WEBVTT 00:00:06.019 --> 00:00:09.259 Hi everyone. This is the how to lower your tax 00:00:09.259 --> 00:00:12.439 bill podcast. I'm your host, Terrence Hutchins. 00:00:12.939 --> 00:00:15.400 I'm a financial and tax advisor in the Dallas 00:00:15.400 --> 00:00:18.199 Fort Worth area. And the goal of this podcast 00:00:18.199 --> 00:00:20.760 is to help you listeners get educated on different 00:00:20.760 --> 00:00:23.579 tax strategies that you could implement to improve 00:00:23.579 --> 00:00:26.780 your tax situation immediately. Each episode 00:00:26.780 --> 00:00:29.780 will break down useful tax tips you can use to 00:00:29.780 --> 00:00:32.390 save money. no matter what your personal or business 00:00:32.390 --> 00:00:35.829 income situation. Because our motto is keep more 00:00:35.829 --> 00:00:39.130 of what you earn. So let's get into today's episode. 00:00:44.929 --> 00:00:47.289 So thanks for tuning in to another episode of 00:00:47.289 --> 00:00:50.289 how to lower your tax bill. The tax season has 00:00:50.289 --> 00:00:53.429 wrapped and many of you who own businesses check 00:00:53.429 --> 00:00:56.950 that box off. and you may not revisit this until 00:00:56.950 --> 00:00:59.429 the end of the year or next year. And so today 00:00:59.429 --> 00:01:01.850 we're going to hopefully encourage you not to 00:01:01.850 --> 00:01:04.409 just check taxes off as an item that you completed 00:01:04.409 --> 00:01:07.150 and actually think through some of the mistakes 00:01:07.150 --> 00:01:09.250 that we see that are common that business owners 00:01:09.250 --> 00:01:11.870 make. And then also some things for you to implement 00:01:11.870 --> 00:01:14.329 from a strategy standpoint to hopefully keep 00:01:14.329 --> 00:01:17.989 more of your hard earned money. I am still here 00:01:17.989 --> 00:01:21.569 with my talented co -host, Tamia Kelly. Say hi 00:01:21.569 --> 00:01:23.900 to the people. Hey, great people. I don't know 00:01:23.900 --> 00:01:26.739 about talented, but I am great. So we're here. 00:01:26.840 --> 00:01:29.939 We'll see what happens. I'm sure you will continue 00:01:29.939 --> 00:01:33.180 to find out that I am still blind. So I mean, 00:01:33.299 --> 00:01:35.280 we'll work it out. Shout out to Terrence. You 00:01:35.280 --> 00:01:38.159 know, he's going to help me along the way. Hello, 00:01:38.379 --> 00:01:42.060 good people. Join us on this ride. So I don't 00:01:42.060 --> 00:01:45.739 know how you are great and not talented. That's 00:01:45.739 --> 00:01:50.069 another podcast. So we're going to go through 00:01:50.069 --> 00:01:53.030 five mistakes or things that we see business 00:01:53.030 --> 00:01:55.750 owners do that hopefully you aren't going to 00:01:55.750 --> 00:01:57.769 be one of those business owners. Or if you do 00:01:57.769 --> 00:01:59.950 or have done one of these things, you'll have 00:01:59.950 --> 00:02:03.189 the opportunity to adjust your behavior for future 00:02:03.189 --> 00:02:05.609 reference. And so one of the biggest things that 00:02:05.609 --> 00:02:08.189 I see, and I always encourage people, if we look 00:02:08.189 --> 00:02:10.710 at their tax return from the prior year, I look 00:02:10.710 --> 00:02:14.060 at line 38 on their tax return. Line 38 on their 00:02:14.060 --> 00:02:17.680 tax return tells you, did you pay enough into 00:02:17.680 --> 00:02:20.599 the IRS for them to not charge you a penalty? 00:02:21.900 --> 00:02:23.819 And a lot of business owners, when I first work 00:02:23.819 --> 00:02:26.740 with them, I tell them that, hey, the IRS is 00:02:26.740 --> 00:02:29.300 your partner, okay? Now, ideally, they'll be 00:02:29.300 --> 00:02:31.719 a silent partner. I don't want to hear from you, 00:02:31.960 --> 00:02:34.400 all right? I just have to pay them what they 00:02:34.400 --> 00:02:37.400 are due based on the money that I make and the 00:02:37.400 --> 00:02:40.460 type of money that I make. But if I don't pay 00:02:40.460 --> 00:02:42.599 them enough during the year, they would charge 00:02:42.599 --> 00:02:46.719 me a failure to pay penalty. Tamia, you probably 00:02:46.719 --> 00:02:48.719 had a few people this past tax year you worked 00:02:48.719 --> 00:02:52.520 with who knew they were going to owe and they 00:02:52.520 --> 00:02:54.460 were just waiting on you to tell them how much. 00:02:54.680 --> 00:02:58.139 Did you have that? Yes. So I did have that experience. 00:02:58.780 --> 00:03:01.719 And honestly, I thought it was the norm, Terrence. 00:03:01.979 --> 00:03:06.460 Like I, again, you guys, being in this tax world 00:03:06.460 --> 00:03:08.900 has really... opened my eyes to a lot of different 00:03:08.900 --> 00:03:12.900 things. And it is very common for people to wait 00:03:12.900 --> 00:03:15.300 and just to pay and know that they're going to 00:03:15.300 --> 00:03:17.080 have to pay and know that there's going to be 00:03:17.080 --> 00:03:20.599 a penalty. And so I did have a few people, and 00:03:20.599 --> 00:03:23.340 here it is people, that penalty is not small, 00:03:23.740 --> 00:03:27.139 not small by a little bit. And so they just handed 00:03:27.139 --> 00:03:30.500 me their shoe box of receipts and was like, hey, 00:03:30.860 --> 00:03:33.620 I know I'm going to owe, but here you go. And 00:03:33.620 --> 00:03:36.319 that was it. So it was interesting to me that 00:03:36.319 --> 00:03:38.580 one, there was an expectation that they owe. 00:03:38.780 --> 00:03:42.120 But two, what was also interesting is that throughout 00:03:42.120 --> 00:03:44.800 the year, right, so we just finished the 2024 00:03:44.800 --> 00:03:47.840 year, throughout the 2024 year, I didn't hear 00:03:47.840 --> 00:03:51.219 any of my customers prepare for these taxes. 00:03:51.780 --> 00:03:54.759 They just didn't prepare. And so I'm looking 00:03:54.759 --> 00:03:56.699 forward to what you have to say about that, Terrence, 00:03:56.699 --> 00:03:59.439 in terms of you don't have to wait until you 00:03:59.439 --> 00:04:01.740 hand your shoe box of receipts to your tax preparer. 00:04:01.949 --> 00:04:05.330 you can prepare to make sure you're paying enough 00:04:05.330 --> 00:04:09.610 taxes and also prepare for any penalty if you've 00:04:09.610 --> 00:04:14.610 underpaid. Definitely. So the things that we 00:04:14.610 --> 00:04:17.230 look at line 38 says, Hey, that definitely the 00:04:17.230 --> 00:04:19.949 other line you can look at is line 24. That just 00:04:19.949 --> 00:04:22.829 shows you how much did you pay last year in total 00:04:22.829 --> 00:04:25.050 taxes. We talked about this on a prior episode 00:04:25.050 --> 00:04:28.089 as far as if you're a W -2 employee, I see the 00:04:28.089 --> 00:04:36.870 same thing. Listen, I hope this person, listen, 00:04:37.269 --> 00:04:40.970 everybody's information is private. Okay. I will 00:04:40.970 --> 00:04:43.949 say this y 'all. Please go back and listen to 00:04:43.949 --> 00:04:46.810 the prior episodes because here's the thing for 00:04:46.810 --> 00:04:51.449 your W for employees. Please make sure you are 00:04:51.449 --> 00:04:54.899 withholding enough. What is it? The W? Four, 00:04:55.100 --> 00:04:59.160 yes. On your W4, please make sure you're making 00:04:59.160 --> 00:05:01.899 the proper selection. I literally, and I hope, 00:05:02.040 --> 00:05:06.620 I hope, if not listening, I literally had someone 00:05:06.620 --> 00:05:10.639 who made over, let's just say over 70K and only 00:05:10.639 --> 00:05:17.740 paid 800 in taxes. $800. $800. You're gonna get 00:05:17.740 --> 00:05:19.660 a penalty, people. You're not getting over on 00:05:19.660 --> 00:05:23.220 the government. Pay them what you owe them, please. 