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The Five Ws in Every Good Business Plan

You may be in a hurry to put together your business plan.  But don’t confuse the frenetic blur of activity with thoughtful preparation.  There are some major issues to discuss in your plan, and you’ve got to think them through.

Winning business plans map out the major Ws of your proposed business – who, what, when, why and where – to help you figure out that all important H – how. Be thorough, but don’t let writing a business plan become too complicated.


Who are the major players? Who are the owners, personnel, advisors, customers, competition, even the target audience for the plan itself?


What do you want to achieve? What is your sustainable advantage? What do you offer? What do you produce?


When do you want to meet particular goals? When did (will) the business start?


Why would customers want your product or service? Why are you in business?


Where is the business located? Where is the target audience? Where are the new opportunities located? And finally, how do you get from where you are now to where you want to be?

Answer all of these questions, and you will see your plan taking shape.

A good business plan can help you determine what you need to make your business a success – from personnel to financing, location to advertising.

But to truly make your company succeed, you must pay attention to what you find during plan preparation. Be thoughtful. Don’t do the plan, figure out you need $300,000 and then try to wing it on $150,000. Be realistic in your planning. Then be just as realistic in following the plan.

The hardest part of crafting a good business plan (or even a bad one, for that matter) is overcoming inertia. Most people have a great idea and fail to take action because of fear of failure.

Inertia is what keeps a body at rest (along with a comfy couch, a good TV night, high-speed internet, whatever). Kick inertia in its thermodynamic behind, get off your couch and get started. Now.

Just as you must overcome inertia to construct a business plan, you might also have to overcome fear. A business plan sounds complicated. But it shouldn’t be. A complicated business plan is often worse than no business plan at all.

Your plan should be understandable in its language (overly technical terms are not welcome). It should summarize where appropriate (leave the details for the appendices). It should truly describe your business (leave the boilerplates for metal shop).

It needs to be short and to the point. Keep it simple, but make it complete. Treat your plan as if it is the only information a potential investor, lender or manager will have before making a decision enabling the success of your business.

Writing Winning Business Plans 4Learn more about writing successful business plans from Garrett Sutton’s Book, Writing Winning Business Plans. To win in business requires a winning business plan. To write a winning business plan requires reading Garrett Sutton’s dynamic book on the topic. Writing Winning Business Plans provides the insights and the direction on how to do it well and do it right.

Rich Dad/Poor Dad author Robert Kiyosaki says: “The first step in business is a great business plan. It must be a page turner that hooks and holds a potential investor. Garrett Sutton’s Writing Winning Business Plans is THE book for key strategies on preparing winning plans for both business and real estate ventures.”

Crisply written and featuring real life illustrative stories, Writing Winning Business Plans discusses all the key elements for a successful plan. Topics include clarifying your business vision, understanding your financials and analyzing your competition. Also covered are how to wisely use your business plan as a tool, and how to attract funding for your new or existing businesses.

As business plan competitions become more popular around the world Writing Winning Business Plans also discusses how to enter and how to win these ever more lucrative contests. How to quickly interest a potential investor, also known as the elevator pitch, is explained. In addition, as opportunities arise around the world, how to present your plan in various countries is explored.

Tax Advantages of Incorporating Your Business

You finally came up with an amazing name for your business, your business plan is carefully written and you’re ready for take-off! But as you read up on starting your business you stumble across a word that just keeps coming up: incorporating.

Then, at your networking event, people keep asking you if you have decided to incorporate or not. You try not to panic as you swiftly explain that you are still considering your options.

You run to the library, checking out all of the books you can possibly find on this very subject, but you’re still slightly confused, especially when it comes to talking about “taxes and numbers”.

We get it, it can be a lot to take in. We’ll give you the best reasons for incorporating your new business based on tax benefits and give you the information you need to incorporate. And don’t worry, we know it can be complex and we’ve made it easy to understand so you can make the best choice is for your business.

What Does It Mean to Incorporate?

If you’re thinking of incorporating your business, it’s important to know exactly what “incorporating” means. When you incorporate a business you are officially making it legal in the eyes of the state in which you reside. It becomes its own entity, separate from you as an individual owner.

It’s relatively simple to become incorporated, all you have to do is fill out an application with your state. This application asks for information about your business, including the business name, your personal contact information, the purpose of your business, and whether or not you will be providing stock options. By incorporating your business, your business can go on without an expiration date, which means that even if you pass away your business still exists.

Remember to consult a professional if you are considering incorporating your business. A professional can help you understand the benefits and drawbacks of each type of incorporation and understands what it takes to set your business up for success.

Incorporate Today: 7 Tax Advantages

When making the decision to incorporate your business, you want to think about what it will look like to run your business. Ultimately, one of the best reasons for incorporating your business is because it keeps your company and its assets separate from your personal ones, which helps to protectg you in teh event of a lawsuit, but there are great advantages when it comes to the big “T” word too.

Here’s a list of the top 7 tax advantages you receive from incorporating your business:

1. Spreading Out Tax Losses

As a business, you’ll likely have some losses, especially at first — most businesses do. Unlike filing your taxes as an individual, a business can spread out their tax losses over time. As an individual, you’re forced to take the loss right away, but as an owner of an incorporated business, you can defer your taxes. More specifically, if as an individual you have a high marginal tax rate and you personally don’t need the funds, you’re able to leave money for your business and take back the money at a later date when your personal tax rate levels out.

