Legally Beat the IRS

7 Little-Known Ways to Legally Beat The IRS

A PUBLICATION OF The Wealth Advocate TABLE OF CONTENTS

Introduction

1 Tax Filing Vs. Tax Planning

2 What Is Cost Segregation

3 R & D Tax Credits

4 WOTC

5 Property Tax Mitigation

6 W.A.R.P. TABLE OF CONTENTS (cont’d)

7 Home Office

8 Is Your Business Properly Set UP

Conclusion introduction If you’re like me, then you started your business from little more than an idea, some hard earned savings, and a credit line. You took massive amounts of risks, spent so much time away from your family that your youngest child confused you with the UPS driver, and considered a 12 hour work day to be a half day off.

But it paid off. In time, you built your business to be successful. You now employ several people, have a good reputation, close to debt free and finally able spend some quality time with those you love. You put in very long hours and are finally enjoying the financial fruits of your labor.

But every year, your least favorite relative (Uncle Sam) comes calling. You now write tax checks to him that are greater than the price of your first house. And worse, the people who wrote the tax code, your congressmen, tell you that you aren’t paying your fair share. Really? If you’re like most small business owners that I work with, you’re not only paying close to 50% of what you make in federal income taxes, you’re also paying an additional 7.65% of every employee’s paycheck in payroll taxes. Of course, you’re also paying local income taxes, commercial activity tax, worker’s compensation, and property taxes. You took huge risks, created jobs, and now you’re paying 5 times more in taxes than that Washington bureaucrat who accuses you of simply being “lucky.” If you want to lower the amount of confiscatory federal and state taxes you are required to pay every year, then this might be the most important information you’ll ever read. Here’ why…

When you hear the word “taxes,” naturally, your first reaction is to say, “My CPA takes care of that.” However, here is what you need to know about the work your CPA does for you and how it is different than what you are about to learn in this guide. Tax Filing Vs Tax Planning Tax Filing vs. Tax Planning

CPAs are trained to file taxes, not develop strategies to lower them. He tells you that if you earned it, you have to pay it. He’s just simply following the law.

Their primary objective is to save you money in taxes, but unfortunately, they only get the chance after the fact. By the time your CPA has the information, they are dealing with historical data.

Accordingly, we are here to tell you that there are tax credits, tax rebates, and tax savings opportunities available to you that you likely don’t even know exist, and that your CPA is unable to capture for you.

Furthermore, this is money that is owed to you, you just need to know how to get it..and that’s why we are here! We Love Your CPA

One last word on your CPA.

We are not here to replace your CPA by any means. In fact, CPAs love partnering with us (and we love partnering with them), because we provide the specialized tax planning work that works in conjunction with your CPA’s tax filing services.

The number one roadblock is that your CPA is not your consultant in these areas. If you have a large firm, they may have an entire division devoted to finding tax incentives. We have 200 attorneys (in our network) and can tap them when needed.

A normal CPA is already buried up to their eyeballs with paperwork for their clients. People assume that their CPAs have a grasp of all the incentives that are out there, (but) almost every CPA says they know the programs are out there. They have been to a seminar and know about them, but are they taking it to the next level and able to file all the necessary paperwork? Standard CPAs don’t have time to dig into those areas without some help. We help the CPAs consult with their clients. We Love Your CPA (cont’d)

We have a team of consultants, project managers, intellectual property attorneys, and expense auditors in our back office that work together to seamlessly uncover these specialized tax savings and incentives.

We don’t want local businesses to lose money because of the disconnect that is out there.

Let me prove it to you.

What follows are 7 Tax Saving Strategies that might get you money that you didn’t know you were owed. 7 Tax Saving Strategies that might get you money that you didn’t know you were owed.

Note: Over 90% of businesses qualify for at least one of these opportunities. Applying even one strategy to your business can yield over $10,000 in immediate tax savings (in some cases, we have seen 6 figures of savings). Cost Segregation Tax Credit. Photo by Greg Rakozy .

“In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods.” – IRS Website If you own commercial property, this is a big one. Your CPA likely knows about cost segregation, but this is one of those strategies that absolutely requires a specialist, and in the case of cost segregation, an engineering specialist (which we have in our back office).

