Tackling Taxes (For Dummies) With CPA Candace Gallifa

Ever wish there was a Taxes For Dummies course that would help you understand the basics of filing taxes in 2024?

This week week we are joined by CPA and CEO of New Way Accounting, Candace Galiffa, who is not only incredibly knowledgeable, but is also a rare, down-to-earth-rockstar when it comes to breaking down the intricacies of taxes in simplistic terms that help easy your anxiety.

From maximizing deductions to navigating tax laws and finding out if we can really trust software like TurboTax, we are asking all of the questions you've always wanted to know in this "understanding taxes for dummies" episode.

• Visit Candace's Website 
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→ Are You An Essentialist? Visit Lance's website: www.lancependleton.com

Transcript

Jake Dreyfuss (00:02.397)
All right, welcome back to the Unmastered class where we simplify the complex and we shed light on the murky waters of adulting. I'm Jake Dreyfus.

Lance Pendleton (00:10.507)
And I am Lance Pendleton.

Jake Dreyfuss (00:13.077)
Today, friends, we are demystifying a topic that might make some of you sweat just hearing about it. And hopefully you've actually just dealt with it. Your taxes.

Lance Pendleton (00:21.879)
Yeah, but let's not get too scared right off the bat because today we're joined by someone I would honestly be completely lost without She is the genius who keeps all of my business affairs and many of my personal affairs financially in order as well, too We're talking my actual personal CPA Candice Galifah Candice. Welcome to the show

Candace Galiffa (00:40.206)
Hi guys, I'm so excited to be here.

Jake Dreyfuss (00:41.717)
Hey, we're thrilled to have you. Yeah, and Lance, we probably should start every episode this way, but for sure this one, we're gonna do a little disclaimer. So before we begin, we just wanna issue a quick disclaimer that nothing we're about to talk about today is like personal financial advice for any one of us to take and run with. This is just a general discussion and any questions you have should be taken to your CPA or to Candace, whose information will be in the show notes here. Always looking to help out more folks. So just wanna put that out there first. Cool.

Lance Pendleton (00:43.163)
We're excited to have you.

Lance Pendleton (01:10.731)
Yeah. And by the way, Jake, just as another side note, we might want to add into this one too, that disclaimer you just put in there should be probably applicable for all of our podcasts. Anything that we just told you, you probably shouldn't be listening to us on the whole, but that's okay. Yeah.

Jake Dreyfuss (01:11.83)
So yeah.

Candace Galiffa (01:19.47)
I'm going to go ahead and close the video.

Jake Dreyfuss (01:19.665)
100%.

Jake Dreyfuss (01:24.985)
Certainly the food safety. That should definitely have had one. Great episode, by the way, go back and check that one out. So let's set the table a little bit here before we dive in and try to pull everything out of Candice's brain. So based on our research from Pew, 53% of Americans say they're frustrated by the complexity of the federal tax system. Lance and I were chatting before the episode. That seems remarkably low. And on our hypothesis, it's just based on the people who are actually paying taxes who are frustrated by it.

Candace Galiffa (01:52.406)
Hahaha

Jake Dreyfuss (01:53.629)
So maybe that's why it's 53%. And yeah.

Lance Pendleton (01:55.959)
Yeah, and you just said too that like 47, that means 47% of the population is going, yep, no, I got it. That whole tax system makes complete sense to me. I'm like, no, it doesn't, you liars.

Jake Dreyfuss (02:01.962)
No, no way. No way, no way. Yeah, and just over half of the US adults feel they personally pay more than what is fair, according to the same research.

Lance Pendleton (02:15.007)
And Jake wasn't the one too that said like as of February the average tax refund this year was $3,213 which is a 4% increase from last year according to most recent IRS data so I'm curious to find out whether that's like real or not, but

Jake Dreyfuss (02:25.149)
Mm-hmm.

Jake Dreyfuss (02:30.513)
Yeah. And, and in, in this year, in this tax year, 53% of Americans filed with a tax professional while 47% were the do-it-yourselfers, which is interesting because it's almost remarkably similar to the 53% who were frustrated by it. Right. It doesn't make any sense to me. And, and for about every 30 taxpayers who file their tax returns every year, there's one business or household that doesn't. So that does speak to our hypothesis on who's doing what. Who knows.

Candace Galiffa (02:39.906)
Wow.

I'm surprised by that one.

Lance Pendleton (02:56.523)
It sounds so interesting too, because again, we started in this concept and Jake and I started talking about this and like, this is one of those areas that we just kick into of like, I, like, we probably should understand this better and know more, but it is interesting because no one ever taught us this. And it seems like a pretty important thing. Like, if you think about this, I'm going to go to jail if I get this wrong. Like that's, that's kind of something that maybe I should have been taught in school. But okay, but before we dive in, Candice, welcome a little background on yourself sort of what brought you to

your love of being a CPA and numbers and all that good stuff or actually the business that you run, but just a quick like background on you.

