Ep. 156 | 4th Quarter Tax Planning for Business Owners
Download MP3Hey, everybody, and welcome back to the Teaching Tax Flow podcast episode 156 today. We are gonna look at those fourth quarter tax planning strategies and tips and some do nots for business owners. But before we do that and you get to meet our fantastic guests, first time on this show, by the way, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Hey, everybody. Welcome back to the teaching tax Flow podcast. So as we always try to bring you some very interesting topics, but what's more important than that here is now you get to hear a great topic from somebody else besides Chris or myself. We're gonna put this topic really into, we'll say, real life because you get to hear from somebody else who's working with clients on this all the time. As you can see in the title, the show notes, everywhere you've probably been directed to this episode from, we're gonna talk about the fourth quarter tax planning for small businesses.
John Tripolsky:And I have to I have to make a joke here, Chris, because we're talking about fourth quarter. And, you know, if it was up to me being a hockey guy, can we just, like, readdress this and maybe call, like, the third period of the year and, like, totally blow everything up that, you know, everybody abides by in a in a calendar year with you guys? Or
Chris Picciurro, CPA:We could, but then we would have to put this out the September and divide the year into thirds instead of quarters like most normal people do.
John Tripolsky:Yeah. Let's not do that. That would a lot good.
Chris Picciurro, CPA:We love hockey people anyway, even if they're those screw loose here and there. That's alright. That's alright.
John Tripolsky:I'll take it. But let's bring it all together. Let's talk about this. Right? Because we always talk about tax planning.
John Tripolsky:Right? And I feel like we kinda hit this from two different angles, maybe three. Sometimes I feel like we just dive right into it, and we start kind of getting into the weeds, depending on the topic that we're getting into specifically. But then other times, I feel like we're kind of peppering this in because people have no idea what it is. Right?
John Tripolsky:We always talk about, you know, oh, you do, as the taxpayer, have the ability to, quote, unquote, own your relationship with the IRS, own the tax bill you get. It's not a one way street here. It's to call tax tax planning. But we usually it's just me and you bantering back and forth. So I look forward
Chris Picciurro, CPA:to this. Yeah. I'm always excited when I get to get to have a guest on that I've met through our private CPA practice, and we know one of the three laws of tax planning is that your tax return is a verb and not a noun. That means it's not something you do. It shouldn't be something you do or get at the end of the year.
Chris Picciurro, CPA:It's something that should be happening throughout the year. Well, this last summer, through working with, the National Association of Tax Professionals, I had the honor of meeting Marit Burmoud, and she is an amazing speaker. She did a great job at Taxposium, by the way. She has her own tax practice. She's not only a CPA, but an enrolled agent, and she really focuses on tax planning and strategy.
Chris Picciurro, CPA:And and like like you mentioned, we want to bring more voices in a tax teaching tax flow. And as we enter this fourth quarter, we thought we I would love to have her on as a guest to talk about what business owners should be thinking about once that once that calendar hits October. So, Marit, welcome to the Teaching Tax Flow podcast, and how are you doing today?
Marit Burmood, CPA, EA:I'm so glad to be here in the ninth inning. I actually am not a baseball fan, but you know, that was my that was my ninth inning. Yeah. I'm really excited to be here. I do love tax planning.
Marit Burmood, CPA, EA:You've got me. For quite a few years, I only did compliance based tax and I was literally gonna quit because it was so unfulfilling and so frustrating to get piles of documents in January through April and not being able to assist my clients because the year was closed and I can't turn back time and change things. So once I found tax planning and was able to implement that into my practice, not only is it more fulfilling for me as a professional to be able to act as a partner and collaborate with the clients, but also in general, like you said, we're not now just being reactive, we're being proactive. So excited to be here. Happy to share some tips and yeah.
Marit Burmood, CPA, EA:Thanks for having me.
Chris Picciurro, CPA:Well, can you give us a little bit of history how you got into this business? A little bit of maybe about your practice and where you reside?
Marit Burmood, CPA, EA:Sure. I don't wanna spend too long on it because we got a lot of things that we need to help the listeners with. We gotta get them all those good tax planning tips. But I, reside in Utah. I like you said, I'm a CPA.
