Hi everyone. This is the how to lower your tax
bill podcast. I'm your host, Terrence Hutchins.
I'm a financial and tax advisor in the Dallas
Fort Worth area. And the goal of this podcast
is to help you listeners get educated on different
tax strategies that you could implement to improve
your tax situation immediately. Each episode
will break down useful tax tips you can use to
save money. no matter what your personal or business
income situation. Because our motto is keep more
of what you earn. So let's get into today's episode.
So thanks for tuning in to another episode of
how to lower your tax bill. The tax season has
wrapped and many of you who own businesses check
that box off. and you may not revisit this until
the end of the year or next year. And so today
we're going to hopefully encourage you not to
just check taxes off as an item that you completed
and actually think through some of the mistakes
that we see that are common that business owners
make. And then also some things for you to implement
from a strategy standpoint to hopefully keep
more of your hard earned money. I am still here
with my talented co -host, Tamia Kelly. Say hi
to the people. Hey, great people. I don't know
about talented, but I am great. So we're here.
We'll see what happens. I'm sure you will continue
to find out that I am still blind. So I mean,
we'll work it out. Shout out to Terrence. You
know, he's going to help me along the way. Hello,
good people. Join us on this ride. So I don't
know how you are great and not talented. That's
another podcast. So we're going to go through
five mistakes or things that we see business
owners do that hopefully you aren't going to
be one of those business owners. Or if you do
or have done one of these things, you'll have
the opportunity to adjust your behavior for future
reference. And so one of the biggest things that
I see, and I always encourage people, if we look
at their tax return from the prior year, I look
at line 38 on their tax return. Line 38 on their
tax return tells you, did you pay enough into
the IRS for them to not charge you a penalty?
And a lot of business owners, when I first work
with them, I tell them that, hey, the IRS is
your partner, okay? Now, ideally, they'll be
a silent partner. I don't want to hear from you,
all right? I just have to pay them what they
are due based on the money that I make and the
type of money that I make. But if I don't pay
them enough during the year, they would charge
me a failure to pay penalty. Tamia, you probably
had a few people this past tax year you worked
with who knew they were going to owe and they
were just waiting on you to tell them how much.
Did you have that? Yes. So I did have that experience.
And honestly, I thought it was the norm, Terrence.
Like I, again, you guys, being in this tax world
has really... opened my eyes to a lot of different
things. And it is very common for people to wait
and just to pay and know that they're going to
have to pay and know that there's going to be
a penalty. And so I did have a few people, and
here it is people, that penalty is not small,
not small by a little bit. And so they just handed
me their shoe box of receipts and was like, hey,
I know I'm going to owe, but here you go. And
that was it. So it was interesting to me that
one, there was an expectation that they owe.
But two, what was also interesting is that throughout
the year, right, so we just finished the 2024
year, throughout the 2024 year, I didn't hear
any of my customers prepare for these taxes.
They just didn't prepare. And so I'm looking
forward to what you have to say about that, Terrence,
in terms of you don't have to wait until you
hand your shoe box of receipts to your tax preparer.
you can prepare to make sure you're paying enough
taxes and also prepare for any penalty if you've
underpaid. Definitely. So the things that we
look at line 38 says, Hey, that definitely the
other line you can look at is line 24. That just
shows you how much did you pay last year in total
taxes. We talked about this on a prior episode
as far as if you're a W -2 employee, I see the
same thing. Listen, I hope this person, listen,
everybody's information is private. Okay. I will
say this y 'all. Please go back and listen to
the prior episodes because here's the thing for
your W for employees. Please make sure you are
withholding enough. What is it? The W? Four,
yes. On your W4, please make sure you're making
the proper selection. I literally, and I hope,
I hope, if not listening, I literally had someone
who made over, let's just say over 70K and only
paid 800 in taxes. $800. $800. You're gonna get
a penalty, people. You're not getting over on
the government. Pay them what you owe them, please.
If you are in a situation where you always owe
every year, understand that you're not only just
going to owe prior to the next year, unless you
made some changes, you're going to continue to
owe more. And many times people will put paying
plans and now we're paying interest. And so we
don't want to have this cycle. Right. But a lot
of people just need that education. But that's
why MasterCard Discover Capital One. You know,
Visa, all of them are big companies because they
make money on people not planning ahead properly
for their purchases. Right. So if you're a business
owner, though, one thing that you need to do,
and this is very common, even for a lot of CPAs,
they don't do a lot of planning with clients.
