Maximizing Your Tax Savings: Expert Advice from Tyler Powers on Trusts, Structure, and More

For those individuals who own companies, that's our focus. Helping entrepreneurs empower them with good information to change the world and to make a massive impact. If your numbers aren't up to date, how do you know what your sort of tax plan could potentially look like? What does your income look like? Once those numbers are up to date, we have a better idea of even estimating what tax liabilities. Like, what would be your top three tips for business owners that they're saving tax or positioning themselves to save the most amount of attacks. Hey, everybody, Bob Gor here. Excited to welcome you to the Wealthy Entrepreneur podcast. I'm excited to bring in one of my colleagues today, Tyler Powers. We're going to ask him a few questions, get him to explain a little bit about his role, how he's come into play with the Goro team. But excited to have you here today, Tyler. This is going to be all about tax process. I'm going to call this Tax Talk with Tyler. So what we're going to do is the outcome for today is going to give you a lot of advice related to some tax ideas, some tax planning opportunities, also talk about some unique circumstances where we've had some big tax wins and maybe just share a little bit of the story of how our team works with people from a tax standpoint. So hopefully that makes sense for you guys. Ultimately, what we're trying to do with this is help and enable you with great tax ideas and tactics and strategies to help you save tax dollars reinvested in your money, make the impact that you need, and ultimately together change the world one day at a time. So, Tyler, I want to kick this off. I want to maybe just ask you a little bit or to share a little bit about your journey with the GoPro team.

Yeah, perfect. I've been here for closing in on nine years now. So started when we were actually in a different office location. I think I was number five or six in the office. So, you know, a lot different than, than how we sit today. But yeah, basically I got word that, you know, there was an up and coming accounting firm in Peterborough that there was this young guy named Bob that I needed to go chat with to see if there was any opportunity for me and essentially made the introduction and the rest is history. Closing in on nine years now.

I really like how you said young guy, Bob, because I feel like that's something we should focus on because I don't get that as much as I used to. But I guess it depends on the, on the audience. But, but that's Great. And I remember that very fondly as well. I know it was a personal introduction from a mutual friend, relative on your end and you know, no looking back. Yeah, definitely one of the best hires we've ever had, if not the best hire we've ever had. So incredible to have you part of this team. Would love to know or maybe just have you explain and share your, you know, the evolution of what our tax department has looked like and you know, maybe some of the services and how we can help support people.

Yeah, for sure. So, yeah, I mean, I guess when I started it was sort of, you know, everyone had a little bit of share in dealing with the tax related issues or planning that came into the office. It wasn't necessarily a separate department. It's something I just kind of got interested in as I progressed along. You know, starting with a personal tax season and realizing that there was things that I could do that would help save people money. It was just kind of a natural fit for me. So along the journey, you know, I, I decided to get involved and do my in depth tax certification. So I finished that a couple of years ago and now it's just a, a constant evolving thing. Which is what I love about tax is that things are always changing and you really got to stay on top of it. So there's always that continuing education. I'm learning all the time. And basically we've been able to build out this department. We offer, you know, a wide array of services that fit. If it's tax related, we can do it. Whether it's corporate restructuring, corporate setups, sole proprietor taxes, just any T1, generals, estates, trusts, HST, GST, PST, any sales related tax. We basically can handle all of that within the tax department. So, you know, it becomes a pretty specialized piece of knowledge where we can support, you know, the bookkeeping side of the business and the year end side of the business with that specialized tax knowledge that we can bring.

Yeah, and I would say one of the things, Tyler, that you've done really well as part of the team is molding and training the next generation of tax expert and tax professional as well. We've got pretty special group in there of young people who are superstars. And you know, it's funny, Tyler is talking about tax and I always refer. He's a nerd, I'm a nerd. You guys are nerds too. We all kind of focus on creating this element of value, right? And creating this special knowledge that we all have that help advance others. And for sure, although he may not look Like a big nerd. The idea of having all this tax knowledge that he brings to the table and is helping mold, you know, a whole team of tax experts is pretty incredible, pretty special to be part of and pretty great to watch. Question for you. I know we had chatted about this a little bit beforehand, but want to know if you could share an experience that you've had where, you know, we've maybe had a difficult tax situation show up, maybe how we had to approach it, what the resolution was for it and how that sort of impacted a client. So is there anything specifically you wanted to talk about?

