Dan Godwin – CPA and Tax Expert- advice for business owners and entrepreneurs.

When and who should be concerned about tax deductions?

Because your number one job is to keep my husband out of jail.

What are the most common deductions that people miss or

don't think of? Can you help us understand from

an accounting perspective the difference between a sole

proprietorship, an LLC, an S Corp, or AC Corp?

Hey there and welcome to From the Ground Up Show, the show

where we inspire and encourage the next generation of free

thinking leaders by telling the stories of those that have been

there, done that, and are still getting it done.

Building a life that they love with their hearts, their hands

and their hustle. I'm your host Eric Loden.

If you guys are enjoying the content, please help us out.

Like, share, follow, subscribe, all the things.

We're on all major podcast platforms, YouTube and on social

media. If you guys could leave us a

five star review, that would be great.

That really helps move us up in the algorithms.

And don't forget to click that auto download button to make

sure that you guys download every episode.

Each week. I am rerecording this intro

because we had some technical difficulties and the audio for

this interview got goofed up. Let me apologize in advance, we

fixed these technical issues so I promise the audio will be

better next week. Please come check us out again

next week. But the content here was too

good to ignore. I've done my best to clean up

the audio and we are going to re record the intro and some of the

things that we can. So please stick with us as we

make the best of a tough situation and make sure you come

back next week. This show is a little bit

different. Typically, we highlight

individuals that have forgone the traditional white collar

career track of college directly into a job.

We focus on blue collar entrepreneurs and those that

have just blazed their own trail.

But today we are going to dive into the depths of a white

collar career track. We're going to interview ACPA.

And the idea here is that we should be able to get some

advice very applicable to our listeners that are in the blue

collar trades, that are entrepreneurs doing their own

thing and try to figure this out.

So I am really excited to have Dan Godwin joining us.

Dan is a tax specialist and CPA living and working in Sheridan,

WY. He grew up in a blue collar

family and now serves many of them in his capacity as ACPA.

Dan is a proud father of two children, a grandfather to a

beautiful 3 year old girl. He is now a partner of Mohat

Johnson and Godwin and has been handling my taxes and my

business dealings for many years.

I can personally attest to his knowledge and experience.

We are truly honored to have him on the show.

Dan, thanks for joining us. Appreciate that to be gone.

Awesome. Well, the first thing we do

every show is we want to learn a little bit about you.

So can you tell us a little bit about how you grew up and where

you come? From well I pretty much grew up

and shared in my whole life. I think I moved.

I was born in Illinois that I moved out to shared when I was

about 3 years old and have lived there ever since.

I'm had a short sent away for college and did some work in

Casper right out of college and then is about back 2004 and back

to Sheridan. It had been in there since.

OK, I know you mentioned that you grew up in a blue collar

family. Can you tell us a little bit

about your home growing up? What was life like as a kid?

My dad, my early years, My dad only a commercial DuPont paint

store. He liked to paint parties and

old cars and things like that. So he sold the detail commercial

paint and this the painting on the side and that you know, my

mom similar worked in the auto parts store, worked at the car

requested in the chairman for many years.

She was more of a bookkeeping hand that, you know, worked from

that to the auto parts stores and things like that.

You share your dad's passion for Harley's and sports cars?

No, I never did Harley's. The motorcycles scared me to

death. Well, I know as ACPA you have

some secondary education. Can you tell us a little bit

about your education and what it takes to become ACPA?

Well, the education track took me a lot of different paths.

I think my parents thought I was going to be a doctor by the time

I got done, but ended up being an accountant.

I left high school, but I, my number one goal was just to go

find a place to go play football.

You know, that was my big fashion back there when I was

18. And you find out right away that

it's not for everybody. You know, your high school

sports are probably the best times of your lives.

And so I, I sat around for a couple of years.

So I went out to Minnesota and played and then I went back to

talent and played and ended up just decided I wanted to go to

college. And so ended up at the

University of Minnesota for a year.

And then it ended up transferred back up to the University of

Wyoming and ended up getting a degree there and like master's

degree in tax at the University of Wyoming.

OK, so how do you go from college to a partner at Mohat,

Johnson and Godwin? What was your career track like?

Well, you know, college, college gives you the, you know, the

basic background, kind of some of the tools you need to

understand what you're going to be working with.

But it, it seems like the, the partnership track in an

accounting world was a little bit longer than maybe you say

the legal world. There's a lot to learn.

You know, the, the international code is a vast so to feel

comfortable enough to sit down and you know, have clients, you

know, have for you with questions and being able to

think on your feet and try to answer those questions, you need

some experience. And so, you know, I started

working in Casper in 2000. I started out in auditing and I

knew right away it wasn't for me, the firm, my work that was

auditing and tax and I really enjoyed the tax words.

So I shifted over to another firm, Casper, and did it all

tax. And then when I got up to go

ahead, Johnson got and I mean, it was, it was a different firm

name at the time, but it was about 2009, January of 2009 when

they asked you to become partner.

So it was, it was a good 8-9 years of just kind of driving

away and, you know, hoping someday you got that

opportunity. And so, yeah, I've been thankful

that I've had that, you know, the previous partners, you know,

John Perdeers and all those, everyone has to give me that

opportunity and I appreciate that.

Yeah, It sounds like an important part of that career

track is picking the right partners to go to work for early

on. Did you know that coming in, was

that done strategically? Well, coming from Sheridan and

knowing that I wanted to move back, you know, it's a small

community. It's really some of the Buffalo,

right. And so you start asking around

and like, you know, where where's a good place to go and,

you know, we'll adjust and got them.

The firm at the time was the name that kept coming up.

And so that's where I applied and that's where I've been ever

since. But yeah, you want to make sure

you know, any business you're going into business in

partnership with the right people you know, makes it you

want to try to make work a little bit fun.

Yeah. That's great.

What were some major turning points or maybe some pentacles

in your career that you remember?

Turning points well, auditing would be the obvious 1.

You know, I, I started interning for a firm and I, I believe on

the on like a Thursday and I drive to random school districts

across the state of Wyoming and audit a school district for

three or four days at a time. And I just knew that it wasn't

for me. So that was probably the first

big period change for me. And I mean, I was still

obviously doing accounting, but auditing in tax for two

different worlds. And so that was the big career

change for me within the profession.

Yeah. For those of us that aren't in

the tax world, can you help us understand maybe the differences

of what kind of things you do in the tax world versus auditing?

Well, the auditing is I always laugh that we the school

district over in Wyoming, Wyoming Indian.

I just remember you show up in the, the district manager rolls

in with the card and he's just got jet files just stacked up on

top of it. He just drops them off in a room

and you're going through just testing transactions one after

another. It's just a lot of paperwork,

but you're testing for fraud and you're doing all these other

things, internal controls and you're getting them an assurance

that their financial statements are accurate.

In the tax world, you know, we're focused on let's try to

let's try to minimize our class tax liabilities.

You know, let's work with them on a plan to to do that.

You know, let's work with them on a plan to get set up for

retirement, you know, down the road.

And every tax return is a little different.

You know, you got you got a red climbing that client.

That's much different from a riffing client, right?

And so to me, it's there a lot of people tell me like your job

sounds boring. You do the same thing every day.

To me, there's intricacies between each client that are

different that kind of makes it a little more fun I guess, so to

speak. Well, I'm probably not cut out

to be an accountant either, but I sure know that auditing is

definitely not for me. Yeah.

That was tough. What was the most difficult

thing you have faced in your career?

Well, I, I was thinking about that and I think I probably have

to break that up. Like in your personal life.

And again, this isn't just for accountants.

This is anybody who wants to be self-employed and run a

business. Is, is finding a good work life

balanced? You know, a lot of times we do

this, we start out when we're young, you know, we're getting

married and we're having children and you're trying to

figure out, you know, how do I balance these things but still

be able to be successful and serve, serve your clients.

So that was probably that that was probably personally one of

the toughest things I, I worked for some guys Casper and this

guys name was Jack. And I just show up every morning

different taxis in 4:00 AM and I believe about 6:00 or 7:00 that

night and I show up in the next morning.

I have a safety note on my computer.

This said, where are you? You know, so I think the part of

it was kind of Jets, but at the same time he had a question and

I wasn't available. And so just learning to say, OK,

I've got to do a good job at the office, but the same time, you

know, my wife and children needed me at home to do so.

So yeah, that was tough. The professionally, it's just

you come back to college, you don't know anything, you know,

and that's, that might be a difference between, you know,

like if you're an electrician or you know, a good contractor, you

know what you're doing when you get started, you know, and

there's some different hurdles. But I come out to college and I

read the textbooks on tax and I understand what appreciation it

is or retirement accounts are and things like that.

But applying it to the real world and being able to

communicate that to your clients, that's, that's hard,

you know, because it's, it's daunting, It's adopting

challenge to better take what you've learned in college and

apply it to the real world. I can.

Imagine that in my own business education I actually studied

accounting quite a bit and I actually had enough accounting

credits. I could have sat for the CPA

exam when I graduated, but the first year I went to look at my

own taxes is like, oh man, I've studied all this stuff and I

don't know what I'm looking at. I don't know what to do.

And that's why I work with a professional like you.

When I first went to college, I thought it was going to be some

sort of a sports trainer, you know, and when I went to lure

me, I was like that. That's not for me.

And, and as it comes to take a business path and I started to

take some business classes and I took accounting and my, my wife

at the time, she had already taken the class.

I was lost. I was like, and I, I, we're

still good friends to this day. I tell her all the time, if you

help me get through accounting, that would be where I am today.

That's great. So an accountant's education

goes a lot further than just your schooling.

You have a lot to learn as you dive into the industry from an

accounting. Standpoint though, since then, I

think the biggest jump that I've had in my career was COVID, the

number of tax law changes that came out around starting in like

late 2019, two, 1020, you know, there was all the money that was

available and everybody was trying to get their fair share

that. But there's two payroll credits

or you know, whatever it was, it created a lot of burnout.

It's affected our industry, you know, with the accounting

world's very, very old, you know, the age, average age is

getting up there. So people are starting to

retire. I think we saw the drop off for

a while. We lost one of our partners

because he's like COVID was too much.

He's like, I can't do that the same.

So it created a lot of burnout. COVID was tough so.

Has that turmoil continued the last couple years or was it kind

of focused there in 2020-2021? Has it settled out or are things

still changing a lot? Yeah, we kind of, we kind of

joke because we still, we still, you know, people prior PPP loans

and employer retention credits. The IRS is just recently

starting to release some of those employer retention

credits, you know, four years later.

