Strategic Tax Masterclass for Entrepreneurs with CPA Bill Robinson

Unlock the secrets to savvy tax planning and transform your small business's financial health with the help of CPA Bill Robinson from GMRI. As your host, Veronica Edwards, I'm thrilled to guide you through a treasure chest of strategies that promise not just to educate but to revolutionize the way you approach taxes. This episode is brimming with Bill's wisdom on intelligent equipment purchases, navigating write-offs without succumbing to impulsive decisions, and harnessing the power of retirement plans and prepaying expenses to enhance deductions. We also shine a spotlight on the critical role of accounting knowledge in entrepreneurship and the personal journeys that lead to careers in this vital field, advocating for diversity and celebrating family influences on our professional paths.

Prepare to be enlightened as we delve into the intricate dance between personal and business tax strategies that can lead to significant savings. For instance, did you know that as a single person like myself, Veronica Edwards, selling your home could mean a tax-free profit if it's under $250,000? Bill and I dissect these nuances, clarifying the impact of home improvements on your taxes and demystifying the differences between cash and accrual accounting methods. And if the technicalities get too intense, Bill's got your back, sharing his personal insights on maintaining balance during the taxing tax season. Missed the live show? Fret not! Every ounce of Bill's expertise and our in-depth discussions are ready for you to explore on our website. So tune in, turn up the volume, and let's set the stage for a financially flourishing year ahead!

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Transcript

Veronica : 0:37

Welcome to the Veronica Edwards show, where we have fun financial conversations that everyone listening can apply to their personal and professional life. I'm your host, veronica Edwards, and I'm excited to be here in 2024, still season three on biz radio dot US. So today's show is all about tax season V team. So I definitely wanted to kick off the new year with friends of the show. Today's guest is a certified public accountant and partner at Gosnell, menard Robinson and Infante GMRI is what we'll call them going forward. He has over 20 years of tax accounting experience and I have the privilege of working with this guest as my go to tax CPA guy for all my clients. For balance, virtually this is his second time on the show and hopefully not his last, so without further ado, I would like to introduce today's tax expert, mr Bill Robinson. Welcome back, bill.

Bill: 1:42

Thank you, Veronica. How are you today?

Veronica : 1:44

I am good, just trying to stay warm. It is officially winter. It is cold. This is going to air in January. So just for those listening a little inside, it is December, right now.

Bill: 1:57

But I will say it's like 35 degrees here in Asheville.

Veronica : 1:59

I don't know how it is in Spartan Berber is cold.

Bill: 2:03

It is cold here, considering even though we are an hour away, but I think it is probably about 43. So that is cold for a Spartan Berber people. Yes yes, for a lot of people.

Veronica : 2:16

So it is funny, my mom is down a little bit further. She is in Charleston and she starts pulling out her fur coat when it goes below 60.

Veronica : 2:27

But, like I said, I know you have been on the show before, but for those that did not hear, the show that aired probably almost a year ago at this point, if you could just give a quick background about yourself, because I always love hearing other people that are accountants hearing their story of how they fell into doing accounting because, as we know, less than 5% of the profession have people looking like me and you.

Bill: 2:50

You know that are black and brown, especially in tax.

Veronica : 2:53

So if you could just give us your love story with accounting, how you found yourself becoming a partner.

Bill: 2:58

Well, you know, I long time ago I used to watch my mom. She was kind of like the church clerk and I used to see her do all the accounting for the church and all that kind of good stuff. So I kind of started back then many, many years ago just thinking about how much I enjoyed numbers and so on, so forth. So they kind of led me to thinking that I wanted to deal with math. And so as I got to college, my initial thought was I was going to major in math and become a math teacher and coach.

Veronica : 3:35

Oh, such a football guy teaching.

