Service Business Mastery Podcast Part II

So really quick, when I read your book, one of the things that popped out was something to do with your children working with you, but also one other thing about the children working with you was your tax credits for child tax credit per family members under 17. Does that also include foster children?

If they’re a dependent, I haven’t come across that particular question so I probably wouldn’t know without researching it, but my guess would be if they are dependent of yours, you would be entitled to the child tax credit, which based on the new laws now is now $2,000 from $1,000.

Oh sweet.

There are also income limitations and stuff like that, so maybe not everybody is going to take advantage of that, but there are other things you could do such as paying your kids, have your kids work for you.

How does that work?

You hire them to do something in your business. Depending on what it is and you have to pay them a reasonable wage and you need to compensate them and document it. So the money should go into their own bank account. Whether you do it weekly, monthly, bi-monthly, however you want to do it, but on a regular basis and then when it’s time to pay for that summer camp or that hockey camp or something else that you would normally be paying for, you have them pay for it out of their account and now you’ve actually made that expense in a round-about way tax deductible. So you’ve gotten a deduction for the wage, you pay them and then they’ve paid their own school.

So they can pay for a private school if they go to private school?

Well my kids paid for their private high school

So then their kids could say as I grew up, my parents made me pay for all my own stuff.

Exactly. Well that’s okay, but you just have to document it and do it right. And you have a couple of kids and schools–back then it was only like $6,000 a year–so if you have three kids going and that’s $18,000 and when you figure in federal and state taxes, you could be up to close to 50 percent. Even if you look at a third, that’s $6,000 you put in your pocket, a lot of money.

Oh yeah. Well I think our kids are somewhere around about $30,000 a year for our kids to go to school. So that would be a huge thing. But what’s the age limitation on that?

There is no age limitation depending on how you’re paying them. If you’re paying them through a Schedule C or something like that and you’re not paying FICA tax on it, it’s less than 18. But in order to pay somebody $30,000—

Its four kids for $30, 000.

Okay, Got it. So $7,500 a kid is, I think you could say that’s reasonable, but we also have clients where the kids have to go to a special school and it might be considered a medical expense and we show them how they could write off that medical expense through like a medical expense reimbursement plan if they do it correctly and they document everything they’re doing.

But that all goes back to planning it out.

Exactly. Exactly. And you can’t plan that today for last year. I need to do it now for this year.

Get your free copy of my book here!

I’m sorry I interrupted you. You said you had a client that was doing a medical–

–and it was ADD and it was a special school and it was a lot of money and they set up a medical expense reimbursement plan. And they actually got to deduct the cost of the school because it was a real medical expense.

Huh? That’s very interesting. So with paying them the way that is legal, so if we have a payroll service, so I would have to pay my children through the payroll service or do I just write them a check?

No, you would have to pay them through payroll service, but sometimes you have different entities set up and that might be a way to set it up. So you have a different entity that’s paying them and they don’t have to go through a payroll service and you’re not paying the 15% FICA so that all comes into play. Obviously if you can do it and not be subject to FICA tax, you’re saving that much more money.

Yeah, that sounds way over my head. So whenever that time comes when we have—

Aa little bit of planning– a little bit of planning. Perfect. Yeah. I mean listen, we’re all working really hard, right? We should be keeping more of what we make.

Absolutely, and it’s those little things that you don’t really think about that really help out. And having a good CPA really helps because there are some CPAs, and I’ve met them, that are more concerned with not throwing up red flags. So how do you feel about that?

Most CPAs are really good and most accountants are really good. They’re putting the right numbers in the right boxes, but it stops there. And I kind of called like over the depreciated Dave. He’s worried about too many things. Now listen, if the code says you could do it and you documented it and you do it right, let the IRS notice, okay, because you can answer it if you’re doing something wrong, don’t do it. But if you’re doing it the right way, that’s okay. That’s why it’s in the code.

I like that. Cool. So if any of my listeners want to reach out to you, what’s the best way for them to reach out to you? And also I’ve been on your mailing list for awhile and there are some mailing lists that I’ll unsubscribe after two or three mailers, but yours I’ve continued to stay on because the information that’s provided is extremely helpful for business owners because it’s a lot of tips and things that you don’t think about and it’s easy to read too, which is nice.

 

Current events related and it’s interesting to read, exactly. So our website is www. craigcodyandcompany.com/dentists. And if you go to /service, you can put your information in, we’ll send you a copy of the book free copy of the book paper copy and you’ll automatically go into our weekly email which usually goes out Wednesday mornings.

Yeah. And it’s really good. And the book will be the current edition? I know you said you updated it, but the one that I have is 74 pages. It’s a simple read and it’s very informative. The problem with this book has, it made me ask a lot more questions, like I had no idea that I could do all of that.

Exactly, but it’s good. But if you do those things, you save money and you could, whether you put that money back into your business, you put it into your savings account, whatever it is, another vacation, it’s more of your money in the government is saying you can do these things, so why not do them. Look at Donald Trump, look at all these big wealthy billionaires. They have whole teams that take care of this stuff. So why shouldn’t you have somebody doing it for you?

Absolutely. So one question that I have, and you and I haven’t ever talked about this before, so I don’t even know if this is in your realm of expertise, but a friend of mine that was a coach several years ago, he talked about when he had a business 15 years ago, he would have a different entity that would own vehicles and then lease it to his HVAC company. Is that a thing? Is that doable or do you have to be like really big before you start doing that?

Depends on the size of your business. It’s typically done really for asset protection purposes. So you have to kind of look at does it make sense for the extra work that you’re going to have to do to do that, but if you’re a big enough business it definitely makes sense.

So that’s more asset protection than it is write off.

Yeah, it’s more asset protection. I mean there might be some specific planning you might do with that, but it’s more of a way to, god forbid something happens. The business doesn’t really have that much in the way of assets.

That makes sense. Yeah, because that colleague of mine had a technician that fell through a ceiling and passed away, unfortunately. And they went from 20 trucks down to two. I mean, we never know if something like that is going to happen.

Exactly, and  obviously if you won’t take the extra time and spend the money to do it, yeah, it’s definitely going to be helpful. God forbid that horrible thing happens to you.

Absolutely.  Well thank you for spending a little bit of time. I knew that people are going to have a lot of questions because anything to do with taxes is kind of scary for a lot of people. So hopefully they’ll reach out to you and if anybody has any other questions they can reach out to me and I’ll definitely put them in contact with you.

Sure, you can call us.  The office number is 516-869-4051. They can call, shoot us an email. Definitely go to the website and get a copy of the book. It’ll save you money.

Perfect. Thank you so much. If anybody has any questions and they don’t want to reach out to you personally and I’ll call you, I’ll be a mediator between.

Listen to the full podcast here!

Get your free copy of my book here!