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SMALL BUSINESS TIPS Quarterly: Oct 17 Deducting Your Business Travel If you travel as part of your business or you have employees who travel you have several options for how you deduct those travel expenses. Typically you can either track and deduct the actual cost of travel or you can use standard allowance amounts provided by the IRS to simplify the record-keeping requirements. If you choose to use standard allowance amounts to deduct your travel expenses it is important to keep up-to-date on what the allowance rates are as they are typically updated on an annual basis. Vehicle Expenses If you use your personal vehicle for business-related travel you can deduct either a portion of your actual vehicle expenses or a standard rate per mile driven. Actual vehicle expenses would include gas, insurance, repairs and depreciation on the cost of the vehicle. For 2022 the standard mileage rate is 58.5 cents per mile, up from 56 cents in 2021. For more information on the vehicle expenses deduction read Deducting the Business Use of Your Vehicle . Meal and Lodging Expenses If you travel overnight for a business-related trip you can deduct your meal and lodging expenses as well as other miscellaneous travel expenses. If you would like to deduct the actual cost of meals, hotel rooms and other miscellaneous expenses you will need to keep copies of receipts for each expense in your records as well as document the business purpose of the trip. If you would prefer not to keep track of each receipt you can instead use the IRS per diem rates to deduct a standard amount for meals and lodging expenses for each day of your trip. You will still need to document the destination, length and business purpose of your trip but will not need to maintain receipts for your expenses. The per diem rates vary depending on your travel destination. You can lookup the rates for your destination at https://www.gsa.gov/travel/plan-book/per-diem-rates . These rates are typically updated every October. The current rates will be effective until September 30, 2022. If you choose to use per diem rates to deduct your business travel, do not have your business directly pay the cost of meals, lodging, etc. Instead, pay for these costs personally and then submit an expense report to your business using the per diem rates and reimburse yourself. If your business is structured as a sole proprietorship, you do not need to reimburse yourself through an expense report. Instead you can simply use the per diem rates to claim a business travel deduction on your tax return at the end of the year. Please note that if your business is a sole proprietorship you can only use the per diem rates for meal expenses, not lodging. Summary Traveling can be expensive. But if you know how to maximize the tax benefits of your business-related travel you can reduce some of that cost. Using the standard mileage and per diem rates can simplify your record-keeping requirements and in many cases can provide a greater tax benefit than deducting your actual costs. To maximize your business-travel deductions read How to Deduct Your Vacation Travel as a Business Expense . Schedule Your Tax-Planning Call Previous Article

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No events at the moment 2020 Strategies for a Lifetime of Tax Savings Join us as we share a clear durable plan of action that cohesively addresses each area of your financial life to: Maximize the productivity of your assets and improve your retirement income stream Minimize the drag from your long-term tax liabilities Potential for over $350,000 in lifetime savings on a $500K retirement portfolio Potential for over $2M in lifetimes savings on a $5M retirement portfolio Minimize the risk of rising tax rates in retirement Address the risk of low interest rates and stock market corrections in retirement Synchronize your values with your charitable giving desires and your legacy goals Provide a quiet confidence that your financial affairs are arranged to meet your long-term goals Help you live the life you want to life

