Get Rich Slow Podcast

Adrienne  00:02

Hello future millionaires. Welcome back to the get rich slow podcast. I am your co-host, Adrienne Shermer. I'm joined by Rob Delavan, Lance Johnson and Sue Horton. Hey guys, how's it going?

Rob  00:14

Hey. So, Adrienne what are we talking about today?

Adrienne  00:22

As usual, I'm excited about the topic, this is gonna be the launch off for, it's an eight part series on some tax stuff and you know, nothing's more important than making money if you want to make yourself a millionaire. But the second most important thing is not losing money to the tax in the process, while you're building that wealth, and while you're storing it. So, you know, it's all about how you organize yourself and that's what we're going to go over in this series.

Rob  00:50

Nice. So, we have what this is one in an eight part series and today's title, is why you need a professional CPA and interestingly enough, we have a spectacular professional CPA and I wanted to share with our audience, just a quick journey of the development of ROI tax, which is Sue's firm and the benefit that I've seen, and the short of it is soon I've been working together for years and we've evolved to the point where we're utilizing tax planning, tax compliance and financial planning, in such a way that we're doing my taxes, which are quite complex, through before the end of the year, and it becomes compliance becomes kind of a just one piece of it. But there's no unknown and this has been a really fun process to learn from Sue, from Lance. You know, Adrienne, you've been part of this, but it's just been a blast. Man, I'm not even doing it justice. Taxes are not something I dread anymore.

Adrienne  02:12

That's exciting one.

Rob  02:13

Yeah. So we'll dig into that. So, we wanted to talk about our recent event. We just did a client appreciation event and it was incredible. We had Barry Mac art, which will link to our comments down below and the opportunity to appreciate just love on our clients, it was a blast and in a way that they under it helps them to kick off this tax season and frankly, this whole 2022 year.

Lance  02:49

Also just promoting the all the things we worked on, you know, the different companies we launched and how we're working together and the staff improvements we've made and the processes, its websites and social media. It's just it was a great year for the four or five different companies coming together as a unit.

Rob  03:12

Right! Yeah, absolutely incredible and we couldn't have done it without, you know, each of us. I mean, frankly, Sue, Lance, your guys's efforts were incredible. Website wise ROI-tax.com. It'll be in the comments below and we'll have some links there. The episode ahead, we're going to be digging in with Sue a little bit. Again, this is episode one of an eight part series. But we'll get a little bit of Sue's story. We're going to basically talk to you guys about why it's important to work with a CPA versus you know, doing yourself online service, those sorts of things and then what does the process look like to start with a professional CPA firm?

Adrienne  04:01

Yep, absolutely. I love this subject. Because the more you know it, the more you realize you really do want to work with someone. It's absolutely self-fulfilling.

Rob  04:10

Exactly! Okay, so introduction here. Sue, we got to make this a warm introduction for you. So, we love working with you. I love to call you a friend. You know, business associate business partner, referral partner, I mean, oh, incredible. But we want to get to know you a little bit and trusted CPA is a big deal and that's definitely in this room and we want to make sure that we're sharing that with our audience. So, let's dig into this. So, let's make sure that we get to story. So tell us about your history where have you been with, how in the world do you get started as a CPA? When you're a little one was that something you were just had to do?

Sue  05:09

I don't want to say, wow, I want to be a CPA.

Adrienne  05:15

Play mobile...

Sue  05:17

It was definitely at home because my dad was excellent at math and so instilled that. So, I'm a CPA, my brother is a CPA and my sister is a math teacher. So, it didn't fall far. But I actually did take the high school bookkeeping course and it was like, okay, this is easy. So, when onto college at University of Oregon, and did decided on an accounting major after I took a class and the professor said, yeah, you ruined my curve, maybe you should consider a major. So like, oh, okay and it sounded good. So, off, I went, I started with a big eight, right now their big four accounting firm, and got my accounting license. But that experience is like huge. You have big companies. I mean, one of our clients at Ernst and Whiney was Bank of America and we were sitting in the Bank of America building in San Francisco. So, when I left there, and was out of the profession, after I got my license, but I was at home with my kids for about 12 years, I said, I don't know if I want to go back to accounting and then needed to have a job and so my brother was had a firm and said, Come to work with me and so we started our [Inaudible 06:45] CPA firm, because that's my name or family name and I realized then, and that was where I got the passion was that I could combine the accounting with working with people, and people are just what gives me energy. I love being out there and being social, and I could help them with their taxes, do a real help, but then also do something that I enjoy, which is getting the math getting the numbers to work all together. So that's kind of how I came to my wow moment was, I love this. I love what I'm doing. So, yeah and off it went, I've been at this for 20 plus years with the firm.

Rob  07:36

And then Lance, do you want to describe a little bit of the evolution of the relationship the last couple years?

Lance  07:43

Yeah, so the last 29 years, you know, as a financial advisor, you got to get through the tax gatekeeper. So, in a lot of the big companies, you were not allowed to talk about taxes or anything and so being an owner of tax, being licensed one in the past as I LTP, I have knowledge on it and I just wanted, I knew clients were meeting with CPAs in March, April, May and you know, it's an incredible hard job where you're condensing a year's worth of work, or three quarters of a year’s worth of work, and three months, it's really hard on an individual and really hard on clients and so then we established, what if we started working on this in the fourth quarter, and started to answer some of those questions when they meet with Sue and they would say, Well, what if we did this and be like, Man, that's a great idea. Man, that would have been great to talk about that in November, December, when we could have implemented that state that thing and so then, light bulb goes off several years ago about what if we start moving some of these clients to fourth quarter reviews.

We can actually give that advice in a timely fashion and so then the tax return becomes more of a compliance formality, then, oh, my gosh, and then goes from there. So and that's where, you know, your relationship with Sue and me, brought us together and we found out we had more in common, but it takes time. I mean, there's a difference in her process and my process and coming together, but when you can have that one, two punch done in that fourth quarter, I think that's some of our best work that we do for clients. It's like you experienced, you know, you hated taxes and now you'd like meeting with us. So we can solve some of those problems. You feel like you're much more proactive and that doesn't happen when you do taxes on your own. You just like, he's like you do it last minute instead of proactive.

Rob  10:01

Okay, and I think it's important to acknowledge just that relationship. It obviously drives both of you and doing that high level of work for the client. So yeah, that's just, it's been absolutely fun to watch and a privilege to be a part of.

Lance  10:24

Yeah, we agree.

Sue  10:26

Yes, we do.

Rob  10:32

Okay, so this brings us to our second question. Perfect segue. Why is important to work with a CPA versus an online service?

Sue  10:41

How much time do you have? [Sue’s laughing] I could go on for days, but let's try and condense it. It really is that one on one experience, and every tax situation is different. I mean, it may seem like, okay, everybody's got this kind of income and this kind of thing, but it isn't, you know, maybe this person owns a piece of property, this person has a business, somebody inherited money, you know, and everybody, like, you'll talk to Lance and already have has different dreams and so you can't do anything like that with online. There's questions, you answer them, it moves you forward, and online is all about compliance and you can't, as much as they tell you on the commercials, that there's a person you talk to. I mean, that person doesn't know you, that person doesn't have...

Rob  11:39

Different person every time.

Sue  11:41

Yes, they don't have a half an hour to, you know, hear your story or an hour or several meetings, to find out what's going on and do that tax planning in advance. You're doing it right there and then and all you want to do is get it done and I've had so many people last year, I did my taxes online and got 10 letters. That's why I'm here this year. So, you know, as many questions as they ask, it's confusing. I mean, that's why we go to class and take classes, it can be confusing to us sometimes and how many times the government changes the tax law. So yes, if you've got anything beyond a W-2, you need a CPA.

Rob  12:29

Right, and there's just I mean, you're touching on that and there's future episodes and topics here. But this concept of there's the actual big picture, individual customized strategy for each person and that doesn't even exist. But the concept isn't even there online.

Sue  12:49

No, it's totally compliance and that can be fine if you're 20 with a W-2, but the minute you start thinking about your future, I need retirement. I need a house. I have kids, then yeah, you need a CPA.

Rob  13:06

Right! So yeah, okay. Adulting 101, right?

Sue  13:09

Yes.

Rob  13:11

Any further thoughts on that, Lance?

Lance  13:14

Yeah, I mean, it's just, everybody has a story, right? And so further 5-10%, where it's, I went to work, I collected a W-2, I came back home, I complained about how much taxes they took out of it and then I have so much, and I'm really not progressing. There's programs out there, you can do yourself and then there's the 90% other people that need to apply their personal story and figure out the options and I think people only know what they know and so if you're a proactive person, which a lot of us are not, we're reactive. If you took a proactive approach, and did things a little bit further, earlier in the steps, you would actually find that there's things that you could be doing today that would reduce your taxes for 2022. It's just did you do them and if you didn't, you know, you pay your taxes, and I just think, you know, somebody like Sue or myself can sit down with you and figure out, man, these are things that you need to be doing in January. You know, and I use the apples in financial planning. We know everybody's going to have a Christmas expense in planning. So when I start saving for it now, why get the Christmas not saved for it, knowing that there's going to be an expense, and then put everything on a credit card. It's like, it's just getting people ahead of the curve to be able to take advantage and I think what Sue does a great job on is helping people just say, hey, there's things you can be doing now, that would make it better for you and let's get going on it and help them through those sticking points. She does an awesome job.

Rob  15:08

Yeah, it's all its yes this year, but then what about next year and then next year?

Lance  15:12

And that's the difference, those people that do yourself, they're like, they didn't think about it until all sons like, oh my goodness, I got to do taxes. I just go online and do it, but they're not really addressing the product and thus redoing their and so I think that's the difference with working with somebody is we're gonna sit there and proactively look at and give you a list of, you know, 5-10 things you could be doing during the year that would improve your tax return, so that you're not meeting with her in April going, I'll go my taxes are so much. What should I have done so?

Adrienne  15:46

We've even had clients who changed where they were going to buy a house based on which county, you know, just be on the right side of this line, and you'll have less taxes for your business. That's not something that you're going to go on a website, they're going to say, hey, by the way, you know, if you had bought a block over, you would be paying, you know, X percent less than you are on your local business tax.

Sue  16:09

Bingo, and it's the same even on residential homes, you know, home block over so yeah, they have a lot.

Rob  16:18

Yeah, Adrienne, it's a good point.

Adrienne  16:21

Like, we have a mutual client literally doing this currently they're working on grabbing a condo on the right side of a line because they made that mistake and it's worth it and then the shift.

Rob  16:30

Yeah, and there's so much depth there, Adrienne. I know you have stories for days. You know, you call qualifying somebody for lending and it's just, it's a nightmare, where and they're going well, hey, this is what I made. I'm fine, right? Well, actually, you did your online taxes, and you have to go back and actually we've had Sue fix some before and then they got it done. But they spent way more than they had ever even thought that they would be saving by you know, online, so.

Adrienne  17:04

And a day at the IRS office waiting in line. Yes [Sue's laughing]. Yeah, transaction. That was just a couple months ago.

Lance  17:13

It's a huge point he makes where, you know, somebody would want to save $200 on tax fee, but then they're gonna end up spending $10,000 move twice plus realtor fees, because they made the wrong decision on what side a line and it doesn't seem to make sense to me.

Rob  17:32

Not on the back end, right?

Sue  17:34

But that something proactive part.

Rob  17:36

Exactly! Awesome! Okay, so what does the process look like to start to onboard with you Sue? Somebody realizes, hmm, I don't think I want to do online taxes this year. Who do I call? They call you? Go!

Adrienne  17:58

Oh, I know this one. They get their shoe box with all their receipts. Bring it on in. All right, every document

Sue  18:08

Right, and Sue says, I know someone down the street. [Sue's laughing] Okay, so, I'll either get an email or a phone call and they'll say, hey, my best friend referred me and so yeah, I say, Okay, let's talk. So we start with a meet and greet, whether or not that's a phone call, or a zoom call, or a come in, in person and that's a, you know, no charge thing because I want to meet with them and they want to talk to me and look me in the eye and we want to see if it's a good fit, you know, because sometimes people have different ideas than I mean, I have how I like to work and they have what they want what they expect and so we chat, and you know, 95% of the time, we're gonna make it a go. So they bring in their tax return. I can even talk right there through, oh, this went on, I see you have this, I see you have that and oh, this means this or this means that, I'd say over 50% of the time, they say you've taught me more in an hour about my taxes than my other CPA ever did, you know, or what I ever knew, just because I can look down it and kind of get an idea a picture of what's going on and then we go from there. You know, I get a little information so I can send them out or send them home or email them a tax organizer that just has a couple pages of questions and then their personal, you know, information that stays very private and then we get them set up with an appointment. Then they collect their data and give it to us whether it's by secure portal or drop it off or something like that and then we put together the tax return or 90% of it, and set up an appointment for them to come in and review it. I've looked at it in advance and said, hey, I think there's a few things they could still do and that's where I say, Would you like to, you know, when they come in, would you like to meet with Lance and his team and see if there's a couple things we can do to get something better for you even this year, and start to talk about what next year might look like and that's kind of where we go with it.

Lance  20:49

And I'd like to add something to that, like, so Sue does a great job of onboarding clients and really working with them to talk about options and then what I tried to do is, how do we utilize Sue's time in the most effective manner for clients? So you know, there's three types of clients. There's the clients that are on a dog on it, right? They got everything organized, they bring it in, and, and so what happens is, that particular client is really the process of getting the tax return. I'll say almost to completion time, is a lot quicker, right? And so if we're utilizing your time less on organizing a file or your data, and we can get that data ahead of time, when you meet with Sue, it's less about what data you're missing, because we could do that through emails and stuff like that. It's more about how do I reduce my tax return and what do I need to do right now before April 15 and what do I need to do during the years so that we tee up your tax clients? Then there's the average that you know, sometimes they bring it in sometimes it's aftermath are always missing one to four items and things like that and then there's the last 30% that are like that shoebox theory of, here you go Sue, and that's a really great use of her time. When costs are going out of control, right, and everybody, everything's expensive for people, including CPAs and if you're used a lot, utilizing our times to sort through receipts, and do that, you're just not getting it and like I said to you, there was a bunch of receipts and it's sorted through and they just dumped it off and it wasn't organized. What would be your comment to them?

Sue  22:49

You need a bookkeeper.

Lance  22:50

A bookkeeper...

Sue  22:53

Or a new CPA. [Sue's laughing]

Lance  22:54

Or a new CPA, or will the cost be a little bit more expensive for that.

Sue  23:00

Well, yes, it's like because it's not prepared for me. This year, I'm gonna have to charge you more. But next year, you need a bookkeeper, or I can't do this for you.

Lance  23:12

So, we want to put clients in a position that they put their best foot forward, teed up so we can give you there's only so much time that we can give under a certain flat rate and then if not, we got to charge more for it. So, we rather give you the most amount of value and then I start to work with them to get them teed up. So, that then eventually teach people how to do your and tax planning, so that we can really maximize not have the conversation in April, but have that conversational fourth quarter, and that's probably I think we, Sue and I 100% agree, we don't agree about everything. But like, we want 100% agree that the clients that do year tax planning, they just seem to be happier than the ones that don't.

Rob  24:02

Well, case in point, right?

Lance  24:04

You're an example. Both of you are examples of that and it's just because clients feel like they're putting their best foot forward, we're putting our best foot forward. She's giving advice that other CPAs weren't doing. I'm implementing them and helping them get that through and it's that yin yang, we just see a happier client. Those happier clients costs are less, and they refer more clients. It's just we don't understand why more people don't do it. That's why,

Rob  24:34

Right! It's adulting you know, 2.0, if you will, yeah, smarter versus harder.

