People tend to look at their accountant as this guy is, he’s costing me money. He’s got to do this compliance work. It’s costing me money. I like to tell people, look at it as an income item. If you find the right person, and there are many great people out there, and you communicate with him, he could actually save you a lot more money than he’s costing you.
Okay. Okay, and is it part of the mix? I hear what you’re saying. I’m now, like three times, I’m thinking one way and three times, I’m now hearing the answer that when you’re responding, you’re talking about the evaluation of how to approach the business from the standpoint of saving money on taxes. Is there a component that also, with a Tax Coach, with a service like yours, you’re a CPA, you’re a Tax Coach, is there a component that one time in that month, that conversation could be an evaluation of, are my expenses at a level that I can justify hiring an employee, or that’s a whole different type of coach? That’s a different person.
That’s all part of whatever you decide you’re going to be discussing that week. That’s why if you talk to somebody on a regular basis, you get an idea for what’s going on in their business. If you never talk to them, you don’t know what’s going on until they’ve done something and maybe that is too late.
Okay. That is part of that counsel. I feel like, you know what it is, because look. Craig, I’m now very much involved in coaching a lot of interior designers, and of course, I’m not Tax Coaching them, by the way, but there is a lot of conversation always in how do I know when it’s time to hire somebody? I can help them evaluate from a workload standpoint and from a responsibility load standpoint, and from what they’re able to communicate and how to offload work in order to determine if it’s time to hire, but then there’s that component of, is the business financially healthy enough to hire? You, your services, a Tax Coach CPA like yourself, will have those kinds of questions with a business owner.
Yes, because basically, by having the information in, having your books up to date, there’s this data there that you could look at and figure out, “Okay, I have the money, or this is the money that’s coming in. These are my expenses. This is what I need to change,” or, “Yes, I can afford that person.” Having numbers in front of you and looking at trends, you can make informed decisions versus seat of the pants decisions.
I love it. I love it. I have to say, I think that is a well-needed services for so many small business owners especially solos because … I mean, I’ve explained this on the show many, many episodes ago, but my husband, his degree is accounting, and he is the finance guy in our business. Here he is, he’s fully formed. He’s got it down. He know what he’s doing, but one of his very closest friends from high school is our CPA, okay? This CPA, I know for a fact, functions as a sounding board for my husband, so when he is in the middle of deciding, should we … like I’m pushing him, “Let’s buy a building,” and he’s like, “Okay, sounds like a great idea. Let me go talk to Frank.” You know what I mean? He can talk to me about it, but it’s different than when he talks to somebody who, like you said, has got his nose in our financials. That relationship is there because they’re friends, but you’re saying it’s possible to have that as a purchased relationship as part of your package.
I love it. I love it. That’s awesome. We need that. People need that.
It’s called being proactive.
Right. I have to say, I think that most people would not expect that to be part of the service and might be concerned that they should ask for it and not realize that it could be. Craig, is it unique to your firm and people that have the outlook of you or am I mistaken in most CPAs will be that person?
That’s what I thought. It really isn’t the normal. It is a breed of people, of professionals like yourself that believe in the whole vision of the business, and of course, look. It’s no different than interior designers. The more valuable you become to your client, the more likely they are only ever going to do their design projects with you. They get to the point where they’re not even going to pick their paint without you. It’s smart for you to offer as much and be as rounded as you can, right?
Most definitely. Most definitely.
Yeah, I love it. I love it. Tell us about, when you are working with a newer or any level business, it doesn’t matter, what are some of the mistakes that you see that are typical that somebody out there is probably making this mistake right now, and they’re going to hear you, and they’re going to go, “Oh”?
My latest book is basically the Ten Biggest Tax Mistakes that Cause Business Owners Thousands, and I’m going to offer that for free to your listeners, but-
Number one is failing to plan. We spend time researching a vehicle, a car. What are we going to be doing? Our clients spend time researching colors and stuff like that, but we don’t plan for taxes, which could be one of our biggest expenses. Choosing the wrong business entity, typically, no thought goes into that.
By that, just so we’re clear, it means being an LLC or being a sub-chapter S, or whatever. That’s what the business entity means.
Then, the new one is based on a new tax law, something called qualified business income and section 199, which is a 20% deduction that we could all be entitled to, and how to properly plan that we get to take full advantage of that.
That is for businesses that … Is it for all or businesses that earn up to a certain revenue?
Well, it’s for all businesses if you are a certain type of business and your taxable income is between 315,000, and you’re married and 415,000, it phases out. Interior designers are currently not in that group. The government was a little bit vague. We’re still waiting for some guidance on that, but there are actually plenty of opportunities. If you are in that boat and you are one of the professionals that they list, because they call it consultants, okay? What is a consultant? If you’re in that group, all the more reason to do planning to make sure that you could take advantage of that 20% deduction. Let’s just say you’re doing okay and you have a $300,000 K1. That can be a $60,000 deduction that you might miss.
Whoa. That’s pretty significant, right?
How about more mundane things? I have talked with designers who … I’ll tell you, it’s a great question. How about this? How about a designer that is working out of their home? Is there a tax deduction or is there something there that says that you could contribute X amount of dollars per month that is called rent? I don’t know the language to refer to it.
Rent is normally not a wonderful thing because if you pay rent, you have to pick up rent on the other side, so you don’t get a whole lot of value from that, though at times, it does work. The home office deduction, which is people start to shiver when they hear that, they think the big, bad IRS is going to come get them, that’s not the case. The IRS actually came out with a safe harbor a few years ago on that. One of the things that the home office does is now, it allows you to … All your travel, from your home to the different places you’re going to, becomes deductible. It also opens up to offer what we call the on-premises athletic facility, which is for the use of your employees and their families, which could be if you’re an employee, and your family. That means the pool could be deductible. The home gym can be deductible.
Those things add up.
Wait. Wait, time out. What we’re saying is that if you have an office in your home and you also happen to have a treadmill and some weights and a yoga mat in your basement, you can deduct both?
Yes. If you have a home office and you qualify for the home office, which means you need to use it 14 to 15 hours a week, and there’s no one I know that doesn’t use their home office for 14 to 15 hours a week-
How about a day?
Right. That opens up to the home athletic facility, the transportation from your home to wherever it is that you’re going to see clients, or if you even have another office, that becomes deductible.
YOU SHOULD REVIEW THE THE NEW TAX LAW CHANGES WITH YOUR CPA BEFORE IMPLEMENTING ANY TAX PLANNING STRATEGIES.