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At Monotelo Advisors we work hard to free up cash flow by helping you minimize your federal tax liability, giving you more money to reinvest into your future. TAX EXPERTISE Monotelo believes there is a better way to help you secure your financial future. It starts by improving your cash flow, then focusing on the budget and retirement savings to help you take charge of a future filled with peace and financial security. Our mission is to make a difference with meaningful and actionable financial solutions that positively impact our client's lives. We do this by integrating the tax component into all our discussions - freeing up cash flow that allows our clients to live the lives they want to live. SMALL BUSINESS OWNERS If you are a small-business owner, there is a high probability that you are paying more tax than what is required. And the key to lowering your tax bill is not in finding a competent CPA to file your tax returns, it's in finding an expert with a disciplined process to help you plan your future. LEARN MORE PRIVATE CLIENTS With the opportunities and challenges of the Tax Cuts and Jobs Act, Monotelo's unique blend of expertise in tax law, retirement planning and wealth management can be a critical factor in helping you reach your short and long-term goals. LEARN MORE RETIREMENT PLANNING The Tax Cuts and Jobs Act has made proper tax planning more critical than ever when it comes to preparing for retirement. Monotelo's unique blend of expertise and wealth management can help you reach your retirement goals. LEARN MORE TAX EXPERTISE Click here to access the tools and articles designed to help you manage your taxes and your finances while giving you confidence to take the steps needed to prepare for a future filled with peace, hope and financial security. LEARN MORE

SMALL BUSINESS TIPS A SIGNIFICANT NEW TAX DEDUCTION NOW AVAILABLE TO SMALL BUSINESS OWNERS! The Tax Cuts and Jobs Act, signed into law in December of 2017, placed a severe limit on the deduction for state income and property taxes. This limitation, commonly referred to as the SALT (State and local taxes) cap, restricts this deduction to a combined amount of $10,000. For reference, a family in Illinois making $400,000 with $18,000 in property taxes would have combined state income and property taxes of $38,000 but could only deduct the first $10,000. Even if your combined taxes are below the $10,000 level, you are unlikely to realize any actual savings from the deduction since you need to itemize your deductions to do so. To circumvent this restriction, a number of states have passed laws allowing pass-through businesses to elect to be taxed at the business level, rather than the personal level. This election can provide meaningful tax savings to small business owners. How Does this Work? If your business is a partnership or an S-Corporation, it is considered a pass-through business, meaning the business itself is not taxed at the corporate level. Instead, that income is passed through to the owners, who are then responsible for the taxes on the business profits. This is relevant because the SALT cap only applies to individual taxes, not business taxes. By electing to pay tax at the entity level, business owners can now turn their state income taxes into deductible business expenses without needing to itemize and without being subject to the $10,000 SALT cap. Nineteen states have passed laws allowing pass-through businesses (as of 10/8/21) to make an election to be taxed at the business level, including Illinois, Wisconsin, New York and California. We are going to focus today's article on how this provision will work in Illinois, as Illinois’ flat tax rate makes it the most straight forward example. Illinois The bill that created this provision in Illinois was signed at the end of August. We are still waiting on the state to provide more thorough guidance on how businesses will make the election, but here is what we currently know: Passthrough businesses can elect to pay state taxes at the business level for tax years 2021-2025. (The SALT cap is set to expire in 2026). This election will need to be made each year. Once made for a given year, the election cannot be revoked. Starting in 2022, businesses that make this election will need to make quarterly estimated tax payments towards state taxes to avoid penalties. This requirement is waived for 2021 since the first 2 quarterly payment deadlines had already passed before the bill was signed. A business that makes the election will pay a 4.95% tax rate on its net income. The owners of the business will then receive a credit towards their personal taxes equal to the amount of taxes the business paid times their percentage ownership in the business. Should You Make This Election? The decision to make this election will depend on several factors, including the net income of your business, the total taxable income on your personal return, your filing status, and the state you live in. As we mentioned, because Illinois has a flat tax rate, nearly all business owners in Illinois will benefit by making this election, though the extent of that benefit may not always be worth the extra steps. The more income your business generates, the larger the benefit this election will have on you (for Illinois business owners). However, in other states the benefits are less certain due to differing methods of implementing this program. Example In Wisconsin, individual