How do you maximize profits and reduce tax liabilities? By tax planning ahead. Scott Carson’s guest in this episode is CPA and fractional CFP Ron Fossum, the founder of Tax Plan Wealth. Ron talks with Scott about how tax planning is where all the savings happen. There are different ways for investors like yourself to plan ahead with taxes. The key is to play by the rules and understand the tax game you’re playing. But Ron also advises you to hire attorneys to help you figure out your tax plan. Running a business is complicated enough. You can’t handle all the responsibilities by yourself! So if you want to learn about the different tax planning strategies you can use, this episode’s for you. Tune in!
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Forward-Thinking Tax Planning: Where All Savings Happen With Ron Fossum
You’re going to want to read this full episode of the show. We’ve got tax planning and rock star tax deduction expert, Ron Fossum, joining us from TaxPlanWealth.com. He shares some knowledge bombs and some things that we can all do differently to get bigger write-offs or bigger deductions so we pay less to Uncle Sam. Make sure you share with at least one person and while you’re at it, go ahead, leave that five-star review and hit the subscribe button. You’ll love this episode. We’ll see you at the top.
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Welcome to the show. I’m jacked up to have a buddy of mine on here to talk about something that will keep you up at night. It’ll scare you sometimes at least one day of the year. Maybe you are sitting there sweating because you probably haven’t done your stuff the last years with everything going on but who knows what you’re doing? It’s something that we all have to do as entrepreneurs and good tax-paying Americans to play our part so that everybody else can be a free loan.
I’m honored to have my buddy here join us. He serves as a fractional CFO for numerous companies, as well as running his own tax planning service, TaxPlanWealth.com. His company’s entire focus is how to reduce their client’s tax bill by 50% or more legally, morally and ethically. Additionally, he frequently speaks on the subject of corporate veil and asset protection, real estate and due diligence processes for investment. We’re glad to have my buddy join us out of Lake Stevens, Washington. The one, the only taxman, the myth and legend, Mr. Ron Fossum. How’s it going?
I’m fantastic. That’s a lot to live up to. Thank you.
Ron, besides what I shared with them, what would you say for our readers? We’ve got a lot of real estate investors and note investors here. Why don’t you dumb it down what I said for folks to share what your nuts and bolts are for you?
What most people end up doing is waiting until the end of the year and turn everything into their tax preparer, bookkeeper or accountant CPA, IRS Enrolled Agent, EA. It’s all done after the fact. It’s very reactive and then we turn everything in. We wait a couple of weeks, maybe a month or something. We’re biting our nails, trying to figure out what we owe. Bless their hearts. The CPAs and the EAs have a super-hard exam.
Remember when we’d go to a big city like LA or San Francisco and these old yellow page phone books were 3 inches thick. The CPA study guides are four manuals like that. There’s not a single thing in there that helps them identify how to reduce taxes for their clients. It’s all about how to properly identify the source of the income, how to record it properly, what forms to file it on, all that stuff into the timeframes that certain forms have to be filed. It’s super complex.
Reducing your taxes is not normally their focus, especially, if the business owner or the entrepreneur is doing it after the fact. Tax planning is where all the savings happen. We’re more of a proactive approach. This is our crazy and busy season because everyone’s trying to get all these strategies done so the cashflow that looks proper gets into the books properly. By the end of the year, whatever is in the books is what ends up on the tax return.
For most people come to the end of the year, they end up to the first quarter a lot of times depending on what’s going on.
We’ve got other months to get whatever’s left. We can’t wait until the end of the year to squeeze everything in.
When you sit down with entrepreneurs whether it’s real estate investors or business owners, what’s one of the biggest things that you are surprised that they’re not doing or things that they can do to help ethically and legally reduce their tax income?
Let’s look at a big picture. What do the Fortune 500 companies do? In 2019, companies like Starbucks, Amazon, Penske, Prudential, Pitney Bowes, Chevron, Delta, Netflix, Alaska Airlines and Levi’s made billions of dollars in revenue and paid zero federal tax. They’re all highly scrutinized because they have shareholders. We know they’re doing it legally.
