Tax WOD - CrossFit Friction
In this recorded Zoom session, Ryan, Sam, and Lynn (the hosts) sit down with CrossFit coaches (Mike, Bobby, and others) and Jeff’s accountant to explain why the coaches should move from W‑2 employment to 1099 contractor status and how to structure their new business to keep more money. The discussion covers (1) the tax advantage of being a 1099 contractor, (2) specific business expense categories that coaches can now deduct – advertising (including workout apparel, specialty health foods, supplements, and massages), auto mileage (54¢ per mile) versus actual vehicle costs, travel for competitions, meals and entertainment, cell‑phone and internet, and the importance of a separate business bank account; (3) record‑keeping tools such as QuickBooks, Excel templates, and MileIQ; (4) entity formation options – setting up an LLC first, then possibly electing S‑corp status once net earnings exceed about $10k to eliminate self‑employment tax; (5) a “rent‑your‑home” strategy where an LLC pays the owner up to 14 days per year for using the home as a meeting space, creating a deductible rent expense without reporting the income on the personal return; (6) audit considerations, red‑flag thresholds, and the benefit of keeping detailed notes and receipts; and (7) next steps, including receiving a spreadsheet template and contact information for ongoing support. The tone is informal, conversational, and supportive, with the advisors emphasizing practical, actionable steps to reduce taxable income.
Chapters
Bobby, can you hear us?
Loud and clear.
Awesome, man. How are you?
Good, how are you?
Good. There's this little button on the bottom left that says start video. If you click that, then we can see you.
Sweet.
What's up, guys?
Not too much, man.
How you guys doing?
Good. Good. Yeah, you, you're familiar. I remember seeing you at the 2 Grand Summit.
Okay.
Yeah. All right.
What's your name?
Ryan.
Ryan, I'm Bobby.
Mike.
Mike. What's up, guys? Do you guys have more people joining in?
I guess just us.
Just us 2. Awesome.
Well, sweet. Um, Yeah, I'm Ryan. This is Sam. This is Lynn. We're just gonna— we're gonna talk some pretty sexy tax stuff with you guys.
Oh yeah, let's get it.
But it's gonna be super chill. You guys, if you have questions, you know, feel free, just pipe up. We're here for you, educate you on how to best deal with the stupid IRS.
Okay, cool.
Did you guys work out today already?
I did.
You did?
I was doing, uh, there was dumbbell box step-ups and, uh, bar muscle-ups.
Oh nice.
It was nasty.
Yeah, we, uh, we did 4-minute stuff today with— we rode 27 calories, um, we did We went down in power cleans, started at 135, 115, 95 each round, and then burpee box overs, over the box. And it was brutal. It was brutal. But then Monday, Monday we did the Dirty 30 for the first time. I wanted to die.
Yeah, so rough.
Yeah, I'm still sore from Monday.
Yeah, it's brutal.
Cool. Well, I'm gonna kind of be the engineer on the technical stuff. These two are actually the tax geniuses. They're gonna take over and get things going.
I was gonna tell you too, if you want me to talk individually to your coaches, I'm happy to do that. So we need to set up a phone call, I can go through that stuff as well. So, okay.
And so Jeff was telling me he's got a Are there 11 coaches? 10 or 11?
Yeah, we're the 2 full-time coaches and then the other guys and Gail are part-time.
Okay. And he was also telling me, are you guys 1099?
We're W-2 right now, but he's telling us that we need to meet with you guys and tell us to go 1099.
Yeah, okay, good. Yeah, because he was telling me, he said, I have 2 W-2 guys that probably should be 1099, so. This is good. Okay, well, these guys will kind of tell you how it should be structured and how you can save a ton of money now.
So this will be good.
Sweet.
Okay, I'll let these guys go for it.
So I'm Jeff's accountant, so I work with him directly. And so Jeff's my client. So, you know, well, whatever questions you guys have, we want to answer everything we have to. And this will kind of help you understand why it's a great thing for you guys to be able to go as contractors and specifically what strategies and tax things that will help you guys in the future. So, hey.
