Age Related Tax Milestones

As I grow older, I am reminded of the Steve Miller song, Fly Like An Eagle where he sings “time keeps on slipping, slipping, slipping into the future…”.  This blog covers some important age-related tax milestones that I witness every tax season and that you should keep in mind as you get older.

Ages 0–23

The so-called “Kiddie Tax” rules can potentially apply to your child’s (or grandchild’s) investment income until the year he or she reaches age 24. Specifically, a child’s investment income in excess of the applicable annual threshold is taxed at the parent’s marginal tax rate.

Hour glass image for tax lawyer blog Greg Spadea

Note: For 2018 and 2019, the unfavorable income tax rates for trusts and estates were used to calculate the Kiddie Tax. Recent legislation changed this for 2020 by once again linking the child’s tax rate to the parent’s marginal tax rate. However, you may elect to apply this change to your 2018 and 2019 tax years. If we feel an election would be beneficial for 2018, we may recommend amending your return.

For 2020 and 2021, the investment income threshold is $2,200. A child’s investment income below the threshold is usually taxed at benign rates (typically 0% for long-term capital gains and dividends and 0%, 10%, or 12% for ordinary investment income and short-term gains). Note that between ages 19 and 23, the Kiddie Tax is only an issue if the child is a full-time student. For the year the child turns age 24 and for all subsequent years, the Kiddie Tax ceases to be an issue.

Age 18 or 21

A custodial account set up for a minor child comes under the child’s control when he or she reaches the age of majority under applicable state law which is 21 in Pennsylvania.  If there’s a significant amount of money in the custodial account, this issue can be a big deal. Depending on the child’s maturity level and dependability, you may or may not want to take steps to ensure that the money in the custodial account is used for expenditures you approve of such as college tuition.

Age 30

If you set up a Coverdell Education Savings Account (CESA) for a child (or grandchild), it must be liquidated within 30 days after he or she turns 30 years old. To the extent earnings included in a distribution are not used for qualified higher education expenses, they are subject to federal income tax plus a 10% penalty tax. Alternatively, the CESA account balance can be rolled over tax-free into another CESA set up for a younger family member.

Age 50

If you are age 50 or older as of the end of the year, you can make an additional catch-up contribution to your Section 401(k) plan (up to $6,500 for 2020), Section 403(b) plan (up to $6,500 for 2020), Section 457 plan (up to $6,500 for 2020), or SIMPLE-IRA (up to $3,000 for 2020), assuming the plan permits catch-up contributions. You also can make an additional catch-up contribution (up to $1,000 for 2019 or 2020) to your traditional or Roth IRA. The deadline for making IRA catch-up contributions for the 2019 tax year is 4/15/20.

Age 55

If you permanently leave your job for any reason, you can receive distributions from the former employer’s qualified retirement plan without being socked with the 10% early distribution penalty tax. This is an exception to the general rule that the taxable portion of qualified retirement plan distributions received before age 59½ are subject to the 10% penalty tax. Note that this exception applies only if you have attained age 55 on or before your separation from service.

Age 59½

You can receive distributions from all types of tax-favored retirement plans and accounts including IRAs, Section 401k accounts, pensions and tax-deferred annuities without being hit with the 10% early distribution penalty tax. Before age 59½, the penalty tax will apply to the taxable portion of distributions unless an exception is available.

Age 62

You can choose to start receiving Social Security retirement benefits. However, your benefits will be lower than if you wait until reaching full retirement age, which is age 66 for those born between 1943 and 1954. Also, if you work before reaching full retirement age and your earnings exceed $18,950, your 2021 Social Security retirement benefits will be further reduced.

Age 66

You can start receiving full Social Security retirement benefits at age 66 if you were born between 1943–1954. You will not lose any benefits if you work in years after the year you reach the full retirement age of 66, regardless of how much income you have in those years. However, if you will reach age 66 in 2021, your benefits may be reduced if your income from working exceeds $50,520.

Note: If you were born after 1954, your full retirement age goes up by two months for each year before leveling out at age 67 for those born in 1960 or later.

