ECommerce Momentum and my Interview with Stephen Peterson

Welcome to the “ECommerce Momentum” podcast where we focus on the people, the products, and the process of e-commerce selling today. Here’s your host Steven Peterson. Welcome back to the “ECommerce Momentum” podcast. This is episode 161: Craig Cody. You know get ready to talk tax, yes I’m an Accountant and I am excited about tax because you should be excited about tax because by now you’re figuring out you probably owe whole bunch of it and Craig is a Certified Tax Coach. So he’s a CPA, and his advice is a little more specific because what he does is try to help you find a way to keep more of what you made and that’s his focus. So a specialist in tax is somebody different than your generic General Accountant and he explains what the difference is. And the word compliance makes so much sense to me and really hear it, he uses it a whole bunch of times. So let’s get into a podcast and get excited.

All right, welcome back to the “ECommerce Momentum” podcast and I’m excited because I’m back with what I think I’m going to do every year, is as the year closes out I want to bring us value–bring you value–the Listeners–on how to really close out your business for the year and then set you up for success in the following year and I think I think the gentlemen that we have today is really going to help us in a lot of different ways but specifically tax. And tax is a very big deal. It’s bigger–if it isn’t, you’ll find that out that it is very shortly. Craig Cody. Welcome Crag.

Hi, thank you very much for having me.

Well thank you for coming on the timeliness, you know, that’s why scheduling for both of us because as you know the holidays are here and you’ve been sick and I’ve been traveling and trying to get it scheduled was difficult because you’re going to be busy very, very, very soon correct?

Yes I mean we’re not as busy as a lot of places are for tax season because we deal with business owners and we work with them throughout the year, so we’re busy but we’re still out of the office by six o’clock at night.

Oh, that’s not bad. You know, it’s interesting you say that, you really are more tax planner right? You’re really looking to say, “Hey Steve, let me help you with your business long term right? Let me help you long term strategize to minimize your taxes you pay that you know follow the law–whatever the law is–but make sure we can minimize your tax because, quite frankly, that’s cash flow”, right? I mean it really is.

Most definitely it’s all about keeping more of what you make.

That’s not a bad thing. It’s funny, if you do pay attention to those things those little margin–I call margin killers–all those little things they add up very, very quickly and it could be substantial. So how did you become a Certified Tax Coach?  I mean you’re a CPA, we are clear about that and you’re in New York State?

Yes.

Okay, so how do you go about–did you say, “Hey I’m going to school.  I’m going to be an Accountant and be cool like Steve.” Is that what it was?

No, as you know this was a second career for me.

Let’s talk about that. No, I don’t know.

My first career, I was a New York City police officer. I retired after 17 years as a Lieutenant.

Wait, wait, wait, wait, you were a police officer who turned into an accountant? Or were you an accountant that went police officer and then eventually became an accountant?

No, I was a police officer that turned into an accountant.  Really at one point, I really got involved with taxes and I went back to school and it was time to retire and I was very lucky and I’m able to do something that I really enjoy, and you know it’s been said the adrenaline rush that you get chasing a perp down the street, I get that same adrenaline rush when I do a tax plan. I save somebody $20-30,000 thats exciting!

Have you really had experiences where you saved somebody $20,000-$30,000?

Honestly over $400,000 for 1 client.

Wow you know it’s funny because I was just thinking about one of our groups that I’m in and there are a–two sellers and their partners. Amazing fellows and they sold, I don’t know four or five six million dollars this year and I saw a post the other day. They were like, “Oh my god we owe a lot of money in taxes. Is there another CPA I can run that this by to make sure that I’m not overpaying?” And I’m thinking to myself, you know when you’re at that level and you have that much liability it’s a very good investment to spend whatever it takes to be certain. Would you agree?

Oh yes, because we bring a lot of value and the average tax plan probably saves somebody fifteen to twenty thousand dollars a year.

