Tax Saving Strategies You Are Probably Missing
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Mr. Biz Radio: Tax Saving Strategies You Are Probably Missing
Unedited transcription of the show is included below:
Welcome to Mr. Biz radio. This talk for biz owners during the next half hour, Mr. Biz, Ken Wentworth, a leading business advisor, and two time bestselling author. We'll cover topics that will help business owners run their companies more profitably, and more efficiently. If you're ready to stop faking the funk and take your business onward and upward, this show is for you. And now here's Mr. Biz, Ken Wentworth. All right. Welcome to another episode of Mr. Biz Radio with me, Mr. Biz
This is Ken Wentworth and it is that time of year. Unfortunately, I know a lot of people are going to eye roll on this one, but we're here to help. It is tax time is tax time. Who's excited for tax time. Raise your hand. Oh yeah, not many of you, right? Not even me. But as some of you guys have heard before, if you're loyal listeners, I don't even do my own taxes. I know enough about taxes to be dangerous, but I'm certainly not an expert. And so I, I leave it to the experts, just like I talk about within your business, you know, things that you're not an expert at delegate get an expert involved, especially when it comes to taxes. Because think about it, a couple of things that you could be missing on your taxes could mean tens of thousands, if not more dollars in your business that you're missing out on either deductions or what have you. And those savings could be absolutely massive, especially think about, even if it was quote unquote only $10,000 that you're missing out on, you know, over 10 years, that's a hundred thousand dollars. So super powerful, make sure you get experts involved. And that's why we have an expert this week to talk about tax saving strategies that you are probably missing out on. So this week's guest is Lisa Bloomfield. Lisa, welcome to the show.
Thank you. I appreciate you having me on your show.
Yeah. So, you know, again, Lisa is an expert in this field and so that's why we wanted to have her on to talk through some of these things. And of course, during the third segment, she's going to share with us some of those tax saving strategies that we may be not considering or not having heard of hadn't considered, or maybe we're missing out on just don't even know about them. So we'll definitely do that. But before we get into all that, Lisa walk us through a little bit of your entrepreneurial journey before starting your business, et cetera.
Thanks, Ken. I started working with a CPA when I was 19 years old and I got hired as a secretary. He slid QuickBooks across the desk, asked if I wanted to self-train my my cell phone that, and I picked it up and just been going with it ever since. I've always been self-employed and always working in with small businesses. So 28 years old started my own bookkeeping tax firm was enrolled with the IRS for years. I've done. I did government accounting for small, very small entities in Texas for 10 years. We had about 60 clients at the, at the time a business partner. And I now I'm in Utah and we're working with small businesses again, but on the tax advising and tax strategy side. Interesting. Well,
You definitely hit a sour note for me. I'm going to tell you Lisa. So my undergrad is in accounting and my, by far my least favorite accounting class that I had to take in my undergrad was government accounting. I don't think, I don't know why, but Oh my gosh, I just, all the other accounting stuff game pretty, you know, to me, at least it was pretty intuitive and you know, I've picked up on it pretty easily, but man government and accounting was just a whole nother animal for me. I don't know if it was a mental block or what it was, but hats off to you for at least from my perspective of going through that,
That's funny for me, it was audit. I did not like the audit courses. I didn't see a lot of value in it. I still to this day kind of like snub my nose at audit, but cost accounting and the government accounting and all the, all the real time, like stuffy feel like really helping people. That's why I love the business accounting. Cause I feel like your day to day, like helping somebody, whereas audit was like, after the fact telling you what you did wrong. Yeah. So working with small businesses is exactly what I've done for 25 years is because you're helping them in that audit. Or in that real time world. And, you know, taxes were pretty much the same for, you know, a good 20 years. And they have changed significantly in the last five years and they're probably going to change again. And so it's kind of a fun time to be doing this.
