10 Important Tax and Write-Off Reminders for Electrical Contractors

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Welcome to the Master of the NEEC podcast, the ultimate
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destination for anyone passionate about the electrical trade. Whether you're
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a season electrician and eager apprentice, or just someone who
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wants to dive deep into the world of electrical work,
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You've come to.
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The right place. Join your host, Paul.
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Abernavi, a true authority in the industry with over thirty
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eight years of trade experience, as he electrifies your mind
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within depth discussions, expertips, and valuable insights that.
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Will keep you ahead of the curve.
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Each episode, Paul will illuminate the complexities of the trade,
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decode the national electrical code, and share the latest industry trends,
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all while empowering you to take your electrical career to
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the next level. So gear up, plug in, and get
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ready to supercharge your knowledge because with the Master of
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the NEEC podcast, the power is in your hands.
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Now get ready. Here is your host, Paul Abernavi. What up, everybody?
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Welcome to another episode of Master the NEC, the podcast
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where I Paul Avernet. They talk about anything electrically related
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or electrical business related, industry news, all those type of
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things revolving around obviously the national electrical code and all
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things are electrical. And on today's episode, I want to
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talk a little bit about we're okay, we're in August now,
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and we have to start thinking about tax time. We
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have to start thinking as a business. If you're in
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business or you're contemplating getting into business for yourself and
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all those type of things. There's only two things that
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are guaranteed in life, and that is death and taxes.
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And while many of us you can't do anything about death,
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it is what it is. You can eat well, but
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then you have somebody you know who died at thirty, right,
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and they have just appeared to be healthy as can be.
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So that we can in control, we can try, we
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can think, we do, we can follow the quote science,
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but you really can't control that. We're just blessed her
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every day that we get. But taxes you can do
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something about. And the answer is not saying I'm not
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gonna pay or trying to circumvent paying. The fact of
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the matter is you're gonna pay taxes. And that's just
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how our economy works. This is not a democratic socialism.
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It never should be. Where you earn the money, it's
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your money, you use it as you deem fit, but
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you're gonna pay your fair share. And for everybody that
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says millionaires and billionaires don't pay their fair share, they
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don't understand that they run companies and businesses and they
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pay a lot more taxes. It's not just about income
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tax there's payroll taxes, there's other taxes. So again, I
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don't want to get into that. And you know, the
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people that go all the way to extremes want to
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talk about that, but that's not what we're gonna talk
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about today. I'm focused on business. I'm focused on your
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electrical business. And there's a guy I'll say this right
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now before I get into the talking of about taxes.
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There's a guy on TikTok. He's the real tax guy.
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That is his actual use your name if you go
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on TikTok. He's called the real tax guy. And this
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guy gives very solid tax advice in fact, the same
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type of Now, my business structure is very different, whereas
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most of the stuff won't benefit the Electrical Code Academy
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because I have very little going out and more coming
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in and going out other than marketing stuff and normal
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business expenses that just be normal but not invoices and
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all this kind of stuff that you may experience in
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your contracting business. So so a lot of the things
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they'll talk about is not really directed specifically to me,
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but it does bring back the fact that I was
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an electrical contractor for many years in multiple states, and
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and how I did my business, and you might be
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thinking about that, and it's you know, it's it's I
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always tell people when when I'm in the summer, I'm
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thinking about how I'm going to sustain myself and winter,
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and in the winter, I'm gearing up for making that
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money in the in the summer, fall and spring. So
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obviously taxes have to come into that equation. Now, before
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we get started talking about taxes, I want to make
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it very clear. I am not a tax expert. I
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am not a CPA, I am not an accountant. I
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am not somebody that you take one hundred tax advice.
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What I'm providing you is information that I've learned along
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my journey. But again, you do your own due diligence. Again, disclaimer,
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I am not a tax guy. I'm not giving tax advice.
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I'm not giving legal advice. All of that up you
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know up front, Now, if you want to stop listening
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at that point, that's your prerogative. But I'm going to
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talk about business and things that just kind of make
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you think about business when it comes to taxes and preparing,
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because you need to prepare early and your whole year.
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You need to be understanding the structure so that you
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don't get hit by any prizes at the end of
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the year. Okay, So, for example, I am a Chapter
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S corporation, not a C. A Chapter S. It all
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passes through to me personally, and a K one, but
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I do get the benefits of business expenses and things
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like that that are for the business, not for me.
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For the business, so you know, differs from an LLC. Again,
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I'm not a lawyer. I'm not telling you how to
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structure your business. But an LLC is more so for risk.
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It's not really for anything else you're gonna have to
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It basically operates just like a sole proprietorship, but it
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does separate you from the business. So if you're making
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a million dollars a year or more, or your businesses
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have substantial amount of income coming in, then you need
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to talk to somebody that can show you how to
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structure that and possibly reduce your personal risk. Right, But
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that's kind of what these different categories do. There were
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many reasons why I chose and this isn't my first
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chapter S. I've had a chapter s all the way
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back when I had Canine Grooming Incorporated and Electrical Service Specialists,
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uh and all that, which was my contracting businesses. And
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I owned boarding kennels things like that and so uh
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and grooming salons for pets and things. So I've always
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had some kind of structure to my business. Okay, So
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just you know, make make the right decisions. It's okay
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to start off as a sole proprietor. I just remember
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that if your business doesn't have a lot of assets,
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it really doesn't matter. But as your business starts growing,
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you can get assets, and you might want to think
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about the risk involved. And of course, and that's the
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case there, then you're going to you know, need to
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talk to somebody and see what's your best best move. Okay,
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all right, So today I want to kind of talk
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about taxes in general from a you know, contractors perspective,
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and we're going to be addressing things like federal taxes,
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state rules, and obviously I'm going to talk contractor business structure,
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all part of this kind of this overreaching conversation and
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again not giving tax advice, but kind of telling you
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how to think about things. And you know, I'll just
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start off right away into the one that I hear
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all the time, and that is a write off does
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not make something free. So I hear this a lot
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where people say, well, I'm just going to go buy
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it because it's a write off. I always tell people, first,
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you got to have money in your account to do this, okay,
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but it's not a one hundred percent right off. For example,
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if I'm spending ten thousand dollars dollars solely to get
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a deduction, that does not save me ten thousand in taxes. Okay.
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That's that's probably one of the biggest misconceptions that people
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out there. And I'm sure the tax guy, the real
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tax guy, will make it clear to people if you
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reach him out and he'll do three years of your taxes,
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he'll look it over for free. So if you're in
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business and you're starting out, man, take it advantage of
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this guy's offer over on TikTok he's called the real
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tax guy and he's legit. Okay, So if I'm gonna
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spend If I'm thinking in my business, and people always
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do this, you're getting and I've done this, you're getting
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towards the end of the year, or you're in midyear
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and you're thinking, Okay, I'm making money. I need to
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get these write offs. Okay, So you spend ten thousand
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dollars and you're thinking that you're going to get ten
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thousand dollars, and you're gonna, say, paying ten thousand dollars
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in taxes. So at the estimated combined at tax rate
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of say thirty percent, combined state, federal, whatnot, it might
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save approximately three thousand dollars, but the business still had
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to spend the other seven thousand dollars. So you're not
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getting a hundred percent. And that's what a lot of
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people seem to think, right, is that I'm going to
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get one hundred percent back off my taxes. It's just
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not how it works. Remember now, never buy a truck, tools,
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or piece of equipment merely because someone says you can
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write it off. Okay, that's the easiest. That's probably the
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number one thing I hear people say, well, I get
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it now. If you need something and you need it, anyway,
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that's great. I mean, you're gonna get something off because
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you can deduct it, but it's not a one hundred percent.
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So I'm like every I hear people that say that
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all the time. Well, it just go this, you can
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write it off. Yeah, well it doesn't make sense to
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spend ten thousand dollars only to write off three thousand.
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You get what I'm saying. So that's the first thing
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I remind you now and again. If you need it,
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you need it, and it doesn't really matter. The write
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off is a bonus, okay. And that's the way I
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always think about it. So I never go in and say, God,
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I'm gonna write I'm gonna buy this because I'm gonna
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write it off. No, because everybody thinks, well not everybody.
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A lot of people think that if I spend ten thousand,
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I can write ten thousand off my taxes. Well that
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might be what you write on the form, but in
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your combined to tax rate, that is not what's gonna happen.
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You're not writing off ten thousand, Okay. So that's a
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first one that I guess that is a biggie because
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that is something and I am sure that real tax
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guy hears all the time, and other people hear that
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all the time. So now number two, I guess, I
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guess it would be the expense must be ordinary, necessary,
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ingenuine business related. So the IRS generally requires a adducted
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expense to be both. Number one, it needs to be ordinary.
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And what that means is it's common and accepted in
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the electrical contracting business. If you're an electric contractor, Okay,
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so you know you could go buy something and it
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would be ordinary. Let me give you example. I bought
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an excavator, and you know, and and I'm in the
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electrical education business and training courses and whatnot. I did
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not write off that excavator. Now, some people say, yeah,
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but you're still electrical. You could have done some work.
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But you know, the vast majority of the work I
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do with it is around my house. It's it's it's
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my to. But there are folks out there who are
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under the misconception is, oh, I can need it for
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something else, so let me just buy it and write
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it off. If it's not ordinary, common and accepted in
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whatever your business structure is, then you're throwing up a
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red flag. And so I don't do it. I just
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you know, just bought it and pay my taxes on it,
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and it's just or just buy it from personal expenses.
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It is what it is. I'm not going to try
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to write it off as a business expense. Now, I'm
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sure people want to argue and say there's blurred lines,
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but those people obviously have never been audited and they
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don't have to explain that to somebody. They just did
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it and that's you know, that's their prerogative. But it's
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important to distinguish the fact that the IRS looks at it.
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And again, I'm not an IRS expert. I am not
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a tax expert. But if you ask your tax experts,
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they're going to tell you that to write it off,
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it must be ordinary, necessary, and genuinely business related. Now,
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the first one was ordinary, the next one's necessary. If
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it's helpful, helpful, and appropriate for operating the business, then
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there you go. It is a legitimate something that you
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can put down as an expense. Now, personal and family
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expenses do not become deductible merely because they were paid
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from the business account. That's called mixed use. Items such
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as cell phone, internet service, vehicle and computers must generally
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be divided between business and personal use. Okay, So that
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that's the one where you know, people want to you know,
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get it confused and where it needs to be. And
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my simple example for my cell phone system, you know,
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business is the fact that for me, I pay my
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cell phone visible one year, one fee, and so it's
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one time and well over ninety five percent of its
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use is for business use. It's the number I list
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on my websites. It's a number, so it is widely
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used as my business. Now. Can I make a personal
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call with it, absolutely, But the fact of the matter
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is the vast majority, overwhelming majority is for business. My
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internet service, my internet service here is for my academy.
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It allows me to maintain my websites. It allows me
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to do this constantly. I have a NAS system. It's
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constantly connected to the internet. Everything I back up on it.
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So again, now vehicles, I don't write any of it off. Computers,
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I don't write any of that off. Even though these
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computers are used for business, they were paid for a
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long time ago. There is no you know anything. Now,
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if I bought a new computer and it was for
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the business, then that would be a different story. But
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trying to write off personal things simply because you're using
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as part of your business, can create a mixed use
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situation where you're gonna have to explain it, okay, And
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again there's irs documents for that. You can ask the
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real tax guy, you know, but there's lines in there
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that get drawn. And again I'm not a tax expert.