Warning: Under current law, up to 85% of your Social Security benefits may be subject to federal income tax, depending on your provisional income level. Provisional income equals your gross income from other sources plus tax-exempt interest income and 50% of your Social Security benefits. Contact us if you have questions or want more information.

Age 70

You can choose to postpone receiving Social Security retirement benefits until you reach age 70. If you make this choice, your benefits will be higher than if you start earlier.

An often-overlooked issue that you must factor into the breakeven age is when you would come out ahead by postponing benefits. For example, if your normal retirement age is 66 and you wait until age 70 to begin receiving benefits, you forego benefits for four years. It would take 12½ years to reach the breakeven point. Are you sure you will still be around and able to enjoy the higher benefit at age 82½?  Fortunately, I can prepare a report to help you decide when to take social security based on your current earnings, other retirement income and your health.

Age 72

At this age, you must begin taking annual Required Minimum Distributions (RMDs) from tax-favored retirement accounts such as traditional IRAs, SIMPLE IRAs, SEP accounts, or 401k accounts and pay the resulting income taxes. However, you do not need to take any RMDs from Roth IRAs set up in your name. The initial RMD is for the year you turn 72 if you had not reached age 70½ by December 31, 2019.  You can postpone taking the initial RMD until April 1 of the year after you reach the magic age.  If you choose that option, however, you must take two RMDs in that same year: one by the April 1 deadline (the RMD for the previous year) plus another by December 31 (the RMD for the current year). For each subsequent year, you must take another RMD by December 31. There’s one more exception: If you are still working after reaching age of 72, and you do not own over 5% of the employer, you can postpone taking any RMDs from the employer’s plan until after you have actually retired.

Thanks to a change included in the Setting Every Community Up for Retirement Enhancement Act (the SECURE Act), the age after which you must begin taking RMDs is increased from 70½ to 72. This favorable change only applies to individuals who attain age 70½ after December 31, 2019.  So, if you turned 70½ in 2019 or earlier, you are unaffected. If you turn 70½ in 2020 or later, you will not need to begin taking RMDs until after attaining age 72.


Remember that almost all adults should do at least some estate planning. In uncomplicated situations, nothing more than a simple will and updated beneficiary designations may be required. If you have a larger estate, taking steps to confront realities about your heirs and to reduce exposure to the federal estate tax and income tax and any Pennsylvania inheritance tax may be advisable. Please call Gregory J. Spadea at 610-521-0604, if you think your estate plan needs updating.

Understanding What Car & Truck Expenses are Deductible For Business

I have a lot of business owners and self-employed clients who ask what records to keep in order to deduct their car or truck expenses incurred in their business. I first remind them to keep track of the total miles they drive during the year as well as the total miles driven for business. The reason is if the business owner uses their car for both business and personal purposes, the expenses must be split. Therefore, they will need to know the total miles and total business miles to calculate deduction based on the portion of mileage used for business.
There are two methods for figuring car expenses:

Using actual expenses which include:
o Depreciation or Lease payments
o Gas and oil
o Tires
o Repairs and tune-ups
o Insurance
o Registration fees

Federal Tax Law Gregory Spadea Lawyer

Using the standard mileage rate. Under this method business owners will keep track of the business miles driven during the year and multiply that total by the current standard mileage rate in effect. However, the business owner must choose to use this method in the first year the car is available for use in their business. In addition, business owners who want to use the standard mileage rate for a car they lease must use it for the entire lease period. The standard mileage rate for 2019, is 58 cents.

No matter which option you select you must keep adequate records. You should keep a diary, travel log or trip sheets documenting where you went, who you met and the mileage and date. You should also keep documentary evidence such as gas receipts, credit card statements and cancelled checks or repair bills to support your expenses. I always recommend paying all the car and truck expenses with the same credit or debit card.

If you have any questions about deducting car expenses call Gregory J. Spadea at 610-521-0604. The Law Office of Spadea & Associates provides estate and tax planning services to business and individual clients including tax return preparation services year-round.