00:05:25.079 --> 00:05:27.680 If you are in a situation where you always owe 00:05:27.680 --> 00:05:30.379 every year, understand that you're not only just 00:05:30.379 --> 00:05:32.319 going to owe prior to the next year, unless you 00:05:32.319 --> 00:05:34.220 made some changes, you're going to continue to 00:05:34.220 --> 00:05:36.139 owe more. And many times people will put paying 00:05:36.139 --> 00:05:39.480 plans and now we're paying interest. And so we 00:05:39.480 --> 00:05:42.720 don't want to have this cycle. Right. But a lot 00:05:42.720 --> 00:05:44.819 of people just need that education. But that's 00:05:44.819 --> 00:05:47.980 why MasterCard Discover Capital One. You know, 00:05:48.060 --> 00:05:50.759 Visa, all of them are big companies because they 00:05:50.759 --> 00:05:54.100 make money on people not planning ahead properly 00:05:54.100 --> 00:05:56.800 for their purchases. Right. So if you're a business 00:05:56.800 --> 00:05:58.740 owner, though, one thing that you need to do, 00:05:58.779 --> 00:06:01.360 and this is very common, even for a lot of CPAs, 00:06:01.399 --> 00:06:03.459 they don't do a lot of planning with clients. 00:06:03.500 --> 00:06:06.199 They prepare their taxes. They send them their 00:06:06.199 --> 00:06:08.600 return and then they give them these vouchers. 00:06:08.800 --> 00:06:11.100 Those vouchers will essentially say, hey, here 00:06:11.100 --> 00:06:13.519 is your get out of jail free card. If you make 00:06:13.519 --> 00:06:16.259 under $150 ,000, if you pay in 100 % of what 00:06:16.259 --> 00:06:19.600 you owe the last year, So if I make $140 ,000 00:06:19.600 --> 00:06:23.600 and I owed 10 grand last year, if I pay $10 ,000 00:06:23.600 --> 00:06:27.899 in 2025, I won't owe a tax bill. That is if I 00:06:27.899 --> 00:06:30.480 do it, if painted. So I can't do it in December 00:06:30.480 --> 00:06:34.579 31st. I have to do it in stages. So April 15, 00:06:34.839 --> 00:06:38.279 June 15, October 15, January. So they kind of 00:06:38.279 --> 00:06:41.079 stagger it, oddly, I guess you could say, as 00:06:41.079 --> 00:06:43.439 far as when you make your estimated tax payments. 00:06:43.800 --> 00:06:46.100 But you have to do it in those three months increments. 00:06:46.360 --> 00:06:49.100 Because, hey, that $10 ,000 IRS thinks you should 00:06:49.100 --> 00:06:51.720 be paying me $1 ,200. That's your get out of 00:06:51.720 --> 00:06:54.459 jail free card. If you make over $150 ,000, it's 00:06:54.459 --> 00:06:57.360 actually going to be 110%. So it'd be $11 ,000 00:06:57.360 --> 00:07:00.240 in that example. And I got to do it in four increments 00:07:00.240 --> 00:07:02.660 from that vantage point. So that's what you would 00:07:02.660 --> 00:07:04.379 call your safe harbor or your get out of jail 00:07:04.379 --> 00:07:07.680 free card. Now, it's very predictable. If you 00:07:07.680 --> 00:07:10.920 are number one saying, hey, I owe 10 grand last 00:07:10.920 --> 00:07:13.120 year, then unless something dramatically changes, 00:07:13.300 --> 00:07:15.980 you're gonna owe probably around that same. Which 00:07:15.980 --> 00:07:19.500 means you should adjust your spending accordingly 00:07:19.500 --> 00:07:21.980 to factor in that this is an expense that you 00:07:21.980 --> 00:07:24.540 have to make. In fact, I tell business owners, 00:07:24.839 --> 00:07:28.100 Your business should pay for your taxes. Yes. 00:07:28.379 --> 00:07:30.100 Meaning you should have enough capital coming 00:07:30.100 --> 00:07:32.680 in to not only pay you for the work you're doing, 00:07:32.800 --> 00:07:35.040 but also to cover the taxes that come along with 00:07:35.040 --> 00:07:37.819 it. If your business can't generate enough income 00:07:37.819 --> 00:07:40.800 to do that, then you probably are either spending 00:07:40.800 --> 00:07:42.620 too much and you need to reassess your budget 00:07:42.620 --> 00:07:46.040 or you need to reassess, is this a good business 00:07:46.040 --> 00:07:48.540 for you? So this is a cycle that you're going 00:07:48.540 --> 00:07:50.379 to continue to follow. You're probably just going 00:07:50.379 --> 00:07:52.699 to dig yourself into a bigger hole. And on a 00:07:52.699 --> 00:07:54.319 future episode, I'm going to talk about just 00:07:54.319 --> 00:07:56.620 the decision to start a business. And maybe some 00:07:56.620 --> 00:07:59.480 of the criteria you could use to help determine 00:07:59.480 --> 00:08:01.680 that. Yeah. So you have your safe harbor method 00:08:01.680 --> 00:08:03.959 or get out of your free car, pay 100 % of what 00:08:03.959 --> 00:08:06.540 you owe last year, pay 90 % of what you owe in 00:08:06.540 --> 00:08:08.939 the current year or pay 110 % of what you owe 00:08:08.939 --> 00:08:11.759 the prior year. If your income is above 150 ,000, 00:08:11.860 --> 00:08:15.060 then you have to pay as you go. Now we'll be 00:08:15.060 --> 00:08:17.540 preferred on the safe harbor method. I would 00:08:17.540 --> 00:08:19.379 prefer the pay as you go method over the safe 00:08:19.379 --> 00:08:22.220 harbor for two reasons. Number one, it allows 00:08:22.220 --> 00:08:25.839 you to be more strategic with when and how much 00:08:25.839 --> 00:08:28.360 you pay your taxes. So for example, I'm a business 00:08:28.360 --> 00:08:31.379 owner. He does very well. But in twenty three, 00:08:31.540 --> 00:08:33.559 let's just say he made two million dollars and 00:08:33.559 --> 00:08:36.120 twenty four because of depreciation and some 00:08:36.120 --> 00:08:38.440 other things he made like a million dollars on 00:08:38.440 --> 00:08:41.259 paper. Well, his tax liability for twenty four 00:08:41.259 --> 00:08:44.080 was a lot lower than twenty three. So his estimated 00:08:44.080 --> 00:08:47.740 taxes would be a lot lower. However. when we 00:08:47.740 --> 00:08:50.120 file his tax return, so 2025 would be the first 00:08:50.120 --> 00:08:53.120 year I'll file his tax return. For 2025, let's 00:08:53.120 --> 00:08:55.580 say he goes back to making that $2 million. Well, 00:08:55.740 --> 00:08:59.159 he could have paid based on making a billion. 00:08:59.500 --> 00:09:01.340 And that was what he was thinking. Oh, you know, 00:09:01.539 --> 00:09:03.159 my estimated taxes are way less than they were 00:09:03.159 --> 00:09:05.379 the prior year. But if his income sheets back 00:09:05.379 --> 00:09:07.879 up and he doesn't prepare ahead of time, then 00:09:07.879 --> 00:09:09.539 all of a sudden when we file, he's going to be 00:09:09.539 --> 00:09:11.720 looking at this big bill. Now, he won't pay a 00:09:11.720 --> 00:09:14.639 penalty, but he will have a big bill tied to 00:09:14.639 --> 00:09:18.139 it. And to me, I would imagine People love writing 00:09:18.139 --> 00:09:24.080 bigger checks than smaller checks. Right, right. 00:09:24.460 --> 00:09:27.100 Everybody liked to pay more than what they did 00:09:27.100 --> 00:09:29.320 the last year. Sure, why not? But I want to go 00:09:29.320 --> 00:09:31.299 back to something that you mentioned. I know 00:09:31.299 --> 00:09:33.860 you were talking about the business owners, especially 00:09:33.860 --> 00:09:36.820 with the pay as you go, and just using that common 00:09:36.820 --> 00:09:40.850 sense, like if I owed... 10 grand in 2023, then 00:09:40.850 --> 00:09:43.409 I need to prepare for that, right? And I think 00:09:43.409 --> 00:09:46.830 the same goes for our W -2 employees. If you 00:09:46.830 --> 00:09:49.289 are owing, you don't have a lot of deductions 00:09:49.289 --> 00:09:52.090 or anything to help, then either change your 00:09:52.090 --> 00:09:55.389 withholding or actually add more to it so you 00:09:55.389 --> 00:09:57.789 won't have to keep on paying this huge chunk. 