Marit Burmood, CPA, EA:I'm an enrolled agent. So I've had my tax and accounting practice for I don't wanna date myself, but over ten years. I started when I was 12. Just kidding. So, yeah, I have my tax practice.
Marit Burmood, CPA, EA:I specialize in tax planning. A lot of my clients are high net worth, but I do also have business owners in all niches making all different types of money. And really a lot of the strategies are the same, just kind of on a smaller number scale. So
Chris Picciurro, CPA:Right. Yeah. And, actually, for those more moderate income taxpayers, a $5,000 savings could be a significant amount of their disposable net income and especially at the at the end of the year. So that could be more impactful. But, no, don't worry.
Chris Picciurro, CPA:I've I've a couple weeks ago now, I had the pleasure going out to Minnesota in for an event, and I said said, you know what's cool? I've been doing this for twenty two years, a firm owner, but I'm a Doogie Howser. You might be thinking to yourself, gosh. She's look looks young. I'm a Doogie Howser of tax.
Chris Picciurro, CPA:So I started when I was 10, then I thought, but if you know who Doogie Howser is, then you really know how old I am. So I I kinda got in trouble my there. Shoot.
Marit Burmood, CPA, EA:You almost had it.
Chris Picciurro, CPA:You almost know. Had But well It happens. Yeah. So so thinking about as as you said, you have a lot of experience working with business owners. You're what I like that about what by you and some of the things you do with your practices, many tax professionals are tax preparation people that kinda grew into a tax practice, which is great.
Chris Picciurro, CPA:But then I meet some tax professionals that I feel have more of an entrepreneurial mindset, and that that's how I feel about you, and it's a big compliment. And I actually feel that that skill or that mindset really helps tax professionals relate to business owners and give them practical advice. So what what are some of the things you're talking to your clients about? And I know you speak to other tax professionals as we enter, you know, October. We're not right at the deadline.
Chris Picciurro, CPA:Right? We're not it's not December, but also we need to there are also lead time when it comes to implementing strategies.
Marit Burmood, CPA, EA:Yeah. To you know, you're totally right. I was talking about this with someone the other day, and not all tax professionals are good business owners for themselves. We can advise other people but there are a certain type of tax professional that's also an entrepreneur and that's definitely me. I've had the entrepreneurial spirit since I was like 14 and my dad told me, hey, my stepdad said, I'll give you $20 to mow an edge.
Marit Burmood, CPA, EA:And so I contracted out the boy across the street for 10 to mow an edge. And then he was like, well, I I don't wanna give you the money because you didn't do it, but also it got done. So, you know, so I've been having contract labor and all of that for since I can remember having those little side side businesses.
Chris Picciurro, CPA:I love it. So I hopefully, you wish to give it $10.90. And maybe it was under the threshold at $10 a week,
Marit Burmood, CPA, EA:fifty weeks. Was thinking about that. Yeah.
John Tripolsky:And then you get into child labor laws, which is a whole another thing.
Chris Picciurro, CPA:What's the statute of limitations? Or you gotta unfile ten ninety nine n e c. Actually, that didn't exist then.
Marit Burmood, CPA, EA:This you're going down the wrong rabbit hole. K? This is we gotta save this for the tax pro, the tax pro podcast.
John Tripolsky:So yes.
Marit Burmood, CPA, EA:So we I was gonna say, so you asked me, what do I kinda talk to my clients about? And leading into that whole thing of being an entrepreneur myself, I know that as I'm leading my clients, I also need to be watching out for my own income, my own tax planning and I need to do what I tell every client to do. And it's kind of what I wanna start out with today, which is get your books in order. You need to have your profit and loss ready. You need to have your balance sheet updated.
Marit Burmood, CPA, EA:You need to know how many distributions you've taken, especially if you're filing as an s corp. You need to be looking at the payroll reports pulling those and seeing how much have I already paid in taxes through payroll. And this is something that when I had a client come to me the other day, I saw him out and about and he said, do I need to buy a new trailer for my business? You know, Should I do that? And I was like, I have no idea because he's not an advisory client.
Marit Burmood, CPA, EA:I don't have access to his books year round. And so first and foremost, everybody, if you don't have it, you need to gather your information, which is a lot of the time I think what stops people from even beginning to tax plan because there's work on you as the business owner upfront to get everything that you need gathered so then you can move forward to estimate how much you owe and and start making plans.