Candace Galiffa (03:32.666)
Yeah, sure, well thanks. So I'm a CPA. I started my career in public accounting, some soul-crushing hours at PWC at the Big Four as an auditor, moved up into industry accounting, in financial reporting, in banking and investments, all the fancy titles where you're just working tons and tons of hours. And then I had a kiddo, and I was like, I'm not going to do the crazy hours with a kid. I come from a family of entrepreneurs, and I was like, you know what I'm going to do?

Jake Dreyfuss (03:42.485)
Hmm.

Candace Galiffa (04:00.666)
I'm gonna do a cute little side hustle. I'm just gonna do some bookkeeping and taxes for a couple local small businesses during naps and on the weekends so I can be a stay at home mom. And it totally exploded. It just absolutely took off. Within a year, my husband likes to say I retired him and he's a stay at home dad now. Now we have 17 people on our team and we work with entrepreneurs across the country because we found this niche of underserved entrepreneurs. So many.

Jake Dreyfuss (04:21.341)
Wow.

Candace Galiffa (04:28.098)
Small business owners, especially millennials, are working with the dinosaur in a suit, the CPA that doesn't return their phone calls and their emails and can't believe they're actually making money off of a podcast outside of real business, right? Like, you know, just the really condescending. So we totally fell into this niche of business owners spread across the country and it's been really awesome. I get to work with people like us, right? And it's super cool. So it's been a dream.

Jake Dreyfuss (04:43.853)
Mm-hmm. Yeah.

Jake Dreyfuss (04:57.845)
It's awesome. I guess to kick things off, we have a lot of questions, as you saw in our email. We'll try to be calm, but let's start with the beginning. I think I have the hypothesis that I think a lot of people inherit accountants, maybe through, cause their family was using them or whatever the case may be. But let's start with the basics. When it comes to taxes and having the right accountant is key, I think we can all probably agree on that.

Candace Galiffa (05:02.742)
So I'm here for it. I'm here for it.

Lance Pendleton (05:03.335)
Hehehehe

Jake Dreyfuss (05:24.243)
What are some of the things that someone should look for in an account to ensure they're a good fit? What are the questions we should be asking? How do we find the right person?

Candace Galiffa (05:30.458)
Yeah, it's such a great question and it's actually, it's kind of sad, this first thing, right? Because when I talk to folks, potential clients or new clients, almost everyone, almost everyone is like, well, you know, I've been working with my dad's CPA or I've been working with so-and-so down the street, but they just like don't return my email. They just don't return my calls, which is like, isn't that business 101? So that's honestly the first thing I tell folks is when you're looking for a CPA, you're looking for an accountant, like ask them their response times.

make sure they actually will talk to you even in July, right? Like make sure they'll talk to you year round. So that's like the first thing. Make sure you get bots. And then the second thing is, you can't as a consumer, as a taxpayer, you can't really do a ton of research to make sure that your CPA actually knows what the hell they're talking about, right? There's no place for you to go to be like, is this person, you know, legit? So what I always tell people is, you wanna make sure you're comfortable with them because you don't know what you don't know. And so,

Another reason we get new folks coming in they're always like I just felt really dumb asking these questions Or like they were a little condescending when I asked this question So when you're chatting with someone make sure you feel really good warm and fuzzy to ask any Questions that you want because you're not supposed to know this stuff like we always joke around with new clients like we all had to take Square dancing and wood shop in high school, but none of us had to take tax 101 Like isn't that kind of bonkers to everyone so you should be able to ask

Jake Dreyfuss (06:54.566)
Mm-hmm.

Candace Galiffa (06:57.254)
any question and feel like really friendly and nicely responded to because there was no dumb questions when it comes to taxes.

Lance Pendleton (07:05.699)
It's so interesting. And you know, I, it is actually part of what drew me to working with you, because I had gone through four, literally four years and five different accountants in four years. Because like everyone in the very beginning, it was the same thing. It was like, oh, yeah, we can do this. And we can do that was a lot of we can do. And then very quickly, it became obvious that I got passed off to some, you know, poor schlub, because I wasn't as cool or important, right, as the big people they had. Right. And again, you talk about like being passed off to the family people.

Like, yeah, my parents are more important. And so it was really interesting to just watch that dynamic then repeat for each person I went to. So when I came across your whole organization, I was like, Whoa, this is what I've been looking for. But, but I want to ask you the one question that I thought of, right. And I think a lot of people think of, which is probably the worst question you can possibly ask a CPA right off the bat, because it makes you look guilty, but it really came from a place of fear. You ready? How often are people really audited? Like.

how can you avoid going to jail because your taxes because I'm always living in fear of this. But I'm like, I want to, you know, save a few bucks here, but I really don't want to go to jail. I wouldn't do well in jail. Let's be really clear. Like, I would not do well in jail. I would be modeling tank tops for some dude and with Kool-Aid on my lips in five seconds flat. Like, so how often are people really audited?

Candace Galiffa (08:12.355)
No. You're way too handsome.