Our secret sauce is we look at what are these Fortune 500 companies do. How can we start to boil that down? To your question, one of the best things people can do is seriously look at the entity structure that they have. You’ve had Laughlin and Aaron Young on here before. I’m not going to beat this horse but the IRS admits that over 70% of taxpayers would be better served in a different entity than what they’re currently filing. Maybe it’s not just one entity. Maybe it’s multiple entities.
When Trump passed his tax plan, we get that QBI deduction of 20% straight across the board that starts to phase out, if you make too much in one income. Sometimes you go in and start to bifurcate income and do some of your business in this entity so that you stay under that threshold and you get 20% on both of that. The phase-out, if you’re married filing joints like 357 or some odd number but 20% of $300,000, that’s a $60,000 deduction. Who cares if it’s going to cost us a few hundred bucks to file an extra entity or something like that?
I was there in California paying $800 a year. We hear people that complain about living in California. I’m like, “That’s your good weather tax unless you’re living in a burnt-out area where it’s on fire for the most part.” We all know that airlines talk about prepare with the end in mind. That’s one of the things that you talk about. Let’s look at the end and see how you help prepare those. You separate off the LLCs, changing your strategies and all combined to one. There are advantages to having multiple LLC structures, not only asset protection but tax planning.
It’s a common question I get, especially, when I speak live to an audience is which entity is the best entity. I’m like, “They’re all good. They all have their advantages.” Why marry your business to just one? There’s no reason for it. In an accounting firm, we’d put accounting in one business. We’d do tax prep in another business and tax planning in another business so they’re all going to qualify and then it’ll be separated, which also helps for the asset protection piece when they’ve been in litigation and that stuff as well.
I was watching HBO and The Accountant popped up, one of my favorite movies with Ben Affleck. There’s that scene where the lady at the revenue office is trying to track down the wolf guy, Ben Affleck, finding income, names and stuff like that, I’ve seen how he structured his business over delegated income across a Chinese restaurant and laundromat that is taxed. He’s tax planning a couple of others that were all businesses to help separate things out. He paid taxes, mostly illegally. That’s a great example of bringing everything in and separating things out so you can multiple max it out.
From a corporate world, you probably heard of a corporate expense account. When the employee takes a customer out and then he can expense it back to the company, the company gives them the money back. The IRS calls that an accountable plan but you can do that as a small business owner. You can set up your own accountable plan and submit for reimbursements.
This will be your home office, mileage, cell phone, travel, all that stuff, that if it comes in your personal name, it ends up on a personal credit card. You submit it as an expense to the company and then the company reimburses you. That money flows out of the business and comes back to you personally. It’s not payroll, salary or wages. You bypass all the taxes. It’s one of the few areas of the code. It’s completely deductible for the business and tax-free to the business owner. Looking at what you can do for reimbursements is another way to start sucking some money out of the business.
You started looking at one of the biggest things. If people are doing besides travel costs is mileage, they’re driving around and looking at properties and it’s part of what they’re doing being able to credit their mileage, that’s a big write-off. When I was traveling across the country for three years straight, driving a lot of times I had a big mileage discount and it adds up quickly.
Especially because of COVID, if I work from home, I don’t have that many business miles. The reverse is true. If it’s your house and you commute to your job, that’s never deductible. There’s no workaround. However, if you have a home office, that becomes your first place of business and you go to another temporary or permanent work location, doesn’t matter, that mileage goes from commuting non-deductible to instantly deductible.
You need to leave with a profitable intent in mind that’s going to be added to your business. Your mileage frequently will be in the 70%, 80% that should be deductible. If you start to compound and stack some of these strategies because you’re doing the home office, you’re going to qualify for more mileage. You’re doing the mileage so you’re going to qualify for the reimbursement piece. Where this starts to get powerful is when you stack these strategies together.
That’s a big one. I didn’t know that. I had a home office here down the street and we’re deducting square footage of where we’re at here versus everything else, the mortgage, utilities, all that good stuff too. This office is on the mileage from the house. As long as you claim that and go in there. It can add up. Even though I don’t drive my truck very much, everything’s done remotely.
The other one is done a lot. Everyone’s heard about home office but done improperly. Number one is there are four ways to write off your home office. Most people, if they’re doing the taxes themselves, they’ve probably taken it right off the tax return, which is $5 a square foot, which is the simplified method, safe harbor method. The IRS says, “If you use that method, we will never use that as a foundation for an audit.”
