Latest news with #SACRAMENTO
Yahoo
2 days ago
- Business
- Yahoo
California closes $12B deficit by cutting back immigrants' access to health care
SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom signed on Friday a budget that pares back a number of progressive priorities, including a landmark health care expansion for low-income adult immigrants without legal status, to close a $12 billion deficit. It's the third year in a row the nation's most populous state has been forced to slash funding or stop some of the programs championed by Democratic leaders. Lawmakers passed the budget earlier in the day following an agreement of a $321 billion spending plan between Newsom and Democratic leaders. But the whole budget will be void if lawmakers don't send him legislation to make it easier to build housing by Monday. The budget avoids some of the most devastating cuts to essential safety net programs, state leaders said. They mostly relied on using state savings, borrowing from special funds and delaying payments to plug the budget hole. 'It's balanced, it maintains substantial reserves, and it's focused on supporting Californians,' Newsom said in a statement about the budget. California also faces potential federal cuts to health care programs and broad economic uncertainty that could force even deeper cuts. Newsom in May estimated that federal policies — including on tariffs and immigration enforcement — could reduce state tax revenue by $16 billion. 'We've had to make some tough decisions,' Senate President Pro Tempore Mike McGuire said Friday. 'I know we're not going to please everyone, but we're doing this without any new taxes on everyday Californians.' Republican lawmakers said they were left out of budget negotiations. They also criticized Democrats for not doing enough to address future deficits, which could range between $17 billion to $24 billion annually. 'We're increasing borrowing, we're taking away from the rainy day fund, and we're not reducing our spending," said Republican state Sen. Tony Strickland prior to the vote. 'And this budget also does nothing about affordability in California.' Here's a look at spending in key areas: Health care Under the budget deal, California will stop enrolling new adult patients without legal status in its state-funded health care program for low-income people starting 2026. The state will also implement a $30 monthly premium July 2027 for immigrants remaining on the program, including some with legal status. The premiums would apply to adults under 60 years old. The changes to the program, known as Medi-Cal, are a scaled-back version of Newsom's proposal in May. Still, it's a major blow to an ambitious program started last year to help the state inch closer to a goal of universal health care. Democratic state Sen. Maria Elena Durazo broke with her party and voted 'no' on the health care changes, calling them a betrayal of immigrant communities. The deal also removes $78 million in funding for mental health phone lines, including a program that served 100,000 people annually. It will eliminate funding that helps pay for dental services for low-income people in 2026 and delay implementation of legislation requiring health insurance to cover fertility services by six months to 2026. But lawmakers also successfully pushed back on several proposed cuts from Newsom that they called 'draconian.' The deal secures funding for a program providing in-home domestic and personal care services for some low-income residents and Californians with disabilities. It also avoids cuts to Planned Parenthood. Environment Lawmakers agreed to let the state tap $1 billion from its cap-and-trade program to fund state firefighting efforts. The cap-and-trade program is a market-based system aimed at reducing carbon emissions. Companies have to buy credits to pollute, and that money goes into a fund lawmakers are supposed to tap for climate-related spending. Newsom wanted to reauthorize the program through 2045, with a guarantee that $1 billion would annually go to the state's long-delayed high-speed rail project. The budget doesn't make that commitment, as lawmakers wanted to hash out spending plans outside of the budget process. The rail project currently receives 25% of the cap-and-trade proceeds, which is roughly $1 billion annually depending on the year. Legislative leaders also approved funding to help transition part-time firefighters into full-time positions. Many state firefighters only work nine months each year, which lawmakers said harms the state's ability to prevent and fight wildfires. The deal includes $10 million to increase the daily wage for incarcerated firefighters, who earn $5.80 to $10.24 a day currently. Public safety The budget agreement will provide $80 million to help implement a tough-on-crime initiative voters overwhelmingly approved last year. The measure makes shoplifting a felony for repeat offenders, increases penalties for some drug charges and gives judges the authority to order people with multiple drug charges into treatment. Most of the fund, $50 million, will help counties build more behavioral health beds. Probation officers will get $15 million for pre-trial services and courts will receive $20 million to support increased caseloads. Advocates of the measure — including sheriffs, district attorneys and probation officers — said that's not enough money. Some have estimated it would take around $400 million for the first year of the program. Other priorities Newsom and lawmakers agreed to raise the state's film tax credit from $330 million to $750 million annually to boost Hollywood. The program, a priority for Newsom, will start this year and expire in 2030. The budget provides $10 million to help support immigration legal services, including deportation defense. But cities and counties won't see new funding to help them address homelessness next year, which local leaders said could lead to the loss of thousands of shelter beds. The budget also doesn't act on Newsom's proposal to streamline a project to create a massive underground tunnel to reroute a big part of the state's water supply.