Sure, yeah. I mean there's a, it's such a wide array of different things that we're working on that I feel like, you know, there's some small impact stuff, some big impact stuff. Regardless of what it is, just giving the client the peace of mind that it's done properly is, is the most important piece. And in one particular situation we were dealing with a non resident disposition, which is basically the non resident of Canada is selling property here. They have special tax filing requirements that we need to take care of. And in this particular situation, you know, the cottage had been passed along different generations and they really weren't sure what had been filed in the past and how we were going to deal with this filing now that they'd finally sold the cottage. Basically we had put everything together, we had submitted it to CRA and we had chosen a particular point in time that we knew was appropriate based on the Income Tax act of when should be the starting point for this tax situation. And we had the CRA come back and basically say, no, that's not going to fly, we're going to tax you back to when this property was first acquired. You know, it was almost 100 years ago for a very nominal amount. And you know, it's one of those situations where we really have to dive into the rules. And just because the CRA is saying something doesn't always mean that they have looked at the legislation or the Income Tax act to back up what is being said. So you know, we pulled, pulled this back and went in and went back to our research to figure out how we had come up with that point in time. And basically we're able to refer the CRA to the Income Tax act where it said we didn't have a requirement to go back that far. This was our starting point. This was a trainer of that division within the CRA and basically said, yeah, you know what, you're, you're correct, we're Going to take that as a starting point. The net tax on it, I think, was about $200,000 of tax that we were able to save the client. So that was a big one for me because, you know, family generational call a cottage that we're looking to pass down and keep that wealth within the family. And, you know, an unnecessary mistake by CRA could have cost them $200,000 that they're now able to pass down to their family to help them do greater things in the world. So that was a cool one.

Yeah, absolutely. And then big impact, right? A couple hundred thousand dollars into family wealth is a, is a massive change. And one, here's a couple things that I get from that one, and this is maybe even a side note. One of the favorite, my favorite things of working in a professional services office is hearing you get fired up when we're dealing with any of the tax authorities and taking them on and saying, you know what, we're going to battle this out. So one of the takeaways I would have for any of the listeners or any of you entrepreneurs or business owners out there is to have somebody who advocates for you.

You.

Right. And one of the things that I enjoy so much is watching Tyler advocate for our tax clients and make sure that their best interest is being preserved, protected and pursued to the greatest extent. So that's a pretty cool thing to watch. Two is that if CRA or the IRS or any of the tax authorities come to you and say this is the case, or even if, you know, you've heard somebody say that, you know, the tax authority say this, or, you know, you've got on the phone with them and they tell you that this is the way that it is. They aren't necessarily the be all and end all of the expertise. Just because they've said something or they've assessed something in a certain way doesn't mean that that's the right answer. It just means that that's how they've processed it. And there's been situations for sure over the past where the processing and the way they dealt with something has been beneficial to clients. And we recognize that maybe that's not the best way for them to actually process that. And we let it slide because it's in the best interest of the client. But there's other circumstances where they come in and they process information and it's just not right. And when we back it up with technical expertise and advocate for the client, we can get these things resolved. And sometimes upwards of multiple hundreds of thousands of Dollars. So just keep that in mind. Right. Have somebody advocate for you. And just because the tax authority says that this is the case doesn't mean that that's an absolute. There's likely a way that we can approach it in a different. A different form so that we can get you the outcome you're looking for. So just something to keep in mind as well. Okay. I know we work with business owners predominantly. We do something like 2000 personal taxes as well for those individuals who own companies. That's our focus. Right. Is helping entrepreneurs empower them with good information to change the world and to make a massive impact. But I know we like to focus on corporations. What would be maybe your top three tips for business owners to make sure that they're saving tax or positioning themselves to save the most amount of tax?

