December 29, 2025 • 50 mins
Tax code benefits and deductions are provisions that allow eligible taxpayers to reduce their taxable income or tax liability. They come in two main forms: deductions, which reduce the amount of income subject to tax, and benefits, which can include credits or specific exclusions. Tax code benefits and deductions are provisions that allow eligible taxpayers to reduce their taxable income or tax liability. Type of business entity you choose can play a significant role in your tax liability.
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ASharpe Outlook is broadcast live Mondays at 8AM PT on K4HD Radio - Hollywood Talk Radio (www.k4hd.com) part of Talk 4 Radio (www.talk4radio.com) on the Talk 4 Media Network (www.talk4media.com). ASharpe Outlook TV Show is viewed on Talk 4 TV (www.talk4tv.com).
ASharpe Outlook Podcast is also available on Talk 4 Media (www.talk4media.com), Talk 4 Podcasting (www.talk4podcasting.com), iHeartRadio, Amazon Music, Pandora, Spotify, Audible, and over 100 other podcast outlets.
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Episode Transcript
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Speaker 1 (00:01):
This program is designed to provide general information with regards
to the subject matters covered. This information is given with
the understanding that neither the hosts, guests, sponsors, or station
are engaged in rendering any specific and personal medical, financial,
legal counseling, professional service, or any advice. You should seek
(00:22):
the services of competent professionals before applying or trying any
suggested ideas.
Speaker 2 (00:31):
Hello, and thank you for tuning in to a Sharp
Outlook on pay for HD radio and talk or TV.
Speaker 3 (00:39):
I am Angela Sharp, your host. Our arm chair discussions
with industry experts will give you the steps, tools and
information to be successful in business and to prepare you
to be your best self. Hello, I'm Angela Sharp, and
thank you for joining us at a Sharp Outlook. We're
(01:00):
going to have a conversation one on one today about
something I know you're excited to know about tax codes.
Tax code secrets. They're not really secrets. What they are
are tax codes that unless you are aware of them,
you don't get an opportunity to take advantage of the benefits.
(01:22):
So I want to go through some of those benefits
that are there and give you some information. But I
want you to know this is not complete, because there's
probably hundreds and hundreds. In fact, there are hundreds and
hundreds and hundreds of tax codes out there, and you're
just getting just enough to hopefully peque your interest to
(01:48):
look further or contact expert advice from tax consultants. Tax
Code benefits and deductions are provisions that allow eligible taxpayers
to reduce their taxable income or tax liability. They come
into forms deductions, which reduce the amount of income tax
(02:14):
subject to taxing, and benefits, which include credits and specific exclusions.
The differing interests of the tax code versus the irs
is pretty vast. The cost of not acting on those
differing interest is huge, and what you don't know can
(02:38):
hurt you. That is really important. If you're leaving thousands
on the table, seek the advice of professional tax consultants
and keep your money in your pocket. It's not free service,
but I guarantee you it's definitely going to cost you
less than what you're having to pay in taxes, and
(03:02):
so you'll you'll want to go and look and seek
that advice. The type of business entity you choose could
play a significant role in determining your tax liability. So
I'm going to try to break this down for you.
The differing structures offer varied benefits and implications regarding tax liability,
(03:26):
so here are few to consider. Your business is it
set up as a sole proprietorship. As a sole owner,
you report your business income and expenses on your personal
tax return using a schedule see. You pay tax at
the individual rate and also pay self employment taxes to
(03:47):
cover for Social Security and Medicare. But if you're a partnership,
income losses or credits are passed through directly to the
owners report them on personal tax returns like the sole proprietor,
and the partners also pay self employment taxes. A corporation
(04:10):
we call it a c corp. These are separate tax
entities from their owners. Corporations kind of suffer from double taxation. First,
the corporation pays tax at the corporate level and their
shareholders pay tax on dividends received at the individual level.
(04:32):
And then there's the escorp. The es corp helps you
avoid the double taxation by passing corporate income losses and
deductions and credits to the shareholders who include this information
on their personal tax returns. Then there's the limited the LLC.
(04:52):
The limited liability company and LLC can choose how it
wants to be tax as a sole proprietorship, a partnership, escorp,
a sea corp, and this flexibility can be advantageous for
tax planning, but changing your tax entity can sometimes be
(05:14):
an effective way to minimize tax liability. For instance, converting
from the sea corp to an escorp allows the avoidance
of double taxation. However, keep these things in mind. Ownership restriction.
Escorps have limitations such as maximum of one hundred shareholders
(05:39):
and one class of stock. Evaluate if that aligns with
your business strategy. Employment tax saving In an ESCORP entity,
only the salary paid to the owner employee is subject
to employment tax. The remaining income distributed as dividends. It's
(06:00):
not subject to employment tax state taxes. While es corp
can provide federal tax benefits, some states do not recognize
the es CORP status and can tax businesses as a
regular C corporation. So when you're looking at thinking about
(06:24):
changing entities, you also need to research what are the
state laws, what are the state tax laws? What are
you liable for in that particular state? Do they charge
state at local taxes? There are some states that do
not have a state in local taxes that are deducted
(06:46):
or are have to be paid, but generally their sales
tax is pretty high. But you do save some money
because in that particular state, there's no state tax that
has to be paid or local tax that has to
be paid on your earnings. So that's something to consider.
(07:11):
Ownership restrictions. The escorp has limitations such as as I mentioned,
one hundred shareholders and one class of stock. It just
depends on how what your strategy is and do you
plan on growing and to what size do you plan
on growing. The employment tax savings in an escorp, as
(07:34):
I mentioned, is not subject and also the state tax.
But there are some other examples of tax deductions and
benefits for regular taxpayers. Most people take the standard deduction,
and that's a fixed amount that shows up on your
(07:56):
form or you see it in the instructions when you're
preparing your tax return, and it does reduce the amount
of your gross income, your adjusted gross income, I'll call
it AGI. Most taxpayers take the standard deduction rather than itemizing,
(08:18):
which is probably simpler and often more advantageous, but you
should at least do the analysis and find out exactly
what items that you can possibly deduct, and then compare
the two to find out which one is going to
be more advantageous. Keep in mind, you have to be
(08:40):
keeping receipts. You have to be logging these because you're
going to have to identify each one of those particular
deductions and you're going to have to have receipts for
those deductions. But in some cases, there are deductions that
you probably are not taking advantage of because you see
the amount of the standard deduction and you say, oh, well,
(09:03):
this is simple. And even some of your tax preparers
are probably doing the same thing, or you're using one
of those tax preparation software, it'll probably advise you to
just take the standard deduction. But if you know that
you've had additional expenses throughout the year or something unusual,
(09:24):
maybe you invested in a stock, and it would you
know the wrong direction for you. That would be something
that you would be able to deduct because that was
an investment that you lost on, But you cannot get
that benefit if you're taking this standard deduction. And so
there are a lot of different deductions. I'm going to
(09:46):
try to go through and hit some of the key ones,
but that's something to consider at least compare the two
to find out which one is the best direction to go.