Associated Press
3 days ago
- Business
- Associated Press
California Legislature to vote on budget capping immigrant health care access to close $12B deficit
SACRAMENTO, Calif. (AP) — California lawmakers on Friday are scheduled to vote on a budget that pares back a number of progressive priorities, including a landmark health care expansion for low-income adult immigrants without legal status, to close a $12 billion deficit. It's the third year in a row the nation's most populous state has been forced to slash funding or stop some of the programs championed by Democratic leaders. This year's $321 billion spending plan was negotiated by Democratic Gov. Gavin Newsom and legislative leaders. He's expected to sign the budget Friday. But Newsom and lawmakers are still negotiating another deal to make it easier to build housing, and the budget will be void if that agreement isn't reached by Monday. The budget avoids some of the most devastating cuts to essential safety net programs, state leaders said. They mostly relied on using state savings, borrowing from special funds and delaying payments to plug the budget hole. California also faces potential federal cuts to health care programs and broad economic uncertainty that could force even deeper cuts. Newsom in May estimated that federal policies — including on tariffs and immigration enforcement — could reduce state tax revenue by $16 billion. 'It is never easy to balance a budget with the deficit that we faced, which was made worse by the actions of our federal administration,' Democratic Sen. Scott Wiener, who chairs the Senate budget committee, said at a hearing this week. Republican lawmakers said they were left out of budget negotiations. They also criticized Democrats for not doing enough to address future deficits, which could range between $17 billion to $24 billion annually. 'We're presenting this to this public as a balanced budget, and it's only balanced because we're borrowing money and we're using reserves that are supposed to be for dire emergencies,' said Republican Sen. Kelly Seyarto. Here's a look at spending in key areas: Health care Under the budget deal, California will stop enrolling new adult patients without legal status in its state-funded health care program for low-income people starting 2026. The state will also implement a $30 monthly premium July 2027 for immigrants remaining on the program, including some with legal status. The premiums would apply to adults under 60 years old. The changes to the program, known as Medi-Cal, are a scaled-back version of Newsom's proposal in May. Still, it's a major blow to an ambitious program started last year to help the state inch closer to a goal of universal health care. The deal also removes $78 million in funding for mental health phone lines, including a program that served 100,000 people annually. It will eliminate funding that helps pay for dental services for low-income people in 2026 and delay implementation of legislation requiring health insurance to cover fertility services by six months to 2026. But lawmakers also successfully pushed back on several proposed cuts from Newsom that they called 'draconian.' The deal secures funding for a program providing in-home domestic and personal care services for some low-income residents and Californians with disabilities. It also avoids cuts to Planned Parenthood. Environment Lawmakers agreed to let the state tap $1 billion from its cap-and-trade program to fund state firefighting efforts. The cap-and-trade program is a market-based system aimed at reducing carbon emissions. Companies have to buy credits to pollute, and that money goes into a fund lawmakers are supposed to tap for climate-related spending. Newsom wanted to reauthorize the program through 2045, with a guarantee that $1 billion would annually go to the state's long-delayed high-speed rail project. The budget doesn't make that commitment, as lawmakers wanted to hash out spending plans outside of the budget process. The rail project currently receives 25% of the cap-and-trade proceeds, which is roughly $1 billion annually depending on the year. Legislative leaders also approved funding to help transition some 3,000 part-time firefighters into full-time positions. Many state firefighters only work nine months each year, which lawmakers said harms the state's ability to prevent and fight wildfires. The deal includes $10 million to increase the daily wage for incarcerated firefighters, who earn $5.80 to $10.24 a day currently. Public safety The budget agreement will provide $80 million to help implement a tough-on-crime initiative voters overwhelmingly approved last year. The measure makes shoplifting a felony for repeat offenders, increases penalties for some drug charges and gives judges the authority to order people with multiple drug charges into treatment. Most of the fund, $50 million, will help counties build more behavioral health beds. Probation officers will get $15 million for pre-trial services and courts will receive $20 million to support increased caseloads. Advocates of the measure — including sheriffs, district attorneys and probation officers — said that's not enough money. They have estimated it would take around $400 million for the first year of the program. Other priorities Newsom and lawmakers agreed to raise the state's film tax credit from $330 million to $750 million annually to boost Hollywood. The program, a priority for Newsom, will start this year and expire in 2030. The budget provides $10 million to help support immigration legal services, including deportation defense. But cities and counties won't see new funding to help them address homelessness next year, which local leaders said could lead to the loss of thousands of shelter beds. The budget also doesn't act on Newsom's proposal to streamline a project to create a massive underground tunnel to reroute a big part of the state's water supply.
