Small business taxes, IRS problems, tax season planning 1/2 4 k video

you know by meeting early before December 31st it's not about how much my going to be paying in taxes it has nothing to do with that it's how much can you deduct out of your business so you don't have to pay in taxes that's the huge thing that I need these guys to start to wrap their head around must have you can run a half million to a million dollar business and have a tax bill that's pretty darn close to zero yes and I think people are usually under two different strategies whether they know it or not so you know there's all sorts of different rules so that's things like so that's an IRS red flag I don't want it yeah because you want to treat it the right way so you don't deduct all the payments you depreciate it it's a sample what actual deduction is first and foremost so person so these guys know what an actual deduction is can you tell me what that is sure accounting is confusing and it is a huge part of the overall success of your business when I was first starting out in my company I brought all of my records into my accountant and he sat down and told me that I owed the IRS over $37,000 I didn't have that much money in my bank account how can I owe the government more money than I actually physically owned I took my same records to another accountant that I'd never met before but I got a high recommendation that this was a business accountant when I turned those records over to him I owed nothing to the IRS and that's when a light bulb went off accounting then as the rules are in black and white but sometimes the way that you can interpret those rules and allocate different expenses has a massive impact on the overall success of your business today guys I don't want you to be an accountant by the time you're done with this video but I want you to be able to talk to an accountant vet an accountant and have just enough basic knowledge so that you can be comfortable when you get your own numbers back from your accountant to know that you're in good hands this is a two-part process this is part of our while you work series and guys the overall success of this is you guys hitting the like button hitting the share button and commenting anything down below I don't care what you say say any comment you want get creative let's get into today's video and meet my accountant um guys this is Geoff law he's actually my accountant and I've said it I can't tell you how many times you've got to establish an actual relationship with your accountant so that they know your business agent our block is one thing but having an accountant that does things like Jeff does call me up bug me over and over because you call me Shane calls me and you say hey Stan we need you to come in before this date because we get busiest contractors and we lose track of time yeah but in reality you are 33% and that's what I say of the actual success of the equation of any small business I don't care if you're a contractor I don't care if you own a restaurant small businesses have to pay X amount of money to the government every single year and what we want to talk about today is some strategies that contractors and any small business owner can use that it's them ahead of the curve sounds good Stan okay so we're in this is November one of the very first things one of the things that we've got to do that every contractor every small business owner should do is pre tax season planning and that means tax season planning before the fiscal year end which is typically December 31st is that always December 31st unless you elect out to a fiscal year will be December 31st and that's all most people operate so yes a couple months before the end of your fiscal year usually the calendar year that's you don't want to wait any longer otherwise once you do your planning and see where you're at it's too late to do anything to change it then at that point so that's why we try to meet in November so you have a good month plus buy equipment or at least know where you're at even if you're not going to do anything you kind of to expect them for if we need to make payments in January and or in April what you're kind of looking at so you know by meeting early before December 31st it's not about oh how much my going to be paying in taxes it has nothing to do with that it's how much can you deduct out of your business so you don't have to pay in taxes that's the huge thing that I need these guys to start to wrap their head around because when you do it the right way you can almost have you can run a half million to a million dollar business and have a tax bill that's pretty darn close to zero yes and that's there's I think people are usually under two different strategies whether they know it or not on a profit or growth if you want to follow girls strategy you can build a business to five hundred to a million dollars without paying much tax because of the tax laws and being able to deduct you know equipment when you purchase equipment for fifty thousand or whatever the amount is being able to deduct all of it that year if your profit was fifty thousand now you've paid no tax if you buy that you know there's some different rules for states which we won't worry about but on the federal level with the accelerated first year depreciation you can eliminate quite a bit of profit run the small guys that and the amount to went up to a million bucks which for small businesses I don't have people that are that are maximizing that you know but so there's plenty of room for the small guy to eliminate their profit and all the the catch-22 which you know is yet to have the money to do that or the financing to do that to purchase the equipment exactly so one of the things that we're talking about is the difference between being proactive and being reactive and obviously we need to be as proactive as possible and that means like right now I feel like I'm almost being reactive because it's getting closest November 21st sure and I should have actually been in here with you and I say in the end October the end of October at the latest which gives me then two months I can project my income ahead yeah I can use everything that I've done up to the end of the beginning in November project my income ahead and then figure out how where my profits are gonna be and then how much equipment that I need to buy to actually reinvest into myself because every penny that I'm reinvesting into myself if I'm doing it the right way is tax deductible and I want to talk about what is tax deductable what is not tax deductable and so that these guys can start to