December 1, 2020

Looking to Invest in Real Estate? Consider These 5 Strategies to Get Started

There are many reasons people get into real estate investing, including to help diversify investment portfolios, generate cash flow and hedge against inflation. Real estate investments can also create passive income and offer tax benefits, such as the ability to deduct mortgage interest, real estate taxes and depreciation. While some real estate investment strategies require hands-on management of the property, other options allow investors to own real estate without becoming a landlord. Below are five potential ways to get started investing in real estate.

1. Buy a Rental Property

One way to start investing in real estate is to buy a rental property. The investor would purchase a commercial or residential rental property and serve as the landlord. This type of investment would require more hands-on work than some other options, but it could generate rental income and tax deduction benefits. Depending on their goals, the investor can either hold their property or flip it:

  • Buy and hold real estate – The real estate could be held and rented to generate income with the intent of growing the initial investment through rental income and market appreciation. 
  • Buy and flip real estate – Investors could purchase lower-priced real estate and put in the work to repair and improve the property. Fixing up the property requires more hands-on work, but it can increase the property’s value in a relatively short time. The improved property could then be sold for a profit or held for rent.

2. Invest in a Real Estate Investment Trust (REIT)

A REIT is a company that owns, operates or finances real estate. Many REITs are publicly traded, like stocks and bonds, so they are highly liquid, pay dividends and require no hands-on management. 

3. Convert a Personal Residence to a Rental Property

An investor could convert their own home into a rental property rather than selling the home when ready to move to a new home. The rental income would help cover the mortgage on the property and allow the investor to build equity while not requiring much, if any, additional investment. As an added benefit, the investor could start taking depreciation on the rental property.   

4. Invest Through Real Estate Funds

Real estate crowdfunding platforms connect real estate developers with investors to finance real estate projects. Investing through a real estate fund requires capital from the investor to make the investment, and the investments tend to be illiquid. However, pooling funds allow investors the opportunity to purchase larger properties, like commercial properties or multi-tenant residential properties, that might be too expensive for one single investor.

5. Buy a Vacation Rental Property

An investor could purchase a vacation home or condo and rent the property when they are not using it. The investor could enjoy the benefits of owning a vacation home while receiving rental income and taking advantage of the tax deductions. Like with other rental properties, the investor would be responsible for finding renters and maintaining the property unless they use a property management company.

The real estate investment strategy an investor chooses will depend on several factors, including the investor’s financial situation, the desired level of involvement required by the investment and the time-horizon of the investment. Once an investor determines these factors, they can identify the real estate investment option that works best for them.

If you’re considering investing in real estate, the Anders Real Estate Group can help decide the best option for you. Contact an Anders advisor below to learn more.

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November 24, 2020

Is Your Password Policy Strong Enough to Outsmart Cybercriminals?

Implementing a password policy in your company is an easy first step in protecting against costly cyberattacks. Modern hackers are using advanced password software that can use a variety of methods to gain your login information. To combat these hackers and protect your data, strong password guidelines is key.  Below are password policy best practices you can easily implement across your organization to act as the first line of defense against a data breach.

Password Policy Best Practices

Having strict password standards in your company lowers the chances that hackers will be able to get access to your network. Implementing a strong password policy and revisiting it regularly will make sure you are staying on top of the latest hacking strategies. An effective password policy will include guidelines around:

Password Lockout

Lockout rules will cause an account to be inaccessible due to too many failed login attempts, usually after a period before the account will self-reenable. Setting the password lockout to three or four attempts will slow the process of a password being guessed and potentially flag an account as being under attack.

Password Age

Creating guidelines around password age will require a periodic password change for all users. We recommend changing passwords every 60 days. Keeping a password for a long period of time allows a hacker to have a prolonged amount of time for identifying a password. Additionally, there is a higher probability that the password will be reused or identified on the dark web.

Restrictions of Reusing Passwords

Reusing the same account password that was used previously on an organizational account is an extension of the password age parameter above, the longer a password is in use, the more time a hacker has to crack the password.  We recommend your system remembering the last 24 passwords so an account is not able to reuse.

Password Complexity Requirements

Password complexity slows the process of a password being identified. Complexity requirements should include using uppercase letters, lowercase letters, numbers and symbols for every password created.

Password Length Requirements

Password length also slows the process and lessens the odds that a password would be guessed. We recommend using passwords of 14 characters or more.

Many of these policies are all within the same place on your network server. If your environment is large enough that it has centralized management, such as a domain controller, you can enforce the settings among your group all at once. If a domain controller is not present, applicable settings will have to be applied individually.

