How to Stop Overpaying in Taxes

[00:00:00] and Entertainment Insights Don't Take Life Too Seriously. Welcome to Brainsky Unleashed.

[00:00:09] Hello and welcome to Brainsky Unleashed. Today we are being joined by Roger Pearson. He

[00:00:16] is an IRS enrolled agent which actually does have a meaning. He is a master with taxes

[00:00:22] and I thought given the fact that we've got some new tax things going on in the books

[00:00:27] as far as the self-employment tax credit, it would be worth kind of digging into that.

[00:00:31] And also just the fact that as I've said many times on this podcast we are all paying

[00:00:35] too much in tax. I thought it would be kind of a nice time to touch on this again and

[00:00:39] we're getting close to end of the year. So Roger welcome to the program. Thank you for

[00:00:44] an Emmy. You are quite welcome. So let's begin with what is that what does that IRS

[00:00:50] mean? The enrolled agent. Yeah the enrolled agent is like being a PhD in the tax loan.

[00:00:56] It's the highest classification that you get as far as tax knowledge and it allows

[00:01:03] you to represent clients before the IRS which I do a lot of also because most people just

[00:01:09] do not want to deal with the IRS. They can give me a power of attorney and I can help

[00:01:14] them out. But then there are some various people they can do this. He can do them or he

[00:01:19] can do that. But enrolled agents are the only ones that get their certification by actually

[00:01:24] tax knowledge. You have to actually take three, three hour long IRS tests which are not

[00:01:30] fun because they're written in IRA and have passed all three before you get the certification.

[00:01:36] You have to renew that every three years and you have to take about 25 hours of continuing

[00:01:41] education every year just to keep off on the latest tax wav. So if you want somebody knowledgeable

[00:01:46] tax wav that's the best type of person to hide. Which is important because what we've discovered

[00:01:54] through our own research is that essentially as approximately 77,000 pages of tax law, regulation

[00:02:00] and guidance that are on the books. So therefore someone like yourself who had to do a lot of studying

[00:02:04] probably is a lot more familiar with a larger portion of those 77,000 pages versus your conventional

[00:02:10] run of the middle CPA fair to say. Yeah I mean it just take a lot of hours and it just keep up

[00:02:16] on all the changes Congress makes every year. Yes and we can always rely on Congress to screw

[00:02:23] everything up. It's true. So recently what would cross my sphere is the self-employment tax credit.

[00:02:34] Are you familiar with this at all? Self-employment tax credit. Yes, self-employed tax credit,

[00:02:40] SETC and if you're not that's okay it's just something that happened across my desk

[00:02:46] and it involves from the CARES Act through the family blah blah blah reference this in that.

[00:02:52] But basically there's a tax credit out there now for any of the 1099 gig workers

[00:02:57] who are getting 1040 SES during COVID 2020 2021 where they may be eligible up to like $32,000

[00:03:05] in tax credits for how they were affected in COVID. Are you familiar with this one at all?

[00:03:08] Oh yeah it was part of the CARES Act where you got credits for like if you had actually

[00:03:17] employees in the business, you could get credit back for paying them while they were being laid off

[00:03:21] and things like that. And that also applies to self-employed people if they had to stop doing what

[00:03:27] they were normally doing because of the restrictions that the government put on them just like if

[00:03:32] you hired an employee you think got the credit as a sole supplier you could also get that credit.

[00:03:37] Right and so they had the they had the ERTC which is the employer retention tax credit

[00:03:41] which is the first thing mentioned then they had the SETC which it's getting more attention you

[00:03:45] see a lot more of it on the web. The first thing I want to ask because you are a tax professional

[00:03:50] you are aware of this it is on the books one question I get a lot from some of my clients with

[00:03:55] with profit max again profit max keep your cash that's profitmax.co keep your cash one of the

[00:04:01] uh throw a commercial in there. One of the things that I get a lot is isn't legitimate can you

[00:04:06] speak to the legitimacy of these programs? Well they're long I mean they're legitimate

[00:04:12] yeah maybe you're referring to all the advertising that's out there right now.

