How much did you pay in taxes in 2018? Was it less than 2017? If so was it due to you planning or making less money? What if you could make more profit (after tax) with lower revenue? Could you? According to Craig you can . With a plan. Check out his free checklist (e-book) and see what you could do. Great advice for this tax (political) time of year.
Craig’s Phone contact: (516)869-4051
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Here is transcript- It is automated so it is not perfect but it does seem to get better over time.
Craig: 00:00 Now there’s a lot of stuff that’s automated, so they say, you know, tax returns are being processed and all that other good stuff. Um, but God forbid that you had an issue going on and everything stopped.
Cool voice guy: 00:11 Welcome to the ecommerce momentum podcast where we focus on the people, the products, and the process of ecommerce. Selling today is your host Stephen Peterson.
Stephen: 00:25 If you’re ready to set up a strong, reliable accounting system when it’s a real strong foundation for your business. Well we think we have the answer for you. If this is from accounting, we will go, you’re here listening to us on this podcast. We set up a course and it’s called Amazon accounting simplified. Yup. Simple. And we only say Amazon yet it’s really all across ecommerce. We’re talking about integrating quickbooks into your existing or new ecommerce business. And New is great because you could set it up right that way, but if you have an existing business, how do you integrate, how do you get, um, quickbooks online specifically? How do you get set up in there? Well, we have modules. There’s over 48 modules that will walk you through each one of those steps. I’m going to talk about cost of goods and I didn’t even talk about it.
Stephen: 01:05 We’re going to dive in, parse it, peel it back and help you understand what it takes. How about chart of accounts, setting up the right accounts, ones that you can use to make decisions. We’ve had hundreds of clients and we come up what we see it have seen as the best practice and I think that’s going to be the best thing for you. Reconciling 10 99 from paypal and Amazon. Good luck. Challenging. Well, we’re gonna. We have modules, unique modules for each of those because they are unique and so vendor management, accounting for Amazon loans. It goes on and on. I’m just skimming the top. There’s 48 plus modules and more will be added over time. It’s going to help you get up, get set up or get caught up with strong foundational accounting books. Um, we use it to help make decisions. We use it to help predict cash and cash pinch points.
Stephen: 01:52 What you’re going to have. If you’re buying inventory and you’re waiting to get paid for it, you’re going to run out of cash at some point. Wouldn’t it be great to know you? It’s not great that it happens, but it’s great to know when it’s going to happen so you can plan for it. You can make different decisions based on real solid information, historical information that you keep building. That’s part about quickbooks online is our CPA signs right in and does his tax voodoo right through the system and so I don’t have to hump it over there and we can get a little better rate by doing that. So how do you find out more about it? And again, you should look into it. AMZ accounting, simplified.com forward slash, podcast I’ll say it again, amz accounting, simplified.com forward slash podcast check out all the different modules.
Stephen: 02:33 Checkout what you can do if you really want to get your house in order. If you’re really looking to get that building block established and then locked in place, and then you can build from there, then we recommend the course. If you’re ready to learn about wholesale, then I suggest best from the nest. And Robin Johnson, her unstoppable Amazon Academy will help you learn from basically even opening account. If you’re brand new to Amazon, but then all the way to brand, how do you, how do you enhance the brain? How do you have that conversation? There’s 300 plus videos, probably more than that by now. So very simple, little as $49 a month. Best from the nest.com forward slash. M that’s it. Best from the nest.com forward slash IOM checkout the services that they offer, checkout some of the events that she hosts. Do you want to go walk around ASD?
Stephen: 03:22 Check it out best from the nest.com forward. Slash. Ia. It’s time to get the listings, right. So what should you do? You should get your images right, right. So amazing freedom has a program to help you do that. And we’ve used them. It’s phenomenal what they can do. You gotta go look at this. So you go to amazing freedom.com, forward slash photos and take a look at the examples of what you can do with an image you take and you give them some sample images. Um, some simple images. And then what they do is they take and um, insert them with lifestyle photos. And so all of a sudden you’re going to see an example of what a plain image looks like and then what it can be enhanced to. Why is this of value to while you were in the wholesale business? And guess what?
Stephen: 04:05 You want to add value to the brand. And this is just a simple way to do it. They offer all those kinds of services. Scroll down to the bottom. If you really want somebody to help really improve this service and you want to bring value to that brand because you want to exclusivity the services that they offer for listing enhancement will blow your mind. So again, it’s amazing. freedom.com forward slash photos take a look at what you can do for your brands that you’re trying to get. So you’re looking for an advantage to help you with brand. Well, one of the tools that you can use this scope. You could check out their product and then check out their competitors and find the keywords that are competitors are using and check out theirs and see that they’re not. And then say, okay, I’ve got an idea.
Stephen: 04:49 Let me do this. Let me enhance your brand. That’s the thing you can bring to the marketplace. When you can hance the brand, you’re going to win that account. So try it and you get a free trial. But seller labs.com, forward slash, scope, use the code omentum and save 50 bucks. It’s a free trial. Try it and see if you can enhance the brand. Welcome back to the ECOMMERCE momentum podcast. This is episode 378. Craig Cody, the tax man is back, uh, been way too long. I didn’t realize it’s been that long. I’m sorry. Correct. I didn’t realize. Um, Craig specialty is tax planning. Um, he does handle taxes. He does do accounting and he does bookkeeping and payroll and all that jazz if you’re a large company. And you’re looking for a service and he’s in New York, but he can practice anywhere. He’s the right guy.