taxes fall into one of four brackets depending on income, with 3.54% being the lowest bracket and 7.65% being the highest bracket. However, businesses making this election in Wisconsin will pay taxes at the fixed corporate rate of 7.9%. As a result, the federal tax savings barely outweigh the increased taxes paid to Wisconsin at lower income levels. See the chart below that illustrates how business owners in different states will benefit from making this election,. As these examples illustrate, the savings for businesses in flat-tax states like Illinois are fairly straightforward. The more income your business generates the larger the potential savings. This is due to the fact that Illinois tax rates do not change when you make this election, they are simply changed from a personal expense to a business expense. On the other hand, there are additional factors at play in Wisconsin. The benefits in Wisconsin are not so obvious until higher income levels. For example, in scenario 5, a married couple in Wisconsin with $250,000 in wages and $500,000 in business profits could reduce their federal taxes by $11,123 while only increasing their Wisconsin taxes by $2,667 resulting in net savings of $8,456. And the benefits only increase as incomes rise. The key takeaway is that the benefits for business owners in states with a flat tax rate (such as Illinois) are straightforward. The more income your business generates, the greater the savings from making this election. For states with bracketed tax rates (such as Wisconsin), the benefit is not as clear. We will need to analyze the impact of making this election on both your federal and state taxes to determine the best course of action. Summary The essential benefit of this strategy is that you can now capture your state income tax payment as a business expense to reduce the taxable income on your federal tax return. If you have $1,000,000 in business income you are likely in the 37% marginal tax bracket. If we push a $50,000 tax bill through your business, we can save you between $14,000 and $19,000 on your federal income tax bill. The SALT cap has been a thorn in taxpayer’s sides for nearly four years. With the passage of these laws in different states, many business owners will now have the ability to work around this cap to deduct their state income taxes against their federal tax liability. The benefit to each individual will depend on your home state, your marital status and your income level. Please reach out to us for help determining if you would benefit from making this election. Schedule a Tax Planning Call

Quarterly: Oct 17 Financial Planning & Long-Term Tax Reduction in Light of the Tax Cuts and Jobs Act The Tax Cuts and Jobs Act (TCJA) that was signed into law in December of 2017 has created a unique and time-sensitive retirement planning opportunity that will sunset in 2025. Representing the most significant tax code overhaul the United States has seen in over three decades, the Tax Cuts and Jobs act brings the US into one of the lowest combined marginal tax rate environments this country has experienced since the late 1980’s. The chart below displays the highest and lowest historical marginal tax brackets in the United States. With the lowest marginal tax bracket as high as 25%, and the highest marginal tax bracket as high as 95%, today’s tax brackets are some of the lowest on record. The challenge with our low current tax rates is that Congress failed to curb spending, and our national debt is now growing at an accelerating pace. These two things: low tax rates and an accelerating national debt, are not sustainable long-term. With the Tax Cuts and Jobs Act scheduled to sunset at the end of 2025, some families will see their marginal tax bracket rise by as much as 9%. This short window, however, creates a unique opportunity to take advantage of our current tax rates and convert pre-tax retirement assets to tax-free accounts. Taking advantage of today’s low tax rates and positioning retirement assets in an account that the US government will never tax again can not only dramatically reduce your lifetime tax liability it can also significantly increase your likelihood of a safe and secure retirement. By taking the additional cash flow created from our General Tax Planning and growing the retirement savings in the “Never-To-Be-Taxed-Again Bucket,” we have the potential to dramatically reduce your life-time tax burden, reduce the paralyzing impacts of RMD’s (Required Minimum Distributions) and reduce the taxability of your Social Security Benefits. With the opportunities and challenges of the Tax Cuts and Jobs Act, Monotelo’s unique blend of expertise in tax law, retirement planning and wealth management can be a critical factor in helping you reach your short and long-term goals.