When you look at the square footage method, that almost always comes out better, especially if you’re in any of the states that ever border in the ocean. Like some of the Midwest states and it’s a lower value property, $5 a square foot might work out but the gross square footage is one method. $5 a square foot, gross square footage measured. There’s also a net square footage method and then an equal size of rooms method.
It’d be unusual to find equal amounts of rooms. The master bedroom is always bigger. Your kitchen is not the same size as your dining room. This net square footage rule allows you to take off all of the common areas out of your house. If you live in a 1,500 square foot house, the gross square footage method is saying, “I got 100 square foot office, 1,500 square foot house. I’m going to take that percentage.”
With that same house, 1,500 square feet, you pull out the common areas like your hallways, stairs, landings, the entryway to the front door and the back door, the bathrooms, if you’ve got a server room in your house, a utility room that has the hot water tank, heater and air-conditioner. Whatever you take out all of those common areas so you’re just left with the main rooms, you’ve shrunk that 1,500 square foot house down to 900. You still got this 100 square foot office. Divide that into a smaller number, you get a higher percentage. You’ll usually pick up 25% to 35% more off every line item that you get with the home office. That’s going to be your internet, insurance, taxes, interest on your loan, made service, maid service and all that stuff.
One of the great things that people pull up here a little bit is being real estate investors. Being able to write off the real estate or the depreciation on the assets, they love that when it comes to real estate. We don’t necessarily have that in the note business, unless you take a property back and then you can start doing that. Do you have the straight depreciation? There’s also another way to depreciate your assets out there too.
You can accelerate that depreciation. Normally, let’s start high level first. If you’ve got a residential property, you’re deducting or depreciating those over 27 and a half years. It’s a $100,000 house so you slice it 27 and a half times. That’s what you’re getting in the depreciation that year. Effectively, it looks like a deduction but it’s technically a little bit different. Not everything in the house is going to live 27 and a half years. We can go in, do an analysis of that property and say, “The windows are going to last fifteen years. The carpet is going to last five years. The driveway, the fence, the roof would probably stay at the 27 and a half years”.
We can start attaching ages to all of that stuff. The stuff that comes up with a 5-year, 7-year 10-year time horizon, we can accelerate that the value of that whole thing all the way up. It increases your depreciation, which then decreases your taxes. That’s phase one. Phase two is if you’re a real estate professional, which means you do 750 hours a year, you materially participate in your business and you spend more than 50% of your time in this real estate business. You can have another job. You work 900 hours doing something else either doctor, lawyer or whatever else but you spend 950 hours in the real estate profession.
Regardless of being an agent has nothing to do with an agent. You’re documenting the hours that you spend in the real estate business. All of that accelerated depreciation not just counts against the rents of those properties but also counts against your W-2 income. Frequently, you’ll start to see the more you look for it. As soon as we become aware of something, we started seeing it all over the place. You see highly compensated individuals that are also qualifying as real estate professionals and there’s a whole set of rules to jump through for sure. All of that accelerated depreciation then wipes out that W-2 income and they can be pulling multiple six figures a year. I’ve got one client doing seven figures a year and getting to zero.
What are the biggest things that drives you bonkers? Do you get people come to you too late in some cases or not early enough to set things up? It’s not too difficult for a little bit to right into the separate entity set up. Bringing somebody on to help with this tax planning is being offensive in your tax plans. Most people being defensively. You do that for a lot of entrepreneurs being a fractional C-Suite person. Let’s talk a little bit about that and how that works.
I’m going to throw my own industry under the bus, the accountants, CPAs and EAs. I was talking with someone and they said their accountant only wanted them to write off 50% of their hotel even though it was 100% for business use. I’m like, “50% for hotel is not a rule anywhere.” Fifty percent of meals can be a rule. Most of those have been switched. We got a new meal plan with Trump’s tax plan and then Biden’s tax plan. It’s only good for two years then it’s going to revert back to Trump’s tax plan again.
Meals and entertainment, you got to watch closely but they’re trying to help out restaurants and hotels. A lot of those 50% rules went over to 100%. The amount of misinformation in this industry drives me nuts. When we do a strategy in your tax plan, we explain it. In high school English, there’s no acronyms or legal mumbo jumbo.
