Year End Tax Tips for Small Businesses Part 2 | Ep 056

🎙️ Tune in to the latest episode of The Business Project Podcast, where we share essential tax tips for businesses! In the previous episode, they covered five crucial things to prepare for tax season.

In this episode we dive into more tips, including:

Retirement planning for businesses

The importance of annual board meetings

Deducting mileage and home office expenses

And the significance of documentation!

Don't miss out on these actionable strategies to navigate the complexities of taxes and ensure your business's financial success. Subscribe now and stay ahead of the game with The Business Project Podcast! 💼🎉

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-Kacie Bryant and John Crespo

TheBusinessProjectPodcast.com

Transcript

Kacie: And before we get into your next five, if you missed it last episode, we went, we went over five important things for tax season for businesses to get you prepared. And we're going to do five more today. But before we get into that, we have a really exciting announcement, 

John: man. I love this one. 

Kacie: This is good.

If you were listening on Apple podcasts, Spotify, you already probably heard this in the, in the intro. But those of you that are watching on YouTube. This is, this is really great. We're, we're pumped. We're doing, we're going to go live. We're going to do live podcasts.

The Business Project Podcast. Business can be complicated. We break it down so regular people 

John: like us can understand and find success. I'm John Crespo, accountant and consultant. 

Kacie: I'm Casey Bryant, marketer and event planner. If you run a business or want to run a business 

John: Welcome to the show.

We're 

Kacie: back. What's up, guys? How you doing today? Yeah, yeah. Last week was so boring, we got another boring week for you this week. Yeah, 

John: we keep you sleeping. You can watch this while you're eating your turkey. Yes. Right? And just, you know, you get the itis, it'll help you go to sleep. But then you'll dream about taxes.

Kacie: Dream about it. Even though this is boring, this is really, really important stuff. Hopefully that can help you guys out. And before we get into your next five, If you missed it, last episode, we went, we went over five important things for tax season for businesses to get you prepared. And we're going to do five more today, but before we get into that, we have a really exciting announcement, man.

John: I love this one. This is good. 

Kacie: If you were listening on Apple podcasts, Spotify, you already probably heard this in the, in the intro, but those of you that are watching on YouTube, this is, this is really great. We're we're pumped. We're doing. We're going to go live. We're going to do live podcasts. Wow. Yeah, instead of pre recorded.

And the main reason What is that going to interact. So if you guys have questions There you go. That's why we're doing this anyway. We're like, we're doing this to help people with their businesses. I love it. And so that's the whole, that's the whole purpose. And there's tools out there to be able to do it live.

So starting January 5th, which I think is the first Friday, Of January. 

John: So we're bringing in 24 live. Live. Live at Times Square. 

Kacie: Yeah, recorded before a live online audience. 

John: I'm excited to interact with y'all. I hope you come with some good questions. Cause it's gonna, I hope you challenge us with your questions.

Cause that's what it's all about. You know, let's get that dialogue going. That'll make it fun. Yep, this is 

Kacie: all about you guys. That's what it's for. Hey. 

John: I'm ready. I hope you're ready. I'm ready. Let's do it. January 24, 2024 on the 5th. 

Kacie: We're going live. We're going live. Yeah. We'll have more information for you guys coming up.

So 

John: awesome. Yeah. Get ready. All right. Let's get into taxes. Now we're back to the boring stuff. You ready? Get your pillow out. Because you're gonna, you know, you're gonna dream about taxes, and it might even be a nightmare. 

Kacie: Well, not now, because they got plenty of time to get it prepared. That's true. Yeah, we're making your taxes 

John: not a nightmare.

Yeah, if you listen to this episode before the season, well, before January, right, then you're good. If you listen to this episode after January, then you're gonna prepare for the following year. Yes, because they'll help you next year. Yeah, the year behind you is already done, deal with the headache, but it'll help you prepare for that.

The following year because these strategies you can use every year. Yeah 

Kacie: It can always get get fixed guys. We all make mistakes. Yeah, I mean our Electrical company was in business for like five years and made a made some pretty big boo boos one year But you know what dug down that's what my husband has an electrical company.