Itemized deductions, the you know instead of the stand reduction
can itemize certain expenses and it's on shows up on
(10:11):
your tax return. It's a different schedule and it will
reduce your AGI if the total is greater than the
standard deduction. Here are some deductions. Retirement contributions contributions to
retirement plan your four one K your IR are often
(10:34):
tax deductible or tax deferred, meaning they reduce your current
taxable income so you're able to deduct that. And then
when you do get to retirement, when you generally have
a lower tax liability rate than as you are pulling
from your four oh one K, then it becomes a
(10:55):
taxable amount. But you may even have very you know,
strong deductible items at that time also, so it will
reduce your liability. This will result in significant tax savings
and help build your future security. Educator expenses eligible educators, teachers,
(11:21):
counselors principles can deduct a limited amount of unreimburse expenses
for classroom supplies, books, and computer equipment. So if you
have one of those professions, please keep track of the expenses,
because I hear all the time that teachers are having
to pay for supplies or pay for different things for
(11:44):
their class because there's not enough budget or it's not
part of the curriculum, or they're wanting to take a
trip or something like that. They try to raise money,
they fall short. Your using your own personal financial then
you're able to deduct this as if you are itemizing
(12:09):
as I said before, if you are itemizing these expenses,
you're able to deduct that, and that can result in
significant tax savings. Individuals who use a portion of their
home exclusively and regularly for business purposes may be able
(12:31):
to deduct associated expenses such as percentage of mortgage interests, rent, utilities, repairs,
different things like that. And it's based on a square footage.
It's something that a lot of people have taken advantage
for specific irs. Rules apply to eligibility and the calculation,
(12:54):
So you will want to do some research on that
particular deduction to find out, you know, if it will
benefit you based on the calculation, is it really going
to be enough. You just can't go in there and say, oh,
I'm just going to put this them out down there
and think you can deduct. There are rules. You have
to know the rules and check that out. Business expenses
(13:16):
self employed individuals can deduct a wide range of business expenses,
including advertising, utilities, health insurance premiums, business travel, and interest
on business loans. You need proper documentation, though it is required.
(13:38):
Charitable contributions donations to qualified charitable organizations can be deducted
from the taxable income. And during these days and times
when there's so many in need, I know many are
contributing to non profit organizations that are helping to provide food,
(14:03):
helping to prevent homelessness, and helping to help those that
are disabled, those that are veterans, different things like that.
If you're making contributions, you should have some type of
schedule that shows how much that you have contributed, how
(14:25):
much you have paid. A lot of these organizations that
you send to they will send you a report at
the end of the year as to how much your
contribution was. But just in case they don't keep track
of that information and whether it's a check or however
you contributed, have those receipts so that you have documentation
(14:50):
for that medical expense, you may be able to deduct
unreimbursed medical and dental expenses that exceed a certain percentage
of your adjusted gross income. This is an itemized in deduction,
(15:10):
and there's a threshold that you need to meet to
make sure that you're able to deduct those expenses. So
it doesn't happen automatically. There is a calculation that helps
you determine whether or not that is deductible for you.
Dependent care benefits tax benefits are available for expenses related
(15:32):
to the care of dependence, such as a child or
dependent adult. To allow taxpayers to work or look for
work often takes form of a tax credit, which directly
reduces your tax liability. There are a lot of tax
(15:54):
deductions that are available, and you want to be able
to take advantage of all of those. Some of the
other ways of reducing your liability is to have the
opportunity to take advantage of some of the tax credits.
(16:16):
The tax credits that are out there, for instance, one
hundred percent bonus depreciation. Those that have a business where
you have assets and you have equipment and things like that,
being able to qualify for deductions for depreciation, they say
(16:41):
for twenty twenty five is being made permanent for qualified
property placed in service after January nineteenth of twenty twenty five,
and can be used on both new and use equipment.
So if you're a sole proprietor and you have an office,
or you have your c corps or a partnership, or
you have a outside office and you have office equipment,
(17:06):
and you have computer equipment, and you have machinery equipment
and things like that, you'll get the actual cost of
that item itself, and you look for the depreciation schedule
and the irs to find out exactly at what rates
(17:26):
you can depreciate those items. You can't make them up.
They do. There are schedules that let you know exactly
you know how long a computer lasts, and that's how
many years you're able to depreciate it. So you divide
up in months, and this is how many You know,
how much you get to depreciate for those particular items
(17:50):
that you have purchased, and so using that as a
deduction or a credit for your tax liability is very beneficial.
I believe most companies out there are utilizing the depreciation
schedules and taking depreciation instead of expensing the full amount.
(18:14):
Expensing the full amount is going to really have a
detrimental effect on your revenue. And not only that when
the IRS sees this, they're also going to see that
this particular item should have been depreciated over time. So
you can't just expense things just to lower your tax
liability and think that it's going to be acceptable. The
(18:37):
laws the rules are set that you have to depreciate
these items over a period of time, but it does
create a benefit and lowest your tax expense. Section one
seventy nine expensing. The maximum deduction has increased to two
(18:57):
point five million for twenty two five, with a phase
out threshold a four million for qualified equipment purchases. Qualified
business income QBI deduction. The twenty percent deduction for eligible
pass through businesses has been made permanent.
Speaker 1 (19:19):
Yay.
Speaker 3 (19:20):
Phase out thresholds were also expanded with an added minimum
deduction of four hundred for those with at least one
thousand dollars in qualified business income. So that's a new
law that's there, and it's something that you can take
advantage of. Research and experimental expenditures domestic r and costs
(19:48):
for twenty twenty four and beyond are now immediately deductible
instead of being amortized. That is a huge benefit to
you and those that have been doing research or experimental
spending money for experimental things. I notice a lot of
new entrepreneurs are out there. They're creating, you know, these
(20:11):
AI tools they're creating, you know, a lot of other
tools that are out there. The equipment, the research, the expenses.
Instead of it being depreciated over time, you are now
able to immediately deduct all of it instead of advertizing.
(20:32):
Amortization is just like depreciation. You it has a set
period of time that you can expense it off. But
now you were able to expense your research and development
and experimental things, you can deduct that. So keep track
of those expenses, keep track of that time that's being
(20:54):
spent and all these different things, because those are deductible
expenses in full and will reduce your tax liability significantly.
And so you want to take advantage of that, and
it's something that you definitely want to do. Work Opportunity
tax credit Businesses that hire employees from certain target groups,
(21:16):
such as veterans or long term unemployed individuals, can receive
a tax credit of up to ninety six hundred dollars
per qualified employee. So if you are an organization a business,
a company, a sober pritorship, a partnership, whatever, and you
(21:38):
are hiring people that have been unemployed for a long
period of time, or they're veterans that have returned and
they're looking for work, or someone that is disabled and
they're looking for work. When you hire them, you not
only you get an opportunity to deduct an extra ninety
(22:02):
six hundred dollars per qualified employee. So not only are
you getting a good worker, but you are getting a
tax benefit for that worker, and you're also helping to
build up their life, giving them purpose, giving them opportunity
to get back on their feet. So keep this in
(22:23):
mind when you're thinking about hiring. If you haven't done
it in twenty twenty five, twenty twenty six is a
new year. There are a lot of people that are
unemployed at this time. If you're thinking about hiring, and
you're thinking about even seniors are coming out of retirement
and going back to work, you're thinking about hiring someone,
(22:46):
consider those that might be in one of these specific groups,
and you will not only have a good worker, but
you also have that tax benefit. So that's something to
consider when you're thinking about lowering your taxable rate Small
Business Healthcare tax Credit. Eligible small employers that pay at
(23:09):
least fifty percent of employees health insurance premiums may qualify
for a credit out of up to fifty percent of
those premiums. That's another benefit that's happening, and it's great
if you're able to if you're large enough or you've
come to the point where you are able to offer
(23:31):
them healthcare health benefits, you're able to deduct that expense
and lower your taxable income for your organization, for your
company by providing healthcare for your employees and getting up
to fifty percent of that premium deducted. A credit for
(23:54):
employer provided childcare, Now, that is a benefit that would
really be great for a lot of people who want
to work, but it's difficult for them to work because
of the cost of childcare. A credit for employer provided childcare,
a tax credit is available for businesses that provide childcare
(24:16):
services for their employees. So you're going to get a credit,
a deduction from your taxable income for providing payment, or
providing services, or providing reimbursement or whatever for your employee.