Sue  24:42

Yeah and the thing that I always like to say is, I don't want any surprised clients showing up in my office and saying, what do I owe, or where did this come from and that's never going to happen if they do tax planning because we know exactly, you know, pretty much we know what the answer is going to look like and they've already made that happen in advance. So, yeah, no surprised clients.

Lance  25:11

Let me give you an example that client comes in and you know, you owe $6000, $9,000. Let's just say $9000 is a surprise. Weird year different year and you're like, holy cow. Now, do you want to know that in April, or you want to know it in November? In November, I can decide to curve my expenditures during Christmas. I can't tell us how somebody was like, hey, you got a $9,000 bill, and we splurged on Christmas, because it's been a tough couple years and we went into Christmas, and we spent more money on Christmas. If I knew I had that tax bill that would have been nice to know. So now I got credit card data. Now, I got this $9,000. Man, if I knew six months ahead of time, I could save for more than half of that, and then make the necessary changes. But if that $9,000 bill and you had the Christmas, and then all sudden your for those clients tend to file their tax returns closer to April, May, June and now you're halfway through the year, and you should have made a change in January, it's like it's two years in a row that ends up happening and it's just too much for clients to graph during a COVID environment. It's just it's a lot and we would just like to have put them in a place of knowledge so that they can control what they need to do and their cash flow and people are happier if they know six months in advance and looks like a hero.

Lance  26:47

And Adrienne can give them a loan, because they know what's wrong.

Sue  26:51

You need a house. They'll see Adrienne and Rob. Yeah.

Rob  26:55

Yeah, there you go.

Lance  26:56

So, it has nothing to do with the compliance side of things other than getting a step ahead and we're reading the book, the goal that talks about the problem is at the moment of taxes, the problem was the year before, we're just trying to teach them how to be proactive. You're just not going to get that and an online service you just not. So, it's more of the coping emotional side of taxes. That's really where the wind is for clients.

Adrienne  27:28

[Inaudible 27:28] companies were run that way, the accounting team would just come in only in January or February and do all the bookkeeping for the year previous. I mean, it's insanity to think of it that way. But that's the way the taxes are marketed to us, right? You look on TV, some black and white video of them die covered in papers, and you know, trying to sort through a scene. It doesn't make any sense. You know, if you really think about it, and this is a recurring theme in this podcast, right? It's just forward planning. It's just getting it done making a plan, and then making it really, I don't want to call it easy, because it does take time to do this stuff and it is complicated subject matter. But obviously, you want to plan ahead, you know, obviously, yeah, you don't want to have that giant bill or cheque coming to you. You know, I made that mistake. I had the biggest tax return of my life. I gave the government an interest free loan for $10,000. That wasn't very bright. You know, a little forward planning as I've been working with you, is I can already see the money that it's saving me.

Rob  28:25

So, thank you guys so much for the value here Sue, incredible Lance, obviously. Yeah, it's we're beating the same drum. But it's just dropping that knowledge we appreciate it. Sue, where online is the best way to find you, which will of course put in the comments.

Sue  28:53

Okay, so we've got a great new website, www.ROI-tax.com and we've got all sorts of information there and ways to contact me and you find it there.

Rob  29:10

Right and we have our client appreciation events on there. Obviously, the educational podcast webinars and then the networking, referral small events also that we're doing so love that. Did we miss? Do we forget anything there Lance?

Lance  29:28

A phone number! Somebody had a direct need and needed to reach out to her today. She has a wonderful staff, schedule that meeting now. Maybe share the phone number,

Sue  29:41

Okay, because it's easy. Okay, so the 503-477-7773.

Rob  29:55

Alright and we want you guys to stay tuned for the next episode. Again, this is a part one of an eight part series...

Adrienne  30:04

It was just the kickoff...

Rob  30:05

Exactly! We'll be learning how to make your 2021 filings simple and finish us up Adrienne.

Adrienne  30:19

Thank you very much. Welcome again to the get rich slow podcast. This is one of eight really looking forward to and deeper into these for you folks. Catch us next time on the get rich slow podcast.

Rob  30:31

Thank you all.

2022-02-09 ROI Tax 2 of 8

Adrian Schermer  00:02

Hello, future millionaires and welcome back to the get rich slow Podcast. I'm Adrian Schermer. I'm joined today by Rob Delavan, Lance Johnson and Sue Hjort. This is part two in an eight-part series on making your 2021, simple tax filings, of course. I want to start off with a nice success story. Sue, congratulations. I know you've completed your continuing [Inaudible 00:24]

Sue  00:25

Yes, I did.

Adrian Schermer  00:27

Every year, each of us has to complete a rather lengthy process. It can be difficult to wade through but it really keeps us up to date on all of the pertinent information on our field. So, it's a good thing, but it's always a hurdle to be cleared.

Sue  00:43

Yes.

Adrian Schermer  00:46

Also, I want to highlight our different websites. ROI, financial ROI tax, I'm Adrian Shermer directors and then my own Delavan-Realty, all of those links will be down at the bottom of the comments on this episode and the specific event I'd like to highlight that it will be on all of our websites is actually the fact that we have calendered out everything that we're doing ,client facing, webinars, wind events, and some in person socials. Lance, am I missing anything here?

Lance Johnson  01:24

Yes, the BNI Group. We set up a business networking events at our office. So, we're excited about that.

Rob Delavan  01:33

Yeah, so all of that is actually calendered out through the end of the year and we will have those linked through our websites. So, just happy to have that done and hey, it's only February, right? So, we know what we're doing next December. So, Adrian, what are we going to experience today.

Adrian Schermer  01:52

So, in this episode, we're going to be speaking with Sue and she's going to teach us how to make our 2021 filings simple. Like I said, this is part two of an eight-part series. We're going to do lots of stuff as we move through. In our last episode, we got to know sue a little bit, who she is, what a CPA is, and what it means to work with one who's a professional like Sue nd now we can dive into a little bit more nitty gritty stuff. So, let's see.

Rob Delavan  02:27

Okay, so, Sue, thank you again, for being here. With our normal hosts, the three of us, Lance, Adrian and I. We want to warmly welcome. We love your experience, decades, the jazz hands, right and we just we want to specifically talk about a few questions for you. But the background for you, which we already covered last time, but you've only been doing this on your third decade now something like that and that's all no big deal. I would say she's our expert content witness when it comes to this episode. So, we were excited to learn about how to keep our 2021 filings simple and get some of the questions answered that are coming through. I know you're hearing them all the time, every day. So, you're getting a ton of questions in regards to the child tax credit. Do you know if receiving the advanced child tax credit will cause any kind of delay or complications?

Sue  03:37

Only if you don't report it accurately. So, here's the deal is most people who were eligible just started getting advanced child credits monthly starting in July of 2021 and it was either, 300 per child if their child was under six, or it was 250 per child if their child was six to 17. As they got that, it reduces what their credit is on the back end. So, for one year, and one year only, they raised the child tax credits to, like I said, 3000 for kids aged six to 17 and 3600 for kids, zero to under six. So, then they gave part of it in advance half of a year. And then they're putting it on the tax return, but it has to get reconciled, you know, reduced by what you already received. Now, there was a lot of issues last year when they gave the stimulus and people reported what they got. People didn't remember too well and so; it caused a lot of problems and there's a lot of backlog at the IRS. So, this year, the IRS sent out letters in January There was letters to people that said, here's how much we gave you for your stimulus and then the second letter was, here's how much we gave you in your advanced child credit, as long as you hang on to that and give it to your CPA or use it, when you're filing and do that reconciliation, then there's no holdup on your refund and that's why the IRS said, file early, file electronic, file accurately, and use direct deposit. So, accurately they sent out that letter to help you reconcile and be accurate. So, I think we've got a link on the IRS that you can learn more about that if you understand IRS lingo. Yes, Lance.

Lance Johnson  05:49

So, on that link,  because I can see clients, I got the letter, but I moved or I threw it away, I didn't recognize it, is there a way to individually go and see what letter was sent to you?

Sue  06:07

I believe you can, because there is a place I don't know if it's in this link. But there's a place on the IRS website where you can log in to your own personal account and it'll tell you those things. It'll say, here's how much you got a stimulus, here's how much you got in advance child credit. I apologise I don't have that off the top my head. But yeah, if you go on the IRS and say, how much did I get? I think it's even one of the topics that you can click on when you go to irs.gov and that's the place to find this.

Lance Johnson  06:42

Maybe we'll add that link, because people that not sure could go, that's the one thing that's going to hold up the return. Now, one thing to tell the clients to do as the IRS moves into the electronic age, is that we can verify and then the happier the client is.

Sue  07:04

Well, the quicker it goes, things move along. smoothly for me and the client.

Rob Delavan  07:14

Just for reference for you guys, the website is, ww.irs.gov/credits/ deductions and then 2021- child tax credit and advanced child tax credit payments topic, a general information.

Sue  07:32

But if you go right there view your child tax credit payments, click on that, and away you go and you'll find it out. Or if it's the same with the stimulus, execute your stimulus status, it'll tell you how much you got when you got it, all that stuff. So, it's trying to help you.

Rob Delavan  07:53

Awesome, love it! So, question number two I have for you, Sue and Lance,  with these changes to child care tax credit, what can be done to proactively make this process easier? You dug into that a little bit Sue with kind of the changes? But how would that affect how you do tax planning and specifically what goes run through those changes again, and you'll both have your own interesting take on it.

Sue  08:28

Okay, so, we talked about the child tax credit, and, like we said, the advanced credit and all that kind of stuff reconciling, but there were also some changes to the child care credit, the dependent care around 2021. So, they raised those limits to be able to allow to be more realistic. Honestly, for one kid, they only had $3,000, 02 kids were $6,000. It's like, no, that's not what people pay. Yeah, I received my daughters for one child this week, not realistic at all. So, they raise those limits so that people can get more credit. Again, I'm not going to give you every detail, but you can find it on the IRS website, we'll put a link I can put things on our websites as you know, the ROI taxes items that you would be interested in. Your other question talked about simplifying my process and we alluded to it in our last question, but to reiterate, making sure you have all the documents, keeping things that say important tax document or you get an organized or I've also started sending out generic tax list. I sent to some people that said, here's anything and everything you could possibly get just throughout the year, putting things in there that you've done, stock sales, donations, all that kind of stuff and these type of things with child care, credits, or whatever and then as soon as possible, uploading that, dropping it off, scanning it in to get to us makes our job easier. So, we're not chasing after you to get information. If my job is easier, we get your taxes done faster, the refunds on the way or it's just out of the way, you don't have to worry about it for the rest of the year and you can move on to tax planning, which is the more interesting and exciting process. So, this is smooth, simple and a no brainer and taxes become not a worry, and a chore and a burden. But okay, here's what we do. Once a year, it's a good thing. So, that's my take on it.

Lance Johnson  11:07

Yeah, and I would add something to that where with these changes, there's always income phase outs, one person may get the full benefit, another person might not get any of it. So, being on more of the less of the compliance side, more of the planning side, urine tax planning really kind of helps address some of that. So, there's this game that we play that everybody has a tax liability, and then you match up your withholdings to get a slight refund, or it's like, oh, but the closer to zero it is with all these changes. We want people to know that in the fourth quarter of the year before. So, they know they're close. Ideally, we always try to position clients with a slight refund on federal and state. But we're having that conversation in the fourth quarter of the previous year. So, there's less anxiety of all these changes coming in. Now, sometimes we don't know all the changes. But we know they don't get solidified until after the first of the year. But they're talked about and then if we're close on the base stuff, then they're small enough changes and then in the planning, we look at dependent care, there's all sorts of questions in the planning side. So how much is that now more realistic, and then how much of it is the dependent care credit versus pretax with your employer, that conversation needs to happen in October, November, or you lose a whole year. So, that tax planning, we have dependent care, we just would encourage you to engage Sue and I in tax planning in October, November during open enrollment,  we can help you make those decisions that have to be done there for a future scenario. So, that's what I'm good at, planning becomes clients are happier when they know their bill in October and November for the next year in April. They're just happier, and then they're able to make adjustments before top 31.

Rob Delavan  13:21

That would be my take. So, the third question I have for you is, how will the stimulus checks affect my taxes?

Sue  13:35

Okay. In theory, it shouldn't be at all, you either got it or you didn't. So, here's what goes on. Everyone who was in the income threshold would have got that last year. So, one for 2021 was $1,400 a person, husband, wife, child, that type of thing. So, the IRS trying to make this easier, has sent out these letters in advance that says, here's what you got. So, you bring that to your tax person, and they enter that in so that there should be no, no problem reconciling that. Now, I did have a situation just the other day where somebody didn't get their stimulus because their income for 2020 was well above the limit that they could have got it, 150,000 is the limit for a married couple, and 75,000 for single. But this year, their income was down because they had an unusual capital gains situation in 2020. that causes them to be over 200,000. But this year, their income was back within range, they dropped below 150 and boom, that 2800, 1400 for each of them showed up on their tax return. So, how does it impact? It's either going to be you got it last year, or woohoo, we got it this year, and you get some extra money. So, it doesn't play into Oregon, there shouldn't be any issues with that. For this year, if we're talking to Oregon people, or I don't know specifically about other states, but you either got it or you didn't you get a letter from the IRS, maybe your income dropped and you get it this year, that's the most that should happen with the status.

Lance Johnson  15:54

So, it's kind of interesting at that point, I love the whoohoo. Because what happens is, if you got it, then you just got it during the year, and it shouldn't affect your taxes, you should have gotten it. But you didn't, because you didn't qualify but you qualified from the previous year and we did plan and let's say you just get a slight refund 200 bucks, I'm just making something up. You get the woohoo, I didn't get it, and I should have gotten it. So, I'm going to get a higher refund and that's always a psychologically a better scenario.

Sue  16:36

Yeah, it's bonus, everybody loves the winds.

Lance Johnson  16:39

There is a situation where  some people have a reluctance of having their refunds direct deposited or taken out of their account and sometimes that is better because I've seen situations, and not everybody's going to agree with me on this. But if you had your refund, or you're owed taxes come out of your tax return on a certain day, then the IRS knows how to deposit into your bank account and there is a lot less work on the clients and the CPAs part, having that automatically done. Then there's there is issues where, hey, I had that bank account last year, but now that bank account is closed  or I did the paper thing, didn't recognize the cheque I moved. There are just all sorts of scenarios, but I know electronically, if that happens, it seems to be a little smoother, if you can set that up.

Rob Delavan  17:45

So, the last question and final thoughts here is, what would you recommend clients do to allow you to serve them better and Lance on the tech side, Sue, and basically to process things more efficiently?

Sue  18:04

Okay. Well, I discussed a little before about that in another question, but just reiterating, of course, is have your documents, have them ready and get them to us as soon as you being able to have them upfront, process them get to, like 90%, and being able to have them come in and do an appointment and we can discuss maybe some other options that they can do, and I can refer them to Lance on the financial side, it just is going to make the process go smoother, and things go easier, and then having some other things to be able to do financially but getting the documents getting them early, getting them processed, that helps things go smoother on RN.