[00:04:17] Conno other I get it across my desk every single day and IRS has actually come out and

[00:04:25] give a warning that some of these aren't quite legitimate they're just they're

[00:04:30] they're people are playing kind of a con game they'll take your money to process all these

[00:04:34] funds for you. Even if you don't qualify I guess they're taking you money to tell you you

[00:04:41] don't qualify so I'd be very skeptical of all those advertising and I get the text mail that

[00:04:47] come in about that right now are just remarkable. Yeah I'm I'm quite well aware of some of

[00:04:55] that the firm that we work with with profit max keep your cash is a firm that will they'll take

[00:05:04] it to posit but the checks go to you if you get them and if you don't it's in writing that you know

[00:05:09] if you don't qualify everything's refunded one of the things that really bothers me is there's

[00:05:14] a lot of firms out there that will take your money upfront and then they will wait for the

[00:05:19] checks come to them and then they will send you the checks or they'll do it where you pay

[00:05:23] nothing upfront the checks go to the firm and then you wait for them to pay you well that's not a

[00:05:29] good scenario either you know I think you know at least with our firm we're quite comfortable with

[00:05:33] making sure the checks go to the taxpayer from the government and not that's that's definitely

[00:05:38] something that should be looked out for so let me pivot for a little bit.

[00:05:42] One thing that we know is that 93% of business owners overpay their taxes they overpaying

[00:05:47] were between 31 and 74% based on our research somewhere in there I'm sure that can be verified

[00:05:55] but that being the case what that would indicate is that most people who are in business

[00:06:00] are probably overpaying in taxes because they're not able to take advantage of all 77,000 pages

[00:06:07] of what's in the tax code is that a fair assessment. I think that's a fair assessment

[00:06:12] especially the newer people that they're their first business and their first time out.

[00:06:17] One of the things that I get at teaching my clients whether it's at the task they have

[00:06:22] searched through online courses is that when you're going in and you're hiring a tax professional

[00:06:28] or you're hiring a CPA or an accountability thing you need to sit down and interview these people

[00:06:33] you just like you would interview. I mean if you have plumbing business and you were to hire a

[00:06:39] plumber for it, you would sit down and you would determine whether they knew what they were doing

[00:06:44] but you could do that because you had the knowledge to do that. Ask the right questions

[00:06:49] especially for our target exactly and the frame thing is true when you're dealing with your money

[00:06:56] you're attacked as you're accounting and everything you need to sit down and you need to be able to

[00:07:01] interview these people before you bring them on your team. The problem is that our educational systems

[00:07:08] in this country do not teach this stuff they don't write. I mean for several years I taught

[00:07:15] tax classes and I would have business majors come into my class and they would come up and

[00:07:23] they'd say, you know our professors we ask our professors about this type of stuff and they say

[00:07:28] well we don't teach that in college you have to go someplace else and learn it

[00:07:31] and that just blew me away when I first heard that but it was consistently pretty true over the year

[00:07:37] but so there I feel there's three pillars that every business is built on. You've got to know your

[00:07:47] legal foundations all the different legal formats where they pros and cons and each of them

[00:07:52] how to organize your papers so paperwork so that not doing the accounting necessarily but how

[00:07:59] to organize the paperwork so the people you get hired do the best job for you and of course

[00:08:04] the tax implications each of the different legal format and there's a lot of things in there

[00:08:11] that you need to know even if you just know the basic I'm not saying you should be an expert on it

[00:08:15] that's why you're going on hiring but you need to know the basics so that you go any you can interview

[00:08:20] a person to tell if they're the right person for your business. So let me stop here right there

[00:08:26] because you bring up an interesting point with the idea of even interviewing people right so

[00:08:33] you know if you've got a clogged toilet you're going to call whatever plumbers available and

[00:08:37] they're going to come and they're going to run a snake and they're going to hopefully clear the

[00:08:40] drain line and you're done so they you don't necessarily need a long and a reprocess for that

[00:08:45] can you fix me clearly however if you're going to remodel a bathroom you know if you're going to

[00:08:51] build a bathroom and you need a plumber where you need a contractor you're probably going to meet

[00:08:55] with multiple ones. Why is it most people don't get second and third opinions on their accounting?

[00:09:02] Why is that they don't see it as important that's insane it isn't saying but you know they're just

[00:09:09] well Uncle Joe recommended this person but did he know how to interview that person?