Stephen: 05:35 But what I bring him on for his tax planning, because I think if you’re making money, you got to start thinking how to keep more of it legally. None of this goofy nonsense and offshore and all that kind of junk. Um, uh, real sound, simple advice. There were some big changes I didn’t realize and it was very eyeopening for me. I stumbled through some things that I remember from old accounting school and still some of them are tried and true, but I just don’t pay attention much of that cause we don’t do our own taxes. We take it to a CPA who specializes and keeping up with the politics of taxes because it is a political thing. So let’s get into the podcast and I really hope you take your time and at the end I give you his link that you can go and get a top 10 mistakes.
Stephen: 06:21 And yes, he does track your email and I don’t benefit in any way, but he does have a free analysis and that’s worth doing. Just have somebody take a look at your business from the outside and you might get your eyes open and you might say, Whoa, this is a big deal for me. And so, uh, when we switched our corporation years ago, we saved a lot of money. So might be worth you doing. And again, I don’t benefit in any way. Let’s get into the podcast. All right, welcome back to the ECOMMERCE momentum podcast. Very excited to have today’s returning guest Craig Cody on. Welcome Craig. Steven, thank you for having me back. Well it’s great to have you back because it’s tax time and nobody likes the tax guy. Craig, you know that. I mean you, you must hear that tea, even your family probably looks a little bit down there, knows that just sometimes,
Craig: 07:06 oh no, they love me because I’m the guy that helps him keep more of what they make.
Stephen: 07:09 You know, it’s funny, you are when you’re in New York, a tax guy and I guess you could practice pretty much anywhere, but you have some specialty stuff. You handle larger clients. So however your shtick is really let’s minimize taxes upfront. Correct. So anybody that’s
Craig: 07:30 and you know, a decent amount of taxes, we can help them save some of that money and keep it in their own pocket.
Stephen: 07:35 Well, we had you on, it was two years ago. I was, I was looking back and I’m like, oh my God, you know, we talked a lot, but it’s just, I can’t believe it’s been that long. And I would assume there have been a few changes, um, in the last year because taxes are political. Correct. They don’t make sense. I mean, I, you know, it’s funny, I sit back and I think about being an accountant. I went to accounting school undergrad and it was pretty common for the most part. It was pretty common sense, you know, and you amortize something because it was logical. Right. It was, you know, based on the life span. Right. And that was a little arbitrary, but it was reasonable. It was consistent. Taxes are political. Is that fair? Yes.
Craig: 08:16 You know, they took so many years ago they talked about this postcard tax return. So now the 10 40 is uh, it’s actually, it’s a postcard size, but it’s eight pages instead of one front and back. But I thought it was going to get easier. Yeah, I call it the full employment act.
Stephen: 08:33 Well, what happened when the government shut down and the IRS, I mean, did they stop going to work? I mean, I’m not familiar with all that except for, except for,
Craig: 08:43 you know, a handful of people basically everything stopped. You know, there’s a lot of stuff that’s automated so they say, you know, tax returns are being processed and all that other good stuff. Um, but God forbid that you had an issue going on and everything stopped
Stephen: 08:58 and how do you get it back up to speed? Especially if you’re working with somebody and they’ve been off dealing with their own personal issues and now they come back, you know, now you’ve got to get them back up to speed. Is that where the conversation starts over again?
Craig: 09:09 Well He, you know, depending on where you at. Yes. I mean we had one client who was, you know, we were just about to start an audit, which was, it was just going to be a three hour audit. And um, you know, there was the day after they shut down and you know, soon as they came back, the order of the call, we set up a new date, we got it done. But you know, there’s a lot of people that are still waiting on stuff because now you’ve got like she says, we spend four hours a day now opening now.
Speaker 4: 09:34 Okay.
Stephen: 09:35 That’s what the at the IRS, because all that mail just sat
Craig: 09:38 for all that. So if you were, if you were in a separate unit that did something and you get your mail every day, now, you know, what was it, 20 something days, that’s a lot of mail.
Stephen: 09:52 So does that bode well for us in business or not so well, or who knows?
Craig: 10:00 Oh No. I would say more on who knows if you have an issue, it could be a plus or a minus depending on where you’re at.
Stephen: 10:06 Isn’t that a good answer? Yeah, it can be. I want a plus, not a minus. Come on man.
Craig: 10:10 So I mean, if, if you owe the government money and they’re looking to take it from you than just being shut down was probably a good thing. Um, if you’re waiting on something because you need to speak with somebody and they owe you money, it was a bad thing, you know, but you know, back to the changes. I mean, there’s some good changes, right?
Stephen: 10:26 Businessmen. Oh, well let’s just, let’s, let’s start knocking them out please.
Craig: 10:30 Yup. The, the big, big thing was the qualified business income deduction. So basically if you’re in business, and let’s just say you’re in the business that we’re talking about today, the government is saying, after everything is said and done, we’re going to take your net income and then we’re going to give you another 20% deduction from that net income. So if your net was $100,000 we’re going to say, okay, we’re going to give you $20,000 free, so we’re going to give you another $20,000 deduction.
Stephen: 10:59 What was the thinking behind them? What was it supposed to spur?
Craig: 11:03 What it was supposed to spur was the c corporations, which is typically your big corporations out there. They were lowering the tax rate down to 21% so what they wanted to do is they wanted to give, you know, the mainstream business owner, the a typical small business owner who’s typically an LLC or a partnership or an s corporation. They want them to give them some kind of relief and that’s where this 20% qualified business income deduction came in.