Cool. So I'm going to talk a little bit about the business deductions that you can take as a 1099 contractor, which as a W-2 employee, you can't take these expenses right now. But as a 1099 contractor, you can. So there's a couple really big ones that are important that often get missed. So the first one I want to talk about is advertising. So for you guys, you're— you can't— you advertise yourself by how you look, your workout clothes and your shoes and stuff like that. That all of a sudden, as a 1099 contractor, now becomes a tax deduction. And we put that under advertising, which is pretty awesome.
So we're basically giving you an excuse to go buy more workout gear.
Right, perfect.
Go get some more shoes.
Yeah, Christmas just got a little bit better.
For sure. So, and then another one that we tuck under advertising is actually specialty foods. You guys have a lot of specialty foods that you guys get when you're going to the special health food store and getting stuff there, that helps you advertise yourself in keeping yourself fit and things like that. So we put that under advertising as well. So the— some of the grocery store trips now can become a tax deduction, which is pretty awesome.
Yeah, very cool.
Because that's unique for you guys because that is one of the things that the IRS doesn't allow is personal grocery deductions. But where you guys are going to specialty health food stores and stuff like that, That's part of advertising yourself and keeping yourself fit. So we're able to tuck that in, which is pretty awesome.
Yeah.
And then let's see, any supplements that you guys have or use as well, those become a tax deduction as well. And it kind of ties into advertising yourself and things like that. So another one is massages, which is pretty cool. You wouldn't think about that, right?
Yeah. All right.
Today just got a whole lot better.
Yeah, that's awesome. Yeah, so when you go to the— go get a massage, we actually put that under employee benefits. That's a benefit for you and, you know, helps keep fit and things like that. So that becomes a tax deduction, which as a W-2 employee, you don't get that. So that's exciting.
That's awesome.
Kind of the reasoning behind this too, guys, just so you know, a deduction needs to be ordinary and necessary. That's kind of the geeky accounting lingo.
Yeah.
But if you think about it, if you guys are coaching a class and you can't perform an overhead squat because your back's kinked or you're sore, like, you're not going to be a very good and effective coach. So you need the massages, you need the mobility and You know, to be able to do the movement. So 100%, all this stuff is like, it's totally legitimate. Yeah, that's what's so cool is you guys are already doing this stuff. Now you just get to save on your taxes by writing it off.
Yeah, anything that helps you guys do your jobs as coaches, then you can figure out a way to write that off.
So, okay. Yeah.
So is that, um, if we look into that more, like, um, let's say Like there was a stint this summer where I had to see a physical therapist for like an ankle injury, um, or even like chiropractic care. Those are all things that can be written off.
So that's what we do monthly.
Okay.
He was like, all right.
No, I thought I heard somebody in the background talking, so I don't know if it was like delayed or something.
Yeah, I was on a call in the back classroom, so.
Oh yeah, yeah, for sure.
Yeah, cool.
All right.
Yeah, and if you guys have questions that come up throughout this little presentation, for sure spit them out.
Okay, sweet.
Thanks.
Okay, so the next kind of big one that I want to touch on is auto expenses. Um, you guys do a bit of driving, so keep track of your miles because those, those add up a ton, and the mileage is a great deduction. So going from your house to the gym or any other business-related driving, those miles all become a tax deduction. And the tax deduction is for each mile you drive, you get 54 cents of a tax deduction. So for one tank of gas, let's say it gets you 350 miles to the gallon, just make it easy. That's about a $190 tax deduction. If those are business-related miles. So it adds up a lot. So it definitely pays to keep track of your business miles. It multiplies very quickly. So that's definitely one to keep track of those.
So that was 54 cents?
Yeah, 54 cents a mile. So yeah.
Okay, that's huge.
Yeah.
It adds up for sure. Yeah, but nobody wants to track their miles. It's too Tedious and it's annoying, but it actually— I mean, it's gonna save you a bunch and you're just driving around anyway.
So yeah. Yeah.