Candace Galiffa (08:23.067)
No, you're way too hands in prison. So here's some good news for you. Here's so everyone can sleep easier at night. Only less than 1% of taxpayers are audited. And if you are a business owner and it makes sense to elect to be taxed as an S corporation, your audit rate goes down even further. Now, with that being said, the IRS, there was legislation that passed last year, last winter that said the IRS was getting 80 billion B, with a B.

in funding to basically like up a lot of their Auditing people but here's the great thing though They're gonna be focusing on folks that are high earners generally speaking making more than four hundred thousand dollars So the average taxpayer your odds of being audited are under 1% now Does that mean you should start writing off all of your shit like should you start claiming your dog as a dependent? No, let's not be crazy. You want to still do it right so you can sleep well night because

Jake Dreyfuss (08:55.104)
Yeah.

Candace Galiffa (09:17.762)
The other thing that folks a lot of time forget that those auto rates are really low, but the IRS every day sends out these automated letters, right, so your tax return just churns through their algorithm and their computer system. And if something looks crazy wonky or it sticks out based off of their averages, you can get an automated letter that's like, hey, what's this, send us the documentation. And so if you don't have that documentation, you, they're like, oh sorry, we can't count that then, pay us money.

Jake Dreyfuss (09:39.689)
Hmm.

Candace Galiffa (09:46.71)
So what I always tell people is you should sleep sound, right? Audits rates are at a historic low. Not a ton of people are getting audited, but do it right, right? Don't don't be don't be ridiculous, right? Let's not don't claim your dog as a dependent and keep track of your documentation So that if you are the lucky one percent you have the support to back it up

Jake Dreyfuss (10:08.465)
Okay, so there's a middle step there. You're not just gonna, Lance literally thinks someone's gonna show up on his doorstep like men in black and take him away to prison because he wrote off his meal Chick-fil-A. Not gonna.

Lance Pendleton (10:13.663)
Oh yeah. Yeah. 100%.

Candace Galiffa (10:16.138)
No, no, don't worry. You're not, you really, people really don't go to jail often. There's like so much that happens before that. First, you're gonna, first thing, the IRS will never ever call you or email, so that's the first thing, right? If you get a phone call, like it's spam, like just click ignore. The IRS will mail you, because they're stuck in the 80s, so they 100% will send you a letter. And again, when you get those letters, if you don't understand it,

and you don't have an accountant, get yourself an accountant, but just pass it to your accountant. What does this mean? Let them interpret it for you, right? Or if you feel savvy enough that you can read that letter, just do it. It's just not something you wanna just put on the pile in the corner and forget about. You don't wanna live with your head in the sand. But those letters, don't think they're scary. We call them IRS love letters. It's actually this time of year is IRS love letter season because everyone's just filed. And so all those returns are going through their system and then you're just getting letters.

Most of the time it's just stuff missing, right? Like, hey, they got a 1099 that you didn't claim. Nothing to lose sleep over. You just amend and move on with your life.

Lance Pendleton (11:21.999)
Ooh, that's like my new theory, by the way. I'm gonna adopt that. I'm just gonna amend and move on with my life. Like next time my wife gets mad at me, like I'm sorry, I'm amending this and moving on with my life now. I like this. This is good, good advice.

Candace Galiffa (11:30.826)
Yes, I like it. I'm meant to move on, it's all good.

Jake Dreyfuss (11:32.226)
Good policy. Wow. Okay. This is really cool. So now there are alternatives to the account, right? There's, there's the, the online tax filing services, like a turbo tax or, you know, whatever good, bad, good or bad idea. If good, who are they good for?

Candace Galiffa (11:50.89)
Oh, TurboTax is fantastic. TurboTax is a fantastic software for folks with simple situations. If you have a W-2 and you own your home and you've got a kiddo, TurboTax is fantastic, right? There's nothing against TurboTax. Quite frankly, the IRS is actually trying to create their own TurboTax for free for taxpayers, right? They're actually just rode out a pilot. So it's a fantastic piece of software that I don't discount at all.

When you no longer want to be using a TurboTax or a tax act or any of those platforms is when your situation becomes more complex. If you're a business owner, you should probably be working with a professional. If you own rental properties, you should probably be working with a professional. You'd have a significant amount of investments, right? A K-1, a partnership. That's when you should be working with someone. And it's not so much that TurboTax will get it wrong. That's less than my concern. My more, the bigger concern is I don't want you to overpay in taxes.

And there's just deductions and ways to report things that TurboTax may not be able to do.

Jake Dreyfuss (12:48.328)
Mm.

Jake Dreyfuss (12:55.089)
Okay, I have a quick follow-up, and this might be a really dumb question, but whatever. That's why we're here, right? This is the whole point. I think I just had like a light bulb moment. So I receive at the end of the year, all these different forms, right? The 1099, if I'm paid as a contractor, the W-2 if I'm paid as an employee, like a mortgage interest statement from the bank, all these different things. And then I take those, package them up, get them to my accountant, and the accountant files all those things.

Candace Galiffa (12:59.276)
There's no dumb questions in that. Yeah. Ha ha.

Lance Pendleton (13:00.731)
This is the literal point of the unmatched classes. We're full of stupid questions, but.