[00:09:17] Chances are not. Sometimes you get some of the things for us there are so many

[00:09:26] steepy Asian accounting for us out there all they do is once you're there drop everything off

[00:09:31] on their death and say I'll call you when I'm done and if somebody's a bit I would run the other

[00:09:37] run the other way if somebody does that. If you're going to get a good accountant or a tax

[00:09:42] professional they need to be willing to fit down with you and discuss your business and learn how

[00:09:47] you run your business I mean I've and I've done that with my clients I mean I've painters and

[00:09:52] especially in their trade I know how painting companies work and plumbing company works,

[00:09:57] electrical company works because I've worked with all of these people that that ran these

[00:10:01] types of businesses and I had to fit down with them and have interviewed it's basically first two or

[00:10:06] three years you're just taking about three years before you really have a good working relationship

[00:10:12] with a professional and each year you need to be sitting down and working with these people

[00:10:18] they need to be able yeah how many times during a year should should you be meeting with the CPA

[00:10:24] at least twice what's when you do it taxes but you should also be in the time frame of November

[00:10:30] be sitting down with your accountant and also saying okay where are we standing and do for us

[00:10:37] and if you don't send a leak 90% of what you're the taxes you owe you're going to be penalized you

[00:10:42] have pay penalties so do you need to make an estimated and additional estimated tax payment before

[00:10:48] the end of the year so that you don't incurred penalties these are the types of things that you

[00:10:52] need to know a new business needs to know what their their profit and loss is at any time during the

[00:10:59] year because there's well faith in most small businesses fail and one of the reasons they failed

[00:11:07] is they wait for a full year before they find out if they made any money or not usually when

[00:11:12] they sit out and make their taxes or somebody had them a P.I.L you should be doing that on a monthly

[00:11:17] or a minimum quarterly business in the first three years of your business to know where you're standing

[00:11:23] is it is it an expectation a reasonable expectation or it's a never thing never will happen I mean

[00:11:32] you know it's one thing to say that someone should look at their P.N.L you know I've been in business for

[00:11:39] 20 years just just shy of 20 years I guess and I've never had anyone from my accounting teams

[00:11:47] whoever they've been as we've gone through iterations and my businesses from growth and all

[00:11:51] this no one's ever said hey you know do you know how to read P.N.L can we can we set your P.N.L

[00:11:56] up you know one mistake that we made and I'll share this with my audience is that for years

[00:12:04] we did a P.N.L through quick books we put things in we got some very very basic guidance

[00:12:10] but when when we try to have a business valuation done we literally presented a bowl of spaghetti

[00:12:17] we didn't you know they couldn't figure out if we were making money and if they couldn't

[00:12:20] figure out if we were making money then what we had was feelings that we believe we're making money

[00:12:25] and in the end you look at it and once once all this spaghetti is straight now you go look at that

[00:12:28] you know this is where yet so what would you recommend people do I mean is is this something that they

[00:12:33] should talk to their CPAs about or there's certain courses they should take even to be able to just

[00:12:37] understand how to format your quick books to read a P.N.L. Quick books is probably I mean it's one of

[00:12:42] the most popular accounting stuff for us out there really it but on the other hand it's one

[00:12:48] of the most complex ones because you can do so much if you're gonna if you're gonna do it yourself

[00:12:53] you need to take a course on it you really really do to understand it because it's vital when

[00:12:58] you first set up an accounting system I mean it can be changed later on but it's vital if it's

[00:13:03] it makes your life so much easier if you sit down and learn about it and then it up correctly

[00:13:08] it can be right there yeah right out of the gate that chart of accounts especially is the thing

[00:13:12] that most people mess up on okay um then for small businesses are they guilty of this um better off

[00:13:24] you know with with husband and wife or a partner or whatever uh doing the books or should

[00:13:31] right out of the gate should they actually if they're especially new sign up to have a bookkeeper

[00:13:35] do it for a little bit just so that way it's right I would I would find a good bookkeeper

[00:13:40] I really would uh there's a lot of low private firms out there they won't charge you that much

[00:13:45] to do your book at least until you're comfortable with it if you're gonna do it yourself then you

[00:13:50] need to have some prior experience in it or you need to take the education to know how to send it up