(24:39):
Ease childcare and a lot of a lot of single
parents out there it's very difficult for them, especially if
they're not living near home, or they're not living near
a friend or something like that, and they can't afford
they're just now starting back to work, they can't afford
(25:01):
the childcare, so many of them are still at home.
You may be doing small jobs, odd jobs, but not
being able to actually get into a career or establish
themselves because of the cost of childcare. So this will
be a way of helping some of the people that
(25:22):
are unemployed that are wanting to come to work or
needing to come to work or to meet qualifications for
their snap and they need to be able to get childcare.
If you're able to provide childcare services for them, or
(25:44):
you're paying those premiums for them or whatever, then that
is a credit that gets deducted from your taxable income.
Energy efficiency incentives. Businesses making eco friendly upgrades such a
as insulation or HVAC systems may qualify for credits extended
(26:07):
by the Inflation Reduction Act. So if you're involved in
energy efficiency in whatever manner, you're going to get a
deduction for the type of business that you're in and
the type of work that you are involved. And here
(26:27):
are some other common deductible business expenses. Of course we
should know all of these, but I'm going to go
through them just in case you aren't aware. So your
common business deductions, and most of them, if you're using
a business software, they show up as an expense on
(26:48):
your financial system, and most of those expenses are deductible
on your taxes. But let's go through them to make
sure you understand. Salaries and wages. The cost of paying
your employees, including salaries, wages, bonuses, and benefits, is fully
(27:10):
completely deductible as an expense, lowering the profit, lowering the
taxable income for your organization. Rent payments for business property
including office space storage units is one tax deductible. And
(27:33):
there's even if you are leasing. You're leasing a building,
maybe you have a warehouse that you use and for
the supply chain, and you have food or different items
delivered and it stays in that warehouse until it is
(27:54):
actually picked up and delivered or sent out. Well, that
lease or that rent that is deductible. There are a
lot of different types of rents that are out there.
Check your business, find out if you are paying any
rents for anything, and know that those are one deductible
(28:17):
utilities expenses for your electricity, your gas, your water, the internet,
the phone, telecommunications are deductible with deductions even for a
home office s based usage. So if you have an
office at home, you're a sole proprietor, you're working from home,
(28:40):
keep track of your utilities, keep track of all of
those expenses that you're paying now, because they are deductible
based on your square footage of your office space, not
one percent if you are a sole proprietor and you
have a home base office. Other than that, it's one
hundred percent deduction for other companies that are outside of
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the home and in a building or what office space
or whatever. Insurance premiums for most types of business insurance,
such as liability insurance, which is protecting against someone falling
or protecting against you know, you have a consulting firm,
protecting against you know, someone you know may maybe airrors
(29:30):
and omission things like that. So these premiums are business
insurance such as liability, property and professional insurance is one
hundred percent deductible, So don't be afraid to provide or
get your insurances or make sure that your business is covered,
(29:52):
covered from liabilities, covered from potential harm, covered from potential
loss lawsuits. Make sure your business is protected by some
type of liability insurance. Travel and meals. Business travel expenses
(30:14):
are one hundred percent deductible, while meals are generally fifty
percent deductible. So and then you really need to make
sure you're keeping the receipts on those because if you
are audited, you're you're needing to prove that you did travel,
you did spend meals, you it was for you. You're
(30:36):
not paying for your friends showing up along the beach,
but you you actually have a business travel where you
conducted business, document the type of business. And I'm not
saying you can't go to the beach. You can have
a meeting, you know, at the beach somewhere, at a
(30:57):
resort somewhere, but you need to die what you've discussed
as business so that it does not end up getting
reversed from your tax return. Marketing and advertising costs for campaigns, flyers, sponsorships,
(31:18):
and other promotional activities are fully deductible. So if you're
hesitating in marketing or advertising, everyone's out there, they're shopping,
but they're not maybe going into the brick and mortar
so much anymore but they are online. You need to
make yourself available. You need to make yourself so that
(31:43):
you're visible, and that might require some help from a
company that provides marketing, digital marketing, digital advertising so that
your product can be seen, your product can appear in
(32:03):
a very nice ways so that it actually attracts and
draws that potential customer in gives them that feeling that
they have to have that particular product. And you got
to keep in mind you're competing with millions now because
everybody is online. So you need to make sure that
(32:24):
you have your marketing advertising. And if you're thinking about
the costs, think about that that cost is going to
be deductible, and if that cost is bringing you business,
it's worth the expense. And that expense is deductible, you
really have been benefited a lot. Legal and professional fees.
Necessary fees for legal and accounting services are deductible one
(32:50):
hundred percent. And if I never say anything else, I
always will say you need to talk with a professional
about legal issues and your accounting. Seek out those professional services.
If you do not have someone in your organization already hired,
because their job is to make sure that you're protected,
(33:13):
that you're meeting all of the rules and regulations, that
you are in compliance with all the laws, especially in
your accounting. You want to make sure you're compliant with
all the regulatory requirements with gap generally accepted accounting principles,
that you're aware of any new laws that have come
(33:34):
in that will affect your business, affect your employees. So
you want to have those services. You want to be
able to have services that understand your industry, understand your business,
understand your forecast. Because you did a budget, right, they
(33:55):
understand where you're going and so they're going to advise
you the best way possible. And also there's a lot
because of maybe AI and different things, there's a lot
of infringement that's taking place. You may want to have
legal counsel there to advise you of how to protect
your particular product, your particular advertising of your product, making
(34:18):
sure that someone is not creating your product and out
selling it and you're not aware of it. So you
going to have that legal and professional services out there.
But they are deductible interests on your loans, interests paid
on business loans or credit cards. It's seductible subject to
(34:39):
limits for certain businesses. So it's going to require some
research as to what types of loans the interest is deductible,
and what kind of cards. How these cards are being used.
Is in a business cards only solely, then it's not
going to be a problem. But when you start mixing
(35:00):
that card with a personal card, and I highly recommend
that if you're going to be deducting the interest on
those cards, you need to have a separate business credit
card that is used only for business transactions and no
other type of spending than you would be safe your
(35:22):
home office deduction. For most using a dedicated home office,
a deduction can be calculated using a simplified method by
tracking actual expenses, and you're going to want, Like I said,
not only are you going to want those expenses that
you're tracking, but you're going to want to have hard
(35:45):
copies of that information just in case you do get audited.
So one other thing is changing your business entity can
provide significant tax benefits, but it's equally crucial to understand
future implications. Each structure has its pros and its cons
(36:09):
and what works for one business may not work for another.
So all of these things that I've mentioned, and there's
so much more. Like I said, there's so much more
that's out there, and you need to talk with a
tax professional, but you need to understand just because this
company functions this way, it is not a one size
(36:29):
fits all. There may be some idiosyncrasies that you are
not aware of that you need to make yourself aware of,
or your accountant needs to be aware of. Specifically, a
tax accountant. Every accountant does not necessarily understand all of
the tax laws. Because accounting is a profession where it
(36:52):
has so many vast areas that you work in, you
don't necessarily and have the opportunity to be involved in tax.