Is there a— so there's— I mean, there's definitely a lot of stuff to kind of keep track here. Is there like a certain software application that you think would be useful, or is it just like collect your receipts, store them in a file or folder, and kind of do that that way? Is there any easier way you found?
You know, it just kind of depends on your preference. So QuickBooks is the industry standard. It's by no means necessary. You can even just keep track of it on an Excel document. So at the end of each month, we can even send you like a template that we have. We can email that over to you. But like at the end of each month, go through your bank statements, you know, and pick out all your business transactions. And then you just categorize them and then you kind of have an idea of where your spending has been throughout the year, but then it makes tax time easy. But that's— yeah, an Excel spreadsheet is completely adequate for it.
For miles, there's a cool app called MileIQ you can get on your phone that'll essentially track your phone. And then when you're driving, you just swipe one way for business and one the other way for personal, so it'll track it all year. That one costs like $62 a year. I think there's some free apps out there as well. But that way, it's at the end of the year, you get a report that says here's all the miles you've driven, here's your business miles, here's your personal miles. So it's pretty cool.
Sweet.
Yeah, let's see, kind of the next big one is travel. You guys do traveling, going to competitions and things like that. But there's also, think of all the, you know, maybe traveling you do for like a family vacation. And things like that. So the key with travel is the IRS wants to make sure before you leave that you have a business purpose in mind. So let's say you're going out of state to, to see family or something. Well, how can we make that a tax deduction? Are you going to go to some of the local gyms there? Is there maybe competition going on there? Are you going to, you know, make contacts out there? You know, that now becomes Your business purpose. So your mileage or your airfare, your hotel, your food, things like that now become a tax write-off because you have that business purpose.
Okay. So, um, I had a question on auto expenses. Um, do repairs tie into that as well? Can you write off, uh, like an auto repair? Let's say you need like an alternator for your car.
Asking for a friend.
Yeah, me.
So there's 2 ways you can write off auto. You can do actual or you can do the mileage. Um, so with the actual, let's go back to talking about that tank of gas. So if you— you can only do one or the other, you can't do both. So it's actual or mileage. So let's say you fill up your car For $40, um, you get 350 miles to the gallon. So with actual, you only get that $40, but with the mileage, you get that $190. So mileage is usually always going to be better, but if you end up taking miles, you still have to keep a mileage log. That's the catch. So at the end of the year, certainly keep track of those things. And you're keeping track of your miles anyway. And when we prepare the tax returns, we'll look and see, okay, is mileage or actual higher, and we'll take the better one for you.
Yeah, you should still pay for it out of your business account.
Yeah.
So if you need to fix your car or you need to buy new wheels, you can pay for that out of the business account. Just when it comes to the tax season and when the preparation is like, let's weigh it out, which one's more beneficial. Which one gives you the better tax benefit? And almost 90% of the time, it's mileage is way bigger.
Yeah, so an actual is gonna be, like you said, everything is gonna be tires, it's gonna be that repair you're talking about, you know, it's putting gas in your car, anything related to your car where you wanna track all those expenses.
Okay.
Yeah, oil changes, all that kind of stuff.
Okay, any other questions?
What if you got a new vehicle? Like, I think Jeff mentioned that he writes off his lease payments for his truck. And I have loan payments on my truck. Is that something I can write off as well? Because that is my vehicle I use to go to and fro from work.
So lease payments, as long as it's a lease and the business has leased the vehicle, then yes. Usually auto payments are not deductible, but the interest that you pay for that loan is deductible for sure.
Okay.
Yeah, so if you're leasing, that counts as the actual expense, right? Like the oil changes and the tires, you can count that lease payment. When it's a— when you bought it or you're on a payment, you know, that You only get to deduct the interest.
Okay.
So not the whole car payment, just the interest portion on it.
Okay, so it's actually better to lease in our situation.
Yeah, and it just depends on what your lifestyle is. Like, if you guys like leasing, lease, but I wouldn't necessarily do it just for the tax benefit.
Sure, okay. But good questions though. I'm sorry, what?