Lance Johnson  19:04

On our side, the CPA is more on the compliance side, getting everything done, obviously, in a timely fashion. We're on the planning side. So, when somebody does plan and they know they're going to get a $200 refund, and they were able to utilize all the benefits during the year that has a lot of them have to be done before 1231. Clients feel like we're being very proactive versus reactive and that always sits better with clients. No client wants to learn that in March or April. They owe money but if they just sat with us on November, and they could do two or three things that reduce their tax liability by 500,000 $2,000. That person is always going to feel alone Better that we did everything we possibly could, it's just February, March, April is not the time to do that, it means you still want to do it as much as you can, but the choices are a lot less. So, we find that the attitude of a client is much better if we really address that, then when we actually do the taxes, you know, anytime you can get the data beforehand, so that when Sue meets with you, you're 90 something percent done with your tax return, instead of bringing the stuff to her, I watch clients bring stuff to her on that meeting, that particular half an hour and 45 minutes with Sue is so valuable, I don't want to waste it with her and the clients with just delivering data. I want to wait, I want to utilize that 45 minutes during February, March, April, where 95% of the tax returns done compared to the urine taxes and we're just strategizing on what you could do today and what you can do before April 15 and what you can do in the current tax year to change the tax law, that's the best use of Sue's time with that client. So, if we can get the data ahead of time, we will have that tax return almost completed and then there's less backlog of stuff that needs to be completed before April 15 and for any CPAs Health, the less that they have to work 90 hours to do silly stuff versus 90 hours to do impactful stuff. I just watching the clients walk out of there that do that. They are just ridiculously happier.

Rob Delavan  21:44

So, for Sue, for all of those procrastinators out there, it does not serve you well.

Lance Johnson  21:51

So, this is actually a great point. So, not everybody has to file by April 15. So, what happens is if we identify clients that need a little bit more time, because they're procrastinators, but we did tax plan, and we're in a position to have a refund, then you've covered your liability, you don't have to file by April 15, you could extend because you already covered your liability, and then you could take a little more time to identify the planning aspect. But if you owe you the pressure is on her to figure out how much you owe to get you to a refund side. I think from a client compliance standpoint, we know that and October November, and you are kind of a procrastinator, then refund or extending is not an issue for those clients. I think it just sets up the expectation a lot better for Sue and the client.

Sue  22:49

I would add one more thing that I don't even know if I should say is, if you come to me April 1, and asked me to complete it by April 15. It's like, do you want April 1 Zombie CPA or would you rather I was fresh, like, and I'm happy to see you. I don't think you want zombie.

Lance Johnson  23:14

Does anyone ever benefit when you're dealing with a zombie? Has that ever worked out? Well, I don't know a movie that ever has done that.

Sue  23:25

Protect your brain, yes,

Rob Delavan  23:26

Exactly. I love it. Well, thank you so much for all of this this information. This is huge. Obviously, there's a theme here, we want to get ahead of the curve. But Sue, this is huge value for our listeners and Lance also. The best way to find Sue is visit her at her website, www.ROI-tax.com. That again will be linked to the notes below and we have another six more episodes on this one. So, please stay tuned a part series, right Adrian?

Adrian Schermer  24:06

Yes, I really am, I wish I could say that I'm joking, but I'm not. It's good info and it's going to save you money and save you time and it might save you a little bit of sanity.

Rob Delavan  24:15

So, episode three, just a teaser here. We will be learning what to expect in 22 when it comes to your taxes. So, love it. Thanks all for being here.

Lance Johnson  24:26

Okay, nice job, everybody.

Rob Delavan  24:27

Catch you next time, folks.

2022-02-09 ROI Tax 3 of 8

Rob Delavan  00:07

Good morning future millionaires and welcome to episode three in an eight-part series of the get rich, slow podcast. I am your host today, Rob Delavan. Adrian Shermer is in sunny Hawaii this week, so he will be joining us not for the next couple episodes. I am joined today by Sue Hjort, our guest and tax extraordinare. Lance Johnson is having a full docket of clients today. So, he will be joining us on probably for our next couple. But again, this is a third episode in an eight-part series and the title today is what to expect in 2022 when it comes to your taxes. So, welcome back.

Sue  00:57

Thanks.

Rob Delavan  00:59

Thanks for being here. So, it's you and I. So, one of the things that we're going to be leaning on in we have been in this entire series, and we'll continue is just the success story every year CEU, your continuing education and tax changes, tax law changes every year. So, thank you for doing that. But yeah, we're going to be leaning heavily on that as well as some other sources and on upcoming events. In the comments down below, we will put a link to our calendar and for all of our local events, webinars, and client appreciation things and so forth and there's also links to our websites, where you'll be able to find that stuff. So, in the episode ahead, so we're going to be just picking Sue's brain a little bit more with Sue with ROI tax, and she's going to be teaching us what to expect for 2022 when it comes to your taxes, again, third in an eight part series, and on our last episode, we learned how to keep our 2021 tax filings simple. So, intro for you, Sue, we appreciate you being here and always love having you with us. Sue is, as you guys all know, my trusted CPA and business partner. I'm going to jump right into question number one. So, based on your continuing education,  what changes are coming down the pike for 2022?

Sue  02:41

Okay, so, I'm thinking about that. Right now, I'm in the midst of doing 2021 taxes, what we're talking about today is looking forward, and what are the possibilities? So, the issue is that if you're following any sort of news on the government, they got stalled,  build back better. Bill was supposed to have all the new tax changes and after they got through approving the transportation bill, the one with all those infrastructures to I think there you go infrastructure bill that had motto no over a trillion of money that needed to be spent. Now, they need to pass this bill back better to increase the taxes so that they can pay for it. However, it got stalled, so that it hasn't been passed yet and here we are already in 2022. They've looked at a couple things like dividing it into three parts, because there's some things that they're not liking it because it's not just taxes in that build back or it's other stuff. So, however, with all that said, I just wanted to tell you, there is things that are being looked at that they've talked about several times, we talked in continuing education, about how they'd had various revisions up through the end of the year, and which things stayed through all those revisions and those are the ones they're thinking are going to go through. So, tax rate increases, that's going to go through, right now the highest level is 37% and it's looking at going up to 39.6%, over  600,000 yen, okay, so we're not talking about, you know, your average middle class family, but that's where they're looking in all of these bills to get the money is from millionaires, multimillionaires is really what they're talking about. They're saying that with the increases in some of these things, that they're looking at multimillionaires paying on top of money, there is even been talk of taxing assets of multimillionaires. Again, we're not talking about you and I in our 401k accounts, they're talking about assets, you know, 10 million and above. So, I'm not going to be able to give you every detail, but those are some of the things that's being talked about.

Rob Delavan  05:51

Well, what's fun about this is fine or not, I guess, depends on how you look at it, it's almost a political conversation of what's going on in Washington DC, versus how, and then how it affects the vast majority of your clients, typically middle class business owners who are trying to be smart with their taxes, by working with a CPA, but it's probably worth mentioning here that in no way shape, or form, are we endorsing, like one political position or another?

Sue  06:30

Absolutely not.

Rob Delavan  06:31

We are literally trying to just share this knowledge of what is likely to happen or not likely to happen, and frankly, based on the political winds changing,  sometimes daily,  we can be totally, oh, this is going to happen, and then the next day can be something completely different. But I guess the point of it is, you're aware of it, obviously, because you do this every day, and you're on it just on behalf as an advocate for the clients that you're serving.

Sue  07:03

Yes. A couple things that I would say, is it, I'm 99% positive, that if they pass something before, June 30, oh, for heaven's sakes, it could be after that, it's going to be retroactive. So, it's going to affect the whole year. But then on the other side of the coin, to reiterate what I said earlier, it is primarily affecting people on their tax return, they have income over 400,000, if they're an individual or 450,000, if they're married. Now, that does affect some of my clients but like I said, the majority of things are going after multi-millionaires. So, we're not talking about should I fund an IRA or something  that we're talking about, be ready, because things are coming if you have a lot of money, but there you go.

Rob Delavan  08:09

Okay. Well, that's good to know. Okay, so, question number two for you today. Sue, there's been a lot of talk about there being changes to capital gains, at this point, is that expected to happen? What can we expect for 2022, speak about that?

Sue  08:31

 Okay. So, as I mentioned, in a previous question, that they're really the tax changes are going after people with large amounts of money. So, like I said, then maybe they've got a tax return with adjusted gross over 400,000 as single and 450,000 as a married couple. So, the capital gains rates now are zero, if you're under the 12%, and there is zero capital gains tax 15%. If you get up to the 22% bracket, and once you're over that, 400,000, it's been 20%, and still is right now, what they're talking about, is raising at the highest level. So, we're talking again, closer to 600,000, that they're going to go with 25% capital gains rate, it's a possibility and then because of the fact that when you have income that high, there's this net investment tax, sometimes called the net tax, that tax is 3.8% on investment income for people who have those high amounts of adjusted gross 600 and over. So, if you add 24 5% plus the 3.8. net tax, it's the effective rate is 28.8%, they're talking along those lines. So, it's a definite possibility. Again, my average client, your middle class taxpayers, you can still make two 300,000, this is not going to affect you, you're going to be those 15 or 20% tax rates, it's just when you've got the higher levels, and you've got a good investment income, hey, I think it's going to go up.

Rob Delavan  10:41

Follow up to that is, is that taking into consideration the long term versus the short term?

Sue  10:47

Those are the long term. I'm talking all long term here. Short term capital gains, anything that is held under one year, less a year or less, right here in a day is long term. Short term capital gains are considered ordinary income, and they're at your ordinary tax rate. So, I apologise not upfront, but long-term capital is what I'm talking about.

Rob Delavan  11:17

We'll put some definitions of that with references in our show notes. So ,that the long-term capital gains rate versus short term capital gains rates, just so that if the audience needs, they can look at it, there you go. Okay, so, next question for you, Sue is having income brackets changed. I think you were sharing with us a cnbc.com article that we'll put into the show notes. But there are some pieces to that, to explore here.

Sue  11:59

So, the federal income tax brackets, going up has been one of the consistent things that we think is going to happen and that's going to be for the highest bracket. So, right now, with the 2021, taxes, we're looking at the highest bracket being 37% and that's 400,000 and over, but it's going to move up to 39.6%. I don't know every bracket off the top of my head, but I do know that the other brackets are going to stay about the same, 10,12, 22, 24, 28, something like that. But it's that highest bracket, they're going to go a little higher, if you're looking at 500,000, plus that type of thing as your adjusted gross income.

Rob Delavan  12:55

When you're saying, four or five 600,000, I think you're utilizing a range, because none of this is settled.

Sue  13:10

That's not set in stone, that's been the problem. Back to that build back better build that contains all the tax increases, hasn't been able to get through Congress, some other things came out, with COVID, and, some political things where it's got stalled right now, and they're trying to get it through. But because of that, there may be adjustments and compromises. It sounds like the rates are going up for that highest bracket. But yeah, all the details haven't come through yet.

Rob Delavan  13:49

So, don't hold your breath. There you go. So, then I believe the second the second point of the three things needed to know by that CNBC article, was talking about standard deductions, correct?

Sue  14:03

Yes. So, standard deduction has, since they did away with exemptions back in the 2018, the standard deduction has been increasing. The statistic we heard in our class was 90% of taxpayers don't even itemize anymore, at least on federal. In Oregon. You can still itemize, so, keep holding on to those receipts and contributions. But standard deduction going from this year doing the 2021 taxes. For a married couple, it's 25,100. But it's going to jump $800 and be 25,900 for a married couple in 2022.

Rob Delavan  14:49

That's very generous of them, $800

Sue  14:51

Yes, it is and the single is half of that, 12,950.

Rob Delavan  14:59

So, I don't want to be too sarcastic on this, but is the concept there of an inflationary adjustment?

Sue  15:14

Every year since they started with the 2018, it was 24,200. So, they've had increased every year and standard deduction.

Rob Delavan  15:27

Should I slightly sarcastically say thank you. You're keeping pace with inflation, but it's just something that's going to move the needle we're going to go from 25 to 30.

Sue  15:38

No, it's just the annual we're increasing, they did a little extra with this 2021. I'm still working on this and we've gone over this, they increased child tax credits for a year, they increased child dependent care for a year, and they've allowed people if you do cash contributions, then in addition to standard deduction, the IRS is giving an extra 300 per person contribution as long as you did cash contributions up to 600 for married couples and for singles 300. So, they're trying.

Rob Delavan  16:27

I got to keep a positive attitude.

Sue  16:31

You know, you can help me with the podcast, we're all about getting the wealth.

Rob Delavan  16:36

Exactly. So, that does the third point on that CNBC article. There's also changes to the AMT estate tax exemption, earned income tax credit, flexible spending account limits, among others and just before I forget, we will put some the definitions of those with references in our show notes for this one, but do you want the AMT?  Do you want to run down a few of those?

Sue  17:05

Yes, to give you a brief overview alternative minimum tax and that's the hardest to explain. But most people know it is AMT and it's like this whole separate tax bracket. Prior to 2018, there was a lot of people that fell into AMT and when they went to standard, this higher standard deduction, it's almost gone for most people, because it had anyway, too much to go into. But yeah, they've talked about some other things with these new changes, possibly the estate tax exemption, which is 11 million now could drop to three to 5 million for the IRS. Federal right earned income credit, they changed for at least the 2021 tax year, and it's a little higher, especially for people without children, people with children were getting it regularly. But they've even done away with age because it started at 25 and went to 65. Now they've expanded so more people could get it and flexible spending limits, those are with your health care stuff, that you opt into, they've allowed you to not have to spend the whole 2500 In a year, they've given you a little over slop into the next year, which is nice for most people. So, those are a few things that I know about it.

Rob Delavan  18:43

Okay. I love that. So, final thoughts on this, Sue, looking forward to 2022, can you sum it up in 15 seconds or less?

Sue  19:00

Yes. If you make over 500,000, you could have some increases and under that, you're going to be fine.

Rob Delavan  19:09

Okay, I like it. So, you're good. Thank you so much for being here. So, you  are adding value to our listeners, the best way to find Sue is to visit her at her website, www.ROI- tax.com. That will be linked in the show notes and please stay tuned for our next episode in this eight-part series with Sue. The next episode we'll be learning the basics of small business taxes so fun stuff. Okay, that'll be it for today. Hope you guys enjoy it. Hope you guys can take a little bit away from this to help you get rich slow, and to really tackle the millionaire become in a millionaire by being brilliant at the basics. Thanks Sue, love it. Thank you, audience, we'll see you on the flip side

2022-02-09 ROI Tax 4 of 8

Rob Delavan  00:05

Good morning. Welcome to Episode Four in an eight-part series to the get rich, slow podcast. I am your host, Rob Delavan. Adrian Shermer, our normal host is in Hawaii. Lance Johnson is back to back to back with clients today. So, I have joined  and you're welcome. You guys don't have to listen to me talk for 15 or 20 minutes, I'm joined by Sue Hjort of ROI tax. So, hello, welcome back, and welcome back to get rich, slow podcast. So, this is again, Episode Four in an eight-part series. The title today is the basics of small business taxes. exciting, exciting stuff, especially for me, at least since I'm the owner of a couple or a few different small businesses. So, I want to share a success story with you guys today and this has been an ongoing thing year after year, but that Sue has helped me as a small business client of hers help planning when to buy vehicles. So, I don't want to go into the nitty gritty too much. But section 179 of the IRS tax code, which we can link to the comments down below, basically states that within certain situations if I'm with certain criteria met, and we won't go into it, but a real estate broker or real estate brokerage or a contracting company can utilize a one year accelerated depreciation right off of work vehicles and last few years, we've been planning on when I buy work vehicles, and that has reduced tax liability and allowed us to frankly, provide more work vehicles for our operations. So, thank you, Sue.

Sue  02:12

You are welcome.