If your taxable income is between $315,000 and $415,000, you could be paying a higher tax rate than any other taxpayer. July 2018 MONOTELO QUARTERLY Quarterly: Oct 17 STAYING OUT OF THE "DANGER ZONE" OF THE NEW SMALL-BUSINESS DEDUCTION The Tax Cuts and Jobs Act introduced a 20% deduction for small business owners. You can read our overview of this deduction in our last quarterly article. The gist of this new deduction is it will allow small-business owners to deduct 20% of their business income from their taxable income on their personal return. While this new deduction provides some welcome relief for small-business owners, there are restrictions on the deduction that highlight how critical proper tax planning is in 2018. If your business qualifies as a “specified service trade or business ” then your deduction will start to be phased out at taxable income of $157,500 ($315,000 if married filing a joint return) and entirely eliminated at taxable income of $207,500 ($415,000 if married filing a joint return). While this means any service business owner with taxable income above $415,000 will receive no benefit from the deduction, the toll is heaviest for any business owner who lands in the middle of the phaseout range. Example: John and Mary own a small consulting business and have taxable income of $315,000. Since they are right at the lower phaseout threshold they will receive the full deduction and their taxable income will be $252,000 ($315,000 x 80%). The tax they will pay on this income is $49,059. Now if their taxable income increases by $100,000 they will be completely phased out of the deduction and their taxable income will jump from $252,000 to $415,000, increasing their tax bill to $96,629. That is $47,500 in federal taxes alone on $100,000 of income. With what is effectively a marginal tax rate of 48%, small-business owners with taxable income between $315,000 and $415,000 are paying a higher tax rate than any other taxpayer! To avoid this heavy tax burden, proper tax planning is critical to reduce your taxable income and stay out of this “danger zone” of high taxes. Strategies to Reduce Your Taxable Income Contribute to a retirement plan. As a small-business owner, you have several options to save for retirement while simultaneously avoiding the heavy tax burden of this phaseout range. By setting up a SEP IRA you can contribute up to $55,000 per year (subject to earned income limitations). A SEP IRA is a simple way to defer significant income for retirement and works best when you are the sole employee. If you have other employees in your business, be aware that you will need to contribute an equal percentage of wages for each eligible employee. Make the most of your medical expenses Take advantage of the deduction for self-employed health insurance premiums . Unless you or your spouse are eligible to receive subsidized health insurance through your employer, you can reduce your taxable income by paying your health insurance premiums through your business. Set up a Health Savings Account . If you have a High-Deductible Health Plan then you can contribute up to $6,900 per year to save for future medical costs. Your contributions will lower your taxable income in the year they are made, and as long as your distributions are for qualified medical expenses they will be tax-free. Increase your charitable donations. If you find yourself in the middle of this phaseout range after an exceptionally successful business year, then you may already be considering increased charitable donations. With the large tax burden you could be facing in this phaseout range, the tax deduction from your donations will be more valuable than ever. These are just a few of the options available to you to lower your taxable income and avoid this danger zone of high taxes. Even if you don’t expect your income to reach the phaseout level for the new deduction, you can still realize significant tax savings by taking advantage of these strategies to lower your taxable income. Previous Article Next Article

5 THINGS YOU CAN DO RIGHT NOW to Help Improve Your Retirement Years When most people think about retirement planning, they focus on growing their money, but they often overlook other critical issues. Eventually you will be shifting gears to preserve what you saved over the years. Taking a few simple steps today can help equip you for the time when that shift takes place. 1. THE INCOME PLAN Build a plan so that you don't run out of money for yourself and your spouse during your lifetime. While this is easier said than done, you can start by figuring out how much money you'll need to cover your living expenses. This would include fixed expenses (mortgage, rent payments, insurance premiums, etc.), variable expenses (food, clothing, car maintenance), outstanding debt (car payments, student loans, credit cards, etc.) and any predictable large purchases (a second home, a new addition, vacations, etc.). Your guaranteed sources of income, such as Social Security or a pension, will be used to pay those expenses. If they aren't enough, you will need to find other income sources. 