I was just saying good questions though.
Yeah, thanks. You mentioned the, like, having a business account, or was that something you would recommend doing, is like opening up a second account with my bank and just making that all business-related purchases and things that I normally would write off?
For sure.
structure, which we'll talk about in just a second. But definitely, if you're a 1099 contractor, have a separate business bank account for sure. It helps keep things separate in case you were ever audited and things like that. I'm gonna just keep things legitimate. So yeah, separate bank account is definitely good.
Okay, so we'll wait for that because it sounds like one's— I had another question on travel. So me, Mike, and Jeff went to Madison for the CrossFit Games. And, uh, so that's something we can definitely write off, like that whole trip.
Yeah, yeah, yeah.
Keep track of your receipts too, um, definitely. And like for the travel, or for really any expense, on the back of your receipt write the business purpose. So hey, we went to this competition, this is who was there. It doesn't have to be very long, but then with your receipts you don't have to worry about organizing them. Just Just stuff them in a big envelope, write 2018 on it, stuff all your receipts in there, and then tuck the envelope away. You don't have to organize it or anything, but if you are ever audited, you could give that to the auditor and say, here's my proof that these are all legitimate business deductions.
What's the extent of that that you can write off? So I mean, like if you get a hotel, you have your, let's say, driving expense, Are those all things that like cost of the competition or entry fee to the competition?
Yeah, yeah, really everything. Yeah, when you're going to especially CrossFit Games, everything's going to be right off. Your meals, hotel stay, travel, if you flew there or if you drove, you know, same thing. All that stuff you can build right off.
So there's no like money limit or anything?
No, no, no.
Another—
I lost my question. I'll come back to it.
Okay, let us know.
And just quickly too on travel, like, we also want you to think about— because our philosophy, we hate the IRS, so we think they're a bunch of dorks. So we want you guys to keep more money, all right? So we want you to think like, well, what about the personal trips that I'm taking? How do I make those You know, because going to the CrossFit Games, that's easy, right? You guys are CrossFit coaches.
Yeah.
What about if you're going to Miami? You guys are in Michigan, right?
Yeah.
I was like, okay, I want to take a trip to Florida this summer for fun, but how do I make it business-related? Well, make sure you contact the local box and be like, hey, can I come drop in? I want to see how your coaches do, all this kind of stuff. So that's like, you could write that whole thing off. So yeah, for sure.
We just need then the receipt from the box that we drop in from, or like, yeah, or something like that.
Just write down the name, name of the box, and maybe the owner, whoever you talk to while you're down there. Just make some notes about, you know, what you did while you're there.
Okay.
Okay, awesome. There's a couple more I just want to touch on real quick. So, meals and entertainment. So let's say you're going out to Costa Vida or somewhere else. Maybe you happen to be in your gym clothes or not or whatever. But how do we take this meal and have it become a tax deduction? Well, anybody there could be a potential member. So the person serving you food, maybe you can strike up a conversation with them. Hey, I do CrossFit, it's awesome. We're just down the road. Strike up a conversation with them and now they're that potential, maybe a potential member of your box. So now that meal that you just purchased is a tax deduction.
Yeah.
It's all about having the business purpose, who is involved and that kind of thing. Yeah, just keep your receipt. But there you go. So any eating out and things like that can be a tax write-off, which is pretty awesome.
Yeah, remember my question. So, okay, we do like a separate bank account. Do we necessarily like have to keep the receipts, or do we just like— if we were audited, can we just show them like our monthly bank statement receipts?
Yeah, receipts are going to be stronger in an audit.
Okay.
Sure, yeah.
Anytime you have any notes anywhere about, you know, what the business purpose was, so I mean, you could show your bank statement, but it's not going to have any of those personal notes in there to tell you exactly. And it's just really the auditor, hey, here's the people that I talked to, here's the purpose.
Okay.
So, and then just a couple more, cell phones and personal internet. Those should be— those are tax deductions. You need your cell phone to be in contact with the gym and your home internet and things like that. So that stuff, which you already have anyway, pay for that out of your business bank account, and now that's a tax write-off, which wasn't previously before. So those are definitely things to write off.