Bill: 3:39

So and so then I did an internship with us from here in Spartanburg and then I thought you know what coaches don't make a whole lot of money and a lot of time and so on, so forth. So in the internship, as finishing up, the guy was showing us what he did at the end of the day and he kind of put up with his billing rate was. And when I saw his billing rate I thought, man, you mean, tell me what we did all day long this year, billing rate. And he said, yes, I thought, hmm, I think I'm going to do this. I don't have to worry about yeah, there are long hours at times, but I had to worry about making widgets or the word by account. This is doing this to that I can go out and do something.

Bill: 4:23

That helped me make money for myself and possibly at the time I want, I want it to be in a CPA firm. But that wasn't initially what happened right off the bat. But Eventually I got. I got here. The good Lord got me here the way he wanted me to be.

Veronica : 4:42

You're the second male CPA to have on the show where their mom was an inspiration to them when it came to the accounting. And I love hearing that because I'm the mom to a young black boy and as soon as his math is tight, you know he only ate. He's getting really good. I'm gonna teach him just so he can have that foundation, because I tell people all the time you know, accounting is the language of business.

Veronica : 5:06

Yeah, and a lot of people are illiterate, you know, and they run in their businesses and they're still successful. So imagine how much more successful you can be if you have a better understanding of accounting.

Bill: 5:16

Well, veronica, I got two, two grown up kids. Don't hold your breath. Neither one of them. My daughter's in the marketing, but I mean she's. She's got four, four kids. She's mostly into marketing and being a mom, but she's got a little online business and my son may end up majoring in psychology and so he's, you know, trying to figure out his way in life right now. But I feel you, but it sounds like they still have that entrepreneur business in them.

Veronica : 5:54

You never doubt that son might end up having his own business in that field.

Bill: 5:59

But I hear you, I ain't go home, I breathe, yeah, don't hold your breath.

Veronica : 6:04

So today, bill, I'm so excited because it's the the start of the year and you know I consult with a lot of small business owners and they always are assuming because I'm a CPA, I'm supposed to know everything that's going on in the tax world and I'm allergic and I try to stay away and I just tell them Bill's the man and Bill keeps us out of trouble.

Bill: 6:24

So If you listen. Yeah, right, so you know, here's a couple of things that some small business may want to consider. The first thing is, of course, if you have the means to look at any equipment that you may need by the end of the year, that will help you depreciation wise, or that's gonna be something that benefits your business. I'm not a person that recommends oh yeah, I got some taxable income, let me just go out and buy a car to make it all go away.

Bill: 7:04

Well, you can go do that, but then next year, and you can't do that. Okay, so you, you push your taxes down this year, then 2024. You want to know why you gotta pay so much taxes? Well, that's because you did it all in one year.

Veronica : 7:18

But and we want to add Bill it's nothing wrong with paying taxes.

Bill: 7:22

Right, yes, all right. If you pay in taxes, that means you've done something right, okay, it's something we've done, right, okay. So number two would be If you got some employees that you want to try to keep and hang around, you can give them a bonus or, you know, at this point in time you could think about setting up a retirement plan. Yes, I Got a client right now working on with about a retirement plan. Well, you know it's it's after October 31st, so you can't set up a 401k plan or a simple plan or anything after October 31st. But you can set up a profit sharing plan and have it convert over to a 401k plan or simple plan.

Bill: 8:08

Going into 2024 so.

Veronica : 8:11

I didn't know that bill. So the deadlines October.

Bill: 8:14

To October the first. If you're gonna set up a retirement plan for one K plan or anything like that, you have to do it before October 31. I mean before October the first. I'm sorry.

Veronica : 8:25

Good to know. And also with employees. I hear I've been getting quite a bit of clients asking about Employing their children and they're being this limit of, I think what? $12,000. What is the rules? I just want to add that, when it comes to children being employees, Okay, here's, here's the here's to deal with the children.