And so when we with these, our clients are bringing these

letters and we're like, you know, we, we don't want to hear

the word PPP anymore, just bring this back that PTSD type of a

situation. Yeah.

So, but it's, it's basically it's for the most part we're

kind of getting back to OK. Do you see some young blood

coming into the industry? Is that maybe a vacuum coming up

in the career space? It's yeah, it's tough right now,

attracting talented small towns, you know, like, like Buffalo,

like Sheridan. Sorry.

There's not a lot, there's not a lot of kids that are going into

into accounting. And I think part of it is, is

that, you know, being in public accounting, they hear that the

workers work in January through April and really that those tax

seasons are getting condensed. You know, the brokerage firms

don't send out there to the 90 nines until late February and

and then you got until April 15th file and they don't want to

work those hours. You know, maybe they can go do

it in private accounting or maybe they can go do something

on their own. You know, you go down to

university, Wyoming and try to recruit and there's just not a

lot of kids coming out that want to come back to a small town.

So it could be the hours that could be the pay.

Not exactly sure. I think that our industry as a

whole, you know, they, I think they make it too difficult with

the testing to try to obtain your CPA.

And so we've had to, we've had to kind of shift our focus on

who we're trying to attract, you know, take chances on maybe a

kid that focused on finance in college, but you know, I was

interested in trying tax. And so we've done that and we've

had some success doing that. And you know, we've found a few

young kids that are still strategy to get that CPA, but

it's it's been tough. And I think that's the case on a

lot of small businesses. You know, help is one of the

hardest things. That's what you hear from small

business owners across the board is finding help is hard and

finding qualified help is impossible.

So how do you manage the seasonality of your business?

I mean, is there a way to find some balance there or do you

just like take off November and December every year to get ready

for the chaos in the spring? How?

How do you manage that? We work hard, you know, you

know, a lot of a lot of taxpayers and clients tax season

stressful on them, you know, just want us to working a lot

and stressful on that because they don't like the word I

arrest. They don't like those blurters.

They just internally it just creates, you know, attention,

you know, angst. And it's still the people don't

want to get extended because they just want to get it over

with and put it behind them and they don't want to have to worry

about it. You know, we could extend your

tax return till October, but that's another six months of

worrying about it. So we're trying to get as much

done. But when I first got it in the

industry in 2000, you know, we worked hard, you know, through

April 15th and I felt like we did a 2-3 months break before

extension season kind of picked up.

It's not like that anymore. We're working, you know, working

here around push it hard to summers even.

I don't know if that's just because there's not as many

accounts we were taking on more work or I mean, just naturally

we're having to extend more and more clients because the tax

season itself between January and April was still condensed

and we just don't have the time to put that many tax returns,

you know, so I can. Attest to that on the client

side of things. I mean, my secretary, treasurer

and I plan on working New Year's Day every year because we try to

put together everything that we need to give to you so that we

can be the front of that line. And we aren't waiting wondering

when the KGB is going to show up wanting their money.

You don't like it This year, the Rs has already come out and said

because they always shut down here for a few weeks to do all

their updates with their computers and they said the

filings won't open until at least the first week of February

now. And so normally it might be the

second or third week of January. So that's just going to push it

back even further. It doesn't mean we can't get in

there and start working on things and ready to file and

things like that. But you know, the people out

there that pay attention to that news, they may not even think

about doing their taxes until later now when they hear that

type of stuff. So still get your stuff together

January 1st, January. First, your e-mail will start

ringing from me. What is something that you wish

you would have learned earlier? Oh, I think I, I think the

biggest thing for me is you learn how valuable communication

is. You know, that's not

necessarily. I wish I would have learned more

about taxes earlier. You know, you go from being a

young accountant to thinking about yourself as the partner.

And when you come in and you're so you're really focused on

still doing the tax part of it. But what you find out is not

that you're in charge of that business relationship with the

client. And so the communication with

the client is probably the most important thing.

And so, you know, you don't really have those opportunities

when you're young and they're just say this tax and this tax.

So that's probably the the biggest thing that I've had

known early on probably probably would have made my start of my

partnership position a little easier.

Yeah. So yeah, that's that.

I think that's that's. Something that applies to a lot

of industries, We see that in the trades.

There are some people that are excellent at what they do,

they're great Craftsman, but they have angry or disappointed

customers because they're just not great at communicating.

It is a totally different skill set than having the skill of

whatever your craft is and then being able to manage customers.

They're two totally different things and both affect the

customer. And you know, when I, I hear it,

you know, when you hear it talking to different people

like, you know, you, I called the contract directs and he

won't even call me back, you know, and we're the same way.

I mean, we get busy like you guys do.

I'm not saying I had a response time in 5 minutes or anything

like that. But but they, even if you're,

you know, hey, I'm, I'm going to get back to you, you know, just

give me some time. If you're calling back there to

you later, they, they still appreciate at least get a

response, you know, so I think that's good for, you know,

whether it's my industry or, you know, any other small business

is just just respond, you know, and and you know, if you don't

have time to do it, please call and tell me you don't have time

to do it because that'll help you down the road during, you

know, you're busy, busy right now, but during a slow time,

that person may call you back because you may be one of the

only contractors to call back, even if you couldn't help them

at that time, is there? Something that you've changed

your mind about significantly throughout your career, maybe

something where you had a a pretty set opinion and as you've

matured or grown or seen things, you change the way that you look

at that and your opinion has shifted.

Yeah. I've learned that when you, when

you were working in a small business, you're an owner,

partner, whatever, you wear a lot of hats.

I mean, and I think that's one of the things going into it, you

know, whether it's you're the, you're the main contact with

your clients, whether you're 1, doing the tax work, you know,

but then you have the HR, you know, you got to deal with, you

have an employee that leaves unexpectedly.

And then you got to figure out what we got to do, you know, how

we get the work done still, how we get that position filled.

You know, you got to care about the financial being of the firm,

you know, so which partners are responsible for that?

So any small business owners wearing a lot of a lot of asks.

And that to me was kind of a busy, like a minute beyond

partner. I'm just relying on the the

elders in the firm to take care of all that stuff for me, you

know, But eventually they transition that report to you

and then pretty soon, you know, you just, you got to delegate

the work, you know, because otherwise you just keep adding

more and more your plate and the next thing you're like, what am

I doing? And so, yeah, I would say that

the HR part of it is, is, is hard, you know, because you, I

mean, you want to, you want your staff to be successful too.

And you want them to be happy. You want them to.

It's not like you come to work to have fun, but you at least

want to have an enjoyable experience, you know?

Hey, they enjoy coming to work and so figuring out ways to do

that is not always easy, is there?

A major mistake that you wish you could have avoided.

Yeah, I can think of, I can think of 1 and, and being an

accountant and, you know, I sit and preach to my clients all the

time about use the resources that are available to you.

If you don't know what you're doing, go ask the professionals.

And I got into a business deal and I, I didn't think I needed

to have an attorney review, review the agreement.

I got burden on the deal. But that was 30 years ago.

And I learned my lesson. Yeah.

You just never know. Like when you're dealing with

contracts and stuff like that, you read it, it all sounds good.

It's not necessarily about what you're reading is it's about

what could be missing that you're not reading in a

contract. And I think that's probably the

hardest part for looking at contract is what's not in there.

And, and that's what attorneys are good at and you know, have

been trained to do. And so I would highly recommend

relying on your attorneys to help you in any type of business

transaction. That's some good advice.

Yeah. I'm always looking close at

contracts because the purpose of a contract is to try to have an

even deal that's fair to both sides.

But that's kind of impossible. And usually whoever produced the

contract, it's leaning a little bit to their side.

I agree. Yeah, absolutely awesome.

Well, we got to learn a little bit about you and your

background and what it takes to become ACPA.

Maybe the last question on kind of that line of questioning for

a young person out there looking for a career.

Do you? Think there's a future trying to

become ACPA, Is that still a good quality career track?

And maybe along with that, if you could go back and do it all

over again, would you? I would do it again, like I said

earlier, you know, from the outside looking at people are

like, I don't know, an account looks kind of boring.

That didn't work. And I just look at it a little

bit differently. Each one of my clients is

different. I enjoy the interactions with

clients. I enjoy sitting, not meeting

with them, you know, having conversations with them.

It's fun when you pick up a young client that started a new

business and 15 years later they're still wicked, yet

they're doing, they're doing well, you know, so, so I enjoyed

that I, I would do it all over again.

There's a lot of opportunities in our profession, you know, to

be an auditor, to be attached preparer, you know, there's,

there's a lot of, like I said, the industry is getting older, a

lot of a lot of them are retiring and we need young

people to come in and start filling those spots.

So it's, I think the industry I need to look in the mirror and

figure out how to make it more attractive.

And it it seems like the the doctor test to have to take ACPA

exam at the end of the day, the CPA exam initially was the first

Test. Today I couldn't pass.

So why are we why are we making it so hard for people to get

into the industry? You know what I mean?

The test is a lot of it's just trying to trick you on the

questions and things like that. And it's like you have the

resources to figure out the answers once you get your CPA,

you know, you know, the clients are trying to tricky, they want

the right answer. Yeah, yeah.

So why? So why do we set it up that way?

You know, maybe back how many every years ago that's maybe

there was no profile when they're trying to limit to get

into it. But I think change his name for

sure. Good to hear.

Well, I really appreciate that you enjoy finding a young client

and sticking with them and that's what you've done for me.

I think it was maybe 8 or 9 years ago when we started

working together. When we first started, we had a

business doing about $2,000,000 a year.

And this year, we're going to break 10 million and you've just

kind of walked with us the whole way.

And actually just this week, we closed on the sale of our

business. My wife and I exited and are now

passing it on to the next generation of ownership.

And I think they're going to continue to use you as their CPA

as well. So we have really appreciated

that stability and growing with us and just helping us learn as

we have grown and matured our business.

You've been a pretty invaluable resource, so thank you.

Now that we've learned a little bit about you, we'll dive into

the meat of maybe the advice that our listeners are waiting

for and help us all get a little better prepared.

I think something that often gets misunderstood and maybe you

could clarify for us, what is the specific role of ACPA?

What sort of thing should the customer of ACPA expect And

maybe like you said, the key part of a contract is not what's

there, but what's missing. What are the things that people

think ACP as role are that really aren't?

Yeah. And still, yeah, you tested on a

couple different things there. You know, just the first part of

the question, the specific role, what do you need, You know, ACPA

firm can offer a lot of no, what's different types of

services, OK, So do you need bookkeeping or do you have it in

house to bookkeeper? So maybe that's part of the role

and then you know, just expands from there.