They prepare their taxes. They send them their
return and then they give them these vouchers.
Those vouchers will essentially say, hey, here
is your get out of jail free card. If you make
under $150 ,000, if you pay in 100 % of what
you owe the last year, So if I make $140 ,000
and I owed 10 grand last year, if I pay $10 ,000
in 2025, I won't owe a tax bill. That is if I
do it, if painted. So I can't do it in December
31st. I have to do it in stages. So April 15,
June 15, October 15, January. So they kind of
stagger it, oddly, I guess you could say, as
far as when you make your estimated tax payments.
But you have to do it in those three months increments.
Because, hey, that $10 ,000 IRS thinks you should
be paying me $1 ,200. That's your get out of
jail free card. If you make over $150 ,000, it's
actually going to be 110%. So it'd be $11 ,000
in that example. And I got to do it in four increments
from that vantage point. So that's what you would
call your safe harbor or your get out of jail
free card. Now, it's very predictable. If you
are number one saying, hey, I owe 10 grand last
year, then unless something dramatically changes,
you're gonna owe probably around that same. Which
means you should adjust your spending accordingly
to factor in that this is an expense that you
have to make. In fact, I tell business owners,
Your business should pay for your taxes. Yes.
Meaning you should have enough capital coming
in to not only pay you for the work you're doing,
but also to cover the taxes that come along with
it. If your business can't generate enough income
to do that, then you probably are either spending
too much and you need to reassess your budget
or you need to reassess, is this a good business
for you? So this is a cycle that you're going
to continue to follow. You're probably just going
to dig yourself into a bigger hole. And on a
future episode, I'm going to talk about just
the decision to start a business. And maybe some
of the criteria you could use to help determine
that. Yeah. So you have your safe harbor method
or get out of your free car, pay 100 % of what
you owe last year, pay 90 % of what you owe in
the current year or pay 110 % of what you owe
the prior year. If your income is above 150 ,000,
then you have to pay as you go. Now we'll be
preferred on the safe harbor method. I would
prefer the pay as you go method over the safe
harbor for two reasons. Number one, it allows
you to be more strategic with when and how much
you pay your taxes. So for example, I'm a business
owner. He does very well. But in twenty three,
let's just say he made two million dollars and
twenty four because of depreciation and some
other things he made like a million dollars on
paper. Well, his tax liability for twenty four
was a lot lower than twenty three. So his estimated
taxes would be a lot lower. However. when we
file his tax return, so 2025 would be the first
year I'll file his tax return. For 2025, let's
say he goes back to making that $2 million. Well,
he could have paid based on making a billion.
And that was what he was thinking. Oh, you know,
my estimated taxes are way less than they were
the prior year. But if his income sheets back
up and he doesn't prepare ahead of time, then
all of a sudden when we file, he's going to be
looking at this big bill. Now, he won't pay a
penalty, but he will have a big bill tied to
it. And to me, I would imagine People love writing
bigger checks than smaller checks. Right, right.
Everybody liked to pay more than what they did
the last year. Sure, why not? But I want to go
back to something that you mentioned. I know
you were talking about the business owners, especially
with the pay as you go, and just using that common
sense, like if I owed... 10 grand in 2023, then
I need to prepare for that, right? And I think
the same goes for our W -2 employees. If you
are owing, you don't have a lot of deductions
or anything to help, then either change your
withholding or actually add more to it so you
won't have to keep on paying this huge chunk.
You can take those same steps. to make sure you're
not owing or having to come out so much money
when you file your taxes. So I think this is
also applicable to those W2 employees as well.
Right. Because it's a lot easier to pay extra
dollars a month and come up with a few thousand
dollars on that. Absolutely. The pay as you go
method. I will use that with people specifically
if they have a drop in income. Oh, OK. So for
example, if he had gone from. $2 million to a
million. I wouldn't have wanted him to pay estimated
taxes on $2 million. He would have paid in too
much. But if we have a jumping income, I wouldn't
need to save partner revenue. So let's say he
makes a million. I still want him to pay based
on him making a million, but I want him to set
aside the extra money. So let's just say his
taxes get doubled. So instead of him paying 10
,000, he has to pay 20. I'd say, hey, go ahead
and pay the 10. throughout the year, so you have
to get out of jail free card, but we need to
set aside that other 10. Now, in this case, he
probably has an extra zero tied to his numbers,
right? So if the numbers are much bigger, you
can see the value of that. Just say, hey, look,
that extra $100 ,000 or $200 ,000 that you're
going to have to pay in taxes. How about we go
and just set that aside, even if we put it in
a CD or something, a treasury bill where, hey,
we're going to get four, four and a half percent.