Sure. Yeah. I would say, number one, right off the hop structure, you know, there's a lot of misinformation out there, I would say, on whether you should be a sole proprietor, whether you should have a corporation, how you should operate things. And ultimately there's so many pieces that go into that. I mean, we can give general information to people to help them try to make the best decision for themselves, but ultimately it warrants a conversation with, with an advisor that can really go in, dive into your situation, figure out, you know, what are your plans for succession, who's going to take over this business, Are you planning on selling this? Are you going to have family members involved? All these different things that are so important in making that decision that, you know, people try to just read online and it's not necessarily a cookie cutter situation. So getting your structure right and just having that conversation if you're unsure is a big one for me.

Before you jump into the next one, I think. And you're bang on with this and everybody who's listening. Again, the idea is that everybody's circumstances are different. Right. And you know, where someone might have a corporation in Canada or an LLC or a C corp in the US that might be their best position, it might not be yours. And I feel like one of the things we hear all the time is, oh, well, my neighbor has got a personal jet that they rode off completely. It's like, okay, well, you know, we're not their advisors and maybe that is their best circumstance. But for you, that's not necessarily the right way. So we need to have that customized approach, which I know that's how Tyler and his team deal with positive planning opportunities to have that customized approach. So for sure, love that.

Yeah.

What's number two?

Number two, I'm going to go remuneration strategies. So dividends versus payroll. If you're a corporate owner or if you're even a sole proprietor, looking at some of the RSP planning that potentially goes into maybe splitting some income over with the spouse and that type of thing, it's another one of those things that I think is so individualized that you really need to look at. What is the long term plan here? I think there's a lot of opportunity out there for trying to keep your tax lower as a joint couple or family group. And there's a lot of different avenues that we can explore to minimizing that tax, starting with, you know, just payroll and dividends of going what's going to make the greatest impact for us moving forward? And which I have a call today actually that's going to go through this, this exact topic and you know, you might think it's going to be the same call over and over again, but it's really not because we're looking at, you know, how is the business doing? What's your inc levels in the business? Why are you looking on shutting it down? How much cash do we need to get out of here? There's so much that goes into it that we can really come up with a plan to keep that tax low. But make sure that your succession plan is set up at the same.

Yeah, and I, you know, just maybe to give an example of this too, I had a call earlier today and this is something that we deal with and had a medical doctor and his spouse were on a call. They were talking about, you know, dividend versus salary versus what's the right structure, talking about investment strategies and you know, again, what is the right fit for them isn't necessarily the right fit for somebody else. He's got, you know, fairly high income, definitely has a dividend strategy in place to maximize the deferral, leaving all of the investments inside the corporation. You know, looking at that and saying, hey, there's other options. Do we put you on salary? Do we look at an individual pension plan? How does that look? What's the easiest and most effective way to build wealth? And again, this was an individualized conversation with that client because their plan is going to be different than anybody else's. And then he threw in to the mix that his spouse just got a job and how does that new salary impact their tax plan? And so we chatted about specifics of that and again, how we pay the least amount of tax now and we avoid you know, the, any of the income tax implications of long term planning as well. So really interesting compensation strategy to me is, is one of the easiest ways to add value. When we start talking about tax planning, you know, one of the. Maybe I'll just take a quick side note on this. Salary and dividends getting paid, especially if you're in Canada, you think of the income tax and pension contributions that are required in Canada and the United States, those amounts come off a paycheck and you've got to remit those to the tax authorities on a regular basis, typically monthly. That impacts cash flow of your business. You know, so sometimes it's not even about the net tax impact, but sometimes it's about the short term cash flow implications of those choices as well. So we want to know. And again, guys, this is why it's important that you work with experts. You don't work with somebody who just claims to be doing this. You work with people who have years of experience and are maybe even specialized in knowledge of how to bring that plan to you in the best way. Because compensation strategy can handcuff you from a cash flow standpoint, can also have a huge impact on your tax savings. Okay, amazing. That's two. What's number three?