Yeah. And again, that's just like, as a, as I mentioned at the outset, that's one of the reasons why I don't do my own taxes even. I mean I did years ago before I had my own business, but I don't keep up with all the latest and I don't want to, honestly, so, and I want to, I want to hire someone who does it day in and day out. Those things are just old hat to you. Right? You understand them, you're you're you have to stay up on it. And so you're going to know this stuff much better than me. And so why wouldn't I have a professional like yourself to help with that. And again, I think a lot of business owners, especially those that are trying to bootstrap, or I know, especially when you're first starting out, you, you want to try to DIY your business.
And I always talk about, you know, DIY and your business and bootstrapping are both fine things to do. Especially, you know, I'm, I'm all about cash flow, but there are certain things that you just have to find the expertise. You have to find the experts because, you know, paying your, your CPA to do your taxes again. As I mentioned, you know, whatever it costs you, you know, a thousand bucks, 500 bucks, 2000 bucks, whatever it costs you to have them do your taxes. My gosh, if they save you 10 grand, they paid for themselves, you know, five, 10 times over think about it
Definitely is. It's almost really cheap insurance. And I don't, I don't think that that's the one of the best places to save your money early on because your taxes are so difficult. Most of the people I've heard you do get audited. We're trying to self prepare, especially sole proprietors. And you make some very basic mistakes on those forms because you're either hand filling them out or you don't know what to answer in TurboTax. And you cost yourself a bunch of money and you, you, you raise your you bring yourself to the attention, to the internal revenue service. But then what I see more often is people trying to do their own taxes on TurboTax or some of the business off do it yourself software. And they're not there. Their reviews do not like it when you get an audited, when you get letters from the IRS, whatever. So they're going to just tell, you know, when you click the wrong bubble and it's not going to work out for you, so you'll save yourself, you'll pay for your own tax prep. Just go get a professional to do it.
Yeah. I mean, think about it guys. What, what, what worst can you think of a w almost almost no letter you could receive in the mail would be worse than going to your mailbox and seeing in the, in the upper left-hand corner, internal revenue service. I mean, it's going to make your heart sink. You're going to open it up and I'll tell you from firsthand experience, I'm going to, I'm going to be pretty transparent here. I got a letter. This was before I had my own business. When I was working in the corporate world, I got a letter from the IRS. I was getting ready to go to a concert and I got my mail. I just got home from work, got my mail and saw IRS. And I jumped, ran upstairs to jump in the shower. I came down. I thought, man, I better open this before I leave.
I opened it up Lisa. And it said, I owed, I think it was $62,000 in back taxes out. And I was like, Holy crap. But thankfully I was able to put it aside. I was like, I'm going to a concert. I'll deal with it tomorrow or tonight or whatever. I'm not even thinking about it. Well, I had left it sitting on the Island, in my house, my buddy, who was coming to get me. He comes in the house, sees it and we get in the car and he goes, look, I don't, I don't want to make it seem like odd or anything, but it was sitting on your counter. I couldn't help but notice. But did you know that the IRS says you owe them $62,000? How are you, how are you still going to this concert? Are you still calm? I said, I know it's an error.
I know. I don't know. $62,000. I'm very diligent about again, this was before when I was doing my own taxes, but before I had my own business. But yeah, I mean that, that letter could be nothing worse. And by the way, if you've done your own taxes and you don't understand them well enough, especially if you're a business owner, there's so many different nuances to it. Good luck, you know defending yourself because you're not an expert in that field. And now you're going to try to bring in a tax expert that they go, Oh my gosh, I've got to get all up to speed because I didn't do your taxes and figure out what the heck's going on. Just hire a professional from the get-go and save yourself, all that heartache.
I, 100% would agree with that.