Stephen: 11:34 Now does, does that, do you have to be a, uh, some type of entity or can it just be a sole proprietor? You could be a sole proprietor? Yes. Okay, so you don’t have to have that legal entity. Correct. All right, so 20% and this was enacted in 2018 is it as now continued into 2019
Craig: 11:55 it goes through, I think 2024 is the date of when everything was extended to. So, um, this is the first year you’re 2018 taxes the first year where you’re going to get this deduction and you know, it can be, you know, a lot of money saved. They could also be a huge planning opportunity. I was going to say,
Stephen: 12:13 what’s, what’s your advice for people to do with that? Right. Give us the secret that we normally pay you. Probably $375 an hour. I know. Wait, you’re from New York. It’s seven 75 an hour. Um, what, what’s the, what’s the advice that you’re typically giving people
Craig: 12:27 now what that secret is you have to plan. You have to see where you are. So, you know, basically everybody gets that deduction. All right? If their taxable income is less than $315,000, so now the people that are making more than that, all right? It’s limited to 50% of their salary. So then there are some people that are in that they made more than $315,000, but maybe they took, you know, $100,000 salary and you know, that limits the amount of deduction that they were able to. So it’s fast at that point it’s faced unless they took more salary, unless that’s where planning, you know, so, um, we had a client bonus himself, a couple of hundred thousand dollars at the end of the year and he saved 74 grand.
Stephen: 13:14 You know, it’s funny you say that because I have a good friend and uh, they only, they only take one paycheck a year depending on how the year went. And I was thinking about that, you know, I was thinking is that taxed as a bonus or is that taxed as salary? Um, I would think as a bonus and it used to, and I haven’t done, I haven’t looked at this stuff and it goes zillion near, so I’m going to talk stupid about this. There used to be a different tax withholding and that kind of thing. Is that still the way it’s done?
Craig: 13:42 There is, but if you’re doing, if you aren’t, then is very few people that do that and probably very few of them that do it, do it right. But if you are taking that salary just annually like that, as long as you’re not taking money out of the business, it’s salary. So meaning if you’re not taking money throughout the year out of the business, then it’s considered salary. Okay. But the other way you’re talking about it’s it’s, and that’s withholding his bonus tax I guess just with the whole. Right. So, um, and that typically comes to play more when you are somebody working for somebody else then then your own employee
Stephen: 14:19 strategically. That sounds like a pretty smart move then, you know, depending on how the year went, uh, to, to possibly draw as a salary one time of year.
Craig: 14:29 Yeah. Most people can’t do it all right. Because they don’t have the cashflow to cover their expenses for the whole year. Um, that’s why people typically self employed are taking it, you know, either biweekly or monthly so they can pay their bills. Okay. All right. It doesn’t work if you’re borrowing money from the corporation or taking distributions through the out the air and not taking a, if somebody looks at it, you know, they could have a problem with it. What the, what the actual problem and penalty could be, may not be existent, but it’s typically not the right,
Stephen: 15:02 that’s a good question. Somebody asks about how, you know, what’s a reasonable salary, you know, cause that’s what you’re required to do to take her out. And so reasonable salary is reasonable. You know, if you’re in California or nothing’s reasonable or you’re in Florida where they’re semi reasonable, it’s significantly different. Right?
Craig: 15:25 Oh, it could be. But we use, um, we use, um, a program that does a reasonable compensation study for our clients. So that gives us something to back up whatever it is we’re doing.
Stephen: 15:36 Okay. And it, and again, that helps defend that position. Right? Ultimately you want to make sure that you, your position is defensible,
Craig: 15:42 right? Correct. The government, especially with this rule, the government doesn’t want you to take an a $20,000 salary and having the $200,000 in net income. And you get a $40,000 qualified business income deduction versus the guy that has 100,000 salary. Okay. So he wants to put say $120,000 in net profit and he only gets $24,000 deduction.
Stephen: 16:03 So this was, it could trigger, this could actually trigger, you know, op issues for people. Correct? Yes, yes. Flags.
Craig: 16:12 Yup. And there’s a lot of new changes this year. A lot of reports that have to be attached. If you’re a business owner, the personal return basis schedules and stuff like that. Um, where the government is really looking to track stuff that they’ve never tracked before.
Stephen: 16:25 Well give us an example. So what, what, what would they be tracking that in the past? They, they haven’t. And what do you, what is your thinking of why they’re tracking it?
Craig: 16:32 Well, the tracking, and of course they’d been leaving dollars on the table. So if, let’s just say you’re an escort Boehner and you, you, you have a salary and you have maybe wind up with $80,000 worth of profit, but you took $100,000 worth of distributions out. So, and there’s a couple of ways that could happen, but so you basically taking out more than, let’s just say your basis that by $20,000 and technically that $20,000 extra should be capital games. So there’s a lot of people that aren’t paying tax on that. They just taken the distribution costs. There is no basis schedule required. So now the government says we want that basis schedule. So we could say where the, if that extra money, you actually always tax on it and,
Stephen: 17:19 and slowly but surely these little, you know, the more electronic we get, right, they’re going to continue to narrow down and dial in. Yes. Yeah. Artificial intelligence. It wouldn’t be bad as long as things got easier. Right. I mean that’s what you would hope. Yes. Yes. You would hope. Yeah. But you’re not saying that they did. Okay. All right. So that was a big one. The 20% is a huge one. Give us another example of big changes that you’ve seen. Well, entertainment is no
Craig: 17:50 longer at the doctoral. All right? So people used to take people out and entertain them and
Stephen: 17:56 we used to get a luxury box. That’s a good example, right? Three bucks, all the sporting events and concerts and stuff like that. So we’ll company can’t deduct that anymore. Correct. They used to get half of it and now they get none of it. So has that affected, I was thinking about that. Does that affect these giant arenas and stuff? It has to. I’m sure if you asked them,
Craig: 18:16 probably tell you yes. You know what? I think a lot of companies are still doing it, you know, cause they kind of have to and they’re just not able to write it off.