Just dug down deep and We just kept on head down kept on rolling. It could have killed us Yeah could have killed the business but just kept on rolling so y'all can do that, too That's part of running a business. It's not always rainbows and 

John: butterflies. Some of the best businesses have came to the, have come to the brink of failure hundreds of times in their journey, but now they're multi billion, multi million, multi trillion dollar businesses.

Um, if you ask any, any founder, they're like, man, I could have given up a thousand times, but you, you know, you do that, then why are you in business? 

Kacie: It's not easy 

John: guys. And then now that you're in business, why not make sure that you're strategizing properly to keep the business going smoothly and keep Uncle Sam off your 

Kacie: back.

And taxes are something that every business needs to know whether you like it or not. Exactly. 

John: Yeah. You gotta come pay the tax man. So what do you got 

Kacie: for us today? 

John: All right, so last week we hit five right that were pretty good like preparational stuff foundational stuff And we had over the bookkeeping we hit or the financial reports.

We hit your structure and self employment Tax information and also the lane went to delay, right? So this week we're gonna continue the conversation and we're saying, you know I have a lot of money left over from my business at the end of the year What am I gonna do? So I don't have to pay so many so much in taxes.

Okay Did you know that a business can do retirement planning? No, I did not know that Yeah, did you know a business can actually invest in their retirement? 

Kacie: Like the business's retirement, like the business is like, okay, it's, we've been in this business for 65 years. It's time to hang, hang it up and retire like that.

John: Well, not the business itself, but it can, it can benefit the people. Okay. Right. But it's a, it's a, it's a write off for the business. Okay. Right? So the business can help their people for, uh, in retirement, um, while taking advantage of tax benefits at the same time. 

Kacie: So like setting up a 401k for your employees?

John: Yes. Okay. Yep. So that's a solo 401k. So now again, it's your business structure. Right. How is your business structure determines what you can do, right? So you definitely want to speak to your CPA or you want to speak to your financial advisor. Some of them are well versed on the business side of things.

If you don't have a financial advisor, that's not well versed on the business side. Find one. Yeah. Because you want them to work together with your CPA, your accountant. You want them to work together to, to make sure, you know, you got a good strategy going on for your business. 

Kacie: This sounds like it's investing in your team.

It is. 

John: Yeah. Yep, and yourself. So if you have, if you don't have a team, you can still create an investment account, a business investment account for yourself. For yourself. 

Kacie: Interesting. Okay. 

John: So there's a set by array. There's a solo 401k. There's a defined benefit pension plan, which is which is a pretty cool deal And I'm not gonna get into the details of those things because it will take forever to talk about it That would be a 

Kacie: whole nother podcast.

A whole nother podcast. A whole nother month of podcasts and you guys will be definitely sleeping. No, 

John: we should invite somebody over professional at that. Maybe This is my world, I know it's boring, but 

Kacie: we'll do a course on it in 

John: the business project. Oh, that's a good idea. Yeah. Yeah. We'll do a video on that.

Throw a little 

Kacie: video on there. Yeah. That way when, if you fall asleep, you can just rewind it and watch it again. Yeah. Yeah. 

John: Yeah. Hey, it's good to know. Right. You want to save some money. There's ways to do it. That's not buying an 80, 000 vehicle. Yeah. Right. That your business doesn't need. Invest in yourself, invest in your retirement.

So, um, look into S uh, SEP IRAs, look into solo 401ks, defined benefit pension plans. Um, that's just to name a few. There's so many other things. There's a health savings account, um, which I think is an amazing investment option out there. But there's so many things that, um, you can do as a business where. If you know you're going to have money left over, why not invest it in your people instead of giving it to Uncle Sam?

Yep, 

Kacie: I love it. 

John: Right? Yeah. So that's the next tip. That's the tip for today. The first one we're starting out with. The second one is, uh, very important. I don't think it's necessarily a tax tip, but it keeps you, um, legit. Okay. Annual board meeting. 

Kacie: Oh, annual board meeting. Yes. 

