolutely this is a phishing deal. Do not do this. You should probably go ahead and change your password right now that would be a good idea.
Rick Sowan: And send them the authentic link.
Tim Horan: Yeah the authentic link. And then I think his assistant used the first one or use it wrongly.
Radio Host: Human error! Uh, for more information about BKM Sowan Horan just go to … contact them. The wide variety of industries that you guys work in so its .. and different areas of expertise which is always cool.
Rick Sowan: And we work closely with our clients to try to navigate difficult waters.
Radio Host: Everybody that comes that meets you guys, fall in love with you. All the clients on the show so enjoy that. Big for Thanksgiving real quickly, staying in town?
Tim Horan: Yeah. ..
Rick Sowan: i’m actually gonna put stuffing in it this year. I’m gonna defy the sayers . ..
Radio Host: And put your stuffing in there.
Michael: I think he can do it. I’ve seen it done. . .smoke at the ..this year.
Radio Host: Smoked turkey oh I love smoked turkey. You ever had a fried turkey?
Rick Sowan: Oh yeah.
Radio Host: Good stuff too.
Rick Sowan: Good stuff.
Radio Host: I went to market street a couple of days ago and the lady was cooking and the lady was having .. and stuff and she.. “oh this is just some of the samples that we have.” And so she gave me a flier and for 99 dollars it feeds 8 to 10 people.
Rick Sowan: That’s good.
Radio Host: It was a turkey stuffing dressing …I mean it was all the stuff for a hundred bucks? I’m in and of course it comes in a foil so you just throw it away.
Michael: I got .. and I hope this is the right one.
Radio Host: Let’s listen. Is that it?
Rick Sowan: Yep.
Radio Host: Cool see you back here tomorrow. Stick around.

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