Bill: 8:44

Okay, you can pay your child as a sole proprietor Prior to, without paying the FICA taxes. Okay, they have to be treated as an employee. You, you have to do a W-2 to show them as an employee. With no FICA taxes. Okay, and you're paying, basically paying them up to the standard deduction. Therefore, there is no taxes. Here's the fallacy, and all of this is that people are not getting the details. They're saying, okay, well, I can just pay my child up to the standard deduction and I have to pay taxes. Yep, okay, it's how you do it. Okay, if you do it and you're a sole proprietor and you say, okay, I'm doing, I'm going to pay them the $12,000, you're paying them as an independent contractor, right, therefore, that means you have to provide a 1099.

Veronica : 9:50

Which they would have to pay 15.3% of self-employed.

Bill: 9:55

So that's not how you do it. You have to treat them as an employee, which means you got to do payroll. You got to do a payroll, you got to do 941. You got to do all these things. That makes them an employee of the sole proprietor. Now, if you're a partnership, s-corp or C-Corporation, you treat them just like a regular employee. Okay, that's it. They got to pay. You got to pay the FICA tax and all sorts of stuff. Is there anything wrong with that? No, there's nothing particularly wrong with that, because here it is you're paying them. They get some FICA taxes. You get a deduction. You're pushing that, whatever the income is, into a lower tax break Great. So here's my other five. One of my five tax tips is stop watching TikTok videos.

Veronica : 10:43

Well for the young kids we're well over 40 now.

Bill: 10:51

Well, tiktok only tells you a little bit. It doesn't tell you everything, true? So that's why I said that, because I've had several clients call and ask me about the same thing, about paying the children. Matter of fact, I just had a client who wanted to do that same thing. She said she did it in the prior year. I said well, I don't think you did it in the prior year. She said yes, I did. I said okay, well, let me go back and look and see what you put down. She said I said okay.

Bill: 11:18

So I went back and looked and she wrote down contract labor. I said, okay, I said you wrote down contract labor. You didn't tell me who it was. I said if you had told me who it was, then it'd been different. And I said that's why you didn't get a tax return for your daughter. But we didn't know who your contract labor was. This year you told me it was for her. So what she decided, dude, she didn't want to pay the $1,700. She basically said okay, I'm not going to take a deduction for paying my daughter Because she didn't want to have to do $1,700. So if you're going to play the game, play the game. You got to do the things that it takes to make it work.

Veronica : 11:57

So my eight year old son, I am taxed as an escort.

Bill: 12:02

I take a payroll.

Veronica : 12:04

I'll set him up as a payroll. Even though he's eight, he will have taxes taken out. But when I do my taxes in the new year, I pull his W-2 along with my W-2. And since he's a dependent of mine, he's just filed under me.

Bill: 12:21

Yeah, I mean you'll file a tax return for him Just like anybody else.

Veronica : 12:27

So he really would have his own tax return.

Bill: 12:29

He'd have his own tax return.

Veronica : 12:31

All right. So that is a piece. Even me being a CPA, I'm thinking well, he is my child and I do claim him, so he's not independent. But you're right, he still has to file his taxes.

Bill: 12:41

Still have to file his taxes.

Veronica : 12:44

Man. Bill, you're really putting me on some things. Like I said, even as a CPA, I wasn't aware about. What other tips do you have for us that we can share with some of the small business owners?

Bill: 12:54

Okay, well, one thing is stop watching TikTok. Tiktok does not give you all the details that go into the complexity of the tax law. It only gives you an overview, and there are certain things that are missing that clients just don't get because they don't do what we do every day.

Veronica : 13:22

Right, right. I definitely see that when I'm training people, they're like, oh yeah, I can do it County until they start having to do some journal entries and some other things that are non-cash transactions. And then they're like, oh, they didn't explain that in TikTok or on YouTube and I'm like that's why we had to go to college for a couple of years.

Bill: 13:42

That's exactly right. Also, we do have clients that tend to think that they can sell a piece of property and not pay taxes on it Because they are under the impression that they can sell the property, take the proceeds and reinvest into another property.