So you have a tax department. Most companies do, and
that's the only thing they concentrate on is tax and
(37:16):
making sure they can reduce the tax liability. They're constantly
we're researching for new changes in the laws, looking for
new benefits, new ways to be able to reduce the liability.
So they're they're constantly doing nothing but research. And like
I said, there's hundreds and hundreds and hundreds of codes
(37:37):
that are out there and searching through them, understanding them
is a totally different situation. So just because you go
and read them, you might read them, but you don't
understand how to use it because it's connected to other
information that it is not so easily reconnizable when you're
(38:01):
reading that particular code. So I would definitely advise you
to always always be looking for a tax professional. I'm
not trying to give you financial advice. What I'm trying
to do is trigger your mind enough that you become
curious to find out am I getting the best that
(38:21):
I need for my corporation, for my escorp, for my partnership,
for my LLC, for my sole proprietorship. Are the right
questions being asked to be to see if I am
taking advantage of all of the different codes that are
out there. Like I said, there's so many other codes
(38:44):
that are out there, but your tax account that needs
to be informed, needs to be on top of it.
And what you need to do is maybe ask the question,
am I getting all of the benefits that I can
take at this time? If not, can you research and
find out what other benefits are available to me? You
(39:07):
know the one thing I want to say, I'll say
it now because I don't want to forget. I'm not
trying to give you financial advice, but I'm trying to
give you enough information to make you go and take
a step like changing your legal entity status is a
(39:28):
big decision and should not be based solely on tax considerations.
It can impact your business in many ways, including liability
control and ability to raise funds. You must consult a
license advisor or tax professional before making such decisions. In fact,
(39:51):
you should always be talking to a tax professional, someone
that that is their background, who is very knowledgeable about
all of the tax code and all of the benefits
and all of the credits and all of the deductions,
and also all of the pros and cons and pitfalls,
(40:13):
because as I said, all of them differ. They're not
as the same. It's not a one size fits all.
Every tax code out there does not apply to every
business or organization, and so you need to know how
they are divided, how they're broken down, so that your
(40:33):
particular entity, however you set your organization up, you get
the complete benefits for you at that particular status. But
what would it look like if you change from a
sole proprietorship to an LLC? What would it look like
(40:53):
if you became a partnership and collaborated with someone else,
What would it look like if you incorporated, if you're
at the point or the size or your dreams to expand,
or at the point where you need to become a corporation,
(41:13):
because maybe not making some of those decisions, not making
those moves are taking far more from you than what
you actually realize. And so I know tax isn't on
a pretty conversation or is even something you want to
(41:34):
hear about until April, but it's something that you have
to know about before then, because you have to prepare.
You have to get the documentation some things. If you're
changing entity, you've got a file to change that entity,
and it takes a little while to get that filing
(41:54):
done and then to get the confirmation from the IRS
that you have changed your status. If you're going to
change your status, I would say you do it at
the beginning of a year, not in the middle of
the year, because now you've got two types of taxing
(42:15):
entities there that you need to file, and it can
end up causing confusion as to what you need to
do and what you need to be breaking out and
what kinds of things that you need to be concentrating on.
So it's really important to think through this and it's
something you need to plan for you. Just don't jump
up and say, oop, it's almost tax time, let me
(42:36):
go start doing all these changes. No, you shouldn't because
you need to be thinking through. Yes, the tax liability
might be high, but there's consequences in not doing it
at the right time. This is why I'm emphasizing talk
to a tax professional. Find one in your area, meet
(42:58):
with them, search and make sure that they really are
and their reputation is that they are successful in helping
you to reduce your tax liability. Research, get references, talk
to clients that they've had to make sure that they
(43:20):
are legitimate, that there's someone that you can trust, there's
someone that you can depend on their advice. But it
is something that I would recommend that you consider looking
at as you go into the beginning of twenty twenty six.
(43:41):
You may be pretty late to be thinking about making
some changes in twenty twenty five, but I will be
four twenty twenty five. Look to see what particular deductions
are permanent and you can take one hundred percent and
take advantage of those particular laws because you you are
entitled for twenty twenty five, but for twenty twenty six.
(44:07):
I think it's a good time to start thinking about
how can I stop leaving money on the table, How
can I stop giving away so much money, you know
for taxes. Surely there is a benefit to me getting
this business and keeping more money in my pocket. But
talk with your tax professionals. Like I said, find one
(44:30):
that is reputable in your area and that can sit
down with you, and please do some research to make
sure that the person handing you this business card has
the references and the professionalism and the ability to be
(44:56):
able to look at your particular business. One of the
things I've always want to, you know, coster you on
for those that you are thinking about looking for a
tax professional. Just like there's different industries, there are different
types of tax professionals. If you were in manufacturing, you
(45:18):
don't want someone who their customers are probably in the
food industry, or they're in garment where or different things
like that. You're going to want someone who understands manufacturing,
understands the manufacturing site, understands the plant, understands the equipment
(45:43):
in the plant, understands the processes, understands the timing understands.
You know, all of the different things in the different ways.
The least, the least the buybacks and all of these
different things. You're going to want someone who is informed
in in your particular industry. It may take a little
(46:03):
while to research that, but I would research that. Just
because they say they're a tax professional and does not
mean they're going to understand everything, because they need to
understand your business first. They need to understand your industry first.
They need to understand your goals and like I said,
your forecast where you're trying to go, because we're not
(46:26):
dealing with what's in the past, we're dealing with what's
going to be in the future. But since I said that,
you may want to even have them look at opportunities
you have up to five years. You may want to
have them checked to see that you have received all
of the benefits and they were on your preparation of
(46:50):
your tax return, and so that you are not leaving
money on the table. You may have an opportunity to
do a revise return and be able to take care
of benefits that were never considered in the previous filings
and get that money back. So I'm saying this to
(47:15):
just advise you to consider the professionalism of the tax consultant,
but make sure they're in the industry that you work in,
so that you're talking the same language when you are
talking about your business and what your business is doing,
and the kind of expenses your business has and the
(47:38):
kind of expenses you plan on incurring because you're expanding,
or you've spent a lot of time during research and
experimental things on your new product, or you know, whatever
the things are, You're going to be prepared and understand
(47:59):
exactly what going on, So seek them out and look
for them. I would just begin by looking for tax professionals,
and then from there I would start considering then looking
for and tell them I would like to have some
references so that you can actually contact those people. And
(48:23):
then there's a lot of information out there in the
data oh zone, and you can get any one of
those research tools out there, Gemini, Chat, g GBT, there's
a lot of them out there. Get one of them
and begin to research and find out. You can look,
(48:47):
like I said, ask for a customer list of those
they've done business with. If they're hesitant, you may want
to keep moving because if they've done business for them,
they should have a reputation of being excellent. And if so,
then that someone that you want to be able to
(49:11):
depend on making sure you have the right tax set up,
entity and everything. I hope you've enjoyed the conversation is
just sitting down chatting with you and just hopefully triggering
your next step, and that is getting help so that
(49:33):
you are not paying as much as you have been
and you find out what these secret codes are that
can benefit you. I thank you for joining A Sharp Outlook.
We're here every Monday at eleven am Eastern Time in
eight am Pacific time. I enjoy talking with you and
(49:58):
sharing knowledge with you, and I hope you enjoy receiving it.