Chris Picciurro, CPA:Right. You you nailed it. The first step of tax a personalized tax plan, even before you start doing the plan, is having a tax projection. That doesn't mean it has to be We have to figure out what your marginal tax rate is and where you stand. And I I get how I kinda shook my head for those who watched on YouTube when you said the vehicle.
Chris Picciurro, CPA:Like, I don't know how many times I wanna stress that buying a vehicle might be a good thing, but it's not a tax plan. Like, it's just a car now or a truck that depreciated once you rolled it off the lot. There might be a tax deduction for it immediately, but there are other implications. And, you know, it's kind of a a lazy tax plan to just go buy a bunch of trucks. You know?
Chris Picciurro, CPA:But that's that but you nailed it. So you talked and said, hey. You we gotta figure out where you're at. And
Marit Burmood, CPA, EA:Gotta figure out where you're at. And there's things that I think that clients don't really think as they're gathering information. Did you have a large capital gain? Were you trading stocks as well? You kinda need to look at all aspects of your life.
Marit Burmood, CPA, EA:Obviously, we're talking to business owners here, but they are human beings also and they might be trading all night long and they've got capital gains or maybe they have rental properties, maybe they have other things. So it's really, and you're gonna have to do it anyway in April. And if you start now and you start gathering everything and trying to figure out where you're at, it's gonna make it less painful in April anyway, and it's gonna give your tax pro a head start in terms of getting your taxes done efficiently.
Chris Picciurro, CPA:I guess. What what are what are some of the misconceptions common misconceptions you see that business owners or myths, business owners have when it comes to taxes.
Marit Burmood, CPA, EA:So you know what was one that popped in my head when you were talking about the vehicle is they think if they spend a $100,000 on a vehicle and they can bonus depreciate it, they're gonna get a $100,000 off their taxes. So a tax deduction is not always a it's not a dollar for dollar reduction in the taxes that they owe. And I think that's for sure a big misconception and something that is a painful, it's a pain point when you're talking to clients and you're trying to explain to them, you're not getting a $100,000 off. It's based on your tax rate. This is a reduction in your income that is then multiplied and I'll do calculations with their effective tax rate to kind of give them an idea.
Marit Burmood, CPA, EA:But I think that's something that we could I always wanna spread the word to regular business owners because it will go drop a lot of money like a $100,000 on a depreciating vehicle, and then they're very unpleasantly surprised when they find out it only saved them, like, $30,000.
Chris Picciurro, CPA:Right. It's it is so, yeah, the tax tax deduction and tax credit are completely different things, and tax credits could be refundable or nonrefundable. I found a lot of what we one of our other roles of tax planning is tax flow and cash flow are different. What that means is that if you were to buy a $100,000 vehicle and you put down 20,000 or you paid cash, the deduction is the same. Do you ever run into something like that misconception?
Marit Burmood, CPA, EA:Yeah. Of course. People it's the same if they wanna finance it versus paying cash. And so they just they're confused on on whether if they finance it, can they take the full deduction? Do I need to pay cash?
Marit Burmood, CPA, EA:And you are right when we're talking about cash flow, depending on the business needs, it can be advantageous for them to finance the vehicle or the piece of equipment so that they have that cash flow inside of the business that they can continue to move and recirculate in order to continue expanding and scaling. And then yes, they can take the full deduction, but you move on to the next misconception or the next caveat that they're not thinking about that now they have a liability on the books and a loan that they're gonna have to pay for say five years and that's gonna continue to take cash out. So they kinda it's a lot of there's a lot of things on the internet from the big tax influencers that talk a lot about, get the Eurus. Do you know what a Eurus is, John? You're a you're a man.
Marit Burmood, CPA, EA:You probably car guy. Yeah. Buy the Eurus, and and you'll save $300,000, and then now they've got a $300,000 liability on the books. It's pretty painful.
John Tripolsky:An Or you $8,000 break job that you that that's a whole
Marit Burmood, CPA, EA:new thing. Yeah. That's true. The maintenance on those things.
John Tripolsky:What you guys are talking about here too, it's it's almost and it drives me nuts now and has for a very, very long time when you hear somebody that maybe, you know, they're gonna take the plunge. They're like, hey. I'm I'm gonna go. I'm gonna start this business on my own. You know, whatever's causing it.