Stephen: 18:25 And so what happens with that? It’s just a, you know, it, you’re paying after tax income for that. I mean it’s really expensive beer that beer is expensive to begin with, but now it’s really expensive.
Craig: 18:38 Really. The big, the big thing, you know, there’s some other stuff that aren’t, isn’t going to affect a lot of people, but the big change is really this qualified business income deduction. How about four?
Stephen: 18:50 Uh, since, you know, we’re talking to e commerce here and these are inventory based systems for the most part, right? And some people do services on the side so that that affects other things. But from an inventory based, uh, has there been any changes that have, uh, in the last two years that, that people need to be thinking about it? Well, this has been something
Craig: 19:08 changes to the accounting for expenses related to inventory. I would bet the vast majority of the audience that doesn’t affect, okay. Um, certain quests you staff to be capitalized. They don’t have to be capitalized anymore. There’s also, it used to be if you were over x amount of dollars, you had to actually go to an accrual method of accounting. Now, now that numbers jumped up much, much higher.
Stephen: 19:33 And so, so let’s just pause for a second. Cause this question, I seek it put out there all the time. So I’m going to the Nike store and I’m going to spend, it’s, it’s December 30, first it’s 10:00 PM, and I’ve got some money to burn because I made a profit. And so I’m going out there and I’m going to buy, you know, $10,000 worth of shoes. So what you just said is that, you know, well you didn’t say, so tell me how that have to account for that.
Craig: 19:59 That’s inventory. So you don’t get the deduction that goes on your balance sheet as an asset
Stephen: 20:04 set. But I’m going to cash account, I’m a cash accounting system. It doesn’t matter. It doesn’t matter. So everything I buy goes into inventory regardless. Correct. Other than supplies and stuff like that. And of course, correct. Okay. All right. So, so what about, I mean, you know, but there used to be, you know, the cash accounting method was common, correct? Yeah. And it, and it’s, it’s still caught, but inventory is one of those things that’s, it’s, it’s like you’re, you’re buying an acid, so it’s just kinda like you bought a piece of machinery and until you sell that asset, you don’t get the deduction for it. Okay. So hopefully that’s clear for people. The polybag said, I’m going to put the asset in to send into Amazon. I get to expense that immediately because that’s just, that’s an expense. However, the shoes themselves, I don’t get to expense until they sell or get destroyed or get donated or whatever you do with them. And then it affects inventory actually not even expense. Correct. Okay. All right. Um, other, how about this, because you’re, you’re all about reducing tax. Um, what, what are some things that you know, the common sense stuff that people should be doing that you, when you take on a client, the low hanging fruit that you find almost all the time.
Craig: 21:24 Oh yeah. Uh, do you operate out of the right business entity? You know, are you an LLC? Should you be an s corporation? Can you make a late election to make yourself an s corporation? Does that make sense?
Stephen: 21:35 Well, does give us an example why would, in why it wouldn’t, well,
Craig: 21:39 one example why, what is that your only business? All right. An example why wouldn’t would be, maybe it’s a side Gig for you. So you have your w two job during the day and you do any Amazon at night and on weekends. So then it wouldn’t make sense to be an s corporation. Why would that not make sense? When you close, you have to take a reasonable compensation instead of an s corporation. And by taking reasonable compensation, you have to pay self employment tax, which a mouse, the 15.3% and you get half of it back if you’re over the limit, but that other half is lost forever. So you’re giving the government that extra 7.65%
Stephen: 22:17 and and now the, the protection behind a s corp prayer behind, uh, uh, a company like that. So that’s where a limited liability would come in to give you that protection. Well, yeah. So, so cause there’s two different methods, right? There’s two different,
Craig: 22:31 right? And the liability protection really goes by the state and that’s more of a legal issue. Typically people call up the attorney and they say, you know, formed this cause that’s what they like to form in that state. It doesn’t necessarily mean that’s the best way to get tax savings. So sometimes we’re able to have that LLC and make an election to be taxed as an s corporation. So you get the best of both worlds, but we’re strictly talking tax and that liability.
Stephen: 22:57 Okay? Okay. All right. So there’s a reason not to do an escorp. However, there are still ways to protect yourself if we’re trying to shelter. Okay.
Craig: 23:05 And, and it all comes down to taking some time to plan.
Stephen: 23:08 Well, how many people will be honest out of a hundred clients that new clients that come into your business, how many of them have been planning? None. Zero. That’s why they come to us. Well, when you think about that, I mean, it’s depressing and I don’t want to be depressed. All right, let’s stay positive. But realistically, how many years, you know, I understand that, you know, you get paid, but how many years could they, if they planned, could they have saved your fees? Right? I mean, that’s what I think about, you know, lost some costs. Right though. He’s, oh, it’s sunk cost. It’s gone now. I dwell on that stuff. I look back and I’m like, for 10 years I’ve been paying that black for a t and t sitting on the wall for 10 years. You know, they always rented the phone number that you rented it for like 40 or 50 years. Everybody rented it for 40 or 50 years and nobody knew it. But it’s one of those things, you know, I’ll dwell on that and I’ll be like, I’ll do the math and then I’ll think about interest rate lost, you know,
Craig: 24:02 I’ll show you, I’ll show you going forward, how much more you’re going going to put in your pocket by planning. Hmm. So if it’s 50 grand, a hundred grand over the next five years, is it worthwhile to do a plan?