So that $100 ,000 and $200 ,000. could actually
be getting that four, four and a half percent
during the year. And then when I file my taxes,
I could have just paid it in April 15th. So as
long as I pay my bills by January 15th, then
I will effectively avoid that penalty. The same
goes for tax withholding. If you have an S corporation
or you're a C Corp owner, you can do your withholding
where your withholding is a bit throughout the
whole year. So I'll do the same thing with retirees,
for example. who, let's just say they're taking
out monthly from their retirement accounts. I
say, well, the first part of the year, you're
just going to take out your net amount, but the
tax amount, we don't want to pay your taxes monthly.
We're going to just do a one time withholding
at the end of the year so that, hey, if my taxes
are 30 grand for the year, I still would have
set that $30 ,000 in cash in the account, but
I'll keep it in a safe place where it's getting
at 4%. And in December, I'll do a one -time tax
withholding of $30 ,000, if that was the tax
bill. And in the IRS, because it came from a
withholding, whether that was from an IRA or
from your W -2 paycheck, that withholding, they
treat it as if it was paid evenly throughout
the year. Even though I did it all in December,
they would treat it as if I paid $1 ,500 a month.
It allows you to basically keep more money on
hand, use it to grow, so you eventually just
basically keep more money in your pocket. So
that would be energies that could help you actually
make a little bit more money. Listen, y 'all.
That's a great strategy. Listen, I don't know
if y 'all remember this from one of our previous
episodes, but Terrence has said like, this is
not, you know, you don't have to go to TikTok
to all these different places. This is not like
hidden information. You can find it, but listening
to podcasts like this. with someone with experience,
we'll give you those strategies for free, right?
So please take heed to this, y 'all, because
paying penalties is not good. I mean, unless
you just want to, you know, like you said, write
them big checks, unless you just don't care about
throwing away money, that's your business. But
I don't know about y 'all, but I need all my
coins, all of them. Right, right, right. So first,
we have, okay, estimated taxes. You have the
pay as you go, or the get out of jail free car,
safe harbor method. So depending on your situation,
you can pick one that makes the most sense. Secondly,
so I'm gonna ask you my favorite question I get
at least 10 times every year. So I'm gonna see
if you're doing your homework, right? So the
question is... The dog ate it. No, no, no. The
question I get is, hey, I made money, but I got
paid in cash. Do I have to report it? I got paid
under the table. You absolutely do have to report
it. So I think, okay, if you stopped a cop and
said, hey, I have marijuana in the car, or I
got a gun, an unregistered firearm in the car,
what should I do about it? What do you think
they're gonna tell you, okay? Like, I'm not gonna
tell you as a tax professional. You know what?
Break the tax law, okay? Do that, all right?
I'm making a lot of this, but... The other component
to that is if you are paying someone that is
working for you and you pay them more than six
hundred dollars and they're not an employee.
And I had this situation happen here recently
where a taxpayer who I'm assuming either didn't
know the rules or they were just trying to. Oh,
you know, they was probably a tick tocker. Anyway,
we said we sent out a 1099. to them that says,
hey, last year it's a 1099 NEC form and that
1099 NEC form showed how much this company paid
you to do work for them. So the IRS essentially
says your income is either earned or it's unearned.
If your income is earned, you do that as an employee
or as a contractor. If you're not an employee
and you're a contractor, that means you're effectively
in business for yourself. Right. Okay. Right.
It's not a lot of money. even if it was $1 ,000,
you're considered in business for yourself, is
how the IRS defines it. Because I had a lady
who thought, well, I can get a 1099 miscellaneous
for, and then that's not gonna treat me as a
business. What she would try to do is avoid paying
the self -report money. And I'm thinking, well,
that's not really a thing. Or I get people who,
they say, hey, I don't wanna get a 1099 because
I gotta report the money. Well, the thing is,
if I'm the business owner and I'm paying you,
well, why should I? have to face the IRS. Correct.