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And as long as you can explain it or justify
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it and be able to document it and and things
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like that, I mean, they can't. It's to me, it
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would be very hard for them to tell you that
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you're you're using your internet service for personal when you're like, no,
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I'm really not. I'm only really using the Internet when
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I'm working on it, you know, and you really can't
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segment it out. Or if you say, look, I look,
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I live rule my phone. My cell phone service is
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purely business. Now somebody might call me, but most of
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my interaction is business. So these are things that you
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need to document, These are things that you need to justify.
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But again it doesn't I mean, if I worked in
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a business and somebody called me on a personal nature,
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that doesn't immediately mean that it's not business. It's just
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somebody called that number, right, So again there are lines there.
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But if it's majortaly used for business activities. Again, that's
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something you'd have to talk to your tax guide that
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type of thing. But my case, a cell phone is
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like what four hundred bucks a year and that's it unlimited,
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so you know, is what it is. Uh. The next
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thing that we would think about is keep business. And
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this is something I tell my son, I tell other
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people as well, and this is something that I did
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early on in my academy is keep business and personal
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money separate. So every contractor should have a dedicated business
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checking account and preferably a dedicated business credit card. Okay, Now,
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save re seats, invoices, cancel checks, customer payment records, loan documents,
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payroll records, proof of business purposes for each expense. The
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IRS says that books must be clearly show income, deductions
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and credit and the supporting documents must substantiate the entries. Now,
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for me, I use quick books online and I tie
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every to my business credit card, and I pay all
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credit cards off every month. I never have a reoccurring balance.
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Dave Ramsey he hates credit cards because he understands that
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the vast majority of people don't know how to manage
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your credit card. When you're putting large expenses on a
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credit card and you don't have the ability to pay
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it off each month, and this can be reoccurring, and
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that's just throwing money down the drain. So the first
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thing I tell business owners is if you get a
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business credit card, preferably one that earns your points things
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like that, that you pay it off every month you use.
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That is your credit line. But you have to be
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prepared to pay it off. Do not continue it now
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as far as receipts and everything, I don't keep receipts
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on those purchases, and I'm probably doing wrong. So again,
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don't listen to me. But all of my stuff is
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tied to the credit card, and the credit card puts
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it straight into my quick books online, which I have
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payroll as well. Now I pay one hundred bucks a
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month for that peace of mind. I'm telling you, folks,
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an I'm not here stomping quick book pro But it
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was the best decision I ever made because for years
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I did my own payrolls. I had to worry about
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all that I had. You know, I had a CPA
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that took help k CA, dude. The moment that I
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switched to quick Books Online and their payroll system, even
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the basic payroll model that they take out the taxes
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they pay, the taxes they pay the state. It made
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my life so much easier because you know what, I'm
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an electrician. I ain't into that shit. I'm not. I
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don't like the books. I don't like that part of
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the business. So for me, was it worth twelve hundred
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dollars a year to have something keep track of all
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my expenses? Because everything gets put in the right category.
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Then when I do taxes, I just go through and
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I make sure that in the category, and I take
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notes through the year on this meeting, that meaning this expense.
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But usually everything is covered in the invoice, I mean
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in the receipt right, But if you do invoices in
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things like that, if you have loan documents and all that.
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And now my payroll records are always automatically done by
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quick Books Online. I have the payroll service. Okay, it
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does it all automatically, so it keeps track of that.
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But the general rule from the IRS is many tax
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records should be retained for at least three years, employment
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tax records for at least four years, and property records
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until after the property is sold and the applicable limitation
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period expires. Well again, you know when you you know,
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I have tax records going back fifteen years. I could
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get rid of them, but I'm paranoid. I just keep
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them because it's just paper, right, I just keep them
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in a filing cabinet. It's just it's but you don't
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have to. My employment tax records are all kept online
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and I print that off as a report every year.
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So I keep those records, right, Uh, And you've got
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to get used to that. So I know so many
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people that are young that are starting in business and
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they hate keeping records. They hate it. But the first
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thing any new business or electrical contract or anybody that's
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starting out, Like I said, the first thing you should
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do is get your business license. Get insurance as if
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necessary for what you do, okay, and have all the
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adequate licenses that are required for whatever you may be doing.
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Make sure you get all that ducks in a row.
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And then make sure that you get a separate business
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checking account or account that can separate and doesn't necessarily
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have to be a business checking It could be another
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like a personal account, but it's only used for business.
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I mean a lot of times they want to force
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you into a business account when all you're trying to
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do is just separate the finances. So on the surface,
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whether it's personal banking or business making, it really doesn't
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matter if you're only using it for business. Again, not
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a tax guide and not giving you tax advice. I'm
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just saying it makes sense to me, Okay, it just
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keeping things separate, start out right up from keep records
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up front, just make your life so much easier. And
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I know you hate it. We hate doing taxes, We
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hate keeping track of things. We just we hate it.
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But it is part of the business. It's part of
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doing it legitimately doing it as business. You get me. Okay.
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The next thing that I hear a lot from a
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contractor starting out because they're putting a lot of road
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miles in is a track every legitimate business mile. So
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electrical contractors, you know you're always on the go and
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you can accumulate substantial mileage between going to the supply houses,
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job sites, inspections, estimates, service calls, various meetings, whatever. You're
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putting a lot of miles on vehicles. Now without a
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contemporous mileage log, a potentially valuable deduction may be difficult
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to defend and right and so in my situation, and
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I'll just tell you what you know, and my son's
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going through this, I can tell you in my situation.
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I have an app on my phone called driver Notes.
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It's drivers with an S note and it tracks and
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I use that diligently to put in anytime I go
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anywhere for business, and it keeps track of it. If
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you're just gonna write your mileage down, then you better
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take copious notes of where you went, why you did it,
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what you did. You can't just write off every single mile,
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even if if it's for personal use, it's not business use.
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You can't write that mileage off. I know it's tempting
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to want to do that, right, but it's you know,
387
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it's it's you gotta be legit here is we're not trying.
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I think one of the biggest things that I can
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tell a new contractor or somebody getting into it is
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don't try to screw the irs. Don't try to screw
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the government. They're gonna get there anyway, So you just
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create potential hazards and problems for you that can follow
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you down the road. It's just not worth it to
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00:21:59.640 --> 00:22:02.920
gain a little bit and take that kind of risk. Okay,
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00:22:03.200 --> 00:22:06.839
it's just not so document everything. So for twenty twenty six,
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the federal business milage rate is seventy two point five
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cent per mile from January first to June thirtieth. Now,
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from July one to December thirty first, it is jumped
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all the way up to seventy six cents per mile. Serious,
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00:22:23.559 --> 00:22:27.279
but this is legit business. I had somebody call me
401
00:22:27.319 --> 00:22:29.799
and say, Paul, I have a certain amount of mileage.
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I have one hundred thousand miles so far this year,
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and I'm like, there is no possible way that you
404
00:22:35.240 --> 00:22:40.920
could work every day, be productive, make money, be on
405
00:22:40.960 --> 00:22:45.599
a project and have one hundred thousand miles. It's just impossible,
406
00:22:45.799 --> 00:22:47.680
you know, it's not. No, it's not it is. Do
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the math. If you're working eight hours and you're on
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00:22:50.640 --> 00:22:52.960
a project and you maybe you're going from one project
409
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to another. To me, it would be just unfathomable for
410
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you to have one hundred thousand miles. But nonetheless, if
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you had one hundred miles, there you go. Okay, seventy
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two point five cent per mile for the first part
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of the year this year and then seventy six cent
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per mile for the second part of the years. Now,
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the mid year increase means contractors need to separate the
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00:23:17.200 --> 00:23:19.920
first half from the second half. And you got to
417
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remember that when you're doing taxes, Okay, when you're putting
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in your mileage and you're putting it as a deduction,
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remember that there's a first half and there's a second half. Okay,
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keep that in mind. Well what you need to do.
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And that's why I like to use this app. And
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it's a free app on the app. I think it's
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on Google Play Store again. Drivers note, you should give
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00:23:39.559 --> 00:23:41.720
it to all of your technicians. You should give it
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00:23:41.720 --> 00:23:44.240
to all your employees again, and you can even have
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00:23:44.279 --> 00:23:47.000
it track you GPS so it automatically does it. So
427
00:23:47.079 --> 00:23:49.559
it's pretty cool, and it's a business. You want to
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take advantage of this. It's a it's a legit deduction
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and it can add up, dude, seventy six cent a
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mile if you're on the road all the time. But now,
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one of the key things you need to meet. You
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can't just write the mileage down. And I think that's
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one thing that I think that if it gets questioned,
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especially if you have some gross amount of mileage you're
435
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trying to write off. The irs is gonna look at
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that and go, wait a minute, did you record the date,
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the destination, what was the purpose the business purpose of
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the miles driven? Do not treat ordinary personal commuting as
439
00:24:26.400 --> 00:24:30.720
business mileage? Okay. I think that's a problem where people
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are going to get into with this and think that
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anytime I'm in the car that is a business that
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I can deduct the mileage. That is not correct. And
443
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again I'm not a tax guy, but I need to
444
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remind you something. If you're doing the mileage deduction it's
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seventy six per a mile, then you can't charge for
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things like the gas a monthly. You know, submit your
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credit card or whatever it is for gas because either this,
448
00:25:00.039 --> 00:25:05.079
yes or that, okay, whichever one yields the bigger deduction
449
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you go with. But again, the normal wear and tear
450
00:25:09.359 --> 00:25:11.640
and all that kind of stuff, mileage on the tires,
451
00:25:11.680 --> 00:25:15.279
all that stuff is covered in that mileage that you're
452
00:25:15.319 --> 00:25:19.359
trying to deduct. Okay, so you can't double dip. But
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I'm not a tax guy. I'm just telling you. Talk
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to your tax person. Talk to you. They may have
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ways around that or understand it better than I do.
456
00:25:26.440 --> 00:25:29.839
I'm just saying that double dipping in things like that
457
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is a no no, okay, no no next thing for
458
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all of you electric contractors. I guess it could be.
459
00:25:38.480 --> 00:25:40.440
I guess you don't have to be an electrical contractor
460
00:25:40.440 --> 00:25:42.319
to listen to this and understand it. But these are
461
00:25:42.359 --> 00:25:44.759
things that you need to do upfront to make sure
462
00:25:44.799 --> 00:25:47.319
that you're running your business properly. Okay, So if you're
463
00:25:47.359 --> 00:25:49.759
coming into this late, go back to the beginning of
464
00:25:49.759 --> 00:25:52.119
this podcast and listen, because these are things are going
465
00:25:52.200 --> 00:25:54.200
to help your business. You want your business to grow right.
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You may be shoestringing it right now, but you want
467
00:25:57.799 --> 00:26:00.720
it to grow right. So you want to make sure
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00:26:00.759 --> 00:26:05.279
that you set your foundation of business up properly, do
469
00:26:05.359 --> 00:26:09.119
the right things, the right licenses, the right insurance or
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everything that you need to do this right up front.
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Get used to some kind of for me, Like I said,
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I got a business credit card and everything goes on
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that that's business related and I've got a personal credit card.
474
00:26:23.720 --> 00:26:25.759
That way I can separate the two and it makes
475
00:26:25.839 --> 00:26:29.599
life so much easier. Now you might say I can't
476
00:26:29.720 --> 00:26:35.440
qualify for a business credit card right up front, that's fine.