00:09:58.090 --> 00:10:01.580 You can take those same steps. to make sure you're 00:10:01.580 --> 00:10:04.100 not owing or having to come out so much money 00:10:04.100 --> 00:10:06.860 when you file your taxes. So I think this is 00:10:06.860 --> 00:10:10.200 also applicable to those W2 employees as well. 00:10:10.740 --> 00:10:13.120 Right. Because it's a lot easier to pay extra 00:10:13.120 --> 00:10:16.259 dollars a month and come up with a few thousand 00:10:16.259 --> 00:10:19.559 dollars on that. Absolutely. The pay as you go 00:10:19.559 --> 00:10:22.460 method. I will use that with people specifically 00:10:22.460 --> 00:10:27.279 if they have a drop in income. Oh, OK. So for 00:10:27.279 --> 00:10:30.090 example, if he had gone from. $2 million to a 00:10:30.090 --> 00:10:32.110 million. I wouldn't have wanted him to pay estimated 00:10:32.110 --> 00:10:34.070 taxes on $2 million. He would have paid in too 00:10:34.070 --> 00:10:37.610 much. But if we have a jumping income, I wouldn't 00:10:37.610 --> 00:10:40.269 need to save partner revenue. So let's say he 00:10:40.269 --> 00:10:42.950 makes a million. I still want him to pay based 00:10:42.950 --> 00:10:45.269 on him making a million, but I want him to set 00:10:45.269 --> 00:10:47.690 aside the extra money. So let's just say his 00:10:47.690 --> 00:10:50.769 taxes get doubled. So instead of him paying 10 00:10:50.769 --> 00:10:54.029 ,000, he has to pay 20. I'd say, hey, go ahead 00:10:54.029 --> 00:10:56.759 and pay the 10. throughout the year, so you have 00:10:56.759 --> 00:10:58.460 to get out of jail free card, but we need to 00:10:58.460 --> 00:11:01.379 set aside that other 10. Now, in this case, he 00:11:01.379 --> 00:11:03.240 probably has an extra zero tied to his numbers, 00:11:03.379 --> 00:11:06.220 right? So if the numbers are much bigger, you 00:11:06.220 --> 00:11:07.820 can see the value of that. Just say, hey, look, 00:11:07.940 --> 00:11:10.179 that extra $100 ,000 or $200 ,000 that you're 00:11:10.179 --> 00:11:12.120 going to have to pay in taxes. How about we go 00:11:12.120 --> 00:11:14.559 and just set that aside, even if we put it in 00:11:14.559 --> 00:11:16.659 a CD or something, a treasury bill where, hey, 00:11:16.659 --> 00:11:18.720 we're going to get four, four and a half percent. 00:11:18.919 --> 00:11:22.360 So that $100 ,000 and $200 ,000. could actually 00:11:22.360 --> 00:11:24.159 be getting that four, four and a half percent 00:11:24.159 --> 00:11:27.460 during the year. And then when I file my taxes, 00:11:27.480 --> 00:11:30.039 I could have just paid it in April 15th. So as 00:11:30.039 --> 00:11:33.779 long as I pay my bills by January 15th, then 00:11:33.779 --> 00:11:37.159 I will effectively avoid that penalty. The same 00:11:37.159 --> 00:11:40.440 goes for tax withholding. If you have an S corporation 00:11:40.440 --> 00:11:44.100 or you're a C Corp owner, you can do your withholding 00:11:44.100 --> 00:11:46.220 where your withholding is a bit throughout the 00:11:46.220 --> 00:11:50.080 whole year. So I'll do the same thing with retirees, 00:11:50.080 --> 00:11:53.169 for example. who, let's just say they're taking 00:11:53.169 --> 00:11:55.789 out monthly from their retirement accounts. I 00:11:55.789 --> 00:11:57.509 say, well, the first part of the year, you're 00:11:57.509 --> 00:12:00.129 just going to take out your net amount, but the 00:12:00.129 --> 00:12:02.190 tax amount, we don't want to pay your taxes monthly. 00:12:02.789 --> 00:12:04.970 We're going to just do a one time withholding 00:12:04.970 --> 00:12:07.250 at the end of the year so that, hey, if my taxes 00:12:07.250 --> 00:12:09.490 are 30 grand for the year, I still would have 00:12:09.490 --> 00:12:12.809 set that $30 ,000 in cash in the account, but 00:12:12.809 --> 00:12:15.149 I'll keep it in a safe place where it's getting 00:12:15.149 --> 00:12:18.809 at 4%. And in December, I'll do a one -time tax 00:12:18.809 --> 00:12:21.509 withholding of $30 ,000, if that was the tax 00:12:21.509 --> 00:12:24.250 bill. And in the IRS, because it came from a 00:12:24.250 --> 00:12:27.649 withholding, whether that was from an IRA or 00:12:27.649 --> 00:12:30.509 from your W -2 paycheck, that withholding, they 00:12:30.509 --> 00:12:32.190 treat it as if it was paid evenly throughout 00:12:32.190 --> 00:12:35.029 the year. Even though I did it all in December, 00:12:35.490 --> 00:12:38.049 they would treat it as if I paid $1 ,500 a month. 00:12:38.629 --> 00:12:40.309 It allows you to basically keep more money on 00:12:40.309 --> 00:12:43.509 hand, use it to grow, so you eventually just 00:12:43.509 --> 00:12:45.320 basically keep more money in your pocket. So 00:12:45.320 --> 00:12:48.220 that would be energies that could help you actually 00:12:48.220 --> 00:12:49.879 make a little bit more money. Listen, y 'all. 00:12:50.059 --> 00:12:52.259 That's a great strategy. Listen, I don't know 00:12:52.259 --> 00:12:53.860 if y 'all remember this from one of our previous 00:12:53.860 --> 00:12:56.940 episodes, but Terrence has said like, this is 00:12:56.940 --> 00:13:00.240 not, you know, you don't have to go to TikTok 00:13:00.240 --> 00:13:04.039 to all these different places. This is not like 00:13:04.039 --> 00:13:06.700 hidden information. You can find it, but listening 00:13:06.700 --> 00:13:09.799 to podcasts like this. with someone with experience, 00:13:10.240 --> 00:13:13.120 we'll give you those strategies for free, right? 00:13:13.320 --> 00:13:15.500 So please take heed to this, y 'all, because 00:13:15.500 --> 00:13:17.799 paying penalties is not good. I mean, unless 00:13:17.799 --> 00:13:19.940 you just want to, you know, like you said, write 00:13:19.940 --> 00:13:21.740 them big checks, unless you just don't care about 00:13:21.740 --> 00:13:24.179 throwing away money, that's your business. But 00:13:24.179 --> 00:13:26.240 I don't know about y 'all, but I need all my 00:13:26.240 --> 00:13:30.120 coins, all of them. Right, right, right. So first, 00:13:30.419 --> 00:13:32.820 we have, okay, estimated taxes. You have the 00:13:32.820 --> 00:13:35.019 pay as you go, or the get out of jail free car, 00:13:35.120 --> 00:13:37.360 safe harbor method. So depending on your situation, 00:13:37.600 --> 00:13:40.299 you can pick one that makes the most sense. Secondly, 00:13:40.419 --> 00:13:42.720 so I'm gonna ask you my favorite question I get 00:13:42.720 --> 00:13:45.500 at least 10 times every year. So I'm gonna see 00:13:45.500 --> 00:13:47.740 if you're doing your homework, right? So the 00:13:47.740 --> 00:13:52.139 question is... The dog ate it. No, no, no. The 00:13:52.139 --> 00:13:55.240 question I get is, hey, I made money, but I got 00:13:55.240 --> 00:13:58.970 paid in cash. Do I have to report it? I got paid 00:13:58.970 --> 00:14:02.269 under the table. You absolutely do have to report 00:14:02.269 --> 00:14:07.470 it. So I think, okay, if you stopped a cop and 00:14:07.470 --> 00:14:10.309 said, hey, I have marijuana in the car, or I 00:14:10.309 --> 00:14:13.049 got a gun, an unregistered firearm in the car, 00:14:13.429 --> 00:14:15.610 what should I do about it? What do you think 00:14:15.610 --> 00:14:17.470 they're gonna tell you, okay? Like, I'm not gonna 00:14:17.470 --> 00:14:20.110 tell you as a tax professional. You know what? 00:14:20.649 --> 00:14:23.570 Break the tax law, okay? Do that, all right? 