Rob Delavan  02:13

If I can save on taxes to invest in a business, I believe that's the reason why that's a win that was put in it's all day long every day. And I'll do it year after year after a year. So, thank you for that success. Upcoming Events, we will link to our calendar of events for the entire year on our websites and we have the ROI-tax.com website for Sue, Delavan- realty.com myself, and then we have Adrian's at directors’ mortgage, and ROI-financial.com. Also, everything will be in the show notes at the bottom. But go there if you'd like more information for the episode ahead. Sue again is going to be the big brain that we're going to add to mine and she'll be teaching us the basics regarding some small business taxes and frequently asked questions again for in an eight-part series. In the last episode three, we learned what to expect in 2022 when it comes to your taxes. So, Sue, you've only been doing this for what? How many decades, going on your third?

Sue  03:38

Yeah, I'm in my third deck.

Rob Delavan  03:41

She's a with ROI tax and we always are lucky and blessed to have you especially given that this is February of 2022. So, we're already into tax season, we will take everything we can get from you and thank you for graciously sharing your time with us. You bet. So as our trusted CPA, let's just jump into question number one. So, what's the difference between an LLC and an S Corp and when should you make the switch? And of course, I'm sure there's some benefits one or the other and this is business Small Business Taxes one on one?

Sue  04:20

Yes, it is. I get asked that question by every small business owner. So, this is an important one. So, there's some basic similarities. LLC and an S corp do not pay their own taxes. They may have their own tax return, but any net income or loss from an LLC or an escort passes through to the personal owner's tax return. So, if it's 5050 owned or  three way owned, however it is it gets passed through in those percentages, those are the similarities. But the big difference is, if you have an LLC, it acts like a partnership, an LLC is a limited liability corporation and with a partnership, if you have income, you don't have wages in an LLC for the owners passes through to the owners return and they not only pay ordinary income tax, but they have to pay their own self-employment tax write on their personal tax return. So, as you can imagine, when you're earning a net income of 10,000, on your personal tax return, that's doable. Yo got ordinary income tax, but the self-employment tax, you're paying the employee or half and the employee half, so that's 15.2%. So, as those people are going up, you know, 20,000 30,000, you know, 50,000 100,000, when they're getting over 50,000, consistently as their net income, and say, there's only one owner, so that whole amounts going on their tax return 15.3% of it is additional tax that they have to pay. That's when I'm talking to them between 50 and 100,000, is when I say, time to do an S corp, I'm now on an S corp, the owner has to take wages, and then any remaining net income goes on to their personal tax return, like I said, passes through, however, there's ordinary tax on it, but no self-employment tax if they've already taken. So, we'll go with that 50,000, they took 20,000 as wages, the payroll taxes on that as paid through the business, the 20,000 does go as wages on their personal tax return, the remaining 30,000 is net income. So, ordinary income tax, but no more self-employment tax, and not two sides of it. So, this is the benefit. I'm saving people 600,0 12,0000, $20,000 by not paying self-employment tax.

Rob Delavan  07:27

I would say that's a big pivot point for somebody's business, because it starts to go from maybe more of a hobby side business to okay, this thing is humming along and it's making 100,000 and that's like you said, the net income.

Sue  07:46

Yeah, you're legit. This is a business and we're not talking about, okay, you've lost money, five years, it, the IRS is going to think it's a hobby go away. You're going up the ladder, and you're making it work and it's a business, we need to do some tax planning.

Rob Delavan  08:06

Okay. Obviously, that's been a big drumbeat for this entire series is, this is where we start really digging, diving into the benefits of, of an actual consultative tax approach, where we're planning and being strategic ahead of time, rather than just reacting to whatever was the status quo before and would you say this is when you start having this conversation, this is where you start doing tax planning, during July and roll out other times of the year to?

Sue  08:44

Absolutely, because it usually happens when they had 20,000 of net income one year, and then the next year, they had 75 of net income, and they're like, my taxes are ridiculously high, and I'm like, now is when you need to be an S corp, they're only going to get bigger. So, yes, we do proactive. I'm looking at their books throughout the year, we're making planning for retirement, all kinds of things.

Rob Delavan  09:13

What gets hairy is, oh, no, I just realized, you know, December 15, that I made triple what I made last year, it gets much more difficult to, to switch and even at that point, even though it's before the end of the year, it's basically impossible, you really have to do it for the next year.

Sue  09:32

Yes, I would really rather do it that way. Because there's a lot more we can do if we start planning in March, May, as opposed to December 15ll we can do is kind of put a bandaid on it and say put some into IRA. But let's talk about in May, getting you an S corp putting you on salary, maybe a 401, some bigger things.

Rob Delavan  09:58

Excellent. Okay, that's great advice. Okay, so, my next question is, what is a Schedule C and why is it important, and we will put the definition of a Schedule C, just the basic one with references in our show notes.

Sue  10:18

Okay, so, Schedule C is where if you're a sole proprietor, you have an idea for a business, you'd like to give it a try. But you don't want to overcome it, maybe you become an LLC, just to give you that layer of protection, an LLC stands for limited liability corporation, it doesn't mean you're a corporation, it doesn't mean you have to pay wages, it just means, hey, I've got a little legal protection. So, I'm protecting my other assets from this new leaf formed entity. So, it could be that hobby that you've decided to take a little further than that, hey, I'm selling some things to people, what do I need to do? Or it could be that family or some type of business where I'm giving this a try? I'm really liking it. Do I need to be an escort? I like to tell people to start as a sole proprietor or an LLC, where you're just got a layer of protection and then I tell them, we'll see how it's going in three to five years and if it's taking off, that's when I take it to the next level of an escort, that type of thing. But it's necessary for those things where you're making, you know, you're making some money, they like to call them cottage industries, sometimes where you're doing it out of your home when you first start. Remember, Nike started in a garage, and a waffle iron. So, that's why they call them cottage industries. So, that's what it's for. We have got a little reference in the notes too, a website called the balance.com and it will give some more information about schedule C's.

Rob Delavan  12:21

Okay, great. So, last question for today. This is a hot button. You've helped me with this significantly over the years, when is it best to hire a 1099 contractor versus a W two employee and we might want to start with defining those terms, which we'll throw in the show notes.

Sue  12:48

Absolutely! So, a 1099 contractor is your business is growing, you need a little help. But you don't need somebody full time you just need, you're selling stuff on Amazon or Etsy or something like that, you need somebody to come in and box it up and take it to the post office and ship it, once a week or something like that. So, that's a contractor where you say, hey, your neighbor's teenager or something, I will pay you 20 bucks an hour to just come over and do this and it'll probably be about four or five hours a week, or whatever it is, that's a contractor. But it can even be a part time person, you've got a moving company, that's small an, I just need a driver a couple day a week. So, 1099 contractors, you're paying them an hourly rate, but you're not withholding any taxes for him. So, that's how it saves money for the business by not having to pay the employer side of the texture. However, the biggest piece about contractors is they come and go as they please, they have a permanent place in your organization and they have another job. They could not be making a full-time wage doing what the hours you're asking them something like that. Or it's someone with a business that's like, hey, I do tile but I need somebody to do this piecemeal work down here that I can't do. So, they just have somebody come in and do that and off they go. They've got another business. Okay.

Rob Delavan  14:46

So, there's a litmus test there. I think some of the questions that I've been asked about that by you actually, was are you telling them like what to do, when to do it? How to do it. Are you furnishing them in a chair? There's a number of questions where if you start at answering yes, on all of those, it's like, they're an employee.

Sue  15:16

Those are all what I've asked you and all what someone needs to ask themselves and even on the Oregon Department of Revenue website, I think even on the IRS website, there's like 10, to 12 questions that you ask, and those are the exact things, it's a W two employee, you provide them with a place to work, you tell them what time to come and go, you train them or provide them, you know, this is what I want you to do. Those type of things, because even part time people can be employees, if all those things are met.

Rob Delavan  15:54

Oh, there's an interesting nuance here in the pandemic world, everybody went to work remote, and which then just by definition started to make it well, there's less telling them when to do it I am aware of a bit of a trend, usually, over the last years, it's been converting more and more people from that contractor role to employee role and then just in the last couple years of the pandemic, there has been a little bit of direction, the other way of, at least, just from a social aspect, I guess, a social norm.

Sue  16:35

Exactly. There's going to be a few more contractors, because you weren't following some of those rules, they get logged in when they want and maybe as soon as their works done, they can log off and that type of thing. However, you can have flex time and still be an employee. For example, some employers have said, okay, we want you to come back, and there's been to an office and there's been pushed back. So, they said, you can be hybrid. So, maybe they spend three days a week at home, but their employer tells them, you have to be in the office two days a week. Or there are some employers that say, you have to be online these hours of the day, because that's when we have zoom meetings, or I need you available to your boss or those type of things. Okay, so, you can still be remote worker and be an employee but yes, I can definitely tell you there's going to be some range of contractors.

Rob Delavan  17:45

Okay, so, Sue, any final thoughts, 15 Seconds or less, small business taxes. Good luck!

Sue  17:55

I want to say good luck. I'd say if you're starting a small business, you need to see a professional because there's a lot more out there than you know about.

Rob Delavan  18:03

Yeah, okay. That's huge. I can personally attest to that. Thank you so much for being here, Sue again, the value of especially during tax season, being able to provide this to our audiences is incredible. The best way to find Sue is visit her at her website www.ROI-tax.com. That will be linked below in the show notes and please stay tuned for our next episode in this eight-part series with Sue. The next episode, we'll be learning how to make standard deductions versus itemized deductions simple for you. So, again, very exciting. I love it. Thank you so much for listening to the get rich, slow podcast and we'll see you guys next time.

2022-02-09 ROI Tax 4 of 8

Rob Delavan  00:05

Good morning. Welcome to Episode Four in an eight-part series to the get rich, slow podcast. I am your host, Rob Delavan. Adrian Shermer, our normal host is in Hawaii. Lance Johnson is back to back to back with clients today. So, I have joined  and you're welcome. You guys don't have to listen to me talk for 15 or 20 minutes, I'm joined by Sue Hjort of ROI tax. So, hello, welcome back, and welcome back to get rich, slow podcast. So, this is again, Episode Four in an eight-part series. The title today is the basics of small business taxes. exciting, exciting stuff, especially for me, at least since I'm the owner of a couple or a few different small businesses. So, I want to share a success story with you guys today and this has been an ongoing thing year after year, but that Sue has helped me as a small business client of hers help planning when to buy vehicles. So, I don't want to go into the nitty gritty too much. But section 179 of the IRS tax code, which we can link to the comments down below, basically states that within certain situations if I'm with certain criteria met, and we won't go into it, but a real estate broker or real estate brokerage or a contracting company can utilize a one year accelerated depreciation right off of work vehicles and last few years, we've been planning on when I buy work vehicles, and that has reduced tax liability and allowed us to frankly, provide more work vehicles for our operations. So, thank you, Sue.

Sue  02:12

You are welcome.

Rob Delavan  02:13

If I can save on taxes to invest in a business, I believe that's the reason why that's a win that was put in it's all day long every day. And I'll do it year after year after a year. So, thank you for that success. Upcoming Events, we will link to our calendar of events for the entire year on our websites and we have the ROI-tax.com website for Sue, Delavan- realty.com myself, and then we have Adrian's at directors’ mortgage, and ROI-financial.com. Also, everything will be in the show notes at the bottom. But go there if you'd like more information for the episode ahead. Sue again is going to be the big brain that we're going to add to mine and she'll be teaching us the basics regarding some small business taxes and frequently asked questions again for in an eight-part series. In the last episode three, we learned what to expect in 2022 when it comes to your taxes. So, Sue, you've only been doing this for what? How many decades, going on your third?

Sue  03:38

Yeah, I'm in my third deck.

Rob Delavan  03:41

She's a with ROI tax and we always are lucky and blessed to have you especially given that this is February of 2022. So, we're already into tax season, we will take everything we can get from you and thank you for graciously sharing your time with us. You bet. So as our trusted CPA, let's just jump into question number one. So, what's the difference between an LLC and an S Corp and when should you make the switch? And of course, I'm sure there's some benefits one or the other and this is business Small Business Taxes one on one?

Sue  04:20

Yes, it is. I get asked that question by every small business owner. So, this is an important one. So, there's some basic similarities. LLC and an S corp do not pay their own taxes. They may have their own tax return, but any net income or loss from an LLC or an escort passes through to the personal owner's tax return. So, if it's 5050 owned or  three way owned, however it is it gets passed through in those percentages, those are the similarities. But the big difference is, if you have an LLC, it acts like a partnership, an LLC is a limited liability corporation and with a partnership, if you have income, you don't have wages in an LLC for the owners passes through to the owners return and they not only pay ordinary income tax, but they have to pay their own self-employment tax write on their personal tax return. So, as you can imagine, when you're earning a net income of 10,000, on your personal tax return, that's doable. Yo got ordinary income tax, but the self-employment tax, you're paying the employee or half and the employee half, so that's 15.2%. So, as those people are going up, you know, 20,000 30,000, you know, 50,000 100,000, when they're getting over 50,000, consistently as their net income, and say, there's only one owner, so that whole amounts going on their tax return 15.3% of it is additional tax that they have to pay. That's when I'm talking to them between 50 and 100,000, is when I say, time to do an S corp, I'm now on an S corp, the owner has to take wages, and then any remaining net income goes on to their personal tax return, like I said, passes through, however, there's ordinary tax on it, but no self-employment tax if they've already taken. So, we'll go with that 50,000, they took 20,000 as wages, the payroll taxes on that as paid through the business, the 20,000 does go as wages on their personal tax return, the remaining 30,000 is net income. So, ordinary income tax, but no more self-employment tax, and not two sides of it. So, this is the benefit. I'm saving people 600,0 12,0000, $20,000 by not paying self-employment tax.

Rob Delavan  07:27

I would say that's a big pivot point for somebody's business, because it starts to go from maybe more of a hobby side business to okay, this thing is humming along and it's making 100,000 and that's like you said, the net income.

Sue  07:46

Yeah, you're legit. This is a business and we're not talking about, okay, you've lost money, five years, it, the IRS is going to think it's a hobby go away. You're going up the ladder, and you're making it work and it's a business, we need to do some tax planning.

Rob Delavan  08:06

Okay. Obviously, that's been a big drumbeat for this entire series is, this is where we start really digging, diving into the benefits of, of an actual consultative tax approach, where we're planning and being strategic ahead of time, rather than just reacting to whatever was the status quo before and would you say this is when you start having this conversation, this is where you start doing tax planning, during July and roll out other times of the year to?

Sue  08:44

Absolutely, because it usually happens when they had 20,000 of net income one year, and then the next year, they had 75 of net income, and they're like, my taxes are ridiculously high, and I'm like, now is when you need to be an S corp, they're only going to get bigger. So, yes, we do proactive. I'm looking at their books throughout the year, we're making planning for retirement, all kinds of things.

Rob Delavan  09:13

What gets hairy is, oh, no, I just realized, you know, December 15, that I made triple what I made last year, it gets much more difficult to, to switch and even at that point, even though it's before the end of the year, it's basically impossible, you really have to do it for the next year.

Sue  09:32

Yes, I would really rather do it that way. Because there's a lot more we can do if we start planning in March, May, as opposed to December 15ll we can do is kind of put a bandaid on it and say put some into IRA. But let's talk about in May, getting you an S corp putting you on salary, maybe a 401, some bigger things.

Rob Delavan  09:58

Excellent. Okay, that's great advice. Okay, so, my next question is, what is a Schedule C and why is it important, and we will put the definition of a Schedule C, just the basic one with references in our show notes.