Yahoo
4 days ago
- Business
- Yahoo
California Democrats stage internal war over Gavin Newsom's late push to build more housing
SACRAMENTO, California — Gavin Newsom thought he could push an ambitious housing proposal through California's Democratic-controlled Legislature. Instead, he ran into a wall of resistance from should-be allies angrily comparing his plans to Jim Crow, slavery and immigration raids. Hours of explosive state budget hearings on Wednesday revealed deepening rifts within the Legislature's Democratic supermajority over how to ease California's prohibitively high cost of living. Labor advocates determined to sink one of Newsom's proposals over wage standards for construction workers filled a hearing room at the state Capitol mocking, yelling, and storming out at points while lawmakers went over the details of Newsom's plan to address the state's affordability crisis and sew up a $12 billion budget deficit. Lawmakers for months have been bracing for a fight with Newsom over his proposed cuts to safety net programs in the state budget. Instead, Democrats are throwing up heavy resistance to his last-minute stand on housing development — a proposal that has drawn outrage from labor and environmental groups in heavily-Democratic California. 'Anyone who believed this would not cause a giant explosion — they were living in la-la-land,' said Todd David, a San Francisco political consultant who has worked for state Sen. Scott Wiener and housing-focused groups. For Newsom, a potential 2028 presidential contender, it was a striking show of resistance from a flank of his own party over housing. A priority of the Democratic governor, Newsom had put his political capital behind an attempt to strong-arm the Legislature by making the entire state budget contingent on passing a bill to speed housing development by relaxing environmental protection rules. A spokesperson for Newsom pointed to a statement Tuesday night emphasizing partnership with lawmakers in reaching a budget deal while noting that 'it is contingent on finalizing legislation to cut red tape and unleash housing and infrastructure development across the state — to build more, faster.' The fault lines on display this week run deep. Construction unions and the statewide California Labor Federation have long resisted housing bills they see as eroding wage standards, often packing hearing rooms with members who urge lawmakers to vote no. Democrats have at times decried their union allies' hardball tactics. But Newsom's unprecedented intervention — and the forceful response from union foes — pushed the conflict into a whole new realm. 'To have legislation that is this large and this significant be forced through at the 11th hour … seems pretty absurd to me,' Democratic state Sen. Sasha Renée Pérez said at the hearing. 'I just cannot begin to explain how incredibly inappropriate and hurtful this is.' Scott Wetch, a lobbyist representing the trade unions, contended that this could be the first time since the Jim Crow era that California is 'contemplating a law to suppress wages.' Pérez, who represents a Los Angeles district, said the proposal was 'incredibly insensitive' amid immigration raids targeting mostly 'blue-collar workers who are Latino.' And Kevin Ferreira, executive director of the Sacramento-Sierra's Building and Construction Trades Council, told lawmakers the bill 'will compel our workers to be shackled and start singing chain gang songs.' In a sign of the stakes, the fight quickly spilled beyond California as North America's Building Trades Unions — an umbrella group covering millions of workers across the United States in Canada that rarely intercedes in state politics — sent Newsom a blistering letter warning the bill would 'create a race to the bottom.' Environmental groups piled on late Wednesday, with around 60 of them, including the Sierra Club and Earthjustice, blasting the proposal in a letter as a 'backroom Budget Trailer Bill deal that would kill community and environmental protections, even as the people of California are faced with unprecedented federal attacks to their lives and livelihoods.' Unions warned the governor was betraying his Democratic base. Gretchen Newsom, a representative of the International Brotherhood of Electrical Workers, said Newsom's stance was baffling to people 'looking at the Democratic Party and wondering what comes next for the governor.' 'I see this as a complete debacle and devastating to workers all across California,' said Newsom, who is not related to the governor. Labor leaders were once again at one another's throats, with many opponents faulting carpenters' unions who have backed streamlining efforts. Danny Curtin, director of the California Conference of Carpenters, said the scale of housing woes in California, where the price for the median home now tops $900,000, demanded an aggressive solution. 'The housing crisis is the most politically, socially, economically destabilizing crisis in California,' Curtin said. 