Small Business Tax Tips – Are You Ready For the January 31 Deadline?

April 15 is not the only critical tax deadline. If you are a small business owner with employees or independent contractors, January 31 is an important tax deadline you cannot afford to ignore.

The end of January is the due date for several payroll-related tax forms and tax payments. Before reviewing them, here’s some good news. Whenever a federal tax deadline falls on a Saturday, Sunday or legal holiday, the due date is automatically moved to the next business day.

Since January 31, 2009 is a Saturday, the due date has been extended to Monday, February 2, 2009. (Perhaps those two extra days will come in handy!) Also keep in mind that to comply with any federal tax deadline, your mailing must be postmarked on or before the due date.

Here are the key federal payroll forms and tax payments due on February 2, 2009:

1. Form 941, Employer’s Quarterly Federal Tax Return.

This is the form used to report all employee compensation (wages, salaries, commissions, bonuses, etc) during the fourth quarter, as well as federal income tax withholdings, social security taxes and medicare taxes (both the employee’s withholding amount and the employer’s match).

If the quarter’s total tax (as shown on Line 10) is more than $2,500, then you should have been making payroll tax payments during the quarter according to the IRS payroll tax payment requirements. (See IRS Publication 15 for details on that.)

But if the quarter’s total tax is less than $2,500, you can pay your entire quarterly payroll tax liability with Form 941. Just be sure to include voucher Form 941-V with the return and make your check payable to the U.S. Treasury.

2. Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

This is the form used to report federal unemployment tax, which employers’ must pay (i.e. out of your own pocket) on behalf of each employee. The tax is typically 0.8% of the first $7,000 in wages paid to each employee each year. So the most you pay for any one employee is $56, assuming the employee had at least $7,000 in wages.

The Form 940 is only filed annually. But the 940 tax must be paid at the end of any quarter in which the unemployment tax liability reaches $500. So you should be calculating the tax every quarter to see what your liability is. If it reaches $500, make a payment by the end of the month following the end of the quarter. If it’s less than $500, you carry over the liability to the next quarter.

Most small businesses that have fewer than 10 employees usually don’t have to make a federal unemployment tax payment for quarters 1, 2 or 3. But when the 4th quarter rolls around you will have to pay the entire annual tax liability. If your total annual tax is $500 or less, you can pay it with the Form 940 (be sure to include voucher Form 940-V). If the tax is more than $500, you must pay the tax at your local bank or via the IRS electronic payment system (EFTPS).

3. Form W-2, Wage and Tax Statement.

You must give or mail W-2’s to all your employees no later than February 2, 2009. Employers must include Copy B, Copy C and Copy 2 along with the Instructions for Employee. In addition, you must send a copy of all W-2’s to the Social Security Administration by March 2, 2009, along with Form W-3, Transmittal of Wage and Tax Statements.

4. Form 1099-MISC, Miscellaneous Income.

The most common use of this form is to report total annual payments to independent contractors (sole proprietors who provided services to your business) of $600 or more. You must send Copy B of the 1099-MISC to the recipient by February 2, 2009. And you must also send Copy A to the IRS by March 2, 2009, along with Form 1096.

Important: Your state probably has payroll tax forms and payments due on January 31 or February 2, so be sure to check with your state’s tax department for details.

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How Destination Clubs Fare in a Slow Real Estate Market

According to the National Association of Realtors, new-home sales are projected to drop to 464,000 in 2009, down 8.8% from their 2008 mark of 509,000. While real estate experts remain unsure when the real estate downturn will again move positive, equity and non-equity destination clubs both welcome and fear the decrease in luxury real estate prices.

Most destination club business models revolve around the clubs’ real estate holdings. Destination clubs typically fall into three rather broad categories:

Bond-like Memberships

The most common destination club model, a member receives a fixed amount when (if) they resign their destination club membership. Members have a fixed amount that they receive at the conclusion of their membership period, generally between 75 percent and 100 percent of the membership deposit they to join the club.

Future Value Memberships

This increasingly popular membership option provides members with a refund based on the ideally higher initial fees a club is charging when a member exits the club. Under this format, members may receive even more than they what they paid in. Although models vary, members typically receive between 70 to 80 percent of the future value of their membership, upon exiting the club.

For example, the Solstice Collection currently offers their Signature membership plan for $615,000. Solstice allows their members the option of choosing a traditional bond-like membership plan, as mentioned above, or a future value membership option. A Solstice member electing to take the traditional bond membership option would receive 100 percent of their membership deposit back when resigning from the club. A member who elects the future value option is counting on the club being able to charge more for their membership in the future. If Solstice raises their Signature membership plan to $800,000, a future value member who joined at $615,000 would get 80 percent of the $800,000 membership value when they resigned; a $640,000 refund on their $615,000 initial membership deposit.