Bill: 14:09

However, you can do that, but you have to do a light kind of exchange. You can't just take the money and then turn it around and buy another piece of property. If you do a light kind of exchange, you have to park the money with someone which we call a qualified intermediary. Then you can purchase the property without paying taxes. But any cash that you receive in the exchange you pay taxes on it. So a lot of people think that, oh, when I got this piece of property, I'm going to sell it and turn it around and buy another one. No, you're not going to do it. You're going to do a light kind of exchange.

Veronica : 14:45

So, bill, let me ask you this Now we all know. Well, I won't say we all know, but am I correct in thinking me personally? Veronica Edwards, if I sell my house, I'm a single person and I sell it for a profit under $250,000. I don't get taxed on that.

Bill: 15:00

That is correct, yes.

Veronica : 15:02

So maybe that's probably the confusion. Of people are thinking, oh yeah, I could sell it and blah, blah, blah. No, it's business totally different from personal.

Bill: 15:08

Business is totally different from personal.

Veronica : 15:12

And I guess it is something to think about. If you're in business, you're in business to make money, which means that you should be paying taxes when you're just buying a house living in it. That's not business. That's just your living expenses.

Bill: 15:24

That's exactly right. We do get that question a lot. Well, I bought my house. Can I take a deduction for the improvements to my house? No, you cannot. It's your personal residence, you cannot do that.

Veronica : 15:40

Wow, what else do you have for us, del? Because you're putting me on a lot of things, too, where I'm like, yep, these are things I hear a lot, and some things I'm hearing for the first time, and others I hear it quite often by a lot of my clients.

Bill: 15:52

Right, there's also exhilarating expenses. I mean, if you're a small business, you can exhilarate your expenses Instead of, you know, waiting till next year. You know you got to buy off supplies, one or two bound. This year you got property taxes. Now sometimes here's what some clients do with property taxes They'll pay two years in one year. So let's say you pay one, you pay what you're supposed to have due at December 2022, you pay it in January 2023, then you're going to pay December 2023 in December. So you kind of double dip and you kind of have to manage and figure out, okay, what's most beneficial. If you feel like you need the deductions more in the following year, you do that. That's what they call budget for the expenses. So some other strategies are retirement plans. I mean small businesses that they got five employees and you got the owners this opportunity to do retirement plan.

Veronica : 16:59

And so one thing I learned from you, bill, with these retirement plans, is that you can set it up, but can you wait to fund it in the next year? I guess that's what I'm always wondering, like when it comes to these bonuses or draws and distributions. Is it about we can book it in the books, accounting wise, and then the cash can happen later? Does the cash have to happen in the tax year If it's a profit?

Bill: 17:23

sharing plan. Yes, if it's a profit sharing plan or like a SIP IRA plan that you got inside the company, you can accrue what you know this term, accrue it and then pay it later.

Veronica : 17:37

Gotcha, because I think that's always a common question is that are we cash basis? Are we accrual? Me being a bookkeeper, I'm always accrual. I'm always talking generally, except in accounting principles. But it seems like more and more of my clients are on a cash basis and I was outloaded in too much detail. But what do you think is the easiest way that you can explain to people why you're cash basis for tax versus not being cash basis when I'm doing their books and click books?

Bill: 18:08

Okay, the biggest reason is you don't want to pay taxes on money you have not received.

Veronica : 18:14

Ah, that's a very simple way of saying it.

Bill: 18:16

Yeah. So now, on the flip side of that, if you're on a cruel basis and your accounts payable is more than your receivables, all likelihood you want to be filing on their cruel basis because you're paying. You're now taking deductions for things that you have not paid for. So you got to kind of you got to kind of manage that. So I mean you have to make sure that those clients that start going down that road to say, okay, I think I want to find my tax return on a cash basis. Okay, if you do, what were you doing prior to this year? If you were filing on a cruel basis before you're switching to cash basis, you can do it. And you got to do a lot of other different steps, but you can. Whatever that difference is you have, you can spread it out over four years or you can take it all in one year. But keep in mind it's not something that you can do every year Exactly Once you make the election. You got to wait five years before you switch it back out of five years.