Sue  10:18

Okay, so, Schedule C is where if you're a sole proprietor, you have an idea for a business, you'd like to give it a try. But you don't want to overcome it, maybe you become an LLC, just to give you that layer of protection, an LLC stands for limited liability corporation, it doesn't mean you're a corporation, it doesn't mean you have to pay wages, it just means, hey, I've got a little legal protection. So, I'm protecting my other assets from this new leaf formed entity. So, it could be that hobby that you've decided to take a little further than that, hey, I'm selling some things to people, what do I need to do? Or it could be that family or some type of business where I'm giving this a try? I'm really liking it. Do I need to be an escort? I like to tell people to start as a sole proprietor or an LLC, where you're just got a layer of protection and then I tell them, we'll see how it's going in three to five years and if it's taking off, that's when I take it to the next level of an escort, that type of thing. But it's necessary for those things where you're making, you know, you're making some money, they like to call them cottage industries, sometimes where you're doing it out of your home when you first start. Remember, Nike started in a garage, and a waffle iron. So, that's why they call them cottage industries. So, that's what it's for. We have got a little reference in the notes too, a website called the balance.com and it will give some more information about schedule C's.

Rob Delavan  12:21

Okay, great. So, last question for today. This is a hot button. You've helped me with this significantly over the years, when is it best to hire a 1099 contractor versus a W two employee and we might want to start with defining those terms, which we'll throw in the show notes.

Sue  12:48

Absolutely! So, a 1099 contractor is your business is growing, you need a little help. But you don't need somebody full time you just need, you're selling stuff on Amazon or Etsy or something like that, you need somebody to come in and box it up and take it to the post office and ship it, once a week or something like that. So, that's a contractor where you say, hey, your neighbor's teenager or something, I will pay you 20 bucks an hour to just come over and do this and it'll probably be about four or five hours a week, or whatever it is, that's a contractor. But it can even be a part time person, you've got a moving company, that's small an, I just need a driver a couple day a week. So, 1099 contractors, you're paying them an hourly rate, but you're not withholding any taxes for him. So, that's how it saves money for the business by not having to pay the employer side of the texture. However, the biggest piece about contractors is they come and go as they please, they have a permanent place in your organization and they have another job. They could not be making a full-time wage doing what the hours you're asking them something like that. Or it's someone with a business that's like, hey, I do tile but I need somebody to do this piecemeal work down here that I can't do. So, they just have somebody come in and do that and off they go. They've got another business. Okay.

Rob Delavan  14:46

So, there's a litmus test there. I think some of the questions that I've been asked about that by you actually, was are you telling them like what to do, when to do it? How to do it. Are you furnishing them in a chair? There's a number of questions where if you start at answering yes, on all of those, it's like, they're an employee.

Sue  15:16

Those are all what I've asked you and all what someone needs to ask themselves and even on the Oregon Department of Revenue website, I think even on the IRS website, there's like 10, to 12 questions that you ask, and those are the exact things, it's a W two employee, you provide them with a place to work, you tell them what time to come and go, you train them or provide them, you know, this is what I want you to do. Those type of things, because even part time people can be employees, if all those things are met.

Rob Delavan  15:54

Oh, there's an interesting nuance here in the pandemic world, everybody went to work remote, and which then just by definition started to make it well, there's less telling them when to do it I am aware of a bit of a trend, usually, over the last years, it's been converting more and more people from that contractor role to employee role and then just in the last couple years of the pandemic, there has been a little bit of direction, the other way of, at least, just from a social aspect, I guess, a social norm.

Sue  16:35

Exactly. There's going to be a few more contractors, because you weren't following some of those rules, they get logged in when they want and maybe as soon as their works done, they can log off and that type of thing. However, you can have flex time and still be an employee. For example, some employers have said, okay, we want you to come back, and there's been to an office and there's been pushed back. So, they said, you can be hybrid. So, maybe they spend three days a week at home, but their employer tells them, you have to be in the office two days a week. Or there are some employers that say, you have to be online these hours of the day, because that's when we have zoom meetings, or I need you available to your boss or those type of things. Okay, so, you can still be remote worker and be an employee but yes, I can definitely tell you there's going to be some range of contractors.

Rob Delavan  17:45

Okay, so, Sue, any final thoughts, 15 Seconds or less, small business taxes. Good luck!

Sue  17:55

I want to say good luck. I'd say if you're starting a small business, you need to see a professional because there's a lot more out there than you know about.

Rob Delavan  18:03

Yeah, okay. That's huge. I can personally attest to that. Thank you so much for being here, Sue again, the value of especially during tax season, being able to provide this to our audiences is incredible. The best way to find Sue is visit her at her website www.ROI-tax.com. That will be linked below in the show notes and please stay tuned for our next episode in this eight-part series with Sue. The next episode, we'll be learning how to make standard deductions versus itemized deductions simple for you. So, again, very exciting. I love it. Thank you so much for listening to the get rich, slow podcast and we'll see you guys next time.

2022-02-09 ROI Tax 5 of 8

Rob Delavan  00:03

Good morning future millionaires to the get rich slow Podcast. I'm Rob Delavan, your host, I'm joined by Lance Johnson, also your host, and a special guest today, Sue Hjort. We are on Episode Five and an eight-part series. Our title today is making standard deductions versus itemized deductions simple for and welcome back. Lance, will you share a quick success story of some work that you and Sue have been doing together?

Lance Johnson  00:36

Oh, yeah. So, I got a good one. So, this year, we really embraced urine tax planning. So, this year, instead of fun, financial planning clients, we kind of opened it up to some of the tax clients and you could tell that they were starving for it. They, by sitting down with them and almost planning out their taxes, not during tax season, when Sue is, like a zombie because she's right, zombie survived. We have the time to look at the situation and provide alternates. Sue just did a great job of helping us through the financial and tax side coming up with a game plan so that when these clients actually did their tax return, it was a moot point we were able to maximize in the year there and reduce their taxes, but then be able to make sure that the withholdings were matched up so that they had a slight refund. And so, then when they do their taxes, it was kind of a formality of compliance, not necessarily a surprise to them. I felt like they felt the gratitude of dealing with that then and then also what changes we made at the end of the year. We're then is able to implement in January for the next year, instead of June, July, August, where you're getting crushed with cash flow. I just thought Sue did a great job and I felt like the clients really appreciated it.

Rob Delavan  02:22

That's awesome. I love the success we are we are making we were making wins for us for our clients and our future millionaires. Upcoming events, we're going to link to our calendar in the show notes and we have the whole year of 2022 mapped out so looking forward to a productive year of get together with people again post pandemic and our appropriate websites. We got ROI-financial.com, we have ROI-tax.com for Sue, mine is Delavan-realty.com and Adrian who is in Hawaii normally are one of our hosts is hopefully, he's enjoying himself. I think he went to a low luau yesterday and he's with directors mortgage.com That'll also all be in the show notes. So, our episode today, we're going to be picking Sue's brain and Lance's on the tax and financial side and she'll be teaching us how to make standard deductions versus itemized deductions simple. This is part five again, an eight-part series and just to recap our last episode, we learned some basics when it comes to small business taxes. Sue, thank you again for being here. We always treasure the time during tax season that we get an actual little droplet of Sue’s wisdom for us. So, warm welcome. You are our trusted CPA and we just we appreciate you being here for this series. So, we're excited to learn the bit some basics about deductions, itemized versus standard, trying to make it simple and we'll explore a few questions here. So, number one, is there a simple place to find a list of itemized deductions for the state of Oregon. I know you guys will talk about the Feds side also. Of course, a lot of our listeners are in other states, we just happen to be in the state of Oregon.

Sue  04:17

So, what I've learned from my education that we talked about in some other episodes, too, was that 90% of people now are doing the standard deduction and because after the 2008 bill, they doubled it.

Rob Delavan  05:06

So, 18 one, right?

Sue  05:14

So, yes, after that tax bill, they doubled it married couple is up to around 25,100 and single is about 12,005 50. So, there's a lot of people who don't have mice. However, I encourage people, one Your state may use be able to use itemized deduction is why we're asking about Oregon because the state deduction standard for Oregon is really low. It's like 2300, for single and 40, 600 for married. So, plenty of people are able to itemize just by property taxes and donations or property taxes and mortgage interest. So that at least I would encourage but we've given you a couple places to look at what you can itemize. I'll talk some more about it. But there's an oregon.gov, reference link that I have in here and then I have an exhaustive list that I use when people come in with unusual things that they want to deduct, it's three pages, and I'll scan and put that into the notes of this as well.

Rob Delavan  06:40

Okay. So, the follow up question to this is, what can I write off as an individual and I'd love to hear maybe an example or two of some kind of weird things.

Sue  07:00

So, the basics are, if you own a home, you've got real estate property taxes and if you also have a loan on that home, then I mortgage interest and then the final would be charitable donations, whether it's cash or non-cash, which is like the Goodwill's, the salvation, Army, stuff like that. There's also medical, medical is a little harder, because they put some boundaries on it. So, in order to deduct medical expenses, they have to be more than seven and a half percent of your adjusted gross income. So, as an example, if you had $100,000, in adjusted gross income on your tax return, then you would have to have more than $7,500 of medical expenses to make it start counting. So, that's my easy example. I tell people they did away with miscellaneous deductions,  with that 2018 tax bill, and that's where we had things like W two workers who could do office in home, or business type expenses, CPA fees and, and financial advisor fees, those were all in that miscellaneous section, and that's where I got some unusual ones, although, in the medical section, way back, I had someone with their hot tube, there was a doctor note. So, they were able to deduct their hot tub and it was never audited. So, through after that they got rid of that deduction. Then, I had someone write off a therapy dog that was under miscellaneous deductions, not medical, because she brought it to school to work with her middle schoolers, it was a legitimate business expense that you could back then write off in miscellaneous deductions, it's that bills, but can't do that anymore. Don't anyone do that? There have been a few over the years.

Lance Johnson  09:33

Along those lines, there are some discussions we'll have with clients where they have choices to do PPO and HSAs. HSAs, you put money in pretax it grows tax deferred, but if used for medical, it's tax free. Well, a chiropractor and massage therapists are part of that list where normally they wouldn't be, but a lot of people don't know this is if you get a let's say you get injured and your doctor writes a note that you need to rehabilitate, then your gym can actually your gym news can be put on an HSM and so, you know, again, check with the CPA and so forth, make sure you get the notes. But those are all part of the, is that possible to do that? The answer is yes, it's possible but you want to make sure they have the right proper documentation in your file. So, as you get audited using that HSA which is tax free, your membership dues.

Sue  10:43

Yeah,  the key is to have the health savings plan what he's referring to HSA because it wouldn't be deductible on itemized deductions if your income was too high. But if you have the Health Savings Plan, you could put it against that those costs. So, yes, that is good, Lance.

Lance Johnson  11:03

So, what we would try to do is the conversation starts with the client is, I remember back in the seven 2017, I was able to do this, and the world has changed, and then it is like, well, you're right, you can't do that. But during open enrollment, if we were doing urine tax planning, and you notice that the person never really goes to the doctor, because they're healthy, but they do use, you know, acupuncture, massage therapist, or maybe they did get injured or whatever rehabilitating, they might switch to an HSA, Max funded, which brings down their taxes and now you're setting them up for next year, which has to be you have to do that enrollment during October to November of this year. Those are useful discussions with Sue that started with itemize but lead to a different direction.

Rob Delavan  12:01

Interesting. So, now we start getting to a little more interesting or a little more complex piece. What can I write off as a business owner?

Sue  12:17

Okay, so, different than itemized deductions because as a business owner, you're going to write things, these you're going to deduct things against your business, it goes to that small business conversation. But as an overall, it's anything that you use to further your business, everything from marketing and promotions, to the basic office supplies, the ones that people always ask about are things like company parties, or things like that, which, yes, you can do that it's employee, appreciation and development and things like that. So, yeah, that is a wide list of things that you can deduct as a business owner,

Lance Johnson  13:16

One of the things we could touch upon that tonight is you use an example is a business owner, small business, we always run into issues of them getting their bookkeeping done and part of it is, you got bookkeeping on the business side and then there's bookkeeping on the personal side. So, example is, I have a home office and in that home office, I see clients and have a bathroom and I have to get to the office. What can I write off, and so, a lot of people are confused what they can write off? Some of these things show up on itemized lists like interest deduction and property taxes, but then a portion of their businesses out of their house square footage wise, and some of their utilities and property and insurance that are normally not written off or written off on itemize. We have to educate them about, okay, now portions on the business so it doesn't show up on the itemize things like that and then when you start to take those and put them over here, now all sudden your charitable contributions are not written off because and so there's a lot of, I'm going to call it lack of better words cause and effect relationship between itemize and business. I think Sue, what I would probably have you do is just talk about the benefits of getting those write offs further up the tax return on the itemized list and what the benefit versus business owner.

Sue  14:51

Well, to go back to the original statement is 90% of the people are using standard deduction. So, I think what Lance is referring to is, hey, if you're using standard deduction on your personal, you know, maybe your mortgage is low, and you don't have the charitable or something, you're using that 25,000, let's move some of it over to the business. So, we can take advantage of it there and that's where you're talking about your office and home and things like that, where if you're doing a LLC, and you're doing office in home, on, then we are going to have portions of mortgage interest in property taxes, as well as a percentage of those utilities that go into the office and home, and then you're taking better advantage of it rather than where you're using standard deduction and can't use it on Schedule A.

Lance Johnson  16:00

It's a big missed opportunity. These small business owners, I'll just say that the ones between zero and say, $300,000 of gross income, maybe not necessarily net income, but just those beginning, they're on their way up to building a more than a mom and pop shop. We just see them trying to do stuff their own, in different programmes that are online. You don't know what to click or what's after that clicked on TurboTax or h&r block or whatever. So, you don't know, then you miss the opportunity of things that you could write off or position better on the tax return. There are missed opportunities, and we see it all the time.

Rob Delavan  16:50

Okay, so, the last question I have for the two of you is, how do I calculate charitable donations? What's the best way to do that?

Sue  16:58

Okay. So, donations, like I said, all into a couple categories, the cash that you're just here, I want to give money to church scouts, whatever it is, and the non-cash, the Goodwill's, and the I cleaned up my house and that type of thing. So, cash is straightforward, anything over 250 have a receipt and most people, even those $25 one offs, if you've got them, you've got an email receipt, pretty straightforward. Now, it's where the non-cash gets a little grey. So, up to $500, you don't need too much documentation, they aren't requiring such but over $500. You need a receipt from Goodwill, where you've detailed or you've taken pictures or that type of thing and according to the instructions, if it's over $5,000 of non-cash items, then you need an appraisal. So, I tend to tell people, hey, I cleaned up my house, it's got to be $10,000. I said, we're going to back off a little on that. However, I have learned a few things, and done a little research that it could be over 5000 If you divide it into types of items. So, clothing, it could be a category, household furniture could be a category. Other types of tools could be a category, you know, you cleaned up the garage, but it again, you need some really good documentation. So, either a written list or pictures that you attach, and as long as you've got it, that's the important thing. I will say as well other people donate stock, like to their church because the reason being is, they can donate stock, it is a donation at a fair market value. Their church gives them a receipt and says you donated the 600 shares of IBM on march 25 21 and you can use the fair market value as the deduction. However, you may be bought that IBM at $2 a share or something, you don't have to pay the capital gain, but you get the full deduction and because there is a fair market value that's online, that's everywhere that you can see, it can be well over 5000 for stocker, there's some other things people do. They want to donate, they want to make a big donation, but they don't know where. So, you can put it into something like Fidelity has a fun You put it into a fun, it's since they're in your name, you get to deduct whatever it is 25,000 in one year, and then in later years, you tell them where you want it to be donated out to. So, you get the current deduction, but you get to a sign where it goes to let it later. So,  there's a lot to charitable donations and to backup to will Yeah, but I'm using standard deduction. So, with that I've seen people do one year on one year off, they do a big deduction, they double their deductions in one year. So, they can itemize and then maybe the next year, they won't do the big deductions.