We’ve explained the strategy step-by-step and then we conclude every strategy with, “Here’s the IRS code. There are usually multiple code sections that we’ll refer to it.” The court cases we can find, treasury opinions, all of that stuff is all sourced on every single strategy. I went, grabbed the plan and section and send it over to him. I’m like, “That’s not a thing.”
It’s also because the tax code is so long. I saw somewhere over 6,000, 6,500 or 7,000 pages deep with all the different US tax codes. I don’t think it’s designed in a lot of cases for people. It’s more than that.
Pre-COVID, it was 73,000 pages. Since COVID, it’s over 25,000 pages additional. The first couple of bills I got passed. I read those things like they keep passing stuff and it’s a couple of thousand pages. You’re like, “I’m going to hit the high points.” I started delegating it out to the team. Fortunately, on our team, we’ve got CPAs, accountants, bookkeepers and four tax attorneys. “You take this and that chapter. Let’s all come back together and share some of these strategies.”
That’s the beautiful thing about having a team like you guys to an entrepreneur out there to help them understand. Somebody out there solopreneurs, entrepreneurs, business owners, they’re best as we know if you’ve ever read The E Myth by our buddy over there, Gerber. It’s not our best interest to be going back and looking at the research and development of the tax code. It’s all about face forward and planning but that’s also planning for these types of changes.
I had to go back to 1986 to find this one. Remember in ’81, Reagan took office and it was Jimmy Carter exiting Reagan there. The first week of his presidency, he was able to negotiate the release of 55 hostages from Iran. They had been hostages for 444 days. The IRS came down super heavy-handed on these poor 55 individuals because being held hostage in a terrorist country is not a reason to file your taxes. It took to ’86 for Congress to pass something.
A terrorist relief act is what it was in ’86. The whole act was two pages super clean. I’m like, “I get this.” Over the years, they said, “If you’re the victim of a terrorist, you get these breaks. If you’re the victim of a hurricane, you should get those breaks too. If you’re the victim of a tornado, earthquakes, volcanoes, anytime there was this declared disaster zone, this section of the code qualifies.”
I haven’t heard this on any other podcasts. No one’s talking about this at all because you had to go back 30 years to find it. It’s very applicable. It’s still only two pages long. It’s a super simple piece. There are only two times I ever tell clients this, “You don’t need receipts in this section of the code.” It was confirmed in 2001 with the joint committee of taxation. No receipts are required if you’re using this section. March 13th, 2020 is when they declared COVID a nationwide disaster zone.
That’s why you would say maybe with the emergency or e-PPO. If they were approving stuff, whatever you filled out in a lot of cases, which for a lot of people was good but you also had people trying to take advantage of that and other cases out there too.
That’s free money from the government. That was the PPP, EIDL loans, that kind of stuff. The disaster relief money I’m talking about is your business. “You got a couple of rentals. I’ve got a notes business. I’ve got an LLC that’s taxed as whatever.” Personally, as an employee or individual of the business, I could submit some of these even personal things and have the business pay for them. The business gets the deduction. The business does not have to issue 1099. You personally get that money tax-free. It’s not income.
If you start the sentence with, “Because of COVID and quarantining, I have this new extra expense,” it’s probably going to be covered here. I’ve got some clients that their kids were in college. They pay for the whole thing. COVID hit and they got kicked out of the dorms. They have this new temporary housing expense that they’re having to pay twice that’s totally deductible.
Another one would be tutors. If the kid was used to getting some one-on-one care with the teachers but they went to Zoom, can’t get one-on-one so they had to hire a tutor to come into the house. That tutor is going to fall under this disaster relief and that’s because of quarantining. With quarantining, I couldn’t go to the gym so I had to go buy an elliptical machine or a treadmill. Personally, I had to go buy a massage chair. I couldn’t go to my chiropractor and massage therapist. I bought one of those Master Massage Chairs that’s in my living room.
Even nonperishable food supplies. I’m sure your family is the same way. We’ve got a cupboard full of stuff just in case the grocery store gets empty. CDC says we should have some food reserves so all your nonperishable food supplies, a certain number of days, how many members in the household. If you’ve got five members, $66 a day is what the IRS gives everyone for travel on food. That’s a reasonable number. If I use $66 a day, times 30 days, that’s $1,980. I get five people in the household. That’s almost $10,000. That’s some of what passed during all this COVID, the new 25,000 pages that they’ve added.