Until next time, Stay informed.
Speaker 2 (50:10):
I want to thank you for joining us on a
Sharp Outlook. We have been informed and energized to take
the next steps. We have posted links to websites and
videos to learn more on today's topic. Please join us
again next week for another thought provoking conversation right here
on key for HD radio and.
Speaker 3 (50:31):
Talk for TV.
Speaker 2 (50:33):
Listen to the podcast on all the podcast apps, and
until next week, stay informed,
This program is designed to provide general information with regards
to the subject matters covered. This information is given with
the understanding that neither the hosts, guests, sponsors, or station
are engaged in rendering any specific and personal medical, financial,
legal counseling, professional service, or any advice. You should seek
(00:22):
the services of competent professionals before applying or trying any
suggested ideas.
Speaker 2 (00:31):
Hello, and thank you for tuning in to a Sharp
Outlook on pay for HD radio and talk or TV.
Speaker 3 (00:39):
I am Angela Sharp, your host. Our arm chair discussions
with industry experts will give you the steps, tools and
information to be successful in business and to prepare you
to be your best self. Hello, I'm Angela Sharp, and
thank you for joining us at a Sharp Outlook. We're
(01:00):
going to have a conversation one on one today about
something I know you're excited to know about tax codes.
Tax code secrets. They're not really secrets. What they are
are tax codes that unless you are aware of them,
you don't get an opportunity to take advantage of the benefits.
(01:22):
So I want to go through some of those benefits
that are there and give you some information. But I
want you to know this is not complete, because there's
probably hundreds and hundreds. In fact, there are hundreds and
hundreds and hundreds of tax codes out there, and you're
just getting just enough to hopefully peque your interest to
(01:48):
look further or contact expert advice from tax consultants. Tax
Code benefits and deductions are provisions that allow eligible taxpayers
to reduce their taxable income or tax liability. They come
into forms deductions, which reduce the amount of income tax
(02:14):
subject to taxing, and benefits, which include credits and specific exclusions.
The differing interests of the tax code versus the irs
is pretty vast. The cost of not acting on those
differing interest is huge, and what you don't know can
(02:38):
hurt you. That is really important. If you're leaving thousands
on the table, seek the advice of professional tax consultants
and keep your money in your pocket. It's not free service,
but I guarantee you it's definitely going to cost you
less than what you're having to pay in taxes, and
(03:02):
so you'll you'll want to go and look and seek
that advice. The type of business entity you choose could
play a significant role in determining your tax liability. So
I'm going to try to break this down for you.
The differing structures offer varied benefits and implications regarding tax liability,
(03:26):
so here are few to consider. Your business is it
set up as a sole proprietorship. As a sole owner,
you report your business income and expenses on your personal
tax return using a schedule see. You pay tax at
the individual rate and also pay self employment taxes to
(03:47):
cover for Social Security and Medicare. But if you're a partnership,
income losses or credits are passed through directly to the
owners report them on personal tax returns like the sole proprietor,
and the partners also pay self employment taxes. A corporation
(04:10):
we call it a c corp. These are separate tax
entities from their owners. Corporations kind of suffer from double taxation. First,
the corporation pays tax at the corporate level and their
shareholders pay tax on dividends received at the individual level.
(04:32):
And then there's the escorp. The es corp helps you
avoid the double taxation by passing corporate income losses and
deductions and credits to the shareholders who include this information
on their personal tax returns. Then there's the limited the LLC.
(04:52):
The limited liability company and LLC can choose how it
wants to be tax as a sole proprietorship, a partnership, escorp,
a sea corp, and this flexibility can be advantageous for
tax planning, but changing your tax entity can sometimes be
(05:14):
an effective way to minimize tax liability. For instance, converting
from the sea corp to an escorp allows the avoidance
of double taxation. However, keep these things in mind. Ownership restriction.
Escorps have limitations such as maximum of one hundred shareholders
(05:39):
and one class of stock. Evaluate if that aligns with
your business strategy. Employment tax saving In an ESCORP entity,
only the salary paid to the owner employee is subject
to employment tax. The remaining income distributed as dividends. It's
(06:00):
not subject to employment tax state taxes. While es corp
can provide federal tax benefits, some states do not recognize
the es CORP status and can tax businesses as a
regular C corporation. So when you're looking at thinking about
(06:24):
changing entities, you also need to research what are the
state laws, what are the state tax laws? What are
you liable for in that particular state? Do they charge
state at local taxes? There are some states that do
not have a state in local taxes that are deducted
(06:46):
or are have to be paid, but generally their sales
tax is pretty high. But you do save some money
because in that particular state, there's no state tax that
has to be paid or local tax that has to
be paid on your earnings. So that's something to consider.
(07:11):
Ownership restrictions. The escorp has limitations such as as I mentioned,
one hundred shareholders and one class of stock. It just
depends on how what your strategy is and do you
plan on growing and to what size do you plan
on growing. The employment tax savings in an escorp, as
(07:34):
I mentioned, is not subject and also the state tax.
But there are some other examples of tax deductions and
benefits for regular taxpayers. Most people take the standard deduction,
and that's a fixed amount that shows up on your
(07:56):
form or you see it in the instructions when you're
preparing your tax return, and it does reduce the amount
of your gross income, your adjusted gross income, I'll call
it AGI. Most taxpayers take the standard deduction rather than itemizing,
(08:18):
which is probably simpler and often more advantageous, but you
should at least do the analysis and find out exactly
what items that you can possibly deduct, and then compare
the two to find out which one is going to
be more advantageous. Keep in mind, you have to be
(08:40):
keeping receipts. You have to be logging these because you're
going to have to identify each one of those particular
deductions and you're going to have to have receipts for
those deductions. But in some cases, there are deductions that
you probably are not taking advantage of because you see
the amount of the standard deduction and you say, oh, well,
(09:03):
this is simple. And even some of your tax preparers
are probably doing the same thing, or you're using one
of those tax preparation software, it'll probably advise you to
just take the standard deduction. But if you know that
you've had additional expenses throughout the year or something unusual,
(09:24):
maybe you invested in a stock, and it would you
know the wrong direction for you. That would be something
that you would be able to deduct because that was
an investment that you lost on, But you cannot get
that benefit if you're taking this standard deduction. And so
there are a lot of different deductions. I'm going to
(09:46):
try to go through and hit some of the key ones,
but that's something to consider at least compare the two
to find out which one is the best direction to go.
Itemized deductions, the you know instead of the stand reduction
can itemize certain expenses and it's on shows up on
(10:11):
your tax return. It's a different schedule and it will
reduce your AGI if the total is greater than the
standard deduction. Here are some deductions. Retirement contributions contributions to
retirement plan your four one K your IR are often
(10:34):
tax deductible or tax deferred, meaning they reduce your current
taxable income so you're able to deduct that. And then
when you do get to retirement, when you generally have
a lower tax liability rate than as you are pulling
from your four oh one K, then it becomes a
(10:55):
taxable amount. But you may even have very you know,
strong deductible items at that time also, so it will
reduce your liability. This will result in significant tax savings
and help build your future security. Educator expenses eligible educators, teachers,
(11:21):
counselors principles can deduct a limited amount of unreimburse expenses
for classroom supplies, books, and computer equipment. So if you
have one of those professions, please keep track of the expenses,
because I hear all the time that teachers are having
to pay for supplies or pay for different things for
(11:44):
their class because there's not enough budget or it's not
part of the curriculum, or they're wanting to take a
trip or something like that. They try to raise money,
they fall short. Your using your own personal financial then
you're able to deduct this as if you are itemizing
(12:09):
as I said before, if you are itemizing these expenses,
you're able to deduct that, and that can result in
significant tax savings. Individuals who use a portion of their
home exclusively and regularly for business purposes may be able
(12:31):
to deduct associated expenses such as percentage of mortgage interests, rent, utilities, repairs,
different things like that. And it's based on a square footage.