Anders Technology can help you develop a strong password policy and implement cybersecurity best practices to protect you and your organization. Contact an Anders advisor to see how we can help you mitigate security risk and defend against a costly cyberattack.

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November 17, 2020

Making Your Business Valuable During COVID-19: Pivoting a Service to a Product

Service companies are disproportionately impacted by the economic disruption caused by the COVID-19 pandemic. While consumers are cutting back on services to save on costs and avoid human contact, they are still buying products that solve problems and meet their needs. Businesses are purchasing products like Microsoft Teams for teleconferencing and internal communications. Individuals are purchasing home gym equipment instead of a service like a personal trainer. This has caused many service-based businesses to throw away the usual playbook and are pivot to provide a product to their customers.

Pivoting in Action

Rather than having customers visit their restaurant, we have seen restaurants have neighborhood deals to deliver to the consumers. By turning a “Taco Tuesday” into an “emergency burrito with a margarita kit”, customers can have the safety of their own home, but still have a product they desired. After spending all day in the home with their new co-workers (aka children), the taco and a margarita is answer to their unique need.

Making this pivot from a service to a product can help make your business more valuable and should be done strategically. Finding your product’s niche, identifying what problems it will solve and stating expectations to customers are important first steps.

Find Your Niche

One of the first steps is to determine your companies’ niche. This can be counterintuitive because your instinct in a down economy is to need more customers, not less, but it is a critical move in creating a product. Picking your niche helps you focus on a single type of customer and design a product to efficiently reach the target audience. Services are adapted and customized for a variety of customers while a product typically fits one type of buyer.  

Identify the Problem You’re Solving

Rank your services and focus on which can solve a problem. Be clear about what problem your product solves for your niche then brand it. With a service, you are hiring the right person for the job. With a product, you are selling a “thing”, so having a solid brand with a clear purpose is essential for turning your service into the product.

Clearly State Expectations

In order to turn your service into an everyday product, it must have the feel of other products. When you run a service you typically price everything out by the hour. A product has the price tag on it upfront. When you pick up any tangible product at the grocery store, there is a list of their ingredients. Show an itemized list of what your customers get when they buy from you.

Service providers have been hammered by the global pandemic. If you can pivot your service to look and feel more like a product, you can move your company into more stability in these uncertain times. Anders can help your business add value to build a more durable business coming out of the pandemic and help transition the business when you’re ready. Learn more about our Business Transition Planning or COVID-19 Business Recovery services or contact an Anders advisor below.

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November 10, 2020

PPP with Paul and Dan Video Series

With new updates and legislation evolving quickly around the Paycheck Protection Program (PPP), our CARES Act Research and Response Team has been focused on relaying information you need to know. Two of the team members, Paul C. Rhea and Daniel K. Schindler, are sharing the latest changes around PPP loans and the forgiveness process in their video series: PPP with Paul and Dan.

View each segment of the series below. Check out more CARES Act content in our COVID-19 Resource Center, or learn how we can help your business recover from COVID-19.

November 10, 2020

October 13, 2020

October 7, 2020

September 18, 2020

September 4, 2020

August 28, 2020

August 21, 2020

August 13, 2020

July 24, 2020

July 16, 2020

June 25, 2020
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November 10, 2020

Flexible, Secure and Cost-Effective Strategies to Build into Your 2021 IT Budget

Year-end budgeting is going to look a lot different this year in the midst of a global pandemic. Business objectives have undoubtedly changed over the past year and innovation is more important than ever to address these changes and recover from the effects of COVID-19. Making the case for flexible, secure and cost-effective technology platforms will be vital going into 2021.

Flexibility

Remote work was forced upon many companies this year, and if virtual work options were not already part of the company’s technology strategy, it caused a lot of time, money and frustration to implement quickly. Being flexible became the name of the game, and the need to be agile is here to stay. In the coming year, businesses will want to build their technology strategy with a focus on flexibility, so as business goals or environmental factors evolve, they can easily adjust using technology. Going into 2021, three flexible strategies to consider are:

Along with having a flexible IT strategy, keeping it secure should also be top-of-mind.

Security

Continuing to maintain and build a robust cybersecurity strategy is another vital focus going into 2021. Cybercriminals are getting more and more sophisticated, and breaches are getting larger and more costly. Now is the time to review your cybersecurity architecture and develop a road map going into the new year that includes:

  • Governance, Risk and Compliance Measures
  • Vulnerability Management
  • Information Protection and Privacy
  • Cybersecurity Training and Testing

Even with the best cybersecurity safeguards in place including backups, firewalls and software patches, it takes one click by an unknowing employee to cost your business a lot of time, money and important data. Employee cybersecurity training can equip everyone in the company with the tools and knowledge needed to do their part in avoiding a data breach.