Those are such relevant things that people don’t think about. Many people who come from accounting are intimidated and embarrassed about what they don’t know. A lot of people have that, “I don’t know. I’m old like an idiot and hiring somebody when they’ve seen all the dirty laundry that I haven’t taken care of or washed.
Some of your readers could do to hold their accountant and CPA is ask a better question. Don’t ask, “Can I write this off?” If they don’t know the answer is going to be no for sure. At a high school reading level, it would take 32 years to read the whole code. I don’t know it all. No one’s read the whole thing. Everything’s deductible somehow some way. What are the circumstances that would have to be for this to be deductible? It’s a much better question. Make him go do some research. If he’s unwilling to do the research, you probably don’t have the right guy or gal.
When you ask a realtor outside the box question on how to structure deals, they’re like, “You can’t do that. That’s illegal. You can’t write that off.” There’s got to be some legal dos in a lot of ways out there. What’s probably one of the things you see people get slapped on the wrist for besides pre COVID in a lot of ways, Ron? Too much outside the box stuff or stuff that’s not in their main wheelhouse.
They feel like they’re paying disproportionately more of their fair share. I don’t believe in the gray zone. Everything is very clear in the code. It’s red, green and yellow lights. If you go to IRS.gov, you look up any strategy and start reading it through, there’ll be caution. It’ll have an explanation paragraph. That’s a big yellow light. Years ago, I was this way. I felt like, “Why am I paying between state and federal 30%, 40%, 50% of my money?” That’s hard to build a net worth that way when you’re giving your $0.50 to every $1 away.
They start wanting to do cash or squeeze things in as deductions that aren’t deductible. There’s no legitimate business purpose for it. There are so many legitimate, honest and ethical ways to do it. There’s no reason to hide it from the IRS game. It’s silly. That will come back to bite you sooner or later. If your accountant and CPA is playing that game with you, that tells you a little bit about their ethics as well. Let’s try to play nice and by the rules.
Look at it this way. Congress and senators write the rules. They’re not going to write the rules that hurt themselves or they’re going to leave more rules for their constituents and the people that have donated them money. There’s always going to be a legal, moral and ethical way to do it. As stuff changes, we need to find a new path. We’ve had more tax changes from Trump’s tax plan forward to Biden in the last years than we’ve had previously. Ronald Reagan was the next largest biggest change in the tax code. If we’re doing the same thing all over again and we’re taking the same deductions, we’re probably missing a small fortune and overpaying.
Sit down and have an advisory. What advice for somebody who knows what they’re talking about? When you look at your clients, what’s a starting point that you work with? Are we talking income levels, businesses, you’re starting with the solopreneur working their way up? Is there an income level that makes sense for them to bring somebody on like you and your team to help them out?
It depends on who the team they need are based on where they’re at. I’m working with a client who’s doing $20 million in revenue. He’s got a great bookkeeper. He’s got a CFO but the CFO doesn’t know anything about tax, which is fantastic. We fill in wherever they’re at. If they’re starting up and they can’t afford a full team, that’s great. We’ve got some do-it-yourself tools so that we can keep everything in alignment. Make sure you maximize that stuff.
Our tax plans are built to be standalone. Even if you have a team and you’re like, “I got a twenty-year relationship with my guy. He’s awesome but he’s not proactive.” Give me some ideas that I can feed him with and we will start getting some of this stuff implemented. The tax plan all by itself can be standalone. You can call us and say, “I’m a real estate and notes investor. I want to know as many strategies as I can find around real estate and notes.” We can give you all the tax code, strategy and make it super simple. We’ll even jump on the phone with them if they’ve got questions after they’ve read the plan. If they don’t know it, they could go read all of our source material and still get it done for you.
I won’t say it fits all sizes but you’ve got a solution for anybody out there, no matter where they’re at and what’s their history. How did you get into what you’re doing from where you’re at before?
I would like to think a lot of people do the first time they get money is you spend it. I bought some stuff for the family. We did some travel and all this kind of stuff. The first time I made $300,000 a year, I did what everyone did. I got to the end of the year and turned everything in. They say, “You owe 30%, $100,000.” I freaked out because one, I didn’t have the money and two, this cannot be how wealthy people do it. You cannot be given 30%, 40%, 50% away and build a net worth. I went on a mission of what does everybody do.