I mean, obviously you're there to get tax prep done, but do you

need your grand plan or do you guys get grasped on that, you

know, other transactions that are happening throughout the

year that you need advice on and how to structure that

transaction? And so the CPA rule should be

that they can fill in any gaps that you that you don't have.

Maybe you got an in house bookkeeper, but you just want

somebody to look at your books quarterly, you know, take a look

at them to see if the in house person is doing it.

You know, the way that they should be to help with the ear

and attached prep. That'll be the first part.

I mean, we can do it as much because this is what I tell my

new clients. I said we can do as much as a

little genius to if all you want to do is come in at the end of

the year and bring me your books and have me prepare your tax

refund, we can do that. You know, cost is obviously a

concern with and it should be right minimum, try to minimize

your costs as much as possible, but you know, get that help you

need. And you know, if you don't need

to be bookkeeping then and he just, and he just wants some tax

planning and tax prep, That's the role that they should play

for you. You know, if there's something

in the ability is that we we have to provide everything.

That's not, that shouldn't necessarily be the case.

And I know there's, there's, you know, there's firms out there,

that's their model. We do it all or we won't, you

know, we're not a good fit. And if that's the CPA firm's

role, that's not a good fit for your business, you know, so the

profit the next time, you know. But then the second part of the

question of misconceptions, I would say the first thing that

sometimes gets misconceived is clients look at it says the

financial advisor. While we do advise on your

finances, we're not stockbrokers, you know, we're

not we're not following the stock market.

We're not going to help you make decisions on what to take before

O1K do. And then the other side of that

is legal advice. People think that we can provide

legal advice and that's just something we can't we can't do

that. And sometimes it doesn't seem

like it's legal advice. It's like, hey, can you only get

set up with Secretary of State attorney and just set up with

Secretary of State or, you know, go online and do it yourself.

But we can't do that for you because it's considered

providing legal advice. And so I think people look at

that. It's like, oh, well, you know,

he's a tax accountant, so he should be able to help me with

some of this legal stuff. You know, we could.

Yeah. We can't.

We can't always do that. It sounds like that's probably a

conversation everyone needs to have with their accountant and

something that you've educated me on and, and that I see all

the time as I talk to other contractors and as they tell me

what they're doing, it's like, Oh my gosh, your tax strategy is

terrible. Like, well, that's what my

accountant told me to do. And I'm usually like, did your

accountant tell you to do that or did they tell you that you

could do that? You know, are, are you asking

good questions? And have you had that

conversation of are they advising you on what you should

do or are they telling you what legally you're allowed to do?

That seems like that's a line that often gets blurred.

And is that a conversation that people should make a point to

have? Yeah, I mean it.

I think it definitely can blur the lines and, you know, like we

pick up the plans and, you know, I'm not saying that anybody's

how they're giving that device on purpose, but you know, I have

ideas on how I think things should be done.

You know, that recently I had to pick up the client to add

another account doing stuff recommended that they just put

real estate in the seat course. And you know, for me, that's

just a general rule, something you never do.

You know, when he shows up with three seat courses, he's got

real estate in them. And it's like, OK, now what we

need to do is let's figure out how to, you know, just, you

know, correct this and move forward.

But if there's any question of, you know, who should be doing

what, you need to have that conversation with your account.

And that would be the small businesses, you know, worry

about getting out there. We're going to build a business.

We've got control costs, but you need to build a team around you,

you know, and so happen attorney that you can bounce questions

off of, you know, have been talking to your account.

I work closely with financial advisors and attorneys for a lot

of my clients, You know, they, they built the team and they'll

say, I don't really know the answer to this or whatever.

Can you call the attorney or can you call the financial advisor

and we start talking, you know, and, and that's how it should be

in my opinion. I love.

That you guys do that because yeah, the end of the year is

always crazy for us as business owners.

There's all kinds of stuff happening that's over my head.

And so the fact that you work with my financial advisor and I

just signed a letter saying that you guys are allowed to talk to

each other. You guys can just take care of

it and I don't have to be in the middle of screwing stuff up.

So another lesson that maybe I learned the hard way is I was

working with another CPA before I started working with you.

And, you know, every year I would ask, is there something

different I should be doing? And I thought I was asking the

question, you know, asking for some good advice on tax

strategy. And one year I came in

frustrated and was like, hey, how come you didn't tell me I

should have done this? And he said, you know, Eric, my

job is to file your taxes, not tell you what to do to avoid

them. And we were just kind of missing

each other and and that was a real wake up for call for me

that you have to ask the right questions to get good answers.

But I have a lot of new clients to come in and they, and, you

know, obviously there's some people are better at

understanding to ask, you know, they spend more time trying to

understand it. And then there's some people

that they're just like, I don't want anything to do with it.

I don't know anything about it. But trying to understand your

tax return is big. And I get a lot like if I get a

new client, there's not all the time, but a lot of times they'll

say, do you have the time to review my stuff accordingly?

Can we meet, you know, twice a year to go over my stuff?

And I think those are great questions to ask, You know, if

you're looking for a new account, a new account, that's

questions that you want to be asking.

I was like, are you going to by calling you, can you help me

with your tax? I think yes, you know, and if

they say they don't do that, you may want to go to the next

account and interview that account.

You know what I mean? So well, that.

Leads me right into my next question, it's how do you go

about finding or vetting A qualified accountant or maybe

even just finding the one that is the best fit for you?

So in my opinion, it comes down to a comfort level and a lot of

the times you're you're moving from one account to a new one.

Majority of the time. A lot of times people are just

starting a new business too. You know, it's like I've already

I was used to have AW2. I've always prepared.

I don't think I need an account. That's a good idea, but it, it

comes down to a comfort level and, and I wouldn't just pick

one unless, unless you have somebody that you trust that

says, you know, hey, I go to, you know, go get them a shot.

And if you're comfortable with that because your friend gave

you a good recommendation or whatever, that's fine.

But if you're out there and you're just randomly calling

accounts or looking at the society's website and looking

for accounts, I would probably try to go talk to two or three

of them and you know, and see who you've got to be comfortable

with. When I find this, I want to a

lawyer, I get two or three names.

I don't ever just say I just go to this one, you know, because I

want you to sit down with each one of them and which one feels

right to you. You can have a conversation with

them, be like, I don't know, something doesn't feel right,

whatever it is. And so I think that's the

biggest thing is just being feel uncomfortable with who you're

talking to and you know, do they feel like they're trustworthy?

Do they feel, you know, do they feel knowledgeable to you?

I think you know what we're talking about, you know, and

just kind of going from there. When they're doing those

interviews and trying to feel comfortable, are there some

specific questions that they could be or should be asking to

kind of get that feel of whether it's a good fit?

Yeah, I think you'd have an idea what services that that you

need, you know, go back to that conversation, you know, do you,

do you provide any bookkeeping services?

Do you provide that? A lot of times, if you can find

somebody that has the bookkeeping and the tax under

one roof, sometimes that's it because they just blow into each

other the bookkeeping and good books closed into the ear in tax

mining and tax Rep, you know, and it's not and I'll be at all

if they don't, but maybe because they recommend a contract

bookkeeper, you know, maybe you don't have enough work to hire

in house looking for, you know, and pay him whatever you need to

pay him and they have recommendations for that.

So figuring out exactly what services you have and figuring

out if the accounting that you're talking to provide those

services that you do need. I mean, I think that's a good

question. But then again, you know, do you

you provide consultations or like in your situation, Hey, I'm

just here to prepare the texture, you know, like if you

if you're comfortable with that, that's maybe that's a good fit

for you, but it's not for everybody, you know, So I think

those are good questions. We'll.

Dive right into the nitty gritty here.

For someone that's maybe starting to grow their business

or even just starting out from scratch, can you help us

understand from an accounting perspective, maybe understand

the difference between running a business as a sole

proprietorship, an LLC, an S Corp, or AC Corp?

Yeah, that's a, that's a big question.

And the like the thing, the thing that question that jumps

out at me is we're talking about a choice identity.

You know, I'm going to start a business and how should I, how

should I form this business? And you know, people hear the

word LLC all the time and you know, that's a limited liability

company, but that's not really it.

That's not a business structure. And it's probably one of the

things I talked to clients the most about is they say, well,

starting LLC. Well, yeah, that's fine.

Starting LLC and LLC, it's just, it's just the, it's a little bit

likelihood company that's set up with the Secretary of State in

Wyoming. Whatever state you have to tell

the IRS doesn't recognize LLC, you have to tell the IRS, the

IRS how you point your LCD taxed and there's default methods.

You know, that's just me. You know, I'm going to start

bringing the company and I create an LLC.

I'm going to default to those old ridership taxes, you know,

an LSD taxes this old ridership, but you can have a policy that's

C for people, you know, LLC doesn't escort and LLC that's

partnership. So I think that's the first

thing that is realizing that LLC is not a form of taxation.

It's really just a paper that you file that kind of creates

this, OK, there's another entity over there or several.

And and it's a it's a legal thing.

You know, we're talking about the liability, you know, and

that's a legal issue. A lot of people use them.

I believe one was one of the first states to use LLC's.

It's. Still one of I guess the states

that is the simplest or has the most generous laws.

I know a lot of people from other states form LLC's in

Wyoming and. So the idea behind the LLC is

that the, you know, if something was to happen and there was some

sort of legal action against you, the assets in the LLC

studied to that law student. The assets outside the LLC are

protected. There's a lot of things that you

need to do on a day-to-day basis to make sure that you're

protecting the LLC and treating it as its own separate entity.

So if you're sole proprietor and you've got an LLC and you're not

really and you're still using your personal bank account, that

LLC really I do anything benefit because you're coming with your

money between personal and business and and things like

that. Yeah, so that this is one of

those questions too where is you know, you go ask 5 or 10

accounts, would you rather be in S corporate, corporate

partnership and you might get get 5-10 different answers.

You know, I go to continue again, there's some professors

that teach those classes that live by partnerships and they

think that's the best choice of identity.

They don't have any PS corporations.

There is a lot more flexibility with partnerships in terms of

you can specifically allocate certain things, escorts and C

corps, you don't do that. So there are there's advantages,

there's bright advantages to all of them depending on you know,

what you're doing. You know, if you're a real

estate company, you know, you go buy that rental house and create

an LLC. You don't want to put it into AC

Corp. You know, we don't want to do

that. But you know, maybe maybe it's

just a single win for LLC, which is a so it's always a good, it's

always a good conversation to have with your accountant when

when you start a new entity is and, and do it literally, you

know, because you know, you don't want to, you don't want

to, you know, we have people that start your partnership and

they'll start paying those wages of the partnership as partners

of the partnership. You're not supposed to do that,

you know, but if you're not, that's what you do.