'I would give the governor credit for trying to cut through another year of arguing.' In the broader budget negotiations, Newsom had largely capitulated to pushback from lawmakers over the steepest cuts he had proposed making to the state's Medicaid program, particularly for undocumented immigrants. Now, he is putting his political capital behind affordability proposals. But in a sign that Newsom's influence may be waning, lawmakers on Wednesday delayed a vote over wage provisions tucked into a separate budget bill. The proposal would allow developers to set a minimum wage standard for construction workers on certain affordable housing projects that could be lower than what union workers currently command. 'It's not a simple thing around the edges,' said state Sen. Maria Elena Durazo, a Los Angeles Democrat. 'It is a massive change. It challenges the role of collective bargaining in this state that has never been done before.' Wiener, a state budget negotiator who for years has fought to remove obstacles to denser housing development in California, defended the proposal at the hearing as setting a 'floor, not a ceiling' for wages. But he admitted that the swift and ferocious opposition led him to delay the vote. 'It's always appropriate for people to say, 'This needs to be changed, that needs to be changed. This wage is too low, that wage is too low,' Wiener said. 'That's always appropriate.' The governor was markedly less aggressive this year in his efforts to wring a budget deal out of lawmakers. Newsom did not attend caucus meetings in person to make his case for the housing legislation, as he has with previous proposals, although he has been in touch with some lawmakers via text message. Some of that was a matter of timing: Newsom has been preoccupied by the White House launching sweeping immigration raids and then deploying federal troops to Los Angeles, fomenting a standoff that overlapped with budget negotiations. Corey Jackson, a Democrat from Southern California who chairs an Assembly budget committee on human services, said that while he wasn't privy to Newsom's involvement in discussions, California needs a governor who is '24/7 going to be focused' on the state. 'Because our issues are that complicated,' Jackson said. 'And the number of crises that come up in California, as you've seen, will continue to happen every year.'
Yahoo
6 days ago
- Business
- Yahoo
CPS HR Consulting Announces Katrina Hagen as New CEO Amid 40th Anniversary Milestone
SACRAMENTO, Calif., June 24, 2025--(BUSINESS WIRE)--CPS HR Consulting is proud to announce the appointment of Katrina "Katie" Hagen as its new chief executive officer, ushering in a new era of leadership as the company celebrates its 40th anniversary of serving the public sector. Following a detailed search and a thorough selection process, Hagen was chosen for her extensive public sector experience and visionary leadership in workforce development. She officially assumes the role on July 7, 2025. Hagen brings more than 25 years of public service leadership to CPS HR. Most recently, she served as director of the California Department of Industrial Relations, where she oversaw more than 3,500 employees and led efforts to protect worker rights, safety and compensation. Her previous leadership roles at CalHR, CalPERS and CDTFA have positioned her as a trailblazer in HR modernization and public workforce strategy. "As we celebrate our 40th anniversary, CPS HR is thrilled to welcome a leader of Katie's caliber," said the CPS HR Board of Directors. "Her experience and passion for public service perfectly align with our mission to elevate HR practices in government agencies across the country." Hagen holds a Masters of Public Administration from the University of San Francisco and a Bachelor of Arts in Political Science and French from Humboldt State University. She has also contributed to the next generation of public service leaders as an adjunct faculty member in MPA and organizational behavior programs at USF. The board expressed confidence that Hagen will build on the organization's legacy while bringing new energy to its strategic vision. Her appointment marks a significant milestone for the Sacramento-based agency as it looks ahead to the next 40 years of innovation in public sector human resources. About CPS HR Consulting CPS HR Consulting, based in Sacramento, California, is a self-supporting public agency providing a full range of comprehensive HR solutions to government and nonprofit clients across the country. CPS HR consultants have expertise in the areas of organizational strategy, recruitment and selection, classification and compensation, and training and development. For more information, visit or connect with them on LinkedIn, Twitter, and Facebook. View source version on Contacts Media Contact: Geralyn GorshingCPS HR ConsultingDirector of Marketing and Business Development916-471-3373ggorshing@
Associated Press
22-06-2025
- Business
- Associated Press
Selling a Business: Expert Tax Guide & Checklist Released