477
00:26:36.240 --> 00:26:39.519
Every business starts up that way. Probably can't get a
478
00:26:39.559 --> 00:26:42.559
business credit card. But if you get a bank account
479
00:26:42.920 --> 00:26:45.599
or a business account or personal account, usually they have
480
00:26:45.640 --> 00:26:49.279
a debit card, and you use that debit card to
481
00:26:49.319 --> 00:26:51.680
make those purchases so that it keeps track and it
482
00:26:51.759 --> 00:26:55.440
keeps it in that separate account. Now, let's face it,
483
00:26:55.480 --> 00:26:57.359
you say, well, I don't have the money now, then
484
00:26:57.400 --> 00:27:00.519
you don't probably need to be in business. If you
485
00:27:00.559 --> 00:27:03.599
don't have enough money to seed your business and be
486
00:27:03.640 --> 00:27:06.359
able to sustain you for a certain number of months,
487
00:27:06.400 --> 00:27:10.119
depending on what industry you're in, then that's a problem
488
00:27:10.240 --> 00:27:13.480
because you're going to intermix your personal and business together
489
00:27:13.480 --> 00:27:15.039
and it's gonna be hard to separate that when it
490
00:27:15.079 --> 00:27:20.839
comes tax time. So if you are have a personal
491
00:27:20.839 --> 00:27:25.319
account but you need to seed the business account, then
492
00:27:25.559 --> 00:27:29.359
you write you transfer money, and you notate it, and
493
00:27:29.400 --> 00:27:31.680
you make it clear that you're transferring money over to
494
00:27:31.759 --> 00:27:35.559
the other account, which is the business account, and then
495
00:27:35.640 --> 00:27:39.799
you make your purchase. Okay, then you document between it. Again.
496
00:27:39.960 --> 00:27:42.720
Tax guys will tell you, you know the right way. I'm
497
00:27:42.720 --> 00:27:45.720
just saying you need to make sure that you document it.
498
00:27:46.079 --> 00:27:49.119
I just don't like reaching into the kitty, which is
499
00:27:49.160 --> 00:27:51.759
your personal to pay business. And now you have to
500
00:27:52.359 --> 00:27:54.680
explain it. If I move the money I need over
501
00:27:54.720 --> 00:27:56.960
to a primary business account, then it's easy for me
502
00:27:57.039 --> 00:27:59.599
to show the reason I made the transfer from personal
503
00:27:59.680 --> 00:28:03.200
business and that money's owed you because you're loaning money
504
00:28:03.240 --> 00:28:06.119
to the business. Okay. And again that's why it's so
505
00:28:06.160 --> 00:28:08.400
important to talk to a tax guy, like the real
506
00:28:08.480 --> 00:28:11.359
tax guy on TikTok and bring up these things so
507
00:28:11.400 --> 00:28:13.440
that you can do it right from the beginning. Because
508
00:28:13.440 --> 00:28:15.559
again I'm not a tax guy. I don't claim to be.
509
00:28:15.960 --> 00:28:18.400
You don't listen to my advice one hundred percent, you know,
510
00:28:18.440 --> 00:28:21.279
do your own due diligence. I'm just trying to to
511
00:28:21.400 --> 00:28:24.359
help you get off on the right foot as an
512
00:28:24.400 --> 00:28:29.400
electrical contractor, That's all I'm doing. Next would be categorize
513
00:28:29.519 --> 00:28:33.240
job costs and overhead correctly. Do not dump every purchase
514
00:28:33.279 --> 00:28:36.279
into a general category called supplies. Now, this is one
515
00:28:36.319 --> 00:28:40.640
that even I struggled with as a contractor, thinking I
516
00:28:40.720 --> 00:28:43.960
just do one big lump and that would be it.
517
00:28:44.440 --> 00:28:48.319
That doesn't work. You need to figure out what your
518
00:28:48.319 --> 00:28:53.400
expensive your expense categories are, and a contractor should separate
519
00:28:53.680 --> 00:28:57.440
and identify expenses such as think about it this way.
520
00:28:58.440 --> 00:29:01.480
You should have a category for your job materials and
521
00:29:01.519 --> 00:29:04.400
direct product costs, so in other words, what you're buying
522
00:29:04.400 --> 00:29:08.279
and using four project. You should have a separate category
523
00:29:08.319 --> 00:29:13.039
for tools, small tools, consumables, personal protective equipment like PPE
524
00:29:13.160 --> 00:29:18.119
anything separate okay, because that's used broadly on multiple jobs,
525
00:29:18.240 --> 00:29:22.599
not just on one job. Next, you should have equipment rentals.
526
00:29:22.599 --> 00:29:26.039
So if you're renting equipment from anybody, anything, you would
527
00:29:26.039 --> 00:29:29.079
put it in that equipment rental. You may or may
528
00:29:29.160 --> 00:29:32.480
not have that category. Again, all these categories may not
529
00:29:32.640 --> 00:29:35.359
be applicable to you, but you need to think about
530
00:29:35.400 --> 00:29:37.319
how you structure these and how you put these things
531
00:29:37.319 --> 00:29:45.359
into different categories. Permit and inspection fees separate category subcontractor charges,
532
00:29:45.400 --> 00:29:48.799
So if you hire subcontractors, the payments that go to them,
533
00:29:49.119 --> 00:29:51.559
you make sure that you have those expenses in a
534
00:29:51.680 --> 00:29:55.839
separate subcontractor category. You don't have that intermingled with the
535
00:29:55.880 --> 00:29:59.240
other jobs that you may be doing. That's fine, but
536
00:29:59.319 --> 00:30:02.599
if anything you're paying out to a subcontractor, make sure
537
00:30:02.599 --> 00:30:06.640
it's in a category by itself for easy tracking. Licensing
538
00:30:06.759 --> 00:30:09.839
and continuing education. If your trade or whatever you're doing
539
00:30:09.960 --> 00:30:13.400
has continuing education and licensing requirements. All fees and things
540
00:30:13.440 --> 00:30:17.480
that you pay associated with that education in licensing that
541
00:30:17.559 --> 00:30:21.480
gets dumped in that category, right, And of course you
542
00:30:21.519 --> 00:30:25.000
can always subdivide these categories. You could create a category
543
00:30:25.079 --> 00:30:28.119
licensing continue Education, and inside of that you can have
544
00:30:28.160 --> 00:30:31.200
a licensing category and a continuing education category. Remember I
545
00:30:31.359 --> 00:30:37.839
use quick Books Online, which also I have the QuickBooks payroll,
546
00:30:37.960 --> 00:30:43.759
So everything that I do is put in categories. Then
547
00:30:43.839 --> 00:30:46.640
they may not be the best accurate categories at the time,
548
00:30:47.200 --> 00:30:49.759
but over time I've developed what mine are and I
549
00:30:49.839 --> 00:30:51.880
tweak that at the end of the year until I
550
00:30:51.920 --> 00:30:54.119
get it exactly the way I want it, and then
551
00:30:54.160 --> 00:30:57.200
the year after year it's just rents and repeat. Doesn't
552
00:30:57.200 --> 00:31:01.480
mean you can't create another category, right, So, I mean,
553
00:31:01.519 --> 00:31:04.440
I'm a big believer in the quick Books products. I
554
00:31:04.519 --> 00:31:06.319
just like the online one because I think it's being
555
00:31:06.359 --> 00:31:08.839
backed up and it's being stored, and I'm just you know,
556
00:31:08.880 --> 00:31:11.200
I got nothing to hide, so you know, it's not
557
00:31:11.240 --> 00:31:12.880
like I don't want the big brother to see what
558
00:31:12.920 --> 00:31:15.359
I got. I don't give a shit. You know, I'm
559
00:31:15.440 --> 00:31:19.200
very transparent, so I don't worry about that. The next
560
00:31:19.240 --> 00:31:24.920
category would be any liability vehicle and workers' compensation insurance.
561
00:31:24.960 --> 00:31:27.400
Remember again, I'm not a tax guy or a legal expert,
562
00:31:27.880 --> 00:31:30.400
but i will tell you that in most states like Virginia,
563
00:31:30.960 --> 00:31:33.640
until you have two or more employees, you don't have
564
00:31:33.720 --> 00:31:36.400
to have workers comp for yourself or even somebody that
565
00:31:36.599 --> 00:31:40.480
helps you it. Typically you don't need workers comp However,
566
00:31:40.559 --> 00:31:43.680
it's important to think about it because somebody gets hurt.
567
00:31:44.039 --> 00:31:46.640
Then you know what if you're just a sole proprietor
568
00:31:46.799 --> 00:31:50.000
just you know, you're at risk. That's it. That's why
569
00:31:50.039 --> 00:31:52.799
people go into an LLC and other things to separate
570
00:31:52.920 --> 00:31:56.519
that risk, not just financial risk but personal risks. Okay,
571
00:31:57.160 --> 00:31:59.599
but at the end of the day, there are projects
572
00:31:59.640 --> 00:32:02.359
that you may do that they don't care how many
573
00:32:02.400 --> 00:32:05.119
employees you have. The fact of the matter is they
574
00:32:05.240 --> 00:32:09.160
want to make sure that you have workers compensation insurance. Okay,
575
00:32:09.279 --> 00:32:12.119
Well it's easy to get you know, you can go online,
576
00:32:12.200 --> 00:32:15.279
get it and pay it month to month. There's next insurance.
577
00:32:15.319 --> 00:32:17.279
There's other ones out there that you can get it,
578
00:32:17.319 --> 00:32:19.079
and you can cancel it if you don't need it.
579
00:32:19.319 --> 00:32:21.319
If you're a mom and pop, you're a one one
580
00:32:21.359 --> 00:32:24.160
man show, two man show, one woman show, whatever. But
581
00:32:24.279 --> 00:32:27.400
as you grow Obviously you're gonna need liability insurance, workers
582
00:32:27.400 --> 00:32:30.599
compensation insurance and whatnot. Vehicle insurance if you have a
583
00:32:30.599 --> 00:32:37.599
company vehicle. Next category would be advertising, estimating, software and
584
00:32:37.680 --> 00:32:41.279
accounting subscriptions like what I do, QuickBooks pro. Excuse me,
585
00:32:41.359 --> 00:32:44.240
quick books online. I used to use QuickBooks Pro, which
586
00:32:44.319 --> 00:32:46.960
was physically on my computer, and I would every year
587
00:32:47.000 --> 00:32:49.559
I would print that down into a zip file and
588
00:32:49.599 --> 00:32:52.880
I would take it to my CPA. Okay, so everything
589
00:32:52.920 --> 00:32:56.200
now is online, So it just makes life so much easier, right,
590
00:32:56.519 --> 00:33:00.960
that type of thing. And of course all this telephone
591
00:33:00.960 --> 00:33:05.599
and internet expenses again, separate category. Again, you can subdivide categories,
592
00:33:05.599 --> 00:33:11.279
that's fine, but correct categorization helps determine actual job profitability
593
00:33:11.359 --> 00:33:16.039
and whether an item is currently deductible or included in
594
00:33:16.119 --> 00:33:20.359
the job cost or treated as a capital asset. So
595
00:33:20.640 --> 00:33:23.440
at the end of the day, it just makes life easier.
