Business Tax & Accounting Secrets You Don’t Want To Miss

Business Tax & Accounting Secrets You Don't Wan't To Miss

Tim Fitzpatrick:

Welcome to the Rialto marketing podcast. I'm your host, Tim Fitzpatrick. If you are a business owner or entrepreneur looking to have a thriving business you've come to the right place. We cover the best marketing, growth, and business tips sprinkled with a little bit of mindset to keep you motivated.

Tim Fitzpatrick:

Business, tax, and accounting secrets you do not want to miss. That is what we're going to get into today. I am Tim Fitzpatrick with Rialto marketing. Thank you so much for tuning in. I am really excited to have with me today Jamie O'Kane, with JEO Kane CPA. Jamie, thank you so much for being here.

Jamie O'Kane:

Thanks for having me.

Tim Fitzpatrick:

Absolutely, I always enjoy our conversations. I get a ton of value out of it. I always try to give a bunch of value in return, so I hope you're feeling that.

Jamie O'Kane:

Yeah, oh yeah. You know that's my thing, we do value and we try to help business owners.

Tim Fitzpatrick:

That's it. Now before we get into all this tax and accounting stuff, which for those of us that don't know it really well, sometimes it can put us to sleep, but it is a super important part of our businesses. So before we get into that, just tell us a little bit about you, what you do, how you help business owners?

Jamie O'Kane:

Yeah, so I've had my own firm for about seven or eight years. I was the tax manager in a medium-sized firm here in the tech center before that. We help small business owners, we do advanced tax planning, which means that we really dig into the nitty-gritty of tax puzzles, you know taxes aren't five minus three equals two. It's more like 12 minus 110 goals. You know there's a lot of moving pieces for every tax situation. So what we do is we dig into those puzzles. We move pieces around in a way that makes sense for the client. And we're looking for cash savings. We're looking for wealth building. We want to get our clients to their end game. And a lot of the time we can do that through cash savings so they can grow their businesses.

Tim Fitzpatrick:

Awesome, I love it. So I think the first thing that a lot of us struggle with the right, it's hit or miss, is we got to find a good accountant first to help guide us through this process right?

Jamie O'Kane:

Yeah.

Tim Fitzpatrick:

I don't, you know I'm a marketer, I'm not a CPA, right?

Jamie O'Kane:

Right.

Tim Fitzpatrick:

We need to hire this stuff out, but we need to make sure that we're getting good advice. So what steps can we take as business owners to help us find a good accountant?

Jamie O'Kane:

I think the big thing is understanding kind of the differences, so I'm going to go, you can stop me at any time, I could talk about this all day because it's an important topic that people don't understand.

Tim Fitzpatrick:

I agree.

Jamie O'Kane:

There're different designations, right? So we have CPAs. So we're certified public accountants. We're generally regulated through our States. We all have accounting degrees, we have to, to be CPAs. And then most of us have some type of working relationship or have worked in a CPA firm. They’re some kind of hours requirements depending on your state. So we're state-regulated. So if you go to somebody and they say they're a CPA, make sure you're checking on the state website that they actually are a CPA.

Tim Fitzpatrick:

Okay.

Jamie O'Kane:

I have had too many people will be like, well my CPA does my payroll. And then the CPA walked away with their payroll dollars and they're not actually CPAs. So make sure that you understand the different designations. The other big one is an enrolled agent. Enrolled agents are tax professionals and they're regulated through the IRS. You can go to the IRS website and find them. The other thing you can do is you can go to the IRS website and what they have is called a practitioner tax ID number directory. If you have if you're looking for a tax person and somebody who does tax returns, you want to make sure that they're properly registered through the P10 registry. So those are a couple of ways to just kind of make sure that the person you're talking to is the person they say they are.

Tim Fitzpatrick:

Okay, I like it.

Jamie O'Kane:

And to kind of understand the designations, we all do different things.

Tim Fitzpatrick:

Yes.

Jamie O'Kane:

I have people that have tried to try to talk to me about nonprofits all the time. I don't do nonprofits. I have people wanting us to do their payroll. We don't do payroll. There are so many different places and things that we can do as accountants. There's plenty of auditors out there who don't know how to do taxes.

