Creating Your Individual Year End Tax Strategy
“Your tax professionals need to talk to each other on a consistent basis or else implementing a year end strategy can be fruitless.” -Scott Arden Click To Tweet
I usually keep my podcast evergreen, but it’s getting near the end of the year, and I have to talk about the big five. You have to get incorporated if you are serious about getting rich. Companies make money individuals get taxed.
You have to get your qualified plans, and review your trusts, insurance, wills, and a whole list of other things. Scott Arden from Controllers, Ltd. is here today to talk about the importance of tax entities and why it’s so critical to have the correct entity in the year that you want to save on taxes.
You can find Scott here:“The purpose of putting in place a corporation or an LLC is to separate personal assets from business assets.” -Scott Arden Click To Tweet
- [02:07] Scott started his first company when he was 19. This is when he first started learning about what he could deduct and how to protect his assets.
- [02:35] He wanted to know what he could and couldn’t do, so he dove into the tax code.
- [02:59] He was in the asset protection industry for about 20 years.
- [03:12] He and his business partner wanted to bridge the gap between the legal side and the tax side of companies and they started Controllers, Ltd.
- [03:23] Tax professionals need to talk to each other on a consistent basis.
- [03:39] Tax entities are not just about tax savings. There’s also liability protection involved.
- [04:54] Businesses high risk. The premise of corporations and LLCs is to protect assets.
- [05:27] There are different entity structures. An LLC is kind of a hybrid between a partnership and a corporation.
- [05:47] A corporation is a separate legal entity. It pays its own taxes.
- [06:32] Scott has a whole list of questions that will help people determine which type of entity they should create.
- [07:28] Timing is critical. You want to make sure that you are getting the most bang for your buck in the way of tax deductions.
- [07:45] Sole proprietors get smashed with self-employment taxes and limited deductions.
- [08:05] There is still time to take some tax deductions in 2018. If you are a sole proprietor, you can create an entity that has a fiscal year ending as opposed to a calendar your ending.
- [08:41] You can also put in place a management company that will be overseeing the operations of the business. You can then pay the company for the rest of this year in the first quarter of next year. This allows us to take extra expenses and deductions that will reduce the 2018 tax liability.
- [10:06] Some of the deductions that you can claim include retirement account, home office account, vehicle account, investments, and more.
- [12:11] If you’ve been a sole proprietor for 20 years and you incorporate today, you will lose your past 20 years of credit.
- [13:25] It’s essential to have a proper accounting system in place. You do have to maintain minutes and resolutions. There are quite a few compliance issues that you need to understand.
- [13:56] The company needs to be able to defend the different deductions that you take throughout the year. There needs to be corresponding minutes and resolutions to back up the transactions. You will also need corresponding documents like an ownership certificate. You want to make sure you clearly separate the corporation from the business owner.
- [15:32] Fund your company,m so you can pay the proper deductions out of that fund instead of your private money.
- [16:15] Don’t commingle your funds and make sure you know your financials. You can also get your own corporate credit card.
- [17:57] An example of how a couple went from 50% tax to about 11% tax by partnering with the world’s largest wine company.
- [19:05] Another example of taking advantage of depreciation of an asset to offset taxes with an online store.
- [19:37] You can take a distribution and then invest it in an asset that will give you a high depreciation.
- [20:21] Many accountants just barely get people by and overlook smart tax savings.
- [20:52] You want a professional will who will present ideas that will help you save on taxes.
- [21:22] Tax planning should be done throughout the year.
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