Tax Strategies Pt. 1 w/ Brian Maro, CPA

Brian Maro and Stoy Hall discuss some tax strategies for business owners. They start by discussing how kids can be involved in a business and the tax benefits that come with it. According to Brian, most people don't know that their kids can help in the business and be paid a reasonable amount per hour for the work they do. This can serve as a tax write-off for the business owner and also provide a good opportunity for parents to teach their kids about the importance of work.

Stoy Hall then provides a personal example of how he involves his boys in the business by having them stack boxes or fill orders. He also mentions that the money earned from their work can be put into an investment account, which serves as a teaching moment for the kids on how to work, save, and understand the ups and downs of the stock market.

The video then moves on to discussing board retreats, where Brian and Stoy dispel the myth that a board meeting has to be in a stuffy boardroom with 12 people. According to Brian, there are other things that can be done, and the concept of a board can be approached in a different way.

Overall, the video provides some valuable insights and strategies for business owners to consider when it comes to tax planning. It highlights the importance of involving kids in the business and taking advantage of board retreats to create new opportunities for growth and success.

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Transcript

Stoy Hall 0:11

Tax, planning, holistic, which you just realized is a term in our world, holistic means over everything. You see everything, see the big picture in order to make good decisions when you do tax planning. We're talk, talking about tax prep. Everybody. We're talking about tax. Different matter. When you do tax planning, is it important for you to see everything or do you just make decisions on the little chunks that you

Brian Maro 0:38

see? No you, definitely want to see everything overall. Anybody's financial picture, tax picture, they go hand in hand. I don't think that anybody could really make a financial decision in any way, shape, or. without having some sort of effect on their taxes one way or another.

Stoy Hall 0:59

Absolutely. And I hadn't mentioned this on a, previous episode of we, we don't just get clients that we can see one little sliver and make a decision on one, because that's ably bad for us, but two, I can't really make a good decision for you if I don't see the picture. And a lot of that picture comes into to tax planning. So in, on your side of the world, how important is it for someone to do tax planning, specifically a business owner, but really anyone? How important is tax planning in the whole big picture?

Brian Maro 1:31

Oh, it's huge. Absolutely huge. If you sit back and think about what is one of the single bi biggest expenses of your year most people gravitate towards their house. But if those ratios are in line with your income, typically speaking it's taxes and taxes can be 40 sometimes even 50% for those upper people in those tax brackets. So you definitely have to look at the whole picture and tax planning as far as, as crucial as nobody wants to go at the end of the year and all of a sudden be like, Hey, I owe this large tax liability that I had no idea was gonna happen. I always stress to clients when working with them. Tax planning is the single biggest piece of their entire year. Taxes can absolutely strong arm a small business in every way, shape or form. So absolutely have to be proactive about that and make sure that you have a plan that's laid out in advance and not just once the end of the year turns, there is actually nothing you. You got a couple IRA adjustments if you want, but once the end of that calendar year flips over you're, it is what it is. You're

Stoy Hall 2:42

Stuck. So I think a big piece you said there was proactive over reactive. I believe most of the society just reacts to taxes, right? They just do tax prep. Do they do their tax returns? And at that point, like you just said, it's too late. So throughout the year, what's a good point for businesses to do for tax planning? What do you do for them, but also if they are not working with you, what is some important pieces for tax planning during.

Brian Maro 3:09

This for people that I don't work with. Let's, we'll just start with the easy one. For people that I don't work with, just keeping a handle on your income and expenses on a monthly basis is actually key. If you see that your business is making money, which is the goal of every business that we work with, ideally make sure that. You are communicating that with somebody so that you have some sort of plan. Just again, people don't even really know their, revenue and their expenses. A lot of people operate by the seat of their pants. A k a, oh, my, my bank account has money in it. So the, all the world is good, right? But that can really give you a very distorted picture of what your actual. Will look like at the end of the year. So for my clients we definitely take a proactive approach. Every business owner that I have minimum meets with me twice a year. So we will, we'll start to roll out those plans and strategies in the June, July, kind of August area where we sit down and really go through your numbers, really come up with a game plan as to what we could do here, there versus what happens for the rest of the year. So they have some options to work with and they have it in the back of. And what that does is it gives'em a full six months to, really execute that plan, decide if they really need a piece of equipment, decide if they really want to put stuff away for retirement. You have options at that point. The second time that we'll touch base is, in November right towards, not towards the end of the year, but just enough time yet where we can still make a decision either way. For the most part, we're wrapping up our plans, making sure. What we've projected out in June is what in fact happened. If it is, then we're deciding when we want to put some money here, we want to buy things here. Kind of executing those last, I wouldn't call'em last minute, but executing those fine details and then really completing the plan at that