Yeah. I'm sure. Well, it's good for your business obviously, but it's, it's so, so true. And I'm not just saying that cause you're a guest. I mean, it's a super, super important, so we're going to hit a break here, but before we do, I want to ask everyone, are you tired of waiting 60 or more days for customers to pay invoices? If so, invoice financing through Porter capital can help invoice financing, provide you with immediate cash for your unpaid invoices in as little as 24 hours to get the working capital you need. When you need it. Visit www.Portercap.com/MrBiz to apply for a free quote today. Good folks down there at Porter Capital based in Alabama. Good. So we're gonna hit a break. We're gonna come back. Continue talking with Lucy Bloomfield
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It's time for Mr. Biz tip of the week and for all you business owners out there, listen to this one. It's a short one, but it's a really good one. If you want to know how to almost instantly improve your profitability, mind your margins, not mind your manners, mind your margin, same thing, MYM, mind your margins. This is one of the things that I see when I talk and you guys have heard me. If you listen to the show regularly for me to talk about this a lot those margins are super, super important and not just your gross margin, gross margin can be, I'll say manipulated. You could be faking the funk cause I like to say and saying, Oh my gosh, my gross margins are so great. But really that's just because you've pushed some things down into your administrative expenses that should be up in your cost of goods sold, et cetera, and not to get too far into the weeds on that, but improving your margins will instantly improve your profitability.
You could have less revenue and make more money. So if you're taking on more profitable and making sure your more profitable jobs and projects ensuring that the projects and jobs you have, you're not falling victim to the, as I call a silent business killer, which our product services you have that are either break even, or actually even losing money. And I call it silent because you don't realize it's there, but almost every business I've ever worked with has it it's lurking. And you don't even realize that you're increasing your revenue, but you're losing money. And it's like, Josh is so counterintuitive. It doesn't make sense. So super, super important. Mind your margins. So as a Mr. Biz tip of the week, this week, and again, we're talking with Lisa Bloomfield and she is a tax strategy expert. So Lisa talked to us a little bit about what does it, I shouldn't say typical. I know no engagement is typical, especially with taxes, but you know, Sam, a business owner, I come to you and I say, Lisa helped me. Here are all my things. How can you help me walk us through what that looks like?
Yeah, definitely most businesses, even in the first year and you talk to a tax strategist and you might think your regular CPA does this when they do tax prep. Usually they, don't one, it's a very busy time of year and you're not going to take the time to delve into you. So our first strategy session is complimentary. We'll spend an hour, at least going through, and we're going to talk about your business. You know, how are you doing your bookkeeping and how are you recording your activity? What is your gross profit net profit. And we're going to talk about those margins you just mentioned. So we're going to discuss at what your business looks like, where your growth set, what are your goals, personal business? Do you have partners? What does their life look like? And so as we get this whole picture, it then starts to become very clear.
And when you've done a couple of hundred different tax plans, tax strategies, you really start to know, okay, here's how we're going to save this person money. And then we, you know, really we'll then dive into deeper numbers and flesh that out. So it's not a fast process. It's not something you do just looking at some numbers or tell people, you know, the classic is well, just go become an escort and that'll save you a bunch of money. That's the very, very top of the iceberg. And it is not at all touching all the things you can do. And so delving into it and asking a lot of hard questions and probably planning on spending more than a few minutes. Just talking to someone is what is how we saved them, the money.
Yeah. I think that's what I understand is I think you're rightly so. A lot of folks think of taxes all, well, let me make an, a, an appointment with my accountant at the end of February, beginning of March, maybe. And you go, well, yeah, I'm sure Lisa, when I said that probably rolled her eyes like, well, yeah, that's the busiest time of year for them. And as she mentioned, it's not that they don't want to spend time with you, but they're just so inundated. So, you know, I, I know I do it with my CPA, who does all my taxes and my tax strategist. And we sit down twice a year before tax season and talk about specific things within the business. How is everything going? What the restaurant we headed, et cetera, et cetera. And then we make a little bit of a plan, which I'm sure is exactly what Lisa had alluded to.