Number three is going to be kind of a two piece. I would say the first piece of it is making sure that you have your books up to date. And this is a huge one. A lot of the tax that gets paid is late tax or penalties, interest, that type of thing. Or not knowing that you needed to register for GSTHST because you didn't know that you exceeded a certain threshold, or not knowing that you have to change over when you're remitting your payroll remittances because you didn't know when things are up to date, you can make proactive decisions. So working with advisors that can guide you on that is huge. The amount of times that I've seen late penalties or interest that would far and above cover the cost of getting proper bookkeeping done during the year for you and also then having that data to make on the fly decisions that you know significantly impact your business is huge. The other piece of this is just the deduction side of it, of what am I allowed to write off? Should I be purchasing or leasing all of these little things that impact how much tax you're going to pay at the end of the year, that if you're getting that ongoing bookkeeping advice and someone can come in and look at your books at a specific point in time and look at cash flow, how much tax you're expected to owe, all of these different things. Well then we can modify these other pieces that we've talked about, the structure, you know, maybe mid year. There's something that we need to change and it's, it's an always ongoing discussion. It shouldn't be a once at the end of the year. Here's where I'm at. How much tax am I going to pay? It's, let's figure it out as we go for sure.

So again, as I think the takeaway, there are a couple of things. One, if your numbers aren't up to date, how do you know, you know what your sort of tax plan could potentially look like? What does your income look like? Once those numbers are up to date, we have a better idea of even estimating what tax liabilities look like. So that's, that's one and two is make sure you file on time. And you know, the one piece I'll maybe just add in there related to that is the tax authorities. When you file late, you're now giving them a little bit of a signal that you're disorganized or that maybe you're a higher risk. And so when you file late, all of a sudden they are on you and you don't want that. Late filing penalties can be substantial. Like what are the late filing penalties for personal taxes?

Yeah, 5% right away on, on a late filing. And then your interest accrues on top of that on a monthly basis and with interest rates going up. So do those, those interest rates that the CRA is going to charge you on not having filed on time.

Right. So depending on. And that's 5% based on the balance owing at the time. If you have money's owing, you know that 5%. Let's say you owe a hundred thousand dollars. 5% is $5,000. You could have had us hired, dealt with this the entire year and not had to worry about anything and been filed on time. No risk profile increase with the tax authorities. Right. Looking at these things in a different way to make sure one, that you're focusing on what you need to be doing. But two, to make sure that you're not dealing with these tax authorities any more than you need to. Again, none of us want to pay more tax than we legally have to. We definitely don't want to pay interest or penalties associated with late filing. It seems to be pretty wasteful. So make sure your stuff is filed on time, guys. Huge, huge situation here that we want to avoid. Is any Sort of increased risk profile. So, Tyler, I got another question for you. So I know for you, your journey, since you've been part of the team, you've gone through, you've gone through the in depth tax program, which I know is a multi year program to become a tax specialist. Right. It's a separate sort of designation beyond being a cpa to get an enhanced sort of training that not too many people go through successfully as well. I can vouch for that. Being in the industry. What other sort of professional development do you look at? On any.

Yeah, I mean, we have our CPA minimums, which honestly I don't even know what they are at this point because it's, you know, we would have to fire and exceed that to be offering the type of service that our clients deserve. So for me, on an annual basis, it's really, there's always something and it's ongoing all the time, you know, reading CRA bulletins. The CRA changes things. Even just being active on LinkedIn and look at what other tax practitioners are dealing with, their situations that they've come come across. But the big one that I'm doing right now is my trust and estate practitioner designation. So this is specifically dealing with, you know, there's, there's a bit of a law element which I think is too, but basically making sure that succession plans are proper, that, you know, if you're a business owner and you pass away, that things are set up properly for you, that your wills and everything is outlined properly. So that's a big piece of that course. After that, who knows? There's some really good corporate reorganization courses which we cover in, in depth. But, you know, things are always constantly evolving. CRA rules are changing. We're always going to be taking all of those courses to make sure that we're on top.

Absolutely. And I think maybe just to add in there as well, you said the rules are always changing and interesting to actually understand the tax law side of things. And I know Tyler is following this way more closely than I am, but it's interesting to watch the law change. The law changes when there's cases that end up in front of a court and a court decides in one way or another and that's on essentially the interpretation of the law. And it's interesting how from one year to the next we can actually see that change, even though something, you know, in the guidelines hasn't changed. But now we've got precedent set from a law or a legal court case standpoint. So some of the times it's beneficial for us as business owners. Sometimes it's not. But knowing how that's working is, is certainly very important from a tax planning standpoint and staying up to date. So love that we didn't really talk about this before, but thinking about family trusts and trust planning, do you want to maybe just share, you know, some of the values of using a trust plan or using a trust structure in, in your business or helping from that sort of wealth accumulation, tax minimization standpoint?