Stoy Hall 5:09

point. So you're saying that a business owner basically by November, should know what their taxes are gonna be unless December decides to just blow up one way or another? They already know going into the next year. So it allows them. Actually plan ahead as opposed to what typically happens is they'll get all that and we're talking about March, April, they still can't figure it out and maybe have to extend into June. And now look at where you're at from last year going into next

Brian Maro 5:34

year. You're very true. So not p approach, but basically puts you on a reactive state of mind and even if you, I think as you extend, and you're referring to tax season, right? Yes. Correct. Your taxes are due April 15th, whether you extend or not, that's a misconception that people have too, is oh, I can just file an extension and pay later. No, it's an extension of time to file, not an extension of time to. So if you end up owing in June or July, whenever you do your taxes, you will have penalties because tax was due April 15th. So it, you just can't go into the beginning of the year not knowing what's gonna happen. You can't really make any adjustments. There's no way to go back in time and spend money. So I don't understand how to do it any other way, which is why my. I guess do it the way that we, do it here, but you just can't be reactive when it comes to taxes because they will get you every time. Every

Stoy Hall 6:31

time. And if, they don't that time, they'll find a way Uhhuh they'll find no way. So within. give me if you can, if off the top of your head, obviously give an example of probably more like, a new client or something that's been in more of that reactive space came with you and is more proactive. What would be an example of either tax due or things that you changed in their business or strategy from being reacted to proactive? Did you save them a bunch? Did they able to make more? Give an example if.

Brian Maro 7:07

Typically when, I look at a client these are just rough percentages and trying to be a little bit on the conservative side. Obviously we're on the air, can't necessarily say we can promise to moon the stars, we promise you a million dollars

Stoy Hall 7:19

in savings

Brian Maro 7:20

and credits, But I would say typically we're able to knock off probably 50% of their tax liability year over year compared to somebody else. Strategies across the board for very, high end all the way down to I guess I'll call it as normal people, So I've got strategies to fit anybody's bucket, anybody's situation. And there's definitely things that we can do. But I just I guess for, yes, for an example worked with a couple owners the last three or four weeks and came to me and we'll just use again, rough numbers. I think their tax liability was going to hover right around a hundred grand all in we got a property in their name. They were able to utilize some real estate strategies. And through doing some cost segregation stuff and some other strategies as far as auto kids, the whole thing, cuz some of those things will get into here a little bit, but able to slash that in half. So it's, really gotta think outside the box for people and not just look at their current situation and say based on what I'm seeing here, we can't really do anything. There are ways that we can do something, even for somebody that has just a w. I do have a couple of those strategies. They're a little bit more limited than your business owners are, but at the end of the day, there still are strategies available for just about everybody at every level. Why

Stoy Hall 8:50

is it that those strategies you aren't widely known, why is it that most people aren't doing them, and why aren't CPAs taking that more? Everyone says aggressive. It's not really aggressive. It's outside the box ideas. Inside the tax code, why are those being done across the

Brian Maro 9:10

board? Good question. Obviously don't want to negatively talk about anybody, but I would just kinda say my profession in general is a little bit on the lazy side. They're just not proactive. I think there's a, there's an old school mindset that everything happens in that first four months of the year, and I guess I'm still shocked to the state, been doing this 15 years and still shocked. Clients come to me and they're like, we talked to our guy or gal one time a year. And that still baffles me because when you're talking to them one time a year, it means you're just filing your return and there's really nothing that you can do at that point to really change a lot. So I don't understand what they're doing besides just filing that. The IRS is not going to throw out a book on how to maximize our tax. Shocker. Yeah. Game's not gonna get the game plan over. Yeah. Yeah. Here's a playbook and how to minimize all of your returns. That's fine. That's not out there. You're gonna have to do your research. You're gonna have to do your homework. You have to listen to other people in the industry, take your classes, do everything you can to figure out the different areas that are out there. And I subscribe to groups. I'm part. a bigger community that vets tax strategies. They'll throw some new ones out there. It goes through the community. It's, looked at by former IRS agents, CPAs that have been doing this a long time, legal and they really do tear'em apart. And by the time that the strategy is ready to roll out to everyone. it has literally gone through the ringer and so it's, tried and tested. So that's been a great addition to the tool belt in the last year and really allowed me to go after some different strategies that I didn't know were available then. And again, that's because they don't put these out there and say, Hey, this is what it is. Somebody came up with a strategy based off of this particular point in the tax code, and were able to utilize it and develop it. So you're