596
00:33:23.480 --> 00:33:26.000
And it also if you do have a tax person,
597
00:33:26.920 --> 00:33:29.839
like the real tax guy on TikTok, for example, it
598
00:33:29.880 --> 00:33:32.039
makes them it makes their job a little easier. And
599
00:33:32.079 --> 00:33:34.039
obviously if they don't have to work as hard, the
600
00:33:34.160 --> 00:33:37.359
cost is not going to be nearly as high. But
601
00:33:37.400 --> 00:33:39.400
if you know do like some people I know, just
602
00:33:39.440 --> 00:33:43.880
take it and dump a freaking a box full of
603
00:33:43.920 --> 00:33:47.119
documents on the desk of a CPA or a tax person.
604
00:33:47.160 --> 00:33:49.759
They're gonna be like, oh crap, you're gonna pay for
605
00:33:49.799 --> 00:33:53.680
my time. Right. So again, these are little steps that
606
00:33:53.880 --> 00:33:57.119
ultimately do save you money because their time is valuable
607
00:33:57.160 --> 00:33:59.279
as well, and they get paid good for their time
608
00:33:59.319 --> 00:34:04.319
as they should be. Okay, all right again, so think
609
00:34:04.359 --> 00:34:06.440
about that. Set it up early. Don't let it get
610
00:34:06.480 --> 00:34:08.719
so far down the road in your business that you scramble.
611
00:34:08.880 --> 00:34:11.039
One of the again, one of the big problems I
612
00:34:11.079 --> 00:34:14.239
had early in business was I just threw everything in
613
00:34:14.280 --> 00:34:15.840
a box and said I'll handle it at the end
614
00:34:15.840 --> 00:34:18.199
of the year, and that's fine when I had very
615
00:34:18.239 --> 00:34:23.320
little expenses, small stuff. You know. You know, I hear
616
00:34:23.360 --> 00:34:25.840
people say this stuff all the time. Is pay yourself
617
00:34:25.880 --> 00:34:28.199
before you pay other people. And that's bullshit. I don't
618
00:34:28.239 --> 00:34:31.679
care if you understand this or not that that is
619
00:34:31.719 --> 00:34:34.639
not good advice. You know. I hear CPA say that,
620
00:34:34.719 --> 00:34:36.559
I see other people say that. I say, pay yourself
621
00:34:36.559 --> 00:34:40.199
before you pay others. That's bullshit. As a contractor, you
622
00:34:40.280 --> 00:34:43.840
need to keep your vendors happy, You pay your staff,
623
00:34:43.960 --> 00:34:47.880
you pay bills that you have you pay. You're the
624
00:34:47.920 --> 00:34:52.519
one's a business owner, you're the last one that gets paid. Seriously,
625
00:34:53.199 --> 00:34:56.039
and if after everything is paid, there's nothing to pay you,
626
00:34:56.360 --> 00:34:58.320
then you can't pay your bills. Then you need to
627
00:34:58.320 --> 00:35:01.480
reevaluate your business. And that does don't mean expand your business.
628
00:35:01.679 --> 00:35:04.280
That doesn't mean it at all. That means there's something wrong.
629
00:35:04.679 --> 00:35:08.280
You have a budgeting problem and you need to analyze
630
00:35:08.320 --> 00:35:10.599
because you've got more going out than you got coming in.
631
00:35:11.280 --> 00:35:14.400
And that's not uh, that's not a good outcome for
632
00:35:14.519 --> 00:35:18.280
any business. Right, So it just means that you need
633
00:35:18.320 --> 00:35:24.920
to reevaluate, okay, now under depreciation before buying expensive equipment. Now,
634
00:35:25.079 --> 00:35:27.559
let's think of it this way. And again, I'm not
635
00:35:27.639 --> 00:35:29.960
a tax guy, but I you know, I had made
636
00:35:30.000 --> 00:35:33.239
some large purchases in my different time and I've made
637
00:35:33.239 --> 00:35:35.880
the decision not to include it in my taxes for
638
00:35:35.960 --> 00:35:38.800
business because I knew that the vast majority of it
639
00:35:38.800 --> 00:35:42.719
would be used for personal use. Right, So you know,
640
00:35:43.119 --> 00:35:45.079
I had to think about those and make these important
641
00:35:45.119 --> 00:35:47.840
decisions on whether or not something was going to be
642
00:35:47.840 --> 00:35:50.840
a tax right off or try to track tax right
643
00:35:50.920 --> 00:35:53.760
off a portion of it. Now, a large purchase such
644
00:35:53.760 --> 00:35:56.719
as let's say, service trucks or a trencher or in
645
00:35:56.760 --> 00:35:59.880
my case, a mini excavator a jenda. Now, if I
646
00:35:59.920 --> 00:36:02.199
was an electric contractor, I could get away with the
647
00:36:02.239 --> 00:36:05.280
excavator because I'd use it to dig trenches and things
648
00:36:05.320 --> 00:36:07.119
like that. I get away with it. But not as
649
00:36:07.119 --> 00:36:10.239
an educator, I'm not going to get away with it. Right,
650
00:36:10.840 --> 00:36:14.880
But generators, cable pullers, testing equipment, all this kind of
651
00:36:14.880 --> 00:36:19.679
stuff tools may not automatically be treated the same as
652
00:36:19.719 --> 00:36:24.280
an ordinary supply expense. So for the tax years beginning
653
00:36:24.280 --> 00:36:28.000
in twenty twenty six, a general Section one seventy nine
654
00:36:28.239 --> 00:36:32.119
limit is two million, five hundred and sixty thousand, with
655
00:36:32.239 --> 00:36:39.239
that deduction being to phase out when qualified property placed
656
00:36:39.320 --> 00:36:44.480
in service exceeds four million, nine hundred thousand. So special
657
00:36:44.519 --> 00:36:48.679
limitations apply to certain vehicles, including a thirty two thousand
658
00:36:48.719 --> 00:36:53.719
dollars Section one seventy nine limit for a qualifying SUV.
659
00:36:54.000 --> 00:36:57.320
So there's certain rules that you have to understand. And
660
00:36:57.360 --> 00:37:00.000
this is where it's important before you make a big perchase,
661
00:37:00.159 --> 00:37:03.280
is that you do reach out to tax people that
662
00:37:03.559 --> 00:37:07.880
understand these rules. Right, I'm gonna give you an example,
663
00:37:07.920 --> 00:37:10.599
and this is just me. This is just me, I
664
00:37:10.880 --> 00:37:16.679
don't listen to a financial advisor that hasn't listened to
665
00:37:16.679 --> 00:37:20.000
their own advice and they're not loaded. Does that sound stupid?
666
00:37:20.239 --> 00:37:21.760
I get it. I'm gonna have people out there send
667
00:37:21.800 --> 00:37:24.599
me nasty messages and says, well, I'm a good financial advisor.
668
00:37:24.639 --> 00:37:26.880
But if you're good, then you listen to your own
669
00:37:26.920 --> 00:37:29.880
advice and you're making money. But if you've got no money.
670
00:37:30.400 --> 00:37:32.760
So one of my questions I always ask ape, you know,
671
00:37:33.039 --> 00:37:35.400
any of those financial advisor says, what is your net worth?
672
00:37:35.679 --> 00:37:38.199
What are you worth? If they don't want to tell me,
673
00:37:38.239 --> 00:37:41.079
I don't want them to be my financial advisor. That's
674
00:37:41.159 --> 00:37:43.039
just me. I'm not telling everybody. I'm just saying me.
675
00:37:43.960 --> 00:37:47.320
So when it comes to taxes, that's why I reach
676
00:37:47.360 --> 00:37:50.079
out to somebody if I have a specific tax question.
677
00:37:50.119 --> 00:37:52.000
And that's why I think that guy on you know
678
00:37:52.119 --> 00:37:56.400
on TikTok is so great and and tell you the truth.
679
00:37:56.800 --> 00:38:01.039
It is unrealized by many people out there that this
680
00:38:01.119 --> 00:38:04.800
guy is giving this kind of advice because he's been
681
00:38:04.840 --> 00:38:08.920
doing this thirty forty years and he's even offered to
682
00:38:08.960 --> 00:38:11.360
do your taxes and look at your taxes for up
683
00:38:11.440 --> 00:38:14.480
to three years in the past that's a freaking amazing
684
00:38:14.639 --> 00:38:16.360
I'd love to have him on the show, do a
685
00:38:16.400 --> 00:38:21.119
podcast with him. But he's an amazing guy, and he's
686
00:38:21.159 --> 00:38:22.800
the kind of guy you're going to ask those questions
687
00:38:22.800 --> 00:38:25.480
before you go out and make that major purchase, Okay,
688
00:38:25.920 --> 00:38:29.000
especially if you're going to do it. Depreciation and use
689
00:38:29.039 --> 00:38:34.559
Section one seventy nine. So current law also generally provides
690
00:38:35.079 --> 00:38:41.119
permanent one hundred percent bonus depreciation for qualified property acquired
691
00:38:41.320 --> 00:38:45.960
and placed in service after January nineteenth, twenty twenty five.
692
00:38:46.519 --> 00:38:52.280
Eligibility vehicle limitations, business use requirements and not personal use
693
00:38:52.320 --> 00:38:58.280
for business use and potential depreciation recapture still matter, And
694
00:38:58.320 --> 00:39:02.480
again you need to talk to it professional, not after
695
00:39:03.239 --> 00:39:06.760
you buy the equipment, not after you sign for the equipment,
696
00:39:06.840 --> 00:39:10.920
but prior so just stop and think you've got a
697
00:39:10.960 --> 00:39:14.960
guy right here on TikTok who you can ask him,
698
00:39:15.679 --> 00:39:18.159
that he can contact him and maybe pay he should be.
699
00:39:18.360 --> 00:39:21.239
I'm assuming he charges a consultation fee to give you
700
00:39:21.280 --> 00:39:25.840
advice based on your situation. So many people have so
701
00:39:26.000 --> 00:39:30.440
much pride that they don't I do not, dude, I
702
00:39:30.480 --> 00:39:33.599
do not. I want to see electrical contractors succeed. I
703
00:39:33.639 --> 00:39:37.880
have no problem asking people that are knowledgeable, but you
704
00:39:37.960 --> 00:39:40.400
have to qualify these people. It's like I tell you
705
00:39:40.480 --> 00:39:43.320
about the National Electrical Code. Listening to people on TikTok
706
00:39:43.480 --> 00:39:47.679
and Instagram and Facebook. They're not qualified people. They may
707
00:39:47.719 --> 00:39:49.760
have gotten their license and they think they know something.
