Understanding your tax obligation is one key to business success. When you start a business, you need to know about income taxes, payroll taxes and much more. Here are five IRS tax tips that can help you get your business off to a good start:

1.       Business Structure. An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you file.

2.       Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, you can use IRS Direct Pay to make them. It’s the fast, easy and secure way to pay from your checking or savings account.

3.       Employer Identification Number (EIN).  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.

4.       Accounting Method.  An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

5.       Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. You’re eligible for the credit if you have fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities. For more information on your health care responsibilities as an employer, see the Affordable Care Act for Employers page on IRS.gov.

For more information, connect with Rebecca D. Martin.

By: Scott Lauck, May 17, 2016 [Money20 – Missouri Lawyers Weekly Reprint]

McDowell Rice Smith & Buchanan is the formal kind of law firm where the chairman, R. Pete Smith, is listed as “Mr. Smith” on the nameplate on his door. It’s also the kind of place where Smith feels free to play the occasional game of fetch with his dog, Roxie, who is hanging out on a couch in his office.

“Of course I’m a good lawyer,” Smith jokes. “Do you think I could bring my dog to work if I weren’t a good lawyer?”

That attitude — it’s OK so long as the work gets done — sums up the essence of McDowell Rice’s approach to the law, if there is such a thing as a “McDowell Rice” approach. As Smith describes it, the firm is not a system to direct the actions of lawyers but an umbrella organization to help them do their best work.

“We’re a little bit different than most law firms are,” said Smith, who has been with the firm for 52 years. “We don’t lead with the law firm; we lead with the lawyer.”

Despite its unusual structure — or more likely because of it — McDowell Rice has been a consistent contender in the MOney 20 financial rankings. In 2011 the firm had annual revenues of nearly $18.2 million and ranked 17th for the year. Yet by 2014, revenue slid to just $12.1 million, denying the firm a spot in last year’s rankings.

But in 2015 it was back, with reported revenue of $14.2 million, an increase of more than 17 percent from the prior year. Profit was up nearly 25 percent, to more than $9 million. They are the largest percentage gains of any of the firms on the MOney 20.

Smith said in 2014 the firm started getting out of medical malpractice insurance defense work, which he described as low paying and restrictive. That shift, and the accompanying change in lawyers, took some time to implement, he said.

“It takes a while to get things back in the pipeline. By the time 2015 came along, we were steaming ahead at pretty good force,” he said. The firm’s remaining practice areas range from personal injury and litigation to business transactions and tax law.

Smith, who is partial to sports metaphors, also said the firm renewed a focus on “getting back to the basics.”

“You do the work, you record the time, you bill it and you collect it,” he said. “Just like block, tackle, pass and catch. It’s just that simple.”

Billing and collecting are the lifeblood of any firm, but McDowell Rice makes it personally important to each of its members. On top of their base salaries, attorneys receive a percentage of the amount collected each month on account of their individual efforts. As a result, an attorney who works an extra eight hours on a Saturday would expect to see a larger paycheck within 60 days, when the bills for that work are collected.

Smith said he leads by example, billing 2,500 hours last year at $525 per hour. Money left over at the end of the year is distributed among the equity partners — which, under the firm’s flat structure, is nearly every partner. Twenty-two out of 27 lawyers last year had equity status, giving McDowell Rice by far the lowest leverage of any firm on the MOney 20.

The best lawyers, Smith said, “float to the top and make more money.” That’s critical, because the vast majority of work at the firm is performed by a single lawyer, from discovery to briefs to the trial.

Smith is dismissive of assigning a “team” of lawyers to handle anything but the most complex cases, saying it makes no more sense than hiring a group of artists to paint anything less than a mural.

“If you had a team drawing a painting, it would look lopsided, and it may never get done, and it would cost a lot more than it should,” he said.

On the wall near Smith’s door is a framed set of Ayn Rand stamps. They’re not just for show. “If it was a government model,” Smith said of his law firm, “we’d be libertarians all the way.”