John Tripolsky:And they're so excited about it. And they're they're so excited because, a, they think they're gonna have all this freedom, which, you know, here, I hate to be the boohoo negative Nancy. Usually, when you start a business, you don't any more freedom for a long time. It's usually a lot harder. Different topic.
John Tripolsky:But then they're like, it's great because I get to write off so much stuff, and it so it's free. It's like, absolutely not. Who whoever told you that, a a write off or expensing something does not mean that it is free. If anything, it is discounted depending on, you know, what your marginal tax rate is. Like, it's not it's it's a moving target, if you will, but I feel like more people need to know that.
John Tripolsky:Right? So how many people do you have probably come to you and they're like, oh, yeah. Took care of it. The business got it. It's all good.
John Tripolsky:It's like Yeah.
Marit Burmood, CPA, EA:No. And then they say, but I don't have any money in my business bank account. Why do I have to pay all these taxes? And I say, the IRS doesn't care what you have in your bank account, they care what's on your profit and loss and you're showing a profit. So I'm sorry that you spent it all but now it's time to pay the piper.
Marit Burmood, CPA, EA:So that's true cash flow. I like that you guys teach cash flow versus tax flow because they're two very different things, and they are so important to understand how they differ and how they work together and how you can work them together.
Chris Picciurro, CPA:And that's where you you know, it's hard to you nailed it. It's hard for business owners to understand, especially, I feel like sole proprietors because they don't really look at their balance sheet like maybe a corp or an s corp as much to understand, you know, servicing debt is not a deduction. Doesn't mean you shouldn't service a debt or you don't have to. But we've run into situations we have where we work with people that buy books of business profession like insurance agencies, and you run into the opposite problem. Hey.
Chris Picciurro, CPA:We're gonna we're gonna pay this make this payment over 5 years, but they don't realize they the vast majority of what they're buying is a fifteen year asset. It's goodwill. It's it's it's something that so now it's the opposite problem. More cash is going out than you get deduction for. And like you mentioned, you might get that big deduction year one, but you're two to five.
Chris Picciurro, CPA:You're paying on that vehicle with no deduction, and here's what could happen. What happens I've had this one, and and I'm well, I bought a vehicle for a $100. I took the $100,000 deduction. I owe 60 on it. My wife hates it.
Chris Picciurro, CPA:It doesn't fit my garage. So I'm gonna trade it in. Don't worry. They gave me the $60 I owed on it so I don't have to pay tax on anything. And that's a big misconception also.
Marit Burmood, CPA, EA:Yeah. Definitely. Especially because now they've kind of over the years, they've gone back and forth in terms of trade ins for business vehicles. But currently, they are looking at trade ins as an actual sale. And I knew what you were getting at.
Marit Burmood, CPA, EA:I knew you were getting at the depreciation recapture before you even before you even you said, okay. Here's the other thing. And I thought, I know what's coming because this is something that you as a business owner need to be aware of this depreciation recapture recapture because because probably 75% of tax professionals, I feel like they don't warn their clients. And so they're very happy go lucky to look like the good guy in the year of and say, yeah, we're gonna take this $100,000 deduction and it's gonna be great. And the client has absolutely no idea that they need to hold onto that vehicle because they've now accelerated the depreciation.
Marit Burmood, CPA, EA:So instead of spreading it out over say a life of five years, they've taken that full five years upfront and now they need to hang on to it for that amount of time or they're gonna have to pay back the deduction that they took. I just had a client this year, I got him in the middle of the year, but he had his previous tax preparer had put an Airstream trailer on his books, which he has a business where I could see the trailer. Okay, all right, It's a business Airstream trailer, sure. But then he decided to I think he sold it. He didn't trade it in, but now he has And it was the very next year he sold, he traded No, he sold that $100,000 trailer, which I wasn't you know, working with him at the time.
Marit Burmood, CPA, EA:I'm looking backwards now. We're always talking about proactive. I now have his documents proactively looking back, and now we have a $100,000 addition to his income, an additional recapture. It is painful, and he no idea. He had no idea when he committed to taking that deduction that he had obligations on his side or at least be aware of what would happen if he decided he was gonna sell.
