Craig, welcome to the show. I appreciate you coming on today to help with a huge topic. I’ve run my own business for almost 10 years now and taxes are one of my biggest pains. Just the thought of having to spend about 40% of what I earn, sending that money directly to the government, that’s probably the biggest heartbreak of running my own business and Craig is going share with us today some strategies on how to minimize that tax.
And we’re not talking about breaking the law. We’re just trying to use the tax code as advantageously as possible, without breaking the law. No shady stuff here. So, welcome Craig. Could you tell us a little bit about yourself?
Sure. Thank you, very much for having me. I’m real psyched to be here. Yeah. I’m a Certified Public Accountant, CPA. I’m also a Certified Tax Coach. I’m a business owner. I am a former New York City police lieutenant. I’ve been doing accounting now for about 18 years.
As a Certified Tax Coach, I belong to a select group of tax professionals that go to advanced and extensive training for about five to 10 days a year. I’ve co-authored an Amazon best-seller, Secrets of a Tax-Free Life, and my most recent book is called the Ten Most Expensive Tax Mistakes That Cost Business Owners Thousands.
Get your free copy here.
So, I’m excited to be here and share!
I’m excited to have you on, because I always … you know, sometimes I’ll try to attack a finance question or a tax question and have to leave the caveat. I’m not a CPA and I’m not an attorney, so I’m glad you could come on and talk about these topics and we’ll get the expert opinion directly from the expert.
So, the first question I’ve got for you today, Craig, is what is proactive tax planning and how can it minimize what we pay in taxes as business owners?
So, what proactive tax planning is, most people are used to what we call reactive tax planning, which is kind of looking in a rear-view mirror. They meet with their accountant or their CPA, maybe in February, March or April, and he’s basically just recording history. He’s not making history.
When you’re being proactive, you’re actually making history. You’re looking for the legal ways your clients can reduce their tax bill by proper planning. Which is communicating and figuring out, I’m doing this, I’m doing that. Maybe if I do it a little bit differently, it could be deductible to me. That’s what proactive tax planning is.
I know with my CPA it’s … you know, I manage all my books, put them in QuickBooks, send my CPA a file after the end of the year, and they prepare my taxes. So, it’s completely the opposite of that. So, I should probably be meeting with my CPA a few times a year? Is that what you’re saying?
Yes. You should definitely be meeting and communicating with them. You don’t necessarily have to meet in person, but you should definitely communicate. We like to communicate with our clients at least once a month and we typically do like a WebEx or a Zoom call with them. Everyone doesn’t have to set aside a whole bunch of time. We could see what they’re doing and we could give them any ideas or strategies that they should start doing. And we should also make sure that they’re implementing the strategies that we’ve already talked about to save them money.
With the clients you’ve worked with, what have you seen that you would consider the biggest mistakes that folks make? Other than not proactively planning?
Right. The first one is failing to plan. You know, people just … they look at accounting and tax prep as a cost item instead of an income item. So, they just kind of fail. The next thing is typically choosing the wrong business entity to operate your business out of. It’s like, what planning went into choosing that entity? Are you an LLC? Are you a corporation? Are you an S Corporation? Why’d you make that decision?
And depending on your particular facts and circumstances, an LLC might be the right way to go, or an S Corporation might be the go. You know, so that’s typically not planned for. Typically, they speak with their attorney and he says, well, I like LLCs for asset protection, which is great, okay? But, let’s take the legal part and the accounting part and figure out what works best for you.
Get your free copy of Ten Most Expensive Tax Mistakes That Cost Business Owners Thousands here.
Listen to the full episode here.