00:14:23.929 --> 00:14:26.549 I'm making a lot of this, but... The other component 00:14:26.549 --> 00:14:29.470 to that is if you are paying someone that is 00:14:29.470 --> 00:14:32.529 working for you and you pay them more than six 00:14:32.529 --> 00:14:34.389 hundred dollars and they're not an employee. 00:14:34.870 --> 00:14:37.129 And I had this situation happen here recently 00:14:37.129 --> 00:14:41.269 where a taxpayer who I'm assuming either didn't 00:14:41.269 --> 00:14:44.230 know the rules or they were just trying to. Oh, 00:14:44.289 --> 00:14:48.909 you know, they was probably a tick tocker. Anyway, 00:14:50.149 --> 00:14:53.419 we said we sent out a 1099. to them that says, 00:14:53.600 --> 00:14:56.639 hey, last year it's a 1099 NEC form and that 00:14:56.639 --> 00:15:00.080 1099 NEC form showed how much this company paid 00:15:00.080 --> 00:15:03.720 you to do work for them. So the IRS essentially 00:15:03.720 --> 00:15:07.679 says your income is either earned or it's unearned. 00:15:07.679 --> 00:15:11.480 If your income is earned, you do that as an employee 00:15:11.480 --> 00:15:14.139 or as a contractor. If you're not an employee 00:15:14.139 --> 00:15:16.320 and you're a contractor, that means you're effectively 00:15:16.320 --> 00:15:18.879 in business for yourself. Right. Okay. Right. 00:15:18.879 --> 00:15:22.480 It's not a lot of money. even if it was $1 ,000, 00:15:22.659 --> 00:15:24.799 you're considered in business for yourself, is 00:15:24.799 --> 00:15:27.539 how the IRS defines it. Because I had a lady 00:15:27.539 --> 00:15:30.340 who thought, well, I can get a 1099 miscellaneous 00:15:30.340 --> 00:15:32.899 for, and then that's not gonna treat me as a 00:15:32.899 --> 00:15:34.779 business. What she would try to do is avoid paying 00:15:34.779 --> 00:15:38.059 the self -report money. And I'm thinking, well, 00:15:38.059 --> 00:15:40.679 that's not really a thing. Or I get people who, 00:15:40.759 --> 00:15:43.059 they say, hey, I don't wanna get a 1099 because 00:15:43.059 --> 00:15:45.220 I gotta report the money. Well, the thing is, 00:15:45.220 --> 00:15:47.240 if I'm the business owner and I'm paying you, 00:15:47.620 --> 00:15:51.179 well, why should I? have to face the IRS. Correct. 00:15:51.200 --> 00:15:54.120 If they don't send you a 1099, then they could 00:15:54.120 --> 00:15:56.659 throw out that deduction. Say it for the people 00:15:56.659 --> 00:15:59.720 in the back, Terrence. I literally just had this 00:15:59.720 --> 00:16:02.779 conversation, the person shall remain nameless, 00:16:03.059 --> 00:16:06.080 but they were trying to help a relative. Let's 00:16:06.080 --> 00:16:07.679 just say that. Okay, we're going to leave it 00:16:07.679 --> 00:16:11.360 at that. And they were trying to not do the 1099. 00:16:11.519 --> 00:16:15.139 And I said, absolutely not. That is not going 00:16:15.139 --> 00:16:18.899 to benefit you, right? And so What he's saying, 00:16:19.000 --> 00:16:21.019 you all, I really hope you're listening because 00:16:21.019 --> 00:16:24.240 for business owners to want to do the right thing, 00:16:24.399 --> 00:16:28.100 who want to eventually get to where you know 00:16:28.100 --> 00:16:31.139 how to balance your books rather, and you know 00:16:31.139 --> 00:16:34.679 how to use those tax deductions and these tips 00:16:34.679 --> 00:16:37.940 and tricks that he's given you all, this is something 00:16:37.940 --> 00:16:41.460 that's huge. If you are paying people more than 00:16:41.460 --> 00:16:46.059 $600, Do the 1099. I digress. Go ahead, Terrence, 00:16:46.120 --> 00:16:49.200 because that just triggered me literally was 00:16:49.200 --> 00:16:51.799 trying to finesse. They call it finessing, trying 00:16:51.799 --> 00:16:53.840 to finesse something. And I said, no, you're 00:16:53.840 --> 00:16:55.879 going to finesse your way in trouble. Let's not 00:16:55.879 --> 00:17:00.019 do that. So the thing is, when you hire someone, 00:17:00.120 --> 00:17:03.139 you should have a process. It's, OK, what are 00:17:03.139 --> 00:17:05.599 the terms of what you're going to do for me? 00:17:06.319 --> 00:17:08.559 We should have an agreement so everyone is on 00:17:08.559 --> 00:17:11.180 the same page. and then you would give them a 00:17:11.180 --> 00:17:13.720 W -9 -4 so you can collect their information. 00:17:14.079 --> 00:17:15.920 Now I've had people where they fill that W -9 00:17:15.920 --> 00:17:18.900 -4 out incorrectly, like they just put a fake 00:17:18.900 --> 00:17:21.140 social or EIA and I've had that happen with people. 00:17:21.359 --> 00:17:25.039 But it was up to you to give them the W -9 because 00:17:25.039 --> 00:17:27.599 not everyone that you deal with, unfortunately, 00:17:27.839 --> 00:17:30.920 is going to want to get that tax form. So you're 00:17:30.920 --> 00:17:33.259 in a position where, hey, I paid this person, 00:17:33.640 --> 00:17:36.279 I did collect the W -9, I did send them a 10 00:17:36.279 --> 00:17:38.920 -9, but I want to deduct that amount on my tax 00:17:38.920 --> 00:17:42.029 return. Well, if I can't substantiate that deduction 00:17:42.029 --> 00:17:44.609 by those things, the IRS could just throw it 00:17:44.609 --> 00:17:47.809 out. And so you're thinking, I paid this $5 ,000, 00:17:47.890 --> 00:17:50.529 I paid this $10 ,000. Well, if you didn't follow 00:17:50.529 --> 00:17:52.769 the protocol, why should I have to pay more taxes 00:17:52.769 --> 00:17:54.970 for someone else who's working for me? It's not 00:17:54.970 --> 00:17:57.529 like they're working for free. I wouldn't, you 00:17:57.529 --> 00:17:59.410 know. They're getting experience, if you want 00:17:59.410 --> 00:18:02.730 to call it that. Internship. But why would I 00:18:02.730 --> 00:18:06.009 pay more taxes on their behalf? Right. And so 00:18:06.009 --> 00:18:07.930 it's like, look, if they're not wanting to do 00:18:07.930 --> 00:18:10.089 that, if they're not willing to pay taxes, just 00:18:10.089 --> 00:18:13.849 imagine it's the same way I get with people who 00:18:13.849 --> 00:18:15.630 cheat on other things. It's like, well, what 00:18:15.630 --> 00:18:18.230 makes me so special that they're not going to 00:18:18.230 --> 00:18:20.109 try to cheat me? If they're willing to cheat 00:18:20.109 --> 00:18:22.710 the IRS. Correct. Way less special than the IRS. 00:18:23.269 --> 00:18:25.759 Correct. So they probably try to cheat me at 00:18:25.759 --> 00:18:28.579 some point. But anyway, I digress on that. Any 00:18:28.579 --> 00:18:33.680 thoughts? I certainly will say, please get some 00:18:33.680 --> 00:18:37.380 processes in order, right? I kid, not really, 00:18:37.779 --> 00:18:41.299 about the shoe box of receipts because some business 00:18:41.299 --> 00:18:44.920 owners do not keep good records and people get 00:18:44.920 --> 00:18:48.660 upset or have anxiety when it comes to tax season 00:18:48.660 --> 00:18:51.259 because they don't, it's like fear of the unknown. 