Chris Picciurro, CPA:Yes. And there there could be phantom. Now at least we have a 100% bonus depreciation moving forward because what would happen sometimes, and you've probably seen this where they traded the vehicle in. There's no, like, I can kinda exchange for vehicles anymore. They bought another vehicle of about maybe higher value, so they might be able to save their there.
Chris Picciurro, CPA:But when bonus depreciation went to 60% and it was gonna be 40 and you were you had the full of recapture I know we're getting into the weeds a little, but the point is when you're making fixed asset purchases, talk to your tax professional first. And, also, it's not always best to just deduct the entire amount year one. Some I've seen it where this one drives me crazy where people will deduct the entire amount year one and actually create, like, an NOL or net operating loss or or move people into low marginal tax bracket instead of saving some of those deductions.
Marit Burmood, CPA, EA:Yeah, for sure. I've seen that too. And I actually, as a tax professional, when I see these things as I'm working on everything, I will make the suggestion that they don't accelerate sometimes because if they're not accelerating, if they don't need to accelerate it, then it might be more advantageous for them to just, you know, do a different method of depreciation so that they can have an additional deduction next year. So you're right. It it can get especially when it comes to depreciation, it's kind of a, point of contention for me when I see the influencers on the internet just so so quick to tell everybody that a 100 and I was gonna say it's a valuable tax planning strategy.
Marit Burmood, CPA, EA:I had it on my list to talk about, but it's something that, you know, you wanna use along with a professional that actually understands depreciation and can help you because it's one of the most complicated areas, I think.
Chris Picciurro, CPA:I agree. I agree. What other what other things are on your your favorite list for tax moves on the last quarter?
Marit Burmood, CPA, EA:You know what I think? So a lot of these small businesses are cash based. They're filing on the cash basis. And so I do like a little bit of playing around if we can with say prepaying expenses within the twelve month rule. So if they have expenses they can prepay that give them a benefit for the next twelve months and they have the cash flow to go ahead and do that.
Marit Burmood, CPA, EA:Those are always kind of good ones to just go through. Okay, what are you What's a new subscription that you're signing up for for the next year? Do you have an insurance policy that's gonna give you another year of benefit? Do you, if you have the cash flow and you're gonna need it anyway, let's kind of get all of those expenses into this year. And then the same can go with income if you have a business where maybe you don't need to invoice immediately, you're on the cash basis, so you're not claiming income as it's earned, you're claiming it as when the cash is received.
Marit Burmood, CPA, EA:So I think that's a really good tip that a lot of business owners, they get blinded by these really flashy, colorful, right off a Lamborghini Urus when they could probably, you know, get the same amount of expenses if they were to look at maybe prepaying options or they were looking at deferring some of that revenue into the next calendar year. So
Chris Picciurro, CPA:Absolutely. Especially if you're in the trades or let's say you have that right at the end of the year, you have the opportunity to, you know, bill someone, but you could, you know, you could bill them in the January, and and it just Yeah. Maybe it's
Marit Burmood, CPA, EA:Don't just leave the check-in the mailbox, though because you you guys don't know about constructive receipt but but a lot of tax pros do and technically if you if you have access to the cash, you have access to the income you're supposed to claim it. So I did have a client who thought he was very slick because he'd be like, well, I'm gonna go out of town with my family for Christmas and I'm not gonna check the mail. And I'm like, gosh. You had that I mean, really just don't bill them. Don't invoice them until the next year.
Marit Burmood, CPA, EA:Oh, I hear it It's not just pretend the cash doesn't exist. That's not gonna work.
Chris Picciurro, CPA:They love saying, isn't it kinda odd there aren't any deposits from December 10 to the thirty first? But January 2, there's a huge lump sum. Oh, that's kinda crazy. But I love that idea of timing. You know, we can we can, within the rules, and ethically, time our deductions, time our income potentially.
Chris Picciurro, CPA:I I mean, that's that's smart. And and you gotta look at where you're at, like you said, at the very beginning. Look at where you're at year to date, determine. Or do you feel like the next year you know, you might work with a business owner that says, wow. Well, next year, know I'm buying x amount of computers or, actually, we're gonna be buying our own office building and have a lot of deductions there.
Chris Picciurro, CPA:So maybe I might wanna not expense things this year. It just just depends.