And your shirts too.
Yeah.
You can now write off all your certifications.
I learned so much this year.
Merry Christmas.
Yeah, yeah, get that across to level 3 this week.
On your question too about receipts, writing stuff down, I read one case study where in the audit the person actually had a journal that they had written everything out in. Like, they kept track of all their appointments, who they talked to, And the journal with the bank records was enough for the audit. So it's really just about keeping something personal somewhere.
Okay.
I'm going to talk a little bit about entity structure and setup. So like you said before, it's really important for you guys to set up a separate business bank account and really to set up an LLC for your business. So you guys can name your business whatever you want. And then once you've— I think Michigan, I think you can actually go online and do the entity setup. Um, I can't remember how much it costs. I don't think it's— it's usually not very expensive. Out here, uh, cost us about $70, but we can go online and just create an LLC. Doesn't take very long. If you have questions about how to do that or while you're doing it, just give us a call. We can help you kind of walk through that. Okay. But that'll be the biggest thing for you guys is just getting that separate structure set up for you. That way, all the income you guys have coming in is going to go into that business bank account. And then as an owner, you can pull money out anytime you want. You can, you know, and then all those expenses that Samantha and Ryan have been talking about, they'll all already be tracked right in your business bank account. So it'll be easier for you guys. You have to separate them out. So, and it's always better just to keep everything separate. You want to have business stuff here, personal stuff here. So if they'll say there was an audit and they were going to just audit the business, if you have stuff commingled, you know, personal, business, and they can look at both. If you just have your business stuff separate, then they can only look at the business. So that's, that's one of the reasons we want to do that. So LLC is the best way. As you guys start making more money, a good, good way to look at it is if you have about $10,000 in net, which just means I've got income and then less my expenses, and then I have about, let's say, more than $10,000 or more, then we actually want to look at an S corporation. And the reason we want to do an S corp Let's put up that—
I'm gonna share my screen for a sec. We've got a little cute diagram for you guys.
This will— it'll be good. You can look at it and it'll help you.
You see that?
Yeah.
Okay, so the reason we want to have a business set up— so as a 1099 contractor, and 1099 just means that's the form the IRS gets That shows you guys have been paid as a contractor instead of that W-2 you've been getting. You're going to get a 1099. Um, so for 2018, I think, right when Jeff's thinking about switching you guys over, um, the end of the year you'll get that 1099. On that, it's going to show all of the income you had coming in. So let's just say it was $50,000 in income, and then you guys have been tracking your expenses all year long. So you're writing off all that stuff you talked about. Bought some shoes, bought some equipment, done some travel, and you had about $20,000 in expenses or more. If you had more expenses, that's great. Because we want to get that number down as low as possible because that's the number that's going to get taxed. So you're not taxed on the $50,000, you're taxed on the net. So it's again income less expenses, and that's your net. So $30,000 is the net, we'll say, after expenses of $20,000. The way we save with creating an S corp is you're going to be paying taxes and you pay state. I'm not sure what the amount is for Michigan state, but you're going to be paying somewhere between 5 to 10% probably in state tax. You're going to be paying somewhere between 15 to 35% federal tax. And then as an independent contractor, the IRS looks at you as though you're a business anyway. And so you actually pay self-employment tax, which is 15.3%. So when you add up all those numbers, that's almost at least half, if not more than half of your income is going to the IRS. So the way we reduce that is we set up an S corp. An S corp will help us get rid of the self-employment tax at 15.3%. Um, in an S corp, you're required to take a wage. So like you guys are taking right now, you're taking a W-2 wage. In an S corp, you're going to pay yourself as the officer and owner of the S corp just a small wage. We're going to keep it, you know, probably about 30% of your net. So 30% of that $30,000, we're going to pay you in a wage for the year. So now I— Instead of paying $4,600, which I would have paid over on just when I have my Either by myself or an LLC, that $4,600 in self-employment tax. Now I'm paying $1,400 in self-employment tax. So I've been able to save $3,200 in self-employment tax. Okay, so on also on the money you guys take out, so you're going to be paying yourself a wage of $9,000. The other money that you need out of the business, so that $30,000, let's say Or we'll say $21,000, you just take those distributions out of the business. It's your business, you can, you know, take money out anytime you want. But we just want to track, make sure it's tracked, and we do it through distributions. So I know there's a lot of stuff there, but any questions on how the entities are set up and why you should have a business set up?