00:18:51.609 --> 00:18:54.410 But if you take these tips, you know, the safe 00:18:54.410 --> 00:18:56.309 harbor, the pay as you go, that type of thing, 00:18:56.410 --> 00:19:00.410 if you issue those 1099s, if you do what you 00:19:00.410 --> 00:19:04.069 need to do, then come time to prepare your return, 00:19:04.450 --> 00:19:06.549 there should be no surprises, right? There should 00:19:06.549 --> 00:19:09.569 be no anxiety. And this is one of those things, 00:19:09.769 --> 00:19:13.049 business owner, where if you are going to have 00:19:13.049 --> 00:19:15.349 people working for you, please get a system in 00:19:15.349 --> 00:19:18.269 place. Please get a plan in place. Please be 00:19:18.269 --> 00:19:21.519 legit. Let's have a legitimate business. and 00:19:21.519 --> 00:19:24.079 issue those and if they don't want to have a 00:19:24.079 --> 00:19:27.720 1099 then do they really need to be working for 00:19:27.720 --> 00:19:31.859 you right right don't mess yourself up by not 00:19:31.859 --> 00:19:35.019 wanting to issue this 1099 um lose the deduction 00:19:35.019 --> 00:19:37.660 or even get penalized for it i don't i don't 00:19:37.660 --> 00:19:40.200 think it's worth it i just don't think i don't 00:19:40.200 --> 00:19:44.849 think it's worth it right and you know If they 00:19:44.849 --> 00:19:46.970 fill out your W -9 and they're a corporation, 00:19:47.069 --> 00:19:48.849 so they're a C -corporate and S -corporation, 00:19:49.029 --> 00:19:52.250 you don't have to send them a 1099 unless they're 00:19:52.250 --> 00:19:56.950 an attorney, okay? But I wonder how many people 00:19:56.950 --> 00:20:00.849 give their attorney 1099s, right? But anyway, 00:20:01.329 --> 00:20:05.730 the third thing that I see mistakes on is you 00:20:05.730 --> 00:20:08.769 buy stuff to save on taxes. Oh, real quick, before 00:20:08.769 --> 00:20:11.210 you jump into that one, don't forget your tip. 00:20:11.349 --> 00:20:14.490 about you don't have to do this to 99 yourself. 00:20:15.990 --> 00:20:18.970 Go get other people to do it. The other part 00:20:18.970 --> 00:20:21.789 is you actually want to send it to the IRS. If 00:20:21.789 --> 00:20:24.390 the other person gets it, they report it, but 00:20:24.390 --> 00:20:26.569 you didn't send it to the IRS, then you don't 00:20:26.569 --> 00:20:29.109 have the level of substantiation. Like they'll 00:20:29.109 --> 00:20:31.109 send that to form, but they won't report it to 00:20:31.109 --> 00:20:33.809 the IRS. So anyway, but you know, this is why 00:20:33.809 --> 00:20:37.700 we're learning. We're giving you things to. change 00:20:37.700 --> 00:20:39.119 if these are things you've done in the past. 00:20:39.160 --> 00:20:41.079 But these are things that you want to invest 00:20:41.079 --> 00:20:44.119 in, right? You want to invest into really good 00:20:44.119 --> 00:20:47.599 tax preparant. You want to invest into systems 00:20:47.599 --> 00:20:50.940 that will help you be organized and together 00:20:50.940 --> 00:20:54.200 like a vendor that can do your 1099s for you. 00:20:54.380 --> 00:20:56.680 Because I don't know about y 'all, but here in 00:20:56.680 --> 00:20:58.980 Oklahoma, they're kind of funky in the way they 00:20:58.980 --> 00:21:01.779 do some of these payroll things. So I will gladly 00:21:01.779 --> 00:21:04.180 give my little $2 to somebody else to do it that 00:21:04.180 --> 00:21:08.299 knows all the things. Gotcha. So I see this where, 00:21:08.559 --> 00:21:11.640 hey, I need to buy something to not pay taxes. 00:21:12.779 --> 00:21:16.660 So this is one area where - To offset. Kind of 00:21:16.660 --> 00:21:20.000 remind people, the government does not take 100 00:21:20.000 --> 00:21:24.960 % of your money. Yes, they do. If you owe taxes, 00:21:25.200 --> 00:21:27.299 that's going to be a percentage of the money 00:21:27.299 --> 00:21:32.240 that you make. So the top tax is 37%. You know, 00:21:32.319 --> 00:21:35.039 states, I think the max is like 13%. No, obviously 00:21:35.039 --> 00:21:37.700 - You'd be making quite a bit of money if you 00:21:37.700 --> 00:21:41.180 were in one of those tax brackets. So Max, you're 00:21:41.180 --> 00:21:44.819 going to pay 50 percent taxes and you are going 00:21:44.819 --> 00:21:47.119 to go buy something. Now, it may be worth it 00:21:47.119 --> 00:21:50.420 to you to buy something to save 50 cents. But 00:21:50.420 --> 00:21:52.720 most people, if you're only going to save 20 00:21:52.720 --> 00:21:55.380 cents or a dollar. So, hey, I got to spend a 00:21:55.380 --> 00:21:57.680 dollar to save 20 cents. That's really not a 00:21:57.680 --> 00:22:00.579 good deal. Or in the same way, if I get a coupon 00:22:00.579 --> 00:22:03.440 to a place I don't shop at, it's like, what am 00:22:03.440 --> 00:22:05.019 I going to do with this coupon? I'm gonna go 00:22:05.019 --> 00:22:07.519 buy something I don't need or don't want so that 00:22:07.519 --> 00:22:10.140 I can save a percent because of the coupon you 00:22:10.140 --> 00:22:12.200 gave. That's pretty much what a lot of people 00:22:12.200 --> 00:22:15.500 will do. Or they'll buy cars, they'll buy stuff. 00:22:15.660 --> 00:22:18.640 But they don't realize that you still have that 00:22:18.640 --> 00:22:20.740 payment. So even if I'm going to tax deduction 00:22:20.740 --> 00:22:23.740 today, that saves me from having to pay the IRS, 00:22:24.460 --> 00:22:28.039 I have a payment on that car in the future. And 00:22:28.039 --> 00:22:30.700 the principal payment that I have is not deductible. 00:22:30.730 --> 00:22:32.950 So if I'm paying a thousand dollars a month on 00:22:32.950 --> 00:22:35.130 this car, I could have took a big tax deduction 00:22:35.130 --> 00:22:38.109 in year one, but year two through five, I have 00:22:38.109 --> 00:22:40.190 a principal payment that I'm paying that I get 00:22:40.190 --> 00:22:42.369 no tax benefit for. That money is coming out 00:22:42.369 --> 00:22:45.029 of my account. And so this is an area where, 00:22:45.049 --> 00:22:47.869 you know, I always say don't pay a dollar to 00:22:47.869 --> 00:22:51.650 save 20 cents or 25 cents. All right. In this 00:22:51.650 --> 00:22:55.170 area, because going back to before, if you aren't 00:22:55.170 --> 00:22:57.450 setting aside money for taxes, you're going to 00:22:57.450 --> 00:22:59.109 probably find yourself in this situation and 00:22:59.109 --> 00:23:00.990 you're going to be trying to scramble. And my 00:23:00.990 --> 00:23:02.349 thought is, well, if you don't have money to 00:23:02.349 --> 00:23:04.529 pay your taxes, how do you have money to buy 00:23:04.529 --> 00:23:06.650 something that you don't need? So this is something 00:23:06.650 --> 00:23:09.390 I'll leave you with the floor for the first part. 00:23:09.769 --> 00:23:12.210 Number four is running your personal expenses 00:23:12.210 --> 00:23:16.430 through the business. Oh, man. Listen, has that 00:23:16.430 --> 00:23:18.589 something you experienced in your first year? 00:23:19.650 --> 00:23:25.049 Listen, so I want to give a little grace here 00:23:25.049 --> 00:23:28.970 because I did see this, right? A lot of small 00:23:28.970 --> 00:23:31.990 businesses who start their business, they will 00:23:31.990 --> 00:23:35.990 typically either use their current checking account 00:23:35.990 --> 00:23:38.950 or, you know, not, or if they get a business 00:23:38.950 --> 00:23:41.849 account, any income that they, any revenue or 00:23:41.849 --> 00:23:44.609 whatever, they'll just start using it for whatever, 00:23:44.789 --> 00:23:47.809 like their personal thing. And it's a no -go. 00:23:48.390 --> 00:23:52.329 You can't commingle. It's a no -go. One, as a 00:23:52.329 --> 00:23:55.269 tax preparer, it is HE double hockey sticks. 