This course examines the various ideas, methods, and techniques capable of optimizing the overall compensation package for key employees and principals in small to medium sized businesses. Qualified and non-qualified deferred compensation, benefit targeting, insurance programs, statutory fringe benefits, interest-free loans, and investment planning are investigated. Effective pay plans are essential to attract, motivate, and retain key people who are defined and evaluated. Consideration is given to indirect compensation in the form of business entertainment, expense accounts, auto use, travel, and transportation. Equity participation is explored through stock sales, repurchase agreements, incentive stock options, ESOTs, stock options, and bonuses. The new field of professional services is probed to provide tax, financial, and estate planning to the key executive. Chapter 1 Tax Economics
At the start of Chapter 1, participants should identify the following topics for study:
* Financial fundamentals
* Tax planning elements
* Taxable income
* Tax-free income
* Tax-deferred income
* Tax-sheltered income
* Budgeting
* Cash
* Acquisition
* Assets
* Management
Learning Objectives
After reading Chapter 1, participants will be able to:
1. Identify financial and tax income types and how cash management is used to acquire and operate assets, specify changes recently made to taxable income, determine how the passive loss rules categorize income, and identify income splitting formats that can reduce tax.
2. Recognize basic cash management techniques and how to generate tax-free income, identify ways to defer income, and specify techniques to shelter income.
3. Determine the importance of budgeting and rules to budget effectively, specify several cash usages, recognize financial acquisition guidelines for tax-advantaged investments, and specify multiple asset management rules.
Chapter 2 Business Planning
At the start of Chapter 2, participants should identify the following topics for study:
* Financial and compensation planning
* Periodic review & goal setting
* Team concept
* Individual and corporate income tax rates
* Capital gains & personal exemptions
* Passive loss rules
* Deferral of income
* Acceleration of deductions
* Avoiding taxable income
* Unreasonable compensation
Learning Objectives
After reading Chapter 2, participants will be able to:
1. Recognize compensation strategies citing employer vs. employee perspectives, identifying parties goals and objectives, and selecting compensation techniques to accomplish such goals.
2. Identify economic and tax trends particularly recent capital gain complexity and rate baskets and their varying taxation and recognize the 469 buckets of income and loss that influence what a taxpayer can deduct against other income.
3. Specify several ways to defer income and accelerate deductions, and thereby expand business cash flow and planning opportunities.
4. Recognize the dangers of unreasonable compensation and its impact on deductions and distributions and identify ways to avoid unreasonable compensation.
Chapter 3 Deferred Compensation Plans
At the start of Chapter 3, participants should identify the following topics for study:
* Types of deferred compensation
* Advantages of nonqualified deferred compensation
* Economic benefit of nonqualified deferred compensation
* Tax consequences
* Qualified deferred compensation retirement plans
* Basic requirements of a qualified pension plan
* Basic types of corporate plans
* Self-employed plans – Keogh
* Individual plans – IRAs
* SEPs and SIMPLE plans
Learning Objectives
After reading Chapter 3, participants will be able to:
1. Determine the meaning of deferred compensation plan, cite questions for assessing deferral usage, and recognize multiple deferred compensation types so clients may properly structure compensation.
2. Identify client compensation decisions by specifying qualified deferred compensation restrictions, recalling the purposes, benefit formulas, and necessary contractual provisions for nonqualified plans., recognize the IRSs position on nonqualified compensation, determine constructive receipt and economic benefit, and identify the
differences among unfunded bare contractual promise plans, funded company account plans, and segregated asset plans.
3. Recognize qualified deferred compensation plans and nonqualified plans, the major benefit of the qualified deferred plans, and the basis of the benefits and contributions and, identify the current and deferred advantages and the disadvantages of corporate plans and fiduciary responsibilities and prohibited transactions.
4. Cite the requirements of the basic forms of qualified pension plans permitting clients to elect among such plans.
5. Identify defined contribution and defined benefit plans, specify the differences among the types of defined contribution plans, and recognize their effect on retirement benefits.
6. Determine the differences between self-employed and qualified plans identifying key choice of entity factors.
7. Cite the requirements of IRAs, SEPs, and SIMPLEs, and recognize tax-free Roth IRA distributions and where changes may be necessary to maximize plan benefits.
Chapter 4 Basic Fringe Benefits
At the start of Chapter 4, participants should identify the following topics for study:
* Benefit mechanics
* Employee achievement awards
* Group term life insurance
* Self-insured medical reimbursement plans
* Medical insurance
* Meals & lodging
* Cafeteria plans
* Employer-provided automobile
* Adoption assistance program
* Interest-free & below-market loans
Learning Objectives
After reading Chapter 4, participants will be able to:
1. Recognize basic fringe benefit planning by determining income under 61 and identify the differences between former non-statutory and current statutory fringe benefits created by recent cases, rulings, and tax law changes.
2. Specify the mechanics of typical fringe benefits, determine the fair market value of a fringe benefit under the general valuation rule or the special valuation rules, and identify the general accounting rule and the special two-month pour-over accounting rule.
3. Identify an employee achievement award under 274 and recognize the rules for group term life insurance under 79 and how to implement proper coverage.
4. Determine the mechanics of self-insured medical reimbursement plans under 105 and specify the requirements of medical insurance under 106 specifying differences.
5. Identify the rules for excluding the value of meals and lodging under 119, and cafeteria plans and how they operate.
6. Recognize the requirements and limits of employee educational assistance programs and dependent care assistance and how to obtain each type of assistance.