Flexibility and security are important pieces of every technology strategy for 2021 but coming out of a pandemic, companies also need to be mindful of budgets.

Cost-Effectiveness

With cost-cutting being a reality amidst a global pandemic, business owners and CIOs need to decide which parts of their IT strategy need to be done in-house, and where they can find cost efficiencies by outsourcing.

Anders Technology specializes in bridging the gap in technology needs, from co-managing alongside internal IT staff to supplement expertise, to being the entire IT team, we can step in as much or as little as needed. Below is an example of ways we partner with our clients.

Bridging the Gap in Your Technology Needs | Anders Technology

Anders Technology can help be flexible by taking on more when needed and pivoting the strategy with supplemental resources. With a team of advisors with in-depth knowledge in several areas, we can help you develop a technology strategy that helps you meet business goals while staying secure and cost-conscious. Learn more about Anders Technology or contact an Anders advisor below to get started.

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November 3, 2020

Blues Captain Leaves for Sin City: How State Income Taxes Played a Role in Alex Pietrangelo’s Departure

On January 3, 2019, no one could have predicted that the then St. Louis Blues captain, Alex Pietrangelo, would be hoisting the Stanley Cup at the end of the 2019 season. In early January 2019, the Blues were in last place in the NHL, but the team turned their season around with the help of the song “Gloria”. A little over a year later, Blues fans could not imagine Alex Pietrangelo wearing anything but a Blue Note as he headed towards unrestricted free agency. But in October 2020, the former Blues captain inked a seven-year, $61.6 million contract with the Vegas Golden Knights.

NHL Salary Cap Takes a Hit

It is presumed that one of the major sticking points in the Blues negotiation with Pietrangelo was the amount of signing bonuses included in any potential contract. The ongoing pandemic has limited the cash flow of many businesses throughout the world, and the NHL is not immune to that reality. Before the pandemic hit, the NHL salary cap was anticipated to increase substantially for the upcoming season, but the league decided to keep the salary cap flat for the foreseeable future. The flat salary cap put the Blues in a bind when it came to fitting Pietrangelo in under the salary cap for the upcoming season, which further complicated negotiations. In his deal with Vegas, he will receive $35 million of signing bonuses throughout the life of the seven-year contract, which likely has major tax benefits for the former Blue.

State Income Tax Comes into Play

Nevada is one of nine states that does not have any state income tax. Athletes’ are generally subject to a “jock tax” in states and cities in which they work.  The athletes’ salaries are commonly apportioned to various states and cities using the “duty days” method. This jock tax is levied by states and cities on athletes who play or practice while in town. Assuming Pietrangelo becomes a Nevada resident rather than remaining a Missouri resident, the structure of his contract provides major tax benefits. This means that half of Pietrangelo’s games will be allocated to Nevada, a no income tax state. In addition, signing bonuses are exempt from the Duty Day calculation provided certain criteria are met. Instead, signing bonuses are allocated to an athlete’s resident state. In this case, all of the $35 million in signing bonuses will be allocated to Nevada and not be subject to state income taxes. If he had remained a Missouri resident and signed a similar contact with the Blues, Pietrangelo’s signing bonus would result in Missouri state income taxes of roughly $1.9 million.

For professional athletes, tax compliance and planning can be an issue when it comes to filing in the proper tax authorities. The Anders Sports, Arts and Entertainment Group has the knowledge to help athletes with tax compliance and planning. Contact an Anders advisor below to learn more.

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October 29, 2020

Year-End Tax Planning for 2020: RMD Changes, Tax Law Proposals and Strategies to Consider

Being nimble has seemed like a requirement for all of 2020. We have needed to be nimble with our businesses, as we pivot product or service lines to deal with the COVID pandemic. We have needed to be nimble as Congress enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act relief efforts and additional guidance, requirements and implementation. It comes as no surprise that year-end tax planning will also require us to be nimble during our current economic and political environment. While our planning will evolve going into 2021, below we dig into things you can do now and year-end tax planning strategies to consider.

Take Advantage of Changes to Required Minimum Distributions

There have been two big changes to required minimum distributions (RMD) over the past 12 months. The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019. One aspect of the bill pushed back the age at which retirement plan participants need to take their RMDs, from 70½ to 72 years of age. This extra year-and-a-half can change the landscape of which source of income to support your lifestyle, as well as, potentially providing additional opportunities for ROTH conversions.

The second big change came with the CARES Act, which was signed into law on March 27th, 2020. One piece of this bill suspended the requirement of RMDs for the 2020 calendar year. This is a great opportunity to allow the qualified retirement account to continue to grow tax deferred.