has released a new and updated guide on selling a business for consumers. SACRAMENTO, CA / ACCESS Newswire / June 21, 2025 / Selling a business might leave you with only 66% of the proceeds after taxes. That's a huge chunk gone to Uncle Sam. Ryan Paulson, Chief Editor at IRAEmpire, says, 'The gap between your sale price and the money that ends up in your bank account can be eye-opening if you're selling a small business you built yourself. The sale typically triggers a long-term capital gain tax of 20% plus an extra 3.8% net investment income tax. Many business owners mistakenly think they'll pay ordinary income rates that can reach almost 50% in total. Let's look at real numbers: A business started with $100,000 and sold for $10 million would face federal capital gains tax that cuts the proceeds by about $2 million.' Schedule a Consultation With America's Best Business Selling Experts State taxes pack an even bigger punch. California residents could pay an additional 13.3% tax on their capital gain. A $10 million sale with a $9.9 million gain would leave you with just $6.6 million after federal and state taxes. Tax planning becomes crucial to protect the wealth you've built over years. This detailed guide shows you seven clear steps to sell your business. You'll learn about tax implications and ways to legally reduce your tax burden. The goal? To help you keep more of what you've worked so hard to build. Alternatively, explore the best business sale brokers of 2025 on IRAEmpire here. Step 1: Prepare for the Sale with Tax in Mind The gap between a good and great business sale comes down to preparation. Smart tax planning could determine whether you keep most of your money or watch it vanish in taxes. Start tax planning early Your tax planning should begin long before you put your business on the market. Research shows businesses that plan their exit 3-5 years ahead achieve 20-40% higher valuations than those who rush the process. Starting early opens up more tax-saving options that you won't find if you're in a hurry to sell. Business owners often focus only on growing their company. They don't think about tax implications until it's too late. This leads to reduced profits after taxes. The best exits happen when tax planning starts at least two years before the sale. Many experts suggest starting five years ahead. Early planning lets you build the right team. You'll need a financial advisor, CPA, business attorney, and estate attorney. These professionals can work together to create a financial strategy that lines up with what you want after selling. Review your business structure Your business structure plays a big role in how taxes will affect your sale. Each type-sole proprietorship, partnership, LLC, S Corporation, or C Corporation-comes with its own tax rules that can change your final proceeds. Pass-through entities (LLCs, partnerships, S Corporations) send sale gains straight to your personal tax return. C Corporation owners should note that selling stock instead of assets helps avoid double taxation, which could cut your proceeds by about 50%. The structure also decides if your sale counts as an asset or stock sale. Buyers usually want asset purchases for tax benefits. Sellers do better with stock sales because of better capital gains treatment. Knowing these details before negotiations helps you keep more money after taxes. Organize financial records Clean, well-laid-out financial records speed up sales and help you get the right price. Buyers will examine your financial health carefully. Messy or incomplete records raise red flags. You need these key financial documents: Buyers bring in accounting experts to check everything. They match your statements against bank records, invoices, receipts, and tax returns. Good documentation builds trust and gives you more power in negotiations. Getting your financial statements professionally audited before the sale helps too. You'll spot weak points early and can fix issues that might lower your company's value or make negotiations harder. The time you spend getting your business ready for sale-especially with tax planning and financial organization-leads to higher values and smoother deals. Taking care of these things early helps you keep more of the wealth you've built. Step 2: Choose the Right Sale Type Selling your business brings a crucial decision: choosing between an asset sale or a stock sale. This choice will substantially affect your tax burden and determine the money you'll keep after closing the deal. Asset sale vs stock sale: pros and cons An asset sale means the buyer purchases individual business assets instead of the entire entity. These assets include equipment, inventory, intellectual property, and customer lists. You keep the legal entity after the sale, though many businesses close down afterward. Buyers love asset sales because: The seller's point of view shows some drawbacks: A stock sale works differently. The buyer purchases your ownership interests directly, and the entire business-assets and liabilities included-goes to the new owner. Sellers usually benefit from stock sales because: Buyers often shy away from stock sales because: Consult the Best Business Brokers in the US Here. How sale type affects taxes when selling a business Your sale structure creates major tax differences. The IRS looks at each asset separately in an asset sale. Different assets face different tax treatment: You and the buyer must use the 'residual method' to split the purchase price across asset classes. This split greatly affects your tax bill because: Pass-through entities (S