00:23:55.720 --> 00:23:58.940 trying to have you go through that bank statement 00:23:58.940 --> 00:24:02.720 to tell me what was personal use versus what 00:24:02.720 --> 00:24:06.079 was actually for the business. And then, I don't 00:24:06.079 --> 00:24:09.819 know about y 'all, but you know, you sleep sometimes. 00:24:10.180 --> 00:24:12.759 And after you've slept a couple of days or two, 00:24:12.759 --> 00:24:16.680 you may forget from January 1 to December 31, 00:24:17.319 --> 00:24:20.279 what you spent or what every expense was and 00:24:20.279 --> 00:24:23.759 if it was for personal versus business use. And 00:24:23.759 --> 00:24:27.930 that's not okay. Although you may not have to 00:24:27.930 --> 00:24:31.190 give me all of your receipts, the way the IRS 00:24:31.190 --> 00:24:35.089 is set up and with this whole automated IA, just 00:24:35.089 --> 00:24:37.490 different things, they may come audit every once 00:24:37.490 --> 00:24:40.769 in a while. And if you can't tell me why you 00:24:40.769 --> 00:24:46.130 spent $500 on some lobster and crab legs, surely 00:24:46.130 --> 00:24:48.650 you wouldn't do an employee retreat with two 00:24:48.650 --> 00:24:53.049 employees. That's not a business expense. You 00:24:53.049 --> 00:24:55.970 really gotta stop doing that. Stop using your, 00:24:56.049 --> 00:24:57.970 I mean, I'm just gonna tell y 'all, stop it, 00:24:58.130 --> 00:25:00.890 right? Have you a separate, matter of fact, like 00:25:00.890 --> 00:25:03.390 we was just talking about before, get you a payroll 00:25:03.390 --> 00:25:06.769 company. Get that set up to where you can get 00:25:06.769 --> 00:25:09.549 paid yourself and have your separate account, 00:25:09.769 --> 00:25:12.829 but please stop co -lingling your business and 00:25:12.829 --> 00:25:15.849 personal. It's not good. Especially when from 00:25:15.849 --> 00:25:18.490 January to December 31st, you can't speak to 00:25:18.490 --> 00:25:20.630 everything that happened. And then you're making 00:25:20.630 --> 00:25:22.799 up stuff. And I'm not going to take the L for 00:25:22.799 --> 00:25:26.460 nobody. OK, we're not doing it over here. So 00:25:26.460 --> 00:25:29.420 that's all true sense with that. There was a 00:25:29.420 --> 00:25:31.920 guy, I can't remember his name, but he was a 00:25:31.920 --> 00:25:34.480 bank robber and they would ask him, why do you 00:25:34.480 --> 00:25:37.039 rob banks? His response was because that's where 00:25:37.039 --> 00:25:40.539 the money is. Well, for a lot of you small business 00:25:40.539 --> 00:25:42.700 owners, your money is in the business account. 00:25:42.759 --> 00:25:46.059 So it gives you the license, I guess, to think, 00:25:46.099 --> 00:25:47.519 hey, I'm going to just pay this out of my business 00:25:47.519 --> 00:25:49.720 account because that's where I have money. Well. 00:25:49.960 --> 00:25:52.539 Go ahead and just transfer the money to your 00:25:52.539 --> 00:25:55.099 personal. Number one, it gives you a real sense 00:25:55.099 --> 00:25:58.099 of these are two separate things. Yes, I tell 00:25:58.099 --> 00:26:00.960 people, hey, when you own a business, you get 00:26:00.960 --> 00:26:03.319 you have two functions. You're an employee, but 00:26:03.319 --> 00:26:05.599 you're also the owner. If you're the employee, 00:26:05.779 --> 00:26:08.119 you should get compensated for the work that 00:26:08.119 --> 00:26:10.000 you do in the same way. If you had another job 00:26:10.000 --> 00:26:12.680 as the owner, because you're taking more risk, 00:26:12.740 --> 00:26:14.400 you're taking more responsibility. You should 00:26:14.400 --> 00:26:17.339 be also compensated for that. And so I want to 00:26:17.339 --> 00:26:20.309 be able to determine is this business Or is this 00:26:20.309 --> 00:26:23.650 just a job that I created? If this is a job you 00:26:23.650 --> 00:26:25.430 created and some people have very high paying 00:26:25.430 --> 00:26:27.809 jobs that they create, but they don't really 00:26:27.809 --> 00:26:30.369 have businesses because they don't really have 00:26:30.369 --> 00:26:33.970 a separation in that way. Also, if you set up 00:26:33.970 --> 00:26:37.490 LLC and you think someone set this LLC up, it's 00:26:37.490 --> 00:26:39.589 going to give me liability protection. But if 00:26:39.589 --> 00:26:41.849 you're not operating like a business, then the 00:26:41.849 --> 00:26:43.390 court isn't going to treat you like a business. 00:26:43.930 --> 00:26:47.750 So you don't you think Apple, you think Tim Cook, 00:26:47.910 --> 00:26:51.200 the CEO. is basically, you know, would be fine 00:26:51.200 --> 00:26:53.960 with, oh yeah, my directors, when they go to 00:26:53.960 --> 00:26:56.039 Costco, they just put it on the business card. 00:26:56.960 --> 00:27:01.039 You know, you'd get fired if you just randomly 00:27:01.039 --> 00:27:03.480 purchase all this personal stuff. And that's 00:27:03.480 --> 00:27:06.059 how the business treats you is, hey, you're basically 00:27:06.059 --> 00:27:08.200 stealing money from the business, which is effective 00:27:08.200 --> 00:27:10.299 in what you're doing. Even if you are the business 00:27:10.299 --> 00:27:12.339 owner, you're stealing money from the business 00:27:12.339 --> 00:27:14.799 if you don't have that separation. And it's going 00:27:14.799 --> 00:27:18.329 to kind of money up your numbers and If you do 00:27:18.329 --> 00:27:20.809 find success and you start actually making money 00:27:20.809 --> 00:27:22.430 and you want to be able to sell your business 00:27:22.430 --> 00:27:24.690 one day, well, how are you going to explain to 00:27:24.690 --> 00:27:27.369 someone who's buying it? We're not going to Walmart 00:27:27.369 --> 00:27:29.650 every week. That's really not a business expense. 00:27:29.970 --> 00:27:32.150 I just pay it through my business. But how are 00:27:32.150 --> 00:27:34.170 they going to know that? And so they're going 00:27:34.170 --> 00:27:36.269 to think, well, look, your business makes less 00:27:36.269 --> 00:27:37.950 money because you have all this personal stuff 00:27:37.950 --> 00:27:40.150 in it. So I'm going to pay you based on what 00:27:40.150 --> 00:27:43.049 you said the business made in your financials. 00:27:43.289 --> 00:27:46.049 And so we have to do what's called a recast or 00:27:46.049 --> 00:27:48.230 like we readjusting numbers and sometimes that 00:27:48.230 --> 00:27:50.910 can be successful, but a lot of times people 00:27:50.910 --> 00:27:53.589 will just, they won't take that extra risk. If 00:27:53.589 --> 00:27:54.869 I'm buying your business, I'm going to just go 00:27:54.869 --> 00:27:57.670 with the numbers you told the IRS. I'm going 00:27:57.670 --> 00:28:00.430 to go with, you know, as much as possible, the 00:28:00.430 --> 00:28:02.849 lowest number so then I can probably try to buy 00:28:02.849 --> 00:28:04.990 you for a lower price. So if you don't get that 00:28:04.990 --> 00:28:06.930 separation, you might be costing yourself money 00:28:06.930 --> 00:28:11.009 in the long run. Mm -hmm, and I think too I like 00:28:11.009 --> 00:28:12.769 what you said you got to keep it clean right 00:28:12.769 --> 00:28:14.869 there needs to be a degree of separation between 00:28:14.869 --> 00:28:17.670 you and your business and Understanding that 00:28:17.670 --> 00:28:21.109 you are the owner and the employee is key I would 00:28:21.109 --> 00:28:24.309 also say to you that your tagline is keep more 00:28:24.309 --> 00:28:26.490 of what you earn in your pocket, right? I think 00:28:26.490 --> 00:28:28.450 that's right. Keep more what you're in your pocket 00:28:28.450 --> 00:28:32.990 and What what is it keep what what is it more 00:28:32.990 --> 00:28:35.089 what you are there you go keep more what you 00:28:35.089 --> 00:28:41.619 earn and then in your pocket This is on the job. 00:28:42.000 --> 00:28:44.799 On the job audition. But keep more of what you 00:28:44.799 --> 00:28:47.359 earn in your pocket, right? But keep more of 00:28:47.359 --> 00:28:49.440 what you earn. And one of the ways to do that 00:28:49.440 --> 00:28:53.039 is really by having that degree of separation. 