If they don't send you a 1099, then they could
throw out that deduction. Say it for the people
in the back, Terrence. I literally just had this
conversation, the person shall remain nameless,
but they were trying to help a relative. Let's
just say that. Okay, we're going to leave it
at that. And they were trying to not do the 1099.
And I said, absolutely not. That is not going
to benefit you, right? And so What he's saying,
you all, I really hope you're listening because
for business owners to want to do the right thing,
who want to eventually get to where you know
how to balance your books rather, and you know
how to use those tax deductions and these tips
and tricks that he's given you all, this is something
that's huge. If you are paying people more than
$600, Do the 1099. I digress. Go ahead, Terrence,
because that just triggered me literally was
trying to finesse. They call it finessing, trying
to finesse something. And I said, no, you're
going to finesse your way in trouble. Let's not
do that. So the thing is, when you hire someone,
you should have a process. It's, OK, what are
the terms of what you're going to do for me?
We should have an agreement so everyone is on
the same page. and then you would give them a
W -9 -4 so you can collect their information.
Now I've had people where they fill that W -9
-4 out incorrectly, like they just put a fake
social or EIA and I've had that happen with people.
But it was up to you to give them the W -9 because
not everyone that you deal with, unfortunately,
is going to want to get that tax form. So you're
in a position where, hey, I paid this person,
I did collect the W -9, I did send them a 10
-9, but I want to deduct that amount on my tax
return. Well, if I can't substantiate that deduction
by those things, the IRS could just throw it
out. And so you're thinking, I paid this $5 ,000,
I paid this $10 ,000. Well, if you didn't follow
the protocol, why should I have to pay more taxes
for someone else who's working for me? It's not
like they're working for free. I wouldn't, you
know. They're getting experience, if you want
to call it that. Internship. But why would I
pay more taxes on their behalf? Right. And so
it's like, look, if they're not wanting to do
that, if they're not willing to pay taxes, just
imagine it's the same way I get with people who
cheat on other things. It's like, well, what
makes me so special that they're not going to
try to cheat me? If they're willing to cheat
the IRS. Correct. Way less special than the IRS.
Correct. So they probably try to cheat me at
some point. But anyway, I digress on that. Any
thoughts? I certainly will say, please get some
processes in order, right? I kid, not really,
about the shoe box of receipts because some business
owners do not keep good records and people get
upset or have anxiety when it comes to tax season
because they don't, it's like fear of the unknown.
But if you take these tips, you know, the safe
harbor, the pay as you go, that type of thing,
if you issue those 1099s, if you do what you
need to do, then come time to prepare your return,
there should be no surprises, right? There should
be no anxiety. And this is one of those things,
business owner, where if you are going to have
people working for you, please get a system in
place. Please get a plan in place. Please be
legit. Let's have a legitimate business. and
issue those and if they don't want to have a
1099 then do they really need to be working for
you right right don't mess yourself up by not
wanting to issue this 1099 um lose the deduction
or even get penalized for it i don't i don't
think it's worth it i just don't think i don't
think it's worth it right and you know If they
fill out your W -9 and they're a corporation,
so they're a C -corporate and S -corporation,
you don't have to send them a 1099 unless they're
an attorney, okay? But I wonder how many people
give their attorney 1099s, right? But anyway,
the third thing that I see mistakes on is you
buy stuff to save on taxes. Oh, real quick, before
you jump into that one, don't forget your tip.
about you don't have to do this to 99 yourself.
Go get other people to do it. The other part
is you actually want to send it to the IRS. If
the other person gets it, they report it, but
you didn't send it to the IRS, then you don't
have the level of substantiation. Like they'll
send that to form, but they won't report it to
the IRS. So anyway, but you know, this is why
we're learning. We're giving you things to. change
if these are things you've done in the past.
But these are things that you want to invest
in, right? You want to invest into really good
tax preparant. You want to invest into systems
that will help you be organized and together
like a vendor that can do your 1099s for you.
Because I don't know about y 'all, but here in
Oklahoma, they're kind of funky in the way they
do some of these payroll things. So I will gladly
give my little $2 to somebody else to do it that
knows all the things. Gotcha. So I see this where,
hey, I need to buy something to not pay taxes.