corporations, LLCs, partnerships) send gains straight to your personal tax return. C corporations might pay twice in asset sales-corporate-level tax on gains plus shareholder-level tax on distributions. State taxes add another layer of complexity. Asset sales might need you to split gains among multiple states, just like operating income. Stock sales mostly get taxed in your home state. Buyers and sellers want different tax outcomes, which makes the final structure a big negotiation point. Many buyers pay more for asset sales to make up for sellers' higher taxes. Some deals include 'tax gross-ups' where buyers increase the price to cover the extra taxes you'd pay in an asset versus stock sale. Step 3: Plan for Federal and State Tax Implications You need to understand your tax burden before selling your business. Poor tax planning can cut your proceeds in half. What looked like a great exit could end up disappointing. Capital gains tax overview Capital gains tax becomes your biggest tax concern when selling a business. The tax applies to the difference between what you sell for and your 'basis' - your original cost plus improvements. Let's say you started your business with $100,000 and sell it for $10 million. Your long-term capital gain would be $9.9 million. The federal capital gains rate starts at 15% for business sales with assets held over a year. This rate can go up to 20% if you have higher income. The math is simple - multiply your gain by the rate that applies to you. In our example, a 20% federal capital gains tax would reduce your money by about $2 million. State income tax differences State taxes can make a big difference in what you keep. The impact varies based on where you live: Where you live at the time of sale really matters. States use strict 'domicile' tests to figure out if they can tax you. Running your business in multiple states could mean splitting up the gain. You might need to pay taxes in each state where you did business. Depreciation recapture and NIIT The Net Investment Income Tax (NIIT) adds another 3.8% federal tax. This kicks in if your modified adjusted gross income tops $200,000 (single) or $250,000 (married filing jointly). The NIIT stacks on top of capital gains tax and can push your federal rate to 23.8%. Depreciation recapture can also increase your tax bill. The IRS takes back previous depreciation deductions when you sell business property for more than its depreciated value. They tax this recaptured amount as ordinary income - up to 37% instead of capital gains rates. Business equipment (Section 1245 property) faces recapture on all claimed depreciation. Real estate (Section 1250 property) has a maximum recapture rate of 25%. Step 4: Use Smart Tax Strategies to Reduce Liability Tax-saving strategies can reduce your liability by a lot while selling a business. Smart planning helps you keep more of your hard-earned proceeds legally. Installment sales to spread tax You can receive payments over time instead of all at once with an installment sale. This spreads your tax liability across multiple years. The approach works if you get at least one payment after the year of sale. Your tax brackets stay lower and cash flow management improves. You'll only report the gain from payments received that year rather than the entire amount. A $5 million business sale might be structured as $1 million yearly for five years. This could lower your overall tax rate. Notwithstanding that, installment sales come with limits. This method won't work for inventory sales or publicly traded securities. On top of that, you must report depreciation recapture as ordinary income in the year of sale whatever your payment schedule. QSBS exclusion for C Corps C corporation owners can exclude up to 100% of capital gains through Section 1202. This applies to qualified small business stock (QSBS) held longer than five years. The exclusion covers $10 million or 10 times your original investment basis, whichever is greater. To cite an instance, a $2 million investment later sold for $22 million could mean excluding the entire $20 million gain. This saves about $4.76 million in federal taxes plus state taxes. Your C corporation must meet these requirements: Charitable giving and 1031 exchanges Donating business interests to charity before selling works well. Moving part of your business to a charitable remainder trust (CRT) or donor-advised fund lets you: A 1031 exchange helps defer capital gains through reinvestment in similar business property. This mainly applies to real-life estate assets in your business. Your investment rolls into new qualified property. Note that charitable donations need planning before any sale agreement becomes final. Both strategies need proper documentation and must follow IRS guidelines strictly. Step 5: Finalize the Deal with Expert Help Your business sale's success depends on proper documentation and compliance. Tax mistakes can get pricey, and even the best-planned exits can fall apart without executing the final steps correctly. Filing IRS Form 8594 for asset sales Asset sales require both buyer and seller to file Form 8594 (Asset Acquisition Statement) with their tax returns for the transaction year. The