2. THE PROTECTION PLAN While the odds of your house burning down are less than 3%, most people wouldn't consider going without fire insurance for their home. It's equally, if not more important to address the risk of "burning down" your income plan. For example, the chances are fairly high that you or a spouse will have some kind of long-term care need. These expenses tend to be high and tend to carry on for extended periods of time. As a result, you need to consider this risk. Another risk to consider is the risk of a pension payment getting reduced. For those who plan to retire on a significant pension, this is a very real and present risk that should be addressed in your plan. 3. THE APPRECIATION PLAN Once you have addressed the income and protection needs, it's time to address how to continue growing your money. Conservative, aggressive, moderately aggressive.... You need to identify your capacity to take risk. Once you have properly identified your risk tolerance, you can then begin to focus on portfolio appreciation. The reason this step is crucial is that you do not want to sell at market bottoms when your emotions get the best of you. This happens when you set your portfolio to take more risk than what your emotions can handle, and this is a recipe for disappointment. 4. THE TAX PLAN Keeping your taxes as low as possible should be front and center, and there are a variety of ways to do this. One example would be to focus on asset location, as opposed to asset allocation. Asset location focuses on WHERE you choose to do your retirement saving (IRA, 401K, 403B, Roth IRA, whole life insurance, etc.), while asset allocation focuses on WHAT you choose to invest in inside the account. Asset location matters because this will have a direct impact on the tax implications when you need to access your money saved for your retirement years. 5. THE ESTATE PLAN Some estate planning may also be in order to protect yourself from taxes - particularly in states that have an estate tax, as the exemption levels are usually much lower than the federal level. Taking care of loved ones in the future can also be a primary concern for many. Consult with an attorney to understand the legal documents necessary to ensure the efficiency of your estate, including a health care power of attorney, financial power of attorney, health care directives, wills and trusts. At Monotelo, we exist to make a difference with meaningful and actionable financial solutions that positively impact our client's lives. If you have questions about what steps you can be taking to prepare for your retirement years, call us at 800-961-0298

Beware of Hedge Fund Managers Bearing Gifts Quarterly: Oct 17 "Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even when they bring gifts." According to Greek mythology, the Greeks had struggled for nearly a decade to penetrate and conquer the city of Troy. In an act of trickery, they constructed a huge wooden horse, hid men inside it and pretended to sail away from the city. Ignoring wise counsel, the Trojans opened the gates and unknowingly opened the door for the Greek army to enter their city. Shortly after the Trojans brought the horse into the formerly impenetrable area, the Greek army sailed back under the cover of night and stationed their men to attack. Once the Greek army was in place, the men crept out of the horse and opened the gates for the rest of the army to enter and destroy the city of Troy. The term "Trojan Horse" has metaphorically come to mean any trick or strategy that causes a target to invite a foe into a securely protected area. We correlate this story to the appeal of hedge funds and private equity to a high net worth investor and the economic reality that is likely to follow. Diverging from our normal lines of discussion, we are going to explore the implications of the Tax Cuts and Jobs Act (the new tax code) on alternative investment income. The tax implications on alternative investment income are staggering. The new US tax code raises the bar so high that most alternative investments will fail to pass the test for the average high-net-worth investor. The term “high-net-worth investor” is a relative term. After all, nobody wants to be the one millionaire on an island of billionaires! Rather than defining high-net-worth by the size of someone’s balance sheet, we are going to define it as anyone with an annual income above $400,000, the beginning of the 35% tax bracket for married couples filing a joint tax return here in the United States ($200,000 is the beginning of the 35% bracket for a single filer). For today’s discussion we are going to use the 37% tax bracket to define high net worth, so technically this would be a married couple with a taxable income above $600,000 or an individual with a taxable income above $300,000. A brief history lesson on our tax code and investment management fees: The “two and twenty” fee structure (2% management fee and 20% performance or carried interest fee) charged by hedge fund and private equity managers has always been a challenging hurdle for alternative investment managers to overcome. Prior to 2018, however, the US tax code took some of that sting out of the bite by allowing investors to deduct their investment management fees once they surpassed 2% of adjusted gross income. In other words, a tax payer with $1 million dollars in adjusted gross income could deduct the investment management fees that surpassed the $20,000 mark (the 2% hurdle). The new tax code however, has removed investment management fees from the list of itemizable deductions. The colossal impact of this change comes down to the fact that 100% of your investment income flows through to your