So, you know, before we get too far down the gravel and you're

doing things you shouldn't be doing and we have to unwind

them, you know, communicate early with your accountant on,

hey, what, what do you think's best here?

So it sounds like each one probably has its own role

depending on your ownership structure, the the entity that

you're running, what type of business or industry you're in,

they're probably all a little bit different.

But could you give us an example just from the tax perspective

with each type? How does money flow through that

entity to the owners, and what implications does that have on

how it's taxed? So if you're a sole

proprietorship, you get no deduction for the money that you

take out of your own company. It's and you can put the money

in it and you can pull money out as freely as you would like.

There's just no deduction for pulling money out back in your

personal account, any of your profits.

And so you just you know, whatever your your gross income,

let your expenses are business expenses, not not distributions.

That's your tax income and you're going to pay

self-employed income tax on that.

Partnerships are similar. You don't, you don't get a

deduction for you really don't get a deduction for any

distributions out of a company, whether you're an S Corp,

whether you're AC Corp or partnership, they just reduce

your basis. But partnerships, you know, like

if, if you work for the partnership, you would get what

they call it a guaranteed payment.

And the partnerships and that's of course are what we call the

pass through entities and your net income.

And in a partnership you're guaranteed payments that's going

to flow through to you on K1. Your K1 gets reported on your

individual income tax return. So provider gets reported under

individual income tax return. There isn't no capable 1.

So purchases and S course are similar in how they letting them

flows through C corpses. They file their own tax return,

they pay their own tax. Partnerships and S course

generally do not pay income tax. OK.

So for an S Corp and AC Corp specifically, could you give us

an example of a time that one would be more beneficial than

the other? Well, C corps of the C corps

were kind of a thing. You know, we see a lot of

ranches, you know, maybe there were set back in the 50s and 60s

or whatever, and they're all C corps.

You don't see very basic corps anymore because C corps are

known for having double taxation.

You know, so let's say you have a piece of land and AC Corp and

you sell it the corporate C corporation based tax on gain on

the sale of that land. Well now you got the money from

the sale of that property sitting in there and anything

comes out of the C Corp is taxable to you.

So you can, you can take it out as a wage and get AW 2.

That's the tax point come to you.

Or you can take a dividend from the C Corp when I have dividend.

And so that's where the double taxation comes.

But you know, now, right now CD Corp have a flat tax at 21%.

You know, so if you have a very successful corporation that's

passing through income to you and say you're in a, you know,

you're in a 30% tax bracket. So that pass through income is

going out and you're paying 30% on it.

Well if it wasn't a sit in AC Corp, maybe you've been paying

21% on it. Yeah.

But after that 21%, then it's locked into that C Corp and you

would be paying that 30% again to take it out.

Is that? Yeah.

And the wages are coming out here.

It's going again. It's going to go back to your.

But if your effective tax rate is on your individual income tax

return, yeah. I have a lot of friends that own

AC Corp and they have a ton of money in the C Corp, but they

feel like it's locked up because that money, they've already paid

taxes on that money, but then to pull it out and spend it, they

have to pay taxes again. So they feel kind of stuck.

The money's locked away well. You feel that way and the C

Corps have rules that they're passing investment income rules

that if you know certain percentage of your income to see

corpus from passive activities, you're not distributing the

money. There could be penalties for

housing in the C Corp for for too long.

So things that you know, again, kind of an advanced idea, but

something that if you have C Corp so you definitely want to

be talking to your account about.

There's also ways to make a selections in the C Corp waiting

five years and then after five years you can pull those assets

out as a distribution, which distributions out of an asset or

protects free. You don't have to pick it up as

dividend income. But in our first five years, if

you have an appreciated asset, then you're and you sell it in

that first five years, they're going to tax it as if you just

shoot it out the seat court. OK.

And so that's and they call that the building gains tax by doing

that. But if you wait the five years

of those assets sit there, all that appreciation, you can pull

it out as the distribution of an escort tax rate as long as you

have the basis in your sock. Wow.

What kind of high level, Very complicated, very fast.

But, you know, like you said, you know, if you're talking to

your friends, it's like, hey, go talk to your account.

And then, you know, maybe an escort election makes sense to

you. Yeah.

And we see that a lot, too. Like these old C corps, you

know, we've done for, they're ready to, you know, think about

retirement. That's like, well, what I'm

making up a selection now. And in five years, when you want

to close this thing up, you know we're not going to have that

double. You can.

Roll something back from AC Corp to an S Corp.

It just has that five year waiting period.

OK, I I was under the impression that you you could turn into AC

Corp or if you had an S Corp you could turn into AC Corp but you

couldn't roll it back. OK.

Yeah. Like if you have an selection

and you lose your selection, if they terminate your selection

you would default back to the C Corp which could be a bad thing.

OK. So I guess correct me if I'm

wrong here, but my understanding is generally for most like

contractor type corporations outside of real estate or

ranches or something like that, that in S Corp in a state that

allows it is usually the most beneficial.

More so than like a a sole proprietorship where you're

going to pay Social Security and Medicare and federal taxes on

what would have otherwise been distributions or profits.

And in in AC Corp, you're stuck in the double taxation having to

pay taxes as the C Corp and then again as on the distributions.

But and an S Corp allows you to pay yourself a salary and also

pay distributions free of the Social Security and Medicare

taxes, so you're only paying taxes once.

So if we're painting with a really broad brush, is that

accurate? I tend to have a lot of rest of

course, that I do partnerships, But like I said before, there's

there's people in practicing other practicing that will

always favorite partnership. They'll figure out ways to try

to manage the self-employment tax.

So if your partnership is similar to the sole proprietor,

all the income self self-employment tax, the thing

that has of course, allow you to do you're, you're an employee of

your own business. So you have to take up what they

call a reasonable wage out of that.

The income, the net income that flows down on the K1 is not

subject to self-employment tax. So in essence, what you decide

you pay yourself as the reasonable wage is, is what

you're paying for self-employment taxes.

Because there when you pay yourself wage at with total 1/2

Social Security and Medicare and then the company pays the other

half, you know you're the same person.

So you're paying the whole thing.

And so figuring out what reasonable compensation is in,

in the IRS, like a lot of the things that they don't, they

don't come out and tell you exactly what it is.

Like I, I wrote something down reasonable compensation for like

services by like businesses under like certain, under like

circumstances. That's what they, that's how

they define reasonable compensation.

Now there's been important cases that you know, so there is some

standards out there. There's been some rule of thumbs

that people right here, you know, take 50% wages to take 50%

distributions, you know, be the highest paid person in your

company. Those aren't going to stand up

under IRS audit. But more than likely if you're

doing some of these general rule of thumbs, you're not going to

get audited. You know, 20 years, I've never

had a reasonable comp audit in our office.

We've had to try to defend what we've paid them.

But I've seen corporate cases where I remember this one that

sticks out. It was a dentist's office and

one of the dental agents was making just a little bit more

money than the dentist. And I said that's not a

reasonable compensation. But if you look at it, it's

like, OK, the dentist prize to make more money than the dental

agentist, you know, but even in a, even in a small business that

does, you know, small blue collar business, you know, lose

the most valuable person in the organization, it's probably you.

You should be the highest paid person if you're desk or you

should be the highest paid person in your corporation.

You're the face of the corporation.

So, so yeah, they're figuring out reasonable compensation.

But one thing I would, I would say is don't, don't set up a

desk corporation and not pay yourself wages and distribute

all the money out to you know, a lot of clients want to all the

tax one. What are the red flags?

You know, there unfortunately doesn't give those to us.

But if you're, if you're taking 0 wages distributing now you

know, 5000 thousand $200,000 in distributions a year, you're

going to get off it eventually so.

So sorry I'm getting into more of a specific example here, but

would that remain true for like a a silent partner or an owner

that is not actively working in the business?

Do they need to be pulling a salary as well or can they take

only distributions? So 2% shareholders are the ones

that need to take reasonable compensation.

But if you look at kind of their Brightline rules, so you can

say, you know, I own a roofing company.

What, what do other roofing companies pay the the general

managers to their company? Because I say it's $100,000 a

year and you're paying yourself to 20.

Maybe that's not reasonable. Or you can look at it and say,

what's a fair market value, average hourly wage and here's

my hours I worked this week. Pay me.

So if you have asylum partner, even if they have more than 2%

of the company and they're doing nothing for the company, it's

just an investment for them. You wouldn't be required to pay

them salary. There's one line on the tax turn

and it says officers compensation and Simply put the

number on there. The officers that you're paying,

it doesn't. I don't think there's a

requirement that says every single officer has to be paid.

Gotcha. They're doing not because that

was how I'd always looked at the reasonable compensation was if

you look at if you were not an owner or not an officer, but

we're doing that workload, what would you?

Expect to pay that. Person.

And if you're in that range, that should be reasonable and

that's pretty safe approach, yeah.

OK, yeah, conversations to have with your account at least to

get a comfort level 1, you know, is it is this to do Typically

the conversation is, is this too little amount to pay myself

because obviously the goal was to push down your wages and

increase your distributions. That's the ball.

But at the same time, you don't want to open yourself up to an

audit unnecessarily, you know, still pay yourself a reasonable

wage something. That gets thrown a lot and I

personally think there's a lot of misconceptions about is tax

deductions. How we hear everybody talking

about tax deductions and doing this for the deduction or

getting that deduction for that. And yet the the vast majority of

tax filers takes advantage of the standard deduction rather

than itemizing. Can you help us understand the

difference? What is the standard deduction

and when and who should be concerned about tax deductions?

Well, I think all taxpayers should be to some extent.

I mean, it's something that should be analyzed.

I mean, so the IRS just the standard deductions just in the

amount of the IRS says this is what if you're saying, oh, this

is the amount you get. If you're married, this is the

amount you get. So, you know, for single, I

think it's around 15,000 now for just a little over 30, you know,

this is double. But we, we just have a lot of

people that itemize the deductions.

But you know, several years ago, 2017 I think it was, they went

in and they almost doubled the standard deduction.

So unless you were paying mortgage interest or you've had

large chair donations or maybe you're elderly and your medical

expenses are just through the rough, a lot of people that used

to itemize didn't anymore. So you're taking a standard

deductions. There's nothing wrong with that,

but. If you have a mortgage or you

give charitable donations of any sizable amount or maybe you have

a specific thing that happened here medically, it's always the

question to ask is, you know, ask your account.