Yeah, no, I think it makes a lot of sense. I mean, It's just, it's a little bit more work that goes into it, but it already seems like a ton of benefit.
Yeah, yeah. The cool thing is you guys really are in control of your tax situation in that, you know, the more expenses you put against your income, which is stuff you're normally going to do anyway, right? Because you're— the idea is any dollar you spend You should be asking yourself, is there a business purpose for that dollar that I'm spending? And again, other than the personal groceries or the mortgage payment or rent payment, then we're gonna try and figure out a business purpose for that. And so it's money you're gonna be spending anyway, but you can use that to reduce your taxable liability by running it through the business. And so at the end of that, I mean, you know, if you spent $50,000 in business expenses, then you're, you're Your tax liability is gonna be zero, right? So the lower we can get that number, the better off you are.
Okay. All right.
Okay.
Any other questions on this?
No, got it.
That's good, because most people don't.
So that's awesome. You guys are awesome. I think so. Hopefully. It's okay.
Yeah, if you have questions, We're here to be a resource to you guys.
Okay, um, how do we get a hold of you guys if questions come up?
Yeah, I will, uh, I'm just gonna put these guys' email in this chat box. Okay, you guys can write it down.
Dude, so I got like—
but the fun is not over yet though, because Sam's about to—
one more thing for you—
blow your mind.
One more thing. Okay, this is the coolest strategy out there. I love this strategy. So you don't have to be an S corp to be able to do this. You just need to be an LLC and have a separate bank account. So if you decide, hey, maybe the S corp's not— I'm not quite ready for the S corp, you can still implement the strategy I'm going to show you here. So there's 2 things to keep in mind with this strategy, and then I'll show you the diagram. So the first one is where you're an LLC, or you're going to be an LLC. You're a business. Now we've all heard of those big businesses that go to a hotel, they rent out the, you know, one of the rooms, the convention center, whatever, and they have their food, audiovisual, things like that. Okay, big businesses do that. So keep that in mind. So the other part of this is there's an IRS rule that says if you rent out your your asset, in this case your home, for more than 14 days, so that's 15 days or more. If you rent it out for more than 15 days, then you have to pick up all that money as income. What people miss a lot of times though is that 14 days and under, you don't have to pick this up as income. So how do these 2 strategies come together? And here, pull up the diagram. So this is really exciting. I love sharing this. Okay, so you're an LLC, you are a business. Your business is going to sign a contract with you as an individual to rent out your home for a corporate business meeting for 14 times or less In a year, so what this does is this creates a rent expense in your business, and as long as it's under 14 days, you as an individual do not have to pick up that money as income. So we've done some market research around here, and around here, if I was to go to a hotel and rent out their facilities, it would cost me. $1,250 for one day for one meeting. So what this does is if I was to do this 14 times, it would create a $15,000 tax deduction in my business that I then do not have to pick up on my personal return. So basically, I just gave myself a $15,000 tax break. Tax-free bonus that I don't have to pay taxes on. So that money is now in my personal bank account and I don't have to pay taxes on it. So, and it creates a tax deduction on your business which lowers your income, which means less taxes you're paying. This can save you anywhere from $4,000 to $6,000 in taxes that you're not paying. So this is an awesome strategy and you don't have to be an S corp to implement it. But you do have to be a 1099 contractor. So that makes sense, the strategy?
I think so. Basically you're saying if we went to like a hotel or something and held like some kind of conference or even just a meeting with some of our clients all related to work, you know, less than 14 days a year, that all the expenses from that meeting, whatever that conference room costs, comes back to me and it's not something I pay for?