personal tax return and your investment management fees no longer offset that income. It’s like the opposite of a tax-free municipal bond. Instead of receiving income on which the government will not tax you, you are required to pay tax on income you will never receive. Let’s take the example of a married couple making $700,000 per year from their employer plus another $150,000 of income from their alternative investments. To keep things simple, we will make the following assumptions: The couple earns $700,000 in wage income from their employer The alternative investment is custodied in a traditional taxable account (ie. non-retirement account) The alternative investment generates $150,000 of investment income on $1,000,000 of invested capital Half of the investment income is taxed at the investor's ordinary income tax rate and half is taxed at the long-term capital gains rate The investment manager is paid $20,000 from the 2% management fee and $26,000 from the 20% performance fee Description $150,000 Of Investment Income ($20,000) 2% Management Fee ($26,000) 20% Performance fee $104,000 Net to Investor Before Tax Tax Liability +$42,750 (Federal Income Tax) +$3,885 (Net Investment Income Tax) Cannot be deducted on Schedule A Cannot be deducted on Schedule A $46,635 Additional Tax Liability The investor receives $57,365 after investment management fees and federal income tax, and still has a state income tax bill to pay. This 5.7% return is a long way from the 15% gross return generated by the hedge fund manager. Keep in mind, we are just looking at the tax implications of alternative investment fee structures. Considering the fact that the HFRI Equity Hedge Index only returned 3.38% over the last five years (according to Hedge Fund Research, Inc. – 2/28/19), we haven’t even begun to address the impact of performance fees on net returns to investors. Potential Solution: Asset Location One potential way to address this problem is to put investments with high management fees into tax-deferred retirement accounts instead of traditional taxable accounts. The challenge with this option is that it puts the investor at risk of being subject to UBIT issues (unrelated business income tax). Because of the potential UBIT and ERISA issues, some managers and many custodians will not accept retirement assets in alternative funds. This asset location issue is a critical piece of the wealth preservation and accumulation puzzle. Unfortunately, this mission-critical issue is often missed by the wealth management community due to a lack of knowledge about our tax code. Conclusion The Tax Cuts and Jobs Act creates a very challenging hurdle for many alternative investments to overcome. Investors should be careful to analyze the net after-tax return on their investments and make sure they are being fairly compensated for putting their capital at risk.

Simplify Your Crypto Tax Filing Expert Help for Crypto Investors Frequently asked questions: 1. Do I need to report crypto transactions on my taxes? Yes, the IRS requires reporting of crypto transactions, including trades, staking, mining, and airdrops. 2. What happens if I don’t report my crypto activity? Failure to report can lead to penalties, interest, or audits from the IRS. 3. How does your service work? We simplify the process by consolidating your data, calculating your gains/losses, and ensuring IRS compliance. 4. What types of crypto activities do you handle? We cover trading, staking, mining, airdrops, DeFi, NFTs, and more. 5. Do you work with international exchanges? Yes, as long as you receive a correct 1099 from your exchange, we should be able to handle transactions from all major global exchanges. 6. How do I upload my crypto data? Download the full 1099 form from your exchange API or CSV file and upload to your secure portal. 7. What if I’ve lost transaction records? We can help estimate and reconcile missing data to the best extent possible. 8. What is cost basis, and why is it important? Cost basis is the original value of your asset. It determines your taxable gain or loss when you sell. 9. Are your services compliant with IRS regulations? Yes, we stay updated on all crypto tax rules and ensure accurate, compliant filings. 10. Can you handle high-volume trading accounts? Yes, we specialize in managing data for frequent traders. Pricing and Support 11. How much does your service cost? Our pricing is based on the complexity and number of transactions. See website for pricing or contact us for a quote. 12. What if I have questions during the process? Our team is available for support via phone, chat, or email. 13. Is my data secure with your service? Absolutely. We use bank-grade encryption to protect your information. 14. Do you offer a satisfaction guarantee? Yes, we stand by our service with a full guarantee that your return will be filed in compliance with IRS regulations, as long as we have 100% of your required tax documents. 15. When are taxes due for crypto transactions? The tax deadline is typically April 15th. Extensions may apply in certain cases. 16. Can you amend previous tax returns with crypto activity? Yes, we can assist in filing amended returns if needed. 17. Do I need to submit a copy of last year’s tax return? It is not required, but we strongly recommend that your provide last year’s tax return to us. Next Get Started Today! © 2025 by Monotelo Inc. info@monotelo.com 800-961-0298