Stephen: 24:15 Yeah. The answer is yes. Well let, let’s talk about that. What about sellers that are selling $100,000 is it worth them really doing a plan?
Craig: 24:22 It depends if if they’re doing something else.
Stephen: 24:27 Yes. Oh wait, hold on a second. If they’re doing something else, like back to that w two example. Correct. Right. Because they’re, they’re already probably in a decent tax bracket and they’re getting to that place. Okay. All right. So that’s
Craig: 24:39 about the beauty about what I do is when we do, when we talk with somebody and we say, okay, let’s, let’s do an analysis that we do that analysis. We basically know when we do the analysis what we could save them and we tell them this is, this is what we can say to you and it hasn’t cost them a second, uh, you know, a dollar yet. So that’s the beauty of doing the analysis and seeing can we save you some money and you know, not everybody can, you know, if they’re not making money, you know, I can’t, can’t keep with the nok giving them white.
Stephen: 25:07 So yeah, if they’re losing, they’re already saving, that’s not a good, that’s not a good plan to be in. Yes. For longterm it happens, but not long term. You don’t want to be there. Okay. So when you think about a client coming in, do they have to be, again, you’re talking tax planning. You generally represent larger clients for, for your accounting services, right? Your type of service.
Craig: 25:31 Typically they’re making a couple of hundred thousand dollars a year. Um, but for the planning side, which is a onetime deal that if we could save them 10, 15, $20,000, that makes sense. Yeah.
Stephen: 25:43 Okay. And again, that would be, it could be that even my hundred thousand dollar example, right? Especially if they were doing something else. Um, but typically half a million dollar business a little bit more. I mean, what I’ve seen is about 20, 20% on most, on most of these business, 2020 5%,
Craig: 26:02 typically hundred and 50. There’s, there’s a lot of savings there.
Stephen: 26:05 Okay. When, how long does it take to take effect? So right now we’re in 2019. Can I still go back and take advantage of things for 2018
Craig: 26:16 if you could take advantage, if you haven’t done a more ready and it’s a retirement plan, you can, okay. I typically, that’s not part of our plan because you could call fidelity and they’ll tell you to do that. Um, but sometimes people have done things and they don’t realize they’ve done it. They don’t realize that they could actually deduct that. You have an example, um, let’s just say you’re operating out of your Home Office and you don’t realize that you can deduct the cost of your pool because he using it as a home athletic facility.
Stephen: 26:49 Was there a big change in the home? A deduction in the last year or two? Nope. Nope. No changes. No change whatsoever.
Craig: 26:57 Well a couple of years ago they came out with the, what’s like a safe harbor number?
Stephen: 27:01 Um, but no, just have to document what you’re doing it in a safe harbor number was because people were arbitrarily measuring down to the inch. Is that, yeah.
Craig: 27:09 Well I think people were not doing it and they were saying if it’s under, I think they get the number was like $1,500. They will consider not like a safe harbor number. They weren’t going to bother you.
Stephen: 27:20 Okay. So next place that we would go looking again for some low hanging fruit that people would be able to save in taxes. Where do you, where do you send them next? How about, how about hiring your kids? Oh, my son is in the office next door, so I got that one right. Yeah.
Craig: 27:35 And he’s a little bit older, but let’s just say, um, you know, you could pay you your kid $12,000 a year.
Speaker 4: 27:41 Yeah.
Craig: 27:42 And he would pay no federal income tax in most states. You pay no tax.
Speaker 4: 27:46 Yeah.
Craig: 27:47 So if you were in a 24% rate, you just save three grand right there. And if you have a couple of kids, you know, next thing you know it’s $12,000 and if you do it right, you might even be able to not pay FICA tax on it.
Stephen: 27:59 Hmm. So what happens to that money? Do we have to give it to the kids?
Craig: 28:03 Oh yes. They have to. Okay. I have to pay him. It has to, you know, you have to be legitimate.
Stephen: 28:08 Right. But now they can save towards retirement at that young age.
Craig: 28:12 They can put it into a Roth Ira. They could use it to, let’s say, pay for their school. They could use it to pay for, you know, hockey camp and stuff like that. So you’re making and John’s deductible expenses deductible
Stephen: 28:26 indirectly. Right. And so then they pay it because that’s the responsibility. They’re implied. And yet, um, then me as the dad who’s been paying forever, it doesn’t have to pay. Oh, interesting. Okay. And that’s legit.
Craig: 28:40 Yep. As long as you document everything and you know, the tax courts have ruled you can pay your kid, um, while higher your child as young as seven. I like people to wait til about 11. It’s how much can you really pay a seven year old. What’s he going to though?
Speaker 4: 28:53 Okay.
Stephen: 28:54 Now you again, you have to have a profitable business that you could do this stuff. So again, we’re back to the scenario where you’ve got, well, you’ve clients making, you know, substantial income. This is a great way to shelter. And you know, I think having your kid working in your business is wonderful, uh, for teaching. I’m sorry, I just think that’s a wonderful thing, right?
Craig: 29:13 And substantial is, you know, to different people, substantial is different.
Speaker 4: 29:17 Okay.
Craig: 29:19 You may talk to somebody in southern California that they need to make $350,000 a year to just to survive.