Jake Dreyfuss (13:25.357)
Does the government, is the government already aware of all those on their side and they're literally just checking to see if I'm presenting what they think is accurate? Is that actually what's happening?

Candace Galiffa (13:32.542)
Yes, that's it. All those forms you get in the mail, they go to the IRS and they go to you. That's it. It's just think of a tax return as a reconciliation. All the tax return is reconciling your income and the tax that you should be paying. That's all it is.

Jake Dreyfuss (13:46.537)
This seems like a silly game. Why can't they just reach out to me and say, Hey, here's what you owe. Let's save each other.

Candace Galiffa (13:50.998)
That would be nice, wouldn't it? Well, here's the problem though. They don't know some of the other things that you pay and we wanna reduce it. So they could do that, but then we'd pay more in taxes, right? So the tax return is also an opportunity for us to reconcile it lower.

Jake Dreyfuss (13:55.209)
They don't know. I know.

Jake Dreyfuss (14:01.513)
Then we pay more. Okay.

Jake Dreyfuss (14:07.206)
Amen.

Lance Pendleton (14:07.291)
also Jake for part of the same reason that the federal government designing an app to turbo tax something for me creates about as much confidence I have in them as them telling me what I owe them. I'd be like, yeah, right. You know, I'm pretty sure that'd be what a well, so on the same note, though, but let's talk about what you just said, Candice, because that brings us to the second segment of what we want to address, which sort of the business filings and what we call write offs, you know, we've all seen that funny clip from

Jake Dreyfuss (14:15.721)
Yeah.

What could possibly go wrong, Lance? What could possibly go wrong? Okay, I digress, go ahead, Lance.

Candace Galiffa (14:20.555)
I'm going to go to bed.

Jake Dreyfuss (14:35.774)
Seinfeld.

Candace Galiffa (14:37.207)
It's great.

Lance Pendleton (14:37.323)
Yes. Was it a sh actually I was talking about Schitt's Creek. There's the Seinfeld one too, but, but the, you just write it off. Yeah. So, you know,

Jake Dreyfuss (14:40.37)
Oh, oh, Kramer. Yeah, this is right off.

Candace Galiffa (14:43.598)
Yeah. What do you mean? The write-off company. You just write it off.

Lance Pendleton (14:47.719)
All right. So, you know, this all starts though, I think with the idea of if I have a business and Jake and I work with a ton of solo entrepreneur people and helping develop them in personal professional development work that we do. And so, you know, can you just help us break down what is the difference between sort of the LLC concept and an S-corp or a C-corp? And like, how does one know what's the right one for your business or which one is better than another for taxing purposes?

Jake Dreyfuss (14:47.74)
They know what it means!

Jake Dreyfuss (14:56.925)
Yes.

Candace Galiffa (15:13.154)
That's an awesome question. So first things first if you're working as a sole proprietor Which just means you're working under your name as a business like you're just you're just self-employed Maybe you're calling it a gig work or a freelancer, but you don't have an LLC There is zero difference in taxation You were taxed the exact same way as a sole proprietor versus a single-member LLC There's no like magical write-offs you get becoming an LLC. That's the first thing the next

cool tax strategy is having that LLC elect to be taxed as an S corporation. This reduces your self-employment tax. However, without going into the nitty gritty of what all the hell that means, don't do this without talking to a tax professional because more often than not, you need to make sure that your net profits from your business are high enough so that your tax savings outweigh the admin costs.

when you start doing these more aggressive tax strategies, additional admin costs come into play, additional payroll fees, tax fees. Like I'd love to charge your money, but I wanna make more money, but I wanna make sure you're actually saving more money than what we're charging, right? So that's the next step up. Realistically speaking, for small business owners, there's only ever gonna be the sole proprietor slash single member LLC, or the tax election as an F corporation. It's very rare for small businesses

Jake Dreyfuss (16:15.549)
Yeah.

Candace Galiffa (16:38.574)
to want to or for it to be beneficial for them to do the C corporation route because of this fun thing called double taxation But my guess my main point is here Don't do any of it until you talk to a tax professional because it could end up costing you more money than saving you

Jake Dreyfuss (16:54.845)
Fair enough. Okay. So we figure out how we're going to incorporate ourselves. And if it makes sense, and then we'll go back to the write off conversation. Can we literally just write off anything every time we eat out like Lance chick filet? Do you know, but he eats there every day, every day. It's unreal. He's no, he, he's a compulsive liar. He, he, no, he buys extra on Saturday so we could have it on Sunday too. Anyway, the.

Candace Galiffa (17:06.762)
Yet, no.

Lance Pendleton (17:07.579)
First of all, I don't go to Chick-fil-A. Technically, I ban it based on some things we can talk about in a separate episode between both food and some of their theological practices in the background. But we'll leave that for a separate topic, but go ahead. Shut up. You're not my friend anymore.

Jake Dreyfuss (17:23.821)
Can you give us the 101 of what a write-off is and how to use it effectively?