Stoy Hall 11:14

saying that not all accountants wear like the, sleeves with the pockets and are all nerd looking? Is that what you're saying? They're not all like that. Not everyone at us. Not everyone. Not everyone else. Oh, I guess that's a misconception cuz that's all I envision, Except for seeing you dress up every day, which is a new fad Z that we're dealing

Brian Maro 11:35

with. I gotta try to outdo you once in a while. Yeah. It's

Stoy Hall 11:38

tough. Life's Is there any other misconceptions that you can think of aside from the whole, if you file, you, regardless when you file your taxes are due, is there any others that come top of mind

Brian Maro 11:54

about tax splitting in general? Probably one of the most frustrating, I guess we'll call it. I don't, it's not a strategy, but some people call it a strategy is my prior CPA told me just to spend everything into my bank account and we'll be good for the year. I think that's terrible advice. Absolutely terrible advice. One, not everything that you spend in that bank account's probably deductible, so we're still gonna have a little bit left, but two I will never be that CPA that advises my clients that, Hey, if if you're getting down to the last a hundred thousand of taxable income, do you really want to spend a hundred thousand to save 10, maybe 15,000 in taxes? Now I get taxes suck. I, hate paying them worse than anybody that I know. But at the end of the day, would you rather have the 85 cents left over or would you rather be. Some nice shiny toys that you've spent a hundred K on to wipe out that 15. So that's probably the most frustrating thing that I get. And I'm not here to make myself look good. I'm here to help my clients, not only now, but in the future. And sure. If you don't want to pay taxes I'll, give you lots of things you can spend it on. We can go out and we can wipe'em out. I totally. But if we're trying to build wealth for the future, and I think that every business owner or person out there would like to retire someday, that's gonna take some wealth at the end of the day. And if you spent it on toys, now you're gonna go to retire and all you have is a bunch of old toys. Old toys that are most likely broke. Yes. That you're not gonna be able to do anything with. So that's the type of discussions and decisions that I put in front of my clients. And I'll advise you one way or another but my personal opinion, and I do this for. I do the same thing I do for myself, for everybody is at some point taxes are a part of it and we manage taxes. We don't try to 100% eliminate them, cuz you do have to spend a lot of money to eliminate taxes. So we manage them down to a good percentage and we keep that percentage year after year. And as long as we are proactive with tax planning on a yearly basis, I am able to keep your taxes very, small relative to your. Picture that you have going on, and that's what I would call effective tax managing for now and for the future. Absolutely.

When to get a CPA?

Stoy Hall 14:18

Love it. I love it. Before we get into the top three strategies that we're gonna speak about today and those that are listening, we'll be doing this periodically throughout the year too, with different strategies that we wanna highlight at, different times of the year. But so someone now has listened to this and they're like, Ooh. I need to work with somebody. What's a, when's a good time for someone to try to hire a new tax planner or cpa? Is it now, is it the first quarter? Is it the summer? When is the right time for someone to hire somebody

Brian Maro 14:57

asap. Not necessarily a time of the year. Got it. I would say, To get on it as soon as possible. There is nothing wrong with having a conversation and saying, you know what? We're good for where we are at the moment. Let's connect in the next four months or something like that. Just getting that relationship going, getting on their radar because we're, all busy. We have a lot of stuff going on. Our, years go by way too fast. And just getting on somebody's radar and getting to be proactive of Hey, when's a good time to, to reach out to you? If now is, cause we have some dead times. I mean there are, but when you getting on somebody's radar and just being proactive, I would obviously start that, you know right away as soon as possible. There's not a particular time of the year that's better. As you get closer to the end of the year, you run into less and less options that are available. Soap does sooner the better is all I can say.