Business Owners Can Deduct the New Section 199A Business Income Deduction in 2018


Eligible business owners may now deduct up to 20 percent of certain business income from a business operated as a sole proprietorship, partnership, S corporation, trust, or estate.  The deduction may also be claimed on dividends from real estate investment trusts.  The new deduction is referred to as the Section 199A deduction and was created by the Tax Cuts and Jobs Act (TCJA).  Congress made this change to create tax parity between business owners and C Corporations.  The TCJA reduced the top federal corporate tax rate from 35 % to 21% but only reduced the top federal personal income tax rate from 39.6% to 37%. Excluding the 20% of qualified business income reduces the top personal rate from 37% to 29.6%.


Here are four basic things business owners should know about this complicated deduction:

  1. There is an income threshold to qualify for the deduction so if your total taxable income

before taking the qualified business income deduction is less than $315,000 for a married couple filing a joint return, or $157,500 for all other filers you are eligible for Section 199A deduction regardless of what type of business you have.  In addition if your business does not fall into one of the service fields listed below you can take the full deduction regardless of your taxable income.


  1. The deduction is available whether you itemize your deductions on Schedule A or take the standard deduction.  However, the deduction will not reduce your adjusted gross income or

reduce your earnings subject to Social Security or Medicare.  Keep in mind income earned

through a C corporation or by providing services as an employee is not eligible for the deduction.


  1. For each qualified trade or business the Section 199A deduction is limited to the lesser of

these two amounts:
– Twenty percent of qualified business income; or
– Twenty percent of taxable income computed before the qualified business income

deduction minus net capital gains.

  1. If your total taxable income before taking the qualified business income deduction exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other filers, there are additional limitations if you in a specified service field.  If you are in a specified service field, once your income exceeds $415,000 for a married couple filing jointly and $207,500 for all other filers, your Section 199A deduction is totally phased out.  A specified service field includes health care, accounting, law, performing arts, consulting, financial services and any service business that relies on the reputation of one of the officers or employees. The good news is that if you do not fall into one of the specified service fields you can take the full deduction regardless of your income.

In closing, I would highly recommend you make the maximum contribution to your Simple IRA, solo 401(k) or SEP IRA to reduce your taxable income and increase your eligibility for the Section 199A deduction.  If you need assistance calculating the Section 199A deduction or preparing your taxes please call Gregory J. Spadea at 610-521-0604.

3 Advantages for Converting a Sole Proprietorship to LLC

Stop, pay your taxes!
There are 3 main advantages for converting your proprietorship into a Limited Liability Company (LLC). The main advantage of operating as a limited liability company is that there is limited liability for the sole proprietor which means the owner’s personal assets are not exposed to the risks and liabilities of their business operations. The concept of the LLC statute is that the owner (technically referred to as a “member”) does not have any personal liability for business debts solely by reason of being a member. This liability protection could be particularly advantageous if you have employees working in the business, as their actions could potentially expose the owner’s personal assets. Of course, this does not relieve the owner of responsibility for personal actions nor for any debts personally guaranteed.

The second advantage of forming an LLC is the flexibility of choosing to be taxed as either a partnership, S-Corporation or as a sole proprietor, despite forming a separate LLC entity under state law. This becomes important because you can start off electing to be taxed as a sole proprietor, and as your business grows and when your annual net income exceeds $20,000 you can elect your LLC to be taxed as an S-Corporation. You can pay yourself a reasonable salary and then set up and contribute up to $15,500 to a Simple IRA, as well as up to $6,500 to a Roth IRA to maximize your retirement savings.

The third advantage is minimizing your taxes, because you do not pay the 15.3% social security tax on your S corporation net income just on the wages you pay yourself. In addition by contributing to a Simple IRA you reduce your federal income tax on the amount you contribute.

For example, in 2015, a 51 year old owner forms a single member LLC that makes an election and grosses $125,000 and nets $45,000 after expenses and after his LLC pays him $30,000 in wages. Assume the member makes the maximum $15,500 employee contribution to a Simple IRA. He would pay regular income tax at 20% on the $45,000 net income from the LLC. He would also pay self-employment tax and income tax on the $30,000 in wages.