708
00:39:49.840 --> 00:39:51.960
They talk a bunch of smack, But the reality is
709
00:39:52.800 --> 00:39:55.480
I prefer to talk to people that if it was
710
00:39:55.599 --> 00:39:58.199
code that I talk to though that my friends of mine,
711
00:39:58.320 --> 00:40:02.519
like Mike Holt, the Phil Simmons, Ryan Jackson's, you know,
712
00:40:02.639 --> 00:40:05.280
the Vince Delacrosses, the people that have been in the
713
00:40:05.320 --> 00:40:08.199
trenches and I can verify they know what they're talking about,
714
00:40:08.719 --> 00:40:11.079
not some guy who just got his license and said,
715
00:40:11.199 --> 00:40:14.079
damn all. These educators are making money. Let me just
716
00:40:14.079 --> 00:40:16.079
go start up a YouTube channel and now I'll start
717
00:40:16.079 --> 00:40:18.159
making some of that money teaching people how to pass
718
00:40:18.159 --> 00:40:21.519
an exam. Because they just pass an exam. But they've
719
00:40:21.559 --> 00:40:24.039
never done anything else. They've never served on a committee,
720
00:40:24.079 --> 00:40:26.599
they've never written any books, they haven't written any articles
721
00:40:26.599 --> 00:40:29.280
that can shed light on what their knowledge is. They
722
00:40:29.320 --> 00:40:32.800
haven't done anything. But you're gonna listen to them, You're
723
00:40:32.800 --> 00:40:36.400
gonna give them money. Well, that's up to you. I
724
00:40:36.400 --> 00:40:37.960
can't tell you what to do, but I'm going to
725
00:40:38.000 --> 00:40:41.079
listen to the tax people that know what they're doing. Okay,
726
00:40:41.280 --> 00:40:43.320
So there you go. That's the best I can give
727
00:40:43.320 --> 00:40:46.920
you with that, all right. The next thing is meals,
728
00:40:47.800 --> 00:40:52.679
And I just recently was actually doing a back and forth,
729
00:40:52.760 --> 00:40:55.360
you know, in TikTok with the real tax guy. And
730
00:40:55.360 --> 00:40:57.599
I don't think he's replied to my last question I
731
00:40:57.599 --> 00:41:01.199
did yet, because he's probably very busy, busy. But a
732
00:41:01.239 --> 00:41:05.119
lot of people think meals are one hundred percent deductible
733
00:41:05.400 --> 00:41:07.559
now over COVID. I believe there was a period where
734
00:41:07.599 --> 00:41:11.159
it was, but that's no longer the case. So most
735
00:41:11.239 --> 00:41:14.679
qualifying business meals, and I say qualifying, we'll talk about
736
00:41:14.679 --> 00:41:18.480
that in a second, remain limited to fifty percent. Well,
737
00:41:18.519 --> 00:41:20.119
you still get to eat the meal. You still get
738
00:41:20.119 --> 00:41:23.039
the meal, and having any type of write off, and
739
00:41:23.079 --> 00:41:27.400
a legitimate business meal is worth it. It's a lot
740
00:41:27.440 --> 00:41:30.079
better than not being able to write it off at all. Right,
741
00:41:30.159 --> 00:41:32.639
So we don't I'm not crying about a fifty percent
742
00:41:32.719 --> 00:41:37.239
right off on a legitimate qualifying business meal. So the
743
00:41:37.360 --> 00:41:42.800
contractor or an employee generally must be present, the meal
744
00:41:42.880 --> 00:41:47.559
must have a legitimate business connection, and the expense cannot
745
00:41:47.559 --> 00:41:54.199
be lavish or extravagant, so you know it's it says
746
00:41:54.239 --> 00:41:58.199
the contractor or employee generally must be present. Nothing says
747
00:41:58.239 --> 00:42:00.639
I have to have fifteen people, ten people, to people,
748
00:42:00.679 --> 00:42:03.920
even one person. If the meal is legitimately part of
749
00:42:03.960 --> 00:42:07.440
the business and it's connected with the business, I'm out
750
00:42:07.559 --> 00:42:10.840
working hard and I'm the CEO of my company, and
751
00:42:11.079 --> 00:42:14.159
I work hours in the night and the day. If
752
00:42:14.199 --> 00:42:17.239
I want to have a legitimate meal that benefits my
753
00:42:17.360 --> 00:42:21.440
business because it keeps me sharp ready, and it keeps me,
754
00:42:22.159 --> 00:42:25.159
you know, focused, then by damn it, I should be
755
00:42:25.159 --> 00:42:28.920
able to write that off. But so many people on
756
00:42:28.960 --> 00:42:31.079
the internet said, no, that would be a personal meal.
757
00:42:32.360 --> 00:42:37.679
If you own the business, there's legitimate reasons. Now, a
758
00:42:37.679 --> 00:42:39.360
lot of people say that, oh, you've got to go
759
00:42:39.400 --> 00:42:43.199
a certain mileage away from your business area in order
760
00:42:43.239 --> 00:42:46.360
for it to be qualified. That's bullshit, that's not true.
761
00:42:47.039 --> 00:42:49.320
Do you think the IRS cares where you have that meal.
762
00:42:49.800 --> 00:42:51.840
They don't give a damn about where you have that meal.
763
00:42:51.920 --> 00:42:55.880
But it has to be a legitimate business connection. For example,
764
00:42:56.280 --> 00:42:59.559
I have a lot of meetings with my brother in
765
00:42:59.599 --> 00:43:04.519
my business, and because he's an active electrical contractor that's
766
00:43:04.599 --> 00:43:08.039
actually out in the field working, and I've created a
767
00:43:08.079 --> 00:43:11.239
lot of products on stack caddy based on his experience.
768
00:43:11.599 --> 00:43:14.320
So I am constantly picking his brain about do I
769
00:43:14.360 --> 00:43:18.159
need to create this product that product. I created the
770
00:43:18.360 --> 00:43:22.199
insert based on his feedback, and we had meetings on that.
771
00:43:22.199 --> 00:43:25.800
That's legitimate business. Oh, but he's related to you. You
772
00:43:25.840 --> 00:43:27.559
can't do it. Where does it say that in the
773
00:43:27.599 --> 00:43:33.199
tax code. I'm not a tax expert, but it's legitimate
774
00:43:33.760 --> 00:43:36.840
business expenses. I have a lot of meals that I
775
00:43:37.000 --> 00:43:41.719
do not write off because they're not legitimate business us,
776
00:43:41.840 --> 00:43:45.800
but ones that I do are legitimate. Another example is
777
00:43:45.880 --> 00:43:48.039
I might write off a meal on a rare occasion
778
00:43:48.039 --> 00:43:50.360
where I'm out somewhere with my wife having a meal,
779
00:43:50.800 --> 00:43:53.159
and you say, whoa, whoa, whoa, whoa, that's your wife.
780
00:43:53.239 --> 00:43:57.639
That's personal. You can't write that off. No, I document it.
781
00:43:57.800 --> 00:44:00.000
That meal is for me to run a lot of things.
782
00:44:00.559 --> 00:44:03.199
We just happen to be out, and I will run
783
00:44:03.280 --> 00:44:07.559
a lot of things by her from a consumer, because
784
00:44:07.599 --> 00:44:11.760
I sell products to consumers for stack caddy and other things,
785
00:44:12.199 --> 00:44:16.800
and I want to get her perspective because my perspective
786
00:44:16.880 --> 00:44:20.519
is always going to be skewed right, and sometimes I
787
00:44:20.599 --> 00:44:23.280
want another opinion, and my wife is not afraid to
788
00:44:23.400 --> 00:44:26.880
give me her honest opinion, whether it's not just always
789
00:44:26.920 --> 00:44:31.199
agrees with me. But she understands it because she's been
790
00:44:31.320 --> 00:44:36.159
around the electrical industry for forty years. She's been there
791
00:44:36.239 --> 00:44:39.280
when the conversations, she's been there, and when I've been teaching,
792
00:44:39.360 --> 00:44:42.559
she's been there at seminars, So she understands how the
793
00:44:43.159 --> 00:44:46.639
customer can react or how the individuals are when I'm
794
00:44:46.679 --> 00:44:50.079
creating a course or I'm creating a separate type of
795
00:44:50.119 --> 00:44:52.199
product that I'm trying to get a broader range of
796
00:44:52.239 --> 00:44:58.519
consumer in stack caddy or something like, she's a launching pad,
797
00:44:58.960 --> 00:45:02.719
if you will. But it's got to be legit. It's
798
00:45:02.719 --> 00:45:04.360
not just hey, baby, let's go out and have a
799
00:45:04.400 --> 00:45:07.519
meal and we'll write it off. But that's what you
800
00:45:07.719 --> 00:45:10.719
have to determine. So I don't do it all the time,
801
00:45:11.039 --> 00:45:17.519
very rarely, But to be fair, my expenses food expenses
802
00:45:17.639 --> 00:45:26.960
are very meager. Right, I maybe have fifteen hundred, so
803
00:45:27.559 --> 00:45:30.800
it's I may have fifteen or two thousand dollars dollars
804
00:45:30.840 --> 00:45:34.159
worth of meal expenses in a year. So again, fifty
805
00:45:34.199 --> 00:45:37.480
percent of that it's not a big deal. It's not
806
00:45:37.480 --> 00:45:40.880
not a big deduction, but it's still a deduction. But
807
00:45:40.920 --> 00:45:44.960
if you're a contractor, you're out there. Every interaction that
808
00:45:45.039 --> 00:45:49.119
you have during the day is typically going to be
809
00:45:49.159 --> 00:45:52.159
business related. You start at seven am, you end at five,
810
00:45:52.199 --> 00:45:55.280
and if you're your own employer, you're working five, six, seven,
811
00:45:55.360 --> 00:45:57.440
eight o'clock at night. If you want to have a
812
00:45:57.480 --> 00:46:01.559
meal by yourself because you're busy, work, working, then you
813
00:46:01.840 --> 00:46:07.119
are the lifeblood of your business. You are legitimately the
814
00:46:07.239 --> 00:46:11.440
connection to your business. If I stop and eat and
815
00:46:11.480 --> 00:46:14.119
I want the company to buy that meal, I will
816
00:46:14.119 --> 00:46:16.800
do that every day of the week. And you know what, irs,
817
00:46:17.159 --> 00:46:19.519
Let's just let's see where the chips fall. Because to me,
818
00:46:19.800 --> 00:46:23.920
I am the business. If you're the contractor and you're
819
00:46:24.039 --> 00:46:27.320
the one man two man show, or you're the business.
820
00:46:27.639 --> 00:46:32.000
Everything you do during your work period benefits the business.
821
00:46:32.480 --> 00:46:34.239
That doesn't mean that I go out at nine and
822
00:46:34.280 --> 00:46:36.320
ten o'clock at night just to have a meal. I
823
00:46:36.320 --> 00:46:38.280
have a hard time justifying that. But if I'm out
824
00:46:38.360 --> 00:46:41.840
during a work day, legitimate work hours, published work hours,
825
00:46:43.159 --> 00:46:48.719
then why can't I treat myself. I'm the owner. I
826
00:46:48.840 --> 00:46:53.400
need that nourishment. So again, you I have a hard
827
00:46:53.400 --> 00:46:56.360
time understand telling people you all that when you know
828
00:46:56.400 --> 00:47:01.199
it's not lavish or extravagant. It's a damn Wendy's, damn McDonald's,
829
00:47:01.199 --> 00:47:05.880
it's a damn Burger Kings. It's because I am the business.
830
00:47:06.559 --> 00:47:09.519
But again, I'm not a tax guy. Somebody will say,
831
00:47:09.559 --> 00:47:11.719
oh no, you can't write that off, you know, because
832
00:47:11.719 --> 00:47:14.480
you're by yourself, you're not meeting. But what if I'm
833
00:47:14.519 --> 00:47:18.440
taking calls during that business lunch because a contractor never
834
00:47:18.480 --> 00:47:21.079
stops working, I might be sitting there at lunch and
835
00:47:21.119 --> 00:47:23.880
I might be working up an estimate. I still gotta eat,
836
00:47:24.320 --> 00:47:29.480
so your situation may be different. Okay, So remember entertainment
837
00:47:29.519 --> 00:47:33.920
expenses are generally non deductible, even when a customer or
838
00:47:33.920 --> 00:47:37.159
a potential customer attends it. Keep the food and beverage
839
00:47:37.239 --> 00:47:43.719
charges separately stated. Whether meals are purchased at an entertainment venue, again,
840
00:47:44.840 --> 00:47:49.840
keep them separate. Meals and beverage. Keep that separate from
841
00:47:49.920 --> 00:47:54.400
any other entertainment expenses, because entertainment expenses itself is non deductible.