Yeah, so you're gonna rent out your home. This is the idea. So your home, your personal living residence, you're gonna hold a corporate business meeting at your home once, you know, 14 times a year. Your business is going to transfer $1,250 from your business bank account into your personal bank account for this meeting that you are hosting at your home.
Oh, so you are pulling out—
You are pulling out to your business. Yeah, thank you.
Okay.
Yeah.
Huh.
So, yeah, if you think about it from what we just talked about before, that $30,000 in net That we showed before. Now I'm cutting that net down to $15,000 because I've added $15,000 in rent expense in my business, right? So now that $30,000 we talked about being in net now is down to $15,000, which is even less tax that I have to pay. So that's a really cool strategy.
Bobby is awesome. Don't ask questions. Just— no, I'm just kidding.
Um, all right. So like, what would be like an instance where we would, uh, rent out our home to ourselves? Would that be like, let's say instead of taking this video call at the gym, I was taking it at my house. Um, would that be an instance where I would rent out my home to do work?
Yeah.
Here's, here's how I do it in mine. So I have an S corp. And for my corporate rent meetings, I literally have a meeting by myself and I will plan out my budget for the year. I'll set goals for myself for the business.
Yeah.
Make notes about that. I say, okay, I had a meeting on this date. Here's the things that I thought about and went through for my business. And that was my business meeting. And that was the purpose of the— and then I can, again, that justifies The corporate rent strategy we're talking about.
Okay, so if I did— like, I write our programming for the gym. If I write that once a month and that's less than 14 days, can I call that like a meeting with myself?
Yeah, sure.
Yeah, absolutely.
Yeah, it doesn't matter what the meeting's about as long as you take notes and you're, you're working on something business related.
Sure. Yeah.
Where—
I guess how much would I like say that is? Like, how much money would I spend on that? I don't— that's— I guess that's what I don't understand.
Good question.
You're not spending any money as an individual to hold this meeting, right? This is picking up an expense to pay you for this meeting. So So really, you don't have to go out and buy groceries to keep in your fridge for this meeting. Does that— I guess maybe ask your question again. I'll see if I can get that answer.
I think, is it like saying, like, normally— I mean, you said it at the start, but normally a business, like let's say a big business, would say we're gonna go rent out this conference room at a hotel. The conference— the hotel puts a cost on that conference room. And what we're gonna do is estimate a cost for that for our own home.
That's what I'm getting at.
Is that—
Yeah. Okay, okay.
The market rate, and we've done the work for you, it's the $1,250. You can just use that number and transfer that money from your business bank account into your personal. And that—
just write down $1,250.
Yeah, we've called a bunch of hotels, we've asked for all the equipment, we've asked for everything. That's, that's the market rate. Well, well, $1,250.
Gotcha.
So that's the number you can, you can transfer every month from Bobby LLC to your personal account, Bobby.
Like that, it's just like that.
And just write, write your notes down of what you talked about, and that's how it becomes audit-proof.
So that's pretty sweet.
Yeah.
That makes a lot— yeah, cleared it up a little bit. So basically, let's say I'm, you know, gonna plan out training for 10 of my personal training clients, and it's their training for the next month or so, and it's gonna take me an hour, but I'm gonna do it at my home and Basically, I take notes on everything there, and then the important part is that I do the transfer that day so that's reflected in my bank account, correct?
Really doesn't matter if it's that day, just as long as there's a transfer that goes from the business to you personally, just so there's an audit trail. And so we just want to see the same amount coming out every month, or you could have a meeting a couple of times a month. And if you— let's say you missed a month for some reason, You could have 2 meetings in a month if you needed to.
Okay, sure.
We just don't want to go over those 14 days is all.
Yeah, okay.
Yeah, we, we like the consistency of every month and just making it easy that way. But like, we've talked to some clients right now that haven't done that many, and we're like, well, why don't you do a Christmas party and you have a Thanksgiving party, and you know, you can do Or 3 transfers in a month, you know, just as long as it's not on the same day, you can do multiple transfers in a month.