LLC Taxed as an S-CORP Sole Proprietorship
Gross Receipts $125,000 $125,000
Less Operating Expenses 50,000 50,000
Less Salary 30,000 —–
Net Income 45,000 75,000
Income tax 9,000 18,500
Self-Employment (FICA) tax —- 6,100
FICA Tax on W-2 wages 4,600 —–
Income tax on wages 6,000 —–
Total Income tax 19,600 24,600

In the above example, the member saved $5,000 in FICA tax by making an S election and contributing $15,500 into a Simple IRA. If the member contributes the maximum employee contribution to his Simple IRA of $15,500, then the Member will save an additional $3,100 in federal income tax on top of the $5,000 in savings in FICA tax savings indicated above. The member could also contribute $6,500 to a ROTH IRA but would receive no current year tax dedduction.

It is important to keep in mind that once the owner begins conducting business as an LLC, it will be necessary to consistently use the LLC designation on the business letterhead, the business checking account, business licenses, and the like. The owner would need to go through the process of adding the LLC designation to the various contracts, leases and documents under which business is conducted. The owner should never pay personal expenses out of the LLC bank accounts and should ensure the LLC has proper liability insurance. If you have any questions about forming an LLC, please contact Gregory J. Spadea at 610-521-0604 from the Law Offices of Spadea & Associates, LLC.

12 Tips to Help Landords Audit Proof Their Tax Return

Tax return paper

The IRS does not audit too many returns due to inadequate staffing and poor management. However, to truly audit proof your return, I would advise you and all my landlord clients to:

  1. Make the election under Treasury Regulation 1.469-9(g) to aggregate all real estate activities as one activity for passive loss rules if you have more than one rental property. This makes meeting the 750 hour rule for all you rental properties much easier than having to meet it for each individual rental property.
  2. Keep a log on Microsoft Outlook or Google Calendars of the work you do as a Landlord to meet the 750 hour test such as:
    1. working or improving the property;
    2. researching and bidding on properties;
    3. finding and screening tenants;
    4. collecting rent;
    5. performing maintenance.
  3. Never use round numbers on your return because it looks like you are estimating your expenses.
  4. If you pay a contractor or any unincorporated person more than $600 during the year you must issue them a 1099. Therefore you should have them fill in a W-9, before you pay them so you will have their information and can prepare a 1099.
  5. Reconcile the mortgage interest and real estate taxes reported on your 1098 to the amount deducted on your return to ensure the numbers match.
  6. Do not deduct capital improvements under repairs but instead depreciate them or use Internal Revenue Code Section 179 to expense them in the tax year they are placed in service.
  7. Use Quickbooks if you have multiple properties to track rental income and expenses for each property. Deposit all your rental income into a separate bank account.
  8. Never deposit rental income into your personal account and never pay personal expenses from your rental account. Transfer money from your rental account to your personal account and then pay personal expenses from your personal account.
  9. Have a separate credit card that you use only for your rental properties and pay the monthly bill from your rental bank account. At the end of the year the credit card company will give you a summary of all your expenses making your record keeping that much easier.
  10. Make sure all your deposits into your rental bank accounts reconcile to the amount of rental income reported on your tax return.
  11. Keep your leases current and make sure the monthly rent that you deposit is the amount listed on the lease.
  12. Keep security deposits in a separate trust account and only disburse those funds when the tenant moves out.

If you have any questions about audit proofing your return or need help preparing your tax return call Gregory J. Spadea at 610-521-0604 or contact him online, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Qualifying for the Family-Owned Business Exemption from Pennsylvania Inheritance Tax

Beginning July 1, 2013, the transfer at death of certain family owned business interests are exempt from the Pennsylvania inheritance tax. Pennsylvania Inheritance Tax is currently 4.5% for linear descendants, 12% for siblings and 15% for everyone else. To qualify for the family-owned business exemption, a family-owned business interest must:

  1. Have been in existence for five years prior to the decedent’s death;
  2. Have less than 50 full time equivalent employees and a net book value of assets totaling less than $5,000,000 at the date of the decedent’s death;
  3. Be engaged in a trade or business, the principal purpose of which is not the management of investments or income producing assets;
  4. Be transferred to one or more qualified transferees – the decedent’s husband or wife, grandfather, grandmother, father, mother, or children, siblings or their children. Children include natural children, adopted children; and stepchildren;
  5. Owned by a qualified transferee for a minimum of seven years after the decedent’s death;
  6. Reported on a timely filed Pennsylvania inheritance tax return and filed within 9 months of the decedents date of death, or within 15 months of the decedent’s date of death if the estate or person required to file the return was granted the six month statutory extension.

