Very very powerful, and I actually jotted down here about hiring your children because that is something that not a lot of people know about but is a very very effective way of reducing your tax liability.
Yes and you have to do it right, and you have to document everything. And you know you’re not paying Johnny that’s licking stamps the same thing you’re paying the dentist that’s putting in implants. It has to be reasonable compensation.
Let’s speak a little bit about the documentation and the importance of that and what the advice you would give for good record keeping, because I believe in and I’m not 100 percent sure but there might be some changes about how you have to have some, all of your receipts on file currently?
Any, I always believe you should keep all your receipts, depending on what it is. Now, it could just be a credit card receipt, depending on what it is. But if it’s a big purchase you want to have that receipt. When it comes to hiring your kids you want to make sure they sign in and they sign out every day that they work, so you have documentation of what they’re doing. But having the information before hand is definitely better than waiting Until, you know you make have to explain it to somebody. Because three years down the road you’re not going to remember what it was. So, we can make sure any of our clients any strategy that they’re using that they’re fully documented and we have copies of everything so in the event that there was to be a question. We have the documentation to provide and get through it quickly.
Now here’s another question that, is a concept that I’ve spoken about quite a bit. You have mentioned, some of the content that your 401K from a tax perspective is plotting against you. Can you share a little bit more with my listeners of why its plotting against you?
Because you’re getting a current deduction this year, but down the road a lot of people are in the same tax bracket if not higher when they are actually ready to retire and they’re waiting as long as they can to start taking the money out. And then that is a lot of times taxed at the same rate that they currently, you know being taxed that or a higher rate than when they were putting the money in. And it’s going into the market and you know being at the whim of the market.
From a tax perspective too, and this is something that I speak quite a bit about too, is you know this is tax deferred so you’re deferring taxes into the future. If you’re living in a country with 21 trillion dollars in debt with social security by their own records that are going to struggle to make good on some of their promises they need to by the year 2034. We have other programs that are severely underfunded, you know we’re not soothsayers but we should ask ourselves a question. Will taxes go up or down possibly in the future if we look at some of these trends and some of these financial situations out there.
Yeah, and that’s the big question. Will they go down? Will they go up? We don’t know, you know that can change from administration to administration. So, you know you can only plan on what you have today and if you look at the rates today and plan that okay they’re probably going to be there down the road when I go to retire. We see so many people that they’re in such a high tax bracket when they retire that they don’t want to pull the money out of the 401k or their IRA.
Staying on the administration, what are some of your views on the tax plan? Will there be some tax changes with the current administration? Is that going to pass?
You know, I don’t see how they’re going to remove the corporate rate to 15 perfect for everybody. Personally I don’t think it’ll happen if it doesn’t happen in the first year, but you never know. So, I just tell my clients that we plan on what we know it’s today, and if there’s changes we try and keep as much flexibility in our planning for changes and move forward. POST INTERVIEW THE C CORPORATION TAX RATE IS NOW 21%
So Craig, let’s talk about the process of planning. If clients are coming into you, can you talk a little about, how you bring them in what some of the education is involved and just give us a little bit of an overview of the planning process for their taxes.
Sure, when we work with clients and we mainly work with business owners, real estate investors, real estate owners. The first thing we do is have a conversation that’s usually a ten or 15 minute conversation, until I get a general idea of what’s going on. Then we have them send us their last two years personal and business tax returns and we do an analysis. From there we go to a Zoom call or a WebEx call where we share our screen and we take them through our analysis and we talk about the missed opportunities sometimes mistakes that we find. What they’re missing in tax savings and at that point if the client wants to move forward with the tax plan, we do a tax plan, we actually charge our fee up front. It’s 100 percent refundable and nobody has ever asked for their money back.
And do you guys also go back and review the past three years or so? Is that something you guy’s also do?
Well we normally look at the last two years unless we find something major that if we find a mistake, then we’re going to look at the third year. If at that point it’s still able to be amended. And that happens.
Right. And things change, and they continually change in the tax code which leads into my nest question. What are some of the big developments and changes that you’re currently seeing out there that would be beneficial just from a knowledge standpoint for investors real estate investors and business owners?
I mean right now, everybody’s kind of holding their breath to wait and see. Alright, you know there’s some changes with depreciation there’s bonus depreciation is being phased out but we don’t see that a lot with our clients. So we’re really just kind of waiting to see what changes they make, being abreast of what the current code is and how that affects our current clients.
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