John: Yeah. How many businesses are either an LLC or a corporation that have never had an annual board meeting?

Oh, yeah. And 

Kacie: you can get in a lot of trouble for not doing that, can't you? Yeah. Like lose your business. That's part of, that's, there's a couple stipulations if you have an LLC or a corporation and one of them is have an annual board meeting. Yep. 

John: Yep. And it's not just that annual report that you have to file with the state, right?

That's not your annual board meeting. That's just telling the state that you're still in business. You actually have to take notes, meeting minutes, discussing what you did in the business, what time it started, what time it ended, you know, that information every year you should have one. Yeah. There's something called the corporate veil, right?

So let's say your business is caught in litigation and you're trying to protect yourself from that litigation. If they see any crack in that corporate veil. That protection that you have from your business to your personal is gone. 

Kacie: And they can attack you personally. They can attack you personally.

Which is one of the reasons that you have a corporation or an LLC is so that it protects your personal 

John: property. That's right. You want to have that business personal separation. Make sure you have everything. Make sure you follow the right steps to keep that protection and intact. Otherwise, you're setting yourself up for litigation Personally, don't do that.

Yeah, so we're I threw that in because this is planning, right? Mm hmm, and not only do you want to do the financial tax planning, but you want to make sure your entity structure is solid, too So just threw another tip in there for you All right You ready for this one? This one's really boring. Maybe Did you know that sole proprietors, right?

And single member LLCs, you can deduct mileage and home office deduct. You get those, the mileage and the home office deduction right on the business tax return, right? You can go in there and you can claim, I use 30 percent of my home for my business and you get to deduct. That, that amount of money from your taxes, right?

And every mile that you travel that's business related, you can deduct. But you have to keep 

Kacie: a good log, don't you? You can't just say, Oh, I estimated 300 miles last year. You have to actually say, I went from here to here, and this is many miles. I went from here to here, right? 

John: Yep. Yeah. That's actually the next, the next tip.

Document, document, document. Yeah. Right? So if you're going to claim a deduction for something, you got to have proof that it's a legitimate business deduction. Right. So as a sole proprietor and as an LLC, you can claim your mileage. You can claim your home office on the tax return on the 1040 or the schedule C.

Um, but as a, um, multi member LLC, which is a partnership or a S corporation or C corporation, you have to have what's called an accountable plan. So in essence, it's, you can't D because you can't claim a home office deduction or mileage deduction on your taxes. You have to get reimbursed by the business, right, for those deductions.

So, in that sense, the business is going to pay you tax free for those deductions. So, that won't count as income to you personally, um, but the business can deduct it from their expenses. So, you're actually getting that deduction, but you have to have an accountable plan in order to do that. 

Kacie: Gotcha. Yeah. So, what's an accountable plan?

John: An accountable plan is basically an expense report. Right? You're, you're, if, if you ever worked for, um, like a corporate company, whenever you travel or, and whenever you have to drive somewhere, they expect you to write a report saying, Hey, I traveled here, uh, spent this much in gas, blah, blah, blah, boom. And then you submit it to the company and they will reimburse you that money.

Oh, gotcha. Okay. That's an accountable 

Kacie: plan. Yeah. Like a receipt 

John: almost. Yep. Yeah. You provide all that information and you get, um, You'll get the money reimbursed to you, and the business deducts it as an expense. 

Kacie: Cool. So it can be done either way. It's just different. It's done different. Whether you're a business or depending on your entity.

Depending 

John: on your entity. Everything depends on the entity. Yeah. Okay. So, um. Good tip. Yeah. Accountable plan. Definitely. And then we were talking about, um, document, document, document. Mm hmm. So. What if you're trying to claim a deduction for anything like that make sure you're tracking your mileage So get yourself a mileage tracker, right?

Mile IQ is a popular one out there. They 

Kacie: make it really easy now. Oh, yeah Yeah, 

John: you just got to remember to turn that sucker on when you're driving You know for business or keep it always on because it asks you if it's business or personal Yeah, 

just 

Kacie: keep it on you can also do it manually and keep a notebook in your car and just hey This is my mileage when I started this is my mileage when I got back and this is where I 

John: went I've seen some people take a picture of the odometer.

