Taiwo Agbaje, CPA - The Tax Monarch

Executive Bonus Plans.

In the past few weeks, I’ve been in two meetings with clients who wanted my opinion on the tax impact of Executive Bonus Plans after being approached about signing up for one.

So I did some additional research and looked at it strictly from the tax side.

First, what is an Executive Bonus Plan?
In simple terms, it's a benefit plan that is paid for by the employer and provided permanent life insurance for selected employees, often key employees. The business gets a tax deduction for the compensation, reducing taxable income and the employee reports it as a taxable compensation.

It can be a great benefit for key employees.
But here’s the kicker for S Corporation owners:
You are both the employer and the employee.

The S Corporation gets the deduction, but the bonus is generally taxable compensation to you and gets reported on your 1040 tax return.

Yes, I know there are ways to structure these arrangements to help offset some of the shareholder’s tax cost.

But the simple answer is:

It is a taxable benefit to the S Corporation shareholder.

So when I hear:

“Your business gets a tax deduction.”

My question is:

“What happens on the other side of the transaction?”
Because we can’t look at the deduction and stop there.

I’ve had this debate several times with insurance agents.

I’m not saying Executive Bonus Plans are bad products. For the right person, they can serve a legitimate insurance, employee-retention, estate-planning, or wealth-planning purpose.

But I wouldn’t buy one simply because it’s being presented as a great tax-saving strategy.

The premiums can also be significant, and these products aren’t for everyone.

Before committing significant cash flow to one, I would first consider:
1. Maxing out your retirement plan.
2. Backdoor Roth IRA - For tax-free distributions after retirement.
3. Maximizing your Health Savings Account contribution.
4. Building your brokerage account - To provide investment flexibility and liquidity.

Do you need life insurance?

I believe life insurance can be an important part of a financial plan, especially if people depend on your income.

Happy Labor Day!

Today, we celebrate more than just work. We celebrate the people behind every effort, every long day, every sacrifice, and every small step that helps move things forward.

To everyone who continues to show up, give their best, and work hard even when no one is watching, thank you. Your dedication matters, your efforts are seen, and the work you do is truly appreciated.

Today is a reminder that behind every success is someone who worked for it.

Think messy books just cause stress?

Think again. They're draining your profit.

Here are 7 signs your books might be draining your profits:

1. Expenses are misclassified
Misplaced categories = missed deductions = lost money you could've kept.

2. You are blindsided by bills
Unexpected payments, penalties, and late fees can sneak up when you don't track cash flow accurately.

3. Inconsistent record keeping
Irregular or messy entries make your numbers unreliable, and unreliable numbers mean poor business decisions.

4. You avoid looking at your books
You don't check your books until tax time hits, and the costs become painfully clear.

5. Overpayments on taxes
You are more likely to overpay on taxes if you don't have clean books.

6. No audit trail
Poor documentation can lead to stress, fines, and wasted hours if the IRS ever comes knocking.

7. Missed growth opportunities
If your numbers aren't guiding you on where to invest or scale, you are leaving money on the table.

Even fixing one of these areas can stop the leaks and start protecting your profits.

Which of these warning signs have you spotted before?

A tax return is a record of decisions already made.

By the time you see the final numbers, many opportunities to make adjustments may have already passed.

For business owners, physicians, and investors, the conversation should happen before the deadline, when there is still time to review income structure, business decisions, investments, and long-term goals.

Tax planning is not about looking backward.

It is about understanding your full financial picture and making informed decisions moving forward.

Comment STRATEGY if you want to start thinking beyond basic tax filing.

A tax strategy can only be as precise as the numbers behind it.

If your books are not reconciled, expenses are sitting in the wrong categories, or your financial reports do not reflect what is actually happening in the business, the problem goes beyond bookkeeping.

It affects what you think you earned, what you think you can afford, and what your tax professional can accurately plan around.

That is why clean books should come before serious tax planning.

Not because bookkeeping is the goal.

Because accurate numbers give you something reliable to plan from.

If your business financials need a closer look, comment BOOKS.

Your tax return is a record of decisions already made.

It shows your income, deductions, and tax outcome, but it does not explain whether your financial structure is still working for where you are today.

As income grows, your financial picture usually becomes more complex.

Multiple income streams, business ownership, investments, and changing priorities all create decisions that need to be reviewed together.

A strategic CPA looks beyond the numbers and helps you understand how each decision impacts the bigger picture.

Planning ahead creates clarity before decisions become expensive.

Comment PLAN to learn more.