As quick background, the Commercial Property benefit is a Federal program designed for business owners who own commercial properties, or have performed significant leasehold improvements. This program traces its roots as far back as the Tax Reform of 1986, but went through significant changes in 2004 making it more accessible for small and midsize property owners to take advantage of. There were also changes made in February 2009 in the American Recovery and Reinvestment Act . The most recent changes are with the new Tax Cuts and Jobs Act of 2017. The new law enhances cost segregation even more because there is also bonus depreciation for properties acquired after September 27th 2017 which allows for 100% depreciation for certain items. Cost Segregation (cont’d) This is an engineered-based program that focuses on the components of the building. 90% of all commercial properties qualify for this program, and this benefit provides an opportunity to significantly reduce federal taxes and improve cash flow.

Here’s a quick way of understanding how this works.

Take a look around your building…

The light fixtures... The plumbing... The flooring... The cabinetry... Everything...

How long will it last? Cost Segregation (cont’d)

Here’s a better question. Do you think that all of the items that make up your building will last 39 years?

If your answer is “NO,” you are correct.

However, that’s how your building is being treated according to your taxes.

Unless you have already completed an engineering-based cost segregation study, then every year, you are depreciating the components of your property on a 39 year schedule.

Depreciation is an income tax deduction that allows you to recover the cost or other basis of certain property. It is an annual allowance for the wear and tear, deterioration, or obsolescence of the property.

So every year, you write off 1/39th of the value of those items. Your accountant does it this way, because it’s the “safer” way to do it (but it’s not the most accurate way that produces the most savings for you). Cost Segregation (cont’d)

In one breath, you cannot blame your accountant.

Since your accountant isn’t an engineer, he/she cannot come into your building, do an analysis of the entire structure and its components, and tell you which components have a 5 year life...a 10 year life...a 15 year life…

So, the standard way to do it, and the way almost all accountants do it, is to put your entire building, and its components, on a straight-line, 39 year schedule.

Accordingly, with a proper cost segregation study done by a specialist, you and your accountant can be handed an analysis of your building, with a specific (and accurate) schedule of the depreciable life of each component.

When done this way, you could eligible for $150,000 of additional depreciation, and up to $75,000 of tax savings for every $1,000,000 in purchase price or construction cost. Cost Segregation (cont’d)

Another reason that CPAs would often shy away from these studies in the past is because in order to get an engineering based study completed, it would cost $10s of thousands up-front in the hopes that you recover more savings than the cost.

It was a risk, and a risk that most CPAs and business owners did not want to risk.

Well, we removed that risk for you.

We will determine up front if we think it is worthwhile for you to do an in-depth cost segregation study for FREE. Then you and your CPA decide whether it is worth it for you to do the engineering based work . We do the work. We get you the savings. Then you compensate us as a portion of that savings.

It’s that simple and there’s no catch. Research & Development Tax Credit.

Photo by Greg Rakozy .

“The Research & Experimentation Tax Credit or R&D Tax Credit is a general business tax credit under Internal Revenue Code section 41 for companies that incur research and development (R&D) costs in the United States. ” – IRS Website The Research & Development Tax Credit was originally enacted as a Federal Tax Program in 1981 and was designed to encourage American investment in innovation. In 2004, tax regulation changes significantly expanded the credit opportunity. Today, the credit is accessible to many small and medium sized companies whose activities include design, manufacturing and process improvements. Who and what qualifies as research and development

(R&D) Believe it or not most businesses qualify for this rebate if they do anything to create, innovate and improve the process of their businesses in any way. These apply to ANY type of business from farmers to software developers, and is much broader than most realize. Furthermore, engineering, design, testing, and programming are now included as Qualified Research Activities (QRE). Industries that most commonly qualify are:

• Manufacturing • Fabrication • Engineering • Software Developers • Chemical • Tool & Die • Machine Shops • Plastics Manufacturers • Pharmaceutical • Biotechnology • Food Sciences/Manufacturers What are the benefits of an R&D tax Study

The benefits of having an R&D Tax Credit Study performed would be: • Dollar for dollar credit against taxes owed or previously paid • Carry forward credit for future profitable years • Immediate increase in company cash flow • Credit average is over $25,000 per $1,000,000 in total company payroll