Stoy Hall 15:50

Absolutely. And the holistic approach that you take, that we take in looking everything big picture tax planning throughout the year. If someone was interviewing other accountants, how would they know by talking to someone? If they have that mindset like you how, would someone know? Like how would there certain questions, would you be able to ask'em strategies? How would someone know if they have the right person in terms of that big picture?

Brian Maro 16:18

I would say if you're sitting with somebody and you're discussing your situation, are you hearing things that you've never heard before? Is there things that can be done differently? And maybe sometimes there's not always things that you can 100% do. It's not something that applies across the board. The. the more complex your tax return is, the more opportunities there are for savings. The simpler, obviously, you're gonna run into more hurdles with what you can and cannot do. So if you're, if they're not throwing out any sort of ideas that are different from what you've heard or. then I would probably say that you're not in the right spot. Like again, your tax situation could be so simple. Maybe there aren't, but is there ways to enhance that situation? Can we get you into other things? Can we expand it? I've come up with lots of quote unquote plants over the years for people to get into investments. Get out there and do a flip with a friend or somebody that does flips, Hey, can I invest with you? All that stuff gets us complexity in those returns and that opens up opportunity. So just because a, situation might be simple things that you should be hearing are definitely outside the box, forward thinking, maybe not now is the right time, but here's what we can do long term to, to get you into a better situation. So I would guess you'd want to hear more of those types of conversations. Obviously

Tax Strategies for Business Owners

Stoy Hall 17:48

first is make sure they're personable and you can relate to them, work with them, right? Obviously if you can't do that, let's not trust'em. Number two, trust. So if you have trust in that person, and then number two, strategies. And then I would say probably number three or above all of those is you have time. Go interview multiple. Don't just get stuck in pigeonhole yourself in. Make sure you're interviewing and, finding the right one. Absolutely find the right one. So now we get to the, fun part. This is the fun. this is the part that all the tos and shorts and stuff blow up always. Oh yeah. Because this is the strategies that most people either do know about or haven't heard of. So we're not gonna start with number one, because I believe that's, the best one or the most fun one. In theory. So let's start with kids. In business, it's around Christmas time. Now if you're hearing this later, if we film this around Christmas time there's a tree behind us. Let's start with kids in the business and that tax.

Brian Maro 18:47

Okay. Most people do not know that your kids are able to help you in your business, and that is a, tax write off and not something that we actually have to run through like a, payroll process to pay. You can actually just give them straight cash and get a tax write off for them helping. Obviously they need to be doing bonafide business stuff to help you. We're not gonna call it chores but things that they, could do to help out. And I think it's good just from a, parenting point of view to get them involved, get them understanding at a very early age that working is important. But overall it can be a nice little tax strategy. You have to have them do things that are business related and then pay them a reasonable amount per hour. And that could be across the board. There's, it's not minimum wage but it's not 500 bucks an hour either. It's, one of those things where we have to come up with something that is reasonable. And obviously we'll be aggressive in that area, but it's it's as vague as it sounds, have something, have them do something in the business that helps some sort of task and then we can pay them to do it. you're gonna pay for soccer, you were gonna pay for cleats, you're gonna pay for all of that stuff anyways, so why not pay them and then have them go pay for those things. And a lot of a lot of parenting things that you teach in there as well. But if you able to do all of that and document it obviously that's key. Hey, they they worked one weekend with me for eight hours. I, paid them this, whatever the case may be. That sort of thing. They can definitely help you in the business and it's a nice little tax write off for money you're already gonna give them anyway.

Stoy Hall 20:31

Is it simple as them stacking boxes or filling orders? Like those are relatively easy things that most children could do. Now we're not talking about infants. I don't think you can really spin an infant No. Doing a lot of work in the business. Although if you tied a broom to'em and let'em. that's

Brian Maro 20:47

cleaning. Yeah. Anything that could help you in your business. That could be cleaning an office, that could be organizing, that could be Mailing stuff out, that sort of thing. Anything that could help you in the business. There's not a specific list that you can or cannot do, it's just that can't have'em take out the trash at home. And then we're calling that a business deduction. That's, obviously not what the goal is. Yeah.