Do you want me to round up my medical expenses?

Do you want me to round up my donations?

Do you want me to, you know, the mortgage interest is easy.

I just give me a mortgage interest saving right now.

You know, with this new tax law that's coming out, they're going

to change again. You know, everybody's right

here. The SALT production, you know,

the statement point tax, the production got limited to

10,000. Well now that's going to 40.

So people that you know, maybe you, maybe you live in work in

Colorado and you pay Colorado State income tax.

Well, that may help you now, you know, property taxes and you can

and there's ways and you want to talk to your accountant about

this too, because if you're right on that threshold of, you

know, say you're married and you've got $29,000 in deduction,

so you're going to take the standard deduction.

There's ways to where you can say, well, a bunch of my

charitable donations this year, I'm going to double up and pay

all of my property taxes in one year versus paid in 1/2.

And you know, just pay 1/2. And so you can make that extra

property tax payment. You know, things like that, you

know, like donations you get, you can give it instead of

waiting until January 1st to give your 2026 donation, even on

December 31st, even though you've already given, given them

a donation. And that's the same year.

And you know, if you're worried about the charity saying what we

didn't give us anything 26, just go talk to them and let them

know what you're doing. You know, I'm doing some tax

like you're not going to double it up this year, but you may not

get anything. 26 So what you end up doing is one year you're

going to itemize, you're going to save a little bit of tax the

next year. Then the next year you're

probably, you know, so there's some, there's some tax money

that can go into that. If you don't have any mortgage

interest and you, you know, you don't give money away to

charities and things like that, you're probably not gonna

itemize. You don't need to worry about

them. Yeah, you know, but it's a good

conversation now. So the standard deduction is an

amount that you can write off as a deduction with no proof, no

evidence. You don't have to track it.

You don't actually even have to have those deductions.

You can just claim it automatically.

So if someone's deductions, their mortgage interest,

charitable donations, medical expenses, local taxes, all of

that, if they're nowhere near that standard deduction

threshold, they're going to take the standard deduction.

And what they give their charitable giving isn't going to

matter a lot on their taxes. And you, you never have to

provide a backup for the standard deduction to the IRS.

This is just an amount they give you.

And so if your deductions are close to crossing over that

standard deduction amount, that's where you really need to

be paying attention, gathering everything up, having the

evidence and being ready to present that if.

You're going to itemize it. You don't want to make sure that

your donation receipts have the correct vagina and things like

that. You don't want to save those for

the seven years and you know, in case you get audited and all

that. But if you're not itemizing,

there's nothing to save. You can throw away your medical

bills here, you know, your donation receipts and things

like that. Gotcha.

So a family that's maybe average, I think the average

household income in the US is like $78,000 this year.

And the standard deduction of having a, a $30,000 deduction

for a married couple, Most people are going to fit into

that bucket where they're taking the standard deduction.

But if you have a much higher income like you said, or or have

a special event that causes some higher level charitable

donations or a a big medical expense or something that is

going to throw you over that amount, you you really want to

pay attention to those deductions and think about

itemizing. For 2025 if you give me a second

Oh. Man, you're prepared.

I'm pulling stuff out of thin air and you're over here with

actual numbers. Well.

As part of this change, OK, this is, it's going to be for, it's

going to be for 2026. So in 2026, they're going to

offer and they did this a few years ago.

They gave everybody like up to a $300 deduction for terrible

donations. Even if you did 9 minus, that's

coming back in 2026 and it's going to be up to 2000.

So if you know, if you're the person that you know, you know,

buys a calendar here, you know, for 25 bucks and does it for 100

bucks, you know, throughout the year.

But it doesn't matter to a lot to help you itemize.

Keep in mind in 2620, keep those receipts because you won't get a

benefit out of it. It has nothing to do with

itemizing more the standard deduction, but you'll get it

right off on your tax return. So yeah, that could help.

That could help anybody that gives just a little here and

there. We're going to dive into

something that, based on my limited understanding, is a bit

of a pet peeve of mine, so maybe you can correct me if I'm wrong

or, or set the record straight or maybe confirm for everybody

else out there, But especially in the contractor world, it

seems like everybody is wandering around and they love

to throw around. Oh, I bought a new truck because

my accountant told me I needed to for the right off.

If you don't need something, is it ever a benefit to spend money

specifically for the quote write off?

I do not advise my clients to just go buy equipment to save

taxes if they don't need the equipment.

I think taxes is about the only thing we do where you say, I'll

go spend a dollar to save $0.20. You know, if you need a new pick

up, it's going to help you, you're going to get directed off

for it. But I think a lot of it comes

down and let's try to manage our tax liability.

Let's not kind of make it, make it 0 every year.

There's a lot of, there's a lot of clients, there's 100% tax

adversed. They don't want to spend $1.00

to the IRS and, and they, you know, they don't take my advice

and that's fine. You know, it's their choice.

But I think preserving cash can be a good idea sometimes, yeah.

Thank you, that clarifies my position.

It's it's always a net loss if you do something just for the

tax write off. If you need a new piece of

equipment or maybe even if you just want that new pick up and

you were considering spending money on it anyway, that's

great. Absolutely.

Take the write off. Take advantage of every write

off, every tax benefit you can get.

But if you're doing something for the sole purpose of the

write off, you're going to be money behind.

It's always going to be a net loss.

That's that's how I look at it. You know, if I had a client sit

there talking to me about how they're looking at buying

something and you know, January, February, March, they'll be

like, well, you might as well lose.

You know, maybe there's tax bull.

It comes up this year. They're looking at buying the

equipment the first part of the next year.

It's like, why don't you buy it? Now that's a good idea.

If you're going to buy it anyways, you know, you need that

piece of equipment. But if if you're just like, how

much taxable income could I find to do this?

Their tax planning is tell me about my tax income is so I know

how much money I'm going to spend this year out point.

I was just going to say I I feel like that's one of those areas

where you have to make sure you're asking the right

question. If you ask your accountant, how

do I reduce my taxes? Well, buying a bunch of stuff

and writing it off will reduce your taxes.

But if you ask the better question of how do I end up with

the most money at the end of the story after any taxes I might

have to pay have been paid, you might get a different answer,

you know? If you just keep, you know, I've

had situations over the years where this happens and you

communicate to them, it's probably going to happen.

If you're just stop to buy equipment, buy equipment and

pretty soon you don't have any cash or maybe everything you

bought, you had to finance nine years situation.

Or maybe the the banks are willing to give you the money to

buy equipment. So then you come into this into

this year where it's like, I didn't have money, I couldn't

get the financing. You can't buy anything.

And then you've accelerated the appreciation of everything that

you bought in previous years. That's you're getting stuck with

a big tax bill and it's, it's going to hurt, you know, So

that's where, you know, I like to try to avoid and it's, it's

not always easy to avoid, but you know, 0 tax this year,

you'll watch this next year, you know, these big peaks in the

alleys. And it's like, let's try to, you

know, let's figure out a task bracket that works best for you.

Let's try to keep you in there as close as we can and manage

that task liability is kind of the way that is my approach to

that. And try to, you know, but

there's this big thing between we're trying to make the balance

sheet look as good as possible for making purposes, right, or

other issues maybe down the road, but for tax purposes, you

want it to look as terrible as possible.

So you don't want to pay tax. So there's a fine line and how

to balance that. And, and there's ways, there's

ways to do it, but I just think in the longer you can get

yourself into trouble if all you're worried about is just

buying equipment and you don't need the equipment because you

might be losing money on the equipment and you're not using

it, you know, or maybe you're not making enough profit off the

equipment because you're not using it.

So I think one way or another you're probably losing if that's

your only approach. It makes me cringe.

Every year in December I have a whole pile of friends that say

it. Oh yeah, I bought a new truck

because my accountant told me I had to.

Or yeah, check out my new skid steer because the the accountant

told me I needed to spend some money.

And I always just roll my eyes. I'm like, man, you are asking

the wrong questions. OK?

Can you help us understand some of this other accountant

language, other stuff that gets thrown around a lot?

What is the difference between a tax credit and a tax deduction?

Tax credits are a dollar, dollar, dollar reduction of your

tax liability. You know, examples of tax

credits are like, you know, some people make it in their income

tax credit, child tax credits, depending on care credits.

So if you qualify for those type of credits and they're just

going to reduce your tax dollar for dollar.

And then there's a, there's a few of these credits, certain

education credits, the additional child tax credit,

income credit, they're actually refundable.

So if you have $1000 liability, but you've got a $3000 education

credit, you're going to get a $2000 refund, right?

So some are refundable, but you know, the opposite of that is

the just a deduction versus the credit.

So if if you take $1000 deduction and your tax rate,

your effective tax rate is 20%, twenty cents or 20 bucks on that

$1000, right. So it's not deductions, they're

not dollar for dollar. They reduce your tax full income

or for dollar. But then that's time for your

effective tax rate. That's not your savings got.

You, so tying into our last topic here a little bit, if

there's a tax credit available, you want to take advantage of

that every time that's a dollar for dollar, you're going to

reduce your taxes. It's basically whatever you're

spending that money on, you're going to get that for free

because you're going to get a a credit to cover what you spend.

But a deduction is only going to reduce your taxes by your tax

rate. So we only want to take

advantage of deductions if that is something that you would have

done anyway. Yeah, I mean you want.

To you want to you want to maximize your deductions

obviously for taxes. I mean, you know, if you spend

how much ever on insurance, well just take half of it this year,

you know, but yeah, you want to take as many deductions as

possible, use your tax pulling. Yeah.

The other and part of, you know, kind of going back to that

conversation we're had about buying equipment earlier is

conversations with your with your accounts.

You know, if you do need to buy new equipment and you know, you

buy a piece of equipment, do you need to fully depreciate it all

on here? Do you need to accelerate it?

Another general rule of thumb is that if you finance equipment,

don't don't accelerate the depreciation on finance

equipment, you know, still have that conversation with your

account. It's like, do I need to fully to

appreciate it? You're working.

I preserve some of it over the next five to seven years, OK.

So something you've helped me understand a little bit is that

a lot of tax deductions are not necessarily forever.

They're more of a deferral. And especially when it comes to

real estate, this is something I'm still trying to get my head

wrapped around, but maybe you can help us out here.

I hear a lot of people, they invest in real estate because of

all the tax deductions. That's something they're chasing

and going into real estate. So you get all these deductions

and in real estate, but then when you go to sell that piece

of real estate, you're going to end up paying capital gains on

all of those things that you deducted along the way.