00:28:53.279 --> 00:28:56.799 Because when we talk about, you know, he was 00:28:56.799 --> 00:28:59.099 talking about buying stuff just to be buying 00:28:59.099 --> 00:29:04.039 stuff. You could possibly lose out on. being 00:29:04.039 --> 00:29:08.480 able to include certain things to certain expenses 00:29:08.480 --> 00:29:13.420 if you don't know what those expenses are. If 00:29:13.420 --> 00:29:16.700 everything is called mingled, you could be missing 00:29:16.700 --> 00:29:20.539 out on some advantages, right? So I think that 00:29:20.539 --> 00:29:23.000 it's worth it. One, like Tamsa's saying from 00:29:23.000 --> 00:29:25.640 the long game, if you really want to stand out 00:29:25.640 --> 00:29:28.779 as a reputable, solid business, this is the way 00:29:28.779 --> 00:29:30.900 to go. And if you end up wanting to sell something, 00:29:31.000 --> 00:29:34.759 this is the way to go. Two, It removes any gray 00:29:34.759 --> 00:29:38.579 area from a tax preparation standpoint. And then 00:29:38.579 --> 00:29:41.400 three, it makes sure that you can get all the 00:29:41.400 --> 00:29:44.279 deductions situations that are applicable to 00:29:44.279 --> 00:29:48.579 you without having to finesse or finagle or be 00:29:48.579 --> 00:29:50.700 weary. It's, you know, this is really something 00:29:50.700 --> 00:29:54.240 we can claim type of situation. So yeah, keep 00:29:54.240 --> 00:29:57.140 it clean people. So the last thing we'll touch 00:29:57.140 --> 00:29:59.140 on and we'll actually go into a court case that 00:29:59.140 --> 00:30:01.480 I'm interested to see where they got this information 00:30:01.480 --> 00:30:04.349 from, but. Be aware of where you get your advice. 00:30:04.750 --> 00:30:06.650 I get a lot of people, I mean, I would say this 00:30:06.650 --> 00:30:09.089 is another thing, at least five to 10 times a 00:30:09.089 --> 00:30:11.910 year, I get, hey, I saw this on TikTok, can I 00:30:11.910 --> 00:30:14.650 do this? And I'm not saying that people on TikTok, 00:30:14.849 --> 00:30:17.369 there aren't some people on TikTok or other mediums 00:30:17.369 --> 00:30:20.289 that don't have information. But as we talked 00:30:20.289 --> 00:30:23.589 about before, the tax code is not the secret 00:30:23.589 --> 00:30:27.269 arts. There is no like backdoor entry and like 00:30:27.269 --> 00:30:31.450 a secret handshake that goes on. Now, how you 00:30:31.450 --> 00:30:34.920 interpret it, how you utilize what it says to 00:30:34.920 --> 00:30:37.380 your advantage, those are things that can be 00:30:37.380 --> 00:30:39.680 legitimate. And then you just might be able to 00:30:39.680 --> 00:30:43.599 have precedent that the IRS backs up. But a lot 00:30:43.599 --> 00:30:45.900 of times I get people that they want to do something 00:30:45.900 --> 00:30:48.519 personal. Hey, I'm getting married. I'm inviting 00:30:48.519 --> 00:30:51.359 people. I'm inviting potential clients. It's 00:30:51.359 --> 00:30:52.900 like, well, the IRS isn't going to see it like 00:30:52.900 --> 00:30:54.660 that. Like if you can't keep a straight face 00:30:54.660 --> 00:30:56.779 when you're trying to prescribe your business 00:30:56.779 --> 00:30:59.519 expense, it's probably not going to work out. 00:30:59.599 --> 00:31:02.039 now there are certain things that are legitimately 00:31:02.039 --> 00:31:06.140 personal items right could change them into business 00:31:06.140 --> 00:31:08.700 things with the proper planning ahead of time 00:31:08.700 --> 00:31:11.200 and structure those things that we can try to 00:31:11.200 --> 00:31:13.359 help you with where hey i was going to spend 00:31:13.359 --> 00:31:16.019 this money anyway but how can i give it a business 00:31:16.019 --> 00:31:18.259 function that does give me a tax benefit that's 00:31:18.259 --> 00:31:20.259 how you want to look at this versus i'll just 00:31:20.259 --> 00:31:23.019 try to write stuff off that's all personal or 00:31:23.019 --> 00:31:24.900 because i heard on the internet that's abril 00:31:24.900 --> 00:31:26.359 and then lincoln said don't trust everything 00:31:26.359 --> 00:31:29.750 you hear on the internet it probably may not 00:31:29.750 --> 00:31:32.170 be legitimate. Or if a tax person showed you, 00:31:32.309 --> 00:31:34.609 they should be able to cite where it is, right? 00:31:34.609 --> 00:31:37.210 Hey, that's in code section 162. That's in code 00:31:37.210 --> 00:31:40.069 section 74. That's in code section dot dot dot. 00:31:40.390 --> 00:31:42.150 That would allow you to say, okay, hey, they 00:31:42.150 --> 00:31:45.250 could cite it. And that would give me the confidence 00:31:45.250 --> 00:31:46.849 that this is something legitimately that I could 00:31:46.849 --> 00:31:50.230 do. And I would just kind of add just a little 00:31:50.230 --> 00:31:54.009 tidbit. If you do get something on TikTok or 00:31:54.009 --> 00:31:56.710 social media, wherever you find your business, 00:31:57.639 --> 00:32:00.960 Advice from the social media spectrum just like 00:32:00.960 --> 00:32:03.720 like terms of saying just vet it before you do 00:32:03.720 --> 00:32:06.000 it And I know I just keep going back to it, but 00:32:06.000 --> 00:32:09.380 the buying stuff just to be buying stuff If you 00:32:09.380 --> 00:32:11.680 hear it on social media, don't just go buy it. 00:32:11.680 --> 00:32:15.000 Please vet it Just please that's all we ask and 00:32:15.000 --> 00:32:17.200 and I know some of y 'all like what's gonna cost 00:32:17.200 --> 00:32:21.519 money to get a consultation Listen, it will cost 00:32:21.519 --> 00:32:24.119 you money. If you end up buying a whole car that 00:32:24.160 --> 00:32:26.279 you know, it will cost you money if you end up 00:32:26.279 --> 00:32:29.599 buying whatever that you can't even claim. So 00:32:29.599 --> 00:32:32.740 it's worth the investment, right? It's really 00:32:32.740 --> 00:32:35.119 worth the investment. I heard someone say, what 00:32:35.119 --> 00:32:36.680 makes you laugh today is going to make you cry 00:32:36.680 --> 00:32:40.279 tomorrow. So if we want to prevent that, it's 00:32:40.279 --> 00:32:43.359 worth the investment to get it vetted and run 00:32:43.359 --> 00:32:46.640 it by a professional. So I'll tell you something 00:32:46.640 --> 00:32:49.240 about that. I had a lady who came to me this 00:32:49.240 --> 00:32:52.609 year. And she was wondering why she owed so much 00:32:52.609 --> 00:32:56.910 in taxes. And she had taken out a distribution 00:32:56.910 --> 00:33:00.009 from her retirement account, but it was a hardship. 