Our Methodology

We utilize a team of highly qualified professionals including IP attorneys with engineering backgrounds and adheres to the Comprehensive Project by Project Approach methodology as required by the IRS. By following this methodology, we qualify every applicable employee, activity, hour spent and corresponding wage paid in order to maximize the incentive for our client. We strictly adhere to the applicable sections of the code and provide first-in-class documentation to substantiate our findings. Getting Started

An initial consultation is done over the phone with one of our R&D Specialists to identify potential Qualified Research Expenditures (QRE). If qualifications are identified, we will collect an authorization to begin working on the client’s behalf. No fee is charged until credits are identified and utilization is verified with the client’s accounting representation. Workers Opportunity Tax Credit.

Photo by Greg Rakozy .

“The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment.”– IRS Website WOTC Overview

WOTC stands for the Work Opportunity Tax Credit and is not one but several tax credits given to employers at a Federal level for hiring qualified employees. Annually employers claim over $1 billion in tax credits under this program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit.

History of the program

Hiring Incentives have been a part of our country’s infrastructure since the early 1940’s. At that time most Hiring Incentives were focused on Veterans returning to work after periods of service. This continued to be the main focus for Hiring Incentives until the 1970’s and 1980’s when the focus was expanded to include Ex Felons, and Welfare Recipients. There was a dramatic shift and expansion to Hiring Incentives in the late 1990’s throughout the 2000’s which opened the door for “Job Creation” as the focus for Hiring Incentives. As a part of this change the Work Opportunity Tax Credit (WOTC) was created in 1996 and has been modified, extended and consolidated with existing Hiring Incentives repeatedly since. What Are The Benefits of WOTC

The average benefit per employee is $2,400.00 and can be as much as $9600.00. That means potentially 10 qualified employees could yield a federal income tax credit between $24K – $96K. Additionally, WOTC credits may be carried back one year and carried forward 20 years.

Simply put, the WOTC reduces an employer’s cost of doing business and turns Human Resources into a profit center.

Our Methodology

Historically the steps necessary to qualify for the WOTC have been time consuming and burdensome. We have made made substantial investments in a proprietary technology process that relieves the employer of 90% of this burden by automating most of the steps involved in prescreening and certifying candidates before hiring as well as streamlining the submission of required documentation to State and Federal agencies. Getting Started

An initial consultation using our proprietary software is conducted to determine the potential benefit. The consultation allows our professionals to evaluate your status and recommend the best course of action to claim the tax credits that belong to you. Property Tax Credit.

“Most local governments in the United States impose a property tax, also known as a millage rate, as a principal source of revenue. This tax may be imposed on real estate or personal property. The tax is nearly always computed as the fair market value of the property times an assessment ratio times a tax rate, and is generally an obligation of the owner of the property. ” Property Tax Mitigation Study Overview

Outside of income taxes, the single largest recurring charge for commercial property owners are Property Taxes. In most states, owners are required to pay taxes on both their real estate as well as their personal property. These charges are often an immense expense and a constant hit to the bottom line. To be ensured you are not being overcharged on your Property Taxes, an industry specialist with extensive market experience in valuation, tax, and law should be retained.

History of the Program

As far back as 1796 there has been some level of property tax in the United States. By 1900, more than half of the states enacted clauses that required taxation of property. Over the past hundred years, local governments, municipalities, townships, school districts, and other bodies have enacted specific methods for the calculation of property tax in their jurisdiction. This has led to innumerable protests and legal mitigations that continue to this day. Who Qualifies

Any Commercial Property Owner who pays over $50,000 per year in Real or Personal Property Tax is worthy of a free review to determine potential reduction opportunities.

What Are The Benefits of a Property Tax Mitigation Study

The immediate benefit is the reduction of taxes owed and the potential of refunds on prior taxes paid. The future benefits would similarly be a reduced tax burden going forward, producing an increased cash flow for the business.