Yeah, for sure. You know, it's. Trusts were a huge topic, I want to say, even 10, 20 years ago. And then when these rules came out, the TOSI rules, the tax on split income rules, which basically started to prevent people, business owners from splitting with family members as they decided to, you know, trust kind of took a seat on the back burner. But there's still a lot of great advantages to trust that make them still a very viable piece of a business structure. And what I would say there's kind of two main pieces there with the trust. The first being your ability to multiply your capital gains exemption. So if you meet certain criteria in Canada, when you go to sell shares of a private corporation, then basically you have the ability to have a portion of that sale be tax free as they meet certain criteria. Now the great thing with a trust is if we have multiple beneficiaries on that trust now instead of one business owner that might be the sole shareholder of a corporation getting their, you know, $960,000 of exemption, we get $960,000 of exemption per beneficiary on that trust. So for example, for you, which is massive, we sell a company for $5 million. We only have one shareholder of that company. We can only protect nine, six. We still got, you know, four plus million that's going to be taxable. You know, you're going to lose a significant chunk of that. Whereas if we're using a trust structure and we can split that gain out with enough beneficiaries on there, there's a chance that we're exempting that entire capital gain from tax, which is now, you know, millions of dollars that are left sitting there to be passed along to your family. So that's the biggest piece of it. And I guess the other main advantage would be, you know, it helps with succession planning if there's a death of a single shareholder. The trust structure allows things to continue till a proper plan can be formulated on how we're going to deal with this. And also, I guess the whole purifying of the company so in order to meet that criteria to get that tax free sale, we need to be getting cash and other assets out of our business that keep us on side with these rules to meet the criteria to be able to sell tax free. So the trust allows a structure where we can flow the money out of an operating company over to a holding company, invest it, grow it, have your wealth accumulate, making sure that you're getting ready for that criteria that we need to meet at the time of sale and also protecting you from a liability perspective, which, you know, on the tax side of it, we're always looking at how do we save tax, but we also need to be looking at liability. You know, especially in the United States, we look at the different structures down there as to how do we protect the assets that we're growing. We don't want to spend our whole life building a business for something to go wrong and to lose a lot of it and be subject to liability. If we can clean that up now and make sure that we're protecting ourselves, you know, win, win scenario, trust, there's a lot, there's a lot. We could go on all day talking about trust structures, but you know, those are a few quick points as to why we would still utilize them for sure.