No kidding? I you know you and I talked on the pre-show had discussed it. I have an accounting degree. I’m an accountant, I don’t do my own taxes, and I don’t. And the reason is I don’t keep up on it because there are just so many changes and it’s political and I don’t want to read about it. I don’t care; let the him handle it, right? And so I have to have somebody–can you practice for stuff in every state?

Yes as a CPA, the only thing I cannot do in other states that I’m not licensed in is sign off on financials.

And so that’s not relevant to what we’re talking about here, but you basically take a tax return from some other CPA, or somebody who did it themselves and go through and parse it and try to find you know things that weren’t done correct–not correctly–weren’t done as far as they can go, is that way to say it?

Yeah so basically most Accountants out there—CPAs– are very good at what they’re doing. They’re putting the right numbers in the right boxes. They’re doing all the compliance work, but they look at it differently than we look at things. We look at where are the missed opportunities? Where are the missed deductions? Where can we take full advantage of the legal tax laws and save you money? So we analyze your business returns. We analyze your personal returns and we look for those missed opportunities and deductions.

And I guess I’m a little early on this, there’s a fee I assume?

Yes.

So walk me through a fee. So I’m a half a million dollar business and I think I’m paying my accountant maybe, I don’t know, $1,000 to do my taxes. Maybe $1,200 including my personal taxes and I come to you and say, “Hey could you go through and look at my tax– my tax returns?”

Right, so typically what we do is we do an analysis. We come up with missed opportunities and deductions. We figure out its X amount of dollars in savings. Our fee is typically– runs in the range of $3,500 to $7,500 for the plan. It’s 100% refundable and nobody’s ever asked for their money back because your typical first-year return on investment is three to six times.

So what happens though, when you look at mine and my guy is that good and you didn’t find a thing? What’s the cost?

We don’t, that’s the initial analysis. There is no cost.

Okay so this is in essence a free service for you to take a second look at somebody and say, “You know what Steve? You got a good guy; he’s done a good job for you. Life is good.”  Right?

Correct.

Have you had to do that?

No

Every way–how many how many, you know–I don’t–probably thousands of tax returns, you’ve never found one that was perfect?

Well tax plans, and analyzing tax returns–I’ve analyzed well over a hundred–and I’ve never found one that was perfect. Of course typically accountants–people go their accountant after the fact

Right.

Okay they’re not working with them on a regular basis. They’re not being proactive. We’re proactive. We know where to look. We know what you’re allowed to do. I go through about ten days a year of training so I know things that maybe the regular CPA who’s more immersed in compliance work isn’t going to readily know. There’s no rocket science here.

Right. You’re not interpreting things, you’re just going to the letter of the law saying, and “Hey this is allowed. This isn’t allowed.”

Exactly and when we do a plan we give you–it’s a binder– and every strategy that we recommend comes with the tax code which says you can do that and it gives you some information about that.

Will you defend me in front of the IRS if I get audited because of the tax advice that you had given me?

Of course.

Just making sure people understand what the value of a CPA is!

If you cannot defend it it’s not worth doing.

So how did you get interested in e-commerce because you have e-commerce clients correct?

Yes I do. It’s interesting because it’s such a different business. Well a– its relatively new right? I mean it’s conceptually–a lot of the concepts are the same but there are a lot of nuances for e-commerce that don’t exist in a brick-and-mortar.

Oh yeah I mean it and it’s such a growing industry but it’s also just like every other business out there. You have to look and you have to see what you can do. What you’re allowed to do and what you’re missing. So I’d hate to say it’s not rocket science but it’s not rocket science. Typically–the biggest issue we typically find is the wrong entity selection.

So let’s talk about that. So that’s a legal term right? So that I’m a Sole Proprietor, I’m a LLC, or I’m a C Corp.  What else? An S Corp.

So how do I know that? How does somebody go about knowing that they’re chosen the right corporation? Is that what the questions, the background information you collect?