The transferee must file an annual certification and notify the Pennsylvania Department of Revenue within thirty days of any transaction or occurrence causing the qualified family-owned business to fail to qualify for the exemption. Failure to comply with the certification or notification requirements results in a total loss of the exemption.

If you feel you qualify for the family-owned business exemption please contact Gregory J. Spadea online or at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

What Business Expenses Are Deductible?

If you are a self-employed sole proprietor or operate an LLC or S-corporation any expense that your business incurs that is ordinary and necessary is deductible under Section 162 of the Internal Revenue Code. Therefore, please list the total spent on the expense categories listed below:

Accounting, legal and professional fees;


Car expense need total miles driven, business miles plus parking and tolls including business log with date, miles driven, business purpose and destination or
total miles driven, actual fuel invoices, auto insurance, repairs and total miles driven and business miles plus parking & tolls;

Fixed Assets – If you bought a vehicle, computer, equipment, office furniture or placed it in service during the tax year, even if you already owned it, bring in the purchase invoice so we can expense it under IRC Sec. 179;

W-3 – Salaries that your company paid to others. List officer and shareholder salary separately;

Employer share of employment taxes like FICA and FUTA;

Commissions or fees paid to other contractors, Get them to fill in W-9 if not incorporated so we can issue them a 1099;

If you already issued them a 1099, bring in the 1096 – showing total independent contractors paid.

Professional Liability Insurance, Workmans Compensation Insurance and Health insurance;

Office Supplies;

Materials or Purchase of inventory for resale;

Travel, Hotel, Airfare and Car Rental;

Meals (need date, place, person entertained and business purpose) Only need receipt if you pay more than $75.00 and have a day timer, If you do not have a day timer or digital calendar (such as Outlook or Google Calendar) then you need a receipt for everything;

Telephone include local, long distance, fax, land lines and mobile;

DSL, cable and internet charges;


Continuing education and business seminars and conferences;

Interest expense paid on business loans and provide year end balances;

Rent for office space or equipment;

Utilities like electricity, fuel oil, water or gas.

Prior year PA franchise (Capital Stock) tax from Page 2 of the PA RCT-101;

Prior Year Local Income Tax paid;

Total state sales tax paid if you included it in gross sales receipts.

Remember to never pay any personal expenses from your business bank account but instead transfer them to your personal account. Feel free to contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604, if you have any questions or need your tax returns prepared.

Checklist for Setting Up Your Business After Forming A Corporation

Clipboard with checklist
After we form a Corporation for your business the next steps are to:

1. Open the New Corporation business checking account using the Articles of Incorporation and the EIN. When you open the business bank account get the following:

a. Just put your Corporate name on the business checks not your address;
b. Put “Void After 60 Days” under the dollar line on the checks and start with number 1001;
c. Get overdraft protection for your business account;
d. Get your monthly statements and check imagines in the mail or print them out or save them every month to your computer or server.
e. Get copy of your signature card. (Per Uniform Commercial Code Article 3)
f. Get a business debit card that you can use to make business purchases or take draws.

2. Then fill in a W-9 with your corporate name and EIN and give it any one that paid you over $600 so they do not issue you a 1099-Misc. under your SSN for the current tax year.

3. You should hire a payroll company to pay you once per month and set up direct deposit and pay yourself at least $12,000 in 2014 so you can maximize your Simple IRA employee contribution for 2013. I would recommend Precise Payroll at 302-530-8410. Remember if you are the only shareholder employee you do not need Workmans’ Compensation Insurance.

4. To maximize your retirement you have until October 1 to open a Simple IRA and then you have until April 15, of the following year to make a $12,000 employee contribution and your Corporation can make a 3% of your pay employer contribution. If you can afford to, you should also fund a ROTH IRA or a nondeductible IRA by contributing $5,500 by April 15, of the following year assuming you met the AGI limits and you re under 50 years old. If you can afford to make additional contributions for retirement I can recommend a financial planner.