[00:13:56] properly um and you can do it yourself the tools are out there the software's out there the systems

[00:14:02] are out there but the problem with most small business people is they just want to get out there

[00:14:07] and start working it start making money and dreams of being successful and everything else and

[00:14:12] they don't want to deal with a new share of running a business or or or learning how to run a business

[00:14:17] yeah yeah and and I mean being a small business person I understand that um you know we we learn

[00:14:25] the hard way that you know maybe we should have a bookkeeper set us up maybe we should have bookkeeper

[00:14:29] runs for a month or two just so that way everything begins to funnel through it properly and the

[00:14:33] books are good you know you get you get oh god for us it was 12 years down the road and you know

[00:14:39] something wants to look at the books you want to get a valuation you want to where you're at and

[00:14:42] you go oh oh what is this you know it's a terrible situation um let me talk to you about

[00:14:49] CPAs for a moment because through some of the research that we've done we've found that

[00:14:55] CPAs typically they all mean very well they all care they're all you probably have some scumbags

[00:15:02] out there right but for the most part there's there they're there they're a class of people who

[00:15:06] are clearly the way their brains function they love numbers they love their analytical

[00:15:14] but they have a big problem which is that they have a limitation on time

[00:15:18] right where does that limitation on time come from is there is there any way for a bookkeeper to

[00:15:25] have enough time to really really maximize the the tax code for every single client that they have

[00:15:34] or this is just not something that's realistic and practical should people have a team instead of

[00:15:40] just simply one CPA but maybe you have one firm that focuses forward what are you doing next three

[00:15:45] to five years coming up with a strategy you should be doing this this and this and then you've

[00:15:50] got your CPA who does your filing and make sure that you know everything you know all the loose

[00:15:54] sounds are tied up does that make sense or should you just stick with one no no I think it

[00:15:58] makes tough to me because most from my experience from one xt of the last two decades is that most

[00:16:04] CPA the tax part is the side business and there's so many firms all they do is file extensions for

[00:16:13] everybody and advise people crazy yeah especially when they're waiting for a k one or

[00:16:17] or something or something to come down so they can do their personal and you've got it all tied

[00:16:23] up and that's unfortunate if it were me giving advice I'd say find one person do your books

[00:16:30] find a good tax guy to do the rest of it because they're going to have more time you know a CPA

[00:16:38] during tax time is I mean they've got their whole accounting thing they've got to get their year-end

[00:16:44] profit lot they went out to all their clients so the tax that can even be done I mean they're really

[00:16:50] slammed already so if you really want the best servers company-wide then I would recommend too and

[00:16:57] here's the other thing that most people don't know I found most people assume CPAs are experts in

[00:17:04] tax that's just the prevailing thing out there the people I talk to and that's not only two because

[00:17:12] CPAs are not required to take any tax classes other than a couple of them when they first became

[00:17:17] a CPA they have to take continue education hours every year but most of them will take it in

[00:17:24] accounting of course now I'm very few and so if you're interviewing a CPA that you want to also

[00:17:31] have do your taxes one of the basic questions you're going to ask them if how many continue

[00:17:36] your education clubs hours a year do you take in a subject of tax and if they don't then they

[00:17:44] shouldn't be doing your taxes that's that's a great question you know that's actually one

[00:17:51] that I've never asked and I probably need it at least I think what the firm that I'm with now

[00:17:56] somewhat confident but I'm not 100% so that's a great question to ask I think everyone should be

[00:18:02] asking that question you know based on the fact that you know we've identified the tax code being

[00:18:07] as complicated as we all know that you're probably leaving money on the table if you don't have

[00:18:13] someone who focuses on taxes and just like you said would you would you put if you had a guess

[00:18:19] all right and it means it's straight up conjecture you know pulling this number out of your

[00:18:23] hand guess how many CPAs or what percentage of CPAs in the country really really know the tax

[00:18:33] code well are we talking like 50% is a number that's astonishing like 10% no I'd say 10 to 15%

[00:18:41] really are good and there are some there are some they they really really want to

[00:18:46] be good and they take the classes they keep up with the courses and everything else but

[00:18:52] so you need to know if you're going to have a CPA do your taxes you're going to need to know

[00:18:56] how much tax knowledge they have or they shouldn't be doing it don't assume that they take a lot of