842
00:47:54.440 --> 00:47:56.639
Mostly again, talk to your tax guy. But when the
843
00:47:56.960 --> 00:48:01.159
food and beverage part is okay, so what you should
844
00:48:01.199 --> 00:48:04.880
do is write the attendees, if there is any the
845
00:48:04.960 --> 00:48:09.480
business purpose what you did on a receipt or recorded electronically.
846
00:48:10.559 --> 00:48:14.559
For me, it's a restaurant meal I'm only gonna use,
847
00:48:14.599 --> 00:48:17.880
so I make it simple. I only use my business
848
00:48:17.920 --> 00:48:21.960
card for a meal that I am going to justify
849
00:48:22.079 --> 00:48:28.639
its legitimate business meal. That's it. That's it, all right.
850
00:48:29.119 --> 00:48:30.760
And again, I'm not a tax guy. So you can
851
00:48:30.760 --> 00:48:32.559
talk to your tax or you can disagree with me
852
00:48:32.639 --> 00:48:35.280
in the comments all you want. You can say nasty
853
00:48:35.320 --> 00:48:38.599
shit like you usually do. That's fine. I'm just giving
854
00:48:38.639 --> 00:48:40.679
you my perspective. Again. I'm not a tax guy. I'm
855
00:48:40.719 --> 00:48:43.000
not giving you tax advice. I'm not a CPA. I'm
856
00:48:43.039 --> 00:48:45.280
not an accountant. I'm not a lawyer. I'm just an
857
00:48:45.280 --> 00:48:48.679
electrician who started electrical contractors of businesses years ago and
858
00:48:48.719 --> 00:48:51.599
been running them for years and do education. I'm just
859
00:48:51.639 --> 00:48:54.239
trying to get you off on the right foot. Okay,
860
00:48:56.039 --> 00:49:01.320
the next one, A legitimate home office may qualify. I
861
00:49:01.440 --> 00:49:04.880
do not use my home office as a tax benefit.
862
00:49:05.320 --> 00:49:08.000
I do not because I don't want that to be
863
00:49:08.159 --> 00:49:10.840
a gray area, because it is limited. And I'll explain
864
00:49:10.880 --> 00:49:13.000
the limitations with that but I just don't want. I
865
00:49:13.159 --> 00:49:15.719
just don't write off anything to do with that. So,
866
00:49:16.199 --> 00:49:20.559
but you may. If you're legitimately working your contracting business
867
00:49:20.599 --> 00:49:22.599
out of a room in your house, and it's legitimate
868
00:49:22.639 --> 00:49:24.599
where you do your estimating, your bidding, and all your
869
00:49:24.599 --> 00:49:27.840
business stuff, it may benefit you. So many electrical contracts
870
00:49:27.880 --> 00:49:32.320
perform estimating, billing, scheduling, purchasing, payroll, and permit work from
871
00:49:32.360 --> 00:49:35.719
their home. Okay, you work from your home. It's perfectly fine,
872
00:49:35.719 --> 00:49:39.079
because your truck is your work site. Okay. So a
873
00:49:39.199 --> 00:49:43.239
home office may qualify when it's used regularly and exclusively
874
00:49:43.280 --> 00:49:46.239
for business. For example, I do have this area in
875
00:49:46.280 --> 00:49:49.599
my house that I don't do anything here but business.
876
00:49:49.719 --> 00:49:54.280
This is it, this room, nothing but business. Okay, I
877
00:49:54.320 --> 00:49:58.639
could probably write that off as a home office. I
878
00:49:58.840 --> 00:50:01.679
just choose not to to do that, and so to
879
00:50:01.719 --> 00:50:04.559
me it's a red flag. But again it's legit. I
880
00:50:04.960 --> 00:50:09.079
I just prefer not to do it, but you may. So.
881
00:50:09.119 --> 00:50:11.960
A home can also qualify as a principal place of
882
00:50:12.000 --> 00:50:17.599
business when the contractor performs administrative and managerial activities there
883
00:50:17.639 --> 00:50:21.480
and has no other fixed location where a substantial administrative
884
00:50:21.480 --> 00:50:23.679
work could be conducted. So I do everything you may
885
00:50:23.719 --> 00:50:28.599
do everything in your house that's legit, that's a home office.
886
00:50:29.239 --> 00:50:32.639
So the simplified method is generally five dollars per square
887
00:50:32.639 --> 00:50:35.760
foot up to three hundred square feet, while the regular
888
00:50:35.840 --> 00:50:41.559
method allocates qualifying expenses such as utilities, insurance, repairs, rent,
889
00:50:41.719 --> 00:50:45.599
mortgage interests, and depreciation. Okay, so that's the regular method,
890
00:50:45.679 --> 00:50:50.280
but the simplified method is just five dollars per square foot.
891
00:50:50.719 --> 00:50:55.079
That's it a moth. But again, talk to your tax
892
00:50:55.079 --> 00:50:56.719
people if you want to do that. If you're doing
893
00:50:56.760 --> 00:50:58.880
all of that out of your home, and you're doing
894
00:50:58.920 --> 00:51:00.320
everything out of a room in your home, and all
895
00:51:00.360 --> 00:51:03.280
you do in that room is your business related, then dude,
896
00:51:03.320 --> 00:51:07.920
you should be taking advantage at least of this. Okay. Now,
897
00:51:09.239 --> 00:51:12.760
a kitchen table used by the family normally does not
898
00:51:12.960 --> 00:51:17.119
satisfy as an exclusive use requirement. Remember that we're not
899
00:51:17.159 --> 00:51:19.039
talking about just because you go into the dining room
900
00:51:19.079 --> 00:51:20.800
and you do all this work in the dining room,
901
00:51:20.840 --> 00:51:23.880
that is not what we're talking about. I have a
902
00:51:23.960 --> 00:51:26.639
dedicated room. It could have been a bedroom. Your kids
903
00:51:26.719 --> 00:51:28.840
go off to school, to go off and leave home.
904
00:51:29.039 --> 00:51:31.159
You now take that bedroom and you convert it into
905
00:51:31.239 --> 00:51:33.559
your office. That is your office. That's what you go
906
00:51:33.639 --> 00:51:37.000
in there to do business, bidding, estimating, planning, whatever. Then dude,
907
00:51:37.039 --> 00:51:40.800
you're legit. Take advantage of it. Contact your tax person,
908
00:51:41.440 --> 00:51:44.320
see what they say. Ask the real tax guy on TikTok,
909
00:51:44.400 --> 00:51:47.199
see what he says. And if you're worried about an
910
00:51:47.239 --> 00:51:50.360
audit because of that, then really it's not shouldn't be
911
00:51:50.400 --> 00:51:53.119
that hard to explain that, dude, it's a room in there.
912
00:51:53.280 --> 00:51:56.079
I go in there just to do business. I come
913
00:51:56.119 --> 00:51:58.920
in here to do create courses. I come in here
914
00:51:58.920 --> 00:52:02.440
to do TikTok. I come in here to do all
915
00:52:02.480 --> 00:52:07.320
these things that are part or help my business. It's legit.
916
00:52:07.920 --> 00:52:10.079
I don't come in here for any other reason. The
917
00:52:10.079 --> 00:52:13.559
only reason I'm in here is I'm working right, So
918
00:52:14.159 --> 00:52:17.719
at the end of the day, it's legit. You just
919
00:52:17.880 --> 00:52:20.159
you know, many people probably aren't taking advantage of that.
920
00:52:20.239 --> 00:52:22.400
If you have no other place, no other office, you're
921
00:52:22.400 --> 00:52:25.079
working out of your home, then take advantage of it.
922
00:52:25.079 --> 00:52:28.800
It's not a lot, but it is something. But you
923
00:52:28.840 --> 00:52:31.039
can't just say I do work on a kitchen table.
924
00:52:31.039 --> 00:52:38.159
That wouldn't qualify, okay. Do not call every worker a subcontractor, okay.
925
00:52:38.199 --> 00:52:41.559
So this is the probably the one that I see
926
00:52:41.639 --> 00:52:46.599
gets a lot of people in trouble. And I can
927
00:52:46.599 --> 00:52:49.119
tell you that there's a gentleman that is up and uh,
928
00:52:49.239 --> 00:52:50.880
I can't say. I'm not gonna tell you where he's at,
929
00:52:51.000 --> 00:52:54.159
but he does a lot of basements. For years, was
930
00:52:54.360 --> 00:52:57.360
simply saying that I pay all these guys and they
931
00:52:57.400 --> 00:52:58.840
do that. But he was the one telling them what
932
00:52:58.880 --> 00:53:01.559
to do. We're to install it, to install it. They
933
00:53:01.559 --> 00:53:05.920
were not independent contractors. They worked for him. So your
934
00:53:06.079 --> 00:53:09.199
taxes are due, payroll taxes are due. Tracking all this
935
00:53:09.280 --> 00:53:12.039
kind of stuff is due. Very important to understand the
936
00:53:12.119 --> 00:53:15.199
term independent contractor and whether or not you're going to
937
00:53:15.239 --> 00:53:19.079
be issuing somebody at ten ninety nine or not. Okay,
938
00:53:19.159 --> 00:53:22.519
so independent contractors be careful. I mean again, I'm not
939
00:53:22.559 --> 00:53:25.519
your tax guy, I'm not your lawyer. I'm just saying
940
00:53:26.320 --> 00:53:30.639
there are rules when it comes to classifying somebody as
941
00:53:30.639 --> 00:53:33.559
an independent contractor, because when you do that, that person
942
00:53:34.000 --> 00:53:37.280
basically you give them a project. They do it turnkey.
943
00:53:37.400 --> 00:53:39.719
My brother used to do that so he would get
944
00:53:39.760 --> 00:53:42.800
a job and he would have these guys that are
945
00:53:42.880 --> 00:53:46.159
contractors that work for him. It's some contractors and they
946
00:53:46.159 --> 00:53:50.599
were independent contractors because you know, they would everything right,
947
00:53:50.920 --> 00:53:53.280
everything would be there they can. All he would say
948
00:53:53.320 --> 00:53:54.920
to them is just why this house and let me
949
00:53:54.960 --> 00:53:57.119
know when it's done. He didn't tell them where to
950
00:53:57.159 --> 00:53:59.119
put this, where to put that. The owners had their
951
00:53:59.159 --> 00:54:01.280
drawings and their blue and all that kind of stuff.
952
00:54:01.280 --> 00:54:04.639
He just, you know, let them go. Whereas there's other
953
00:54:04.679 --> 00:54:06.719
people that hire people. They go out there they say,
954
00:54:06.719 --> 00:54:07.840
I want you to put this here. I want you
955
00:54:07.880 --> 00:54:09.519
to put this there. I want you to put this here.