5. Instead of a Simple IRA you can also consider a 401K and make an employee contribution of $17,500 and have your employer match 10% of that.

6. You should get the following insurance under your new Corporate name:

a. Professional liability or Errors and Omissions insurance.
b. You should also register your business vehicle registration in your Corporate name and inform your auto insurer to update your policy and add full tort coverage.
c. You should also get a personal umbrella of at least $ 1,000,000 if not more depending on your personal net worth.
d. You should also get disability insurance and pay the premiums out of your personal bank account so if you have to file a claim the proceeds will be tax free. I would recommend Tim Harris of Nationwide at 610-565-1910 to get quotes for a, b, c and d.
e. Health Insurance, I recommend you contact Donna McCabe at 610-832-3740.

7. You should sign up for a business visa or master card that either pays you cash back or pays you rewards like Pentagon Federal Credit Union 800-247-5626, or Chase Ink 800-882-6751. You should use the card to make all your business purchases so when you receive the yearend detailed statement that will list all your business expenses by category, it will simplify your record keeping.

8. You should use Microsoft Outlook or Google Calendars to schedule your appointments and track your mileage, meals, entertainment and cash expenses. Also keep receipts so you can total your cash expenses at year end. You should use Quickbooks to do monthly profit and loss statements to calculate your quarterly estimated tax payments. I recommend Kathy Shippee to help you set up Quickbooks at 267-228-4818.

9. If you want to accept credit cards using your smart phone sign up for Square, which has no monthly fees and charges about 3% per transaction.

10. If you hire someone else to reconcile your bank statements and or make deposits make sure they are bonded to prevent fraud. You should also review your annual profit and loss statement and tax returns with your tax preparer looking for any unusual increases in expenses. Finally you should review the cancelled checks every month from the business account to ensure there are no missing checks or suspicious transactions.

11. If you rent or own commercial space consider switching to Direct Energy at 888-734-0741, which will charge you a fixed rate of 8.79 cents per kWh for electricity which includes transmission charges and gross receipts tax. Compare that rate to PECO’s rate.

12. If you pay anyone who is not a corporation more than $600 during the tax year get them to fill in a W-9, before you pay them so can issue them a 1099-Misc.

By doing all the above steps you will follow the three rules that every entrepreneur has which are to:

1. Pay the least amount of taxes legally by following rules 2 and 3 below;

2. Maximize your retirement contributions by fully funding both a Simple and Roth or nondeductible IRA;

3. Practice good corporate governance by not paying personal expenses from the business checking account and keeping good business records and using your business credit cards for all your business purchases. Making sure you have the proper amount of insurance listed in paragraph 6 above.

Feel free to contact Gregory Spadea at Spadea & Associates, LLC in Ridley Park at 610-521-0604 if you have any questions.

Amortizing Intangible Assets When You Buy A Business

Intangible assets business diagram
When you buy the assets or the stock of business you may acquire intangible assets such as goodwill if you pay more than the net value of the underlying tangible assets. Under the Internal Revenue Code Section 197 you must amortize these intangible assets over 15 years. Common examples of intangible assets include the following:

  1. goodwill;
  2. going concern value;
  3. workforce in place including its composition and terms and conditions (contractual or otherwise) of its employment;
  4. business books and records, proprietary operating systems, or any other information base including client lists or other information with respect to current or prospective customers;
  5. supplier based intangibles such as the existence of favorable distribution relationships or favorable contracts;
  6. any patent, copyright, formula, process, design or knowhow;
  7. any government license or permit;
  8. any covenant not to compete entered into in connection with an acquisition of an interest in a trade or business; and
  9. any franchise, trademark, or trade name.

After you purchase the company you must allocate the premium paid in excess of the net tangible asset values to the appropriate intangible asset listed above. However, if you can show that the useful life of the intangible asset is less than 15 years you can use that period to amortize the asset. An example would be a covenant not to compete contract with payments made over 5 years. In that example you can amortize the cost of the covenant over the five year contract period as payments are made instead the 15 year statutory period.

If you are considering buying the assets or stock of a company and you need a sales agreement or help calculating the value of the intangible assets please call Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604 in Ridley Park, Pennsylvania.

