welcome to another session of ooi DA’s business education series oh i DEA is proud to offer the most comprehensive business education series available for america’s professional truck drivers we would like to thank our many friends in the industry who take educating America’s professional drivers as seriously as we do with the help of these sponsors we’ve been able to make the programming on the business education series free to all drivers this program is being sponsored by our friends at taxation solutions incorporated when you need tax consultants with experience the right credentials and the ability to help with penalty abatement audit defense and tax settlements look no farther than taxation solutions incorporated taxation Solutions has experienced tax attorneys and enrolled agents that have assisted taxpayers with negotiating and settling their IRS debt their overall goal is to get you only the best deal available with IRS relief live again without the fear of the IRS contact the professionals at taxation solutions you can reach them on the web at WWE nine nine seven two two one five you the topic for this series is dealing with the IRS in this series we’re going to be discussing tax issues which unfortunately are all too common in the trucking industry and in this program we’re going to be talking about 12 things you can do to beat the IRS legally my name is Tom Gann and once again I have the pleasure of hosting this program I truly am honored to have Barry Fowler as our guest on this program Barry is the president and founder of taxation solutions incorporated and he also holds the title enrolled agent and for those of you who don’t know this enrolled agent status is the highest credentials the IRS Awards these enrolled agents they’re unrestricted as to who they can represent they can represent their client for any type of tax matter and they can also represent him in any IRS office around the country Barry’s been recognized as one of America’s premier experts in IRS relief and taxes he’s helped hundreds of people solve complex tax issues with the IRS and were truly honored that he’s agreed to be with us here today to share his insights we’ve got a lot of material to cover with Marion this program so we’re probably gonna run it a little bit over on our time frame please bear with us let’s get started ok Barry I know this title how to beat the IRS legally is a big deal everybody wants to beat the IRS and I guess what we’re going to talk about today are twelve things that are mistakes most people make where they could save thousands of dollars if they only knew to do this and I guess that kind of leads into the very first thing is planning for your taxes and that’s something that people just don’t know a lot about you know in high school we didn’t learn about taxes and so you come out here you start running a business and all of a sudden you’ve got all these taxes you don’t know anything about it so if I’m new to owning a business or if I’m planning on opening a business what are some of the things that I need to do to plan for taxes well I think you know that the first and the biggest mistake of all is just failing to plan and I’d really don’t care how good you are or how good your tax preparer is where the stack of receipts on April 15th you can miss so many things by not planning ahead and one of my favorite quotes here is Judge William Rehnquist a Supreme Court judge said there’s nothing wrong with the strategy to avoid the payment of taxes the Internal Revenue Code it does not prevent that that’s where we go with planning and one of the keys to planning is a good financial defense it’s actually going to set the stage and the map so to say of how we’re going to guarantee results with planning and give you all the advantages of the tax laws there is you know my accountant talks about grey areas you know he told me that well we can go into these gray areas it’s just a matter of whether you want to take the chance when he said that I guess I

really wasn’t sure what he was talking about when we talk about tax planning I know there’s some areas that are kind of risky whether or not you want to get involved in well when we talk about the gray areas I kind of use it as a football analogy you want to be first in ten inside the 20-yard line but don’t necessarily want to have to score that touchdown that’s going to set you up for a problem so you know we want to be close but we don’t want to go through the line what we’re trying to do is move as much of people’s income in tax planning to where they’re spending pre-tax dollars that’s dollars that are sped before they’re taxed so whether they’re spent in the business spent through the business to accomplish personal things its deductions and credits in tax planning that will save people tax money on their bottom line because what you’re going to do is reduce the taxable income down as far as you can without scoring that touchdown or where they’re going to throw the flag possibly on you and you get your taxable income low enough to where you’re in a lower tax rate I think when a driver moves from being an employee driver to a business owner I think a lot of guys get caught off guard on tax planning you know when you’re a an employee first of April you start thinking about better get all my tax stuff together because I got to pay my taxes by April 15th but when you’re a business owner tax planning is a full-time activity you’ve got to pay quarterly taxes and I know that catches a lot of guys off-guard that first year and even guys who have been in business for a while they kind of let it slide they start getting all their tax stuff together right before each deadline and that’s not really the way a business operator needs to plan for their taxes is it exactly in the quarterly filings the coordinate estimated taxes need to be paid and it’s weird quarters for the IRS because it grows April 15th at June then September and then January so it’s not your normal quarters you would think of but one of the things we try to do is a lot of our ID a driver’s is get them into bookkeeping so we can kind of stay ahead of the game with them and help them plan as they go through the future but also help them plan for beating the taxes that the IRS wants to charge now we talk about that bookkeeping