[00:19:02] tax classes and they keep up with the latest I mean they have to know the basic right but

[00:19:08] especially if you have a growing business or if you have a business that you you want to grow

[00:19:13] and sell or all those type of things you really need to know something that knows what they're

[00:19:17] doing tax-wide and the other thing is that you know there's there's things like if you have a

[00:19:23] business where you're buying equipment of course you have to do what's called to appreciate that

[00:19:27] otherwise you can't write the whole thing off the year if it's over $2,500 you're going to have

[00:19:32] write it off on multiple years although there's different ways to fool with that

[00:19:37] and do a good tax professional it's got to sit down with you and I'm going to say okay

[00:19:42] how much of the deductions do we need to take this year versus what is your projections to be

[00:19:47] your profit any project growth next year do we need to move some of those deductions over

[00:19:52] to next year to help compensate for that when they just be wasted this year these are the type

[00:19:58] of conversations of tax professionals going to have for you well let's say I mean in my head I think

[00:20:05] to myself you know a god forbid but you know let's say god forbid you know uh-oh we've got an audit

[00:20:12] first thing in my head is going to be do I want my CPA with meaning for the audit or I mean

[00:20:19] the quality of their work should be questioned is that why it's even being audited or you know

[00:20:23] should I should I immediately focus on someone like yourself who is the expert in that situation

[00:20:29] and can help get the business owner out of a jam the first thing I tell my client is I don't want

[00:20:35] you there because you're going to say something which is going to spark something another question

[00:20:41] so that's why you want to hire somebody to represent you if you're going into a not necessary

[00:20:46] a correspondent on it but if you have to sit down with an actual auditor you don't want to be

[00:20:52] there you're going to say something silly and do yourself in trouble life that happened because

[00:20:56] it's just that I'm being there um so you're going to want to know you're going to want to hire the

[00:21:02] person that has the best knowledge of uh of uh of uh of text knowledge and the other thing you're

[00:21:08] going to have to ask it well how many audits that you don't how many types if you had to sit out

[00:21:13] with an auditor and take care of this problem on those of those are the other things that you need to know

[00:21:20] I mean based on you know your your background and you know history how many have you done

[00:21:27] I've done about a doctor and of them now okay you know now I'm going to for live ones you know

[00:21:34] that the correspondent thought if I do you know it doesn't a year so it's a high number of

[00:21:39] there yeah because those are usually correspondence audits or I um I have a we have a backline into

[00:21:49] the IRF that's a professional that I can get and I can work out my client okay so I mean if it ever

[00:21:59] happens to me Roger you might be my guy um so uh we are uh running a little bit short on time here

[00:22:08] I uh I do want to ask how can people find you I mean first of all I need to make sure I could find

[00:22:13] you because if I get an audit you're my guy so how can people find you Roger my corporate website is

[00:22:20] uh Figaltagnologies.com Figalt spelled like the bird F-E-A-G-U-L technologies.com and it

[00:22:27] head links to everything I do um I have some one on YouTube channel I'm working on I have some

[00:22:33] free courses on my website I have links to my paid courses also where I actually teach the

[00:22:39] foundational aspect of a business so that you know what you need to know you know it's no

[00:22:45] little thing you don't know what you need to know until you need to know it and um that you can

[00:22:50] learn all of the basic three pillars of the power business so that you can make better business

[00:22:55] decision oh no that's fair enough so that's how they can find you do you have any last words of advice

[00:23:01] wisdom anything you want to you know bestow upon those who listen to our fine voices

[00:23:09] ask a lot of questions to anybody that's dealing with your money

[00:23:14] yeah that's the best thing that you can do yeah that's that's that's that's true all right well

[00:23:20] Roger thank you so much for joining it's a pleasure having you on uh I found this to be enjoyable

[00:23:25] and enlightening and uh and now I got a new audit guy if I need one so I'm thrilled you know you

[00:23:30] passed the test and uh and and uh please everyone go to that website and learn something you know

[00:23:38] it's not gonna hurt you to learn more because what we've already figured out is all of us are

[00:23:43] basically shooting ourselves in the foot while smiling and not even recognizing what we're doing

[00:23:48] that's true all right well thank you again