Small Business Tax Advice and Tax Deductions

all right I'm back with Jeff law from law tax and financial and the question that I have for you today is do you feel completely in control when tax season rolls around you're you're prepping your taxes what do they usually prep your taxes January February March sometime in that time frame when we're preparing IRS usually starts to allow corporate returns Maybe by mid January a couple days earlier sometimes and then not till more the end of January before they start accepting the personal 1040 returns okay my question is do you feel completely in control like you know to the penny where your taxes are going to be now if you can answer yes to that question shut the video off because I'm just going to be wasting your time for the next 10 minutes but if you can't answer yes that's what this video is about and it's about one of what what I consider to to be one of the most fundamentally important business moves that you can make whether you're in landscaping Excavating whether you own a carpet cleaning store whether you own a bakery I don't care what you do but what we're going to talk about today is going to change everything and how you interact with your taxes from this point moving forward and it's pre tax season planning now this video originated because last year I was being audited by the IRS and they were going through every single one of my records for the past 5 years they were interviewing all the people that I'd ever worked with and i' ever hired and gone through and I was sitting at this very desk with Jeff and being nosy and I said to Jeff what are you doing and he's putting files away he's like oh I'm just doing pre-tax season planning and I asked him to explain what that was and from that point I'm going to let Jeff take over yeah it's in a way it's doing kind of a mini return you don't have your final numbers in so you're using projected numbers most of you I'm sure have heard those terms and that I guess in rounds up to the complicated side of things organization which is one of the things that I see a lot of small business people struggle with and you know you're working long hours you know getting your jobs done and that it's organizing your records and your books is just always I hear I don't have time for that I'm I'm busy making money but uh I've had and I have it sometimes on the on the good side where people are putting enough money away but more often than not it's the times that people just don't understand what they're going to pay tax on what records they need to keep and putting aside enough money um to account for taxes as well I I consider it being either Proactive or reactive what we're talking about today is being proactive it's about knowing exactly where you are and you I personally going to recommend starting in October at the latest yeah to get your taxes done so what you really do is you go from January to October and you tally this is the way I do it now Jeff is going to probably come up with a recommendation of a different way but I tally everything that I've got for my expenses and for my revenue and then I categorize it so I know where my advertising expenses my phone expenses from January to October and I also know at that point how much money I brought in from January October and that gives me two months to plan ahead last year because I did this it gave me enough time to buy two pickup trucks a skid loader eight mowers a trailer invest into my retirement fund I don't remember what do we call it 401K 401K um and to do all of this all of these things that had I waited I would have been reactive and I would have had no options I would my timeline would and I was talking to other business owners when it struck me that not a lot of people understand or even begin to know this concept in fact one of my close friends owns a pretty big underground utility company and he was telling me about how he negotiated purchasing some heavy equipment worth hundreds of thousands of dollars and part of that negotiation was they were willing to backdate the purchase date on the piece of equipment to help him out with his t taxes well that shouldn't be part of the negotiation at all you should you should be able to do that ahead of time and know exactly where you're at so Jeff is going to be here and help us understand what we've got to do so what are we looking at how how would you like to see people bring in their pre-season tax planning to you what yep sure and real quick you I just want to expound you mention the key thing you need to get in by October or the key to that is be in in time to have time to to make purchases um deferred compensation which is 401k or there's other avenues that route but the important thing is you can't do this December 31st and then otherwise you've only got that data run out and buy stuff give yourself time to if you find out you're going to be in a hole with taxes that you can do something about it because once it goes to taxes it's gone gone forever so I like that date December 31st because I didn't start in October I actually started November about 25th 26th last year with my pre-tax season planning because it was the first year I heard about it I was writing out a check on December 31st to a snowplow company to purchase two brand new MVP 3s uh Western Snow Plows because I couldn't wait till the very next day and it was 4 or 5 o'l in the afternoon and I was just going through got up at 4: or5 that morning was going through and finalizing all of the transactions and make make sure that it felt it it fit into the schedule the right way I always am checking my cell phone on the 31st if I'm at home so I know somebody's making a last minute call or email that hey I need to purchase this should it be in the business name or my personal or there's always those type issues at the end of the year but but to get back to it yes the the important part of it is you need to have the records and that's another big thing if you if you haven't kept records all year lot of you wouldn't be alone but there's really nothing you can do about it you have no idea what your revenue is but wait if you don't keep records you still have a check register right and you still have bank accounts so the way I do my personal books is every month the bank sends me a statement and it shows every credit card transaction every check I've ever done and that's what I use sure that's a more accurate register for me than it is my own personal record keeping no that's that's perfect and I maybe I wasn't uh maybe I confuse that subject a little bit it's if you don't go back and total all those things up then until after the end of the year then it's it's the same thing then you found out too late but uh your options