It's something that a lot of people have taken advantage
for specific irs. Rules apply to eligibility and the calculation,
(12:54):
So you will want to do some research on that
particular deduction to find out, you know, if it will
benefit you based on the calculation, is it really going
to be enough. You just can't go in there and say, oh,
I'm just going to put this them out down there
and think you can deduct. There are rules. You have
to know the rules and check that out. Business expenses
(13:16):
self employed individuals can deduct a wide range of business expenses,
including advertising, utilities, health insurance premiums, business travel, and interest
on business loans. You need proper documentation, though it is required.
(13:38):
Charitable contributions donations to qualified charitable organizations can be deducted
from the taxable income. And during these days and times
when there's so many in need, I know many are
contributing to non profit organizations that are helping to provide food,
(14:03):
helping to prevent homelessness, and helping to help those that
are disabled, those that are veterans, different things like that.
If you're making contributions, you should have some type of
schedule that shows how much that you have contributed, how
(14:25):
much you have paid. A lot of these organizations that
you send to they will send you a report at
the end of the year as to how much your
contribution was. But just in case they don't keep track
of that information and whether it's a check or however
you contributed, have those receipts so that you have documentation
(14:50):
for that medical expense, you may be able to deduct
unreimbursed medical and dental expenses that exceed a certain percentage
of your adjusted gross income. This is an itemized in deduction,
(15:10):
and there's a threshold that you need to meet to
make sure that you're able to deduct those expenses. So
it doesn't happen automatically. There is a calculation that helps
you determine whether or not that is deductible for you.
Dependent care benefits tax benefits are available for expenses related
(15:32):
to the care of dependence, such as a child or
dependent adult. To allow taxpayers to work or look for
work often takes form of a tax credit, which directly
reduces your tax liability. There are a lot of tax
(15:54):
deductions that are available, and you want to be able
to take advantage of all of those. Some of the
other ways of reducing your liability is to have the
opportunity to take advantage of some of the tax credits.
(16:16):
The tax credits that are out there, for instance, one
hundred percent bonus depreciation. Those that have a business where
you have assets and you have equipment and things like that,
being able to qualify for deductions for depreciation, they say
(16:41):
for twenty twenty five is being made permanent for qualified
property placed in service after January nineteenth of twenty twenty five,
and can be used on both new and use equipment.
So if you're a sole proprietor and you have an office,
or you have your c corps or a partnership, or
you have a outside office and you have office equipment,
(17:06):
and you have computer equipment, and you have machinery equipment
and things like that, you'll get the actual cost of
that item itself, and you look for the depreciation schedule
and the irs to find out exactly at what rates
(17:26):
you can depreciate those items. You can't make them up.
They do. There are schedules that let you know exactly
you know how long a computer lasts, and that's how
many years you're able to depreciate it. So you divide
up in months, and this is how many You know,
how much you get to depreciate for those particular items
(17:50):
that you have purchased, and so using that as a
deduction or a credit for your tax liability is very beneficial.
I believe most companies out there are utilizing the depreciation
schedules and taking depreciation instead of expensing the full amount.
(18:14):
Expensing the full amount is going to really have a
detrimental effect on your revenue. And not only that when
the IRS sees this, they're also going to see that
this particular item should have been depreciated over time. So
you can't just expense things just to lower your tax
liability and think that it's going to be acceptable. The
(18:37):
laws the rules are set that you have to depreciate
these items over a period of time, but it does
create a benefit and lowest your tax expense. Section one
seventy nine expensing. The maximum deduction has increased to two
(18:57):
point five million for twenty two five, with a phase
out threshold a four million for qualified equipment purchases. Qualified
business income QBI deduction. The twenty percent deduction for eligible
pass through businesses has been made permanent.
Speaker 1 (19:19):
Yay.
Speaker 3 (19:20):
Phase out thresholds were also expanded with an added minimum
deduction of four hundred for those with at least one
thousand dollars in qualified business income. So that's a new
law that's there, and it's something that you can take
advantage of. Research and experimental expenditures domestic r and costs
(19:48):
for twenty twenty four and beyond are now immediately deductible
instead of being amortized. That is a huge benefit to
you and those that have been doing research or experimental
spending money for experimental things. I notice a lot of
new entrepreneurs are out there. They're creating, you know, these
(20:11):
AI tools they're creating, you know, a lot of other
tools that are out there. The equipment, the research, the expenses.
Instead of it being depreciated over time, you are now
able to immediately deduct all of it instead of advertizing.
(20:32):
Amortization is just like depreciation. You it has a set
period of time that you can expense it off. But
now you were able to expense your research and development
and experimental things, you can deduct that. So keep track
of those expenses, keep track of that time that's being
(20:54):
spent and all these different things, because those are deductible
expenses in full and will reduce your tax liability significantly.
And so you want to take advantage of that, and
it's something that you definitely want to do. Work Opportunity
tax credit Businesses that hire employees from certain target groups,
(21:16):
such as veterans or long term unemployed individuals, can receive
a tax credit of up to ninety six hundred dollars
per qualified employee. So if you are an organization a business,
a company, a sober pritorship, a partnership, whatever, and you
(21:38):
are hiring people that have been unemployed for a long
period of time, or they're veterans that have returned and
they're looking for work, or someone that is disabled and
they're looking for work. When you hire them, you not
only you get an opportunity to deduct an extra ninety
(22:02):
six hundred dollars per qualified employee. So not only are
you getting a good worker, but you are getting a
tax benefit for that worker, and you're also helping to
build up their life, giving them purpose, giving them opportunity
to get back on their feet. So keep this in
(22:23):
mind when you're thinking about hiring. If you haven't done
it in twenty twenty five, twenty twenty six is a
new year. There are a lot of people that are
unemployed at this time. If you're thinking about hiring, and
you're thinking about even seniors are coming out of retirement
and going back to work, you're thinking about hiring someone,
(22:46):
consider those that might be in one of these specific groups,
and you will not only have a good worker, but
you also have that tax benefit. So that's something to
consider when you're thinking about lowering your taxable rate Small
Business Healthcare tax Credit. Eligible small employers that pay at
(23:09):
least fifty percent of employees health insurance premiums may qualify
for a credit out of up to fifty percent of
those premiums. That's another benefit that's happening, and it's great
if you're able to if you're large enough or you've
come to the point where you are able to offer
(23:31):
them healthcare health benefits, you're able to deduct that expense
and lower your taxable income for your organization, for your
company by providing healthcare for your employees and getting up
to fifty percent of that premium deducted. A credit for
(23:54):
employer provided childcare, Now, that is a benefit that would
really be great for a lot of people who want
to work, but it's difficult for them to work because
of the cost of childcare. A credit for employer provided childcare,
a tax credit is available for businesses that provide childcare
(24:16):
services for their employees. So you're going to get a credit,
a deduction from your taxable income for providing payment, or
providing services, or providing reimbursement or whatever for your employee.