Marit Burmood, CPA, EA:Yeah. And and, you know, you said you said something that kinda got my head going to. This is something the business owners would definitely wanna work with a very knowledgeable accountant. But let's say you really are planning on buying an office building in the future, there might be an option for you to implement the self rental strategy where you can group your rental with your business operations. It's a special grouping election and then they could do a cost segregation.
Marit Burmood, CPA, EA:There's a big one there that's kind of for say a higher net worth business that would be looking to purchase their own office building. But it's kind of this thing where technically, suppose you could do it in the fourth quarter because if you group it in with your business operations, you're not so pressed for material participation. It's already included in with your business operations. So it's something that definitely won't apply to everybody. But if you are a business owner out there and you're thinking that could be me, I do want a building and I and I really need to expand.
Marit Burmood, CPA, EA:I've been wanting to anyway. Maybe talk to your tax professional about doing the self rental strategy with the grouping election. It could fit for you. But, again, there's other caveats that we couldn't cover in this podcast that you would wanna be aware of because the way the income is treated moving forward and losses are different than a regular rental.
Chris Picciurro, CPA:So Correct. Correct. And and it could be prudent just financially to own your own building as well.
Marit Burmood, CPA, EA:Right. Yeah.
Chris Picciurro, CPA:What are some of the other things that you're thinking about that that that people need to focus on as we enter the wow. The pre holiday season. I don't know. It's yours flying by right now. So
Marit Burmood, CPA, EA:Well, if you are an owner of an s corp and you have not been doing an accountable plan like most s corp owners do not unless they have a really good accountant that gets after them, I would suggest that you get together those reimbursable expenses that you have that contract with the company that they're going to reimburse you as an employee. Technically you want these reimbursements coming through every month and you want them to be organized. But let's just say you haven't jumped on that boat yet but you're going to, you're gonna get organized moving from here on out. Well that, know, because those S Corp owners will say, well, I want a home office deduction and I want this and my accountant won't let me have it. You can have it, but you need to submit it the right way through an accountable plan.
Marit Burmood, CPA, EA:If you're a Schedule C owner, you could also do the same thing. So if you haven't been tracking your mileage, let's get that mileage log recreated. I use MileIQ for my mileage and I classify all of my drives. There's a lot I think of missing expenses and deductions that the business owners can find. But, again, they need to gather it.
Marit Burmood, CPA, EA:They need to gather that information for the home office. They need to gather that mileage, and it will, you know, it will result in a good deduction. And it's much better to get it done now than to try to be gathering it all at tax time, and it will help you plan and find out what else you need to do in order to to lower your income.
Chris Picciurro, CPA:Absolutely. We we have, I ran into a new new client in our private practice who is in the professional service business, has a legit home office in an affluent area in a major city, and it was deemed that that a home office somewhere would be about $800 a month for just like a WeWork or Regis. So that's a $10,000. He's an s corp. And the other accountant was for some reason, they said, oh, you don't you know, there's no they didn't understand the accountable plan.
Chris Picciurro, CPA:And his tax rate hits it's about a $3,500 tax reduction, so he can he can pay himself under an accountable plan, you know, and and about $10,000 a year in his case. So, yeah, if you have same thing with a c corp, you can have an accountable plan. So I think being organized is one of your best attributes as a taxpayer.
Marit Burmood, CPA, EA:Yeah. And also really rolling up your sleeves and and finding those expenses, keeping things separate because a lot of people miss expenses because I guess they're not organized but they're also co mingling like crazy. We've got even people with S corps, they're just not, they don't have a designated business card. They're not separating out. I go to Costco and I literally have a business order that I pay with my business card and then I have my family order.
Marit Burmood, CPA, EA:The more that you can do for that, I think that business owners have the misconception that it's annoying and my accountants just, they're getting after me and they want the receipts, but really we do it all for you. We don't, I mean, I certainly don't like being the bad guy that's out there having to drop huge tax bills, feeling like I'm fighting with my clients. I wanna be your ally, but I'm also not a miracle worker. I can't go with you to Costco and tell you to split your purchases. So really being cognizant of your business expenses and keeping them separate, treating your business as a separate entity from yourself.
