Welcome to the “Delivering Wow” Dental podcast, Episode 56.

Hi guys and welcome to another episode of the “Delivering Wow” Dental podcast. I’m your host, Dr. Anissa Holmes, and I’m so thrilled to have you here today on another episode. So today we are actually going to be talking all about how you can keep more of what you earn, which is keeping more profits by having tax reduction strategies. And I’m really excited to have Craig Cody on the line today who is a Tax Strategist and a Tax Coach.

Okay guys, on with the episode. So today I’m actually going to be interviewing Craig Cody, and he’s a Certified Tax Coach, Certified Public Accountant, business owner, and former New York City police officer with 17 years experience on the force. So in addition to being a Certified Public Accountant for the past 15 years, he’s also a Certified Tax Coach. Okay. And so as a Certified Tax Coach, Craig belongs to a select group of tax practitioners throughout the country, in the US of course, who undergo extensive training and continuing education on various tax planning strategies and strategies to become, as well as to remain, certified. With this organization, Craig has co authored an Amazon best seller book, “Secrets of a Tax Free Life.” And I’m really excited to have Craig. So Craig, welcome to the show. What is going on?

Well, thank you so much for having me. I’m so psyched.

I’m really happy. So, you know, lots of dentists, you know, focus a lot on–on production and on growing their practices–but a lot of people really don’t understand the importance of being able to keep the money that you make. And so I’m really excited to have you on. I know you’re a Certified Tax Coach. I actually have a Tax Coach, um, as well. Lots of dentists don’t really even understand what Tax Coaches are, but I would love for you, before we even get started, to tell us a little bit about the journey that has led you to where you are today.

Oh, it was a fun journey. It’s a second career for me. So I’m really, really lucky. I spent 17 years in the police department. I retired as a lieutenant. I went back to school while I was still working. I got my accounting degree. I retired and went to work for a firm. I really was into estate planning and back then you needed to do estate planning if you a married couple worth more than $2,000,000. You needed estate planning. And then the rules changed, then it was really $10,000,000–maybe really close to 15,000,000 before you needed some estate planning and that’s kind of really what I like doing. So we started to review the estate plans that we had done, and we realized that they actually also had significant income tax savings, which led me to the group I’m part of, which is basically helping business owners keep more of what they make.

Good stuff. So how do you help your clients achieve their goals?

Well, we kind of–first thing we typically do is, we’ll meet with a client, whether it’s over Skype, you know, with the Internet, you can talk to people all over the world. We’ll have a conversation with the potential client. We’ll tell them–the way we work is–we’ll take your personal returns or business returns, we’ll analyze them. We’ll look for, missed opportunities– mistakes. We look at things differently than your typical typical accountant does. The typical accountant is very good, okay?  Puts the right numbers in the right boxes and that’s what he’s really trained to do. We look at it from a position of how do we help our client keep more of what he’s making? And we do this analysis, and we come up with, we say x amount of dollars, we found–$50,000 of missed deductions and opportunities. This is going to save you $15,000-$20,000, depending on what the number is. Let’s do a tax plan.

Why is it important for dentists to take tax planning seriously? And how does having a tax plan lead to financial success?

Keeping more of what you make allows you to put more money into–whether it’s your bank account, your investment account, in your retirement account, whatever it is. So rather than needlessly giving extra money to the government, you get to keep that and you get to do with it what you want.

So typically we hold—we love our job, I love my job. But it’s also a means to an end for our family, too. For the future, for retirement and reaching that future answer, it gives you a lot more options.

Okay. So you a little bit earlier about, having different roles of accountants. And I mean let’s face it, if we look at dentists, even there, there are dentists who are–do general dentistry and there are people that are specialized in specific areas to be able to achieve people’s specific goals. For example, dental implants, or people who specialize in dentures, who do cosmetic dentistry. And I think the same thing really goes for accountants as well and being able to have an accountant that focuses on tax planning, and then having a Coach on top of it to help you to be able to know which questions to ask the accountant, is so valuable. Right? So I love to just talk a little bit about that, because a lot of people think that, “Oh, I have an accountant and I’m good.” Like the accountant is going to tell me what I can do to save taxes, but that’s not exactly true, is it?

That’s typically correct. And I like to ask people, when was the last time your accountant came to you with an idea to save you some taxes? And invariably, it’s–it hasn’t happened because like you said, accountants are typically reactive. They’re looking in a rear view mirror, the recording history, whereas we’re trying to make history.

So a lot of people really don’t understand the role of a tax coach. So can you share what a tax coach does and the benefits of hiring a tax coach?

So a tax coach looks at things from the viewpoint of “What are you doing now and how can we structure that legally so you could take advantage of various things in the tax code. Just the same way that Warren Buffet does, just the same way that Donald Trump does without having a multitude of attorneys and tax advisors on hand. So we use a medical expense reimbursement plans. We use accountability plans, we use late election filings. Things that we do on a regular basis that we know you are allowed to do to lower somebody’s tax burden.