Tim Fitzpatrick:

Right.

Jamie O'Kane:

So know what you're looking for and know what services you want.

Tim Fitzpatrick:

Are there, so I like that, right? You have to in order to find somebody that's going to be a good fit you have to know what you want.

Jamie O'Kane:

Right.

Tim Fitzpatrick:

What do you want to accomplish?

Jamie O'Kane:

Right.

Tim Fitzpatrick:

Are there a few types of questions that we might want to ask once we've already done that research and we know, hey this person is legit.

Jamie O'Kane:

Yeah. So I want to talk real fast about what are you looking for? So if you just want tax returns then don't try to find somebody who is a relationship and knowledge-based like our firm. I get a lot of people that are just like, well I just want to target tax returns. And I'm like, we're just not the people for you. We sell knowledge. And on the flip side of that, if you're looking for somebody who just does tax returns and then expecting them to have a relationship with you, or answer your questions, or be responsive, all you paid for was a tax return.

Tim Fitzpatrick:

Right.

Jamie O'Kane:

Right?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

And they might not do that. They might not do the planning. They might not want to be responsive. They might just do tax returns from January to April, and are gone the rest of the year.

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

So know what you're looking for and also know what you're going to be paying for. Right, if you just pay for a hundred dollars tax return, that's all you're going to get.

Tim Fitzpatrick:

Right. Yeah, so part of the problem we may be having in finding a good accountant is we're not setting good expectations or proper expectations upfront.

Jamie O'Kane:

Yeah, and not knowing or saying, you know I have people all the time that are like my CPA just isn't communicative, like they don't talk to me ever. And you know I send them questions and they never respond. And I'm like, well do you have like a relationship with them? Do they bill on recurring? That's all we do. They're like, oh well, no, I just talk to them once a year. Well, that's what you paid for.

Tim Fitzpatrick:

Yeah. So you're getting what you paid for, but you didn't set the proper expectation upfront.

Jamie O'Kane:

Exactly. So if you want somebody that plans for you, if you want somebody that's communicative with you, that's there for you, that is a partner in your business, then you need to find that person. So those are the people that are going to be more knowledge-based or selling knowledge, not products.

Tim Fitzpatrick:

Right. Now most of those people though are still doing tax returns, right?

Jamie O'Kane:

Yeah, I mean we kind of have to.

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

It's kind of required. We have to do the backside compliance, especially with the planning that we do. We want compliance so that we can make sure things are done properly.

Tim Fitzpatrick:

Got it. Okay, so are there, once we know those expectations what questions do we ask?

Jamie O'Kane:

You know I think a lot of it is, you know how do you work?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

A lot of people just assume that they can just send me their tax stuff, nope, we start with planning. You know you want to understand how that person works. You know generally people they're just like just tax returns. So some good questions are, what is your turnaround on emails and phone calls?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

Do you include those in your pricing? You know I want interim planning every year, is that something that you do? And do you do actual planning or do you do productions? Because those are two different things. Will you help me grow my business? Are you available for talking about financials and budget, and project productions and things like that?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

Do you consider yourself a numbers person? Not all tax people are numbers people, right?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

You can't hand a bunch of, I know a bunch of tax people you can't hand a spreadsheet or a QuickBooks file to, that are just really good, like all they do is tax returns. They don't understand their way around a QuickBooks file.

Tim Fitzpatrick:

Okay.

Jamie O'Kane:

So understanding that they're going to work in a way that works for you too. So are you in QuickBooks desktop? We don't work with the desktop. We only work with online.

Tim Fitzpatrick:

Yup.

Jamie O'Kane:

So making sure that the tools they use also are something that makes sense for you. And if you want a virtual CPA, if you want somebody who works virtually with you, which a lot of people do now...

Tim Fitzpatrick:

Yes.

Jamie O'Kane:

... make sure that they're able to do that. You know are they across town and you have to come to sit in their office? Or do they have secure portal situations for you?

Tim Fitzpatrick:

Yeah, got it. Okay, I love it. What about, let's talk about taxes, death, and taxes, right? The only sure thing in life. What are the most common tax mistakes that you see business owners making?

