Are you missing out on your family employment? Do you have kids? Have you looked at hiring your kids? Depending on the type of entity you have, you might not even have to pay Social Security tax for them. All that stuff needs to be documented. Then, we talk about medical benefits, medical expense reimbursement plan you can have if you’re a certain type of entity where you could write off dollar for dollar or your medical expenses, which is most people don’t get to write off their medical expenses thankfully because they would be so high, and it would not be a really good thing, but let’s just say you have kids and they need braces or maybe you’re a little old and you’re going for a little bit of cosmetic dentistry, which could be real expensive, you get to write that off.
You get to write that off because, what? Is the cost part of doing business that you have or you’re talking about this because they’re an employee of the company?
Of course, depending on how you’re set up, you could have a medical expense reimbursement plan.
That medical reimbursement plan. Probably would not want to do that if you have 20 employees, but maybe if you’re a sole proprietor or you have one or two people, or it’s a family business, that makes a lot more sense that way.
Okay. Interesting. Yeah. I’m thinking back. I remember when my kids were in college that Frank, our CPA, would be like, “And they’re all working. Now, this one’s working for the company this year, right?” “Yes, he is.”
Right. You need to document that.
Yes. Of course, you know what, we made them all come in and answer the phone. It’s like, “You have to do this for four hours every Friday. Sit here and answer the phone.”
They have to be paid a reasonable wage, and tax code has actually ruled that you can hire them as young as seven. I like to wait till they’re about 11, but the tax code, there’s a case where they ruled seven years old.
Now, that’s crazy. I have to tell you, honest to God, I did start working for my parents when I was eight years old, but it was putting … It’s what you call soda jerk. My parents had a luncheonette, and I used to do the sodas, and we would be busy on Sundays, and we could need 25 sodas in an hour. I would just stand there with sodas, but I’m not sure what else an eight-year-old is actually capable of doing.
Exactly. With the new tax laws, you could actually, on a federal level, you could pay one of your kids up to $12,000 a year, and they will not have any federal tax.
Wow. I just remembered having something to do with the whole college thing. I don’t remember what it was because I never need to know those things. But I remember Frank saying. “Put them to work X amount of hours a week,” and there was something about the deduction or the college, almost like paying for college for an employer, something like that.
Yeah, I’m not sure if … It was probably just something else, but it’s a good way to do it. If you look at it that way, the business is getting a deduction. If maybe college isn’t $12,000 a year.
We’re also going back 15, 20 years, so-
Right, exactly. My kids went to a private high school, and they all worked. The money went into their bank account, so I got a deduction for it. Then, the school tuition came out of their bank account.
Okay. Yes, you know what, that’s probably is the way it sort of went, something like that. Well, the point of it is, we’re down this whole rabbit hole of it but the point of it is, is that that is just exactly the types of information and things that you can miss if you only show up with the garbage bag full of receipts in March for your April 15 deadline if you don’t have this ongoing, as you said at the top of the show, communication.
Most definitely. If you’re looking in the rearview mirror, there’s not a lot you can do.
Right. Right, right, right, right. What happens? How does it work, Craig? Is it like a retainer basis and the retainer basis includes X amount of filings, quarterly, sales tax, your monthly phone call? Is that how the model works for a firm like yours?
Our clients are all on a flat monthly fee. I think I’ve sent out three additional bills in the last seven years that were all agreed upon in advance, but it’s a flat fee basic agreement. What comes before that though is the tax plan, all right? Our tax plan, we do an analysis, we look at your prior year returns, we estimate how much we’re going to save you this year. If you want to do it, we get paid up front. Our fee is 100% refundable, and in seven years, we’ve never had anybody ask for a refund. It’s typically instant gratification.
That’s awesome. I love it, and so-
I’m sorry. Go ahead.
From there, if they want to work with us going forward, okay. Sometimes, it’s their drinking buddy, so their accountant, they’re going to work with them, going to take the plan and they’re going to implement it with their accountant, which is fine.
Okay. Well, that’s also similar to what designers do. Sometimes, you go in and you do the consultation, and you give them all the list of things that will make your home wonderful and then, the client goes and says, “Okay. Thanks so much for the list. I paid you for the list, and I’m going to go do it myself.” Other times, the client says, “Okay, I’d like you to keep doing it for me,” right?
Yeah. Okay, I like that. I would make an assumption too that it’s probably similar in that depending on the complexity of a individual’s company would be the determining factor for that flat fee rate.
Correct. All of our clients have a bookkeeper, a CPA assigned to them, and then myself. There’s three people looking at that stuff.
Okay. Now, that’s interesting right there. You said bookkeeper. Many of the designers listening, at the very least, have a bookkeeper that even if it’s a part time, two, three hours a week or whatever it is a month. Is part of what you do that bookkeeper could be replacing whoever they might be outsourcing or we’re not talking about bookkeeping for project management and stuff? That’s not the bookkeeping we’re talking about, or are we?
It depends because we have interior designers where they actually have their own bookkeeper, and then we go through it after that to make sure it’s correct and make our adjustments. They’re usually doing it on that project side, making sure they’re associating the cost with the right project, but then we’re doing the rest after that. We’re doing the reconciliations and everything like that.
Yes. That makes sense to me. It’s two separate tasks of bookkeeping. One is real live daily bookkeeping, managing the project and expenses, and what you’re describing as the second is the big look at it and then the apportioning of it to the different categories within the business structure for the yearend reviews and the quarterly reviews and stuff.
YOU SHOULD REVIEW THE THE NEW TAX LAW CHANGES WITH YOUR CPA BEFORE IMPLEMENTING ANY TAX PLANNING STRATEGIES.