Speaker 4: 29:25 Okay.
Craig: 29:26 All right. And you may have somebody in south Florida that could survive on $60,000 a year.
Stephen: 29:30 Hmm. Okay. That’s a perspective there. All right, so we got the kids hired, we got the pool deducted. I like that. Right. So we got what now we’re relaxed. Get, do I get my Margarita’s? No,
Craig: 29:42 but maybe you could pay one of your kids to do something and as a courtesy I’ll bring you over.
Stephen: 29:47 Ah, okay. So that’s a quid pro quo. He could, we can do that. It’s part of his employment and you’ve got to supply the Tequila. That’s a little bit of an issue.
Craig: 29:54 All right. And what else? We have to Home Office. We have, how about your vehicle? You know, if you met the Home Office,
Stephen: 29:59 confusing one for people. I think the vehicle because either write off the mileage or you feel the gas tank, but you just can’t fill your gas tank. Kenya. No, no. You have to keep a log
Craig: 30:11 and you need to basically say, okay, if it turns out that you’re using your vehicles 70% for business, then you, you get to write off 70% of those expenses. If you’re doing the mileage, then it’s business mileage and you can’t change from year to year. So if you put one or the service, if you put that car in service and you using the mileage rate until you get rid of that car and you’d have to use the Milo tree.
Stephen: 30:34 Yeah. The only time we’ve ever had duplicate is when we had to rent a vehicle, like a truck or something like that. And you have to get gasoline for that. I mean that’s a legitimate, that’s a rental. Yeah, totally different. Totally different. Right. But it just, you are driving it and so then it’s mileage. Um, how about um, the section one 79 to that amount go up?
Craig: 30:54 Yup. Most people aren’t going to be affected by the, the amount that that went up to. I’m not even sure why they were sad. Is it that it was like 25 grand or something like that, wasn’t it? No, no, no, no. You’re talking about vehicles probably use the vehicles will match stat 25 grand. Yeah, right, right, right. So there’s no change there.
Stephen: 31:13 No change there. Well, how about that? What about people that are in their business or an ecommerce business, a good example and there they had a good profit this year and they’re looking at, my question is, what was this, what’s the section one 79 amount up to now?
Craig: 31:28 Oh, it’s a couple of hundred. It’s either half a million or a million. Oh, it’s, I’ve never actually bumped into,
Stephen: 31:33 okay. So it’s way up there now. But it used to be, right, mean back when I, I used to know how to do depreciation, which I haven’t done in probably 15 days. I literally haven’t, I wouldn’t even know how to do it, but we used to have to go through those, all those crazy calculations and back then it was only, you know, 10 or 12 or something like that. And so, um, you know, you’d buy a buy a printer, which was $5,000. Remember those days you literally pay five grand for a laser printer and you know, you’d have to amortize it unless you can get it under the section one 79 which you’d write the whole unit off one kit and caboodle. Right. And that’s a beautiful thing. Well, if I’m turning a profit this year, does that mean I get to buy a vehicle and and deduct the whole thing?
Craig: 32:14 Oh, let’s just assume you are using that vehicle 100% and it meets the qualifications. Yes, you could write it off most vehicles, unless there were over $600,000, 600, 6,000 pounds, you can not go over that section one 79 amount.
Stephen: 32:30 Okay, so that’s a limit. Now let’s just take eye and say, I bought that vehicle and it’s a van. So Cube van that he’s 100% for business, I don’t get to deduct the then correct. Now I’m into the gas and insurance and that. And you know, business insurance is expensive. And so that’s just, it’s something that’s, that’s pretty important to note that that does get a little complicated. And Steve’s not giving any advice here, but it’s definitely a little murky there.
Craig: 32:56 Yes. Yes. Most definitely. So, yeah. So you’ve got your limits there, but then you have, you know, your retirement plan.
Speaker 5: 33:03 MMM.
Craig: 33:06 What else we have here? Fired your kids. Yeah, we got the pool. We’ve got the kids’ medical benefits. Oh yeah. This is a real complicated one now. Right? Ending on the type of entity you are, you might be able to write off the cost of your kid’s braces
Stephen: 33:21 dollar for dollar. So let’s talk about this. So that’s a whole bunch of our listeners here, probably s corp’s at this point, um, or their sole proprietors and one of the other generally, right? I’m sure there’s some LLCs for whatever reason. And maybe I, I, I find it hard to believe there’ll be many seat corpse. So, so can you talk through each example, what would be a deduction that’s normal that, that you can take?
Craig: 33:44 So on your, on your sole proprietor and you’re a single member LLC, you could do the medical expense reimbursement plan.
Speaker 5: 33:51 MMM.
Craig: 33:52 On the ESCORP you cannot to seek help, you can, but you’re not going to see too many of those.
Speaker 5: 33:57 MMM.
Craig: 33:58 So that’s why if you do some planning and you’ll see what your situation is, sometimes that factors into what type of entity.
Stephen: 34:05 So here’s this old white dude named Steve. Let’s just call him Steve. And so if he wants health insurance and they happen to be an s corp, what’s some of the options?
Craig: 34:16 So health insurance is a little bit different. The business doesn’t actually, I don’t know why it’s done this way, but the business doesn’t actually get to write off the health insurance. But you do personally on page 100 return s corp or an s Corp c Corp, the c Corp, c Corp, totally different set of skills. Um, but the s corp doesn’t right off the health insurance, but they get a deduction on page one and their return. So it nets out the, basically the same thing.