Jamie O'Kane:

I think the biggest one is they're not in a proper entity type, that's the biggest one. Or they might be in the proper entity type, but they don't understand the compliance that needs to happen with those entity types. One of the biggest things that's kind of come to the forefront with all the PPP loans, as S-Corps and their owners not taking reasonable compensation, which is a requirement, but people don't understand that requirement.

Tim Fitzpatrick:

Got it.

Jamie O'Kane:

So either they were told by their hairdresser’s dogs' brothers, uncle to be an S-corp, which honestly happens. And they're not taking a proper salary and now they can't get PPP loans, because they still have to payroll for S corporations, or their CPA just decided they should be an S-corp and never communicated the requirements.

Tim Fitzpatrick:

So that really points to a really key thing. So entity selection type is really, really important.

Jamie O'Kane:

It's very important.

Tim Fitzpatrick:

I think there are a lot of people like you said that they're making that decision without talking to their CPA, because their attorney may be drawing up the documents. So if I'm hearing you correctly, when business owners are doing the setup initially it's important to have a conversation with not only your attorney but your CPA as well, to make sure that you're selecting the right entity type for what you're trying to do?

Jamie O'Kane:

Yeah. I mean I have clients who would they save taxes in an S-corp? Yes. Do they want to max their individual? Yes. One of those things is more important to them.

Tim Fitzpatrick:

Yes.

Jamie O'Kane:

Right?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

So there're different ways that we can structure entities that are, you know that brings you to your goals.

Tim Fitzpatrick:

Right.

Jamie O'Kane:

And so I have a lot of people come to me and they say, oh I want to save taxes. And I say, but why? Because I can save you taxes, but what are you going to do with that? Do you know what are your priority for those dollars? And sometimes there's two or three, you know is it retirement? Is it growing your business? Is it hiring somebody? Is it, you know what is it? But saving taxes isn't a goal, using that money for something to move your life forward is your goal.

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

That's kind of what we like to suss out is, what do you want to do with that money? Otherwise, you're not going to do the work.

Tim Fitzpatrick:

Well, and I can tell you firsthand changing from one entity type to another can be very painful and it can be expensive.

Jamie O'Kane:

Shouldn't be.

Tim Fitzpatrick:

Man, we had to do it for one of the first companies I was a partner in, it was really one of those things where it was kind of an unforeseen thing, but it was painful and it cost a lot of money. So yeah, knowing.

Jamie O'Kane:

They might cost money, but usually, there're savings on the back end of that.

Tim Fitzpatrick:

Yes.

Jamie O'Kane:

You know right?

Tim Fitzpatrick:

Yes.

Jamie O'Kane:

So I think the other thing to understand is tax savings costs money.

Tim Fitzpatrick:

Yes.

Jamie O'Kane:

It just does.

Tim Fitzpatrick:

Right.

Jamie O'Kane:

Right?

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

So if we have to move to a different entity and we have to run payroll, and we have to do stuff it's going to cost money, but what are you saving on the backend of that?

Tim Fitzpatrick:

Yeah. So I look at that as an investment.

Jamie O'Kane:

Mm-hmm (affirmative) it is. It's an investment.

Tim Fitzpatrick:

It's an investment up front to get a return on the backend.

Jamie O'Kane:

Absolutely.

Tim Fitzpatrick:

Yeah, are there.

Jamie O'Kane:

Yeah, we had, I had somebody who I did a tax plan for this last year, and I think he ended up having to pay out 40 grand. We saved him 40 grand though. He wanted it to be like zero cash out, and I'm like, that's just not how this works.

Tim Fitzpatrick:

Yeah, it's not going to happen.

Jamie O'Kane:

It's not going to happen. And then also like are we doing pretax savings or are we doing post-tax savings? So that's where we work with your financial advisors to say, what does the portfolio need?

Tim Fitzpatrick:

Right.

Jamie O'Kane:

If your big thing is retirement, then we're like, well what does the portfolio need then? You know are we doing post-tax savings, do you want pre-tax savings? Work together to make sure that all works.

Tim Fitzpatrick:

Okay, so proper entity selection super important and a common mistake. Is there another common mistake you see people making?

Jamie O'Kane:

Not having their books done.

Tim Fitzpatrick:

Okay.