Stoy Hall 21:12

A, good example I do it with, my boys is then we'll take that money and I'll allow them to, Put it into an investment account. And I don't really let them pick all the stocks, but they've picked Disney because we watch a lot of Disney. They're, huge into Jurassic World, so we picked up that. And so they're able to learn how to work, learn how to save, and then also understand that the market goes up and down a lot. Right now. It's been down. Yeah. But they, get that understanding. So it's a huge teaching moment for parents, I believe. But also, like you said, we pay for soccer anyway. Let make'em come work. They can go buy those cleans. Yep, exactly. It's, as simple as that. Yep. Love it. Love it. Let's get into board retreats. I think this, is a misconception too of people understanding like, you, you don't have to have a board meeting and a stuffy boardroom in your. There's other things that can be done. So talk around the whole board idea, because most people think I have to have 12 people on my board. They have to be all over the place. Talk through the whole board concept. Exit from a tax standpoint. By the way, I want you guys to

Brian Maro 22:24

know that. Sure. If, you think about it, if you've ever. Heard of another company like like Disney or Jurassic Park that you name of, all of those have a board of directors. All of those companies will go to a different location event, have them in partial fund, partial business, that sort of thing. Just because you're not a huge business does not mean that you are not afforded all of the same opportunities and strategies. So what we do is we'll, draft up a, legal board document where we will list out all of the board members. And those board members might be all the intermediate family And so every every year we'll do that board retreat where we go to an offsite location. And that could be any offsite location, anywhere. It doesn't matter. That's not a criteria. But you have legit meetings. Sit down, discuss the family business, discuss what's going on in it. Some teaching moments for maybe some of the kids maybe between spouses a little bit more of a, dynamic conversation there and some strategic planning as well goes into it. Again, you can talk about anything in these board meetings. There's not a set criteria, but if everything done right, set up, documented you can get a a whole trip could be essentially a business write off. Yeah, we're not gonna do. The waterpark tickets that we did for one day, but the hotel for all of the days, the travel costs for all of the days. Meals in between. You can even have happy hours and things like that with the board. But you can really, if structured right, you can get by with being able to write off an entire not trip you were there to do business and the little bit of personal stuff that you had on the front end, the back end, and maybe. That's, that doesn't kill the whole idea. That's just maybe not something that we claim. But the majority of travel costs are gonna come in the hotel, the airfare the, meals, that sort of thing. And all of those things can be included. We just have to come up with proper documentation and have a, plan for executing some board meetings during the time that we're there. Is there a time

Stoy Hall 24:38

limit constraint? Can I go for six?

Brian Maro 24:42

I don't exactly think that's gonna get over. Then we're then, we're almost relocating The whole relocating whole different ballgame.

Stoy Hall 24:49

That's, fair. So you have a business most families take annual trips anyway. It's a very easy way to not deduct a hundred percent but to actually utilize your business cuz you know you're gonna talk about business as a business owner myself, no matter where we go, businesses to be had structure it not. and it could be, some type of deduction, right? Absolutely. Awesome. Awesome. All right let's get into the fun one. I'm a golfer. A lot of golfers out there. Those who follow other podcasts are golfers. A lot of business owners love to golf. So the word Augusta means something to them, not the rest of the world. Not at all. Did you know about Augusta before the strategy? Did you know? What Augusta means? I

Brian Maro 25:35

think I had heard about it once. Okay. Big old golf tournament. Yeah. A big old golf tournament.

Stoy Hall 25:40

Yeah. Happens once a year. Yeah. Down the south. Yeah. It's may or may not be one of the best ever the masters. So Augusta talk, us through that. Now. We've done a little clip before but talk us through that strategy and talk us through an example of the last time you used that. Although you use it.

