Let’s jump into a couple of mistakes. Now you mentioned the one of not planning. What are some of the other most expensive tax mistakes that cost business owners thousands of dollars?
The wrong business type. You know, you set up as a sole proprietor, an LLC, a single member LLC, a corporation, a S corporation, a partnership. What kind of thought went into that entity formation? More times than not, there’s no thought. You call the attorney and the attorney says, “Okay we’ll form an LLC or we’ll form an S Corp.” and there can be big tax benefits depending on, how you’re set up. Depending on what your particular situation is, and what may work for me in the same business may not work for you in the same business, because we may have different other things in our lives going on.
And I mean, some of the other things, there too and you mentioned the entities, which is very very important and that’s also really important that your CPA and your tax strategist are on the same page as your asset protection specialist and advisor.
Everyone should have a team and that team should be able to communicate when they need to. Whether that’s your financial advisor, your attorney, whomever else you have working with you and your team, you should all be communicating.
What is the frequency of that communication that you would advise? What’s the type of relationship? This isn’t something as we’ve mentioned earlier in the interview that you just give Craig a call in April, you know in March saying please help me. What should that look like and what is involved in this planning to be strategically positioned for your taxes?
Well we work with all our clients throughout the year, so I like to speak with them or email back and forth at least, once a month. At the very least you should be talking with your CPA or advisory in your team, quarterly. But, we like to discuss things once a month and it can be a quick short discussion it can be, “What’s going on?”. It could be going over the Profit and Loss. Depending on what the situation we’re talking about, but maybe somebody is looking to buy a piece of real estate. Do we need to do cost segregation study? What do we need to do? What’s the cash flow going to be? Etc… It’s always best to do that before you purchase it than after you purchase it.
Absolutely. Have that conversation. Now Craig, let’s jump into some of the strategies for a Tax Free Life. We’ve seen people, you know, real estate investors, like Donald Trump and Robert Kyosaki talks about this too. How they have basically gone into a zero percent tax bracket for some passive income investments and they have reduced and limit this wealth destroyer. Warren Buffet does the same thing. You write about some of these strategies, can you share some of them with my listeners?
Oh yeah, I mean we’ve spoken about the wrong business entity, we’ve spoke about failure to plan, okay some small ones are home office. Do you work out of your home? Do you take a home office deduction? If you do, do you have an on premises’ health facility which could be a gym in your basement or could be a pool in your back yard? Are you taking a legal deduction that you’re allowed to take for those? Are you hiring your kids? Tax court has ruled you can hire your kids to do work for you at the age of seven. I typically like to wait until they are eleven or twelve but are you hiring them? Are you sending them to camp? Maybe if you hire them you get a deduction for their salary because they’re performing a service and the money goes into their bank account and then their camp or school tuition comes out of their personal bank account and you’re getting a deduction for their tuition which you normally wouldn’t get.
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