Candace Galiffa (17:30.182)
Yeah, okay. So all a write-off is a business expense. If you have to purchase something for your business that's necessary and ordinary for that business, it is a business expense, aka write-off, aka tax deduction. And you just need to be tracking those items so that then it can be reported on your tax return. So anything that's normal.

for your business, advertising costs, your podcast equipment. If you go out and you meet a client or a potential client for lunch and you pay for their meal and yours, that's a write-off, right? If you have to travel to a conference, those networking fees, all of those things are all a write-off, a tax deduction, a business expense. Where it becomes a gray area is some of those personal expenses that may or may not be a tax deduction. For example, deducting your home office use, which by the way, totally is a tax deduction. If you use

your home office regularly and exclusively for business, we can write it off. Same with your car. If you're using your car to drive places and you're tracking that miles, that's a write off. But there's a whole slew of gray areas where it also can be really beneficial to work with an accountant. Like for an example, my, yes, I have a fairly large presence on Instagram, but can I deduct my skincare regimen just so I can look kinda cute on Instagram? No.

I can't, I'm an accountant. However, can my skincare dermatologist, who's an influencer, who makes 90% of her income through Instagram do that? Because she's testing it and then she's linking it? Yes. So there's this huge gray area in the tax code when it comes to this necessary and ordinary for the business, which again is why it's important to work with someone if you're doing, if you have a profitable business and making money.

Jake Dreyfuss (19:03.939)
Hmm.

Lance Pendleton (19:13.283)
And you just made Jake really sad because he has an extensive skincare regimen that he goes through every morning.

Jake Dreyfuss (19:16.949)
Do you see? There's no lines here. No lines. Come on.

Candace Galiffa (19:18.314)
like a nine step serums included. Yeah, I know, I'm so sorry. I'm so sorry.

Lance Pendleton (19:23.223)
It's it's really has that whole like Iron Man mask that lights up that you put on and everything that like it's a whole dr Brahm or stuff. He's he's in he's full in

Candace Galiffa (19:26.218)
Yeah.

Jake Dreyfuss (19:26.815)
You

Candace Galiffa (19:31.908)
I can't wait to say it. I'm gonna have to start, you know, stalking you.

Lance Pendleton (19:33.751)
So, okay, so we have all these sort of the gray area and things like that of the write-offs and not write-offs. And, you know, I will say that from just my own sort of dopey experience, this really is where the benefit of a CPA and a tax professional comes in because, you know, I was able to learn pretty quickly, like this good, that bad, like, and then begin to figure out how to structure my own life in a way where there were some advantages that I could have and certain things that maybe I thought were advantages that you very quickly were like, yeah, no.

Candace Galiffa (19:53.711)
Yeah.

Lance Pendleton (20:02.955)
Um, that's just a hard no, but you know, and it's like one of those like, is my dog independent? I'm like debating with you. Well, the dog weighs more than I do at 160 some odd pounds and eats $300 a food a month. Like technically is that? And she's like, no, good try though. So here's the next piece then. One of my biggest fears when we talk about this old mentality of like, I believe audits are going to happen as we, as Jake said, the men in black are going to show up. But I always thought I had to collect all of my receipts for everything at all times, because if they showed up.

Candace Galiffa (20:04.377)
Yeah, hard enough.

Candace Galiffa (20:15.286)
No, still no, still no.

Lance Pendleton (20:31.043)
You know, I had to hold on to all of my Chick-fil-A receipts in the glove box to make sure that they were, knock it off, Jake, that they were going to be, right? Like I had presents. Do we really need to be keeping all these receipts or like, and what's the best way to organize and store this stuff?

Candace Galiffa (20:33.774)
Thank you.

Candace Galiffa (20:44.726)
Yeah, great question. So here's what I tell everyone who's getting started, who's like, what do you mean? I've never held onto an entire receipt in my entire life. It's fine, again, nothing to lose sleep over. It is the best practice moving forward. So this is what I always tell my business owners. If you went to Target and you bought office supplies, and it's truly a business expense, but you didn't keep that receipt, take the deduction. Report it on your P&L and take the deduction, right?

I would never say just, if it's a legitimate business expense, I would never say don't take the deduction just because you lost the receipt. However, it is absolutely best business practices to keep receipts, but not keep receipts. Please don't keep paper. That's crazy. All I want you to do is this. There's going to be two places you're holding receipts. One, which is probably 70% of our receipts, email. You get an electronic email. Just store that email into a folder that says receipts and never think about it again. Your accountant doesn't want your receipts. I do not need that noise.

And then the other thing is when you're at Chick-fil-A and you get that paper, first thing, I think Chick-fil-A, I don't know a lot of these places like text you or email, anyway, if you get a paper receipt from someplace, all I want you to do is download an app, a free app, please don't spend money on this, a free app. I use Smart Receipts, but there's a billion out there that literally is just an app. You get that paper receipt from, you know, right after you go and get food or whatever you're doing, you snap a picture of said receipt through your app and throw that.

