Proactive Tax Planning

Yeah, I think it's I think it's a challenge for most small businesses and individuals because they're not only are they on a calendar year for their taxes, but they're also a cash basis.

And if you're running a small business, like your job is managing cash all the time.

And so to think beyond that into the future of actually how could you structure yourself to save some future costs rather than the thing that's right in front of you, it's hard mentally.

I think also like budgeting.

Nobody wants to budget for taxes.

Like, I don't know.

I don't think I've ever met a business that, you know, when they do their budgets and I looked at their budget spreadsheets, the tax is there.

nobody wants to think about it it's it's nasty uh like listen we're gonna overcome it there because like you said small business owners most of the time they use their own cash to put back in their business you know when do they have excess cash i would say when they're like profiting seven eight hundred thousand dollars that's when you're like already feeling oh i have some excess cash you know people start saving up after that instead of putting it back in their business um and nobody budgets for it and it gets ugly later on

Yeah.

Well, it becomes that post hoc after the fact.

I've got to do something about my taxes as they're writing the check in April or September, trying to catch up.

But what do you think would be on your, say, top three or four list of things that most small businesses don't seem to be doing, but they ought to consider?

Sometimes it's hard to say because a lot of small business owners, they have an accountant, but you don't really know what that accountant is doing for them.

There's never a checklist of four things because it could be a checklist of four things for one business owner, but another checklist of four things for another business owner.

One thing I would say, I worked a lot in the past with attorneys and successful attorneys making seven figures or multiple six figures, and they're still filing taxes as a sole proprietor.

Like we pay so much money in social security, Medicare tax, they don't have to.

I don't think they even gonna get that social security benefits when they retire.

And it's just like, it's just one of those things they work, they take care of their cases, they're an attorney and the accountant, this old school accountant just prepare and just files their taxes, collects here his few hundred dollar fees.

So one thing I would say for everybody is entity structure.

Do you have an S corporation? Most small business owners, the best structure for them, generally speaking, is an S corporation.

That's why I actually wrote this book that's behind me, S Corporation Tax Secrets.

It's all about having an S corporation and using a lot of strategies for the S corporation.

So that would be the first thing.

Obviously, second thing, are they paying themselves a proper salary? Are they taking advantage of the pass-through entity taxation strategy with the PTET? I don't know how much you know about it or your listeners know about it, but when Tax Cuts and Jobs Act was passed in 2017, they limited how much you can deduct what you pay your state.

Think about it this way.