2. Business Expense Deductions

Keep track of all your costs. This includes start-up costs, operating costs and capital expenses (land, business equipment, commercial property, etc.). These expenses can be deducted during tax time and can add up to big money for your business. And as a bonus, you’re at a lower risk of being audited as an incorporated business.

3. Social Security Tax Deductions

By incorporating your business, you’ll only have to pay social security taxes on the income salary that you personally receive. This saves you a big chunk of tax money and allows you to separate your social security tax from your entire business income.

4. Benefit Deductions

Incorporated businesses are able to deduct the benefits they pay their employees too. As an unincorporated business who has outside people helping you, you’re unable to deduct those benefits.

Another deduction included is the insurance you provide to employees.

5. Protect Personal Assets

It’s always a wise idea to keep your business and personal assets separate. This includes bank accounts, property, etc. As an incorporated business, you’re able to protect your personal assets — it’s critical to have this asset protection in the unfortunate case that something goes wrong in your business.

For example, if you’re sued as an incorporated business, you’re not personally being sued, only your business is liable. Since incorporating your business classifies it a separate entity, your businesses’ assets are in jeopardy, not your personal home, vehicle or property.

6. Credibility

When your business is incorporated, you’re more likely to be taken seriously as a business owner. You become more credible in the community and in the tax world. When that’s the case, you’re more likely to earn money from people who trust you and your business. You are also far less likely to be chosen for an audit if you are incorporated.

7. Income Flexibility

Another tax advantage of incorporating is that you can lower your tax bill by taking income in dividends rather than salary, which allows you to be flexible with your income decisions from your own company. With income flexibility, you’re able to run your business in a more creative way and can meet a diverse set of needs that may be necessary, especially when you’re just starting out.

The Bottom Line on Incorporating

Incorporating a business might be a great choice for you. In addition to tax advantages, incorporating your business opens up many doors and opportunities and also protects you from unlimited personal liability.

Need help incorporating? Contact us today to get started!

Garrett Sutton Recognized for Lifetime Achievement Member by America’s Top 100 Attorneys

On March 23, 2018 America’s Top 100 Attorneys announced the Lifetime Achievement selection of Garrett Sutton, Esq. among America’s Top 100 Attorneys®. Lifetime Achievement selection to America’s Top 100 Attorneys® is by invitation only and is reserved to identify the nation’s most exceptional attorneys whose accomplishments and impact on the legal profession merit a Lifetime Achievement award.

Garrett Sutton Top 100 Attorney

Selection is not achieved based on a single accomplishment or a single great year of success, but rather on a lifetime of hard work, ethical standards, and community enriching accomplishments that are inspiring among the legal profession.  To help ensure that all attorneys selected for membership meet the very high standards expected for selection, candidates for lifetime membership are carefully screened through comprehensive Qualitative Comparative Analysis based on a broad array of criteria, including the candidate’s professional experience, lifetime achievements, significant case results, peer reputation, and community impact.  With these extremely high standards for selection to America’s Top 100 Attorneys®, less than one-half percent (0.5%) of active attorneys in the United States will receive this honor — truly the most exclusive and elite level of attorneys in the community.

For more than 30 years, Garrett Sutton has run his practice assisting entrepreneurs and real estate investors in protecting their assets and maximizing their financial goals through sound management and asset protection strategies. The companies he founded, Corporate Direct and Sutton Law Center, have helped more than 12,000 clients protect their assets and incorporate their businesses.

Garrett also serves as a member of the elite group of “Rich Dad Advisors” for bestselling author Robert Kiyosaki. A number of the books Garrett Sutton has authored are part of the bestselling Rich Dad, Poor Dad wealth-building book series.

Garrett attended Colorado College and the University of California, Berkeley, where he received a B.S. in Business Administration in 1975. He graduated with a J.D. in 1978 from Hastings College of Law, the University of California’s law school in San Francisco. Garrett is licensed in Nevada and California. Garrett is a member of the State Bar of Nevada, the State Bar of California, and the American Bar Association. He has written numerous professional articles and has served on the Publication Committee of the State Bar of Nevada. Additionally, He has appeared in the Wall Street Journal, TIME, and other publications.

He serves on the boards of The American Baseball Foundation, based in Birmingham, Alabama and The Nevada Museum of Art and Sierra Kids Foundation, both based in Reno, Nevada.

Garrett and his law firm, Sutton Law Center, have offices in Reno and Minden, Nevada, Jackson Hole, and Wyoming. The firm represents thousands of corporations, limited liability companies, limited partnerships and individuals in their real estate and business-related law matters, including incorporations, contracts, and ongoing business-related legal advice and accepts new clients. The firm also assists its clients to find and analyze appropriate real estate projects.

Garrett enjoys speaking with entrepreneurs and real estate investors on the advantages of forming business entities. He is a frequent lecturer for small business groups as well as the Rich Dad Advisors series.