Pete and LesLee Smith Receive “Justice for the Innocent Award” from The Midwest Innocence Project

Congratulations to Pete and LesLee Smith on receiving the “Justice for the Innocent Award” at the 2016 Faces of Innocence fundraiser gala benefiting The Midwest Innocence Project (MIP).  Mr. Smith served on MIP’s Board of Directors for years and became President of the Board in 2013, and is currently the 2016 Advisory Board President.  

Mr. Smith was instrumental in developing MIP as a law firm, one directly handling and/or supervising the legal work involved in obtaining exonerations.  As a major contributor and top fundraiser, Mr. Smith plans to continue supporting MIP and its board in an advisory and fundraising role.

The Midwest Innocence Project is a not-for-profit corporation dedicated to the investigation, litigation and exoneration of wrongfully convicted men and women in Missouri, Kansas, Arkansas, Iowa and Nebraska.

The annual Construction Industry Outlook Assembly hosted by Ingram’s Magazine was held on May 12, 2016 . Tom Buchanan participated in the Assembly along with 40 other experts in the construction industry, including construction companies, contractor associations, builders, architects, engineers,  electricians, and attorneys.  Talking points included: state of the market, construction technology, supply and demand of workforce labor, competition and margins, and financing and bonding.  The full Construction Industry Outlook Report will appear in Ingram’s May publication.

When a debtor seeks to reaffirm a debt, and the debtor acts pro se with respect to the reaffirmation, the Bankruptcy Code requires a court hearing to approve, unless real property secures the debt. 11 USC 524(c)(6). The 2005 Bankruptcy amendments included a new section 524(m) inserting a presumption of undue hardship where the debtors’ monthly expense exceeds income as shown by schedules on file. The debtor may rebut that presumption, and if so, the court may approve reaffirmation. But, 11 USC 524(m)(2) excepts Credit Unions from this presumption.

At first read, this exception appears to eliminate court approval on any debt to a credit union. In Case No. 15-36323 In Re Cassandra N. Edwards, the Southern District of New York followed Judge Karlin’s lead, in validated a reaffirmation agreement, and held that the credit union exception only applies to a pro se case involving reaffirmation of a debt secured by debtor’s home. The court relied upon In re Cooper, 2012 WL 566070, at *5, 2012 Bankr. LEXIS 604 (Bankr. D. Kan. Feb. 21, 2012) (“The requirements of § 524(c)(6) operate wholly independently of the requirements of § 524(m)(1), and are not affected by the provisions of § 524(m)(2).”). Unlike the requirements of § 524(m)(1), which do not apply to debts owed to credit unions, the only exception to the requirements of § 524(c)(6) are reaffirmation agreements where the debt is a consumer debt secured by real property. Id.

Jason Buchanan has been elected President of the Board for EPEC, which is a nonprofit program. 

EPEC means Empowering Parents which will Empower and improve the lives of their Children.  EPEC starts with the need for a living wage and teaches the parents admitted a trade enabling them to transition off welfare through a living wage.  Studies show that lessening financial stress creates the potential for an improved family environment and increases the likelihood that their children will achieve success. The trade taught is one identified a marketable and transferable skill set that allows them to earn a living wage and provides flexibility required to care for their children.  Based on market research on demand, EPEC’s pilot program teaches animal grooming which pays well, is in high demand in the Kansas City area, and yet the nearest grooming school is 3 hours away.

Moreover, EPEC’s parenting program teaches students the importance of active parenting, higher education, nutrition, coping skills and resources.  The parenting program teaches parents how to identify and regulate their emotions and identify and moderate their child’s emotions. EPEC uses the Love and Logic parenting program and utilizes guest speakers to teach and support parents with their most important job — raising their children and advocating for higher education.  EPEC teaches participants how to choose quality childcare and schools on a limited budget.  EPEC teaches budgeting, health and wellness, and professionalism in the work place.  Finally, in an effort to meet the family’s other needs, EPEC partners with organizations for childcare and housing.