956
00:54:10.480 --> 00:54:12.199
I'm gonna you know, you know I need you. I'm
957
00:54:12.199 --> 00:54:14.440
gonna run and get you supplies. I'm gonna tell you,
958
00:54:14.599 --> 00:54:16.519
and this is what you're gonna use. You're gonna use
959
00:54:16.519 --> 00:54:19.079
this brand and this brand or whatever. That is not
960
00:54:19.159 --> 00:54:22.239
an independent contractor. I'm not a lawyer, I'm not a
961
00:54:22.280 --> 00:54:25.639
tax guy, I'm not a CVA. But ask them what
962
00:54:25.800 --> 00:54:28.840
is the threshold for independent contractor? And you're gonna see
963
00:54:28.840 --> 00:54:31.360
that if you have involvement in it, then that's not
964
00:54:31.400 --> 00:54:35.320
an independent contractor. They're not working independently of you. Now
965
00:54:35.400 --> 00:54:38.079
you have something you're saying in it, and that can
966
00:54:38.119 --> 00:54:40.519
get you in a lot of trouble, especially if you're
967
00:54:40.559 --> 00:54:43.960
not paying taxes on it, because they could classify those
968
00:54:44.000 --> 00:54:50.599
as employees and not independent contractors. You with me, okay,
969
00:54:50.719 --> 00:54:52.639
let me, I kind of got sidetracked. Let's get back
970
00:54:52.639 --> 00:54:55.239
to this one. Do not call every worker a subcontractor. Now,
971
00:54:55.280 --> 00:54:59.360
whether someone is an employee or an independent contractor really
972
00:54:59.400 --> 00:55:02.880
depends on the actual working relationship, not merely what the
973
00:55:02.920 --> 00:55:06.880
agreement caused them. Okay. So now, if the company controls
974
00:55:07.400 --> 00:55:10.480
what the worker does and how the work is performed,
975
00:55:10.840 --> 00:55:15.280
the individual may be an employee, even when paid hourly,
976
00:55:15.400 --> 00:55:20.199
part time, or even without benefits. The misclassification can lead
977
00:55:20.239 --> 00:55:25.199
to unpaid payroll, taxes, penalties, and interests. So, folks, again,
978
00:55:26.199 --> 00:55:31.239
just because you want to lump somebody as an independent contractor, okay,
979
00:55:31.400 --> 00:55:33.039
I knew a guy who did a bunch of work
980
00:55:33.079 --> 00:55:37.400
for somebody got paid over one hundred thousand dollars under
981
00:55:37.400 --> 00:55:39.519
the table, and then the guy at the end of
982
00:55:39.559 --> 00:55:41.960
the year tried to say, oh, you were an independent contractor.
983
00:55:42.079 --> 00:55:45.639
You didn't pay your taxes because that was your responsibility
984
00:55:45.679 --> 00:55:49.079
because you're an independent contractor. But the fact is the
985
00:55:49.119 --> 00:55:51.280
guy rode with them every day to the job site,
986
00:55:52.559 --> 00:55:54.519
went to pick up things for the job site at
987
00:55:54.519 --> 00:55:58.800
the direction of the owner, was there every day, did
988
00:55:58.800 --> 00:56:02.400
what the owner told them to do did everything. That
989
00:56:02.559 --> 00:56:06.840
is not the definition of an independent contractor. An independent
990
00:56:06.880 --> 00:56:09.000
contract would say, hey, I need you to dig this ditch.
991
00:56:09.679 --> 00:56:11.159
There's a ditch that needs to be digged over here.
992
00:56:11.199 --> 00:56:12.840
I don't care how you do it whatever, I just
993
00:56:12.880 --> 00:56:14.440
need it done. I'll pay you to do it. You're
994
00:56:14.440 --> 00:56:16.880
an independent contractor. You go get it when you got
995
00:56:17.159 --> 00:56:19.119
fitted into your schedule, and they go do it, and
996
00:56:19.119 --> 00:56:21.960
then they send you a bill. That's an independent contractor.
997
00:56:22.000 --> 00:56:24.119
I had no say I didn't provide the equipment. I
998
00:56:24.119 --> 00:56:26.480
didn't do anything. I just told you I needed it done.
999
00:56:27.599 --> 00:56:31.519
That's oversimplifying it, But again, be careful. This is the
1000
00:56:31.559 --> 00:56:34.559
one that I think I see out there that so
1001
00:56:34.760 --> 00:56:38.239
many people think that that's a benefit to reduce their taxes, Like, ooh,
1002
00:56:38.280 --> 00:56:40.280
I won't have to pay payroll taxes, I won't have
1003
00:56:40.320 --> 00:56:42.480
to match it and all this stuff. I'll just get
1004
00:56:42.480 --> 00:56:45.599
these people and do them as an independent contractor. That's
1005
00:56:45.719 --> 00:56:51.559
fine if that's what they really are. Right now, let's
1006
00:56:51.599 --> 00:56:55.960
look at this. For payments made after December thirty first,
1007
00:56:56.000 --> 00:56:59.039
twenty twenty five, the General Form ten ninety nine NEC
1008
00:56:59.400 --> 00:57:03.400
reported thresholds increased from six hundred to two thousand dollars
1009
00:57:03.400 --> 00:57:08.880
for qualifying non employee service payments. Contractors should still obtain
1010
00:57:09.039 --> 00:57:16.880
a completed W nine before paying any subcontractor. Okay, any subcontractor. Now, again,
1011
00:57:16.920 --> 00:57:19.639
a subcontractor is a little different than an independent contractor,
1012
00:57:19.679 --> 00:57:23.000
because a subcontractor is somebody that you have no say
1013
00:57:23.000 --> 00:57:25.719
in it. That would be me building a home and
1014
00:57:25.800 --> 00:57:28.840
me just paying electrical contractor to do the electrical All
1015
00:57:28.840 --> 00:57:30.960
I'm doing is paying you to do it. I'm subcontracting
1016
00:57:31.000 --> 00:57:33.199
it to you. But if I'm out there and I'm
1017
00:57:33.199 --> 00:57:35.480
telling you how to do it as a business and
1018
00:57:35.559 --> 00:57:38.360
what to do, that's different than an owner saying I
1019
00:57:38.360 --> 00:57:40.480
want a receptacle here, I want a receptacle there. That's
1020
00:57:40.519 --> 00:57:43.039
the owner. That's based on what it's agreed from them.
1021
00:57:43.719 --> 00:57:46.039
I'm just agreeing to pay them a price to do
1022
00:57:46.079 --> 00:57:48.760
it and be done with it. They buy the material,
1023
00:57:48.880 --> 00:57:52.039
they buy everything, they install it, do everything. I have
1024
00:57:52.159 --> 00:57:55.760
no say in it that part of it. Anything other
1025
00:57:55.800 --> 00:57:58.400
than that, you start blurring the lines. And again that's
1026
00:57:58.400 --> 00:58:00.480
for you to discuss with your tax person, not me.
1027
00:58:00.800 --> 00:58:05.199
I'm just saying I see that. Whereas everybody wants to
1028
00:58:05.320 --> 00:58:10.679
lump their work as independent contractors simply because they're trying
1029
00:58:10.719 --> 00:58:13.840
to get away from paying taxes, payroll taxes and things
1030
00:58:13.840 --> 00:58:15.719
like that. Also, I want to tell you this, you're
1031
00:58:15.760 --> 00:58:19.280
not doing anybody any justice by paying them under the table.
1032
00:58:19.480 --> 00:58:24.000
I get it, it happens, I understand, But they're not
1033
00:58:24.119 --> 00:58:28.519
paying into Social Security. They're not setting the established rate
1034
00:58:28.559 --> 00:58:30.639
that they're going to get when they retire. So you
1035
00:58:30.679 --> 00:58:33.039
can kick that can down the road all you want.
1036
00:58:33.119 --> 00:58:35.280
Eventually you get down and they get to the point
1037
00:58:35.320 --> 00:58:38.360
of retirement and there's literally nothing in there. They have
1038
00:58:38.440 --> 00:58:41.920
no retirement So you may thought it was a good
1039
00:58:41.960 --> 00:58:44.199
idea now or they did because they're getting more money
1040
00:58:44.199 --> 00:58:46.519
in their pocket right now and they're not paying taxes
1041
00:58:46.559 --> 00:58:51.280
and you're trying to beat the irs. The problem is
1042
00:58:51.519 --> 00:58:53.199
they're the ones that get hurt in the end. And
1043
00:58:53.280 --> 00:58:56.360
you can get hurt if that person realizes that they
1044
00:58:56.360 --> 00:58:59.119
can't make any money. If they're not making any money,
1045
00:58:59.480 --> 00:59:02.000
and all of a sudd and they become disgruntle. All
1046
00:59:02.000 --> 00:59:04.320
they gotta do is whistle blow to the irs and
1047
00:59:04.360 --> 00:59:06.880
say that you know what, this guy was paying me
1048
00:59:06.960 --> 00:59:08.760
under the table for this many years and he never
1049
00:59:08.760 --> 00:59:11.639
took out payroll. And I'm not an independent contractor. I
1050
00:59:11.719 --> 00:59:14.880
did everything that he told me to do. I was dude,
1051
00:59:15.920 --> 00:59:19.360
Now you got big problems. So again, at the end
1052
00:59:19.400 --> 00:59:22.880
of the day, everybody loves you until they don't love you. You
1053
00:59:22.400 --> 00:59:25.880
get what I'm saying. Everybody's your friend, everybody's all man.
1054
00:59:25.880 --> 00:59:28.559
I'm here to help you out until something happens and
1055
00:59:28.599 --> 00:59:31.840
they find hardship. They will throw you under the bus
1056
00:59:32.320 --> 00:59:36.000
every day of the week. So again, just be careful, folks,
1057
00:59:36.400 --> 00:59:39.320
That's all I'm saying. Don't try to classify something as
1058
00:59:39.320 --> 00:59:41.760
something it's not just because you think it might benefit
1059
00:59:41.800 --> 00:59:44.079
you now, because it ultimately will hurt you in the
1060
00:59:44.079 --> 00:59:49.480
long run. Okay. Tax planning must happen throughout the year,
1061
00:59:49.639 --> 00:59:51.559
not just at the end of the year. Again, when
1062
00:59:51.599 --> 00:59:54.639
I started in my business, I just threw stuff in
1063
00:59:54.679 --> 00:59:56.239
a box and said I'll take care of it at
1064
00:59:56.239 --> 00:59:59.320
the end of the year. Do not wait until tax
1065
00:59:59.360 --> 01:00:02.519
returns is being prepared to discover that money needs to
1066
01:00:02.880 --> 01:00:05.480
is needed for taxes, has already been spent, and yeah,
1067
01:00:05.519 --> 01:00:12.639
you have nothing. Okay. Sole proprietorships, partners s, corporations shareholders
1068
01:00:13.079 --> 01:00:17.960
may need to make estimated payments during the year. Estimated
1069
01:00:18.000 --> 01:00:22.559
payments may cover both income tax and self employment tax.
1070
01:00:23.280 --> 01:00:27.519
The general self employment tax rate is fifteen point three percent,
1071
01:00:27.679 --> 01:00:31.719
subject to applicable wage bases and of course additional Medicare
1072
01:00:31.800 --> 01:00:36.000
tax rules. So an S corporation, for example, owners must
1073
01:00:36.119 --> 01:00:40.840
also remember that shareholders who works in the business generally
1074
01:00:41.079 --> 01:00:47.679
must receive reasonable compensation before taking non wage distributions. Now
1075
01:00:47.719 --> 01:00:51.480
for me, for example, I spend in my company, I
1076
01:00:51.519 --> 01:00:54.760
get payroll, and the payroll is not a big amount.