Planning considerations:

  • Have you previously had large withholdings on your RMDs to cover your federal and state tax liabilities? Don’t forget to consider making quarterly estimated tax payments if you choose not to take your RMD in 2020.
  • Are you still planning on taking a distribution? Consider utilizing a qualified charitable deduction (QCD) to fund your charitable intentions. The distribution will not be included in income, but no additional charitable deduction is available. Typically, this strategy is still more tax advantageous.
  • Will your tax bracket significantly decrease without your normal RMD? Consider a partial ROTH IRA conversion to utilize the lower tax brackets. Additional details discussed below.

Be Aware of Proposed Tax Changes

Tax laws are always evolving at their own pace. In the current political environment, differences in tax policy are on the forefront of everyone’s mind. While it is completely uncertain when, or even if, tax law changes could be implemented, here are some current proposals on the horizon and strategies to keep in mind going into the end of the year.

  • Proposal of increasing the top individual tax rate back to 39.6% and the top corporate tax rate to 28%. The normal “defer income, accelerate expenses” may not be the best strategy depending on how everything plays out.
  • Proposal on increasing net long-term capital gains tax rate on individuals making over $1 million. The current top tax rate is 23.8% when considering the net investment income tax. The top rate under this proposal could be as high as 43.4%. Careful consideration should be taken when planning for the sale of securities and recognition of capital gains.
  • Proposal to change itemized deductions. This would likely eliminate the current $10,000 limit on state and local taxes, however, would also reinstate the limitation on itemized deductions for higher-income taxpayers. This would likely limit deductions to 28% for upper income individuals. Specific scenarios should be analyzed to determine if there is a better tax benefit under current law or proposed law when considering the timing of year-end charitable giving and fourth quarter state estimated tax payments. Many factors will come into play.
  • Proposal to change current gift and estate taxes. There are many different scenarios which could ultimately transpire: The estate tax exemption could be lowered from the current $11.58 million, to pre-Tax Cuts and Jobs Act of $5.5 million, or even lower.  There is also talk about raising the top estate tax rate from 40% to 45%, as well as the possibility of eliminating the step-up in basis to the beneficiary on inherited assets.  The time is now to re-visit estate plans and consider utilizing lifetime gift tax exemptions. 

Don’t Forget Traditional Year-End Strategies

While each individual scenario warrants specific recommendations and guidance, here are some traditional items to keep in mind before 2021.

  • Qualified Business Income (QBI), also known as the “20% Business Deduction”, is a large tax planning strategy. In order to optimize the QBI deductions, careful considerations need to take place to determine year-end bonuses or if considering accelerating or deferring income/expenses.
  • Consider contributing to 529 college savings plan. Some states may allow a deduction for contributions made in this calendar year. Missouri, for example, allows up to $8,000 per taxpayer to be contributed and deducted on their return. 
  • Consider ROTH IRA conversions to utilize lower tax brackets. Whether due to COVID, RMD suspension, or if you are just entering retirement, some individuals may find themselves in a unique situation of being in a lower than usual tax bracket. This is a prime opportunity to convert some of your traditional retirement account to a ROTH retirement account. Pay a little extra tax today but will have tax-free growth going forward.  
  • Revaluate payroll deductions. Before the last paycheck of the year, see if you should make any adjustments to your pre-tax benefits. Have you contributed enough to your retirement to maximize your company’s match? Also, if you are over 50, you are eligible for an additional $6,000 catch-up contribution. Have you maximized your health savings account (HSA)? If you are over 55, you are eligible for an additional $1,000 catch-up contribution.

While I’m sure many of us are ready to put 2020 behind us, there is still time to put some of these tax planning strategies in place before the end of the year. Contact an Anders advisor below to further discuss your tax planning options, or visit our COVID-19 Resource Center for more CARES Act considerations.

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October 27, 2020

Do Your Employees Actually Need Cybersecurity Training?

We can all agree that protecting your business and employees from data breaches is important. But is company-wide cybersecurity training necessary? Some businesses have periodic training courses along with phishing tests. Others send out a friendly reminder to employees to “be careful not to open suspicious emails”. What is enough?

