Business owners can find out how to use IRS tax codes to eliminate their tax liability.

1. The $20,000 Tax Dilemma
How to Eliminate $20,000 of Annual Tax Liability
Presented by Walter Hines
Bison Business & Technology Solutions
“You can pay yourself, or you can pay the IRS.”
Walter Hines

2. Problem Overview
“You can pay yourself, or you can pay the IRS.”
Walter Hines
Owner of a Dental Practice has an annual IRS tax liability of $20,000
FACT:
Owner is in her early 30’s
Earning between $100,000 - $150,000 per year
Practice has two full-time employees, the owner, and 1 part-time employee
All employees are under age of 30
No benefit plans for staff
S - Corporation

3. Solutions
“You can pay yourself, or you can pay the IRS.”
Walter Hines
• High Deductible Health Insurance Plan (HDHP)
• Health Savings Account (HSA)
• Safe Harbor 401(k) Plan
• Professional Overhead Expense Insurance (P.O.E.)
• Executive Bonus Plan (Disability Insurance)

4. High Deductible Health Insurance Plan
(HDHP)
“You can pay yourself, or you can pay the IRS.”
Walter Hines
Definition- (HDHP) is a health insurance plan with lower premiums and
higher deductibles than a traditional health plan. Being covered by an
HDHP is also a requirement for having a Health Savings Account.
Tax Deductible Voluntary Benefit under IRS

5. Employer contributes $175 per month in premiums x 2
employees, = $525 per month or $6,300 per year

6. “You can pay yourself, or you can pay the IRS.”
Walter Hines
High Deductible Health Insurance Plan (HDHP) - $6,300
Solutions

7. “You can pay yourself, or you can pay the IRS.”
Walter Hines
Health Savings Account (HSA)
Definition - A health savings account (HSA) is a tax-advantaged medical savings account
available employers and employees who are enrolled in a high-deductible health plan
(HDHP).The funds contributed to an account are not subject to federal income tax at the time
of deposit. Funds deposited into the account roll over and accumulate year to year if not
spent. Funds must be spent on legitimate health expenses or will become taxable.
IRS Code Section 223
Plan contribution limits - $3,250 per Individual and $6,450 per Family

8. Employer contributes $1,000 per year x 2 employees, =
$2000 per year + $1,200 for self-contribution = $3,200

9. “You can pay yourself, or you can pay the IRS.”
Walter Hines
High Deductible Health Insurance Plan (HDHP) - $6,300
Health Savings Account (HSA) - $3,200
Solutions

10. “You can pay yourself, or you can pay the IRS.”
Walter Hines
Safe Harbor 401(k) Plan
Definition - An employer-sponsored retirement plan that combines the benefits of a 401(k) with a profit sharing plan.
Safe Harbor plans are very advantageous to companies with a few highly compensated employees (HCE) who are
limited to how much they can contribute to a 401(k) because regular wage employees are not participating or
contributing enough money to the plan.
Key benefits:
HCEs can maximize contribution to plan each year if lower paid employees contribute very little
Employers MUST contribute 3% of employee salary plus 50 cents on the dollar for the next 3% - 5% of salary EVEN
IF EMPLOYEES DO NOT CONTRIBUTE TO THE PLAN
IRS code Section 401(k)(12) & 401(k)(12)(B)
2013 maximum employee contribution - $17,500
2013 maximum employer self-contribution - $51,000

11. Employer contributes $1,500 per year x 2 employees =
$3,000 per year
*Assuming highest paid employees earns $40,000 or less per year

12. “You can pay yourself, or you can pay the IRS.”
Walter Hines
High Deductible Health Insurance Plan (HDHP) - $6,300
Health Savings Account (HSA) - $3,200
Safe Harbor 401(k) - $3,000
Solutions

13. “You can pay yourself, or you can pay the IRS.”
Walter Hines
Professional Overhead Expense Insurance
(P.O.E.)
Definition - Professional Overhead Expense Insurance (P.O.E.) reimburses a business owner for
business expenses during an injury. It covers fixed cost, loans, and salaries of employees.
Key benefits:
Covers fixed costs
Employee salaries
Insurance premiums
Outstanding business loans
Tax Deductible under Revenue Rule 55-264, 1955-1 C.B. 11

14. Employer pays approximately $4,000 per year for $120,000
of coverage ($10,000 per month for expenses)

15. “You can pay yourself, or you can pay the IRS.”
Walter Hines
High Deductible Health Insurance Plan (HDHP) - $6,300
Health Savings Account (HSA) - $3,200
Safe Harbor 401(k) - $3,000
Professional Overhead Expense Insurance - $4,000
Solutions

16. “You can pay yourself, or you can pay the IRS.”
Walter Hines
Executive Bonus Plan
(Disability Insurance coverage)
Definition – An Executive Bonus Plan allows a business to provide life and/or disability income
insurance to key executives (or shareholders) using tax deductible dollars. The insurance
policies are owned by the executives and are paid for through cash bonuses.
*Owners of 2% or more of S-corporations are not considered employee
**Bonuses paid to owners of S-corporations must be added as income to W-2
Tax Deductible under IRS Section 162

17. Employer covers up to the 60% of her income (maximum
amount) approximately $60,000 - $90,000.
*Estimated cost - $3,500 - $5,000 annual premium

18. “You can pay yourself, or you can pay the IRS.”
Walter Hines
High Deductible Health Insurance Plan (HDHP) - $6,300
Health Savings Account (HSA) - $3,200
Safe Harbor 401(k) - $3,000
Professional Overhead Expense Insurance - $4,000
Executive Bonus Plan (Disability Insurance) - $3,500
Total Estimated Amount of Tax Deductions -$20,000
Solutions

19. Where’s the Owner’s Retirement?
Our Suggestion :
• Contribute at least $5,000 annually to 401(k)
Estimated Savings = $419,343 (30 years@ 6% interest)
• Contribute at least $5,000 annually to an Index Universal Life Policy**
Death Benefit = $752,411 at age 65
Cash accumulation = $581,949 (32 years@ 7% interest)
*LIBR/Annual Income = $91,849 from age 65 -100
*As of 2013, Business Owners can contribute up to $51,0000 annually to a 401(k) or 100% of income up $51,000
**Index Universal Life policies offer guaranteed returns, increasing death benefits, chronic, and critical illness
protection

20. Contact
Walter Hines,
Benefit Specialist
Owner & CEO
Bison Business & Technology
Solutions
20209 Nestor Ave.
Carson, CA 90746
Ofc. (310) 631-1106
Mobile (310) 346-0850
Website: www.bisonbiz.com
Email: walter@bisonbiz.com
“You can pay yourself, or you can pay the IRS.”
Walter Hines