ADA Compliance and SEO

By: Melissa Matheson
Corporate Direct Webmaster

Back in 2017, we published an article regarding ADA compliance on websites. The Winn-Dixie case was the case that defined websites as “public spaces,” thereby requiring that they be accessible to those with disabilities. This in itself is not an issue, I think we can all agree that we want all people to be able to freely access information and services. And in brick and mortar business, these requirements are clearly outlined in the Americans With Disabilities Act Standards for Accessible Design (ADASAD). These standards are now embedded in building codes and permit requirements so there is no confusion as to how to make your brick and mortar business ADA compliant.

Website accessibility, however, has proven to be a more difficult issue. There are no strict guidelines for websites set by the ADA or in the ADASAD. You will however, be strictly liable for following these guidelines that do not exist. Strict Liability means that even with the absence of intent to harm and/or absence of negligence, you can be held liable for violating any provision of the law. There will be no leniency granted if you aren’t aware of the law, or if you are “working on it.” You are either in compliance, or you are not.

But there has to be some sort of guidelines, right? Well…yes, and no. The Web Content Accessibility Guidelines (WCAG 2.0 and WCAG 2.1) have been established. (WCAG 2.1 are appended guidelines to WCAG 2.0). The WCAG are extremely technical and reading them is akin to learning another language if you aren’t a complete tech nerd. As well, you can make your site accessible without meeting all of the WCAG. There is information contained in WCAG for all possible scenarios, so there is a ton of information making it nearly impossible to digest. So if you can make your site accessible without implementing all the WCAG, but there are no other clear guidelines, how exactly do you go about becoming compliant?

Good question. I have found that a common sense approach is much more beneficial than trying to read all of the WCAG. As stated in the beginning of the article, we want everybody to have access to our services, right? So this is just a matter of making sure that is possible. And it turns out, if you have built your website with SEO in mind (which I hope you have) you probably have the bulk of the work already done.

If you have not focused on using the best SEO practices, you’ve probably got a lot of work to do. And if that is the case, please remember that there is no quick and easy miracle solution. There are many out there who have capitalized on the fact that people need to make these changes to their sites. But unfortunately, there are no miracle cures for this. Please do not spend your money on WordPress plugins or fancy scans. They won’t help. There are many WordPress Plugins out there (premade snippets of code that can be easily imported into your site) that are available both for free, and for sale. Be careful with these. If they are free, secure, and you like what they do, that’s great. Use them. But don’t be fooled into thinking that any of these plugins (even if they cost a fortune) are going to make your website ADA compliant. They will not. Regardless of how fancy they are, there are no tools available in them that make it easier for say, a screen reader, to access your content. They also usually provide functionality that can be achieved by just using the web browser functions (i.e., enlarging text).

As well, there are free scans that are great and can give you a very good idea of where you are in regards to compliance. A company called aCe for example, will scan your site and give you scores on different categories of your site for free. It will also show you code snippets of where the issues are along with any successful examples (if you have any) so that you can easily find where errors are and understand how to apply the fixes. Again, there are tools to help, but the solutions are largely manual and will take some time to complete.

Back to SEO. If you have built your site with SEO in mind, you have probably made sure to add alternative text to your images, captioned your videos and have a site map. You probably have a content rich site and have focused on presenting the content in a logical manner. You know that you will be punished by the SEO masters for any deceptive anchor text or other such tricks from the early days of the internet, so no worries there. You regularly speed check your site and apply fixes to anything slowing you down.

It turns out that by following SEO best practices, you are also in line with the four principles of the WCAG. The WCAG says (broadly) that your site should be: Perceivable, Operable, Understandable, and Robust. While there will still be some technical issues for you to bring your site into full compliance, if you have paid attention to SEO, you’ve also knocked out some of the biggest reasons that people get sued for not complying with ADA.

ADA website compliance lawsuits often begin because a company has failed to provide alternative text on their images. Again, using common sense, you can see how this can be a problem. If you have 25 products listed as images with no text, a visually impaired person would not be able to use your website with their screen reader as there would be nothing to read. Also, crawlers can’t read images so you have to add text if you want your site to be indexed properly. So adding that alternative text to help you climb higher in search results actually serves two purposes now.

The second biggest issue is not providing alternative multimedia support. The type of media will dictate your approach to making it fully accessible. Captioning videos may not be a huge SEO issue directly, but we all know how much it helps to have a video captioned when we put it out on social media. The click through rates, exposure and added interest in your company all indirectly affect SEO so if you’re not currently captioning videos that you put on social media you should start anyway. If it is audio only, like a podcast, you need to include a complete transcript. You can either have a link to it, or display the full text near the podcast. (Bonus: If you are lacking text content on your site, displaying the entire text will help to easily add some good text content).

Last but not least, the structure of sites often get people in trouble. Just like with SEO, your site must flow easily and not contain deceptive or unclear link structures. Anchor text to your links should clearly show the purpose. For example, your link should not be anchored with only “click here,” it should show as “click here to see an article about anchor text.” Get rid of any redundant links or any information that clutters your site and make sure that all of your menu items are available through keyboard navigation.

Although ADA compliance seems daunting and confusing at first, you may have more of it done than you realize. This is by no means an exhaustive list of requirements but if you don’t have much done, then taking compliance measures will not only keep you on the right side of the law, it will help you on the SEO side.