a lot of guys tell me I can’t afford a full-time bookkeeper well we talked about bookkeeping a lot of times is just getting a bookkeeper to set you up you do the actual data entry and then you get with your bookkeeper on a quarterly basis is that how you recommend people do it well we kind of work with people on a month-to-month basis and most of them just send us their receipts their check register or their bank statements and we take care of everything from there and it makes it a lot easier these truckers are on the road so many days out of the year that they don’t have time to even keep up with this and that’s you know part of where we come in yeah they may think they’re saving money by do their own books but boy it is really a hassle especially when you’re on the road I say most of our truckers more than they could ever afford to pay anybody to doing it they would pay a lot more in tax and I’m going to save them all that by you know us helping them with their bookkeeping and getting them on down the road and they can concentrate on what they do best driving trucks and I can concentrate on what we do best saving those truckers money now to set up or start planning for your taxes what some of the first steps of guys should do well the first step is looking at the prior year you know what expenses in what deductions you had and then pointing to a budget of where you’re going to plan on going this year and then working with us or any other tax professional to kind of walk that line to see what deductions they’ve missed what deductions we can add in and get them within that goal line in that first intent inside the twenty one thing that keeps people away from getting inside that 20-yard line is what we would call our number two most expensive mistake and that is an audit paranoia yeah everybody wants to beat the IRS but everybody’s afraid of that audit aren’t they they certainly are and you know we deal with enough of them around here and Taxation Solutions deals with people nationwide that have tax problems and have had IRS problems and other problems but most people are got to understand is that Schedule C which is a small business self-employed if you’re making under a hundred thousand dollars there’s only about a three point six percent chance of being audited if you’re under that hundred

thousand it drops to like two points for and under twenty five thousand it drops to one point two but if you’re in a partnership or you’re in an S corp that drops down to like a half a percent it’s not really that big of risk of being audited it’s just knowing how to avoid the red flags the red flags that’s the big deal it it very much is and if you can avoid the red flags the audit possibilities go down you know to even less than that you got to have somebody on your side that knows what they’re doing how it’s going to help you down the road and help you avoid what the red flags will be I talked to a lot of drivers who seem to be overly paranoid about red flags and one of the things that comes up in discussion all the time is they’re afraid to claim their per diem and for a driver per diem is a pretty high number so does it make sense for them to be so paranoid about the per diem amount triggering a a red flag it is not a red flag for her our truckers that are over the road truckers meaning that they’re spending nights on the road and away from home where we get in trouble or where our clients do get in trouble is when they’re taking those per diems on local transport so they have no support no evidence but most of our truckers have great evidence that they’ve been on the road overnight and don’t have any problems there a minute ago you talked about LLC and an S corp you mentioned that there are less red flags or your chances of being audited are much less how should I set up my business that brings us to number three on our 12 most expensive lists is wrong business entity everybody’s business we have to sit in and look at and say what are they doing if they’re only running maybe twenty-five thousand dollars a year which you know most of our truckers are not they’re running a much more than that you can be a sole proprietorship get all your tax deductions you won’t have very much tax and your audit rates would be very low but you do have choices out there you could be a Sikh or you could be an escort you can be a partnership way those kind of differ out there is your sole proprietorships report everything on Schedule C and you pay all the self-employment tax your S corporation is going to split the proceeds into a salary and an income and on your salary you pay the Social Security and Medicare tax and on the distributions or other income you only pay the federal tax you pay no Social Security tax and then the LLC side of it is if you can be a dual member maybe husband and wife or maybe you’re in a partners with somebody then we don’t have to worry about the payroll side of it we use the guaranteed payment and save yourself on that Social Security and FICA tax out there that will save you that 15% on anything that’s not you know payroll now the beautiful part is and that your audit risks drop down to you less than 1% and it keeps all what I would like to call the trash off your personal tax return which means it shows no business income and gross amount doesn’t show all your deductions against it it’s all sewn on a corporate or a partnership return I like that getting rid of the trash somebody’s got to take the trash out yeah what about a driver who set up his business say as one entity maybe a corporation and the tax professional he’s going to recommend that they change it to a different type of entity is that a big deal to change how your business is set up it isn’t for for us because we will actually walk them through that change there’s a lot of things we’ve got to do get eaten the organizational side set up and then getting our clients to change their bank accounts to the corporate or LLC accounts and then working with them to move their assets which is like their trucks and the trailers over to the corporation so there’s a lot of little things to do but we’re able to walk them through step by step to get them there and I think that’s part of the problem most of the guys are just so confused about the steps required that they’re afraid to even try well that’s exactly the case and they think well I’ve been doing it this way for years why should I change it’s because we want to find a way to save them as much tax as possible can you imagine going from paying maybe ten fifteen or twenty thousand dollars in tax and maybe even cutting that in half you know that makes it worthwhile absolutely okay let’s talk a minute about retirement plans I think that’s number four on our list and I hear guys all the time say I don’t