So it might still be an advantage.

You get to kick the can down the road and pay it later, but it's

not going away forever. Our active tax planning is

kicking the tax liability down the road.

You know, can we defer this tax liability to a later year?

So there's some of that. And I think the deduction that

you're mainly getting at and especially with real estate is

depreciation. But I was young and a partner

from one of the firms I worked for in Casper.

He said depreciation is an interest rate from the from the

government. Because what happens is you're

getting, you know, you depreciate a residential rental

house or for 27 1/2 years. And so you're getting a little

bit of depreciation every year. And you can get 10 years down

the road and you want to sell it.

But what you're doing is you have to recapture, you have to

recapture depreciation and recapture depreciation as

ordinary income. So you think that I'm selling

this, that's all the capital gain income, all pieces of it's

ordinary. So you've converted capital gain

income into ordinary income due to this depreciation recapture.

And so that's where they say, you know, just really long

they're going to get you on the back end depreciation, you know,

which is fine, there's nothing wrong with that, but just got to

be prepared. You can't just take the capital.

You can't take the 15% capital gain rate, 10 gains.

So my tax is going to be it could be worse than that.

You know, it's going to be some sort of blended rate deal, you

know, other, you know, you can take deductions for retirement

expenses, but that's it comes to you later, you know, when you

start in retirement, when you you know, unless you're in some

sort of area or something like that, your retirement incomes

going to become taxable to you down the road, but you got

deductions for it. But that's why they're going to

make you pay tax on down the road.

You know the other one. Let's see.

But the bringing taxes, I mean like just to the bigger point,

different taxes. It's kind of the idea you're.

Gaining that inflation along the way, you can pay that tax with

future dollars that are worth less than today's dollars.

Well, I mean, there's there's a lot of tax funding and you know,

we go back to real estate, a lot of people are everybody's hurt

like kind of exchanges, you know, we call them that 10301030

ones, you know, and you know, first if you if you're thinking

about doing one of these, talk to your counter early because

once you touch the money after closing you there's no going

back on it. You know, the like kind of

exchange opportunities gone, you know, the place that be helping

that stroke. But you know, the whole idea of

like tax changes, all you're doing is differ in that tax.

So you sell the second property because all you're doing is

reducing the basis in that next property that you bought by the

gain from the previous property. And so now you have a bigger

gain on the next property, you know, but maybe there's tax

planning involved. Maybe you hold on to that

property and you know, it goes to your errors after you die,

the basis and nobody ever pays a tax on it.

But you know, there's kind of if, if you could have

conversations about how to defer tax, don't, you know, kick it

down the road. That's that's really a lot of

tax planning, I think because again, the idea is that we can

get the liability down the road, you know, so we're going to save

taxes currently by taking the depreciation.

I think you would want to do that for sure.

Yeah, you just have to be careful in that in that

situation. Like, you know, a lot of people,

it's pretty popular. Go, let's go buy a house, fix it

up and sell it. That's a little bit different

situation because that that technically should not be

capital gain income. If you're floating houses, that

would be kind of more arbitrary to business and subject to

self-employment. So, you know, if you're if

you're into flipping houses, let's let's let's fix it up,

let's rent it out for a year to do.

That's all you know. But if all you do go make

improvements, it takes you, you start on, you know, a year today

you sell it, but you've flipped it.

Yeah, that's going to be self-employed income.

I mean, these, these are all the reasons somebody needs a CPAI.

Could I could myself accidentally, right.

Talking to a lot of people that have the ability to go do that,

they can go do the work themselves, which makes flipping

houses appealing. But you might want to talk to

the account. It's not necessarily just yeah.

If you're out there trying to do your own taxes, you can land

yourself in trouble with the IRS real quick.

So OK, this is probably going to be a really popular question.

What are the most common deductions that people miss or

don't think of? No.

That's a good question too. And obviously, you know, you got

a set of books and all the business expenses are getting

paid out of business account right now isn't much, you know,

but you might have a you might have a small business and you

know, you got your cell phone set up on an individual plan and

the bill's coming to you personally.

It's OK because all small business owners are giving out

their cell phone number right right down their business card.

It's OK to have a business write you a check if you get a bill

once a year at the end of the year, like how much of my cell

phone calls me? Have your business or write you

a check and reimburse you for your cell phone.

You know, if you sit at home and you use the home Internet, you

know the Home Office deduction. There is a Home Office deduction

of this. It's it's usually pretty small

deduction. That's one.

Of those that you might be able to defer a little bit, but it

comes through eventually. Like, you know, say you got

your, you know, say you got your Internet to the house, you know,

anybody you have the Internet to run your business.

You can, you know, the the key is just any of these small

expenses that you're paying out of pocket personally, but

they're business related just from your business to you

personally. Just write yourself a

reimbursement check cell phone reimbursement, Internet

reimbursement. Another one is for self-employed

people. There's a lot of rules related

to self-employed health insurance.

And so if you, if you're paying health insurance, make sure

you're communicating that too, you know, to the account.

So the itself employee health insurance deductions or if your

desk or, but it's getting accounted for directly because

there's, there's some such rules with self-employed health

insurance S corporations for 2% shareholders asking about

retirement opportunities. I mean, I, I try to encourage,

you know, especially the young, the younger generation that are

going to start their own business and doing this is like

getting started early. You know, what's a good

retirement plan for me to get started?

And even if it's just a little bit of money to start, you know,

and because it's going to, it's going to help me down the road,

my daughter to start teaching this year.

I told where I said the first thing to do is fill out that

retirement form and never proceed in your paycheck and

never make that excuse boss part in the year.

I'll start that in two years because it's going to be a lot

longer than that for you probably to do that.

But you know, HSAS, if you have HSAS, make sure you communicate

if they got an HSA to your account, there's deductions

related to that. And then the big one, you know,

if you've got a small, if you've got a proprietorship or signal

umbrella, seeing the trucks in your name, figuring out what's

the best way to handle that vehicle.

Do we want to take the actual expenses related to the do we

want, do I just want to have a company reimbursed for mileage?

You know, there's no set standard that says it has to be

paid monthly. It has to be paid quarterly.

All this could be done at the end of the year or you could do

it monthly, you know, but tracking notes and the direct

wants to see, wants to see you moving money, pay physical money

from the business to you individually.

I said, I've never done that, but a lot of times accounts

through general countries, yeah, hey, they contributed this and

they got a deduction, you know, but there's no money to change

hands. So you want, you want to

actually physically pay the money between the company and

yourself on those things, whether it's reimbursed mileage

or, you know, whatever. So I would say those are

probably the big ones that I can think of off time something.

I hear from a lot of small business owners again, they say,

well I'm self-employed, I don't have a retirement.

Or they think that kind of the the big corporate 4-O1K is the

only way to do retirement. What retirement vehicles are

available for small business owners or someone that is

self-employed? Well, there's, there's different

types of fire rays that you can, you can use.

There's one's called set fire ray and there's rules related to

steps. If you have employees that, you

know, there's rules about when they qualify for that plan, how

many hours they work, how old they are and things like that.

And if you contribute 20% of your net income, then you have

to contribute 20% for everybody that qualifies.

But Sapphire areas are a good vehicle.

There's, there's just individual retirement accounts that aren't

necessarily tied to your business.

You know, if you qualify to put $7000 into a Traditional IRA and

you do that, you can get a deduction for that.

Then there's limitations and rules, of course, but but then

again, you want to talk to your accountant about, well, it is a

traditional area, the best for me right now or maybe a rock

player is better for me. And I'm not going to get a

return deduction, but it's going to grow tax free until I retire.

And when I retire, pull money out of it.

I have no tax pulling right. And so you want to have those

type of conversations too. But there's, yeah, there's you

can have a simple platter array, you have 401 KS.

So there's all kinds of opportunities to start putting

money in the way and get a tax advantage out of it.

You know, versus you can just have a regular brokerage

account, you know, start to pile some money into that, but you're

not getting a current tax deduction for any of the money

that goes into it. So maybe, you know, if you've

got that excess cash to do that, putting some into your brokerage

account, but also taking advantage of your deductions

through your retirement, yeah. So just because you don't work

for a big corporation that has a 401K that you can sign up for

does not mean that you're excluded from participating in

the retirement, correct? Correct.

There's opportunities out there for just the just the solo

business partner for sure. What are some?

Things business owners could do to best prepare for tax season.

Or maybe what are the frustrations you have with

clients that if you could get in front of them and teach them a

lesson of hey if you do this, this, this and this, it would

make my lifeway better? What can we all be doing to help

make your life easier? You know, most accounts, you

know, starting with something as simple as they send out the tax

organizer every January. And really all that is, is just

a, it's just kind of a guide what you had last year, you

know, familiar, familiarize yourself with what you did have

last year. You know, it'll show you the

prior numbers and you know, that's what we're looking for to

collect in the current year. You know, at the front of it

will be two or three pages of yes, no questions.

You know, a lot of those yes, no questions, you know, and let us

know if things have changed from one.

I mean, I've filed the extras because the couples of friends

told me that maybe, you know, like that's that's stuff that we

need to know. I mean, it's been several years

ago I had one. I had one lady that didn't tell

me that she got remarried, you know, so all these life changing

events need to be communicated. There's questions in there that

are yes or no when you just simply say yes and explain it

and you know, whatever, but it helps you gather up all the

information. I think one of the things that

can slow down tax prep is just peace knowing things.

You know, like I got a 1099 miles together from the tax

account, but we can't do anything with it because we're

waiting on the other 15 things we need.

So trying to get as much information as you can and

gathered up by going through that tax organized turn,

bringing it all at once. Whether you're the client that

likes to go in and sit down and go through real with your

accountant or they you just like to drop it off and something

when it's ready, you know, and there's nothing wrong with you.

We're just drop it. In a Dropbox like I do for you

guys. You know, if you're if we're

missing something or we have questions about something, I

mean, there's nothing wrong with that method because we're going

to call you and you know, we're going to figure it out.

But something just something simple like that.

I have a lot of people that just don't even open the envelope,

you know, and I think it just goes back to the tasks.

I don't want anything to do with it.

Tell me what I need. You know, the businesses, the

the price of that businesses Plethoris, you know, that score

for a partnership for just so prior.

Those are a little bit different.

You know, you want to go through and try to make sure your books

are in some sort of working order and trying to do some

hearing clean up. Or if you need help getting the

books cleaned up, you know, we can start doing that type of

stuff in November and December kind of get this out much

further ahead, you know, because we've got to start thinking

about we need W2 prepared. We need 1099 prepared, you know,

and we need to send out stuff to get the information about 1099.