00:33:00.809 --> 00:33:04.029 She withheld 10 percent because in her mind, 00:33:04.089 --> 00:33:05.750 oh, you know what? They hear that 10 percent 00:33:05.750 --> 00:33:07.930 early withdrawal penalty. And so they think, 00:33:07.930 --> 00:33:09.950 oh, I'm going to have to pay 10 percent on this. 00:33:10.210 --> 00:33:12.509 But she did also factor in that you actually 00:33:12.509 --> 00:33:15.470 have to report that as income income in addition 00:33:15.470 --> 00:33:18.049 to the 10. So she has this huge tax bill because 00:33:18.049 --> 00:33:20.650 she went by the house. But that could have been 00:33:20.650 --> 00:33:23.529 easily avoided if she had done, one, a little 00:33:23.529 --> 00:33:25.470 bit of research, but secondly, to say, hey, let 00:33:25.470 --> 00:33:27.009 me talk to someone who kind of knows what they're 00:33:27.009 --> 00:33:29.730 talking about. And then that would, may not have 00:33:29.730 --> 00:33:31.809 changed her decision, but she wouldn't have been 00:33:31.809 --> 00:33:34.950 in turbo tax looking at this $60 tax bill and 00:33:34.950 --> 00:33:37.529 completely thrown off guard and confused about 00:33:37.529 --> 00:33:41.509 why it happened. So our court case this week 00:33:41.509 --> 00:33:44.150 is actually an interesting one. This happened 00:33:44.150 --> 00:33:47.089 in 1977. I was thinking, this is something that... 00:33:46.940 --> 00:33:50.079 I wouldn't be shocked what happened today. Instagram 00:33:50.079 --> 00:33:52.920 models and all that that we have in our society. 00:33:53.359 --> 00:33:56.720 But Mr. Trinidad, he owned a nightclub and, you 00:33:56.720 --> 00:33:59.240 know, nightclub, obviously, you know, long hours 00:33:59.240 --> 00:34:02.259 can be stressful. Got to manage a lot of stuff. 00:34:02.579 --> 00:34:05.019 And so he needed what he said in order to do 00:34:05.019 --> 00:34:07.839 his best job. He needed to be relaxed and happy. 00:34:08.099 --> 00:34:12.420 OK. And so because his live in girlfriend allowed 00:34:12.420 --> 00:34:14.719 him to be relaxed and happy, she, you know, cooked 00:34:14.719 --> 00:34:16.969 for him. she did all this stuff for him that 00:34:16.969 --> 00:34:19.289 was essential for him to be in his best business 00:34:19.289 --> 00:34:21.590 shape. He thought, well, I would just go ahead 00:34:21.590 --> 00:34:24.170 and write off her stuff. So, you know, I'm taking 00:34:24.170 --> 00:34:26.030 care of her. I'm going to pay for her rent, her 00:34:26.030 --> 00:34:29.349 food, her clothes, her beauty salon visits, because 00:34:29.349 --> 00:34:32.269 obviously she can't be looking busted. So I'm 00:34:32.269 --> 00:34:35.570 going to write off that stuff for her as if she 00:34:35.570 --> 00:34:38.550 was like an employee. And so he took this to 00:34:38.550 --> 00:34:41.050 the court and the court said, well, you know, 00:34:41.090 --> 00:34:43.809 we understand that she maybe helps your morale. 00:34:44.170 --> 00:34:47.269 but your girlfriend is not a legitimate business. 00:34:47.829 --> 00:34:52.289 So I'm not exactly sure how he came to that conclusion. 00:34:52.429 --> 00:34:54.190 I don't know if he's someone told him that, but 00:34:54.190 --> 00:34:56.030 to me that sounded as if it was something that 00:34:56.030 --> 00:34:59.349 you would hear on TikTok today. Oh, I'm, I am 00:34:59.349 --> 00:35:01.650 sure people are trying to do this today, but 00:35:01.650 --> 00:35:04.409 here is the question. Let me just kind of, and 00:35:04.409 --> 00:35:07.090 y 'all don't do this, but you asked the question 00:35:07.090 --> 00:35:09.429 right earlier in the, in the podcast, you said, 00:35:09.670 --> 00:35:12.929 you know, if this is an expense that you're already 00:35:12.929 --> 00:35:16.409 going to have. How do I make that to where I 00:35:16.409 --> 00:35:20.190 can include it, right? So this person should 00:35:20.190 --> 00:35:24.369 have asked, if this is an expense, do I need 00:35:24.369 --> 00:35:29.030 to 1099 her? What do I do? I need to treat her 00:35:29.030 --> 00:35:34.210 as an in -house maid, an in -house worker. What 00:35:34.210 --> 00:35:38.469 can I do to write this living girlfriend off? 00:35:38.929 --> 00:35:41.170 So I'm sure there are people thinking about it 00:35:41.170 --> 00:35:44.059 right now. How can we use this to our benefit 00:35:44.059 --> 00:35:47.760 for sure. Yeah, I get that. The other thing I 00:35:47.760 --> 00:35:50.960 get multiple times is they think they can write 00:35:50.960 --> 00:35:55.380 off their time. So like they volunteered or, 00:35:55.400 --> 00:35:59.239 hey, I did this work. I didn't get paid for it. 00:35:59.260 --> 00:36:02.579 How can I write off my time? Well, how does IRS 00:36:02.579 --> 00:36:06.599 know what your time is worth? Right. There is 00:36:06.599 --> 00:36:10.860 no universal standard that says if you are 55 00:36:10.860 --> 00:36:12.860 and have 20 years of experience, your time is 00:36:12.860 --> 00:36:15.079 worth X. Okay, there's nothing in the tax code 00:36:15.079 --> 00:36:18.980 that would specify that. Once again, we try to 00:36:18.980 --> 00:36:21.519 help you be educated. Look at, hey, here's some 00:36:21.519 --> 00:36:22.980 of the things that other people have done that 00:36:22.980 --> 00:36:25.800 we see. You could think, all right, that's something 00:36:25.800 --> 00:36:27.539 that I didn't know. Or hey, that's something 00:36:27.539 --> 00:36:30.119 I've done before. Or now that I'm in a situation 00:36:30.119 --> 00:36:31.800 where I started a business, these are things 00:36:31.800 --> 00:36:34.300 that I want to avoid so I can start building 00:36:34.300 --> 00:36:37.179 better systems. I can start implementing things 00:36:37.179 --> 00:36:40.550 in a more structured way. because most of the 00:36:40.550 --> 00:36:45.050 time, if you start a business, you ideally want 00:36:45.050 --> 00:36:48.170 to be making money in that business. And so it's 00:36:48.170 --> 00:36:51.329 a lot harder to start doing things right after 00:36:51.329 --> 00:36:53.849 you've been doing them wrong for multiple years. 00:36:53.889 --> 00:36:56.510 And then you have way more responsibility, but 00:36:56.510 --> 00:36:58.710 way more money on the line than to actually just 00:36:58.710 --> 00:37:01.670 try to do it correctly at the beginning. So you 00:37:01.670 --> 00:37:05.070 don't have to basically reinvent the wheel. that 00:37:05.070 --> 00:37:08.170 you kind of created over the time that you have 00:37:08.170 --> 00:37:10.449 been in business. So your final thoughts to share 00:37:10.449 --> 00:37:13.030 with people before we wrap? No, but I would just 00:37:13.030 --> 00:37:17.989 say stay tuned for the discussion about the business 00:37:17.989 --> 00:37:20.250 startups. I may be the case study for that. Who 00:37:20.250 --> 00:37:23.650 knows? I don't know. But and I don't want you 00:37:23.650 --> 00:37:26.570 all judging me either. OK, if I if I be vulnerable 00:37:26.570 --> 00:37:29.829 on that podcast, do not judge me people. OK, 00:37:30.030 --> 00:37:32.719 but. Stay tuned for that one. I'm looking forward 00:37:32.719 --> 00:37:36.179 to that one as well. Listener and learner as 00:37:36.179 --> 00:37:39.699 well. So that's going to be a good one. Well, 00:37:39.699 --> 00:37:41.800 awesome. Well, thanks for tuning in. And as we 00:37:41.800 --> 00:37:44.199 say, keep more of what you earned. And don't 00:37:44.199 --> 00:37:47.519 add that in your pocket. Later, y 'all. We'll 00:37:47.519 --> 00:37:48.059 talk to you next week.