And, and again, I'll throw in some takeaways from that one. You know, per beneficiary, the upwards tax savings potential is multiple hundreds of thousands. So by implementing a trust, being able to utilize some of those capital gains exemptions could be hundreds of thousands of dollars per beneficiary, money back in your pocket that we can save on tax if it's structured properly with the utilization of a structure of a trust. Incredible. The other piece that I heard you say, which I think is important as well, is that as a business owner, if we go to sell our business and we have intercompany amounts or transactions going through, it could disallow us from getting access to that Capital gains exemption at 960 you talked about altogether. So by using a trust, it will allow us to make sure that we continuously qualify for that sort of exemption. And then one of the pieces that I think you talked about, and I feel like we could talk about this the whole time, is on that sort of estate planning side of things. A lot of people when we have, you know, if you're an individual shareholder or maybe your spouse is a shareholder with you, we don't like talking about when we die and what happens, but you know, if we both die, it's a triggered gain on sale of that company. And if it's. That company's a holding company, it's essentially a taxable situation where we have to pay tax on everything that we own. And one of the things, if I heard you correctly, was talking about a trust. If the trust is the owner of those entities or those assets, if we can structure it that way, it defers that triggering to a later date. Because now, even though mom and dad have passed away, it's transferring the beneficial ownership to the next generation without a tax trigger. And guys, if you're thinking about estate planning or if you haven't been thinking about estate planning, these are the mechanisms that are so very important. I'll just give you one, one quick example. Probably about 10 years ago, I had a discussion with a family. The mom had come in, she was getting elderly and she had this cottage that she paid $20,000 for. It was now worth multimillion. They continue to build on it throughout the years. And mom came in and said, how do I get this to my kids? You know, my kids enjoy this cottage. And now we're talking about a $3 million property. The land transfer tax one of transferring it from her to the next generation is costly, hundreds of thousands of dollars. And then we have this property tax situation where on a monthly basis it was multiple thousands of dollars just to maintain the property. Yes, there's nothing owing and yes, we want that to go to the next generation. But when she passes away or if we trigger this, there's a massive tax bill that's happening in this situation. And ultimately the outcome was that we didn't transfer it to the next generation because they couldn't afford the mortgage. Right. Even though they had all this equity in this great property, you still have to cash flow the mortgage payment for the tax bill. You still have to cash flow the property taxes, you still have to pay the land transfer taxes. This could have been avoided if it was structured properly in the first. That intergenerational transfer could have happened if it was owned in a corporation and a family trust on the corporation. The transfer could have been super easy and non triggering when mom passed away. So ultimately, because the structure wasn't done right, we actually ended up losing a family asset because we couldn't put the kids in jeopardy of having to pay those bills along the way. So, you know the importance of utilizing a tax structure. I know Tyler talked about incorporation potentially as a structure for you as a business owner, whether maybe it's an LLC or a C corp in the United States, utilization of a trust, how we do compensation planning. These are all areas where. Yeah, it might sound complicated. Right. Which is areas where someone like Tyler and his team work on this stuff every single day. Specialized on an individual situation so that the plan is done for you. Right. You may not have a cottage that you want to transfer to your next generation, but someone else does, and that specialized plan needs to take place for them. Tyler, this has been amazing. Any last sort of business advice that you would have. I know that you work with thousands of businesses every year and individuals helping them come up with a tax plan. Any advice? Just general advice that you would have for them as a business owner.

General advice? Yeah. I mean, I think it comes back to using an advisor. Right. And I dealt with this situation again yesterday where I had a gentleman on the phone that was completing a farm transfer, was thinking about completing a farm transfer. You know, didn't fully know what his tax obligation was going to be. You know, we took a quick dive into it and, you know, within a matter of minutes we're figuring out that, oh, yeah, you know what, you're going to meet a farming exemption there. You're actually not going to pay any tax on the transfer of that. Well, that was going to impact his decisions of moving back and being closer with his family. All of these other things that he wanted to do for the rest of his life that, you know, he was thinking that there was this big liability sitting on the. You know, having that ongoing conversation with your advisor, it's just like the dentist. It's the routine checkup that you need to go to every year, see if anything has been changed. They answer all the questions, you get your teeth looked at, you're out of there. You don't think much of it, but it's, you know, we're here for a reason and your business should be treated the exact same way. Your tax return should be treated the exact same way. You should know where you're at all the time so that you can make a proper plan moving forward. And I think that there's so much that we see that's just left on the table because, you know, someone chose to do their own tax return or was getting incorrect advice from their neighbor who is loving to give the the advice. You know, everyone's situation is different. And if you're unsure at all, you should be consulting with an advisor to make sure that you're on the right track to make sure that you can live the life you want to.

Yeah, love that. So, guys, I make sure you put comments in the chat or below Let us know your thoughts if there's follow up questions. Tyler and I are going to have some tax talks on a frequent basis. We're going to talk about specialized tax areas. But one thing that should be conveyed at this point is that you need to work with an expert who has the knowledge and expertise to help solve your personal tax situation. Right? And you know, just like you go, you don't go to the family doctor for knee surgery, you go to the family doctor, they help you identify where you need help, but then you go to the specialist. Tyler and his team are the specialists that help create these plans to execute and build wealth for you and your family and minimize your tax. So thank you, Tyler for jumping in today. Appreciate all your insights, guys. If you want to chat with Tyler and his tax team about designing your tax plan that's customized for you, save you tax, help you build your wealth and potentially even intergenerational wealth, we've put a link below to connect with Tyler and his team. Tyler, thanks again. Appreciate this. Thank you guys. This has been the Wealthy Entrepreneur podcast. Super grateful that you are here with us today. If you like the podcast, please like follow, share the episodes. We're here to help empower the most amount of people we can and entrepreneurs help fulfill their mission, maximize their impact. I appreciate your insights today and can't wait to see you next time.