Through our research, we found Kris Rivenburgh, who does an outstanding job of breaking the WCAG down into terms that normal people can understand. He offers a WCAG guide at no charge (at the time of this writing) which can be found on the website he founded: If you have questions on ADA compliance, definitely check him out at and

Is Bitcoin a Scam? Scam-Proof Your Assets

Scam-Proof Your Assets: Guarding Against Widespread Deception, my newest Rich Dad Advisor book in several years, was released near the end of 2020. Cyber criminality is everywhere, costing people not only financial losses but emotional damage as well. You must be vigilant.

To learn the protective strategies you need against the cyber onslaught you may purchase the book from the RDA Press website.

I couldn’t fit all of the scams into Scam-Proof Your Assets. So the following excerpt isn’t in the book but is important for you to know.

While some frauds become harder to perpetrate due to better oversight, others become easier thanks to technology. One type of fraud that didn’t even exist just a few years ago is that involving cryptocurrency.

To illustrate what this is, let’s establish right now that currency is something that at least two parties agree has value and constitutes a type of payment. It’s a unit of exchange. When they taught real economics you would learn this. If I hold a dollar bill out to you, you see that as valuable because you can use it to buy things. We agree it’s money, so it is. Each dollar bill has a serial number on it, so according to the Treasury Department, that serial number represents legal tender in the amount of a dollar.

Well, in the case of cryptocurrency, a series of numbers—a sort of cryptography—represents an agreed-upon value. That series of numbers is currency, and it’s used to conduct transactions online. And like money, which the U.S. Treasury only produces a finite (albeit inflated) amount of, there is supposedly a finite amount of cryptocurrency. Promoters claim it is a finite amount but there is no intermediary—say the U.S. Treasury or a bank—to authenticate the value associated with that number. So in cyberspace it has value, but elsewhere, it’s a toss-up. You can’t go buy ice cream with it. Its price volatility is very high, making it unreliable. And it’s not a thing you can see or touch. It’s ideal for criminals.

The biggest and most well-known type of cryptocurrency is Bitcoin, though there’s no stopping anyone from creating their own cryptocurrency. In recent years, there are more than 1,500 of them, with more on the way. Because cryptocurrency is just a series of numbers, and because numbers, despite all claims, can be infinite, there’s no shortage.

Without certainty, but subject to animal spirits, the corresponding demand and value go up and down. Certainty arises when the two parties using it to buy and sell things agree on its value. So investment in Bitcoins or any other cryptocurrency is speculative at best. It only has value if people continue to want it and see it as valuable. The jury is still out. For all those who believe in crypto, that is fine. Go ahead and take down the Fed. But, for the rest of us, keep your guard up!

Bitcoin isn’t a scam—whether it has value or is useful is for you to decide. But what is a scam is when some fraudster throws out a lot of technical jargon and makes cryptocurrency sound like some unconquerable wave of the future. They claim they have some special insight to forecast a huge rise in cybercurrency, that it will eventually be the currency. In other words, for all its futurity, it is just another age old big pump-and-dump scheme. In December 2017, that’s what happened. Scammers intentionally pumped the value of Bitcoin so they could solicit investors, inflate the price up, then unload the ‘coins’ at a much higher value.

And many small investors fell for it, dumping all their money into it. Dipping a toe in is one thing, but pouring all your money into one investment is rarely a good idea—even a commodity you can actually see and use and has value. More on this subject in the book, Scam-Proof Your Assets.

In early 2017, Bitcoin’s prices went from under $1,000 to nearly $20,000 by the end of that same year. But then the market fell 80 percent, devastating investors who lost millions.

That hasn’t stopped scammers from plaguing Facebook with Bitcoin ads promising riches to savvy investors. In January 2018, Facebook instituted a policy banning Bitcoin and other cryptocurrency ads, but then later it relaxed those rules, allowing pre-approved advertisers to use its platform for these purposes, priming the pump yet again for a surge in cryptocurrency.

It bears repeating: Bitcoin and similar currencies have little, if any, actual intrinsic value, making it a prime target for crime. In fact, William H. Harris, Jr., founder of Personal Capital Corporation, a digital wealth management firm, reports that about 90 percent of all remote hacking is focused on Bitcoin theft by taking control of computers to mine their coins.

In 2019, a Ukrainian firm scammed $70 million from elderly investors in Britain, Australia and New Zealand. The company’s online ads featured interviews with celebrities such as Hugh Jackman and Gordon Ramsey who supposedly made a killing in crypto. High pressure salesmen in Kiev promised extraordinary returns. And the money all went down a Ukrainian rabbit hole.

“In what rational universe,” Harris writes, “could someone simply issue electronic scrip—or just announce that they intend to—and create, out of the blue, billions of dollars of value? It makes no sense.”

As Keller points out, “I get the idea that some of these ‘Bitcoin funds’ actually own no, or very few, Bitcoins, but are simply the next wave of Ponzi schemes. It’s actually a Ponzi schemer’s dream: Something that most folks don’t understand, but are being led by media buzz to believe it is the next big thing … Note to file: Nothing that you don’t understand is likely to ever turn out well.”

Scam-Proof Your Assets covers the many threats we face from cyber criminals. Everyone needs a guide book against deception.