Stephen: 34:42 And what percentage are you allowed to write off? 100% of the health insurance cost. 100% yes. So, you know, one of the things that I’ve heard from people is that they can’t afford to lose their job because they get health insurance paid for a portion of it by their employer. And in the old days it used to be pretty, you know, pretty significant. Right now the, the, the portion that the employer would pay, that’s definitely diminished, uh, for a lot of people. Um, and a lot of companies over the years. Is that something else that your, your um, your tax planning looks at?
Craig: 35:16 No, because typically people are either working a side job or they’re in business already roll by themselves. Okay. So that’s not, you know, they just have to have the health insurance. It’s not about, you know, they’ve already made that decision when they left their regular job that, okay, I’m going to forego whatever benefit I got there. Um, and paid all out of pocket, but I know I have the potential to make a lot more money now.
Stephen: 35:38 It does not create a taxable event. Tell me having no insurance. Right. There wasn’t that catalog nonsense. That’s all gone away. Right.
Craig: 35:46 And I think in 2018 it’s the, there is no penalty for not having health insurance. Um, so I guess the Cadillac, I never saw the Cadillac, um, penalty. I don’t think it ever made it anyone that had it, they lobbied the government and they got the exemption
Stephen: 36:03 like that 100%. Okay. And so, so there’s a benefit right there. So you get a full deduction for 100% of the health insurance. Now what you were referring to before then, because I went off on my little Steve Tangent there, you were talking about um, tax deferment for health, correct?
Craig: 36:20 Right. Well we were talking about a medical expense reimbursement plan, which is different than a tax, the firm with texts, the firm, it would be if you have a high deductible health health insurance plan. Okay. And you took out a health savings account where you were able to put about almost $7,000 into it in a year. Do that as an escort. Yeah, you could do it any, any type of entity, you are, as long as you would have a high deductible plan.
Stephen: 36:43 Okay. Okay. So you have to have a high deductible plan that’s a given. And then you can have this on top of that.
Craig: 36:48 And the idea is it’s almost like having another IRA.
Stephen: 36:51 And, and this is Steve Naive, Steve saying this, I believe you can’t use it for premiums, but you can use it for all of their medical issues. Correct?
Craig: 36:59 Correct. And then, um, once you turn 65, then you can use it for premium.
Stephen: 37:04 Oh, that’s interesting. So that’s a huge opportunity. Correct. Oops.
Craig: 37:09 That’s why a lot of people are really funding it.
Stephen: 37:11 Really Fun to get. And again, this is all part of that tax planning. Correct. Those are the little things that come into the tax plan. Well, it depends. As you get older they could be bigger things, right? Yes. Yup. I have it when you hit 50. Right. Cause it, when I had 50, there was something that, um, I was able to do some ketchup, some ketchup, uh, to my ira and some different things. What’s that all about?
Craig: 37:35 So once you hit 50 to government, says you could put more away for retirement request, presumably you’ve missed a few years at some point in your life. So if you have a 401k, it’s like an extra $6,000 that you can put away. Once you hit 50, um, I think it’s $1,000 on an IRA. So typically, you know, a, a four oneK is going to give somebody a lot more bang for their Dallas far as how much they can put away.
Stephen: 37:59 Well, how about these small companies? So, you know, think about it, you know, the, you’ve met a bunch of my listeners and that they’re going to be small businesses doing a hundred, 200, 300, $400,000 million, you know, but making 20% what, what kind of retirement options are available to the escorts and the general they have. They have all the APPS,
Craig: 38:23 sins, and we’ve seen them do 401ks sub plans. They’re putting away a chunk of money, you know, um, they’re coming to us, they’re making money and they’re saving money, which is a good thing.
Stephen: 38:33 And that’s really at this point really important. Yeah. You, especially with the volatility in the market south there in the ecommerce platform markets, you know, if you can put this money away and, and you know, really pack it away now as the time. Correct? Correct. All right. So, so we now have gotten the kids employed, we got the pool house covered, we got the part of the home written off, we got our new vehicle. Right. We, um, are, what else did we do? We got the retirement, we got some health care. What other areas are again, I guess low hanging fruit or do you think we’ve covered it?
Craig: 39:10 We’ve, we’ve covered a lot of the low hanging fruit, but we have what a paranoia. Yeah. Well that don’t they, they don’t want to do something even though the government says you could do, of course they are afraid that they’re going to get audited. So I, my theory is, well, if you’re doing it right, what do you care if they wouldn’t you
Stephen: 39:26 [inaudible] most audits are done over the phone, correct? Correct. Correct. And so it’s just different. And if I’m correct, there are parameters that they use, he arranges for a lot of stuff. Right. And exceed arranged and there’s an anomaly. Yeah.
Craig: 39:41 A lot of things that there’s a lot of things that can trigger an order what it is, as long as you do it right and you document it, you shouldn’t worry about it.
Stephen: 39:47 And that’s what we pay you for, right. That’s what you pay your CPA for. Right.
Craig: 39:51 You pay him to, you know, sometimes a lot of people just paying them to put the right numbers in the right boxes. All right. Um, but somebody has to document it and if you’re working with us, we’re going to make sure you document it, but if you’re working with somebody else, they may be leaving it to you to document it, which that’s fine. Document it.