Jamie O'Kane:

It's hard to plan when your books aren't done.

Tim Fitzpatrick:

Right.

Jamie O'Kane:

You know it's hard to know what your taxes are going to be. It's hard to estimate. We can't do anything without proper books.

Tim Fitzpatrick:

Yeah, it's kind of like a customer relationship management system, the data that is in there is only good as what you put into it.

Jamie O'Kane:

Yeah, I think, and I guess really the other thing is prescription without a diagnosis, a lot of people will say, you should be this, well do they have the ability to diagnose your situation? You know and we work with women who own veterinary and dental clinics, so I'm always just like, guys got to diagnosis first, or diagnose before the prescription. It's malpractice, a prescription without diagnosis is malpractice. So, anybody who tells you without diagnosing anything that they think you should be, I would run. If there said, hey you should be a C-Corp, I would run because they haven't looked at it.

Tim Fitzpatrick:

Yeah, that's super, that's a really important point because you know certainly you can treat the symptoms, but if you don't know the underlying cause you're always going to have those symptoms, right? If you want to eliminate them completely you need to identify the root cause first.

Jamie O'Kane:

Yeah, like what is going on in your situation? And you know a lot of the time, and it really is very familiar, like people don't understand what their symptoms are. Like if you tell me you're paying too much tax, the next thing I'm going to ask you is, what's your effective tax rate?

Tim Fitzpatrick:

How many people can answer that question?

Jamie O'Kane:

Very, very few.

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

Very few. And that's where the education kind of comes in, right?

Tim Fitzpatrick:

Right.

Jamie O'Kane:

Even if somebody is like, oh my pain point is I pay too much tax. My next question is, well what's your effective tax rate? And they're like, oh I don't know. And I'm like, well I just did the math and it's like 15%. And they're like, oh.

Tim Fitzpatrick:

Oh, it's not quite as bad as I thought.

Jamie O'Kane:

Yeah, right. Can we still work with that? Yeah, probably.

Tim Fitzpatrick:

Yeah, I love that. So with taxes again, let's jump into some of the commonly overlooked ways that business owners can save money through proper tax planning. I think tax planning is often overlooked right?

Jamie O'Kane:

Yeah.

Tim Fitzpatrick:

It's just I need my taxes done. I need my books done. But there are a lot of things that you can do with proper tax planning.

Jamie O'Kane:

Yeah. And I think so you know what I kind of want to talk about is lazy tax planning real fast.

Tim Fitzpatrick:

Okay, yeah absolutely.

Jamie O'Kane:

Purchasing vehicles you don't need on December 31st is lazy tax planning. Buying equipment you don't need that it's not going to create efficiencies in your business on December 31st, also lazy tax planning. If you need those things we can work around it. But some of my favorites are, you know income shifting, can we pay our kids? Can we, you know look at ways to utilize them in our businesses? That's a really good one. You know pretax retirement is always a good one. How do we get as much money to the owners as possible? C-Corps, a lot of people are very afraid of C-Corps. We're looking at a 21% flat rate right now for their taxes. Do we think that might change with the next administration? Potentially. Nothing certain, everything's all we know is things are going to change.

Tim Fitzpatrick:

Yes. The only constant.

Jamie O'Kane:

We're just trying to keep up.

Tim Fitzpatrick:

That's right.

Jamie O'Kane:

You know utilizing the, again that goes back to the proper entity type, mixed entity types, you know maybe running part of your business out of this entity type and you're doing part of the business out of this entity type. And then I love partnerships, partnerships where maybe you have a spouse and you have some rentals and we can utilize the code for you.

Tim Fitzpatrick:

Yeah, that's interesting. I actually didn't even, I didn't know that you could run multiple entity types.

Jamie O'Kane:

Mm-hmm (affirmative) yeah absolutely.

Tim Fitzpatrick:

I had no idea. I learn something new every time I have these conversations.

Jamie O'Kane:

Yeah, I mean, I just, you know if you have a business and you have a business reason to create a business we can run different types.

Tim Fitzpatrick:

Yeah, that's fascinating.

Jamie O'Kane:

It's really.

Tim Fitzpatrick:

I also think a lot of people overlook partnerships too, because well I know it comes up oftentimes on the legal side, right?