What do we— so we're gonna mark that as— how do we label that when we do that?
It's a rent expense.
And on the personal side, it's just bonus happy money.
Yeah, that's what it sounds like.
It's just like, hey, Just rented my home to somebody that paid a good chunk of money for the hour or so. So the— so we don't start doing any of this until next year, is that correct?
Talk to Jeff and see. Jeff will make that decision about when he wants to start it. If it is going to be, just say, January 1st, 2018, you know, for you guys, if you get things set up now, that's fine, but you can You can really wait till after the new year and then get things set up once it starts. Just know by the end of the year, that's when the IRS is gonna send out that— I'm sorry, Jeff will actually give you a 1099 for the income he's paid you all year. And then, you know, so you'll know exactly how much money you've got coming in. So, but we just have to make sure everything's in place before the end of the year of 2018.
Okay.
So you got time.
Okay, so this past year, none of this would apply to the past year, right?
Yeah, 'cause you guys, will you have any 1099 income from anywhere?
We've been W-2 for a while.
We've been W-2, I think, this whole year.
So it only affects you if you're getting 1099 income. Because really, if you think about it this way, when you get 1099 income from any source, whether it's from Jeff or somewhere else, The IRS looks at you as though you're already a business.
So, okay, gotcha.
Yeah, and I mean, it's a win-win for you and Jeff because he saves money because he doesn't have to pay unnecessary, unnecessary payroll tax. Yeah, you guys get to be able to deduct stuff now. So it's really a win-win. So it's awesome. Yeah, it's pretty cool.
Okay, cool.
Any other cool stuff?
I think that's it. So let's see, I think that's it. Anything else?
Real quick, as far as auditing goes, how do you— like, do they just randomly choose you to audit you, or do they audit you once a year every year?
No. So an audit is really— I mean, the IRS has their own and the ways they do things. You're more likely to have an audit as an LLC that's picked up on Schedule C, which just means your personal return. You're less likely to have an audit if you have something separate like an S corporation set up, which is why we always recommend if we can get to the S corp, that's the best way. But even an LLC that has its own EIN, then that's better than doing like, you know, some personal stuff on your, on your personal tax return. So audits are— they can be random. They can be based on income, those type of things. But we, you know, if we help you with your tax returns too, we can look through them next year. We can kind of help you understand what things would be a red flag. For the IRS, you know, especially like the different categories you're gonna set up for expenses, making sure there's not one that's super big.
Yeah.
So if you get like $50,000 in income and you do $60,000 in travel to Florida, then that's a red flag.
But other than that, we'll help you out there though.
All right, well, uh, cool guys.
Um, I was just gonna say If you wanted to send us— or if you want to put your email in the chat box right now, yeah, we send you that spreadsheet that kind of has automated the different categories and kind of becomes your tracking system.
Yeah, that'd be awesome.
Email in the chat box, then we'll go ahead and send you that and send you some other resources too.
Yeah, thank you.
Thanks, guys. Thank you.
Do you guys have— sorry, I forgot we were still sharing our screen. You don't want to look at me and my ugly mug anyway.
Awesome.
Do you guys have any other questions though?
Um, not that come to mind right now. Still kind of sponging everything up.
Thank you.
Okay, how cold is it there right now?
Uh, 20s.
20s? It's been like, I think, past 2, 3 3 days, it's been like constant snowfall. Yeah, so, uh, yeah, it's been pretty gross.
It's freezing here, but we've had snow in the mountains but really nothing in the valley.
So yeah, yeah, bitter cold with no snow.
Yeah, it sucks.
It's the worst.
Yeah, you're just like, just snow, just do your thing.
Thanks guys for taking time with us today, really appreciate it.
Yeah, thank you.
Appreciate it. You guys helped a lot.
Thanks.
All right, and reach out if you have any questions.
Will do. Will do.
Thanks, guys. Thank you.
I'll see ya.