Stephen: 40:09 Consistency, right? Correct. It’s really what it takes. Okay. All right. So you have this program, you have a free book. Okay. And um, it’s a, yeah, he’s going to collect your email address. So get ready for it. All right. That’s the cost right down. Steve doesn’t benefit anyway other than if you get help. He, Craig’s doesn’t sponsor me in anyways, but it’s Craig, Cody and company.com forward slash momentum and uh, on there he’s just tracking who comes through my podcasts. But you’re going to sign up for a free 10 biggest tax mistakes that cost business owners thousands were a bunch of those ones that we just mentioned.
Craig: 40:46 Yes, yes. But now you actually see them and maybe you’ll do something with them.
Stephen: 40:49 Yeah, because basically you have a program where I can put in my particulars and you can see if there’s an opportunity or not. Right?
Craig: 40:56 Yeah. At this point I’ve been doing it enough. I could look at a tax return and I can see if there’s opportunities.
Stephen: 41:01 Is that, is there a cost for that service? No, that’s a free service and we call it a free analysis. So it’s a free analysis that you do at of the goodness of your heart, hoping that you’ll see even you’ll be like, oh Steve, we could save you 15 grand and then you could charge me. And then that’s a reasonable conversation when we switched to an escort, I think our first year we saved nine grant, correct. When we did it and he was 9,000 bucks. And like, yeah, years ago was that, uh, not enough. Several, but not
Craig: 41:29 10 years ago. That’s 90 grand you saved.
Stephen: 41:31 It’s huge. Yeah. What, how much inventory can you buy that? That’s right. It’s a lot of, Craig knows we sell shoes, so yeah, that is a lot of shoes. Okay. All right. So anything else that we, we want a buzz out because I’m going to put this, the link to this in the episode and again, um, I have his phone number I’m going to put out on the episode too and his contact information because it is free for this kind of stuff. And once in a while I’ll send him a note just like, Hey, what about this? And you’re like, Steve, don’t be stupid. Do it this way. Right. Um, but a lot of it is planning and I just think that this is a miss. Everybody’s worried about getting their taxes done, which minor into my CPA. By the way, just want to get credit for that. A week or so ago. However you planning really has to start sooner than that planning should go on all year round. There’s no excuse. How much effort does it really take? I mean, cause I’m sure if somebody is listening to this and they’re like scared to death over it,
Craig: 42:23 it doesn’t, it doesn’t take, you know, a lot of effort. I mean in our case we make sure our client through, we typically do a call once a month with them via zoom, you know, and it might be 10 minutes, it might be 20 minutes, might be an hour depending on what’s going on. But that’s not a lot of time. Over the course of the year,
Stephen: 42:40 you also offer accounting services. So if anybody’s looking for a large accounting, these are typically larger companies that you do and you have ecommerce companies cause I’ve talked to some of them. Um, but these are larger sellers and larger other types of businesses and that, and I’ll put that information here, but if somebody connects with Craig because he, you like what he’s saying here. Um, you’re in New York. Can you practice in other states?
Craig: 43:04 We have clients as far as far away as Washington state.
Stephen: 43:07 Okay. So all the way the other end of the world. Um, and cause Craig’s in New York, so. Okay. All right, cool. All right, well the goal, uh, anything else you want to do before I do my goal? Nope, I’m good. Okay, you’re good. And I’m going to put all this information again. It’s Craig, Cody, Craig with an eye, Craig, Cody, c, O, d y and company.com, forward slash. Momentum. Go get that free. Um, free a list and make sure that you’re not doing any of those 10 mistakes. Please make sure you’re not, and then see if there’s an opportunity for you. Save money. And whether you use Craig or use a similar company. We used a CPA. I don’t do my own taxes. We use a CPA to do ours too. And I absolutely suggest you do that and somebody smarter than me. So the goal of the podcast is to help people who are stuck. You see people in all industries. I mean, I it, have you ever thought about how many industries you, you dabble in? Oh, this is a lot of industries. It’s crazy, right? But you probably see some common things going across them. What’s the advice you do give people who are stuck and just can’t get out of their way?
Craig: 44:07 No, I, the best advice really is work with a coach. You know, why make your own mistakes when you can learn from somebody else’s mistake.
Stephen: 44:16 That’s so solid. Dude, I, I’m, I’m very thankful for you to come back on. I won’t, I won’t make it two years next time. I apologize for that. I didn’t realize, I swear to God, I looked at it, I was like, Oh yeah, we talked last year and then I looked and I’m like, oh my gosh, we did not realize when we’re getting old. Yeah, my it is happening. So, Hey, I really appreciate it. I think there’s tons of valuable information. Again, Craig, Cody, and company.com, forward. Slash. Momentum. Check out that free guide and see if you’re making those mistakes. Take Care, Craig. Thank you. Bye Bye. Such a great guy. I’m fortunate to know him. Um, and just, I see him around every so often. We travel in similar circles and yet his advice is just, it’s like sage. She’s got that steady voice. He’s just so confident because he sees it every single day.
Stephen: 45:01 And when he, when you see it, time after time, you know, it’s funny. The same mistakes get, you know, a hundred people come in. Not One person has plant, not one person. So you’re not any different than anyone else. So that’s the good news. The bad news is if next year you’re not different than anyone else and you didn’t take advantage and really didn’t take and elevate your business to that next level. So hope you take his advice, hope you go out there and, and, and find out what the opportunity is, whether you use him or not, doesn’t matter to me. I just want you to do something to help build up your business. ECOMMERCE, momentum.com ECOMMERCE, momentum.com take care.
Cool voice guy: 45:38 Thanks for listening to the ECOMMERCE momentum. All the links mentioned today can be found that incomers momentum.com under this episode number, please remember to subscribe and the lake us on iTunes.