Recycle it because we are conscious about the world, but that's it and then move on with your life And you never have to look at it again. You don't need to like link it up into QuickBooks You don't need to file it away and something really snazzy That's it because the only time you'll ever have to look back at that receipt is if you're audited so spend the 30 Milliseconds to snap that picture and move on with your life

Jake Dreyfuss (22:34.697)
Can I do everything on a credit card? Is that a form of a receipt or no?

Lance Pendleton (22:38.235)
Oh, that's a good question. Yeah.

Candace Galiffa (22:39.042)
Great question. All right, so here's the deal with the credit card statement as a receipt. If it is something that is abundantly obvious, like there's nothing you can purchase from that location that wouldn't be that. Like for example, your Squarespace website, right? That's on your, just that domain. That's obvious, that has to be for your, like you feel really good about that. That would be like, all right, you don't really need that receipt.

Jake Dreyfuss (23:00.177)
Yeah, right.

Candace Galiffa (23:07.882)
But if you go to Target and you're buying office supplies, I don't know if you're buying bikinis, Jake. You know, the IRS doesn't know that. So they're gonna need to see the receipt for that one.

Lance Pendleton (23:17.295)
So Larry's love nasium. That is not, I gotta stop putting that on the credit card. Okay, sorry, nevermind. Oh, Jesus.

Candace Galiffa (23:20.844)
You really got to stop doing that. Yeah, we've been talking about this before. You really got to stop doing that.

Jake Dreyfuss (23:22.13)
Hmm. Red flag. Okay. Well, that's, that's good to know. Now I'm, now I'm worried. Now I gotta change my behavior. That's okay. I will. A lot of our listeners, um, dream about owning vacation property. And I feel like everyone has an opinion about what it, what's the definition of a vacation property and what the benefits are of owning it from a tax perspective. I feel like no one's really clear on it. And obviously this, I'm sure it can change.

every year with the tax code, but can you give us an overview on what the definition of a vacation home is and what the benefits theoretically could be?

Candace Galiffa (23:52.462)
Well, so I think there's two ways of thinking about it. If it's just a vacation home and you're not renting it out, it's for your own personal use. There is not a ton of additional tax savings from it. Let's just be really clear on that, right? We are now taxed, we are capped, I'm sorry, at $10,000 for what you can deduct from, what you can itemize on your deductions for real estate taxes. So quite frankly, most of us are getting tapped out of that just with your primary home. You may be able to...

potentially itemize, which just means deduct some of the mortgage interest on this vacation home. But at the end of the day, you should not be buying a vacation property for the tax savings. It's just there just really isn't enough there. Now, with that being said, maybe you're running out this vacation home, right? Is that something you're doing? Are you actually using it as a rental property? Then things can get a little bit more interesting. What's really cool about vacation properties or rental properties or just investment properties is

Jake Dreyfuss (24:39.549)
Mm-hmm.

Candace Galiffa (24:50.974)
A lot of the times, you're making money from the rental and you're writing off the expenses related and you have leftover cash. You're making money. But we get to take this thing called depreciation, which writes off that amount and so that at the end of the day, you made money from a rental property, but you're not paying income tax on it. So buying real estate properties, vacation home and renting it out can be a fantastic way for you to make income without paying tax on it.

But is it a huge tax savings win? Like you buy a $500,000 beach house and all of a sudden you're getting a $500,000 loss and your taxes, no, unfortunately that's not how it works. So again, we see this all the time. People buy an investment property or a rental property and they all of a sudden think like they're not gonna pay taxes that year because they've made this huge purchase which doesn't exactly work that way. There's a lot that's included or a lot that's involved around, is it active income? Is it passive income?

Jake Dreyfuss (25:32.433)
Right.

Jake Dreyfuss (25:44.132)
Hmm.

Candace Galiffa (25:48.702)
Is it a short-term rental? Is it a long-term rental? So again, if you're trying to invest in real estate for tax saving strategies only, who do you talk to first? Your tax professional.

Jake Dreyfuss (25:52.605)
OK.

Jake Dreyfuss (25:59.117)
And does it have to be a certain, is a vacation home a certain number of miles away from your home? Is like to count or nothing to do with it? See? That was, I thought, that's what I thought too.

Candace Galiffa (26:04.018)
No, that doesn't have anything to do. Nothing to do with taxes.

Lance Pendleton (26:06.887)
I thought it was a 50 mile, didn't I read that? Something that was like a 50 mile thing, but if it was less than 50 miles, it can't be a vacation property. I don't know, Connecticut's weird.

Jake Dreyfuss (26:12.917)
What the?

Candace Galiffa (26:13.774)
Now that could be something with your mortgage and how it's loaned to you, right? So there's three different loans you can get when it comes to mortgages, right? You can have your primary residence, which is gonna be your best rates. You could have an investment property that then they have different ways of calculating how much you can take on in debt because you get rental income or a vacation property. So that could be part of it. It could be something to do with your mortgage.

Lance Pendleton (26:18.621)
Uhhhhhh...

Lance Pendleton (26:38.099)
for the Swampland in Florida that I purchased that we'll talk about later, Candice, that I thought was a good investment.