So this is one area where - To offset. Kind of
remind people, the government does not take 100
% of your money. Yes, they do. If you owe taxes,
that's going to be a percentage of the money
that you make. So the top tax is 37%. You know,
states, I think the max is like 13%. No, obviously
- You'd be making quite a bit of money if you
were in one of those tax brackets. So Max, you're
going to pay 50 percent taxes and you are going
to go buy something. Now, it may be worth it
to you to buy something to save 50 cents. But
most people, if you're only going to save 20
cents or a dollar. So, hey, I got to spend a
dollar to save 20 cents. That's really not a
good deal. Or in the same way, if I get a coupon
to a place I don't shop at, it's like, what am
I going to do with this coupon? I'm gonna go
buy something I don't need or don't want so that
I can save a percent because of the coupon you
gave. That's pretty much what a lot of people
will do. Or they'll buy cars, they'll buy stuff.
But they don't realize that you still have that
payment. So even if I'm going to tax deduction
today, that saves me from having to pay the IRS,
I have a payment on that car in the future. And
the principal payment that I have is not deductible.
So if I'm paying a thousand dollars a month on
this car, I could have took a big tax deduction
in year one, but year two through five, I have
a principal payment that I'm paying that I get
no tax benefit for. That money is coming out
of my account. And so this is an area where,
you know, I always say don't pay a dollar to
save 20 cents or 25 cents. All right. In this
area, because going back to before, if you aren't
setting aside money for taxes, you're going to
probably find yourself in this situation and
you're going to be trying to scramble. And my
thought is, well, if you don't have money to
pay your taxes, how do you have money to buy
something that you don't need? So this is something
I'll leave you with the floor for the first part.
Number four is running your personal expenses
through the business. Oh, man. Listen, has that
something you experienced in your first year?
Listen, so I want to give a little grace here
because I did see this, right? A lot of small
businesses who start their business, they will
typically either use their current checking account
or, you know, not, or if they get a business
account, any income that they, any revenue or
whatever, they'll just start using it for whatever,
like their personal thing. And it's a no -go.
You can't commingle. It's a no -go. One, as a
tax preparer, it is HE double hockey sticks.
trying to have you go through that bank statement
to tell me what was personal use versus what
was actually for the business. And then, I don't
know about y 'all, but you know, you sleep sometimes.
And after you've slept a couple of days or two,
you may forget from January 1 to December 31,
what you spent or what every expense was and
if it was for personal versus business use. And
that's not okay. Although you may not have to
give me all of your receipts, the way the IRS
is set up and with this whole automated IA, just
different things, they may come audit every once
in a while. And if you can't tell me why you
spent $500 on some lobster and crab legs, surely
you wouldn't do an employee retreat with two
employees. That's not a business expense. You
really gotta stop doing that. Stop using your,
I mean, I'm just gonna tell y 'all, stop it,
right? Have you a separate, matter of fact, like
we was just talking about before, get you a payroll
company. Get that set up to where you can get
paid yourself and have your separate account,
but please stop co -lingling your business and
personal. It's not good. Especially when from
January to December 31st, you can't speak to
everything that happened. And then you're making
up stuff. And I'm not going to take the L for
nobody. OK, we're not doing it over here. So
that's all true sense with that. There was a
guy, I can't remember his name, but he was a
bank robber and they would ask him, why do you
rob banks? His response was because that's where
the money is. Well, for a lot of you small business
owners, your money is in the business account.
So it gives you the license, I guess, to think,
hey, I'm going to just pay this out of my business
account because that's where I have money. Well.
Go ahead and just transfer the money to your
personal. Number one, it gives you a real sense
of these are two separate things. Yes, I tell
people, hey, when you own a business, you get
you have two functions. You're an employee, but
you're also the owner. If you're the employee,
you should get compensated for the work that
you do in the same way. If you had another job
as the owner, because you're taking more risk,
you're taking more responsibility. You should
be also compensated for that. And so I want to
be able to determine is this business Or is this
just a job that I created? If this is a job you
created and some people have very high paying
jobs that they create, but they don't really
have businesses because they don't really have
a separation in that way. Also, if you set up
LLC and you think someone set this LLC up, it's
going to give me liability protection. But if
you're not operating like a business, then the
court isn't going to treat you like a business.
So you don't you think Apple, you think Tim Cook,
the CEO. is basically, you know, would be fine
with, oh yeah, my directors, when they go to
Costco, they just put it on the business card.