Mm hmm. 

Kacie: Oh, goodness. 

John: At the beginning of the year, and they take a picture at the end of the year, and then they're like, alright, 60 percent of that is business related. 

Kacie: Can you do that? 

John: You're, you're, you're towing the line there. Pushing it a little bit there. Yeah, you can, cause you can kind of like, uh, um, what is it, estimate on a monthly basis what you've traveled.

Um. You know, but you, you want to document everything. You don't want to get in 

Kacie: trouble. It's better if you just do 

John: it the right way. When it comes to the IRS, you want proof. Yeah. If they ever decided to come and, and audit you, you want to pull out a whole thing of, of receipts and say, here you go. Yeah.

Here's my receipts. Here's my proof. Don't say I estimated because they were like, okay, I estimate you as this extra. Yes, 

Kacie: exactly. They don't take the estimation seriously. 

John: No, no, no, no. So keep that in mind. Um, and then There's some creaking. 

Kacie: Yeah, we got creaking going on in the office. We have a ghost. We got the ghost.

After Halloween, a ghost stayed here. Yeah. 

John: Yeah. I do. I'm scared. You hear that? You hear that? You probably don't hear it. No. Here's a good one. Yes. This is the final tip for today. Okay. Hire your children. 

Kacie: Oh, we talked about this the other day. This is a good tip. 

John: Yeah. Yeah. If you have children that are, uh, 16 and younger, because it's 16 and younger.

Okay. You can hire them to work for your business and it's a tax deduction for you, for the business, because you don't pay any income tax on that, and they don't pay any income tax. So you're saving. Income tax on both ends and as a deduction, it's a deduction for the business. That's 

Kacie: great. Yeah. Hire your children.

Hire your children. And if you don't have children, have children, just so that you can hire them and get a, I'm just kidding. 

John: Go ahead. I'm just kidding. Go ahead and just create that, uh, that work, what is it? The workforce? Yeah. Hey, you gotta do what you gotta do for those tax breaks. You know what's funny?

What? Is um, me growing up, right? Um, I didn't, we didn't grow up with a lot of money, right? And so a lot of people around us didn't have a lot of money either. So everyone was trying to scheme on how they can get the biggest tax refund at the end of the year. And I was like, well, the government will give you 500 per child up to a certain amount of money.

They're like, all right, well, you know, can I claim your kid? Can I claim your kid? Because I don't have, they started spreading around kids. I, it wasn't me. I was just saying, back in the day, people would share their children for tax deductions. 

Oh, 

Kacie: goodness. That's crazy. Well, you know. 

John: Wow. That's the way it was.

Yeah. It's crazy. But I hope you take advantage of these tips. Yeah. These were 10 good ones. Um, and there's plenty more. So find a good, solid, um, person in your area or reach out to us and we'll be able to provide resources. But find somebody you can partner with to help you prepare. For the tax season because the last thing you want to do is be surprised that you, you owe 20, 000, 30, 000 to, to Uncle Sam when you could have done some stuff throughout the year to, to make, to mitigate that.

Yeah. 

Kacie: Yep. Important stuff. Yeah. And just like any other aspect of your business, if you're not good with computers or graphics or branding, like you partner with somebody that can do that. I think that's something that we all, especially getting into business, we think that we have to be an expert in everything.

We have to know all the taxes and how to, all the business license stuff and the insurance stuff and the branding stuff and all of this, but that's, that's really not true. I think the most successful businesses are the ones that. Partner with people that are experts in all parts of 

John: your industry.

Exactly. It's a team effort. There's no one, I don't know any business owner that did everything on their own. No. You just had a good team. Learn how to build that team. Yeah, build a team. Well, hopefully that helps. Yeah, cool. You ready? Ready. That's it for the tax tips. So if you were sleeping through this I feel bad for you.

But we'll see you next 

Kacie: week. See you next week. We got another good one for you next week. All right. 

John: Take care. Bye. Bye.