have the wrong retirement plan I don’t have one at all well that’s the first thing we need to correct and get them into a retirement plan and if you’re not running running one at all then you can start with the simple which is in the IRA but it has the lower limits now as a self-employed person or even running your own S Corp or LLC you can set up those simplified employee pension plans simple IRAs or even the 401ks I’m not here today to make anybody an expert on those plans but we can pretty much help everybody decide what plan is right for them and how to save the most in the correct plan they’re set up correctly takes a lot of the pain out of setting that money aside when you know it’s done right and you you’re confident that it’s gonna work out in the end exactly and you got to realize that that money is gonna go in pre-tax most pension plans or most most retirement plans that we set up are going to be pre-tax plants we’re not going to use the Roth right at the moment we want to put as much money in an IRA or a 401k or SEP plan to save them as much as possible on their employment taxes now if you have a SEP set up the right way you could put up almost to 25 percent of your net self-employment income so you’ve got for 2015 a maximum you could put into that account at $53,000 well but so many of them tell me yeah I can put that away legally but if I do I can’t eat and that’s why we try to work with them to set up a plan to show them what the cost-benefit ratio is for them but we’ve got to set it right so that you can eat so you can drive and you’re not strapping yourself for cash fluxes the last thing we want you to do is we’ll look back out after you put in because we don’t want the penalties for early withdrawal let’s talk a minute about hiring your wife or your children as part of the business well that’s number five missing that family employment you can employ your family and depending on how your business is said there’s different ways we can do it the wiggers you can employ your wife to do certain things for you you can employ your children that are over seven years of age and one of the good things about children is the first sixty three hundred dollars could be tax-free and the next nine thousand taxed at 10% but it’s got to be a reasonable wage for what they’re doing with a written job description yes they would like timesheets and they should have their own account in their own name when you talk about their own account are you talking about their own bank account own bank account and why is that important it’s a great way to start saving for college education even if you’re going to use money let’s say to put them in a summer camp it’s a great way to employ them pay a lower amount of tax based on what they’re earning and then let them or you basically spend the money for that kid to go to a summer camp or maybe their education or whatever it is at that point now when you employ a family member is there some advantages for the medical benefits for that person depending on who you’re playing and how you’re employing them you can use it to cover the family’s health cost NS number 6 on our list missing medical benefits what you’re going to do is if you’re paying your own health insurance you can do a health insurance plan through the company and have your wife cover you and the kids as a self-employed or as a employee of your business and you can now deduct that from your business expenses and then you can also set up like a medical reimbursement plan to where it will reimburse all uncovered medical and dental costs so your business will cover all that with pre-tax dollars you’ll need a plan what is called a section 105 and a medical reimbursement plan put in place for your company but it makes it deductible expenses before tax ok let’s be clear while we’re talking about this so guys listening are confused we’re talking about setting aside money so they can buy a health care plan we’re not talking about getting a health care plan from say my tax professionals out no absolutely not we don’t sell insurance at all hey Barry I got a I want to build a four car garage where I can keep my truck and my boats and some of those things in and I also want to have room for a pool table and you know I’m gonna put a computer over in a corner so I can claim that as my home office is that gonna work absolutely not your one thing you know we get the question all the time well

why doesn’t it well here’s how you qualify for the home office deductions in the first place your home office qualifies as a portion of your principal place of business one you got to use it exclusively and regularly for administrative management activities of your business and if you have no other fixed location where you conduct a substantial amount of business you can then deduct a portion of your house but again we’ve got it back up because it has to be exclusively and regularly used for administrative or management activities of your trade or business so yes you cannot have an area where you get a pool table area where your kids play it’s got to be a separate room and only used for the business it could be a spare bedroom in the house as long as that’s all you use it for isn’t that right exactly it can be a spare bedroom you may even have a larger area that you do it speaking of the truck you may have land and you may maybe Park it in covered parking or something and you do that just for the truck that can be deductible as well it’s just got to be used exclusively for your business when you do have the office in the home and you’ve got an area exclusively used for businesses you can deduct portion of your property taxes portion of utility security cleaning office furniture so you have all that available to you when you do have that in the home but again it’s just got to