Jamie O'Kane:

Mm-hmm (affirmative)

Tim Fitzpatrick:

Partnerships I think sometimes kind of get poo-pooed a little bit.

Jamie O'Kane:

Well, and I think the thing with partnerships is that they're just so flexible, right? Like we can do different loss allocations, we do different profit allocations. We can do passive, we can do active. We can, you know there's just so many different options with the partnership. And I also think that they just kind of, they're harder, you know if you don't have a background in partnerships and understand how they work, and how to utilize them, you know the S-Corps just easier. I prefer S-Corps, but partnerships work in a way sometimes that really saves our clients money. I just have one where we saved them almost 20 grand this year by putting them both in a partnership in a way that made sense.

Tim Fitzpatrick:

And that's what tax planning does for you.

Jamie O'Kane:

It does. And it works, because they have a business reason to have the partnership, and they're proper, you know there's a lot of compliance with a lot of this too.

Tim Fitzpatrick:

Yeah.

Jamie O'Kane:

So understanding those compliance pieces and making sure your Kosh, because I don't do anything that's illegal, but we're using the code to the advantage of our clients.

Tim Fitzpatrick:

Yep. As we should.

Jamie O'Kane:

And business owners have the moving pieces. Every time a business owner is like, well I'm a small business owner so I pay a lot of taxes. I'm just like, no, you have so many more options than the person with a W2.

Tim Fitzpatrick:

Yeah, oh that's great. So anybody that's tuning in to this, if you need help you need to reach out to Jamie, okay, she can help you avoid these common mistakes we've talked about. She can help you with your tax planning so that you can save money.

Jamie O'Kane:

The plans are important.

Tim Fitzpatrick:

I super appreciate you being here. Where else can people learn more about you?

Jamie O'Kane:

Yeah, so they can have another website? So it's jeokanecpa.com and actually Tim and I are going to be working on, we're actually pushing both of these things together in a minute.

Tim Fitzpatrick:

Yup.

Jamie O'Kane:

But you can also hit me up on our, I have a podcast with about 90 episodes now, a wide range of topics from everything, from your marketing to productivity, to really just pretty much anything, on our podcast. It's a business based podcast where you talk to business owners. We talk to people who work with business owners, and we try to just give you just some actionable steps to make your business better. It's an international podcast. I think we're in like the top 5% of downloads now.

Tim Fitzpatrick:

Very cool.

Jamie O'Kane:

It's amazing. And it's so fun. Like you were saying how fun this is for you, doing the podcast is one of my favorite things. I just love to get to know people, hear their stories, and then just give people actionable steps. Business owners live in their own space a lot of the time, but give them something to work towards.

Tim Fitzpatrick:

Yeah, I agree. I will second that if you've been thinking about doing video interviews, doing podcasts, I would highly recommend that you jump in and do it.

Jamie O'Kane:

Yeah, it's just...

Tim Fitzpatrick:

I was telling Jamie...

Jamie O'Kane:

... it's fun.

Tim Fitzpatrick:

... before we went live that I love doing this. It is so much fun. And being guest on podcasts is a ton of fun, it's a great way to get your name out there, build credibility so yeah.

Jamie O'Kane:

Yeah.

Tim Fitzpatrick:

So you guys got to check Jamie out.

Jamie O'Kane:

Better host than I am a guest.

Tim Fitzpatrick:

Yeah. I think you did a great job.

Jamie O'Kane:

Thank you, it's a skill set I didn't know I had, this hosting stuff, but it's just been so fun. You know I'm just so interested in every business owner and I think that's why it works.

Tim Fitzpatrick:

Yeah, that's awesome. Jamie, thank you for being here. Those of you that are tuning in, thank you for doing so. Again, I am Tim Fitzpatrick with Rialto Marketing. Remember marketing your business shouldn't be a challenge. All you need is a plan and till next time, take care.

Tim Fitzpatrick:

Thank you for listening to the Rialto Marketing podcast. If you'd like to learn more about us and how we help businesses grow, or simply check out the show notes, visit us on the web at www.Rialtomarketing.com. That's www.R-I-A-L-T-Omarketing.com.