You know, you'd get fired if you just randomly
purchase all this personal stuff. And that's
how the business treats you is, hey, you're basically
stealing money from the business, which is effective
in what you're doing. Even if you are the business
owner, you're stealing money from the business
if you don't have that separation. And it's going
to kind of money up your numbers and If you do
find success and you start actually making money
and you want to be able to sell your business
one day, well, how are you going to explain to
someone who's buying it? We're not going to Walmart
every week. That's really not a business expense.
I just pay it through my business. But how are
they going to know that? And so they're going
to think, well, look, your business makes less
money because you have all this personal stuff
in it. So I'm going to pay you based on what
you said the business made in your financials.
And so we have to do what's called a recast or
like we readjusting numbers and sometimes that
can be successful, but a lot of times people
will just, they won't take that extra risk. If
I'm buying your business, I'm going to just go
with the numbers you told the IRS. I'm going
to go with, you know, as much as possible, the
lowest number so then I can probably try to buy
you for a lower price. So if you don't get that
separation, you might be costing yourself money
in the long run. Mm -hmm, and I think too I like
what you said you got to keep it clean right
there needs to be a degree of separation between
you and your business and Understanding that
you are the owner and the employee is key I would
also say to you that your tagline is keep more
of what you earn in your pocket, right? I think
that's right. Keep more what you're in your pocket
and What what is it keep what what is it more
what you are there you go keep more what you
earn and then in your pocket This is on the job.
On the job audition. But keep more of what you
earn in your pocket, right? But keep more of
what you earn. And one of the ways to do that
is really by having that degree of separation.
Because when we talk about, you know, he was
talking about buying stuff just to be buying
stuff. You could possibly lose out on. being
able to include certain things to certain expenses
if you don't know what those expenses are. If
everything is called mingled, you could be missing
out on some advantages, right? So I think that
it's worth it. One, like Tamsa's saying from
the long game, if you really want to stand out
as a reputable, solid business, this is the way
to go. And if you end up wanting to sell something,
this is the way to go. Two, It removes any gray
area from a tax preparation standpoint. And then
three, it makes sure that you can get all the
deductions situations that are applicable to
you without having to finesse or finagle or be
weary. It's, you know, this is really something
we can claim type of situation. So yeah, keep
it clean people. So the last thing we'll touch
on and we'll actually go into a court case that
I'm interested to see where they got this information
from, but. Be aware of where you get your advice.
I get a lot of people, I mean, I would say this
is another thing, at least five to 10 times a
year, I get, hey, I saw this on TikTok, can I
do this? And I'm not saying that people on TikTok,
there aren't some people on TikTok or other mediums
that don't have information. But as we talked
about before, the tax code is not the secret
arts. There is no like backdoor entry and like
a secret handshake that goes on. Now, how you
interpret it, how you utilize what it says to
your advantage, those are things that can be
legitimate. And then you just might be able to
have precedent that the IRS backs up. But a lot
of times I get people that they want to do something
personal. Hey, I'm getting married. I'm inviting
people. I'm inviting potential clients. It's
like, well, the IRS isn't going to see it like
that. Like if you can't keep a straight face
when you're trying to prescribe your business
expense, it's probably not going to work out.
now there are certain things that are legitimately
personal items right could change them into business
things with the proper planning ahead of time
and structure those things that we can try to
help you with where hey i was going to spend
this money anyway but how can i give it a business
function that does give me a tax benefit that's
how you want to look at this versus i'll just
try to write stuff off that's all personal or
because i heard on the internet that's abril
and then lincoln said don't trust everything
you hear on the internet it probably may not
be legitimate. Or if a tax person showed you,
they should be able to cite where it is, right?
Hey, that's in code section 162. That's in code
section 74. That's in code section dot dot dot.
That would allow you to say, okay, hey, they
could cite it. And that would give me the confidence
that this is something legitimately that I could
do. And I would just kind of add just a little
tidbit. If you do get something on TikTok or
social media, wherever you find your business,
Advice from the social media spectrum just like
like terms of saying just vet it before you do
it And I know I just keep going back to it, but
the buying stuff just to be buying stuff If you
hear it on social media, don't just go buy it.