after the end of the year there's still a few with retirement type things and IA and that but it severely limits your options so what you need to do is if you haven't like Stan mentioned go through those registers hopefully you're keeping separate business and personal accounts that'll make life way easier um you know and it doesn't matter if you keep track of this stuff quarterly monthly you know depending on the amount of transactions you have don't let it pile up where it's a huge ordeal then um so I would try to do that so I keep track of my records almost daily but of course this is what I do but certainly um the important part is doing it you need to get your accountant the revenue which is everything you've been paid for your business and then all of your expense information and then you just kind of run a return to date I usually I'll ask people what are you looking at the last couple months you know is it going to be similar to this pace is business basically done and you know the the more accurate we are in our projection the more we we'll come in on where your tax liability is so is it legal Jeff and I know you're not really an attorney by by fact but I have a question for you an accounting question is it legal then for us as small business owners let's say we get paid Revenue in November we get paid Revenue in December but we don't deposit that until after the first of the year is that in the year that you collected it or is that the year you deposit it uh you know a lot of te if you're now the what you're referring to is the difference between Cash basis accounting and AC cruel basis accounting most small businesses are Cash basis which means you only report things received January 1st through December 31st in your example then if it's not on your bank statement until J January of the next year that's the year it would go on now if you're holding checks for a couple months and you were to be audited they would argue the the term they use is uh constructive receipt you know that this you had this money and you were just holding on to it to delay into the next year but certainly you know if you had received a check right at the end of the year and didn't get a deposited they're not going to have a problem with that and what you mentioned do people do that of course I I hear that people do that so okay um and then as far as from the accounting side when it comes to me you know if they just give me their numbers for the year I would have no idea that they held on to Jacks okay but you could get yourself in trouble under that you know it's you're you're kind of manipulating the the tax here then okay that's good to know so but it's they they'll look they they won't look at it quite so much if it's you deposited on the last day if you receive the che the last day of December and you can't get to the bank and you deposit on the last day of the year or and I suppose that wouldn't be too legal if you asked your customers to put you know January 1 of the next year onto onto the chat I just as you me mentioned previously with your uh friend that has the utility business that that that H I mean does that stuff happen yes so okay um I'm just trying to get a very clear path so contractors don't do something thinking that it's okay when it really isn't I mean it's a loose term but reasonable if you use that I mean it is it reasonable if you received a check in the last week of December that you didn't get it deposited by the end of the year yes if you received it in October and had you know 30 checks that you've been kind of hanging on to I mean they they know what you're doing then okay it's pretty obvious okay okay so how do you going back to how what do you find is the best way for businesses to bring you their records in any format do you prefer Quicken email to you or what we covered I the way I use it with using bank statements to bring it in but yeah and and I get this question all the time and I always just tell people as long as you can get me the numbers that's all I care about a lot of people use QuickBooks nowadays that seems to be the popular one either they buy the Standalone version and track it themselves or they do it online or they have a bookkeeper who tracks all their stuff in bookep in uh QuickBooks I have a lot of clients that do that you know they pay a bookkeeper to do it so they give them their information all the receipts that you're talking about you would give your statement and receipts to your bookkeeper and then you can run a p&l at any time which is a profit and loss statement um it just basically lists your revenue and all your expenses by category you know automobile insurance accounting cost of goods your materials tools Etc the type things you have so we just list it all off and then a net income and you know from there if you did this monthly you could kind of is January a good idea of my average month then multiply It Out by 12 and that's how you start projecting you know and once you have more months of information obviously your numbers are going to be more accurate so you don't really need to start doing it right after January but perfect that's a theory so let's do a recap real quick you come in you bring in you do all your your expenses from January to October we're going to use October as our deadline year to date is the term we always used it Y and then you should know that if you have any big expenses coming up like if your insurance is due or if you have a big advertising bill at the end of the year you can also put an anticipated expense amount into that into there likewise if somebody owes you money if you've invoiced someone you know if you have a lot of invoices out there large receivables well let your account know because that's going to be collected by the end of the year most likely or if it's not but you need to adjust for things like that and again the more accurate the less surprise you're going to have and then that gives you two months that gives you all of November and December gives you October to kind of strategize and then November December to not only do any 401ks but equipment purchases or major expenses to make sure that your records balance out and I think that that alone is what puts you back in control of of your taxes and not being a victim but understanding every single thing where it goes and where you're going to sit so when tax season actually rolls around you can be comfortable and not questionable yep agreed perfect yeah you don't want surprises when it comes to taxes no all right well Jeff thank you I'm going to put your contact info in this video and if anybody has any questions Jeff is a great resource I tell you without him life would be different with uh with my companies so thank you thanks