Lance Johnson  20:52

If I can interject on that, there's so reiterating with her there's just basic concepts. So, there's compliance of itemized versus charitable. So, obviously, sometimes you're in a standard, but this year, I think if cash donations are $600, and you're at the standard deduction, you still can take $600 and write it off against the tax return above because it was cash donations versus a goodwill.

Sue  21:24

Yes, that is correct lens for this year and that's in addition to your standard deduction, if you add cash donations, 600 or more, they let you throw that in.

Lance Johnson  21:35

Then there's what I call best place practices type stuff. So, alluded to it is, if you are going to donate a couple things you want to do is don't, instead of one bit, bring a big trailer one day, dump it all off one day, a couple things you'd want to do snap a picture, itemize the list more, what I would tell you to do is make multiple donations throughout the year and categories them with pictures and an itemized list and then you can use a programme called it's deductible for some of the basic stuff and you'll be surprised on how much a bag of clothes adds up. When you go to that and you realize you like I would have never put that in. But it's a programme that the government and turtles TurboTax worked out to have a fair so you got a picture, you got multiple donation slips, you got an itemized list and you use this deductible, that that's a programme that's being used. I'm not saying you're bulletproof, I'm just saying you've done a really the best place practices of documenting your stuff. Then what she talked about is what we call tax bunching. So, every other year, you bunch your charitable, especially maybe if you had huge medical, maybe it's a year that your income is low. So, some of those things are the medical is more deductible, and you can put them, it's not a charitable remainder trust, but like we use, it's an it's a charitable donation funds, where you can put 50,000 into one, put it in the programme, manage yourself. So, my brother in law did a couple years ago, put $150,000, its grown to 200 and some 1000. But he can then just dole out money, but he got the write off, whereas every year he wouldn't get the write off because the full write off because the standard deduction. So there's a strategy with clients where we tax bunch in particular years, and it depends on medical depends on income depends on your charitable content and then I agree with Sue, anything over 300 bucks going to a routine organization, we can draft a letter, my clients never use cash, cash is king. So, I agree with her, if you're going to put $2,400 to your church or 200 bucks a month, I would tell you to talk to the pastor. What we do is January, we would donate a highly the most highly appreciated stock, okay in your nonqualified, that's $2,400. You would make that donation but your cost basis might only be $200 and then at the end of the year, you're looking for next year, I would do the exact same thing for next year, but I wouldn't use your cash I'd keep your cash and that's a best place practice. That's a long story. But those are some of the things that we talk to clients about is are we bunching this year or next year, and how are we doing it?

Rob Delavan  25:00

Well, in the final thoughts here, I would say obviously, I'm noticing a few trends. So, number one, obviously document, document, document, write your document correctly, and you need advice advisement for that and then number two, strategy is literally, let's make sure and I guess you can't really document or do strategy without or make those strategic decisions without having things, you got to be ahead of it. So, if we're going to make these decisions, we need to be making them in probably summer and fall. The concept of, you have to be ahead of the game, you can't be strategic unless you know where you're at. So, any other final thoughts between the two of you?

Sue  25:57

In order to do that strategy, and plan ahead, you need good advisors. So, tooting our own horn, you need a CPA and a financial planner. So, it helps when you're strategizing and doing the right tax planning.

Lance Johnson  26:14

Okay, I know that I think those two people need to communicate, and not always does the CPA and the financial advisor, are they on the same page, nor do they communicate at the right times. So, you're communicating to the client in tax season, I'm communicating clients in fourth quarter, having those in the fourth quarter, I think better what I call best place practice.

Rob Delavan  26:42

Awesome. Okay. I love it. Well, thank you, Lance. Thank you, Sue, for adding such value to our listeners. Again, the best way to find Sue as our guest in this series is www.ROI- tax.com. Again, that'll be linked below in the show notes and stay tuned for the next episode in this eight-part series with Sue. In the next episode, we will be learning all about real estate and taxes. It's a fun one. Love it. Thank you all for being here. Thank you all for listening and we'll catch you on the flip side. You

TAX SERIES 6 OF 8

Adrian   00:02

Hello and welcome back to the get rich slow podcast. I'm your host Adrian Shermer and I'm joined by my co-hosts, Lance Johnson, and Rob Delavan and today, continuing our series our eight, partner on taxes, the ever-exuberant Sue hort.

Rob Delavan   00:25

So this is episode six and an eight part series. This one is real estate and taxes. We could have 100 episodes just on this but we're gonna just touch some high points for you guys today. Real Estate and taxes your questions answered and we're gonna jump right into it but before we do, you can find us at our respective websites. Sue as our special guest hosts ROI-tax.com. Mr. Brilliant at the basics himself Lance J. at ROI-financial.com. Mr. Shermer, he's brilliant too but lending isn't basic mortgage.com and myself Delavan-realty.com and we're going to be speaking with Sue with ROI tax and she'll be answering some questions in regard to real estate and taxes. Again, this is six in an eight part series. In our last episode, we learned how to make standard deductions versus itemize deductions simple and it was a hoot, wasn't it and warm welcome to Sue. Gentlemen, we're in for a treat, there we go. Okay, I'm going to throw it. Adrian, why don't I throw it over to you for questions? We have three questions. I'll do the first one, what are the tax benefits of having a vacation rental?

Sue   02:10

Okay, so a vacation rental, as opposed to just a regular rental is where someone says, I want to own rental property, I want to have some tax advantages, I want to be able to have something to put money into gain some equity it's a diversification from maybe their stock portfolio. But the important thing is that as a vacation rental, it's in a place where you want to travel, where you get to spend at least two weeks a year just enjoying. But anytime that you go there to repair, fix up, visit, that can be used as a vacation as well. So, you're getting some rental income out of it because you're renting it during those peak times of the year. But you're also being able to use it and enjoy it and maybe you want to retire there someday. But the important thing is that you're getting some rental income and you're also being able to use it. So, your tax advantage would be if it's coming in that you're losing on it, then you've got a loss that you could be able to use on your tax return. But it's mostly a paper loss because you depreciate the property, even though it might be appreciating. I know its sounds complex, but that's where people go when they're looking to have a vacation, rental.

Rob Delavan   03:46

And, Lance, my question for you, because we've run into this many times is it typically in your experience, the first investment property somebody buys?

Lance Johnson   04:02

Necessarily, but let me piggyback on what Sue talked about, I do believe in diversity, I don't think everybody should have just stocks and bonds. I'm a big proponent of real estate, as you know and the tax benefits of it. So, with that all being said, some common scenarios that occur is some people want a vacation home. But then it's very costly to maintain a vacation home that you sometimes only go three or four times a year, but when you go you want to spend a week or two or whatever and so, the discussion becomes why don't you make it a vacation rental so it's your vacation home that now we morph into a vacation rental or you're used to having a first time home buyer they want to upgrade their house so they make their own house vacation their first time home, they upgrade and then and we'll talk about this, then they want to do something about that first home or the next rental as they enjoy the benefits of rental income. They explore either duplexes or quads or they do vacation rentals, depending on their personal priority of what they want in their portfolio and I really like vacation rentals, if I had my choice, I'd have 30 vacation rentals all over the world and so when I travel, there's tax benefits and so that would be my choice.

Rob Delavan   05:41

So, the concept there and obviously, there's lending. I mean, this is a whole episode series of episodes but to sum it up Sue, what I heard you say is find somewhere you like and probably have some tax advantage from depreciation and then you have an investment and then you're diversified. In somewhere that is a personal benefit but it's also probably going to appreciate over time.

Sue   06:11

Exactly and the beauty of having the vacation rental where you enjoy is, it's not going to be in your next or neighborhood, it's going to be at a place you enjoy going to. So, while you're going there, you can deduct the travel to get there, you can deduct some of the meals and the time because you're working on it, you're doing a little bit of upkeep and maintenance and visiting and make sure the property manager is doing what they want. So, you're getting a tax benefit out of something you're also enjoying, plus you're getting some rental income for the months that you're not there. So, it's a real nice thing to have in your portfolio.

Rob Delavan   06:58

What a win-win. So, jumping into the next question and Adrian, I wanted to kind of do this, explore this a little bit with you, from a tax standpoint, but I own multiple homes and rent them out. So, from a tax standpoint, starting with Sue, what should I do to plan properly for taxes and for the tax benefits there. So, we've gone from vacation home to now multiple properties?

Sue   07:32

So, I have several clients with that they've decided that they enjoy having that rental income, they're happy, to have that. So, they've decided to expand into 2 3 4. So, the key is, there's one of two ways you can go use a property manager, pay that extra fee. So, they're taken care of so that you're not the one who has to do all the work or get the calls on the weekends, fix the toilet. So, just make sure that if you've got that property manager, they're giving you statements every year, they're calling you regarding major improvements or repairs that you have to take care of and then tax wise, you've got some that are maybe making money, maybe you've paid off their mortgage and some that are losing money because they're more expensive and you can offset those, but you're still getting that rental income, then there's the other side of the coin is if you're somehow involved in real estate, for example, as a broker, as a property manager or something of the like, you can be a real estate professional if you're spending more than 750 hours in a year working with these properties or in your profession and then you can deduct as much losses as you have during the year. Some years you're gonna have more losses than other years but you can take advantage of that if you're a real estate professional, a whole other direction that I could go into but there's a couple of ways that you could use tax wise with rentals.

Rob Delavan   09:19

Lance and Adrian, care to expand or add?

Lance Johnson   09:22

Well, so multiple homes pose some opportunities like Sue said is depending on your other income so your regular income, not passive income. You know, there's that $350,000 threshold where you can write off the losses. You can have some properties that cash flow positive significantly and others that don't and so then you can offset positive cash flow with negative cash flow. If you have a negative you can carry them for future. So, that's good and then multiple homes, there's pros and cons and there's single family homes, there's duplexes, there's quads, there's eight plexus and so forth and so there's just this progression when you get into rentals and you go down that, how is it just a bunch of small homes but then when you realize a good rental is one that doesn't have a loss and so you're looking for those and then when you have a bunch of those, you're gonna get those in duplexes and quads because it's the same land cost with multiple income streams and so then you compare that to running a business like an 8 plexus, 16 plexus or a vacation rental, where you hire people to manage it. So, it's just, what's the sophistication that this client wants to deal with in real estate and there's a whole progression that can occur.

Rob Delavan   11:06

And throughout that progression, there's a, hey, how are you going to do the next one if you're in a portfolio that's increasing if that's how you're been and that really gets down a, again, multiple episodes on this but Adrian, from a lending standpoint, you can't write down too many losses because then you can't get qualified for a loan right, for the next one.

Adrian   11:28

And sometimes I get this question; this is the worst question I got. I actually just got it last week, which was, how much income should I show so that I can get qualified for a loan? You can't ask me a question like that, there's a huge problem there. What can you learn from your lender about these kinds of write offs? Absolutely nothing, because we don't know your full financial picture, the difference that being able to write off your overhead on a rental is for a person who made $30,000 last year and somebody made $300,000, last year is totally different. So, you've got to talk to your CPA and you've got to figure out what the pluses and minuses are to this situation for some people, rehabbing homes, doing renovations, you may find that you get that quote, unquote discount, because it is a write off and you make enough money, that you're writing off the highest tier of your income but if you don't have a lot of money and you're purely on the income of your rental properties, then it might not be as much of a air quotes here discount is what I'm going to call it. You know write offs have compounding results, the higher up the income chain, you go. So, you've got to meet with your CPA and you've got to have the kind of CPA that you can meet with before the tax season. You're not just looking back going, what could we have done better? You're going forward and saying, hey, I'm looking at investing, I'm talking to my financial planner, I'm talking to my CPA, let me get the pieces of information I need from each expert and then make an educated decision.

Rob Delavan   12:51

How do we always come back to planning?

Adrian   13:09

All right, last one, 1031 exchange, I get this question all the time and once again, I'm just going to echo it. I always defer to the CPA, because if you're asking your lender, just don't, I'm sure some lender will give you the answer, but they shouldn't, because they don't know enough to give you the right answer. So, it's kind of funny you ask enough people a question, you'll eventually get the answer you want. We want the right answer, though. So, we go to the experts and we get the expert advice. Sue, what's a 1031 exchange?

Sue   13:38

1031 exchange, you have one rental property. But if you sell it, it has a huge gain. So, you decide, I'm going to do a 1031 exchange where I sell the first rental property, the money goes to a 1031 exchange agent, almost like a title company, a trustee, it's held there, I purchased the second property of equal or higher value, the money from the exchange goes to purchase that second property and I don't have to pay on the game, as long as I don't take any money out all the money goes into the second property but my second property now has a reduced basis on it by the amount of the gain from the first property, so I pay no gain now, I'm deferring it to later. That's the purpose of the 1031 exchange, buy another property defer my gain until after I sell that second property or however that works out.

Rob Delavan   14:48

I'll give you guys a scenario and this is fighting straight here how Lance and Sue talk about these things. So, usually where I run into them as a real estate broker is somebody has two or three properties and they're smaller, like say they're the houses that they bought back in the 80s, that were when they were cheap, or even in the last 10 - 15 years and they want to trade two or three properties that maybe are older or, you know, have appreciated in value and want to sell those, but of course, they appreciated quite a bit and then they want to consolidate into a bigger property, say, multifamily or a, go from residential to commercial or that sort of thing. So, comment on that. And, Lance, I know you have, you've experienced an incredible amount of that sort of thing, too so…

Lance Johnson   15:45

Well, so on 1031 exchange, I mean, one comment I make is it's of equal value, or more. So, downsizing that that's a trickier you can go from one property to two properties, but the total needs to be greater, right and then the, if you have loans, you have to have equal loan exposure or greater as and so that's to qualify, there are a set of rules and instructions. So, the agent, everybody I tell that, let's do some planning, let's get with the agent and there's a set of rules. You do not want to mess this up. There's other worse than going in hoping that could go through this whole process and then you mess it up and you have to pay the taxes and you wish you never sold the original property.

Rob Delavan   16:36

No undo button here.

Sue   16:39

You don't come to your CPA and say, I sold the property and then I immediately bought another one is that at 1031 exchange? There is no after the fact...

Lance Johnson   16:54

And then 1031 is a exchange. So, you get into issues of I'm in a partnership with three people and I want to 1031 exchange my portion into a single, I believe there's some issues there can't be done and so like exchange is very important part and it's all about just pushing that tax bill down later on in life, instead of dealing it with it right now and so that's just the key to it is going through the process of figuring out whether it's vacation rentals, rental the rental and the rules of moving that and getting to, let's just say our newer, better rental, whether it's vacation, or single or duplex or quads or whatever, you're just trying to take the original one and not pay the taxes on the gain with the depreciation and move it to a better one. That's the goal.

Rob Delavan   17:53

And that's the summation and over the course of 10 20 30 40 years of financial advising, tax planning, lending, real estate brokerage, I mean, this is an interesting topic, because we all touch it at one way or another. It's probably a lot more common than a typical person would expect.