Please vet it Just please that's all we ask and
and I know some of y 'all like what's gonna cost
money to get a consultation Listen, it will cost
you money. If you end up buying a whole car that
you know, it will cost you money if you end up
buying whatever that you can't even claim. So
it's worth the investment, right? It's really
worth the investment. I heard someone say, what
makes you laugh today is going to make you cry
tomorrow. So if we want to prevent that, it's
worth the investment to get it vetted and run
it by a professional. So I'll tell you something
about that. I had a lady who came to me this
year. And she was wondering why she owed so much
in taxes. And she had taken out a distribution
from her retirement account, but it was a hardship.
She withheld 10 percent because in her mind,
oh, you know what? They hear that 10 percent
early withdrawal penalty. And so they think,
oh, I'm going to have to pay 10 percent on this.
But she did also factor in that you actually
have to report that as income income in addition
to the 10. So she has this huge tax bill because
she went by the house. But that could have been
easily avoided if she had done, one, a little
bit of research, but secondly, to say, hey, let
me talk to someone who kind of knows what they're
talking about. And then that would, may not have
changed her decision, but she wouldn't have been
in turbo tax looking at this $60 tax bill and
completely thrown off guard and confused about
why it happened. So our court case this week
is actually an interesting one. This happened
in 1977. I was thinking, this is something that...
I wouldn't be shocked what happened today. Instagram
models and all that that we have in our society.
But Mr. Trinidad, he owned a nightclub and, you
know, nightclub, obviously, you know, long hours
can be stressful. Got to manage a lot of stuff.
And so he needed what he said in order to do
his best job. He needed to be relaxed and happy.
OK. And so because his live in girlfriend allowed
him to be relaxed and happy, she, you know, cooked
for him. she did all this stuff for him that
was essential for him to be in his best business
shape. He thought, well, I would just go ahead
and write off her stuff. So, you know, I'm taking
care of her. I'm going to pay for her rent, her
food, her clothes, her beauty salon visits, because
obviously she can't be looking busted. So I'm
going to write off that stuff for her as if she
was like an employee. And so he took this to
the court and the court said, well, you know,
we understand that she maybe helps your morale.
but your girlfriend is not a legitimate business.
So I'm not exactly sure how he came to that conclusion.
I don't know if he's someone told him that, but
to me that sounded as if it was something that
you would hear on TikTok today. Oh, I'm, I am
sure people are trying to do this today, but
here is the question. Let me just kind of, and
y 'all don't do this, but you asked the question
right earlier in the, in the podcast, you said,
you know, if this is an expense that you're already
going to have. How do I make that to where I
can include it, right? So this person should
have asked, if this is an expense, do I need
to 1099 her? What do I do? I need to treat her
as an in -house maid, an in -house worker. What
can I do to write this living girlfriend off?
So I'm sure there are people thinking about it
right now. How can we use this to our benefit
for sure. Yeah, I get that. The other thing I
get multiple times is they think they can write
off their time. So like they volunteered or,
hey, I did this work. I didn't get paid for it.
How can I write off my time? Well, how does IRS
know what your time is worth? Right. There is
no universal standard that says if you are 55
and have 20 years of experience, your time is
worth X. Okay, there's nothing in the tax code
that would specify that. Once again, we try to
help you be educated. Look at, hey, here's some
of the things that other people have done that
we see. You could think, all right, that's something
that I didn't know. Or hey, that's something
I've done before. Or now that I'm in a situation
where I started a business, these are things
that I want to avoid so I can start building
better systems. I can start implementing things
in a more structured way. because most of the
time, if you start a business, you ideally want
to be making money in that business. And so it's
a lot harder to start doing things right after
you've been doing them wrong for multiple years.
And then you have way more responsibility, but
way more money on the line than to actually just
try to do it correctly at the beginning. So you
don't have to basically reinvent the wheel. that
you kind of created over the time that you have
been in business. So your final thoughts to share
with people before we wrap? No, but I would just
say stay tuned for the discussion about the business
startups. I may be the case study for that. Who
knows? I don't know. But and I don't want you
all judging me either. OK, if I if I be vulnerable
on that podcast, do not judge me people. OK,
but. Stay tuned for that one. I'm looking forward
to that one as well. Listener and learner as
well. So that's going to be a good one. Well,
awesome. Well, thanks for tuning in. And as we
say, keep more of what you earned. And don't
add that in your pocket. Later, y 'all. We'll
talk to you next week.