What they do is we make a bit of a plan. So that way, when tax season comes, we hop on a phone call and usually it's 10 minutes or less to where we go, okay, well, we talked in October, you mentioned these three things were going to be decision points, where are we with those? And we figure out those three things usually pretty quick, and then we're done. And I don't bog down their time at the busiest time of year. I think it makes, you know, obviously makes their job a little bit easier and I have Mo much more you know peace of mind that they understand exactly what's going on in my business. And, and, you know, again, can I have those strategies in mind as we go through everything
That is, that's exactly it. You know, our relationship with our clients, it's truly a relationship. It's not a one-time of your transaction. It is multiple appointments a year. We're going to look at where you're at, how have you progressed meeting those goals and a lot of things that save you money in business, but are also helping invest in your future, like retirement plans and whatever those have deadlines that have to be hit well before the end of the year, if you want to change your owner's compensation, you probably have to notify your payroll company six weeks out or so you want to invest in a retirement plan. Maybe you don't have one, or we want to change it to something else. Those can take months to set up. So you're looking at it in August, September. This is stuff that you don't want to do in like January and be like, Hey, I'm just going to do this. Now. It probably isn't going to work out for you. So you want to have a relationship with someone in order to properly look at your taxes in this work, those that extra time, you know, you mentioned very beginning of your show. You're like, it'll save you 10 it'll cost you tens of thousands if you don't do it well. Yeah, if you think that that 15 or 20 minute phone call with your CPA, you're too busy for, but you just cost yourself 20,000. Well, I hope that was a really profitable 20 minutes for you,
Right? No kidding. No kidding. Yeah. And I can tell you, even from my business as a, as a part-time CFO, each and every one of my clients, every single year, to your point, Lisa, about deadlines at the end of the year is between, you know, the, the Monday after Thanksgiving until December 15th is when I set up all of my meetings with my clients to talk about where are we coming in for the year, right. I can project out. We're close enough towards the end of the year. I can project out where we're going to land as far as net income, et cetera, and okay, do we have extra money? We do what we want to have some tax savings strategies we want to implement. Have we crossed over some thresholds we need to cross over. And then we get there there's, you know, tax advisor and potentially their financial advisor involved. And we have another meeting, you know, usually in that December 15 to December 20th timeframe to take the actions we need to, you know, lessen their tax liability as best we can.
Yep. That's exactly what it looks like. This relationship is no, the fault really is, can be some of our busiest time. Is it handling that? And so if you're thinking of changing your tax person, if you're looking at the strategy, you know, it's never a bad time to start people like, no, I need to either need to do it right now, or I'm going to wait and do it like after tax season, it's start that process because you really want to start that relationship as, as kind of as early as possible. So you don't miss important deadlines and you don't cost your business money. You know, it hurts every CPA's heart to like see their client, you know, have lost money from the prior years. And a lot of time, your CPL look at you and like, they won't even say anything. They won't even say about how much you lost, because they're like, that's just how you start that conversation, right? Yeah.
Yeah, no, I it's, it's again, it's super important. And think about it guys, the more your tax strategist, your CPA knows about your business, the better they can advise you. You know, I do it with my as well. I need to have my finger on the pulse of the business to be most effective. I can help you, but the more I know, the more transparent things are to me, the more I can help you because that may, you know, you may mention something or forget to mention something that could trigger something in Lisa's head that she goes, Oh my gosh, I didn't know. You guys are doing X, Y, and Z. Well, that opens another door for us, you know, another tax savings strategy. So it's super, super important to have those ongoing conversations, making sure you're well aware or your, your tax advisers well aware of all those things.
So very, very important ties right into let's dive into it. Do you lack the cash flow needed to expand your business, but you don't meet the qualifications of a traditional bank loan. If so you might want to check out invoice financing with Porter Capital. Unlike traditional lenders, Porter Capital looks at the strength of your customer's credit as qualification. So to get the working capital that you need, when you need it in as little as 24 hours, many times, visit www.PorterCap.com/MrBiz to apply for a free quote today. Again, can help with your cash flow significantly. And, you know, as I always say, if you don't have cash flow, you don't have a business. So come back after the break and we're going to get some tips from Lisa Bloomfield.