Jake Dreyfuss (26:42.837)
Yeah. Candice, are there any kind of like common red flags that you look for when like you're reviewing, let's say a client asks you to look at their, either their personal financial kind of cashflow situation or their business, anything that's stick out in general as like red flags to you that may also trigger like some of Lance's fears about, you know, tax inadequacies, but like, what are some of the things you look for as a professional numbers person?

Candace Galiffa (26:44.298)
We should.

Candace Galiffa (27:10.314)
Yeah, I mean, I think there's some simple easy ones, right? Like where, when it comes, so the big one is when business owners are paying themselves and they're calling it a salary, but you're a single member LLC and it's not a salary. Like things like that, you know, that are just big red flags, depreciation. So when you own a rental property and it's being depreciated, those sometimes show up really wonky. But again, that's not gonna be something you're probably doing well, the bookkeeping for the paying yourself probably would be.

But just like some easy things you should be thinking of when it comes to business ownership, right? Like right now, you cannot deduct any entertainment expenses. That was all done away with Trump's tax reform in 2018. So that's like a fairly simple red flag, right? Like you can't do that. Virtual businesses that are writing off their entire car like that could be tough to support if you don't even have another car, you know, at your at your home.

Jake Dreyfuss (27:51.007)
Hmm.

Jake Dreyfuss (28:05.502)
Hmm.

Candace Galiffa (28:05.586)
So those are some of the big ones. Again, it's all around just like being way too aggressive with tax deductions. We love being aggressive with tax deductions, but we wanna make sure we're following the tax code.

Jake Dreyfuss (28:16.489)
Fair enough, thank you.

Lance Pendleton (28:16.871)
It's like, it is, that is, I mean, look, we can sit here and chat all day, it's about 2000 questions because again, it's a complicated thing, which I go back to the, just quickly, if you wouldn't mind, do you genuinely believe that 53% or 47% of Americans like fully understand the tax code as that question was before?

Candace Galiffa (28:33.59)
Uh, no, I don't fully understand the tax code. I mean, I can be honest with that. Are you kidding? It's like 70,000 pages. I get something insane like that. I am an absolute expert when it comes to small businesses and real estate, right? But, you know, don't, like, if you wanna start looking at like crazy swampland credits or environmental, you know, it's insane. I don't, I would have to look all that up, right? So no, I don't think there's.

Lance Pendleton (28:36.749)
Okay.

Jake Dreyfuss (28:57.854)
Yeah.

Candace Galiffa (29:01.53)
anyone that understands the entire tax code. I don't think there's a single person that works at the IRS that does, quite frankly. And I think they would admit that too, you know? I think you just have to find someone who's specialized. And so no, most folks I talk to are like, oh my gosh, why is taxes so freaking complicated? It doesn't make any sense to me. I'm like, I know, me too, sister.

Lance Pendleton (29:19.587)
Well, that's it's, you know, I, I chuckle sometimes too, because Jake, you'll appreciate this. The level of I don't know what I don't know, as the beauty of the unmastered class was, you know, there was a point in time when we were looking at buying the house that we live in right now, where I went online to do my own research, which is like the worst idea ever, right? I was like, somehow Reddit is like a bad place to go. But Jake, you know, I read this thing that said that if it's deemed farmland, then you get this really amazing rate from the government on the purchase of the property. And I was like,

Candace Galiffa (29:35.15)
I'm sorry.

Lance Pendleton (29:49.231)
down the rabbit hole for like deductions that I could then find for converting this into farmland all of a sudden. I was like, if we get bees, now I wanna point out, my wife is highly allergic to bees, but I was like, if we put them 80 miles away from the property, but technically within the boundaries. So I was like, you know, this is what the Unmastered Class is all about. Stick to the basics, just get them information, know who to talk to, right? So, because we're almost out of time, we gotta ask Candace before we go. Our favorite traditional ending question.

Jake Dreyfuss (30:05.333)
I'm going to go ahead and turn it off.

Candace Galiffa (30:05.651)
Mm-hmm. Yeah.

Exactly.

Lance Pendleton (30:16.919)
If you wanted to enroll in an unmastered class on a topic completely outside of your current expertise, like something you wish you'd learned when you were younger, what would it be and why?

Candace Galiffa (30:26.434)
It's so, it's so very embarrassing because I'm a millennial. So I should know how like technology and hardware works, but I, I do not. I do, I learned like two months ago that there's a way you're supposed to close the tabs on your iPhone. Like I didn't, I didn't know that. We were talking ahead of time. I don't know. I didn't know you're supposed to close your, like turn off your laptop before you close it and then put it in the bag. I am horrific. My teammates find me, we should really have like an I, like a director of IT.

and not supposed to be me. Because I shouldn't be, I should, I'm so unqualified. So it's just like basic stuff. It's like, if you ask me, hey, can you connect Bluetooth to this laptop? I'm like, I don't know what you're talking about. It's bad, it's really, it's bad.

Jake Dreyfuss (30:56.722)
100%.

Lance Pendleton (31:08.748)
It is a-

Jake Dreyfuss (31:09.014)
Lance, do you shut off your laptop before you like pack in your backpack?