Veronica : 19:18

Okay, yes, five years, yeah, and that is something I don't think a lot of people know, because they're being like oh, this was a good year for receivables, let's switch it this way or payables.

Veronica : 19:26

It is like no, no, no, no, no, no, yeah, so bill before we go, because Both of us are people of color and we deal with a lot of people of color. I definitely want to talk about pricing of tax services. You know quality overpriced, because you know it's getting to the point now where H&R Block Turbo tax you could go to these places. You're not paying 50, 60 dollars, you know. So that's not the route to go if you're just trying to save money. So what do you typically tell people when it comes to what best practices are for small business owners and individuals listening when it comes to finding the best tax services.

Bill: 20:06

Well, my go-to is this you get what you pay for.

Bill: 20:12

And if you go to H&R Block and I mean we did this, this has probably been 15, 20 years ago we went out and we found a pricing scale for H&R Block. They compared it to, compared it to our pricing scale and we realized that you know we are not charging enough. So we adjusted our pricing schedule to be, you know, in line with H&R Block. Now, was it for us to get business from H&R Block? No, it was. We wanted to show our clients that what we're bringing to the table is much more than H&R Block, because we go to back for you. If you get a notice from the IRS, we'll sit down, take your time to go through it, so on and so forth. H&r Block yeah, you, possibly. If you call over and get somebody after taxing, you're lucky.

Veronica : 21:08

Okay, and again, we're not knocking H&R Block or any of these services, but we do want people listening to know that when you have your business and then when you start making a little bit more money individually yes, you do have some of these places like at H&R Block that is making it easy and, you know, in a price point. But I am finding more and more people saying I could have did this myself or they missed things, and so we just want to advise you here to just do a little bit more research and don't be afraid to get an accountant. I think some people feel like, oh, it's going to be thousands of dollars, not necessarily. And, bill, I don't know if you're willing to share your starting rates for things, but I think people will be pleasantly surprised to know you can have a degree, cpa, with 20, 30 years of experience and you're going to get it for a reasonable price.

Bill: 22:00

Yeah, I mean, our minimum fee for an individual tax return is $400. That's the minimum right off the top. Now, once you get beyond that $400, we're going to be competitive and that you know. And this is what I always tell people it is. If you had to go to an attorney, are you going to not use that attorney because of what he's going to charge you? It's not really about what he's going to charge you, it's really about the relationship. Yes, At the end of the day, and if you don't feel comfortable with what you are, you're going to get it by employees.

Veronica : 22:38

I implore you to go try something like this, but if you got any savvy or you feel like you have a good relationship with, it'll all work out Exactly, and that's the biggest thing I'm learning in small business is all about the relationship, because when I first started about six years ago, I'm like I know accounting but I don't know small business, and so many people bill were like, oh yeah, yeah, you're good, we like you, you'll figure it out. And I was like, uh, okay, so you're right.

Veronica : 23:08

So those listening make sure that whoever is your accountant or anybody that's working with your books, and you trust them, you have a relationship with them, and that you vetted them out and bill, thank you so much, because I'm always sending Bill Klein some good, some bad.

Bill: 23:24

He always takes them all.

Veronica : 23:26

Bless you, my friend, but we are to the end of the show. Thank you so much for those listening. We had technical difficulties and bill came back twice and this is going to air the start of the year and I so appreciate that because I do want our listeners to get some of these free tips that a lot of folks aren't aware of. So thank you so much, bill. Don't work too hard during tax season. This year you do the same, don't work too hard.

Bill: 23:52

Yes and I will be just make sure you work hard enough. I know that's right, yes, so I just want to thank you, bill.

Veronica : 24:00

I want to thank the listeners for tuning into biz radio dot us. Please come back next week, same time, same place, 10 am on Wednesdays for the Veronica Edward show. And if you miss the live airing, you can listen to all prior shows at Veronica Edwards bus sproutcom.