Brian Maro 26:00

I do use it frequently. Augusta strategy like he said, literally labeled after the Augusta Golf Tournament that was put into place so that owners with houses on that tournament could rent out their, in their house for 14 days tax free and would not have to report it. So that was inserted into our tax code, which means that. Can rent out any venue for 14 days tax free throughout the year. And that could be your house. So the, strategy that we implement is it's an event if you're going to use your house as an event venue and you gotta get comparative sales. You can't just say I'm gonna rent out my house to myself for two grand a day. Yeah. If that's not comparable to where you would. Then that's not something that we can do. So how the strategy works is, we're gonna set a venue that is going to be your house. We're gonna look at the event and then say what is a comparable event price for something for a group of 10 people, I called over to the Sheraton and said what, would a room be for the day? And I believe it got$600 for room to rent for the day for 10 people. So that's typically a baseline for what we. is, that's that small group day approach, and then we suggest to our clients document every day that you have the team over or you have a. A group of clients over what you discussed it, it needs to be a business oriented function. Just as if you were taking on that room and you were standing up giving a presentation. That's the idea behind it. Just having a buddy or two over while you guys watch the game, whatever, and calling that an event day is, not, that's not what we're going for. It is legit. You had the team over, you had. A small group of clients over, you went over some stuff. Obviously no one's, A lot of marketing and networking is all part of that sort of event type thing. But if that's all done right, documented correctly we can write off aor not a portion, but a rate, a daily rate for however many days that you might do that comparable to what you would have paid to another event place in the.

Stoy Hall 28:17

and it doesn't have to be 14 in a row. You, we can you pocket these throughout the year. Uhhuh, really define your events around that. For business owners that have pools, maybe it's a great idea. Absolut's, fabulous idea, right? The rest of everyone else it's, a obviously an easy way to do that. There's a lot of business owners out there that will, they do it anyway, they host events, whether it's product sell or just having people. Think about it. If you have a good home, instead of going out and paying a hotel or wherever you're going that's, yours, right? Absolutely. So think about it a little differently in that regard for the Augusta strategy. So what you're saying though is I would we love Hawaii. That's where we would typically have those events. So I can't use those numbers. I can't just use the$2,000 a day of the giant house that we wanna rent out as the, it's not comparable. Ah,

Brian Maro 29:11

I don't, I'm not, I don't think it's gonna be a comparable for for the area.

Stoy Hall 29:15

No, You mean the snowy, horrific place that we live in that's always cold compared to the, nice palm trees and beach is not,

Brian Maro 29:23

we'll have to move somewhere over there closer and then use that venue. Ah

Stoy Hall 29:26

fair, Okay. That. Awesome. Definitely appreciate your time. This is a quick rundown. We want to get these 30, maybe 34, 45 minutes. We're gonna do these once a quarter, twice a quarter for certain strategies that pop up. We do have going into 2023 we've got new contribution limits that we'll speak about. I don't think really anything's changed too much in the tax. from year to year for the first time in like it feels like ever. But we'll, hit upon those as much as possible and then come here with some more ideas. Cuz there's a lot more strategies. There's a ton. His brain operates all the time. You should see me on the weekends, just going, oh, that's a sweet strategy. How the hell did you come up with that? It's from his group. Appreciate it. Subscribe, follow, share. Come check out our sponsors@blackmammoth.com, Trinity i f.com, enm. Eventually we'll have a website so you can go check them out. If not, go to brian morrow.com or hit us up on social. You'll find us somewhere some ways. Peace out. Thank

Brian Maro 30:30

you.

Disclosure 30:43

The proceeding program was sponsored by Black Mammoth. Any awards, rankings, or recognition by unaffiliated third parties or publications are in no way indicative of the advisors future performance or any individual client's investment. No award ranking or recognition should be construed as a current or past endorsement of black mammoth. Information regarding specific awards, rankings, or recognitions is available on the Black Mammoth website, www.black mammoth.com. All investment strategies have the potential for profit or laws. Investment strategies such as asset allocation, diversification, or rebalancing do not assure or guarantee better performance and cannot eliminate the risk of investment losses. There are no guarantees that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strateg. This broadcast should not be construed by any client or prospective client as a solicitation to affect or attempt to affect transactions and securities or the rendering of personalized investment advice due to various factors including changing market conditions. The information discussed in this broadcast may no longer be reflective of current positions or recommendations. While information presented is believed to be factual and up to date, black mammoth, do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. The tax and the state planning information discussed is general in nature and is provided for informational purposes only and should not be construed as legal or tax advice. Listeners should consult an attorney or tax professional regarding their specific legal or tax situation. Past performance is not indicative of future results.