So there's some clean up work there.

So whether that's your in house cookie burger or you can do that

work yourself or, you know, asking for help to help get the

books cleaned up, you know, close are ready to go to work on

the the taxes. It's part when you get somebody

that doesn't, you know, doesn't do a good job with taking care

of their books and they bring it in March to try to have the time

to try to get that done by table 15.

That's going to be an extended client more than likely and a

lot of clients to be like Dallas.

Fine. Yeah, just trying to be

prepared. And, you know, we ask all of our

clients, you know, we want copies of your purchase

invoices. You know, did you buy any new

equipment, give us some purchase invoice because they'll forget

to tell us that they traded. They'll say about this for

50,000. Well, they won't tell us they

traded something else. And then the actual cost of the

equipment was 150 or, you know, whatever, you know.

So we're always looking for purchase invoices on your big

purchases, you know, gotta gather uploading histories.

If you have loans with the banks, you know what we do in

our firms, we go through what we call balance sheet.

The approach we're going to make sure your cash is threatened

December 31st, your fixed assets are accounted for accounts

receivable. You know, all the accounts

receivable reasonable, are they collectible?

And we just go down the balance sheet, you know, the loans tied

out because we feel like the balance sheet is tied up and

then you're going to say we're reporting as income.

It's got to be pretty close to where it needs to be.

So it's not always foolproof. But but yeah, talk to your, you

know, the accounts are busy through October 15th with

extensions and, you know, after that start Starbucks.

And I'm saying, can I get in there for a tax?

If you're into tax planning appointment and let's, you know,

figure out where I'm at, what I need to do, you know, it just

helps set it down on surprises at the end of the year, you

know, like, hey, suck you with a big tax.

Well, I've heard from you since last year when you picked up

your protection, you know, I didn't know yeah, this year, you

know, so communicating that stuff and trying to get ahead of

where you're at with your tax liability, I'll say.

But I, I think one of the things that small business owners, you

know, like you, you've always had a pretty good grasp on them.

How do your taxes work and where you're going and things like

that. But there's people that are the

complete opposite to that. They just want nothing to do

with it, you know, because maybe it's stressful former they're

busy doing something else. I would encourage all small

business owners to try to understand their tax return, try

to figure out a way to just the basics of what's driving my tax

liability. Why am I paying $20 to here, you

know, on what can I do to help preserve that a little bit?

But by just gaining a little bit of understanding of how this

works, you know, even if you don't want to, you know, you

don't like it, you don't understand it, you know, ask,

ask stupid questions, you know, you know, because to me, they're

not, they're not stupid questions.

You know, and I, and I get encouraged when I have my

clients coming in and just asking me the most basic

questions because it shows me that they're trying to take care

that they're engaged. And what I see people doing that

typically they're more their businesses are more successful

just because they're helping manage that tax liability.

Yeah. I can see that.

I mean, I'm, I'm in the field talking to other contractors and

stuff and there's a lot of them they get mad at their CPA 'cause

they mow owe more in taxes this year than they did last year and

they can't explain why. And I'm like, it's probably not

your CPA's fault. They're filling out the forms

following the process, and if your tax bill went up, it's

because something changed in your business, not because your

CPA did a bad job. I.

Think that's the most frustrating part is, is, is

getting a big tax bill and not expecting it, but you've got to

communicate. Go back to the communication

part and and communicate, really communicate often about where

you're at. You know, if you, if you go pick

up the big job and it's going to be done by the end of the year,

you know it's going to, you know, increase your revenue to

fold from the prior year. You should be communicating with

somebody about that. You don't just plot it down in

March and. So I remember this very clearly

because it was not the answer I wanted to hear, But one of the

first years after I bought my business for my dad, I had an

unexpectedly large tax bill. And I was having coffee with him

and was complaining about it. And he goes, well, you have a

huge tax bill because you had a huge year.

You made a lot of money this year.

Pay your taxes and quit complaining about it like you

have a tax bill because you made a lot of money.

So use some of that money to get the IRS off your back and move

on with your life. And I've.

I've given that exact message to the clients that your dad gave

you and it, it doesn't always go over well.

You know, that's not what they want to hear, you know, but

there are, there's situations where it's like, hey, you did

well, you know, we're managing tax liability here.

We're not trying to get rid of it 100%.

And you're going to, you're still getting bad even though

you're paying some taxes. But like I said, the biggest

thing is getting stuck with that bill, you know, because maybe

they spent all the money buying equipment, but they can get rid

of the whole tax liability. And it's like, what am I going

to pay the tax with? You know, they're just, and then

there's just the idea of having to write a check to the IRS.

It just drives people crazy. No, it's not.

I write it up too. And I don't like it either, but.

Maybe this is a similar question and it it's just something

that's been on my mind lately with what we've been working

together on. But how can owners best prepare

for a liquidity event or an exit?

How can we prepare our books to sell our business or transfer to

somebody else? I think it's a good question the

IT doesn't start. It shouldn't start at the end,

you know what I mean? And when you're talking like

prepare the books, we you go into business and in your mind

you're thinking maybe I'll build this business up and I can sell

it or maybe the kids want to take it over or whatever.

But there's going to be a buy sell.

They got to buy data out on it or whatever.

But that's where we want to make sure that we're keeping it.

We're trying to build that apology if they want, you know,

the business. The business, yeah, cash is

important, but it's it's not the only asset of the business, you

know, And so, you know, these cash only business doesn't

people want to take the payment under the table and stuff like

that. But when people go into my

business, they're going to be looking at maybe the last five

years of tax returns and they're going to take the numbers that

are on that tax return, you know, So if we've got a ton of

bogus deductions that are, you know, you make a bunch of

personal productions and things like that, they're not important

revenue or, you know, whatever, you're not doing a good job of

building that balance sheet. You know, you want to make that

look as attractive as possible at the end of the day, when

we're getting close to like, hey, it's not going to do some

succession planning, you know, but you can get within, you

know, three or five years of retiring and you're like,

balance sheet looks terrible. Well, you know, you're gonna

have to find somebody and I'm not saying you can't, but you're

gonna have to go find somebody and convince something of what

you've been doing and hope and hope they trust you that that is

what you were doing. And it really makes us much

money versus just do another right way.

And for the income, you know, keeping the personal expenses

out of it and building that balance sheet up, making them,

making it look like a valuable asset to some third party that

wants to come in and buy your business from you.

So in terms of getting the books ready, I think that's got to

start from day one. You know, and I, I had

conversations with clients about that all the time.

What if you want to sell it someday?

You know, but they're so young. But they don't.

That's something they're thinking about.

You, you mentioned it earlier more in light of like banking

and finance, but there's just this, this weird dichotomy where

like you want your banker to think that you're making a lot

of money and you want the IRS to think that you're making none.

And, and so it's kind of the same thing here.

And I know this is a learning curve for us.

It's a process we've gone through for a while, but same

sort of thing. You want a new buyer to think

you're making the, the most amount of money possible and you

still want the IRS to think you're making the least amount

of possible. So you're paying the least taxes

and there's things. You can do to, you know, if the

bank wants to see a financial statement about your books are

in terrible condition, it's, you know, it's hard to put together

a financial statement. So we're always focused on the

balance sheet and make sure that sheets get ordered.

You know, most of our, most of our taxes are done on a cash

basis. But if you have receivables and

payables and things like that, they're cruel basis, tax item or

accounting item, you can go give the bank an accrual basis

financial statement. You don't have to give your tax

return. You can say, yeah, but that is

here's my attachment, but that includes my receivables.

Here's my receivables, they're all collectible and collect

within the next 60 days or whatever.

So you can, you can do what we call a compiled financial

statement for the bank that goes with your tax return and you can

do that on an accrual basis. And so that's that's one way

that you can help kind of walk that line of I need something

that looks good. But on the tax I didn't, you

know, something that's going to show not make any money.

Yeah. So.

We're back to some of this terminology that gets thrown

around a lot and many of us probably don't understand it

very well. What is the difference between

accounting on a cash basis and accounting on an accrual basis

cash? Basis is, is really just what it

is. You pay tax on the cash you

receive and you get to deduct the cash you spend, you know,

between January and December. I'm your cash basis where

there's a cruel basis. You know, if you have accounts

receivable, you don't want to work in the work done by

December 31st, but you know, maybe you're not going to get

paid till January of the following year.

You're going to tax on that thing.

I'm in the current year is a cruel basis.

You've earned that income, which you haven't received the cash

and but it works the same way with accounts payable.

You know, like I haven't heard this liability, but I haven't

paid it until next year. So you're going to get it done

that here. And so that's that's kind of the

that's the biggest difference. Is there maybe different types

of industry or maybe different sizes of businesses if

somebody's just trying to get their arms around their

accounting and trying to do it properly?

Is there a time or a situation where I would make more sense to

keep your books and do accounting on a cash basis

versus an accrual basis? I would if, like if you, if you

have receivables and payables and stuff like that, our clients

are probably they're tracking them on an accrual basis.

We make what we call tax journal entries to to adjust from

accrual to cash for tax purposes.

And sometimes we do that inside your books.

We'll make interval entry as a 12/31 and we'll reverse it as a

one on so that you're back to the accrual basis.

So if yeah, if you check it out, if you, if you're, if you're in

an industry that has receivables a lot more, it's less.

Maybe the size of business or the type of business and it's

more if you provide services and get paid in cash that day, you

can probably run on a cash basis.

But if if you have receivables or payables, either one, you

probably need to be tracking it on an accrual basis.

What's been tracking it in your in your accounting system,

whether that's QuickBooks, so you have some Excel situations

set up for yourself because you don't want to pay for

QuickBooks, whatever it is, but you definitely should be tracked

in here that's. Good to know.

I've heard people give the advice before that when you

start out and it's a small business, you just track your

cash and eventually when you get big enough, it's going to need

to switch to an accrual based accounting.

But I guess that's not necessarily the case from.

The very beginning, I'd start working off an accrual business

balance sheet in inside your accounting system, we make your

accounts going to make adjustments for the accrual cash

adjustments to get what we need to report on the tax.

That's good to know, I'm learning new stuff today.

You know, we talked about the book side of that, but there's a

lot of planning that goes into transitioning businesses, right?

And you know, your parents transition the business to you

and now you're transitioning again.

So you, you've been through this a few times, but you want to

again, communicate early what's going on, what your ideas are

and how to do this. Because there, there could be

situations where there's tax savings available, you know,

there's installment sales versus lump sum payments.