IRS determines seven asset classes, and this form documents how the purchase price gets split among them. This allocation affects: Cash and general deposit accounts get allocated first, and other assets follow in a specific order. Buyers must use the residual method when their basis in the assets only depends on the amount paid. Avoiding tax surprises at closing Negotiations often hit snags over purchase price allocation. Sellers usually want more value assigned to goodwill because it's taxed at capital gains rates. This beats having value tied to tangible property, which faces ordinary income rates and depreciation recapture. You should take these steps to close smoothly: Working with M&A advisors and tax pros Smart business owners bring in transaction specialists early - usually months before going to market. A qualified tax advisor can help you: Many deals collapse during due diligence because tax problems pop up unexpectedly. Good advisors earn their keep by spotting potential issues before buyers find them. They keep deals moving forward and help you get the full value from your years of hard work. Consult the Best Business Brokers in the US Here. Selling Smart: Final Thoughts on Maximizing Your Business Exit Your business sale marks the pinnacle of years-maybe even decades-of hard work and dedication. Without doubt, protecting your proceeds from excessive taxation stands as a crucial part of this substantial transition. This piece highlights how proper tax planning can make the difference between keeping 50% versus 80% of your sale proceeds. Federal capital gains taxes, state income taxes, depreciation recapture, and the Net Investment Income Tax create a complex tax world that needs careful navigation. Here are the key takeaways: Start your tax planning at least two years before selling-five years would be ideal. Early preparation lets you implement powerful tax-saving strategies that aren't available close to the sale date. Your business structure affects taxation deeply. The choice between an asset sale or stock sale substantially affects your after-tax proceeds. Stock sales usually offer better tax treatment for sellers. Tax minimization strategies like installment sales, QSBS exclusions for C corporations, and strategic charitable giving can help. These approaches legally reduce your tax burden while arranging with your post-sale financial goals. Of course, build a qualified team of advisors including tax professionals, M&A specialists, and financial planners. Their knowledge helps spot potential risks before they affect your transaction. Your business sale represents one of your life's biggest financial events. The investment in proper planning and professional guidance multiplies by preserving the wealth you've built. The final sale price matters less than the money that reaches your bank account when the deal closes. Consult the Best Business Brokers in the US Here. FAQs Q1. How is the tax calculated when selling a business? The tax is calculated based on the difference between your tax basis (original cost plus improvements) and the sale proceeds. This difference is typically subject to capital gains tax, which can range from 15% to 20% at the federal level, plus potential state taxes and a 3.8% Net Investment Income Tax for high-income sellers. Q2. What documents are essential when selling a business? Key documents include detailed profit and loss statements for the past 3-5 years, balance sheets, cash flow statements, 5-year financial forecasts, and all relevant permits and licenses. It's also crucial to have your operating agreement or articles of incorporation ready, as these outline the business's ownership structure and governance. Q3. How do I report the sale of my business on my tax return? You'll need to report the sale on IRS Form 4797 (Sales of Business Property). This form requires information such as the property description, purchase date, depreciation, and cost of purchase. For asset sales, both buyer and seller must also file Form 8594 (Asset Acquisition Statement) with their tax returns for the year of the transaction. Q4. Are there strategies to reduce tax liability when selling a business? Yes, several strategies can help reduce tax liability. These include structuring the sale as an installment sale to spread the tax burden over time, leveraging the Qualified Small Business Stock (QSBS) exclusion for eligible C corporations, and considering charitable giving or 1031 exchanges for certain assets. Q5. How far in advance should I start planning for the sale of my business? It's recommended to start planning for the sale of your business at least two years in advance, with many advisors suggesting a five-year timeline. Early planning allows you to implement more tax-saving strategies, assemble the right team of professionals, and potentially achieve a 20-40% higher valuation compared to businesses with shorter planning timelines. About is a trusted platform providing financial education, business insights, and unbiased reviews. Our mission is to empower small business owners, retirees, and investors to make informed, confident decisions. CONTACT: Ryan Paulson [email protected] SOURCE: IRAEmpire LLC press release