In 2010, Warren Buffett made $39 million and only paid 17% tax. Are you freaking kidding me? This belief that the more you earn, the more you pay is hogwash. That’s what your accountant tells you when he doesn’t want to go do his job for tax planning. Maybe it’s not his job. Maybe the tax planning piece is separate from the accounting. Maybe you only engage with them for the accounting and that’s all you’re getting. That can be it as well.
How do wealthy people earn millions and millions of dollars? For us, we want to be efficient. If you’re in this 15% to 20% range, you’re probably pretty efficient. If you’re keeping 80%, 85% of your money, you can build a real net worth. Zero can’t be the right number for everybody or we wouldn’t have a government, roads, police, fire fighters, teachers and all that stuff. When it works out that it’s zero, that’s always fun but not everybody can get by with zero, for sure.
The Oracle of Omaha was making $39 million but only paying 17%. That’s well below. It’s sad and maybe opening up a Pandora’s box here. The whole national argument of, “You got to pay more. You didn’t pay any taxes,” is a child issue because the tax codes there help identify opportunities first to write things off.
People get so bent out of shape that people don’t pay taxes, Trump’s tax returns or whoever’s didn’t pay anything. A reason for that is they use legal avenues to pursue this to make things happen. Years ago, it was all about the Roth IRA with Romney. He’s got self-directed Roth IRA but he did it legally. It’s not the, “Congratulations.” It’s, “Shame on you. You owe me because I’m not smart enough to do the same thing.”
That was one of them. The other one that he got a lot of flak for was being a fund manager, which also applies anyone in your group that’s doing a syndication whether it’s for notes, real estate or anything else. If you’re a fund manager then they call it earned interest. It caps out at 15%. It’s not ordinary income. Forget the brackets. He made several million dollars in one year and only paid 15% on that income. They were like, “How come so slow?” That’s one of the lowest brackets. He’s like, “Those are the rules.”
I’m in the process of putting one together myself, going through that and setting that stuff up. I’ve never regretted spending a dollar on asset protection, tax planning and stuff like that. It all comes back exponentially in one form or fashion and helping you long-term.
It’s complicated enough to run a business. You can’t be the jack of all trades and go figure it out yourself. I’ll hire the attorneys to get the def stuff done. I’ll hire the law firms of the world to help me with the entity structures, rely on other people that do it all day every day. Clearly, they’re going to do it better than you right
One of the things too is we’ve had some of our students reach out to because they’ve screwed up. They haven’t filed their taxes and they have a tax lien placed against them. That’s not the end all be all of that. A lot of times you can go back and redo your taxes or file to get those removed or reduce it or put on a payment plan in some cases.
There are nine ways to negotiate with the IRS. It depends on a lot of the facts and circumstances of your case. You’re dead right. Depending on the timing of the year, you can either go 2 or 3 years from the date the tax is paid and refile those years if you found out you made a mistake. They even pay you a small interest rate. It’s nothing to be excited about. Ron screws up, files his return and then a year later, say, “I screwed up. I kept my money back plus interest.” That doesn’t happen anywhere else but the government.
That’s a beautiful thing with what’s going on in the world. All this stuff with COVID, being able to write off stuff as a disaster area is well-worth people taking a look at what they filed in 2020 and then what they’re thinking about filing in 2021 to be proactive.
When they came out with a PPP and the Employee Retention Tax Credits, they said, “It’s one of the other kind of thing.” The second round, they changed that and most people missed it. Even if you took PPP money, you can still go back and get the earned Employee Retention Tax Credit, ERTC. It is worthwhile going back, look and make sure you’ve taken everything. In fact, regardless of your relationship, I wouldn’t have your returns looked at every three years, even if you stay with your guy but having a second opinion is totally normal with our health so why not with our finances?
One of the things our team did is we work with Golden Tax Relief quite a bit. The owner of the company under the Freedom of Information Act went and got the auditor’s training manual. Call it what it is. If you have the other team’s playbook, you should be winning most of your games. You know the rules. If someone hasn’t filed 2 or 3 years or if they’ve got a lien, a levy or garnishment or something, it’s worth talking to someone that is an expert in that.