Lance Johnson   18:17

The goal is to defer until you die, right and you get a step up in basis.

Rob Delavan   18:23

And we pull in the estate attorney, right and then they tell us what happens then…

Adrian   18:27

The IRS rolls their sleeves up.

Sue   18:29

Yeah, that's a whole another animal.

Rob Delavan   18:31

But this just dips our feet and by the way, we will have references for our material here. There's a good article that defines things as we discussed on CWS capital.com. As its labeled, what is a 1031 exchange; also, the IRS.gov site has a lot of resources on that we'll include those in our show notes, so that the audience can reference that.

Lance Johnson   18:47

And I like to make one comment about what are some of the applications on 1031 Some people ran to Oregon and then realize there's a bunch of property taxes and taxes and additional taxes and now, as they get later on in life, they want a rental that's not necessarily in the state of Oregon with all the extra taxes because there's other states that have different taxes, that you're looking for those like exchanges to improve your tax bill later on for estate planning and or income taxes.

Rob Delavan   19:39

Right, huge conversation, love these topics. We're just dipping our toes in here but thank you so much Sue for gracing us with your presence during this tax season. We love ringing out every drop of wisdom you have to give to us. Thank you and the best way to find Sue again is visit our website www.ROI-tax.com that will also be linked in the show notes and please stay tuned for our next episode. In this eight part series with Sue in the next episode we will be learning about year and tax planning and why it's important another barnburner, oh, boy, we're gonna have a blast, until next time, thank you all for listening.

TAX SERIES 7 OF 8

Adrian   00:02

Hello future millionaires and welcome back to the get rich slow podcast. We're your hosts, Adrian Shermer, Rob Delavan and today we have Sue Hort with us for some more tax fun.

Rob Delavan   00:12

Good afternoon and welcome, Sue.

Sue   00:16

Thanks, tax fun. I serve that up.

Adrian   00:19

Part seven in an eight part series. We're nearing the end, which makes me sad. Not the end of tax season, though, because that seems to be Gosh, thanks to COVID I guess I just bleeds all the way through the year at this point, right? Like it's just a constant so, throw an extension in your two years out. So, today's episode, it's about yearend tax planning. So, we've talked a bit, I mean, most people attack their taxes right from a what happened before kind of standpoint and I think a big message that we're trying to push here is that you can plan ahead and you can make differences in how you're going to operate and it can save you a considerable pile of money, can save you from silly mistakes. I personally have made plenty of silly mistakes. I've gotten enormous tax returns before, AKA I gave a interest free loan to the government. Here's how we can help you dial in what your situation is. So, that you're not lending the government money, even though that tax return can feel really good at the end of the year. That's what you've done. You've let them hold on to your money without interest. So, Rob...

Rob Delavan   01:34

Okay, well, before we dive too deep into that, upcoming events, please go to ROI-FA.com/ events. We have a full list of this year and actually, I think we're starting to do next year's. On our website we have of course ROI-FA.com, Delavan-realty.com and directorsmortgage.net. Just search up Adrian Shermer and go from there and then Sue our wonderful co-host for this short series is at ROI-tax.com and Lance is seeing clients today. So, we'll do our best to make sure that we keep this thing moving. So, seven in an eight-part series, we're getting close, like you said and the last episode, of course, we got some of our questions answered in regards to real estate and taxes. I think we just barely scratched the surface but it was something and now we're going to just jump into this tax planning conversation. Okay, so Sue Hort, our trusted CPA and trustworthy all around person and so you're in tax planning and why it's important so let's start out with just the time element, when's the best time to begin your own tax planning, Sue?

Sue   03:09

Trick question, tax planning is a year round event. So, we start during tax season, because that's when I see people or talk to everyone in one way or another and so we've got your current year taxes going on and we might be able to see some places that we could possibly do things for the last year. But most importantly, we're looking forward to what can we do different for this year to help this client? So, we'll start by saying, okay, let's make you an S-Corp or you started a new business and we want to look at how you're doing. So, I'll plan out with my client to let's touch base in July. Let's touch base in October and if we need to December to see how they're doing to see what incomes doing should we do more in estimated payments, have they done better or worse? Just various things or their investments, how have investments been going this year or the year they have a lot of capital gains, let's harvest some losses, you know, we've got the tax planning and it should be all year round some check ins.

Rob Delavan   04:30

And then in that process, are they continuously providing you information or updates or year to date, books, what's that look like?

Sue   04:44

Most definitely, so they're providing me information throughout the year. So, we've got that first year. I've run a business client and I tell them yes, I can give you estimates. We'll start out with something but I need to talk to you say in July or August, because there's an estimate coming in September. So, I want to see how the first six months went and then I want to talk again in October or November to see how we're doing towards the end of the year. So, they've got to provide me some of those books. So, they need to have a bookkeeper or be doing bookkeeping and then the same if maybe it's rental properties or investments, did they sell a property? Did they buy one? Are they doing a 1031 exchange? I'm going to need some up to date things regarding all that so I can make and help them make those decisions.

Adrian   05:38

In my opinion, this is the coolest part of using a CPA. I've got anecdote after anecdote of this, Sue, I think we were just working with someone where some parents were going to be gifting potentially equity in a property as they moved it from and there are all these questions. What are the implications of that? What portion of that from a tax perspective is a gift and I can't tell you the answer to it on this podcast, because it would be different for everybody. It wouldn't be fair for me to say, oh, do it this way because it just depended on what did the parents make, what did the kids make? What are their sources of income and I know, at least if I'm gonna throw an anecdote under the bus, it's when my wife started her business, you helped us slide all the expenses into the correct year and it saved us literally 1000's and 1000's of dollars, I think we broke 10,000 in how much money was saved because of the consequence of what we were able to write off.

Sue   06:36

Yeah, it's all those kinds of things that make it important that we're doing that planning and there is a charge for tax planning anywhere between 750 and 1200. It depends on what kind of work you have involved and what's going on. But how many 1000s that I can save you in taxes, because of this planning, just like Adrian's talking about, you know, is priceless, I guess, I mean, there is a price but it's well over $1,000, that you would pay me to help you throughout the year to do this and so that's what I want to do, that's one of my core values, I want to help people so that they don't feel so in the dark and so overwhelmed and afraid of taxes and this is the way to do it and we get things set up, you start with one year, but it takes about three to five years to kind of get on a good smooth plan.

Rob Delavan   07:42

I mean, we always have to remember everybody's results are going to be different, whether it be Adrian and his family versus and what did they say in the financial world past results are no guarantee of future results or something of that effect with that being the case, you're talking about a serious time savings when it comes to actual tax season, because taxes are basically all but done by the end of the year is one piece, so there's no scramble in April 13th to try to get things done by it's just not the case and then of course, if and when it does happen occasionally where somebody says, oh, should I be doing tax planning and their situation super simple. The first thing you're probably going to say, Sue, I just because I know how you run your business, is you take a quick look and you're going actually, no, this really isn't for you. I mean, you're a W2 employee that just it's very simple. You don't need tax planning, it's not worth the cost that I'm going to charge you but for most people, that's generally not the case.

Sue   07:55

That's correct. I mean, if you go anything beyond, I own a house and have two kids say two rentals or even investments or I mean, I'm gonna throw out this one, I was helping a family member and they have way too much withholding because the first year I did it, they were under withheld and they were so upset that they had to pay. So, they went totally the opposite direction. So, I've been helping them now with dial it back and then gently doing things like well, look, you could put money into a backdoor roth and you could do more to the 401k and various things. Maybe you do a roth and a 401K combo, so there is some things to be added to people, even if they are W2 but that's if they're making good money and they're interested in retirement and savings and how to not give the government alone.

Rob Delavan   10:07

So the last question for you on this topic, Sue is do you have any recommendations on systems to keep your paperwork and filings in order so that you can do this time, efficiently?

Sue   10:20

So, there's a lot of different ways and it depends on the individual. So, you've got some, I'll say, people younger than me, who might be more into the apps or the online, there's various everything from apps on the computer that you can scan in and save tax documents and so I think we might even have a couple of those links at the end of this...

Adrian   10:54

Pretty impressive software has getting better every year too...

Sue   10:57

For sure, I had somebody tell me, they could scan it in and it automatically went into their business expenses like directly onto a financial statement. So, I had to kind of tell them, well, that's great but you've also got your bank feeding into your financial statement information and you could be double counting. So, that's where we have to kind of have a conversation about that kind of thing but in addition, there's the good old fashioned paper filing, and, but what's most important is I tell people have your this year file where you're putting in receipts or documents or something like that and then once you get the tax return from me and you're all finished, then you package up the tax return with those receipts, if you have paper copies and put it in the tax box somewhere. I mean, there's a possibility you might need it someday, especially when people ask me, what do I save? I say seven years only because I have to save seven years and I know there's a reason and they can only go back three years and audit.

But if you file late, they go back three years from the time you actually filed and sometimes if they audit and they find something, they go back farther. So, I think Oregon, could go farther than Federal and so that's why I just say rather than three or five, I just say seven and the only documents that you would keep older than that is if you wanted to keep your house purchase or house sale. Most important would be house purchase, really but there's the old fashioned file where you just put everything in. I also tell people if they're got a house and they do remodels and improvements have a house file that rolls forward every year because there's been a lot of people in this past year who sold their house and they'd been there 20 years, 25 years. They can't exempt the whole game, they can attempt up to half a million, but there's people I've had with a million or 2 million and this people who have a farm in particular, I'm thinking, so you've got to have all those improvements to add on to your basis. I could go on but I don't know how much you want me to go on.

Adrian   13:29

There's always more that's one fun thing about this. There's another was another layer to unpack, but we'll only go so deep on this one.

Rob Delavan   13:40

Okay, so the final thoughts here, Sue, obviously are pick some systems, go with it and you got to plan ahead, that's tax planning is incredibly valuable.

Adrian   13:55

That reminds me one of my favorite quotes "the best system is the system you use".

Rob Delavan   13:59

There you go, that makes sense. So, speaking of systems we use, the best way to find Sue is to visit her at her website at www.ROI-tax.com that will be linked in the show notes along with our disclosures. I think Sue you had a few links to some different articles on ways to save...

Sue   14:23

And how to save things and like Adrian says everybody's a little different and whatever works for them, I can use.

Rob Delavan   14:33

And then so in our final episodes, so this was number seven. Our next one and final one is episode eight, in eight-part series and we'll be learning about why your financial advisor and your CPA should be working hand in hand. So, that's it for today. Thank you both, special thank you to Sue for being here during tax season and you only have about a month left. So, keep up the good work, all right, take care everybody, thank you.

TAX SERIES 8 OF 8

Adrian   00:02

Hello future millionaires and welcome back to the get rich slow podcast. We are your hosts. I'm Adrian Shermer and I've got Rob Delavan and Lance Johnson here. Hello, gentlemen.

Rob Delavan   00:12

Good afternoon.

Lance Johnson   00:14

Good morning.

Adrian   00:15

And continuing our eight part series, I can't believe we've made it to the end already with Sue Hort, our resident tax expert, thank you so much, Sue.

Rob Delavan   00:24

You're welcome

Adrian   00:33

So, why don't you tell us I would love to hear from you, especially since it's last in this series. For now, I know we're going to have you back again, but recent success story in your world?

Sue   00:46

Well, I think the success and this is something we're going to talk about in today's podcast is the joining of ROI tax and ROI financial, to share our clients together and I recently had a couple of different clients that have met with Lance and are getting started on the whole process and they said, Sue we're just getting to know Lance. But most of all, we trust you and if you say he's the guy to go with, then we're gonna go with him and I really appreciate their trust in me, but then that's when I can turn around and share my trust in Lance and how hard he's going to work to help them increase their assets and plan for their future. So, yeah, I think the partnership is quite a success.

Rob Delavan   01:43

Yeah, well that's powerful

Lance Johnson   01:46

And I like to add some to that is, just because clients have trust with Sue, it still means that I have to earn their trust. So, I let them know upfront that you can have 20 years and Sue has earned that trust, it doesn't mean that I've yet to earn it and so I think it's a dangerous thing for financial advisors, or professionals to just assume I have trust, I think you should go at every new client, putting your best foot forward, fiduciary responsibility, given them choices and options and that's how you earn trust with that client and so then I make Sue look like the genius that she is.

Sue   02:32

My 15 minutes.

Rob Delavan   02:39

I love it, awesome, well, that's definitely going to be fun to build on in this conversation. So, thank you both for sharing that, upcoming events for us we have under www/ROI-FA.com/events, everything coming up monthly and by monthly and so forth for clients for the different referral partnerships that we have and the fun stuff. So, that's all there and then, of course, we have the ROI/FA.com website for all things, ROI financial, Delavan-realty.com is my own website for our real estate side to connect with us. We have directorsmortgage.com and search Adrian Shermer on that and you'll get to all things Adrian, with lending and so forth and then last and certainly not least, Sue, www.ROI-tax.com, there we go.

Adrian   03:49

In this episode, we are going to be speaking with Sue Hort. Of course, she's with ROI tax and we're going to answer some questions in regard to why it's so important that your CPA and your financial advisor work hand in hand and I know we've got an audience that spreads pretty wide, it's actually pretty fun. We've been picking people up all over the country. So, for some folks, it's not going to be this group. But it is important that that level of communication is open and we're gonna talk about why it matters, why they should be partners in working towards your financial goals and your future and once again, this is part eight of eight. So, after this, we're going to roll into a bit more of the real estate side, but this will help wrap us up on the tax end of things.

Rob Delavan   04:30

And in the last episode number seven, we did talk about the year-end tax planning process and I think that covers us there. So, Sue, thank you again for being here. We're looking forward to this culmination. It's always fun and let's start with question one. So, the benefits of your CPA and financial advisor working hand in hand. I guarantee we're gonna get a little Mr. Johnson here, too.

Sue   05:10

Well, let me tell from my perspective, I think the importance is that you've got two trained professionals that can help you on both sides of the coin. So, you want to invest your assets and make the most of them and you pick your financial advisor, so that they can do that with you and help you stretch and reach those goals and dreams, as Lance always says and if you're rolling along and making money, then you get to tax time and you have to pay a big bill. It shouldn't be a surprise and I have people come in my office that are like, why am I paying so much? I said, well, you made a lot of capital gains, look here, they sold stocks and we don't want surprises. The financial advisor and the CPA, working hand in hand can do what's best for the client, make them money and minimize taxes and that's the big advantage to working together is you're both on the same team for that client and they want those two professionals, but they want them to work together for their best interest and that's why it's so important. Lance, speak from your perspective.

Lance Johnson   06:37

Well, I like it as there's checks and balance. So, you know, I often describe what the financial advisor is trying to look at the present and really trying to move people forward in what I call an academic way. So, we predict different assumptions and with those assumptions, there's a future net worth, which the net worth to me is one of the best indicators, because it takes real estate tax efficiency, rate to return, cost associated, inflows, outflows the net worth year over year is one of the best indicators. So, what we're trying to do is build assumptions that say, this is what it's going to look like, based on these assumptions in the future and the question is, are we measuring up on that? So now, there's this double edged side or double coin which is, should we be more tax efficient now or should we be more tax efficient in the future? It's kind of an age old question, right? It's a chicken or the egg scenario and so I think you have to kind of look at both of those things and then the past occurs. So, Sue takes a look at the last year and she's getting everything ready and say, oh, by the way, you owe taxes and in their surprise, so, she often is looking at the current year and the past years and making sure that there's no police officer that's going to pull you over and put you in jail and I'm looking at the present and the future and saying, God, these are the tradeoffs of tax efficiency now in the future, not knowing what rates of return and tax changes and laws are going to be and so because we come at it at a different point of view, it's awesome when we can be in front of the clients and say, here's some of the things that you the client, we just want to educate you about being smart with your money and so therefore, here are the two points of view we're going to give you, you ultimately have to make the ultimate decision about your money and I think having those two professionals kind of gives them the ease of mind and I think that's where the hand in hand comes in.