(24:39):
Ease childcare and a lot of a lot of single
parents out there it's very difficult for them, especially if
they're not living near home, or they're not living near
a friend or something like that, and they can't afford
they're just now starting back to work, they can't afford
(25:01):
the childcare, so many of them are still at home.
You may be doing small jobs, odd jobs, but not
being able to actually get into a career or establish
themselves because of the cost of childcare. So this will
be a way of helping some of the people that
(25:22):
are unemployed that are wanting to come to work or
needing to come to work or to meet qualifications for
their snap and they need to be able to get childcare.
If you're able to provide childcare services for them, or
(25:44):
you're paying those premiums for them or whatever, then that
is a credit that gets deducted from your taxable income.
Energy efficiency incentives. Businesses making eco friendly upgrades such a
as insulation or HVAC systems may qualify for credits extended
(26:07):
by the Inflation Reduction Act. So if you're involved in
energy efficiency in whatever manner, you're going to get a
deduction for the type of business that you're in and
the type of work that you are involved. And here
(26:27):
are some other common deductible business expenses. Of course we
should know all of these, but I'm going to go
through them just in case you aren't aware. So your
common business deductions, and most of them, if you're using
a business software, they show up as an expense on
(26:48):
your financial system, and most of those expenses are deductible
on your taxes. But let's go through them to make
sure you understand. Salaries and wages. The cost of paying
your employees, including salaries, wages, bonuses, and benefits, is fully
(27:10):
completely deductible as an expense, lowering the profit, lowering the
taxable income for your organization. Rent payments for business property
including office space storage units is one tax deductible. And
(27:33):
there's even if you are leasing. You're leasing a building,
maybe you have a warehouse that you use and for
the supply chain, and you have food or different items
delivered and it stays in that warehouse until it is
(27:54):
actually picked up and delivered or sent out. Well, that
lease or that rent that is deductible. There are a
lot of different types of rents that are out there.
Check your business, find out if you are paying any
rents for anything, and know that those are one deductible
(28:17):
utilities expenses for your electricity, your gas, your water, the internet,
the phone, telecommunications are deductible with deductions even for a
home office s based usage. So if you have an
office at home, you're a sole proprietor, you're working from home,
(28:40):
keep track of your utilities, keep track of all of
those expenses that you're paying now, because they are deductible
based on your square footage of your office space, not
one percent if you are a sole proprietor and you
have a home base office. Other than that, it's one
hundred percent deduction for other companies that are outside of
(29:04):
the home and in a building or what office space
or whatever. Insurance premiums for most types of business insurance,
such as liability insurance, which is protecting against someone falling
or protecting against you know, you have a consulting firm,
protecting against you know, someone you know may maybe airrors
(29:30):
and omission things like that. So these premiums are business
insurance such as liability, property and professional insurance is one
hundred percent deductible, So don't be afraid to provide or
get your insurances or make sure that your business is covered,
(29:52):
covered from liabilities, covered from potential harm, covered from potential
loss lawsuits. Make sure your business is protected by some
type of liability insurance. Travel and meals. Business travel expenses
(30:14):
are one hundred percent deductible, while meals are generally fifty
percent deductible. So and then you really need to make
sure you're keeping the receipts on those because if you
are audited, you're you're needing to prove that you did travel,
you did spend meals, you it was for you. You're
(30:36):
not paying for your friends showing up along the beach,
but you you actually have a business travel where you
conducted business, document the type of business. And I'm not
saying you can't go to the beach. You can have
a meeting, you know, at the beach somewhere, at a
(30:57):
resort somewhere, but you need to die what you've discussed
as business so that it does not end up getting
reversed from your tax return. Marketing and advertising costs for campaigns, flyers, sponsorships,
(31:18):
and other promotional activities are fully deductible. So if you're
hesitating in marketing or advertising, everyone's out there, they're shopping,
but they're not maybe going into the brick and mortar
so much anymore but they are online. You need to
make yourself available. You need to make yourself so that
(31:43):
you're visible, and that might require some help from a
company that provides marketing, digital marketing, digital advertising so that
your product can be seen, your product can appear in
(32:03):
a very nice ways so that it actually attracts and
draws that potential customer in gives them that feeling that
they have to have that particular product. And you got
to keep in mind you're competing with millions now because
everybody is online. So you need to make sure that
(32:24):
you have your marketing advertising. And if you're thinking about
the costs, think about that that cost is going to
be deductible, and if that cost is bringing you business,
it's worth the expense. And that expense is deductible, you
really have been benefited a lot. Legal and professional fees.
Necessary fees for legal and accounting services are deductible one
(32:50):
hundred percent. And if I never say anything else, I
always will say you need to talk with a professional
about legal issues and your accounting. Seek out those professional services.
If you do not have someone in your organization already hired,
because their job is to make sure that you're protected,
(33:13):
that you're meeting all of the rules and regulations, that
you are in compliance with all the laws, especially in
your accounting. You want to make sure you're compliant with
all the regulatory requirements with gap generally accepted accounting principles,
that you're aware of any new laws that have come
(33:34):
in that will affect your business, affect your employees. So
you want to have those services. You want to be
able to have services that understand your industry, understand your business,
understand your forecast. Because you did a budget, right, they
(33:55):
understand where you're going and so they're going to advise
you the best way possible. And also there's a lot
because of maybe AI and different things, there's a lot
of infringement that's taking place. You may want to have
legal counsel there to advise you of how to protect
your particular product, your particular advertising of your product, making
(34:18):
sure that someone is not creating your product and out
selling it and you're not aware of it. So you
going to have that legal and professional services out there.
But they are deductible interests on your loans, interests paid
on business loans or credit cards. It's seductible subject to
(34:39):
limits for certain businesses. So it's going to require some
research as to what types of loans the interest is deductible,
and what kind of cards. How these cards are being used.
Is in a business cards only solely, then it's not
going to be a problem. But when you start mixing
(35:00):
that card with a personal card, and I highly recommend
that if you're going to be deducting the interest on
those cards, you need to have a separate business credit
card that is used only for business transactions and no
other type of spending than you would be safe your
(35:22):
home office deduction. For most using a dedicated home office,
a deduction can be calculated using a simplified method by
tracking actual expenses, and you're going to want, Like I said,
not only are you going to want those expenses that
you're tracking, but you're going to want to have hard
(35:45):
copies of that information just in case you do get audited.
So one other thing is changing your business entity can
provide significant tax benefits, but it's equally crucial to understand
future implications. Each structure has its pros and its cons
(36:09):
and what works for one business may not work for another.
So all of these things that I've mentioned, and there's
so much more. Like I said, there's so much more
that's out there, and you need to talk with a
tax professional, but you need to understand just because this
company functions this way, it is not a one size
(36:29):
fits all. There may be some idiosyncrasies that you are
not aware of that you need to make yourself aware of,
or your accountant needs to be aware of. Specifically, a
tax accountant. Every accountant does not necessarily understand all of
the tax laws. Because accounting is a profession where it
(36:52):
has so many vast areas that you work in, you
don't necessarily and have the opportunity to be involved in tax.
So you have a tax department. Most companies do, and
that's the only thing they concentrate on is tax and
(37:16):
making sure they can reduce the tax liability. They're constantly
we're researching for new changes in the laws, looking for
new benefits, new ways to be able to reduce the liability.