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To the show. And I have been remiss in not mentioning so you out there might be saying, okay, great. Loved it. What Lisa's saying. Love hearing about how she works with clients and how she helps. And, you know, even if you have a tax advisor or CPA right now, you know, it wouldn't hurt. It's always good to get a second opinion. You don't have to dive in it. As Lisa mentioned, the first first discussion you have with her is complimentary even just to talk through things, because look at it this way, and I'm not calling you out. I'm not calling out your CPA or current tax advisor, but if you have someone who's a six on a scale of one to 10 and Lisa's an eight, nine or a 10 think about what dollars that could mean for you, right? Again, your CPA might be just checking the box and not really diving into everything.
So it's always good to get that second opinion. If it doesn't work, that's fine. But you know, w w what's the worst. It costs you, right? You sit down and you have a conversation. You figure out that, ah, I think I'm good where I'm at. That's fine too. But at least having that conversation I think is, is really, really important. So so if you want to find out more about Lisa and her firm go out to, and I'm probably going to butcher this name, but wasatchcpaservices.com that's wasatchcpaservices.com. Did I say that right, Lisa,
Almost it's Wasatch with them that it is a mountain range in Utah. That is part of the Rocky mountain range, but it's in the Utah portion. So Indian words, they're always every time.
Well, when I first saw it, when I was doing show prep, I saw it I'm like, is it was at no, it's not that no, no, no. And I didn't have time to go cause I was going to Google it. I figured it had to have some stuff. I knew it was a native American. I figured I had to have some sort of a meaning to it. So I'm glad you mentioned that, but again, go out to her website, you can find out more about what you do and what she does. You can also book that complimentary discussion with her. Maybe right now, this time of year is not the best time, but nonetheless wait until the dust settles a little bit. And as you begin to plan for as you're, you know, rounding out your 2021, and when I say rounding out, you need to start planning for that stuff. Not in October, November, that should be an ongoing throughout the year plan, as you well know, as we talk about all the time on the show, but that being said, I'm going to shut my mouth and we're going to get some knowledge and have Lisa help us with some tax savings strategies that we probably are missing out on, or just don't even know about.
Thanks, Ken. You know, it's actually a perfect time of year. You can go ahead and if you want to book that free appointment we do a lot of tax strategy and tax planning. So you don't need to plan on using us for all your tax prep. You have a guy, you love him, he wants to do your taxes, but he's like, I don't really spend a lot of knowledge and time, you know, brushing up on all these extra strategies. So we prepare a lot of plans for people who use others for tax prep. They don't have to be together much like CFO services has nothing to do with either your, either day-to-day bookkeeping or with your tax prep. You need all these different professionals. So how we help, a lot of people is after we've done this strategy and what are a lot of the like I would say five basic ones.
You, you can Google them. You can get out there and you can find them. So I'm not going to actually be probably saying words that the people who are really savvy have haven't heard of, but I would probably caution you about like running and doing them all by yourself because the intricacies, the paperwork, the making it so that it's, you know, all of these have been usually tested in tax court. So you want to make sure that your compliance so that you are like, what didn't lose in tax court. That's how we stay compliant. So kind of like you could probably Google brain surgery, but you probably don't want to be performing it on your friend. So you've heard of S-corp well, escort comes with the tricky, additional structure of requiring reasonable compensation. What does that look like? What's the right number.
If you choose the wrong number and as your income changes every year, you want to evaluate that tying into S-corp is going to be your S-corp owners, health insurance, and retirement plans. So what does your salary need to be? Does it need to be on the W2? How does that look, report it? An additional strategy generally, when you've transferred from being sole proprietor or partnership to an S-corp, you need to consider something called an accountable plan. What's in that. How do you reimburse, how do we, especially with COVID you might've gone from having a physical office to being at home and did that change things you have gone from maybe you now do have to, like, you're renting a small space because you can't be working at home because you have a lot of children. So you're renting like a part of an office.