Chris Picciurro, CPA:I agree. Yeah. You wanna especially if you're, you know, an s corp, that's that's huge. Yeah. What you know?
Chris Picciurro, CPA:And then kinda in the same vein as s corp, making sure that you are taking some type of reasonable compensation is important. But that's, like you know, it's kinda more compliance. I would look at the you know, if people are interested in retirement plan contributions, small business owners, There's somewhat of a misconception that those have to be done before the end of the year. I mean, if they're not all of them have to be, so that's another thing. But, you know, there are some things that have to get done in the fourth quarter.
Chris Picciurro, CPA:Like you said, the reimbursable plan, is is very important, you know, for variety of things for the because this is what we run into, especially I mean, the standard mileage deduction is pretty favorable right now.
Marit Burmood, CPA, EA:Yes. Especially if
Chris Picciurro, CPA:we have, like, a hybrid vehicle or an EV and goes so so if you're not the best and or if you and you wanna avoid that depreciation recapture or some of those pitfalls that we talked about, do having a reimbursable plan if an s corp for your mileages would be a good idea. What are any other things that you wanna make sure people are aware of? And and and should they wait till, like, know, December 31 at midnight to be contacting their accountant about okay.
Marit Burmood, CPA, EA:Yeah. I think don't don't wait that long. Definitely don't wait that long. Another one I kinda wanted to talk about, I think, is something, again, is kind of one of those flashy things, but when done properly is really if you're already paying a family member or a boyfriend or a girlfriend to help you in your business, I have a lot of young clients that are content creators, for example, and they will have a boyfriend or a girlfriend who literally does everything. He helps me film, he edits all of my videos, he does all this stuff, but they're not trying to shift any of that income over.
Marit Burmood, CPA, EA:There might be people that you're already paying to help you in your business, but you're not actually giving them a $10.99. You're not getting a w nine. You're not doing the things that you need to do to write it off as an expense. That's sometimes really big missing deductions, especially with younger clients who are in more artistic industries. Or I have another client and she builds she builds little crafts, candles, and things like that.
Marit Burmood, CPA, EA:And she'll have people that come over and help her build them and they'll have candle building parties. And then she'll pay them and she'll be like, I gave so and so $500 and they're helping me and I gave so and so $700 Well, in order to write that off and you can write that off, we need to get the w nines. It's very important and get that information. You should be getting the w nines before you pay the person so that you can then send them a $10.99. But income shifting when it's a valid income shifting strategy, can also be very helpful.
Marit Burmood, CPA, EA:A lot of people really especially in small businesses. Right? Like we wanna hook up our family members and our friends, but you can't just pay them and then you don't get to take it as an expense and they don't have to take it as income. You can if you want to, but it's certainly not gonna help you with tax planning to do it that way. And so I I sometimes see areas where, you know, they could improve a little bit in that instead of just giving handouts to everybody.
Chris Picciurro, CPA:Well, you may I mean, you just mentioned something that's very important as far as, yes, being organized and getting deductions and how and if you are paying subcontractors, this might not seem like tax planning, but, ultimately, it is. Make sure now your best practice is to make sure you have a w nine. W nine form is a form that someone independent contractor gives to someone paying them to to share with them how they are taxed and what their tax information is if the ten ninety nine is it should be issued. But having those on file instead of scrambling around in January, February after you've already paid somebody and that person might not be willing to give you that information, and now you've got a now you've kinda have a a compliance issue, is something that especially for smaller business owners that they're the they're the, the maintenance team. They are the, you know, the banker.
Chris Picciurro, CPA:They are doing so much for their business, and they don't have the you know, they just don't have a team yet to to kinda keep them in check and and make sure all those checks and balances are are done. A lot of times they're scrambling around to get a job done and paying people outside their truck and be like, okay. And, yeah, that could be stressful.
Marit Burmood, CPA, EA:And they might not even be tracking it. I don't know. I think I gave this guy $500 to come help me do this real fast or I mean, you wanna track that. That can add up to a lot.
Chris Picciurro, CPA:Mhmm. Absolutely. Well, we appreciate it. This has been great. Do you have any final, little tidbit for for for, that that business owner?
Marit Burmood, CPA, EA:Sure. I can think of a good one.
Chris Picciurro, CPA:Oh, thank you.