So they're they're constantly doing nothing but research. And like
I said, there's hundreds and hundreds and hundreds of codes
(37:37):
that are out there and searching through them, understanding them
is a totally different situation. So just because you go
and read them, you might read them, but you don't
understand how to use it because it's connected to other
information that it is not so easily reconnizable when you're
(38:01):
reading that particular code. So I would definitely advise you
to always always be looking for a tax professional. I'm
not trying to give you financial advice. What I'm trying
to do is trigger your mind enough that you become
curious to find out am I getting the best that
(38:21):
I need for my corporation, for my escorp, for my partnership,
for my LLC, for my sole proprietorship. Are the right
questions being asked to be to see if I am
taking advantage of all of the different codes that are
out there. Like I said, there's so many other codes
(38:44):
that are out there, but your tax account that needs
to be informed, needs to be on top of it.
And what you need to do is maybe ask the question,
am I getting all of the benefits that I can
take at this time? If not, can you research and
find out what other benefits are available to me? You
(39:07):
know the one thing I want to say, I'll say
it now because I don't want to forget. I'm not
trying to give you financial advice, but I'm trying to
give you enough information to make you go and take
a step like changing your legal entity status is a
(39:28):
big decision and should not be based solely on tax considerations.
It can impact your business in many ways, including liability
control and ability to raise funds. You must consult a
license advisor or tax professional before making such decisions. In fact,
(39:51):
you should always be talking to a tax professional, someone
that that is their background, who is very knowledgeable about
all of the tax code and all of the benefits
and all of the credits and all of the deductions,
and also all of the pros and cons and pitfalls,
(40:13):
because as I said, all of them differ. They're not
as the same. It's not a one size fits all.
Every tax code out there does not apply to every
business or organization, and so you need to know how
they are divided, how they're broken down, so that your
(40:33):
particular entity, however you set your organization up, you get
the complete benefits for you at that particular status. But
what would it look like if you change from a
sole proprietorship to an LLC? What would it look like
(40:53):
if you became a partnership and collaborated with someone else,
What would it look like if you incorporated, if you're
at the point or the size or your dreams to expand,
or at the point where you need to become a corporation,
(41:13):
because maybe not making some of those decisions, not making
those moves are taking far more from you than what
you actually realize. And so I know tax isn't on
a pretty conversation or is even something you want to
(41:34):
hear about until April, but it's something that you have
to know about before then, because you have to prepare.
You have to get the documentation some things. If you're
changing entity, you've got a file to change that entity,
and it takes a little while to get that filing
(41:54):
done and then to get the confirmation from the IRS
that you have changed your status. If you're going to
change your status, I would say you do it at
the beginning of a year, not in the middle of
the year, because now you've got two types of taxing
(42:15):
entities there that you need to file, and it can
end up causing confusion as to what you need to
do and what you need to be breaking out and
what kinds of things that you need to be concentrating on.
So it's really important to think through this and it's
something you need to plan for you. Just don't jump
up and say, oop, it's almost tax time, let me
(42:36):
go start doing all these changes. No, you shouldn't because
you need to be thinking through. Yes, the tax liability
might be high, but there's consequences in not doing it
at the right time. This is why I'm emphasizing talk
to a tax professional. Find one in your area, meet
(42:58):
with them, search and make sure that they really are
and their reputation is that they are successful in helping
you to reduce your tax liability. Research, get references, talk
to clients that they've had to make sure that they
(43:20):
are legitimate, that there's someone that you can trust, there's
someone that you can depend on their advice. But it
is something that I would recommend that you consider looking
at as you go into the beginning of twenty twenty six.
(43:41):
You may be pretty late to be thinking about making
some changes in twenty twenty five, but I will be
four twenty twenty five. Look to see what particular deductions
are permanent and you can take one hundred percent and
take advantage of those particular laws because you you are
entitled for twenty twenty five, but for twenty twenty six.
(44:07):
I think it's a good time to start thinking about
how can I stop leaving money on the table, How
can I stop giving away so much money, you know
for taxes. Surely there is a benefit to me getting
this business and keeping more money in my pocket. But
talk with your tax professionals. Like I said, find one
(44:30):
that is reputable in your area and that can sit
down with you, and please do some research to make
sure that the person handing you this business card has
the references and the professionalism and the ability to be
(44:56):
able to look at your particular business. One of the
things I've always want to, you know, coster you on
for those that you are thinking about looking for a
tax professional. Just like there's different industries, there are different
types of tax professionals. If you were in manufacturing, you
(45:18):
don't want someone who their customers are probably in the
food industry, or they're in garment where or different things
like that. You're going to want someone who understands manufacturing,
understands the manufacturing site, understands the plant, understands the equipment
(45:43):
in the plant, understands the processes, understands the timing understands.
You know, all of the different things in the different ways.
The least, the least the buybacks and all of these
different things. You're going to want someone who is informed
in in your particular industry. It may take a little
(46:03):
while to research that, but I would research that. Just
because they say they're a tax professional and does not
mean they're going to understand everything, because they need to
understand your business first. They need to understand your industry first.
They need to understand your goals and like I said,
your forecast where you're trying to go, because we're not
(46:26):
dealing with what's in the past, we're dealing with what's
going to be in the future. But since I said that,
you may want to even have them look at opportunities
you have up to five years. You may want to
have them checked to see that you have received all
of the benefits and they were on your preparation of
(46:50):
your tax return, and so that you are not leaving
money on the table. You may have an opportunity to
do a revise return and be able to take care
of benefits that were never considered in the previous filings
and get that money back. So I'm saying this to
(47:15):
just advise you to consider the professionalism of the tax consultant,
but make sure they're in the industry that you work in,
so that you're talking the same language when you are
talking about your business and what your business is doing,
and the kind of expenses your business has and the
(47:38):
kind of expenses you plan on incurring because you're expanding,
or you've spent a lot of time during research and
experimental things on your new product, or you know, whatever
the things are, You're going to be prepared and understand
(47:59):
exactly what going on, So seek them out and look
for them. I would just begin by looking for tax professionals,
and then from there I would start considering then looking
for and tell them I would like to have some
references so that you can actually contact those people. And
(48:23):
then there's a lot of information out there in the
data oh zone, and you can get any one of
those research tools out there, Gemini, Chat, g GBT, there's
a lot of them out there. Get one of them
and begin to research and find out. You can look,
(48:47):
like I said, ask for a customer list of those
they've done business with. If they're hesitant, you may want
to keep moving because if they've done business for them,
they should have a reputation of being excellent. And if so,
then that someone that you want to be able to
(49:11):
depend on making sure you have the right tax set up,
entity and everything. I hope you've enjoyed the conversation is
just sitting down chatting with you and just hopefully triggering
your next step, and that is getting help so that
(49:33):
you are not paying as much as you have been
and you find out what these secret codes are that
can benefit you. I thank you for joining A Sharp Outlook.
We're here every Monday at eleven am Eastern Time in
eight am Pacific time. I enjoy talking with you and
(49:58):
sharing knowledge with you, and I hope you enjoy receiving it.
Until next time, Stay informed.
Speaker 2 (50:10):
I want to thank you for joining us on a
Sharp Outlook. We have been informed and energized to take
the next steps. We have posted links to websites and
videos to learn more on today's topic. Please join us
again next week for another thought provoking conversation right here
on key for HD radio and.
Speaker 3 (50:31):
Talk for TV.
Speaker 2 (50:33):
Listen to the podcast on all the podcast apps, and
until next week, stay informed,
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