I’m more of a planner windshield move forward kind of guy. He’s a genius in how to go backwards and clean this stuff up. Maybe you have that lien because your accounting was done wrong. Never cease to amaze. He looks at balance sheets, income statements, tax returns and he spots a mistake crazy fast. You can play by the rules and the rules are there. You got to understand what game you’re playing. It does no good if you’re playing football with a basketball. If you can’t score, you don’t know the rules.
It’s also what you can and cannot do whether they can pass forward or pass back, how you can take the true rules of passing your taxes. It’s such a great opportunity and great rules to play by. We could call it tax instant replay in a lot of cases.
You’ve heard Aaron talk about doing the minutes and the resolutions every month. There’s probably something going on very routinely. You got to document your annual shareholder meeting, most of your major and routine decisions. There’s a tax piece that goes along with that. Scott has a meeting with Scott. You’re talking to yourself. If you’re the only person in your company, you can have a meeting.
That’s what Starbucks and Apple do. They have a meeting. They’ve got 30 people but in your company or my company, maybe it’s one of us. It doesn’t matter. The rule is the same. You have the meeting. The IRS says that you can have fourteen times a year, you can rent out your personal house to anyone in America and have tax-free income.
Anyone in America can be your business if that business has its own EIN number. You have your social security number. Your business has its EIN number. You’re separate under the law. What Loughlin does with entities and what we do with taxes is we’re looking to try to align all of those things because there’s offense and defense. Getting those teams to play together is very effective. You rarely see championship teams that don’t have a solid defense. That’s where they come together.
That’s a great analogy to put it all together for everybody there. Even that last tip, most people didn’t realize up to fourteen times a year, your entity can rent out your house to have your annual, monthly or quarterly meetings and pay what market rent for the day to your house for that or for the office.
Based on the square footage of your house, don’t confuse this with home office because that’s a percentage. Your whole house is rented once a month to your business. To get that number, it would be the total square footage of the house. We would call some hotels and say, “If I am in a 1,500 or 2,500 square foot house, how much is a 1,500 or 2,500 square foot conference room or a 2,500 square foot suite upstairs?” Get 2, 3, 4 comps of what your rates are. Keep those comps and write yourself a lease. Expense that. It’s in your ledger entry. It goes over to the business as corporate room rental. That money comes out of the business deductible. It comes over to you completely tax-free.
That’s worth the cha-ching on that one.
Look at the cost to implement that one. It’s a few pieces of paper and a couple of phone calls. The biggest bang for your buck is that one. There are eight steps total to implement that one all the way through. Don’t miss any of those steps. The biggest bang for your buck is almost always that fourteen- day one, plus it adds to your asset protection. Without those meanings, amendments and resolutions, you’re going to pierce your corporate veil and cut off your personal assets. It’s garbage from there.
Ron, what’s the best way for folks to connect with you and your team, make a phone call or touch base with you to set up and see if they’re a fit for it or start picking your guys’ brains? Putting you to work is the best way to say.
They can reach out to us on Facebook, Tax Plan Wealth. TaxPlanWealth.com, there’s a contact us page. Our office is (425) 381-2253. If you let us know if you want planning and/or accounting or resolution, if it’s not me, we can hook you up with the right person for sure.
Ron, it was a good time to start planning for 2022. Start looking back to make sure you’re not missing anything when taxes come due in 2022.
Don’t wait until the last minute.
That’s going to wrap it up for this episode of the show. Go out and take some action. Reach out to Ron and his team. You’ll feel a lot better and be enlightened. You might even be excited about all the opportunities that you’re missing out and the fewer taxes that you got to pay to Uncle Sam or your state, if you’re on a state income tax basis. We’ll see you all at the top of everybody.
Important Links:
- TaxPlanWealth.com
- Ron Fossum
- Aaron Young – Past episode
- The E Myth
- IRS.gov
- Golden Tax Relief
- Tax Plan Wealth – Facebook Page
- Contact Us – Direct Contact Page
About Ron Fossum
Ron serves as a Fractional CFO for numerous companies as well as running his own tax planning practice, TaxPlanWealth.com. Their entire focus is how to reduce their client’s tax bill by 50% or more, legally, morally, and ethically. Additionally, Ron frequently speaks on the subjects of Corporate Veil & Asset Protection, Real Estate, & Due Diligence processes for investments.