Meadowbrook Environmental Testing Finds No Damage From Herbicides 

[Reprint:  Prairie Village Post, April 5, 2016 – Thomas R. Buchanan referenced]

Extensive environmental testing on the Meadowbrook land set to become a new public park revealed no problematic toxin levels associated with the use of herbicides, pesticides or fungicides on the former golf course land, but did find an area of approximately one-third of an acre likely contaminated by a gas spill.
Johnson County Park and Recreation District and VanTrust Real Estate conducted environmental testing totaling approximately $180,000, according to attorney Tom Buchanan of McDowell Rice Smith & Buchanan, who represented the parks district in the matter.
“The environmental assessment that was done was the most complete you would ever find for a transaction on a comparable piece of property in Johnson County,” Buchanan said. “Johnson County Parks and Rec took to heart the reticence expressed by members of Prairie Village’s governing body…about potential risks associated with golf courses.”
Soil testing throughout the property combined with silt testing from the ponds on the property revealed no problematic toxin levels associated with herbicides and pesticides frequently used on golf course greens.
The study did, however, find a patch of soil near an old maintenance shed where mowing equipment and storage tanks were located that showed signs of hydrocarbon contamination — likely from spilled gas. That area is located to the west of the southernmost retention pond, far from the most concentrated swath of parkland on the northern part of the property.
To remove the contamination, crews will dig up dirt over the area affected by the gas spill and replace it will fresh soil.
Buchanan stressed that both the parks district and VanTrust had gone above and beyond to provide a clear picture of the environmental status of the property.
“A $180,000 expenditure on this exploration is an extraordinary level to try to make sure that the public interest in getting a clean park that is safe for use is met,” Buchanan said.
Johnson County Park and Recreation District Executive Director Jill Geller said the county had been satisfied with the findings and was eager to move through with the closing of the deal.
“Of the 80-plus acres we will be acquiring, there remains a very small piece of property requiring remediation,” said Jill Geller. “Overall this is a very clean piece of land.”

Adam Gasper recently persuaded federal judge, Hon. Brian C. Wimes, to issue an injunction requiring a Colorado company to ship more than $325,000 of product to their local client, a long-time distributor of commercial and industrial tools and building materials.  The parties had a 25-year distributorship relationship that had recently deteriorated.  The defendant purported to terminate the relationship and refused to honor the client’s pending purchase orders.  Given that the client had less than 30 days to try to obtain similar cover product, Mr. Gasper filed suit in Jackson County (then removed to the Western District) asserting various contract and tort claims and requesting extraordinary relief.  The court granted their request for TRO and injunctive relief ruling that an injunction was appropriate to compel the Colorado company to ship inventory per previously placed purchase orders to preserve the status quo between the parties.  Judge Wimes found irreparable harm in that “[a]bsent specific performance, Plaintiff has demonstrated that it will be unable to fulfill orders and suffer damage to its reputation and goodwill.”  The judge ordered all such inventory be shipped immediately and did not require posting of a bond.  In an expedited timeframe, Mr. Gasper litigated multiple motions to dismiss by defendants, a motion for judgment on the pleadings, multiple injunction motions and hearings, a motion for clarification, and an opposition to voluntary dismissal of remaining claims.  The injunction ruling survived multiple collateral attacks by opposing counsel, and the case has now reached its conclusion.

KANSAS CITY, Missouri (February 1, 2016) – At its 2016 Annual Meeting, the Law Firm of McDowell Rice Smith & Buchanan, PC, announced that R. Pete Smith as Chairman, Thomas R. Buchanan as President, Jonathan A. Margolies, Kristie Remster Orme, Greg T. Spies, and Michael J. Gorman as General Counsel, will serve on the Firm’s Executive Board.

It was also announced that Ania W. Moncrief was elected as a Shareholder of the Firm.  

Contact:
Sherry Newsom
snewsom@mcdowellrice.com
(816) 753-5400