understand that but when I'm when I'm reinvesting into myself literally the checks that I would be writing to the IRS I'm now just putting back into my own company which is how that's a that's a huge part of the financial planning for any small business owner Chris so the rule of thumb I'm gonna say is make sure that you get into your accountant months ahead of time at the latest weeks ahead of time and then you're gonna be scrambling because you're gonna if you're you know running an okay business you're gonna have money to spend and we've spent a lot of money over the last 10 20 years just to avoid tax bills and that's how we buy all new equipment every single year correct I mean and so there's leasing equipment there's buying equipment there's different loopholes and advantages and so let's talk about let's talk about some of that stuff okay you want to cross-check that over a little bit sure so if you leave some there there are some different rules and that's why you do need to work with somebody you're not gonna be able to do all the research and stay up on everything when you're building a business and working long hours it's you know it's just like I wouldn't try to build my own deck or anything you have to have people that do those things for you but uh the back to your question you know you know if you lease something and it's for a hundred percent business item which I'll assume everything we're talking about is items that are gonna be used 100 percent for the business so all of your lease payments would be deductible then would be a hundred percent correct right that equipment correct now you wouldn't own that equipment you give that back five year leaves or whatever the terms of your lease are so one of the different rules I would mention that some people get confused on and that's my you know important to have a professional if you have a lease with like a one dollar purchase at the end i RS considers that a purchase upfront then that's not a lease then you'd appreciate it because who doesn't take it for a buck at the end of the lease they consider that purchase them so you know there's all sorts of different rules and things like so that's an IRS red flag if you don't want it yeah because you want to treat it the right way so you don't deduct all the payments you depreciate it and then otherwise you know if it's a legitimate lease option we know a regular a fair market value buy at the end you deduct all your lease payments along the way and then you purchase it for you know X amount and then depreciate that item but when it's a bargain-basement price like a dollar then that's just considered a purchase off from okay and I want these guys I really want us to break this down in the absolute simplest terms possible sure if I don't want to lose any one of these guys along the way so at least let's say let's say a business makes a hundred thousand dollars a year that's just their growth right and they're like I need to lease a truck okay and then the truck lease is 24 25 grams just say 25 grand yeah so they're not buying the truck they literally roll $25,000 out to their local Chevy company for the lease that means they take the 25 grand away from the hundred grand that they made on the year correct and they have 75 thousand dollars of income left and that's what they would then potentially get taxed on correct before personal deductions and other items correct right I just want to break this down into very simple terms because there's so much confusion over everything related to taxes plain and simple so what our goal today is is to help clear some of that up we're not going to answer everybody's questions but I want these guys to have a path so that when they talk to their accountant because I interviewed you this is what the things that you guys need to understand I actually interviewed your dad i sat here with him and as a business owner I was I was determining who I was going to work with and he answered questions so you guys be picky because this is the dude that your accountant is to do there's a huge huge part of your financial success yep because when it comes to taxes when it comes to accounting the rules are in black and white but the interpretation of those rules are in gray and that may sound iffy but here's the thing Tim did not use you Tim's my manager he did not use you he went to a different accountant and he's like I gotta spend three grand paying taxes this year and I don't have it I remember this conversation I had with him 10 years ago and I says who are you using and he was used an ancient or black or somebody I don't remember but you remember this right um not completely but I know we were speaking on and so then I'm like use my accountant and so then he came to was your dad or UI my dad at first yeah it was your dad and your dad did the same taxes and Tim didn't owe anything agent our block guy said he owed 3 grand your dad recalculated they're all the numbers ran them he didn't know anything no it's my if timid state with that same accountant originally ten years later Tim would have spent an extra thirty thousand dollars in taxes that he didn't have to but because he went to an accountant that understood his business understood his personal situation understood where he was at he was able to maximize the deductions minimize the amount of money that you had that he had to spend in and that's thirty thousand bucks that went into his pocket that he's reinvesting into his business instead of writing a check over to the IRS and when I say the rules are in black and white but the interpretation is in great if anything was going wrong the IRS would have said years and years ago hey this isn't right and you owe us this money but you can see where two accountants can give you two completely different results using the same numbers and is how they understand your business which is the most important thing yeah and that's that's asking questions and I don't want to say that somebody can't do your return right if they never ask you questions but I it doesn't work for me people that if you come in and meet with me face-to-face or if you send me your information we're gonna have to have email exchanges and/or phone call because I'll have questions there's we always find things that they just haven't sent then so your comb should understand your business but there's gonna be transactions in your Bamm enough to say hey Stan what was this one for you know and that's just so if they're not asking you questions to me that would be the biggest red flag because you're not gonna send a hundred percent perfect information to me