Marit Burmood, CPA, EA:Yeah. I gotta I gotta I I have a final tidbit besides me harping on you to get organized and get going now because you can listen to this podcast and then you're gonna put it off until December 31 and don't do that. But also remember that don't buy it if you don't need it. Like, the whole premise of the theories behind what these guys are teaching is all about managing your cash flow with your tax flow. And let's not get so caught up in creating a deduction and I need a tax expense and I'm writing it all off that you're sinking your own shit because yes, you wanna make sure you're always proactively tax planning, but you don't wanna go buy a bunch of stuff that you don't need just to get a discount on your tax bill.
Marit Burmood, CPA, EA:So that would be my final advice is be smart about it. Don't let your emotions make you get crazy because sometimes people get real crazy around this time of year, and we need to keep our heads on straight. We need to tackle this with a logical mindset.
Chris Picciurro, CPA:That is great advice.
Marit Burmood, CPA, EA:That good? Don't let Yeah. Okay.
Chris Picciurro, CPA:Don't let that text tell wag the dog, as they say.
Marit Burmood, CPA, EA:Yeah. Yeah. That's yeah. Exactly.
John Tripolsky:That's awesome. And and and honestly, Berene, I think one of the coolest things about what you said a little bit earlier on, right, when we're talking about all this stuff. Right? Like, there's so many people, and this is not a dig at TikTok specifically, but sometimes they call, you know, the TikTok diploma on how you do things really quick. Right?
John Tripolsky:Mhmm. It's it's again, people are saying these strategies, these tips, but they're not giving you the whole story. Right? So probably the best advice is there's so much stuff out there. Just making sure you're connecting with somebody.
John Tripolsky:But then you gave the example. Right? Like, you're renting. You might wanna buy an office. It it comes down to communication, the relationship with your tax professional.
John Tripolsky:They're also not a mind reader or a wizard or a warlock, whatever it is that makes things happen. If you don't tell them that you're thinking about buying an office, they might not know that's on the horizon. Right? And you might have to do things differently today that'll impact yours down the road. So it all comes down to that.
John Tripolsky:Right? Just communication, organization
Marit Burmood, CPA, EA:Yes.
John Tripolsky:And the rest is, you know, whoever you're working with.
Marit Burmood, CPA, EA:Harmony. Oh, that's a great Harmony.
John Tripolsky:End it. End with harmony. We shall sing together like innocent anyways. We won't do that.
Chris Picciurro, CPA:We won't
John Tripolsky:we don't wanna lose subscribers.
Marit Burmood, CPA, EA:Yeah. At least from
Chris Picciurro, CPA:me and
John Tripolsky:Chris standpoint.
Marit Burmood, CPA, EA:I I don't have a voice that would keep subscribers either. So
John Tripolsky:We could just go to a black screen and just, you know, add some, yeah, some generative stuff in there.
Marit Burmood, CPA, EA:Perfect.
John Tripolsky:But thank you for joining us on this, Chris. As always, I mean, I I love kinda being a fly in the wall, listening to these conversations a little bit as well. But I know we have more of the stuff coming up. So I look forward to that as always. Again, great, great topic here.
John Tripolsky:We're gonna put, really, a bunch of contact information at the bottom of this in the show notes here depending on where you're listening to. Reach out to anybody else anybody on our team. Marin, obviously, always, we appreciate your time. So please, everybody feel free to connect with her as well too. And let's just keep this going.
John Tripolsky:And if anything, if anybody takes anything from this, let's just make it more known that tax planning is a thing. Right? And and people can do this, and there's a lot of power to it as long as you're building up that team with some knowledgeable people knowledgeable around you. So on that note, we'll see everybody back here again next week on the teaching tax flow podcast. Same day of the week, completely different date, and somewhat related topic.
John Tripolsky:So have a great week, everybody.
Disclaimer:The content provided is for educational purposes only. We encourage you to seek personalized investment advice from your financial professional. For all tax and legal advice, please consult your CPA or attorney. Investment advisory services are offered through Cabin Advisors, a registered investment advisor. Securities are offered through Cabin Securities, a registered broker dealer. The content of this podcast does not constitute an offer of securities. Offerings can only be made through an offering memorandum, and you should carefully examine the risk factors and other information contained in the memorandum.