Equity Membership Most similar to true second home ownership, members are also direct owners of the club’s portfolio of properties. Members enjoy similar access to the club’s properties as the other formats, and when they redeem their membership, they receive an amount that is calculated based on the club’s current real estate holdings. Some equity clubs have a fixed date at which point the club will liquidate its holdings, and return pro rata shares of the proceeds to all member/owners. If the club has made wise real estate investments in burgeoning markets, the member may well receive an amount significantly greater than the amount they invested. If the club’s real estate has not appreciated at all, the amount refunded will probably be similar to the amount paid in. “We’re finding luxury homes up to 30% off in markets that would have sold at market rate just a few years ago,” said Adam Capes, President of Equity Estates, in a recent conversation with The Veras Group. “Our owners/members love that we are acquiring our portfolio of homes in a down real estate market.”

Equity Estates, one of the leading firms in this sector of the destination club industry, structures their membership as ownership of an investment fund. Members enjoy luxurious vacation residences and first class service, but are also owners of the fund, which has an anticipated liquidation date in 13 years.

While Equity Estates and other destination clubs’ members directly benefit from the club buying homes in a slumping real estate environment, the other destination club models also see benefits from their structure in slower markets.

Diversified Real Estate Portfolio

While the value of one home in one location can vary widely, depending on the local market, destination clubs have a disparate, global portfolio of homes. The diverse locations spread risk across a broader platform, which can be a great benefit to clubs with larger portfolios. While domestic real estate has seen a recent downturn, many international properties have seen record gains. Some international beach properties have posted gains over 230 percent in the past five years. Los Cabos, a destination club mainstay, has enjoyed 17 percent year over year gains during this period, and other areas like the Turks & Caicos have dedicated billions of dollars to tourism development, subsequently strengthening the area’s real estate asset value. While some US and Canadian properties have seen value depreciation, some have seen just the opposite, shielding clubs from drastic regional price variances. Membership Deposit Toward Real Estate Nearly every destination club states how much of its incoming membership deposits are allocated toward real estate acquisition. While many home prices have slid, destination club membership prices have risen. This presents a huge opportunity for forward-thinking clubs.

Purchase More Real Estate: If members are contributing more capital as part of their initial purchase decision, the club can purchase additional real estate in advance of their acquisition schedule. This second option not only increases availability, but also allows the club to grow their real estate holdings. By taking a long-term view, destination clubs can maximize profits when they do sell, during more favorable market conditions. This also adds more homes and destinations, allowing for stronger future sales.

Purchase Better Real Estate: Every club has a target home value they purchase for their members. If a club typically purchases $4 million residences, they may be able to temporarily increase their buying power, and purchase homes valued at $4.5-$5 million currently. This allows the club to buy homes that are closer to the beach or ski lift, more spacious, and more stunning than their other real estate.

Decrease Their Debt Service: While both of the above options strengthen the member’s travel options, a down real estate market can also strengthen the club’s financial security. Members’ deposits are backed by the club’s real estate holdings. Many destination clubs do not purchase their homes outright, but rather incur debt between 40% and 70% of the property value to complete the transaction. If clubs are receiving more membership deposit monies per home, they can increase their down payment and drive down the loan-to-value ratio. This decreased debt improves the club’s balance sheet and thus members’ deposit security.

The oldest investment mantra is “buy low, sell high.” The destination club model is predicated on this idea. While lower real estate values temporarily decrease the value of the club’s overall portfolio, it ultimately raises the club’s long term sustainability and produces highly satisfied members.


The Veras Group is the only unbiased destination club news, consulting and brokerage firm. As our client, we accompany your purchase from start to finish: customized reviews of your travel needs, unrestricted access to our expert advisors, insiders’ advice from industry veterans, insightful due diligence support, thorough club comparisons and points of difference, and the best available terms & pricing on your membership, all at no cost to you.

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Recent Market Losses: How Concerned Should We Be?

Many investors viewed the end of January and early February as a pretty scary time. Over a period of just 12 trading days (1/15-2/3), the S&P 500 lost -5.76%. This spurred conversations online and in the media about the end of a long bull market run and even the possibility of a bubble. However, since the end of that tough stretch, the market has responded strongly and is again obtaining new all time highs.

So what happened during that short time span to cause such a response? Was it a concern about the health of emerging markets that caused such a scare, or perhaps the threat of rising interest rates? Did the uncertainty of having a new Fed chairman cause a pullback in the market, or maybe the concern of a terrorist attack in Sochi during the Olympics? These are all clearly issues that obtained a good amount of short-term attention, but I’d contend that none of them were the root cause of the market decline.

