Should you "ROBS" your 401(k) to start a new business?

ROBS is an acronym for a relatively new financing arrangement known as a "rollover as business startup" being touted on the Internet and arranged by some investment firms.

Typically a ROBS works like this: You pay a fee to a plan sponsor to create a corporation, which sets up a profit sharing or 401(k) plan of its own. Then you roll funds from your own 401(k) plan into the newly created corporation's plan. Your next step is to use the funds in the corporation's plan to buy the stock of your new company, thereby providing working capital for your new business.

Sound too good to be true? It probably is. For one thing, profit sharing plans, while a legitimate way to reward employees by sharing profits from your business, must follow strict rules. These include filing annual tax returns and avoiding transactions that discriminate in favor of highly paid employees, including yourself. The IRS scrutinizes ROBS very closely to be sure all the rules are carefully followed.

When you're looking for capital to set up a new venture, the idea of tax-free cash is appealing. But if the IRS determines that the deal is a prohibited transaction, you can be hit with penalties and you risk losing your retirement money.

Please contact us before you enter into any complicated, questionable arrangement. We're here to help you make the right choices for your business.

Act fast if you want to cut your 2010 taxes

1. Tax rates are likely to go higher in 2011, so you might benefit from shifting income into 2010 and delaying deductions until 2011. It’s always a matter of personal circumstances, so analyze the two-year results of shifting income and deductions before you do anything.

2. Remember that required minimum distributions from retirement plans are back this year. If you’re over 70½, your 2010 distribution must be taken by December 31 or a 50% penalty may apply. If you turn 70½ this year, you could wait until April 1, 2011, to take your first distribution. In deciding, consider the likelihood of higher tax rates next year and the fact that a delay means you'll have two taxable distributions for 2011.

3. With the $100,000 income limit dropped for converting a traditional IRA to a Roth, consider doing a conversion before year-end. You can elect to pay the tax over two years’ tax returns, 2011 and 2012, or pay in full on your 2010 return.

4. Consider buying needed equipment for your business to benefit from the first-year $500,000 expensing option and 50% bonus depreciation.

5. If you’re planning to add employees soon, do so before January 1, 2011. If you hire someone who has been unemployed for a while, you might qualify for an exemption from social security payroll taxes on the new hire’s wages. Keep the new worker for at least a year and you could also qualify for a tax credit of up to $1,000.

6. Start a pension plan for your small business. You may be entitled to a credit of up to $500 in each of the plan’s first three years.

7. Review your portfolio and start thinking about offsetting gains and losses for the year. You can deduct $3,000 of losses against ordinary income.

My Point of View of Florida Income Taxes and It's Equivalent Tax , the Real Estate Tax.

My Point of View of Florida Income Taxes and It's Equivalent Tax , the Real Estate Tax.

As Citizens of the State of Florida we have to understand that the State has
two principal tax revenue sources, the first is the Florida Sales tax and
the second is the Real estate taxes charged by the respective Counties of
course there are other methods of Tax funding but, these two are the topics
covered in this discussion.

Most of the States of the Union have a State Income Tax Revenue source in
addition to their Sales Tax Revenue Source. In our State of Florida we have
zero Income Taxes at the individual level and a small Corporate Income Tax. We must also understand that thousands of corporation have elected to
become S Corporations which are exempted for State Income Taxes.

The State of Florida government is tied to the funding sources permitted by
our constitution. So for me is evident that the Real estate Tax is the
substitution for other State Income Tax Revenue.

So those are the major funding sources in place created in our State in
addition to the so called FEES (taxes in disguise) . Our politicians must
understand that economies have contractions and budget and services must be
adjusted accordingly.

Real Estate values have decreased substantially the last couple of years, so
our income tax equivalent (Real Estate Taxes) have decreased. Florida
coffers have been depleted. It is not business as usual.

Services at the State and local levels will have to adapt to the
decrease in budgets due to decrease on tax revenues.

We want a government that we can not afford, our government structure was
created to serve us and not to hurt us. Almost every family, every
taxpayer, every small business is suffering in these economic times and we
have modified our budgets in this contraction.

If we still want a government that we can not afford, then higher taxes are
the solution. We need a government that we can afford and if that means
cutting services to accommodate the shortfall ,so let it be. We can not
mortgage the future of generations to come, it is truly irresponsible and
abuse of power

PADRO & Company, P.A.
Certified Public Accountants
TEL. 305-500-9361 FAX. 305-500-9492
2520 NW 97 Av. Street. Suite 120 Miami. FL. 33172

http://www.padrocpa.com
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Any tax advice included in this written or electronic communication was not
intended or written to be used and it cannot be used by the taxpayer, for
the purpose of avoiding any penalties that may be imposed on the taxpayer by
any governmental taxing authority or agency.