Scam-Proof Your Assets

Paul Manafort Case and Metadata: The Overlooked Factor That Determined His Fate

In March of 2019, former Trump campaign chairman Paul Manafort was sentenced to 7.5 years in prison on 8 counts. One count was conspiracy to defraud the United States due to his ties to Ukrainian officials. But could this count have been avoided? The answer is yes, and here’s why.

On January 8, 2019, Manafort’s attorneys filed a sensitive motion in Federal Court that included some redactions. Once these documents were sent to the opposing counsel, they were able to track the changes made to the redacted portion of the document.

This allowed Robert Mueller’s team to un-redact the information that discussed Manafort’s continuing ties to Ukrainian oligarchs after his time with the Trump campaign, and ultimately resulted in a longer prison sentence.

Instead of cutting and pasting the redacted information into another document, as Manafort’s attorneys should have done, they simply blacked out the information in the same document.

Had Manafort’s counsel moved that information into another document and reinserted it into the motion, the opposing counsel would not have been able to uncover the damning evidence. Many of you might be asking: How could the opposing counsel uncover this information? The answer: Metadata.

What is Metadata, and How Does it relate to the Paul Manafort Case?

Metadata in short is data about data. There are many different types of metadata, but it is commonly used to determine information relating to when and how documents were created, accessed, or changed.

While it is both easy and helpful to have metadata in many situations, it is of the utmost importance for users to be aware of how easy it is for sensitive information to be placed in the wrong hands. Just ask Paul Manafort.

Fortunately, there are ways to remove metadata to prevent any inadvertent disclosures. The first way is by manually removing data through various software programs in use.

Document editing programs like Microsoft Word have document inspecting features that allow the editor to inspect and remove any changes, sensitive content, or any other forms of metadata to ensure that any other viewer cannot uncover anything that you do not want them to see.

The second way is by installing additional scrubbing software to automatically clean metadata on other software programs. These software programs include iScrub, Doc Scrubber, and cleanDocs, and they can aid you tremendously if you do not want to manually remove metadata.

Given all of the measures that Paul Manafort’s attorneys could have taken to preserve that redacted information, it is clear that he would not be serving extra time for his ties to Ukraine had his attorneys not been either careless or incompetent.

The public would not have found out about his continual ties to Ukraine, and the prevailing narrative of the mainstream media would be very different. It is crucial that we be aware of the downsides of metadata. If we are not, many severe unintended consequences can occur. Just ask Paul Manafort.

Ted Sutton is a graduate of the University of Utah and will be attending the University of Wyoming Law School in the Fall of 2019.

New Rules for HELOCs

Your Home is No Longer a Full Service Tax Deducting ATM

Have you ever tapped the equity in your home to pay for a new car or a college tuition? With a HELOC, also known as a home equity loan or line of credit, you could do so. Better yet, you could deduct the interest you paid on those loans on your tax return.

The new tax law has changed all of this (at least through 2025, when this portion of the tax law expires). With over 14 million HELOCs borrowing over $500 billion, the new rules affect many Americans for the tax year starting 2018.

You can still tap into your home’s equity for whatever you want. But under the new tax law, you can’t deduct the interest in every circumstance. And there are limits on how much you can deduct even if you are using the money correctly.

What is a proper usage for an interest deduction?

Borrowings used to “buy, build or substantially improve” your home are accepted. Fast cars are not. (But again, you can still buy the car and just not deduct the interest.)

The borrowing must be used to improve the house securing the loan. So you can’t use a HELOC on your primary residence to improve a vacation home.

Interest can only be deducted on the total debt of up to $750,000 for up to two homes. If you had a debt of up to $1 million on one or two homes before December 15, 2017 (the last date before the tax law changed) you can still deduct the interest if the money was used to improve, build or buy a home.

How does the $750,000 limit come into play?

Let’s say John has a $700,000 mortgage on a primary residence and borrows $100,000 on a HELOC to make improvements on that property. His total borrowings are now $800,000. John can only deduct interest on the first $50,000 of the HELOC. The remaining $50,000 in interest is over the $750,000 limit.

Mary has a primary residence and a vacation home. Her residence has a $300,000 mortgage on it with the vacation home having a $200,000 mortgage. Her total borrowings are $500,000. Mary then borrows $100,000 against each property. The money borrowed against her primary residence goes for improvements on that property. Likewise, the $100,000 vacation home borrowing is used for a landscaping project on that property. Mary’s total borrowings are now $700,000. Because she used the money the right way on each property she can deduct the full amount of interest on the $700,000 in loans.

There is another wrinkle to be aware of here. You can only deduct interest on a HELOC of up to $100,000. And that HELOC deduction is limited to the price you paid for the property.

Let’s say you bought a Detroit fixer-upper for $50,000. Somehow, you are able to get a HELOC on it for $75,000 so you can completely remodel it. You can only deduct interest on the first $50,000 of the loan, because that is what you paid for the place.

Once again, the tax law benefits single persons. Two singles could deduct a combined $1.5 million in mortgage debt ($750,000 each) if they bought a home together. Married couples are limited to the $750,000 amount.

Of course, record keeping becomes important in this arena. You’ve got to be able to prove all of this up to the IRS. Track your spending and save all of your invoices. If you don’t already have one, consider using a bookkeeper to assist with it. Save these records for a good long time. The IRS may take years to get at any audits on this. You may need to be prepared into the distant future.