1077
01:00:55.280 --> 01:00:57.199
And the reason it's not a big amount is because
1078
01:00:57.239 --> 01:00:59.840
most of my stuff today is pretty automated. You purchase
1079
01:00:59.880 --> 01:01:02.639
my courses online. Years ago I decided not to teach
1080
01:01:02.679 --> 01:01:06.119
the live courses anymore. All this stuff was strategic in
1081
01:01:06.159 --> 01:01:09.360
my business. My trade hog is one hundred percent online.
1082
01:01:09.800 --> 01:01:12.639
My hands are off, but we may have to modify stuff,
1083
01:01:12.719 --> 01:01:17.000
update the codes, change things. So collectively, I probably spend
1084
01:01:17.159 --> 01:01:22.039
in the business fifteen hours a month, maybe maybe twenty
1085
01:01:22.039 --> 01:01:25.800
hours under real busy. But it's because I'm so you know,
1086
01:01:25.960 --> 01:01:29.960
and I am kind of when I'm creating courses, I'm
1087
01:01:30.000 --> 01:01:32.920
spending more time in it than I am. Once the
1088
01:01:32.960 --> 01:01:34.960
ball is rolling and I've already created the courses, it
1089
01:01:35.039 --> 01:01:37.400
kind of runs itself a little bit. That's not the
1090
01:01:37.440 --> 01:01:42.079
same as you as a contractor, totally different. So my
1091
01:01:42.280 --> 01:01:44.880
payroll from the company, and we also have to remember
1092
01:01:45.000 --> 01:01:47.840
I have another salary coming in from other companies that
1093
01:01:47.920 --> 01:01:49.920
I own that I do pay taxes on that, so
1094
01:01:49.960 --> 01:01:53.119
I don't need so much to come from the academy
1095
01:01:53.960 --> 01:01:57.480
to sustain me. So for what I do as an
1096
01:01:57.559 --> 01:02:02.400
overseer of the of the company in creating content, I
1097
01:02:02.480 --> 01:02:04.920
keep track of my time. And people say, well, that
1098
01:02:04.920 --> 01:02:08.159
doesn't sound like a lot of time, because I appear
1099
01:02:08.199 --> 01:02:10.840
to be doing everything and my hands are in everything,
1100
01:02:11.239 --> 01:02:13.719
but I block my time. I have a calendar I keep.
1101
01:02:13.760 --> 01:02:15.559
I make sure that I'm doing to do two hours
1102
01:02:15.559 --> 01:02:18.360
of this, one hour of this, two hours of this,
1103
01:02:18.480 --> 01:02:20.719
and I'm very focused when I'm working on it, and
1104
01:02:20.760 --> 01:02:25.000
I stop when I'm done. So I am very regimented.
1105
01:02:25.920 --> 01:02:28.039
And so this is how I get so much stuff done.
1106
01:02:28.239 --> 01:02:30.000
One is because I don't have to edit it. I
1107
01:02:30.000 --> 01:02:32.280
don't have to retake it. Every podcast you hear is
1108
01:02:32.360 --> 01:02:35.920
not edited. It's straight out of my mouth, okay, which
1109
01:02:36.199 --> 01:02:38.000
you know, maybe I put my foot in my mouth
1110
01:02:38.079 --> 01:02:40.039
once or twice, but I mean the end of the day,
1111
01:02:40.639 --> 01:02:42.840
this is how I am able to keep track of
1112
01:02:42.880 --> 01:02:46.400
my time. Okay, because I'm very efficient, But I don't
1113
01:02:46.400 --> 01:02:50.440
pay myself a crazy compensation because I don't need to
1114
01:02:50.519 --> 01:02:55.280
because the role is doesn't need that type of thing. Okay, now,
1115
01:02:56.199 --> 01:02:59.039
but your business is different because if you're in contracting,
1116
01:02:59.360 --> 01:03:02.119
you're in it every single day. You're putting in it,
1117
01:03:02.400 --> 01:03:04.559
so you have to have If you're anes corporation, you
1118
01:03:04.599 --> 01:03:08.599
have to have reasonable compensation. What's reasonable, Well, that's something
1119
01:03:08.639 --> 01:03:11.800
you have to decide. I determine what's reasonable for me
1120
01:03:12.440 --> 01:03:14.679
in a certain salary that covers the time that I
1121
01:03:14.719 --> 01:03:18.039
put into the business. I might put in more certain
1122
01:03:18.119 --> 01:03:23.159
times when I'm creating courses than I do other times. Okay. Now.
1123
01:03:23.280 --> 01:03:28.639
Year round planning should also consider retirement plan contributions, self
1124
01:03:28.679 --> 01:03:35.039
employment health insurance deductions, and available small employer retirement plan credits.
1125
01:03:35.599 --> 01:03:40.519
Eligible employers may qualify for a retirement plan starting credit
1126
01:03:40.599 --> 01:03:44.519
up to five thousand dollars annually for three years. So
1127
01:03:44.679 --> 01:03:46.639
you may not be able to offer these things in
1128
01:03:46.679 --> 01:03:49.400
your business. You're early, you're starting out, you can't offer
1129
01:03:49.440 --> 01:03:52.400
these kind of benefits, retirements and things like that. I understand.
1130
01:03:53.239 --> 01:03:55.400
But the moment that you can and you get to
1131
01:03:55.440 --> 01:03:59.159
that point, you need to start thinking about that. Now,
1132
01:03:59.199 --> 01:04:01.239
I ran my business for years. I did not have
1133
01:04:01.280 --> 01:04:04.519
health insurance when I started out years ago, and you know,
1134
01:04:04.519 --> 01:04:06.480
I had a young child and my wife and we
1135
01:04:06.519 --> 01:04:09.599
had all these businesses and I just couldn't afford it.
1136
01:04:09.599 --> 01:04:11.760
It was feast or famine. I was just going to
1137
01:04:11.840 --> 01:04:15.000
try to stay above water. And that's how a lot
1138
01:04:15.039 --> 01:04:19.920
of businesses start, just keeping your head above water and
1139
01:04:20.199 --> 01:04:22.360
making your way as you can. Then we went through
1140
01:04:22.400 --> 01:04:27.159
temporary layoffs. There were good times, but you know, easy
1141
01:04:27.199 --> 01:04:31.400
cradle ripoffs. But there were good times, you know. But
1142
01:04:31.599 --> 01:04:35.199
at the end of the day, we made it and
1143
01:04:35.679 --> 01:04:40.400
I got insurance for my family as quick as I could,
1144
01:04:40.840 --> 01:04:42.760
and then I grew from there. Lucky for me, I
1145
01:04:42.760 --> 01:04:46.119
have a great retirement plan from the company. The other
1146
01:04:46.159 --> 01:04:48.800
company I work for, Prismium, that have put quite a
1147
01:04:48.840 --> 01:04:51.239
bit in my four oh one k. That's a whole
1148
01:04:51.239 --> 01:04:53.199
another story because I'm going to owe those taxes when
1149
01:04:53.199 --> 01:04:55.039
I get there. But it is what it is, Okay,
1150
01:04:55.039 --> 01:04:59.360
It's still great to have it, right So anyway, so
1151
01:05:00.039 --> 01:05:02.000
let's kind of end this podcast on that. I'll give
1152
01:05:02.000 --> 01:05:04.679
you some things to talk about with your CPA, your
1153
01:05:04.719 --> 01:05:07.440
tax guy, maybe the guy online, the real tax guy.
1154
01:05:08.119 --> 01:05:11.960
Talk to him. The goal is not to manufacture deductions
1155
01:05:12.079 --> 01:05:15.400
or spend money unnecessarily. The goal is to capture every
1156
01:05:15.599 --> 01:05:20.559
legitimate expense you have, maintain records that can support those expenses,
1157
01:05:20.639 --> 01:05:23.119
and operate the business in a way that keeps more
1158
01:05:23.199 --> 01:05:27.400
of the profits that you've actually earned because you're using
1159
01:05:27.400 --> 01:05:31.239
the system properly, and you're also reducing your risk by
1160
01:05:31.360 --> 01:05:35.719
tracking everything and taking that extra time. Whereas you may
1161
01:05:35.760 --> 01:05:38.360
think this is boring to do this as a business,
1162
01:05:38.880 --> 01:05:41.679
it is all necessary that you keep track of everything,
1163
01:05:42.000 --> 01:05:44.480
if that makes sense. So for everybody out there that's
1164
01:05:44.519 --> 01:05:46.679
not in business that are thinking about getting into business,
1165
01:05:46.719 --> 01:05:49.320
if you do start off the proper way, do all
1166
01:05:49.360 --> 01:05:52.079
these things that I say, you know, and if you
1167
01:05:52.159 --> 01:05:55.719
have questions, ask somebody that is qualified. I am not
1168
01:05:55.840 --> 01:05:58.760
your tax guy, I am not your insurance guy. I
1169
01:05:58.760 --> 01:06:01.639
am not your legal guy. I'm your nec code guy.
1170
01:06:02.119 --> 01:06:05.239
I can handle that. But if you need tax advice,
1171
01:06:05.760 --> 01:06:08.519
then there's people like the real tax guy on TikTok.
1172
01:06:08.559 --> 01:06:12.320
There's others out there as well. There's CPAs, there's local folks.
1173
01:06:12.880 --> 01:06:16.159
Check them out. But you know what, get the answers
1174
01:06:16.559 --> 01:06:18.960
because you need the answers to run your business. Properly
1175
01:06:19.159 --> 01:06:22.960
and not create problems down the road. Makes sense, all right, folks.
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01:06:23.079 --> 01:06:25.400
Until next time, Stay safe, God Bless again, it's Paul
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01:06:25.480 --> 01:06:28.679
Avernaty with Master of the AC podcast. Make sure you subscribe.
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01:06:28.719 --> 01:06:31.960
We'll catch you on another upcoming podcast. Take care, God Bless.
1179
01:06:32.840 --> 01:06:36.159
Thanks for tuning into another electrifying episode of the Master
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01:06:36.280 --> 01:06:40.400
the ANEC podcast. We hope you're feeling more powered up
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01:06:40.440 --> 01:06:43.000
and ready to tackle the electrical world with the knowledge
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01:06:43.000 --> 01:06:48.000
and confidence you need to succeed. Remember, in the electrical trade,
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01:06:48.199 --> 01:06:50.800
knowledge is power, and we're here to make sure you
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01:06:50.840 --> 01:06:55.239
stay flooded into the latest insides, tips and code updates.
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01:06:55.840 --> 01:06:59.639
If you enjoy today's episode, don't forget to subscribe, leave
1186
01:06:59.719 --> 01:07:02.159
us a thank you and share the podcast with your
1187
01:07:02.159 --> 01:07:07.400
fellow electricians and industry pros. Until next time, keep your
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01:07:07.440 --> 01:07:11.360
tools sharp, your circuits clear, and you're my focused because
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01:07:11.400 --> 01:07:14.280
here at the Master of the NEC podcast, we're all
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01:07:14.320 --> 01:07:19.400
about sparking your success. Stay safe, stay smart, and keep
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01:07:19.480 --> 01:07:23.400
mastering the trade. From all of us here at Electrical
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01:07:23.440 --> 01:07:26.079
Code Academy. Thank you for all your support and we
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01:07:26.119 --> 01:07:28.239
will see you on the next amazing Master of the
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01:07:28.360 --> 01:07:32.880
NEC podcast episode.