That’s all part of what we do and what it comes down to is most times when people form an entity you know they go to the attorney and they say I want to form–start a business and he’ll say, “Okay well you should form an LLC or you should form an S corporation, or you could start out as the sole proprietorship but there’s no communication between the accountant and the attorney. When there’s communication between the accountant and attorney then you could figure out for your particular situation what entity is really going to work out best for you.

Because you need to change as your business evolves correct?

Correct and it also changes, you know a lot of people start out part-time right and then as they move to full-time may make a difference what type of entity they’re in.

So give me an example. So most start out as a sole proprietor right? Generally, they just say, “Hey this is Steve’s business and Steve selling shoes because I like to sell right?” So Steve selling a few shoes getting good at it you know a little bit of money and coming in not really a business–probably a hobby for a while and that probably is okay at that level.  Correct?

Correct.

Okay and so what point do you decide that a corporation is–makes some sense? And I know that’s a general broad statement because I’m sure if I have a you know eight other businesses or I have a lot of you know I have a million–ten million dollars sitting in a bank account, the liability needs to be protected but you know generally.

It really depends on everybody’s circumstances so are they doing it full-time? Are they doing it part-time? Do they have, you know, a job and they’re going to continue in their job and do this as a side business?

Well what would that—stop there a second. So tell me what that–what would that–so I still work full-time right? I have a full-time business and so I’m a part-time seller and so am I ready for an S Corp?

Well you know you typically want to have some type of liability protection so you might want an S Corp or you might want an LLC and then as you grow maybe that LLC needs to make some changes. Maybe you need to elect to be treated as a corporation and an S corporation. Everybody’s circumstances are different, so just because you’re selling shoes doesn’t mean you should be an S corporation.

Is –would you say this though that generally again I mean and this is hard because it’s very specific area and that’s the beauty of what you do.  It is very specific right and that’s where the tax benefits come in–the specificity right? I mean that’s really what, “Hey this law says this then you can do this.”  But let’s take somebody–would you say that all full-time sellers at this point should be probably an S corp or something like that? Generally?

That would be a good general statement, but they could also be an LLC and make it work. It also depends on whether they have partners or shareholders, and how they–how they’re split is devises and what kind of liabilities they have. There are a lot of things that go into it. That’s why it’s not just, “Okay you make an X amount of dollars you should be a corporation.” Or you should be an LLC. It really makes a difference on what that individual circumstances are and really what they want to do, I mean if they’re just quick to make the money and they don’t have any plans to really build a business, they’re building a quick income stream to take them somewhere else, you know for example they want to make as much money as quickly as they can because they want to get into the rental business or something like that. Well it might not make sense for that one business until they evolve into this second business, maybe.  I mean maybe. I guess there are so many extenuating questions that really make that decision pretty important.

And that’s why it just takes communication really. It’s really; you know should not be just one person making that decision. You should have your whole team.

And so walk me through what you think a team should be. So you’re not a bookkeeping company correct?

Well we actually–one of the services we offer is, we offer you know Tax and Accounting and we handle all the bookkeeping that goes along with it..

Okay so you do offer those services, too.

And we offer outsourced CFO services so we –everything starts with a tax plan but we do those other things. We just don’t do a lot of individual tax returns that are not affiliated with a business.

So I come to you. Walk me through the process of what you would expect. So I’m going to get my 2016 taxes done right? By my regular guy and then from there what would happen?

So I would say before you get your 2016 taxes done you come see me and we look at your 2015 documents and you tell me okay what kind of a year you have 2016 and now you know this is going to be airing after January first but there are still certain things you’re allowed to do legally that can affect your 2016 taxes

All the way up until …. March?

Up until you file that return.

Oh even when you extend it then?

Yes

So technically until it is October or something like that? October? November?

Or September 15th or October depending on what type of entity you are. Yes.

That’s a–that’s a little thing I didn’t understand.

So we can make a late election sometimes and we could save you $15,000 you know and it’s like I said not rock science but its dollars that you’re saving.

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