Media And Tech Giants

You Can’t Vote On Us
Do As I Say, Not As I Do

Hypocrisy: A pretense of having some desirable or publicly approved attitude.

The media and tech elite in America lecture us that our voting system is unfair, easily colluded with and leaves millions of people disenfranchised.

Those words clearly describe the voting systems within their own corporations. Of course, when you control the flow of information duplicities go unnoticed. Unless you are a large pension fund with fiduciary duties.

The New York Times, CBS, Viacom, News Corp (Fox News), Google, Facebook and others all use corporate structuring strategies to limit shareholder voting and input. The right to vote for a board of directors is an important right of corporate share ownership. But the geniuses running these companies know better than mere shareholders.

By using two or three classes of stock with different voting rights per class, founders and management can maintain control.

For example, Viacom owns Paramount Pictures, Comedy Central, Nickelodeon, BET, VH1 and NTV, among other valuable media assets. The Redstone family owns 10% of the total outstanding shares through their Class A shares. Most outside investors hold Class B shares. Class A shares hold 80% of all the votes to elect a board of directors. So with 10% ownership the Redstones have 100% control of Viacom. Similarly, Facebook founder Mark Zuckerberg maintains voting control without having to deal with a majority of the owners.

Does this benefit the other majority shareholders? Are the Redstones and Zuckerbergs always right?

Defenders of unequal voting rights argue that founders and management need the ability to make decisions that are tough in the short term but result in long term gains. They decry Wall Street’s focus on quarterly short-term performance instead of year to year, decades long execution. But this is a shallow argument. Pension funds and key institutional investors are also focused on long term success. They will certainly bless solid and fair strategies for the future.

With entrenched management comes skewed incentives, which always benefit the insiders at the expense of shareholders. With a minority of the shareholders controlling a majority of the voting, the voices of opposition, much less reason, are not heard. In the political world they refer to this in abstract theory and sometimes practice as the tyranny of the majority. In the corporate world it is the tyranny of the minority day in and day out within the media and tech giants of America. As a shareholder you are required to ignore the people behind the curtain.

A 2016 study prepared by the Investor Responsibility Research Center found that multi class voting corporations came with weaker corporate governance and higher CEO pay.

So, of course with such evidence, the next trend is to offer shareholders no voting rights at all. Snap, Inc. just completed one of the largest tech IPO’s in history. Purchasers of shares received no voting rights in the corporation.

The California Public Employees’ Retirement System (Cal PERS) is the largest public pension fund in the country. They have a difficult job. State and local politicians have promised generous retirement benefits to California’s public employees. But they haven’t properly funded the system. Cal PERS is one trillion dollars (yes, with a ‘t’) short on what has been promised. So they have to be very careful on how they invest. They have fiduciary duty to the retirees and they can’t be losing money.

Cal PERS is very critical of Snap’s structure whereby public shares have no right to vote. Said a Cal PERS spokesperson of Snap shares: “I think you have to relabel this junk equity. Buyer beware.”

Over the last ten years, corporations with multiple classes of stock and unequal voting rights have seen more than their share of management scandals and securities violations. Better shareholder returns are seen where companies allow for greater shareholder involvement. Before investing, research a company’s corporate governance structure. Buyer Beware.

And recognize the hypocrisy of media and tech elites that scold America on unfair systems. They need to be questioned first and foremost on the inequities within their own home base organizations. Wealth inequality actually starts on their doorstep.

Estate and Gift Tax Exemptions Increased for 2018

The Internal Revenue Service (IRS) just announced new rules for 2018.

First, the estate tax. In 2017, an individual could pass with $5.49 million in assets and not be subject to any federal estate tax. This amount is doubled for married individuals (or $10,980,000.) For 2018, this exemption amount has been increased to $5.6 million, or $11.2 million for marrieds. That is a lot of money to pass on tax free to your heirs. For context, in 1998 the estate tax exemption was only $625,000. The gift tax is assessed on gifts made during the year (as opposed to at your death). In 2017, an individual could gift $14,000 of assets to anyone without having to report the gift to the IRS on a tax return. There is no upper limit on the number of individuals you can gift money or assets to during your life. Grandpa Eddy can gift $14,000 this year to his ten grandchildren and get $140,000 out of his estate. For 2018, the gift tax exemption is $15,000. No gift tax return is required for gifts up to this amount. So now, Grandpa Eddy and Grandma Edna could each gift $15,000 to their 10 grandchildren and get $300,000 ($15,000 times 2 gifters times 10 grandchildren) out of their estate. Of course, with the estate tax exemption now at $11.2 million the need for couples to gift away assets during your lifetime to avoid a large estate tax at their death is somewhat diminished. One other tax change of note for 2018 is the Social Security wage base for computing payroll taxes. In 2017, this amount was $127,200. For 2018, it moves up to $128,400. Best wishes for the holidays and for a prosperous 2018!

13 Tips for Responding to IRS Notices

Contributed by Robert W. Wood, Tax Lawyer and Managing Partner with Wood LLP.

Everyone must pay federal income taxes. Yet exactly how much you owe, and on exactly how much, is famously complex. All tax returns must be signed under penalties of perjury. That means you have to do your best to report everything fully and honestly, but the grey areas are plentiful.