They're transferring it through gift, they're transferring it

through inheritance. You know, one has carryover

basis, one gets stepped up basis.

So there's a lot of different factors in, in certain

situations, like, especially with like the C Corp, for

example, there's if you meet certain standards and you're C

Corp, you could sell your business and not have to

recognize the, the gain on the sale of it.

But it's pretty limited. But there's a rule out there or

if you're going to recognize the loss, the account losses in the

accounting world are terrible because you're going to do the

$3000 a year. Whether it's a rule out there

for the sale of business stock that if you sell it, you

recognize a lot. You can treat like about things

up to 100,000 of this ordinary income, which is all about one

year. So there's different situations

where you want to be talking to your accounts really about this

type of succession planning and things and how to structure them

with your attorneys and different ways to try to, you

know, save the taxes on the transition on the sales

business. Yeah.

C Corp rule was something that caught me off guard a little

bit. For the longest time I was like

S Corp, S Corp, S Corp. You don't ever do AC Corp unless

you have to because they just seem like a nightmare.

But then when we were preparing for the sale of our business, I

stumbled onto that C Corp rule and it's like, oh man, this is

the one scenario where that would be really nice.

I'd would love to not be paying taxes on all of this.

Yeah. We don't see it very often

because I think you got to be the original or the C Corp and

the capitalization, the C Corp has to be under certain amount

which lot of our small businesses fall into that around

here. And so there's different rules,

but you know, you definitely want to go down the avenue to

explore it. Yeah.

What? Is one thing about bookkeeping

or taxes that people just don't seem to get?

Bookkeeping into taxes I I think if you don't, if you don't

understand bookkeeping debts and credits, you're probably better

off focusing on what you're really good at.

You know, use your time and resources to go generate revenue

versus trying to spend the time messing up your books.

You know, and it's, it's no different for me.

You know, I need to focus on if my job, what, where can I

generate the most revenue And I need to delegate, you know, we

talked about that earlier. I need to delegate this to

somebody else. So I can, you know, be focusing

on this. And I think that that's good for

anybody in a small business. If you don't know what you're

doing and then you're just so you're you got input into

QuickBooks, that means nothing, then you go take it to your

accountant. You can't make heads or tails

up, but then you've wasted your time.

In all reality, you're better off finding somebody that knows

how to do it, whether that's a third party contract bookkeeper

that's, I mean, that you've hired or maybe it's the

accountant in house bookkeeper that's helping me with that.

So from a bookkeeping standpoint, you know, it's just

focus on what you're good at. And if you don't know anything

about the bookkeeping, the accounting, you know, ask

questions. I think that might be one of the

unsung heroes of the industrial revolution is specialization.

Instead of doing everything yourself, use specialist to do

it. We have employees or people all

the time that give me a hard time because I don't change the

oil and all of our company trucks.

And like man, if if I am out roofing, I can make more money

roofing in the same amount of time that it takes to change my

oil as what it cost to pay somebody else to do it.

And the guy running the oil change place, he can probably

make more money changing oil in the amount of time it takes to

fix his roof than what he would pay to have me do it.

So just hire a professional and let them take care of it.

I agree 100% and we just, and I you know, I tried, I tried to

manage costs in our business too, you know, and but you got

to think about the lost revenue, not doing like you're gonna, you

know, you can make more money then you're gonna go pay

somebody to do this and. Especially in your industry.

I mean, changing your oil is one thing, but you're not going to

wind up in jail because you did it wrong.

And with taxes, that might not be the case.

Right, right. This is super random but that

comment reminded me. I was reading a book one time

and the author said that he instructed his lawyer and his

accountant on the three to five rule.

He always wanted to absolutely push the envelope on legality of

avoiding taxes, but yeah, if he were to get caught, he wanted

his lawyer to be able to get him out in less than three to five

years. I had to there's a couple

they're they're good friends of mine and they moved to town.

She's I need to just start doing her tax.

I said, OK, I can do that for you.

And she goes, your number one job is to keep my husband out of

jail. So he's he's clearly one of the

tax reverse class I have. But yeah, she's like making sure

that he doesn't. I think a lot of us probably

fall into that category. You don't want to pay more in

taxes than you have to. So what is one piece of advice

that you would give to a small business owner or an

entrepreneur to help set them up for success?

If you had only one piece of advice, what would you tell

them? It's been mentioned, but it's

trying to under, it's trying to understand taxes to the best of

your ability and making, you know, relying on your account to

explain it to you. You know, go ahead and ask

questions, figure out what's driving your tax liability.

Maybe they have ideas on them. We're not always the perfect

advice from the industry industry to help help you run

your business because you know, I don't know anything about, I

don't know anything about changing oil.

But we can definitely help you understand what's you're adding

the tax situation and where you're at and ways that we can

maybe try to, you know, limit the tax liability.

And, and with that, it is build a build up a team of advisors

around you to get the help that you need.

You know, whether that's, you know, you have a lawyer, you

have a financial advisor, a retirement advisor, you know, an

insurance guy or gal, you know, you know, build a team around

you people and you know, whether it's an idiot, just mentors.

You know, maybe you're young and you grew up and you've got

successful, successful business people around you that have been

through the child and relations that you're getting into, you

know, and talking to them. But yeah, building a A-Team

around you, people that you can trust and rely on to help you

grow the business and that allows you to go focus and do

what you do well and build your business one of.

My favorite sayings is you don't know what you don't know.

So what are the questions that I haven't asked?

Or maybe, what are the questions that your clients don't ask?

I can't think of any questions they don't ask off the top of my

head. I think it just kind of goes

back to the conversations. I have a lot of clients that

drop their stuff off and pick him up the desk and I'll see him

once a year, you know, trying to, they're not asking questions

because they feel like the questions they have or some

people questions or, you know, something to that effect.

And so I would just mainly just say don't be afraid to ask the

questions, you know, because it could be something simple or you

could be on to something that maybe is a little more

complicated. So any questions that you think

of, you know, whether it's through an e-mail or a phone

call, you know, or just ask the questions, ask any and all the

questions. You know, that's what you're

paying us for is to advise you and help you understand what you

know. Well, this.

Is my favorite question that I ask of every guest.

Are you a person of a particular faith tradition, and if so, how

has that affected the way that you run your business?

Well, I, I, I grew up going to church every Sunday with mom

grew up in a Lutheran household. Today I'm not AI don't go to the

church every Sunday, but I'm more, I guess I'm just more of a

spiritual person. And you know, I do have a lot of

praise self talking in my head to God.

You know, you know, I'm very thankful for where I'm at.

And I know there's reasons other than just, you know, me working

hard to get here. You know, there's other things

that I've been blessed with and on it and asking for, you know,

help looking over my kids and my grandkids and, you know, things

like that in my in my business, you know, I just tried it.

I just wanted to look at everybody the same, you know,

whether it's an employee, whether it's the, I work in the

front desk where it's one of my bookkeepers or one of my

partners, you know, I look at them all the same.

And I, and I, I do, I try to do the same thing as, you know, I

don't worry. I've been doing a lot of numbers

to number. You know, I don't care if you're

worth 0 or 39. It's like I want, I look at

everybody the same. And that's kind of the biggest

thing I've taken away from that spiritual thing.

Thank you if. Somebody is interested in

engaging your services or chatting with you about CPA

services and more depth. What's going to be the best way

to get a hold of you? We have.

We actually have an office in Buffalo and we have an office

chairman. So yeah, just just call the

office. We refer to them as cold balls

and we have an intake sheet, but the, the the gals that answer

the phone or will help get that filled out and it's pass on to

the the partners. And then we just kind of come,

we contact you back right now, you know, in our, in our, in our

firm. The first question you're

pregnant to be asked is, are you open to being extended?

Because we just can't promise people at this point that you're

not going to get extended. So we want to be very prompt

with that. But yeah, so so.

Do you deal mostly or maybe even exclusively with local clients

or would you be interested in long distance clients as well?

We, we have, we have clients in several states.

It's, it's one of those things where we're, we've kind of moved

to where we're kind of focused more on local clients instead of

the only people from our state, but for years and years and they

decided to move in retirement, things like that.

And we don't get rid of them. And I'm not saying that we

wouldn't take on a client. Our main focus is Johnson County

and try to take care of those lines.

Is there somebody that you think would make a good guest on the

show, Somebody that has a unique story, a unique business, or

maybe works in a really unique industry that would be fun to

learn more about? I thought about this quite a bit

and there's one name that comes to mind and it's Bryce Fischer.

And I don't know if you know Bryce, but he was, well, I

became partner. He was my very first client that

picked up on my own through through a referral.

And so we got to be getting close to 20 years and he, he was

very young and he started out and he's on a successful

business and the, the happy machinery and you know,

reclamation work and things like that.

And he's just continuing to to grow and doing very well.

I think that I think from a young entrepreneur standpoint, I

think right. So fit the bill for sure, but I

also like what you did today, you know, helping your helping

your listeners out by talking to advisors.

You know, maybe there's some major stuff there that you know,

or financial advisors that would be able to come on and provide

some insights to your listeners as well.

I think you have to go full circle on that.

Those are. 2 great ideas. I'm going to have to explore

that. And yeah, we might have to make

that happen. And I I do know Bryce.

I had not yet thought of him to bring him on the show, but I

think he'd be great. I've known him for quite a

while. Also.

Yeah, Popped. In my head right away, that's

great. All right, So last question to

either settle or fuel the debate, if you have a job to do

and have to pick a cordless tool, which brands do you

prefer? I really.

Try to practice, but I preach. I don't know how to do it.

I I'm going to rely on your listeners to come in and give me

a hand. OK, fair enough.

Well, Dan, thank you so much for joining us.

It really has been a pleasure. I think the advice you've given

is wonderful and I hope that people listening really take it

to heart. I hope that giving you some

advice that can help you somewhere along the way, yes.

And I really appreciate all you've done for us and for

joining us today. So thank you and thank you guys

for joining us here on From the Ground Up Show.

If you want to reach out and join us on the show as an expert

or if you have a question that you want to ask of one of our

expert guests, you can find us online from the Ground Up

show.com or on social media at From the Ground Up Show.

Again, if you guys are enjoying the content, please like, share,

subscribe, follow all the things.

It would really mean a lot to us if you could leave a five star

review. Those five star reviews go a

long ways towards moving us up in the algorithms.

And make sure you click that auto download button so that

each episode gets downloaded automatically every week.

Until next time, keep grinding.