Year End Tax Planning Ideas & A Little Retirement Advice

Hey, everyone. Today I wanted to go over briefly some ideas to give you for year-end planning. We're at that time of year where, as our firm, we are focusing on getting our clients in to make sure that we can maximize any tax outcome before the year ends. Because once December 31st happens and we're now on January 1st, Everything's basically closed as far as opportunities to save on taxes. Now, I also, I noticed some comments in the Facebook group here, um, or our Facebook group Profit First for Microgyms, and I guess I don't talk about it enough. Um, other than being an author for Profit First for Microgyms, I'm also the founder of Insight Tax. And we have a team of 30-plus individuals, accountants and admin support staff, where we help clients grow their wealth through saving taxes. So in case anyone didn't know that, we are very versed in helping people save on taxes. So I wanted to share some of those ideas with you as we get to the end of the year. We like waiting to the end of the year around this time, usually Prime time for us is between Halloween and Thanksgiving, just because at that point you can really accurately forecast what your taxable outcome could be because you have 10 months of real data and you just need to— we would call it forecast, guess, accurately guess the next— the last 2 months of the year. So a couple things to think about. Um, if you're following the Profit First system, the accounts that you would have— and if you're not familiar with this, I recommend you pick up the book Profit First Microgyms, um, so you can understand what I'm talking about when it comes to the accounts, the smaller plates. You have an equipment account and you have a tax account. Of course you have operating expenses. And so at this time in the year, it's a great place to look and see, are there any purchases that you plan on making between now and I would say even through March of next year? Do you, do you feel like, uh, you need some more equipment in the gym? Do you— I mean, whatever equipment Whatever that means for you, but whether that's for growth or to replace something that might be broken, now's a good time to look at that because if you buy it now, you can accelerate the whole cost of that equipment as a tax deduction. But I wouldn't leave it to just equipment alone. What other opportunities are out there that could allow you to grow your business But give you a tax deduction right now in this current calendar year. And that could be as simple as there's an advertising campaign that you are very confident is going to give you a return on investment that you wanted to put some money into. Maybe it's hiring an outsourced person to help you with that advertising campaign. See, all of those things are tax deductions. Now, I forgot to mention this, but I'll mention it now. When it comes to year-end planning, usually it does require cash, which is why I immediately went to some of those buckets that you might have with the Profit First system, equipment account, the tax account, and of course, operating expenses. It's very— there are some what we call non-cash tax deductions. Meaning you can get a tax deduction without actually having to spend money. But most of the strategies do require you to actually have the cash outflow. So you definitely want to be aware of what your tax liability may be, how much cash that's going to take, because you don't want to use that cash. I mean, that is the purpose of the tax account in the Profit First system, is so that when you get to the end of the year, you find out your tax liability, you have the money already set aside. So we don't want to spend all of our tax money on opportunities or buying equipment because, yes, it will reduce your taxes, but it's not dollar for dollar. If I spend $5,000 on equipment, I don't save $5,000 in taxes. I get a $5,000 deduction. But the tax savings is my tax rate percentage of the money spent. So $5,000, if I'm in the 20% tax bracket, I saved $1,000 in taxes. So again, I wouldn't want to spend all $5,000 if I needed all of that money to do a cash outlay. We— I had a client, we were looking at a very large tax strategy using a pension plan, which is kind of like a 401, a little bit more fancy. And he had a hefty tax burden. We're talking more than 6 figures, and he had cash saved up. And so I went through the different scenarios for him and laid out, if you do nothing, based on the way it looks, this is how much tax you'll owe. This is the cash requirement. If you put $50,000 into a pension plan, This is the cash outlay. So we estimated what the tax would be with the $50,000 deduction. And so we were able to give him 4 options, and he picked the one that he was most comfortable with as far as cash outlay. The pension plan is a really great option because not only is he getting a tax deduction, he's also building towards retirement and setting aside money in his working years so that when he decides to stop working, he has the investments that will give him a return. Now, that being said, investing in a 401, IRAs, those have favorable tax treatments. Now, I'm not going to tell you wholeheartedly that that's an absolute must. I have met enough people in my life and I have enough skepticism myself when it comes to doing an investment the government has some slight control over. Because I just have— I don't have a high level of trust in our government and them keeping their word and being honorable human beings. And they— anyway, so I won't go on my soapbox. And for the record, that's all of politicians. I don't care what group you stand in. I just have a distrust for them. I do not think they've done enough to honor, uh, the, the positions that they've been elected to. So some people hesitate when it comes to, should I put money in a 401? Uh, because there is some aspect that the government is slightly involved because they have requirements. When you get to a certain age, you have to— like, we're talking about 401s, IRAs, SIMPLEs, SEPs. All of those could be good options. But I recommend you sit down with your tax accountant and potentially your financial advisor, or if you're in a scenario like us where we can refer you directly to the financial advisor, it really helps so that we communicate better because we both— both us and the financial advisor agree on the same types of strategies. So those are things to look at as well. Those contribute towards your retirement. They're tax favorable, so they save you taxes. Now, other things to consider. If you haven't read any of our blogs on InsightTax.com about corporate rent, also sometimes called the Augusta Rule, I encourage you to go to our website and read some of those. We have a lot of material on it. That's definitely a strategy that can still be implemented this year, save you a lot of money in taxes. That's a no-brainer. I recommend going back through all your statements, specifically your personal credit card statements, because those are the ones that should not be tracked in your business books. But it's possible that you might have some expenses in there that are actually business-related that you have not captured yet as a tax deduction. Yeah. Okay. So we talked about using cash, going back, looking at statements, Profit First accounts. We talked about how to manage the cash. So if I have my equipment account, that's one of the reasons I have it, right? I isolated that money and purposely said the purpose of this money in this equipment account is to buy equipment or replace equipment, etc. Yeah, look at how much money you have in there now. And again, maybe you can find a way to Accelerate some purchases because you have the cash now, save the taxes down. When it comes to the tax account itself, I'll just give you an example. I have, I have a high dollar amount in my tax account right now. We also have bought a commercial building and we're putting a lot of money into building it out. That is going to give me a very favorable tax deduction this year. And I know that I have more money in my tax account than I need. So I am looking at that extra cash and saying, is there anything I can do to further my wealth— growing wealth strategies while also reducing taxes? Now, that can mean a lot of different things to different people. I think it's really critical that you sit down with a competent tax professional and get your financial planner involved to make sure the strategies are aligned so that you are actually building towards the opportunity to retire should you choose to. You don't want to get stuck in a scenario where your body breaks down or mentally you're just like, I want to be done, but you don't have anything to retire onto. Does that make sense? Hopefully. So now is always a good time. Don't forget, Don't, don't worry about the past. Don't, don't be one of those people that says, oh, well, if I'm 40 years now or 50 years old now and I haven't done anything yet, and maybe it's just I'm not going to do it now, it's too late. No, now is a great time. Who cares about the past? Now is a good time to start building towards some sort of retirement strategy. You don't have one, please get one. I think it's really critical. All right. So those are some year-end tax planning ideas. Hopefully some of it jogged some ideas for you. Um, uh, and as always, profit is a choice. Have the courage and wisdom to choose it.