For example, exactly when is something income, even though you physically don’t have it? What type of proceeds qualifies for long term capital gain rather than ordinary income rates? What losses are full write-offs, and which ones are limited to offsetting gains? What assets can be written off all at once, and what must be capitalized and written off ratably over many years?

These and many other questions come up at tax return time. You must have some answers to be able to file, even if you are leaving many of the details to tax return preparers. But once you sign your name and file, what about the IRS notices that come? How should you react, and in what order?

You can contest many IRS tax bills, although there are times not to. When you disagree with the IRS, procedure is important. You must pay attention to the order in which notices arrive and the specific ways in which you can respond.

Most Audits are Via Correspondence

Most audits do not involve sitting across the desk from an IRS agent. Let’s say you file your tax return and later receive a notice from the IRS saying it has information that you received $6,000 that you failed to report. It might be due to a Form 1099 you mislaid, one that failed to show up in the mail, or some other bit of information the IRS has that does not match your return.

Usually such a notice will ask you to sign the form and mail it back if you agree. Alternatively, the notice will ask for an explanation of why the information is incorrect. You can contest it—if you do so promptly. You can also agree if the IRS is right.

 Don’t Fight Every Tax Bill

If you know the IRS is correct, don’t fight. Likewise, if the IRS is seeking a small amount of tax, you may be better off not fighting it, even if you are right. Just consider whether it is worth it if the dollars are small. Of course, what is a small tax bill can mean different things to different people.

Sometimes, disputing something small can end up triggering other issues that might have best been left alone. So consider that too. In most cases, if you get a bill for additional taxes, you’ll want to preserve your rights. Timelines and procedure are critical.

Watch Out for Proposed Deficiencies

The notice described above is not a Notice of Proposed Deficiency. Still, you should answer it. An Examination Report may follow the first notice if you fail to respond. Most tax lawyers call the Examination Report and accompanying letter a “30-day letter.” It will say you have 30 days to respond in a so-called administrative “protest.” A protest is just a letter.

Make Sure You Prepare a Timely Protest

If you receive an IRS Examination Report, make sure you prepare a protest and sign and mail it before the deadline. Keep a copy for your records, and keep proof of mailing too, preferably certified mail to provide verification of mailing and of IRS receipt. Explain yourself thoroughly and attach documents where they will be helpful.

Your protest should analyze the facts and the law. Put your best foot forward. The IRS may review your protest and agree with you. Even if they don’t, how you frame your protest can help later. If you have protested in a timely way, you will normally receive a response that the IRS is transferring your case to the IRS Appeals Division.

IRS Appeals Division is Nationwide

The IRS Appeals Division is a separate part of the IRS. Its mission statement is to resolve cases. By definition, these are cases in which the auditor has recommended additional taxes, and the taxpayer disagrees. The Appeals Officer assigned to your case works for the IRS, and in that sense, can never be truly unbiased.

Even so, the IRS Appeals Office is separate, and they try to be impartial and, when they can, fair. This process of working out compromises works surprisingly well. A tax lawyer may be best qualified to handle your case, but an accountant can be equally qualified. Alternatively, you can do it yourself.

Just be aware that while it is less expensive to do it yourself, it is also generally less effective. The vast majority of tax cases are resolved at Appeals. Usually, you’ll be assigned to the Appeals Office closest to you. Offices are throughout the U.S. and sometimes you are assigned to an Appeals Office in some far corner of the country.

This is generally based on the workload of the offices and Appeals Officers. It can also be based on particular tax issues that some offices are handling. If that location doesn’t facilitate a face-to-face meeting and you want one, you can ask for the case to be moved to the IRS Appeals Office nearest you, nearest to your tax lawyer, your books and records, etc.

The IRS is not required to grant such requests, but they usually do. Most IRS Appeals Officers are happy to get a case they are assigned off their desk and assigned to someone else!

Beware a Notice of Deficiency

If you fail to protest, or if you do not resolve your case at IRS Appeals, you’ll next receive an IRS Notice of Deficiency. An IRS Notice of Deficiency always comes via certified mail. It can’t come any other way. A Notice of Deficiency is often called a “90-day letter” by tax practitioners because you’ll have 90 days to respond.

There used to be many flubs about exactly when that 90 days ran out. So today, the IRS is required to prominently display on page one of the Notice of Deficiency the actual deadline for your response. Don’t write the IRS to protest a Notice of Deficiency. In fact, only one response to a Notice of Deficiency is permitted: filing a Tax Court petition in the U.S. Tax Court clerk’s office in Washington, D.C.

Although it is best to hire a tax lawyer, some taxpayers handle their Tax Court case on their own, pro se. There are special simplified procedures available to taxpayers who represent themselves in cases where less than $50,000 in tax is in dispute. Whether you are handling the case yourself or you hire a tax lawyer, the U.S. Tax Court cannot hear your case if you miss the 90-day deadline.

Tax Court Judges Travel to Your Area

The Tax Court building and clerks are all in Washington, D.C. However, the 19 Tax Court judges travel to federal courthouses all around the country to conduct trials. You can pick the city where you want your case to be heard when you file your Tax Court petition.