I'm gonna I'm gonna have to ask questions and so if they don't I'd be worried that stuff was being missed let's talk about deductions the sample what an actual deduction is first and foremost so a person so these guys know what an actual deduction is can you tell me what that is sure I mean the definition for business expenses it has to be ordinary and necessary so you know necessary if you need it for your business and again you mentioned kind of interpretation that's there is a little bit of interpretation but you know in common sense really if you're traveling to a out-of-state convention for country you know landscaping contracting whatever you go for three days that's what you did that's all deductible you know if you go to same location for a week in your timeshare and you duck out for a three-hour contractor meeting you know that trips not deductible that was a personal trip that you just went to a seminar on and you can deduct if you paid anything for that seminar but you know there's just a lot of different scope of things and then looking at your office you know using your home office mileage different deductions for vehicles but I'm going beyond the scope of your question so that's to be it has to be is next very much it has to be necessary for business which is why I use the travel example I mean is a convention necessary for business or ordinary I would say yes and yes that's reasonable right right but is it necessary for you to spend a week out there and go skiing and go no condemning so yeah I mean you have to use some common sense then it's kind of data for the difference between tax planning which is completely 100% legal and tax avoidance or evasion which you've heard those terms that's not what we do we do tax planning to legally figure out ways to lower your tax tax evading is you know you don't report your income or take that trip to Colorado that wasn't really business that's tax evasion tax planning is coming in and you know my profit is this do I need any equipment or you know yeah if you buy this excavator you need for 60 grand that's gonna take 60 grand off that hundred thousand before and now we've got forty thousand that we're working with before we get to your other personal stuff so let's well let's play through a scenario of different deductions and how it can actually impact your income sure so you are a small business owner your business brought in a hundred thousand dollars in the year yeah you bought the truck for 25 grand that you leased it you didn't buy it you lease okay the truck so you can deduct 100% of that lease right correct all and that's your work truck yes we're again we're assuming this is 100 percent of work vehicle a hundred percent of the fuel that goes into that work truck is tax deductable correct a hundred percent that's 100 percent business vehicle a hundred percent fuel insurance repairs and maintenance tabs so the only thing you can't take is mileage that's the difference its mileage or actual expenses which actual would be your lease payments or if you buy it depreciation how you recapture at the principle involved so your small business owner let's say you put 10 grand into fuel insurance etc you can deduct it because this is your dedicated work truck so now you've got 35,000 in expense correct okay but you are a contractor and unique tools to complete a job so you go out and you buy yourself shelves you buy yourself rakes you buy yourself all of these tools that you need for your business right you spend another 15 grand on investing into equipment okay all right so where are we at right now 50 grand I believe well it's just saying we've total with the truck fuel insurance extra tools you've invested 50 grand into your business okay so now you've taken your hundred thousand dollars which the average person would pay taxes on a hundred thousand if it was just they were and if it's only you two job you pay on the top amount I mean there are some things you know for ones and different things people can do to lower the taxable portion but generally yes hundred hundred thousand a contractor income then you take expenses if you were if you're working as a w-2 employee hundred thousand before expect you're paying on a hundred thousand because you can't deduct any personal expenses or work expenses of the w-2 employee okay so let's make sure that we're absolutely straight on this as a small business owner you have a hundred thousand dollars you bought a truck all this stuff equipment and you literally cut your taxable portion in half as an employee if you made a hundred thousand dollars you pay taxes on the full one hundred thousand dollars am I right or wrong correct I guess we're just assuming that your company isn't giving you any reimbursements for the vehicle but if they were not then that would be correct okay so this is one of the few advantages that business owners have is because they can deduct things like let's talk about things that the gray area deductions let's just be very frank very open what about a garage because a lot of these guys while they're in the growth stage you know they're storing their stuff at their home in their garage in their how did that that's that's awesome you brought that up because so let's talk about purchasing equipment what is tax deductable what is not because there's guys that may go out and buy themselves a vehicle and and not and they may sign on the dotted line but not buy the right vehicle and not be able to take the deductions so these guys we've got to pile this in this is what you need forgetting something let's talk about a few of the IRS red flags that guys need to avoid miss common mistakes that guys may think they're okay on but it's gonna be a big in the IRS office hey let's audit this guy because I was that one of the hardest lessons that I ever learned was with the IRS with its with taxes with understanding I mean I made every single mistake that a small business owner could make and I survived by the skin of my teeth and so I don't want guys out there doing what I did because I shouldn't have survived I want you guys to thrive and not just get by so you guys tell me there's a video like this actually help you it's I know it's not the most entertaining it's not the most exciting but when it boils right down to to it to me it's probably one of the most important things that you guys can do tell me what you guys think in the comments down below and we will see you guys in part two I'm gonna pop a video here here and please hit the like button please share the video and we will catch you guys next time god bless and go get on you guys