What does that look like to, how do you reimburse yourself? How is it included on your taxes? Can you maximize something else? Now, all these different things, trigger tax, saving strategies. Other ones you look at is hiring children. If you didn't know that you could hire your children, if you don't know that you can, if they are already probably playing some role in your business, what kind of benefit can you get from that? That's a tax saving strategy and you want to make sure that you implement it correctly. There are the retirement plans. There's a lot of very good profit sharing either. You know, solo, 401k then there are some other benefit ones that are for higher, higher investments, more than what you would've seen in the standard W2 job for retirement accounts. Owners should look at those.
Even if you have employees, you don't have to necessarily give the same amount to the employee. So you can, we can get you plans that are very professional finding a financial advisor who does that. It's kind of like finding a tax strategist, not everyone does business plan, so you'll want to pick carefully. Yep. I agree with that for sure. And so and then I think, you know, just an example, we had a client who did, he had one of these, he was investing 65,000 in a retirement plan and he had about $350,000 net income anyway. And his tax bill was massive. It's like 75,000 or something a year we're looked at as like 2017. And he's like, it seems really high. So we went through and yet he was structured wrong. He was had like four or five other strategies. He wasn't, he thought he was using them, but he wasn't, and they weren't being properly recorded in his books, which is a whole separate problem.
And so then we go through and we restructure it. We make sure it's done. So 2018, we do his taxes. And we're like, well, you're only going to owe 44,000, but we recalculated based on how you're doing it before you would vote 77,000 again. So we only saved you 33,000. And so, yeah, so even though a tax plan might seem a little pricey when you do one, remember this is a template that's going to last, you like three to five years, at least unless your business massively changes in that timeframe. So it's a very good investment. They usually double saves you at least double the money right off the bat.
Right. It's a great point. And I kind of alluded to that a little bit, a little bit towards the beginning of the year, I should say is, you know, that example of saving, just make it easy. Number is 30 grand, 30 grand over, like you said, that tax plan that lasts you, let's say even three years, you know, that's, that's $90,000 that you save, you know, who cares? I mean, almost as long as it doesn't cost $90,000, sign me up. Right. There's gotta be a return on that investment.
I mean, really honestly, you do CFO work, you know what it's like, you see people where they're like, Oh, this is just cost me money. I'm like, some things are really investments and most tax planning and most looking at your financial bottom line is always in investment.
Yeah. And I love what you said earlier. I just circle back real quick about, you know, having a CPA and it's not necessarily a tax strategist. And I love that you said that because it's the same thing for me. When what I do with being a CFO is people say, well, I have a bookkeeper and I'm like, I'm not a bookkeeper. I don't, you know, I don't make, I don't make journal entries. I don't want to make her journal entries. I want to be a strategic partner and much the same way that you would be. I think there's a very good, it's very analogous, a bookkeeper to a CFO, a CPA to a tax strategist. Again, some CPAs might be tax strategists, but I I've found the same as you is most are. I don't want to say they just check the box, but they're not thinking straight, strategically as much or more tactical as opposed to strategic. Would you, would you agree with that? Lisa?
Definitely. You know, we spend about $30,000 a year in that extra special training and about 300 hours. It's a lot of time if you're doing a lot of transactional work it's not the same thing, so exactly what you said.
Yeah. Yeah. Super important. Super important. Look, we've been talking this week with Lisa Bloomfield and you can find out more at wasatchcpaservices.com
Lisa, I really appreciate you coming on the show. You start some great strategies. I appreciate it.
Thanks for having me here. It's a lot of fun.
Yeah, absolutely. Thanks for listening guys. Have a great week. Make sure you check out www.PorterCap.com/MrBiz for your cash flow needs. You may have again, we've been talking this week with Lisa Bloomfield and about tax saving strategies. Hopefully you got some good value out of it. Have a great week. And don't forget as always cash flow is King
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