Tax Court procedure and rules of evidence are streamlined, with no jury, and with relaxed rules of evidence. You can call witnesses, and many cases are presented based on a “stipulated record.” In it, you and the government agree on certain facts.

Your Case Can Go Back to IRS Appeals

Remember, the only way you can respond to a Notice of Deficiency is to file a timely petition in U.S. Tax Court. Fortunately, though, that doesn’t mean your case will necessarily be decided in court. An IRS lawyer will file an answer to your Tax Court petition. As with most other answers in litigation, the IRS will generally deny whatever your petition says.

But then, you can ask the IRS lawyer to transfer your case to IRS Appeals. Often, a Notice of Deficiency is issued before a case has ever gone to IRS Appeals. In that sense, it can seem as if the IRS is trying to cut off your right to an Appeal. Actually, though, it is usually because of workload, or because the IRS is worried that the statute of limitations on the tax year in question is about to run.

The IRS often issues a Notice of Deficiency to make sure you can’t later say the IRS is too late to assess taxes. When this happens, the IRS lawyer will almost always be happy to transfer your case to (or back to) IRS Appeals. This also ties into extensions of the IRS statute of limitations, below.

IRS Often Asks You to Extend the Statute

Often, the IRS says it is auditing you, but needs more time. Giving the IRS more time to audit you? It may sound counterintuitive–if not downright crazy to give the IRS more time, but it is not, as we will see. The IRS may ask you for an extension because they need more time to audit you.

Your first reaction may be to relish the thought of telling the IRS absolutely not! Even a routine tax audit can be expensive and nerve-wracking. The IRS normally has three years to audit, measured from the return due date or filing date, whichever is later. But the three years is doubled in a number of cases. For example, the IRS gets six years if you omitted 25 percent or more of your income.

Even worse, the IRS has no time limit if you never file a return, or if you skip certain key forms (for example if you have an offshore company but fail to file IRS Form 5471). You have to assume that if the IRS is asking you to extend the statute, the IRS is already monitoring you closely. And for the most part, people usually do voluntarily give the IRS more time to audit.

Why would anyone do that? It works like this. The IRS contacts you (usually about two and a half years after you file), asking you to extend the statute. Most tax advisers say you should usually agree. If you say “no” or ignore the request, the IRS will assess extra taxes, usually based on an incomplete and quite unfavorable picture.

You might think that you could fail to say yes or no and that the IRS might forget about you. But this is something the IRS is very careful about. The IRS rarely misses issuing a Notice of Deficiency, and you usually will be worse off (often much worse off) than if you agreed to the extension. There are exceptions to this rule, but relatively few. And sometimes you can agree to the extension but limit the extra time you give, or even the tax issues at stake. Get a professional to help you weigh your facts.

You Can Sometimes Get Extensions Too

Everyone knows there are automatic six-month extensions to filing your taxes. April 15 can become October 15, although you still must pay any taxes due by April 15. But what about extensions when the IRS demands a response to a notice or letter within 30 days?

For many notices, the IRS will grant an extension of time to respond. In some cases, though, they can’t. For example, when you receive a Notice of Deficiency (90-day letter), you must file in Tax Court within 90 days, and this date cannot be extended. Most other notices are less strict. If you do ask the IRS for an extension, confirm it in writing, and keep a copy. In fact, confirm everything you do with the IRS in writing.

Some IRS Actions Can Be Undone.

It is always best to respond to IRS notices within their stated time frames. Still, it is sometimes possible to undo IRS action after the fact. For example, even after the IRS places a lien on property or levies on a bank account, this can be reversed. However, it is usually harder and more expensive to undo something, and it usually requires professional help.

You Can Pay Up, Then Sue

If you do not respond to a Notice of Deficiency within 90 days, and you have an assessment, all is not lost. You will not be able to go to Tax Court, but you can contest the taxes in federal district court or in the U.S. Claims Court. Usually you must pay the taxes first, and file a claim for refund. If the refund request is not granted, then you can sue for a refund.

The primary advantage of proceeding in Tax Court is that you need not pay the tax first. In contrast, most taxpayer suits in U.S. District Court or U.S. Claims Court are after the tax has been paid. Sometimes, though, you can cleverly shoehorn yourself into one forum even though it might seem that you don’t satisfy the rules.

Take the case of Colosimo v. U.S., 630 F.3d 749 (8th Cir. 2011). There, the IRS pursued the company and its owners for payroll taxes. The owners sued in District Court for a ruling they were not “responsible persons” required to pay the payroll taxes. But the owners paid only a fraction of the taxes the IRS was seeking. This was a clever use of the notion that sometimes you can pay only a portion of the tax due, with your suit resolve both pieces of the asserted tax: the part you paid, and the part you didn’t.

Be Careful

Remember, there are many different types of tax notices, even if you are only talking about the IRS. We have covered a few types of IRS notices here, including a Notice of Deficiency. However, there are many other types of important notices, including liens, levies and summonses. Forms of response vary, and procedure is important. You’re best advised to get some professional help. In general, don’t ignore anything you get from the IRS!

Robert W. Wood is a tax lawyer with WoodLLP and the author of numerous tax books including Taxation of Damage Awards & Settlement Payments (  This discussion is not intended as legal advice.