The Importance of Identifying a Scammer

The probability of an employee opening a malicious email may be directly related to the amount of training they received. Let’s say your company has the friendly reminder approach with employees. Here is what happens when an employee clicks on a ransomware link:

  • Hopefully, your anti-virus and firewall has up-to-date patching to HELP prevent an attack
  • However, just clicking the link is enough to activate the sequence for the attack and many times a firewall and anti-virus cannot help you after that action
  • After that, the characteristics of the specific malware will start to deploy in your system – however, you may not notice, and the virus does not always execute immediately
  • You may feel forced to pay a ransom. The government may punish organizations who pay the ransom after a ransomware attack

Beyond ransomware, scammers are using other tactics to gain valuable information through phishing and spear-phishing attempts. By posing as a colleague, manager or other credible source, employees could be conned into:

  • Wiring an ACH payment
  • Using a personal or company card to buy a gift card or other unsuspecting errand
  • Providing their password  

Invest in the training of your human firewall. A traditional firewall cannot do it alone. Even with the best laid cybersecurity safeguards in place including backups, firewalls and software patches, it takes one click by an unknowing employee to cost your business a lot of time, money and important data.

How to Train Employees on Cybersecurity Best Practices

Now that we know the importance of cybersecurity training for employees, how can you get started? Anders Technology has cybersecurity advisors that can implement a training program for staff based on their skill level. Maybe they can already identify a suspicious link but could still be fooled by a credible-looking domain. We use a personalized approach to ensure each employee is equipped with the tools to keep themselves and the company safe from scammers.

Anders Technology can help you implement the best cybersecurity practices to protect you and your organization. Contact an Anders advisor to see how we can help you mitigate security risk and defend against a costly cyberattack.

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October 20, 2020

How Real Estate and Construction Contractors Can Avoid Overpaying Sales and Use Tax

Whether you’re a real estate broker and independent contractor or a general or sub-contractor working in construction, sales tax for contractors can be complex and difficult to understand. There are many factors that affect taxability, and real estate and construction contractors may also be subject to exemptions based on the customer and the property’s function. In this time of uncertainty with the COVID-19 pandemic affecting many businesses, sales tax refunds can help recoup over-paid sales tax and put more money in your pocket.

Are contractors exempt from sales tax?

There are many circumstances where exemptions are allowed but understanding sales tax liability for a construction contractor can be a challenge. States generally do not consider contractors to be making taxable sales, but providing tax exempt services. Contractors are typically treated as the final users and consumers of materials and supplies they use on construction contracts and are liable for sales tax on purchases of those materials and supplies used in a contract. However, many states provide special treatment for construction contracts with exempt organizations if the purchases are related to the entities’ exempt functions and activities.

When can an exemption certificate be used?

In both Missouri and Illinois, a contractor’s purchases of tangible personal property can be exempt with a flow-through exemption, provided a contractor is contracting with an exempt organization. The contractor can obtain an exemption certificatefor purchases of tangible personal property and materials used for a specific contract for the exempt entity. In Missouri, a project exemption certificate is typically needed from the exempt entity and provided to the vendor when making such purchases. Not all states allow a flow-through exemption from exempt organizations, and each state’s rules need to be reviewed individually.

In Missouri, contractors are exempt on purchases of tangible personal property for use out-of-state on a construction contract with an entity authorized to issue an exemption certificate under that state’s law. In Illinois, tangible personal property sold to contractors who resell it as tangible personal property can be treated as a purchase for resale.

Are all contracts treated the same?

Determining the structure of the contract can also impact the taxability. A lump-sum contract will generally leave the contractor responsible for the tax on materials. Whereas, with a separated contract or a cost plus contract the sale may be deemed as part property and part sale of service which may be treated differently on the contractor’s sale to their customer.

These are just a few sales tax nuances and opportunities available to contractors. A clear answer to specific questions on a state-by-state basis will need to be determined by reviewing each state’s rules and regulations. Anders has the resources and expertise to quickly help determine opportunities for you.

A sales and use tax refund review can help find overpayments to keep more money in your business’ pocket during this tough time. Anders State and Local Tax advisors have the expertise to pursue these refunds and can do so on a contingent basis. Contact an Anders advisor below for more information on reverse audits.

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October 13, 2020

How the Presidential Election Could Impact Your Taxes

As election season comes to a head, taxpayers across the country are wondering how their families and businesses could be impacted by the results. Both candidates have proposed their own versions and iterations of the tax law if the election works in their favor. Below we discuss the main provisions that would impact individuals and businesses and the points of each proposal.

Impacts on Individuals

Below are the major tax impacts on taxpayers based on each candidate’s proposal.

Impacts on Businesses

Below are the major tax impacts on businesses based on each candidate’s proposal.

Learn more about Qualified Improvement Property, Qualified Opportunity Zones or rules for Net Operating Leases.

Anders will be keeping up with tax impacts as a result of the presidential election and COVID-19. If you have any questions about year-end planning and how the tax proposals could impact you or your business, contact an Anders advisor below.  

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