Our Methodology

Our experienced team of professionals in mitigation, valuation, assessments, and law will work on your case to identify any potential opportunity for refunds and/or reductions in your current property taxes. We perform all the work on your behalf until savings are captured, including partaking in hearings and filing necessary paperwork. We act as an extension of your company toward the governing property tax bodies. How To Get Started

A simple contingency engagement with us will get the ball rolling. We will collect your most recent property tax assessment as well as an authorization for us to work on your behalf. We then go to work for you! When we procure a savings/refund for you, our fees will simply be a percentage of what you receive as a result of our work. Wealth Advocate Retirement Program(W.A.R.P.). Photo by Greg Rakozy .

“Here at the Wealth Advocate, we have uncovered a very advantageous way for business owners to fund their retirement without raiding the reserves of your business. .” – Roy Innella Here at the Wealth Advocate, we have uncovered a very advantageous way for business owners to fund their retirement without raiding the reserves of your business.

In fact, this strategy is so powerful, by leveraging one little tax code (IRC 236??) it can increase your retirement income by 239%.

While there are many nuances to the methodologies behind the working parts of this structure, the WARP is simply a tool through which a business owner may have the ability to drastically advance their wealth accumulation relative to their retirement planning efforts in a highly tax advantaged manner.

This methodology, when applicable, gives business owners the opportunity to take a tax deduction relative to their participation, grow their wealth tax deferred and take distributions out of this retirement planning medium tax free.

Additionally, it jump starts their retirement by advancing massive amounts of capital in their program for them, with the goal of realizing superior gains as a result of having more money working for them. This lends itself to having the ability to generate a much larger nest egg than through other approaches that may then be distributed on a tax free basis. Additional benefits of W.A.R.P:

Wealth Transfer: Transfer massive amounts of wealth to your heirs, charity, school or foundation utilizing the most powerful and cost effective manner while guaranteeing the results

• Estate Plan: Engage in estate planning utilizing the benefits of your business to accomplish the most cost effective legacy plan in existence

• Qualified Plan Rescue: By redirecting participating funds, the opportunity exists to generate a structure that results in tax free distributions that may be applied against taxes due on distributions out of a qualified plan

• Business Exit Planning: With the ability of the front loading to be assumed, it may provide massive benefit to the business seller and buyer at sale

• Key-man & Buy/Sell: With the insurance contained within the structure, it can be used as a wealth accumulation medium and address insurance needs simultaneously Using Your Home Office As A Tax Deduction.

“If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.” -IRS Rent Your Home Office to Your Corporation - Did you know that if you have an office outside of the home that you can rent up to 2 weeks of office in the home back to your corporation. This can net you sizeable sums of tax rebates or at least business tax deductions which were otherwise unthought of. Even if you have an office outside the home that you regularly use you can rent up to 2 weeks of office use to your business.

I know in my case my tax deduction was 9500.00. Of course you must have the proper entity set up in order to take this deduction and you need to know the back up paperwork that has to be on file. Using The Appropriate Business Entity Setup.

“When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.” -IRS Having the Proper Business Entity Setup - If you are a growing business that started an LLC but have grown to a point where you are paying taxes on the flow through entity as a sole proprietor you may want to think about changing your tax filing status in order to take advantage of certain dividend options as a corporation which will allow you to avoid some self-employment tax. This can be a huge tax savings if handled properly and it only requires one page of paperwork to file with the IRA and there is an added benefit that reduces your chance of audit if you become this type of entity. As you can see the above 7 strategies are an easy way to get added recurring revenue for you or your business because most of these credits occur year after year. After a thorough business assessment we may be able to find more ways to save you or your business deductions or rebates.

Now you could do this on your own or you could ask your CPA to figure it out and I am sure your CPA is willing to help. Most business CPA’s are very busy and don’t have the time or the staff to continually analyze their clients’ assets and tax situation in order to find credits and rebates. We work with your CPA or trusted advisor to get the ball rolling and follow through so that you and your CPA can do the work in your respective businesses that needs to be done and that you like to do. Now Is The Time To Call or Schedule a Tax Savings Meeting

If you think that your company may be a candidate for one of these strategies or if you are just tired of having Uncle Sam as a partner by paying too much in taxes we may be able to find a way to get Uncle Sam off of the payroll by working with your CPA to find the right strategies that work for you.

To set up a quick half hour call you can either call my office at 610-695-8748 or go right to my calendar at: http://www.talktoroy.com

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