Why Your Business Needs the SBA Section 8(a) Certification

Businesspeople meeting in conference room
What is the SBA Section 8(a) Program?
Section 8(a) of the Small Business Act empowers the Small Business Administration (SBA) to enter into contracts with other federal agencies to provide supplies, services and construction. In contracting with another agency, the SBA subcontracts all of the performance requirements to a “socially and economically disadvantaged small business concern.” Firm participation is divided into two phases over the nine year program: a four-year developmental stage and a five-year transition stage. A firm may only be certified once under the SBA Section 8(a) nine year program. During the first four years of this program, firms are in a developmental stage or growth stage. For the next five years, firms are in a transitional stage. The 8(a) program is SBA’s effort to promote equal access for socially and economically disadvantaged individuals to participate in the business sector. This program assists Section 8(a) approved firms to participate in the business sector by applying for government contracts and to become independently competitive in the marketplace.
To qualify for the program, a small business must be owned and controlled by a socially and economically disadvantaged individual. Presumed disadvantaged groups include African Americans, Hispanic Americans, Asian Pacific Americans, and Subcontinent Asian Americans.

Other individuals can be admitted to the program if they show through a “preponderance of the evidence” that they are disadvantaged because of race, ethnicity, gender, physical handicap, or residence in an environment isolated from the mainstream of American society. Individual applicants must be a U.S. citizen, be fully employed by the subject firm, possess and demonstrate the technical, managerial, operational experience to manage the firm. Individuals must have a net worth of less than $250,000, excluding the value of the business and primary residence.
Why you need an SBA Section 8(a) Designation and Certification
The biggest and most powerful benefit of 8(a) participation: vendors can receive sole-source contracts up to a cap of $3.5 million for goods and services and $5 million for manufacturing.

The SBA undertakes an extensive effort to provide contracting opportunities to those businesses certified under their 8(a) program. The SBA maintains close contact with various federal agencies to keep government personnel informed of the 8(a) program goals and procedures and to request that contract opportunities be reserved for the 8(a) program. There are some federal contracts that are set aside so that only 8(a) certified or Socially Disadvantaged Businesses (SDB) can bid on them. There are other cases where federal contracts are awarded to 8(a) firms without being put out for open bidding. These are called sole source contracts. It is imperative that 8(a) certified firms conduct independent marketing activities for contract opportunities both in the public and private sector. When a 8(a) firm soliciting business with federal government agencies identifies contractual opportunities, it may attempt to convince the federal agency that it is qualified to undertake the work, and that the firm’s name should be submitted to the SBA as the recommended contractor. The SBA has signed Memorandums of Understanding (MOUs) with 25 federal agencies allowing them to contract directly with certified 8(a) firms. Section 8(a) firms are also permitted to form joint ventures and teams to bid on contracts.
Spadea & Associates, LLC Offers Superior Assistance for the Entire Certification Process
Our staff provides expert assistance in the preparation and submission of the 8(a) application. Our Services are Complete and Comprehensive: We collect, analyze, prepare submission documents and professionally format your application, ensuring that it is responsive to the requirements as outlined by the Small Business Administration. We collect, prepare, package and submit your application to the respective SBA office in either King of Prussia, PA for east coast applicants or San Francisco, CA for west coast applicants. We provide on-going support, including representation at the SBA Office of Hearing and Appeals, until a final determination on the Certification Application is rendered. Our Services are all inclusive: initial strategic planning, preparing the application, submission to SBA, follow-up with SBA 8(a) officials, face-to-face representation before SBA’s Division of Program Certification and Eligibility and finally, if necessary, representation at the Office of Hearing Appeals by our trained and experienced attorneys. We also proactively address certain issues that our staff identifies which the SBA will be critical of in evaluating your application enabling your application to be processed faster. In the event the SBA raises issues in reviewing your proposal, we present strong and convincing arguments citing specific code sections of the Federal Regulations to overcome any objections preventing your application’s approval. If you have any questions or would like more information on Section 8(a) please call Gregory Spadea of Spadea & Associates, LLC at 610-521-0604 in Ridley Park, Pennsylvania.

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