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Legally Beat the IRS

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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 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. 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.
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