History illustrates time and again that market volatility leads to memory problems for many investors. Check out this chart itemizing all market corrections of 5% or more since the bull market began:

As you can see, although the market has increased in value from 676.53 on March 9th, 2009 to 1,819.75 on February 11, 2014, the S&P 500 has endured nine pullbacks of over 5% during that time frame. As illustrated by the lengths of the red lines associated with each correction, many of these market declines happened over a similarly short time span. Consequently, despite the S&P increasing in value by 169% over the last five years, the market has experienced a decline of at least 5% every six and a half months on average. In fact, nearly a third of the months since the bull market began have seen the market decline, and by an average of 3% per month. Considering this information, late January and early February wasn’t particularly unusual.

These periodic market pullbacks aren’t specific to the recent strong run. Historically, we typically see three stock market dips of 5% or more every year and one correction of more than 10% every 20 months. Yet, for some reason, the same conversations and concerns are repeated during every market correction. Investors wonder if this is the beginning of an extended market decline or even a crash. People consider selling their assets and taking their money out of the market. It is so easy to forget that we have seen similar circumstances in the past and that very rarely has anyone benefitted from selling. Refer back to the chart itemizing all market corrections over the last five years. There wasn’t a single market decline that didn’t recoup all value in a short period of time. Even the 20% decline that occurred in 2011 only took nine months to go from peak to trough to new all time high.

As a result, I’d suggest that the January decline in the markets is not only nothing to be concerned about, but it is expected and healthy. In fact, if you have done your homework as an investor and have a well diversified portfolio with a stocks/bonds ratio that matches your risk tolerance, you’ll be hard-pressed to find a market movement that justifies dramatic action. Of course, there will always be market corrections (even the occasional crash), but as long as your portfolio is built to accurately match your investment time horizon, market values are likely to recover before the pullback is catastrophic to your retirement goals. Next time the market endures a short-term correction, remember it isn’t anything we haven’t seen before.

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Taking a Good Loan to Enhance Your Bottom Line

Taking a loan nowadays to meet expenses has now become a fad in our country. The availability of easy credit in the economy has fuelled consumerist trends to such an extent that gradually people are getting impulsive about taking loans to meet unwanted purchasing decisions. There is no harm in going for loans to meet our consumer demands except for the fact that these are loans that go towards creating liabilities on the long run. And thus these are Bad Loans!

Well! If these are bad loans, then what are the loans that can be termed good? Good loans are those that are worth taking and on the long run create assets! So today let’s talk about good loans and how they enhance you bottom line!

Good Loans

So what are good loans? Well when a loan has been used to create an asset/debt rather than paying off some sort of liability, the loan is termed good. The advantage of acquiring income producing assets out of loan is that whenever you will get out of that debt, you will be the owner of one income producing asset.

On the other hand if you have got a loan that you use to acquire some items of regular consumption or use, you are simply assigning a part of your income to pay off a liability that has created a depreciating item.

What Loans Should You Be Taking?

Loans taken to create an asset: As long as you are not speculating that the asset value will go up, it is worth taking a loan to build an asset. If you acquire debts to purchase a house for example, you are adding an asset to your portfolio whose value will keep on growing in the future. You are thus adding to your net worth all the while the assets keep growing in value.

Loans taken to increase your human capital: If you take a loan that spruce up your skill and career prospects, you are again creating long term assets. Study loans for example provide you with the option to improve your earning capacity in the future. Such a loan is worth taking.

Business Loans Business Loans are always good loans because over a period of time they would help in creating assets that would help you earn in the future. A loan taken for funding a business is always good.

What Loans Should You Avoid?

Loans taken for consumption: Taking a personal loan to fund your expenses is always disastrous because it does not create any asset for you in the long run nor is there any improvement in your bottom line. It has common now a days to go for loans in order to fund life styles. Use of credit cards is also random. You should always remember that using a credit card you are not only paying interest later but also end up purchasing more than you have thought of. People end up using credit cards to purchase clothes and accessories that they would have normally avoided purchasing in cash. This kind of tendency is disastrous not only because it creates liability but also because it can put them in a debt trap.

Loans taken to buy assets that depreciate: If you take a loan to buy the latest cell phone or LCD television, a car or any other appliance, you are not creating an asset that goes up in value. What happens on the contrary is that the very moment you unwrap the product; it is no longer worth what it was a few moments back. Another problem with products or appliances is that they are rendered obsolete in the market after a few year as newer and improved models always keep on flooding the market. And then just think of the resale value of such products if you were selling them to repay your loan. It is thus always advisable not to go for loans when you are buying goods or appliances that depreciate in value.

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