7. Identify no-additional-cost services and determine what property or services are excludable from income as qualified employee discounts under 132(c) and specify exceptions to working condition fringes and de minimis fringes.
8. Determine the requirements for qualified transportation fringe benefits under 132(f), specify valuation methods for employer provided automobiles, and identify the qualifications for the popular physical fitness exclusion, and the requirements and benefits of adoption assistance programs.
9. Recognize planning services available under 132, 212, and 67, determine interest-free and below-market loans, identify childcare benefits and corporate-funded educational savings accounts, specify S corporation fringe benefits, and identify ERISA compliance requirements.
Chapter 5 Business Entertainment
At the start of Chapter 5, participants should identify the following topics for study:
* Tests for pre-2018 entertainment expenses
* Statutory exceptions
* Former ticket purchase rules
* Percentage reduction for meals & entertainment
* Entertainment facilities
* Substantiation & record keeping
* Employee expense reimbursement & reporting
* Self-employed persons
* Employers
Learning Objectives
After reading Chapter 5, participants will be able to:
1. Identify tax definition of entertainment, recognize the former tests for pre-2018 entertainment expenses to be deducted, determine the importance of the statutory exceptions and the percentage reduction restriction for meals and entertainment, and specify the former 2% floor on miscellaneous itemized deductions.
2. Determine what constitutes an entertainment facility, identify substantiation, recordkeeping, reimbursement, reporting requirements, and variations in methods, specify how to itemize non-reimbursed employee expenses, and identify the special reporting rules for self-employed persons and employers.
Chapter 6 Business Travel & Transportation
At the start of Chapter 6, participants should identify the following topics for study:
* Transportation & travel distinguished
* Definition of tax home
* Temporary & indefinite assignments
* Away from home requirement
* Business purpose requirement for business travel
* Convention & meetings
* Cruises & luxury water travel
* Automobiles
* Actual cost method
* Standard mileage method
Learning Objectives
After reading Chapter 6, participants will be able to:
1. Identify business travel and transportation concepts by specifying the differences between transportation and tax home sensitive travel to maximize deductible expenses.
2. Recognize how time acts as a critical factor in distinguishing a temporary from an indefinite job assignment, cite the away from home requirement, and determine the factors associated with the business purpose requirement.
3. Identify deductible meals, lodging, conventions, and meetings and related necessary compliance issues, specify the special requirements for cruises, determine the treatment of luxury water travel, recognize auto usage as a component of travel, cite the requirements for family member travel expenses and recognize the interplay of the “no
additional cost” rule to ensure taxpayer compliance with 274.
Chapter 7 Insurance
At the start of Chapter 7, participants should identify the following topics for study:
* Company paid insurance
* Group term life insurance
* Retired lives reserve
* Split-dollar life insurance
* Medical & dental insurance
* Disability income insurance
* Interest limitation on policy loans
* Self-employed health insurance deduction
* Capitalized insurance
* Health savings account
Learning Objectives
After reading Chapter 7, participants will be able to:
1. Recognize the business and tax importance of available business insurance including the broad spectrum of company paid insurance, 79 group term life, retired lives reserve, split-dollar, former death benefit plans, business travel, disability, medical, and dental specifying permitted coverage and tax treatment.
2. Determine the requirements and restrictions pertaining to the interest limitation on policy loans under 264, the interest limitation for tax-exempt interest income under 265, the conditions under which business owners may fully deduct amounts paid for medical and dental insurance and qualified long-term care insurance, recognize the application of the uniform capitalization rules, and identify the basic mechanics of health savings accounts.
Chapter 8 Equity Participation
At the start of Chapter 8, participants should identify the following topics for study:
* Stock plans
* Section 83
* Stock appreciation rights plan
* Qualified incentive stock options
* Golden parachute agreements
* Buy-sell agreements
* Entity & cross-purchase agreements
* Estate tax valuation
* Funding the buy-sell agreement
* Purchase price & terms
Learning Objectives
After reading Chapter 8, participants will be able to:
1. Recognize equity participation by specifying factors that determine the benefits of stock options, determine how to transfer an equity position, identify controlled sales, and cite programs to provide executives with an equity ownership interest in a business.
2. Identify the taxation and use of nonqualified stock options under 83 and the mechanism for stock appreciation rights (SARs) plans.
3. Recognize the requirements of 422A which ensure that a qualified incentive stock option is available, and recall changes the TRA 86 made to the golden parachute rules and their effect on what constitutes a parachute payment.
4. Determine tax-advantaged entity purchase and cross-purchase agreements, recognize the importance of funding a buy-sell agreement, and determine the value of closely held stock.
Chapter 9 Estate Planning
At the start of Chapter 9, participants should identify the following topics for study:
* Unlimited marital deduction
* Applicable exclusion amount
* Stepped-up basis
* Basic estate planning goals
* Simple will
* Types of trusts
* Charitable trusts
* Insurance trusts
* Family documents
* Private annuities
Learning Objectives
After reading Chapter 9, participants will be able to:
1. Identify estate planning for business clients and the elements of estate tax planning that have remained unchanged by recent legislation, recognize the unlimited marital deduction including its effect on the gross estate of the value of property, and specify the
applicable exclusion amounts for various years of death.
2. Determine a stepped-up basis comparing the former modified carryover basis rules for estate tax purposes and identify the basis increase for certain business property.
3. Specify several basic estate planning goals and identify the benefits and drawbacks of the primary dispositive plans.
4. Recognize the various types of trusts and items necessary in business estate planning, specify multiple family estate documents that every taxpayer should consider, and identify the advantages and disadvantages of private annuities for the transferor and the transferee and the property transferred.