So what is proactive tax planning, and how can it minimize your taxes?

So let’s just say–you know this–it’s funny, we’re talking about a group of dentists here, but you know, a common thing we see with people with children is your braces. Braces are expensive.  At least–I’m in New York, braces are expensive and we show clients how to make the cost of those braces tax deductible. So if we’re looking at, $6,000 a child, and you have two kids, over maybe three or four years that you’re paying for braces, we could turn that $12,000 into tax deductible money. Whereas a typical accountant would say, okay, well that’s a Schedule A medical deduction, but it doesn’t exceed the 10 percent of your adjusted gross income. So you get no benefit of it. We want to get a benefit. So we look at ways where you can have things structured to get that benefit. And these are all true time tested, legal strategies.

So let’s talk about kids a little bit because I know that there are ways that you can pay your kids through the business, and also be able to reduce your taxable income as well. So can you tell us a little bit more about that?

Yeah, let’s, let’s think of a sole proprietor–keep it real simple. Well maybe he’s a dentist, he’s a new dentist just starting out and his kids maybe go to private school and it’s, $500 a month to send this kid to a private school. So the dentist can either pay it out of his own pocket, or he can have his child perform certain services for his business. And these services will have to be documented, and he pays the child that $500 a month. It goes into the child’s bank account. And then the school drafts the child’s account every month. So now we made a nondeductible expense, deductible and we did it perfectly legally.

So what are the limits? Are–how much can people actually take advantage of tax free by employing their kids?

Well, it has to be reasonable compensation, so depending on what your child is doing for you. So if he’s coming in and he’s licking envelopes and stuffing envelopes for you on Saturday, and you’re paying them a thousand dollars a day, I would say that’s not reasonable compensation. So it has to be something that’s reasonable. So what would you pay somebody else to do this?

Once you reach that tax free threshold, are you able to continue to pay your kids above that threshold? I believe the threshold is like $6,400 per child or something like that, right?

Once you get up to that $6,400 number, that typically is enough to do what you need to do, whether it’s to pay for his hockey practice and stuff like that. Whatever that child needs–summer camp. You find what it is that you’re paying for and you figure out a way to legally make it something that you can pay him to do and then use that money to pay for his activities.

So what is the biggest mistake that you see small business owners making regarding taxes?

By far is the wrong entity choice. So operating as an LLC when maybe you should be an S Corp or operating as an S corporation or a corporation when you should really be an LLC. It really depends on a lot of facts and circumstances. And typically that choice is made because somebody went to their attorney and said, “I’m starting a dental practice,” and the attorney says, “Okay, form an LLC, this way we don’t have to do another tax return and it won’t cost you a lot of money.” And now you’re filing as a single member LLC and every dollar you make is subject to self employment tax. And that might not be the most advantageous way to do it. And sometimes we have clients that come to us after the fact and way after the fact, and there are late elections we were able to make that can save them significant dollars. To have that LLC taxes and this Corporation, change some type of structure that they already have.

How can business owners use their CPA to their advantage?

They need to communicate with their CPA. If you don’t communicate, you’re not going to get the knowledge that that person has. Now that person has to be willing to communicate with you, also. Many years ago, an old time accountant said to me, “You know, your doctor doesn’t call you up and say, are you sick today?” You need to go to your doctor and tell him you’re sick. So if you don’t communicate with your clients or communicate with your accountant, he’s not going to know that. And there are, unfortunately, there are a lot of accountants that don’t look at things the way we look at things and they are looking at really just putting the correct numbers in the correct boxes and they want to keep their fees as low as they possibly can because they’re worried that their client is going to leave them. Whereas we look at, you know, our services as a very value based service. So we may charge you a little bit more than you’re currently paying, but the value is tremendous.

So how often should we be communicating with our CPAS?

I would say at a minimum you want to be communicating on a monthly basis, but rather whether it’s in person, email, um, you know, we always have at least quarterly meetings with our clients. Okay. Some of them we have monthly meetings, some of them we talked to every week. It really depends on what their situation is and they always know they can reach out to us and we’ll get back to them and figure out what it is, whatever it is that they’re trying to figure out.

So say if I was looking to get a new accountant for my dental practice, which specific questions should I ask CPAs in the pre interview process to make sure that they are knowledgeable about, you know, tax savings and the tax code?

I would ask them what do you consider the tax planning to be. And you know, what is the first thing you do when you sit down with a new potential client. And a lot of accountants unfortunately feel, feel that tax planning is in late December. Sitting down and figuring out how much money you made and saying, okay, you need to make this estimated payment by January fifteenth. They consider that tax planning. Whereas that’s basically figuring out how much money you owe and saying, okay, you need to make this payment. Whereas somebody that looks at tax planning is going to be looking at the big picture, seeing what’s going on and how to, you know, develop strategies or implement strategies that are going to save you money.

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