Lance Pendleton (31:13.555)
Well, again, since I used to work for Apple, technically, I kind of do know some of these in the Apple world. Yes, not every time, but you at least once a week should be powering the machine fully off and back up on again to clear the processor. And by the way, fun fact, Jake, did you know that what slows your computer up the most on an Apple computer is when you have things on the desktop. It's not how much stuff you have in the computer, the desktop, because that's where the processor pulls most of its fastest information from. So if you're that person that has like 8000 things on your desktop.

Candace Galiffa (31:13.678)
I need to know the answer.

Jake Dreyfuss (31:20.157)
You.

Jake Dreyfuss (31:35.645)
Yep.

Lance Pendleton (31:41.719)
Yeah, you want to speed the machine up? Put all of those things into one folder on your desktop. Watch how much faster the computer runs. Crazy.

Jake Dreyfuss (31:43.785)
Canada.

Candace Galiffa (31:48.318)
Really? See? I don't know when the last time I turned my computer off. Again, that's probably why it hates me so much.

Jake Dreyfuss (31:49.97)
I have a hy... Yeah. I have a hypothesis. Candice, sorry if it's too personal. How often do you wash your jeans?

Candace Galiffa (31:59.242)
I watch my jeans probably like every two to three wears. That's what you're supposed to do with lady jeans.

Jake Dreyfuss (32:03.395)
Oh, no, I'm wrong.

Lance Pendleton (32:06.463)
I-

Jake Dreyfuss (32:06.861)
Okay. You know, first of all, let's you're definitely shutting off your laptop every time you close it. That's that is psychotic. That is psychotic.

Lance Pendleton (32:13.591)
No, no, I really don't. I don't, not every time. No, at least once a week, maybe twice a week, I'll power everything off and let it rest, but no. But that's okay.

Jake Dreyfuss (32:21.213)
Okay.

Candace Galiffa (32:21.622)
Guys, I need to know how often are you washing your jeans? My husband would be mortified. He's like, I wash my clothes every time I wear them. I'm stinky. You are!

Jake Dreyfuss (32:28.445)
voice a year. Well, with the exception of one after I fly, we've discussed this on a previous podcast.

Candace Galiffa (32:35.415)
Wait, are you being serious? You wash your jeans twice a year? Lance, how often do you wash your jeans?

Lance Pendleton (32:36.451)
Oh, no, he's serious. He's serious. Yeah. Well, first of all, I don't really wear jeans thanks to COVID. Everything is sweat material with spandex in my life now because I've just, you know, I've given up. I'm just gonna be honest, I've given up. But like, but no, if I do, every time I wear them, why? Because I don't wear them that often. And I don't know that just for me, it seems weird. I don't know. But we, go back, if you wanna listen to our previous podcast, there's a whole discussion around that and socks in bed and you know, all that good stuff. Socks in bed, not.

Jake Dreyfuss (32:37.745)
Yeah.

Candace Galiffa (32:49.068)
I'm sorry.

Candace Galiffa (33:03.086)
Boom. You shouldn't have socks in bed. Yeah, no. Absolutely not. Strong no.

Jake Dreyfuss (33:05.008)
It was right, Candice. You is right.

Lance Pendleton (33:06.487)
Not to know for you, huh? By the way, Jake, fun story for me, I was like feeling like a big winner because I visited my mother-in-law the other day and she was like, I listened to your podcast. It was so much fun. And by the way, I wear socks in bed too. I was like, that's not helping me. Thank you. I'm so glad you enjoyed the podcast. Love that you're listening. But yeah, I did not feel good on that one.

Jake Dreyfuss (33:21.897)
Hehehehehe

Jake Dreyfuss (33:25.941)
Love it. Exactly. Well, well, there you have it. There you have it. Taxes, Candice, thank you so much. Taxes is a topic we all try to avoid. It's not as scary anymore to me after spending some time with Candice here. Hope you guys all feel the same way. Thank you so much for joining us. We really appreciate it. And of course, if you want to get in touch with Candice, all of our contact info is in the show notes. So please do.

Lance Pendleton (33:48.407)
And we can't thank you enough. I can't thank you enough for all the wonderful things you've done for me, my life, my family's life, my business. It took me years to find you, but now I can't quit you. So I am super grateful for everything you've done for me and all of us. And remember, keep asking questions. Don't forget to subscribe to the show wherever you get your podcasts so you don't miss an episode. And stay in tune for us for more tips on us trying to master the art of adulting and speaking apparently.

Candace Galiffa (33:48.622)
Thank you for having me.

Candace Galiffa (33:57.952)
Thank you.

Jake Dreyfuss (34:15.445)
I'm going to go ahead and turn it off.

Lance Pendleton (34:15.695)
But for us, it's all about trying to master the art of adulting. So thank you so much, everybody. And thanks again, Candice.

Candace Galiffa (34:15.798)
Yeah.

Jake Dreyfuss (34:21.353)
Thanks, Candice.

Candace Galiffa (34:21.582)
Thanks for having me, guys.