Rob Delavan   08:56

So there was a article on money.USnews.com. If you search that up, we'll put it in the show notes, comments below and it basically said that there's a natural fit, which is what you guys are talking about understanding the flow of money, particularly in the retention of assets against and they use the term excess taxation. So, you guys both talked about that is that's kind of an interesting way to put it like excess taxation and it seems as if retention of assets is the financial side, obviously, excess taxation, Sue is where you come in. I haven't heard of the usage of the term that way. It almost connotes there's like a rolling you said oh, okay, well, the financial advisor said just looking at from one direction and taxes looking at the other and you said, Lance, there's not one perfect way. But it's like they decide on a rolling scale oh, are they going to be you know, it's this wide, for those of you watching the video, it's this big, you got to be somewhere in here versus here versus so forth. I mean, is that accurate, do I understand that correctly?

Sue   10:27

I think excess taxation means to me, I think, if I look at someone's last year tax return, which is what I always do first with a new client, I look for where can I find them places that we can reduce their taxes and I think the excess taxation means there isn't just one way to attack a tax return you put all the information in and then you say, okay, could I do a IRA? Could I do as SEP-IRA? Could I do various things? Are there more expenses that I could put in itemized deductions? What about my business? Is there something I'm leaving off? That's always the question that people have for me, what else can I do? And so excess taxation would be if you just put in the information and never asked any questions or never sought for the best, taxing of it, which means, of course, the least amount of taxing on the other hand that's why you work with a financial advisor. Lance is all about Roth conversions because if you do that, now you have your money earning tax free later and it's after tax money. So, sometimes, if you have a year where taxes are low, you do more Roth conversions, so that you're paying tax now. So, maybe it's more now, but less late, is the goal. So, Lance, I'm sure you might have something to add to that.

Lance Johnson   12:14

So real quickly, way back when Money Magazine was really popular, super popular, when it first came out, they every year would do an a little presentation or right before tax time and they would solicit a 100 CPA's across the nation and they give a tax scenario and they would publish, you have to agree to this, you would do the tax return and you would publish your results of what they owe or got a refund and how much you would charge for that tax return and then they would have 10 auditors from the IRS give the exact same to come up with what the IRS says the right tax return would be. Now, out of those 100, only two came within $1,500 of a quote unquote, the right tax bill and the rest of them range from 1500 discrepancy to $50,000 difference and what they charge and I thought it was such a like, I'm not sure I would want to swing that bat. So, they did this for years and then there was a lot of complaints about it.

They obviously damaged Money magazine would damage that person nationally. So, when you talk about xx taxation, there's a discrepancy amongst every professional about what your tax returns would be and what the IRS so that's one second. I look at it when Sue looks at, I have an opportunity to do an IRA contribution or a Roth IRA contribution, which one do you do? Well, it depends on the taxes, the assets and stuff like that. There's a decision that needs to be made, the age and who they are and whether they're aggressive with their investments, are they going to they're going to put it into Google or are they going to put it into an AT&T stock and that might dictate whether you do one or the other. So, there's that and then there's things like the Roth conversion. This gets back to this last I think it's a tragedy that people don't do year tax planning before a year at. So, it's hard to have a Roth conversion strategy, if you have to do it in the calendar year and the 401K so what happens with Sue and I sit on these meetings is she does a wonderful job of lowering taxes.

But we have these conversations with some clients between April and August. Now they're behind on their taxes. We tried to scramble to figure out the few things that they could be doing and now we're nine months into this year where they can make changes. But if we did year taxes and you knew that bill, they would make more changes before year end. Rob, we used us example, one year, yep and then we lowered your tax build quite a bit and then the next year, we were starting in your planning in January, so that you had a full year of being able to deal with cash flow. We just ended up making more changes quicker. So, instead of taking three tax years to improve the client's situation, we were able to take two tax years and it's really only 14 months versus 30 months to [Inaudible 16:04] a year in tax plan. I just can't say enough about it, that going hand in hand with Sue, the more we can do more year-end tax planning with tax clients, the happier they're going to be with her services and to be praying, the less stress they're going to be about their tax return, because we've already determined it.

Rob Delavan   16:34

Okay, so question number two, this is a fun one. Can you tell us the story Sue, of how ROI tax and ROI financial came together and how is this going to benefit your clients immensely and I'm sure there's going to be some comments from all parties involved here, this will be fun.

Sue   16:59

Well, one day at our BNI meeting, the Business Network International that we belong to I was talking to Mr. Rob Delavan himself and I was lamenting, what is my exit strategy for retirement, there just aren't enough people becoming CPAs. I don't know who's going to want to buy this firm, what am I going to do and Mr. Rob Delavan said to me, Sue, you're a unicorn, there's only one of you, the way you do business is incredible. But I want to introduce you to someone who could really benefit from your tax firm and you could benefit from his knowledge as well and that's how I became introduced to Lance Johnson, with ROI financial and we talked and then we talked again, and, it took us a couple of years to get into a groove and now we're in the same office and doing the clients and it's all about that Lance had a vision and I could fit in that vision and it could benefit me and it could benefit him and it could benefit our clients and so here we are, we took my firm, made it into a partnership with some professionals, Lance and Rob and drive a county and now we're in the same place and we're offering tax services, but then I'm able to share with my clients and offered them to Lance for his services and here we are...

Rob Delavan   18:56

And the rest is history, now I will say Lance, didn't you and I before we started this entire have a full heads of hair.

Lance Johnson   19:13

Well, I mean, in all honesty, though, financial advisors and CPA's I think they think from different sides of the brain in some cases and then our points of view are different. I often say that if we're working with a client, I'm sitting in the front seat, looking at the road ahead, trying to help clients navigate potholes and Sue's sitting in the back making sure that the police officers, we are not going too fast and we're not taking too much risk with taxes and keep us very compliant and then we're sitting in the car discussing which direction we should go in north south east west. So, that's how I describe it. It just so happens that in the past, we were in separate cars, now we're in the same car with the client and here's one thing I know about Sue and I, we care about clients. I mean, we do, there's a fiduciary responsibility to put our best foot forward, it's just always trying to help clients make better decisions about their money, nobody else can make that decision, but them, we can just encourage them to do certain things and make sure we steer clear from any potholes in the past or present so that's the issue. It takes a long time for a financial adviser and a CPA to get together and the best thing we ever did was move into the same office, because our business is complement, when she's super busy, we have some access time and when I'm super busy, she has access time and so if we utilize our time, efficiently with staff, one plus one can actually equal three instead of one and a half and I think that's starting to happen.

Rob Delavan   21:08

The other thing that's incredible too that I've experienced and we talked about this happening, but happening, in reality has been so much higher level is, for example, I'm running a real estate firm and a property management company and some other real estate stuff, the benefit to having, to be able to say, hey, Sue, hey, Lance, this is the situation we're dealing with and of course, caveat, especially from a compliance standpoint, everyone's situation is completely uniquely different, I mean, literally is uniquely as different as everybody has their own fingerprint. Everybody has their own financial questions and answers that are correct or not, or so forth and myself, Adrian, on the lending side, I mean, we can have these conversations in real time, Adrian and I get to get in and out of that car, if you will. And, like, hey, I can ride with you guys for a few miles during this [Mixed Voices 22:14]. We just took off but that's the concept and that analogy I mean, it could almost be seen as you know, kind of hockey, like, hey, we're all in the in the car together, it's a bunch of clowns in a in a Volkswagen. But there's something to be said for, hey, this lending scenario on this property versus this scenario, cash on this property, what's that look like Lance? What's that look like Sue? If we save the money over here and God forbid, actually invest the difference, instead of just say, we're going to invest the difference, what does the projection look like with but when you actually start crunching the numbers and I mean, the power of that is, is something that I knew that it was going to happen. As it actually happens, it's so cool, it is so cool to be able to just, have those resources at our fingertips for the benefit of our clients.

Lance Johnson   23:21

I think one scenario though, is use a good analogy where everybody's situation is different. So, they have a unique thumbprint or facial expression. Yet we all have two eyes, one nose one mouth and what you realize that the concepts are all the same for everybody like so Adrian, you and myself all have and Sue all have some common scenarios want to minimize taxes now in the future? We want to have a good retirement; we're going to have investments while retirement plans. There's cash flow issues, there's paying down debt, there's utilizing business write offs. That's the eyes, the nose, and the face. Some of us have hairline some of us don't, there's some uniqueness. But there are a lot of similarities and I think it's helping clients gravitate to the same strategies. What do you do with the markets at the height of the market? There's a set of things you need to do. What do you do to take advantage of the market? What do you do on the bottom of the market? There are certain things you could do that take advantage of that market. The question is, do clients out there have a game plan and that's the issue. Most of them don't have a game plan. That's like designing a house and building a house with no blueprints or plans. Do you ever do that as a real estate agent? The answer is never ever, why should anybody do financial planning, without blueprints to their future? They never should do that and you're house is only a small pittance to what your overall net worth is over time and so we're just trying to teach people same concepts that you utilize every day in your real estate life.

Rob Delavan   25:20

So, last question, what do you see for the future of ROI tax in ROI financial and your clients?

Sue   25:31

Okay, so the sky is the limit, really because of the fact that now we're joined. Now, I have resources and we can hire some other CPAs and start to take off and maybe have other locations in other cities that hire CPAs, to free me up to do some different things and consult more with lenses clients and vice versa. So, I just see a lot of opportunity for growth and for our clients to be able to experience better synergy to have the opportunity to minimize taxes but increase their wealth at the same time. So, I'm very excited about the future.

Rob Delavan   26:29

There's a article coming out, I want to say it's April 2022. In entrepreneur fortune Bloomberg, I think News week, also that talks about this and national article and I mean, it's incredible opportunity to share this concept. Lance speak to that, because that was all about just forward thinking this concept that we've been talking about this entire podcast.

Lance Johnson   26:58

So, there's articles coming out and I had a chance to talk about ROI financial, which everybody wants to talk about a concept that I would, I don't know if I'll see it in my lifetime, but it's worth pursuing. But use the example of these big companies like Costco, you know, one of my favorite companies to shop at and it's just interesting, because you can get a Kirkland brand, you can get great goose and it's similar and you can get a high price and a low cost, all in one stop and they promote other businesses within their business. The question is, could we create that same scenario working with regulation, to create the same one stop shop in the financial world? Now banks are trying to do it and insurance companies are trying to do it but the concept is, could you do it over real estate, financial and so forth? And I just think it's worth pursuing, it's just the ideas kind of cool and where I see the collaboration going with ROI tax and financial, it's just one small cog that will build and in the future, I think, a happier ROI tax client, that is not yet a financial client, is they become a financial client and they do year-end tax planning.

If 95% of Sue's old clients do year-end tax planning, you will have a happier client, a client that is informed on decisions in a timely fashion, not after the year, but during the year they're in, they'll have less surprises like, oh, my God, I made $300,000 I have to pay more taxes? Well, of course you do but and those years that you have high energies, maybe that's the time to buy a vehicle or building something and then when your incomes lower, you do Roth conversions. But if you're trying to make those decisions after the year, all you're doing is setting yourself up for disappointment and so if we can get those clients to do more year-end tax planning, that clients are going to be happier and Sue's gonna be happier, because I can tell you what we're going to plan for. Most of those clients will get a slight refund and they already know their tax bill and the urgency of the tax, getting it done I mean, Sue has to do her business in 12 weeks. That's huge but if all of them we're gonna get a slight refocus, we did all the work at the fourth quarter things are a lot easier to do. It's not being bottlenecked by the CPAs because we already did the work and we spread the work over time. So, you have a happier client, a happier CPA and they're probably more inclined to work with the financial advisor, which will help them build wealth by not paying as much in tax. I just see it as a win-win situation and I hope any ROI tax client who hears this, that is not doing year-end tax planning, please engage sue in that service and you will have a happier client.

Rob Delavan   28:43

The one other piece here, Adrian, the clients that do year-end tax planning in the real time tax planning of the future, right, let's call them the future clients, although we're doing it today with a lot of them. Adrian, what kind of borrower are they?

Adrian   30:23

It's a slam dunk. I mean, a lot of times they have layered and complicated income situations. But it's twofold because we can get the documentation really easily; we can go to one stop source. There's a lot of times as I need new documents, the clients that are in the situation, we just have it uploaded through a portal, they don't even have to get their hands messy and there's certain situations where they genuinely don't know what's going on and I know that that sounds bad on paper, but it's not there were so relaxed about the whole process. Well, I'd speak to my CPA, I know it's dialed or speak to my financial planner, it's all in there, they're much easier to qualify, really, because everything's in the right columns and I've seen some pretty squirrely stuff. I mean, Sue, I've gone to you a few times and said this is right, can you really do this and it's like, well, let's just hope they don't get audited but we send to the right place and we just know that everything's really dialed in and we just have less underwriting problems, less red flags, it's a lot simpler.

Lance Johnson   31:42

I think year-end tax planning, what it does is, like, if you have small business owners like that would be the first thing. It forces the business owners to get their books in order by November, December. So, there's not as much work in October, November, they get into so if they're looking for our house in November, December, you're gonna want a profit and a loss and if they are forced to year end taxes, it's just gonna force them to keep updates for the books, half the battle that Sue and I deal with is small business owners, you know, less than a million dollars of income, that still are trying to keep their costs down and grow the staff and the business and so they'll try to do the books themselves or whatever and we're always trying to get updated financials. By doing that ahead of time, that taxes you're more likely to get their books in order so we can do the right tax planning and it just makes it much simpler for you too and so, again, I go back to this if we love our clients, if there was one thing I would encourage every client to do urine tax planning, puts them in a better position in so many different ways. I just can't stress it enough and that's what I hope the future of ROI tax and financial is we do some of that work before year end instead of after year end.

Rob Delavan   33:09

Love it, so thank you so much for being here. Sue, [Mixed Voices 33:27] hey, you heard it here, she might come back, Adrian take us home here.

Adrian   33:28

Oh, wow, impressive, www.ROI-tax.com is where you can find information about Sue. I hope though, that this, like all our episodes, this is universal information that we're offering. I know we've done a great deal of back rubbing here, we all love each other. But there's good reason because we've flushed out professionals that we respect within our field and that's how they end up on this podcast. So, don't think for a minute that this is only applies to the group that you hear in front of your ears. We definitely want this to spread out and for everyone anywhere to be able to glean some benefit and hopefully, if you can't use us, you can find a team local to you that'll be able to achieve the same level of balance and just that teamwork, so final episode eight and an eight part series. Next week, we'll be moving you guys on to a bit more of some more real estate stuff and look at what the market is doing right now. I know that the world is crazy. I feel like I say that every year but it continues to evolve on a weekly basis. We've got our fingers on the pulse and we want to spread that information to you from all sides of the industry, financial planning, real estate and lending and please share this episode and please comment back we've received tremendous amount of feedback. It's really helping guide what we produce for content for you guys next. We want to make sure that we get ahead of it, do the research and provide you accurate information and great sources to draw information from.

Rob Delavan   34:55

Thank you all for listening.

Adrian   34:57

We'll catch you next time.

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