be exclusively used for that as well what about missing deductible business expenses what the heck are we talking about well for a company driver you’re only limited to non reimbursed expenses that are required by their employer those are only available if you’re itemizing it on Schedule A but other expenses that are missed all the time is what the driver actually does for their business and in their business now what we see a lot of times is they’re afraid to deduct this expense or that expense just because it doesn’t look like it’s passes the smell test what we use is if it’s for the business it is definitely a business expense so we try to make sure that when we’re doing but keeping with all of our clients is go through a litany of questions that will identify other business expenses forms so make sure they’re not missing them just because you pay cash for whatever expense you have and didn’t have out there at the time doesn’t mean it’s not deductible just need the receipt yeah if I need new windshield wipers and I run in some place real quick and grabs em and put them on myself I make me cash for those I really need to keep track of that expense yes you do the interesting part is that driver would turn to me and go hey what my time is that deductible – no sorry the other day I was doing some maintenance on my truck and I needed some parts I jumped in my car I drove down and picked up some parts and came back and did some work can I do that part of my car expenses that is one of the other biggest items that’s missed by our truck drivers because they think okay it’s not driving my truck so they’re forcing out my expense yes going from your house to go pick up parts to go work on your truck or going from your house to get to your truck if you’ve got to Home Office we can take advantage of the miles to go from your house to the storms lots of your trucks at there’s all kinds of expenses that are missed there just because you’re not driving your truck doesn’t mean it’s not related to the business it doesn’t mean you can’t deduct it keep track of your mileage log of where you go for business in the car and where you end up and the business purpose for it now that mileage log that can just be a three-ring binder or a spiral notebook and you just write down the mileage you use to go get parts or whatever exactly or if you’re working with us we give you a nice little mileage log you can write in every day and we’ll give you a new one every year oh another log book great it’s small it’s small now I see the next two items on our list they look to me like they’re kind of the same thing number 10 we’re talking about missing meals and entertainment expenses and for number 11 we’re gonna talk a little bit more about missing per diem expenses is there a difference between meals and entertainment and per diem very definitely what you also have is when you’re going to some of the trade shows and the truck shows out there you’re gonna have business meals for attending those you may be employing

other truckers in your business and meetings with those drivers are deductible so if you’re out having lunch if you’ve got referral sources or people maybe that are providing loads to you those lunches or dinners are deductible if you can relate your business or meal to business its business now let’s go ahead and extend this out a little bit your wife is working in this business with you you guys go out to dinner and you’re discussing business it’s a business expense there’s a business purpose for that meal and you had an actual business discussion during that meal that meal becomes deductible and I suppose you’d also be able to deduct a mileage in your car to go to that meal exactly and coming back now the business expense of meals and entertainment is only 50% deductible but it is at least it’s deductible it saves you money on your taxes hey that’s paying for her meal that’s exactly right and what we’ve always been talking about in this whole program is reducing the adjusted gross income which is the dollars you get taxed on by spending pre-tax dollars per diem let’s get back to that I can only claim a per diem if I spend the night on the road is that correct basically that is correct now we will include the day that you end that travel so it may be one night but we get two days in there and we generally have been using the per diem civ about fifty nine dollars a day and it’s deductible at eighty percent now normal meals and entertainment are only deductible at fifty percent but because you’re in the trucking industry those become 80 percent and I believe you guys got a really good program on per diems yes actually we do the title of that program is taxes the pros and cons of per diem and my guest on that program was Jim O’Donnell Jim did an excellent job of explaining per diem so if you’d like some more information on per diem I recommend that you also take that program in this series and of course it’s free too and if I’m remembering correctly I believe Jim said that drivers don’t really need to save the receipts for the meals when they’re on the road it’s just a flat fee per day am I remembering that correctly that is absolutely correct we never asked for a receipt of what any of our truckers have spent father on the road for their meals we just get the number of days and the best thing is to just refer back to the trucker logbook and we can get the number of days that are on the road right from there yeah so it’s normally the number of nights you are on the road plus one day exactly and it also depends on where you begin and end each one of your your trips you would add a couple of days here and there depending on how long your trips are one of the big things that we need to talk about is a tax coaching service let’s touch on that a little bit missing a tax coaching service is probably one of the most expensive mistakes you can possibly make what we do is a true tax plan it becomes a written plan in our coaching service will actually try to keep as much money in your pocket as possible how do they do that by actually sitting down and getting a written plan together for their family their home their job their investments or their business a complete review of the current and prior returns to where we can find is much money that they can get back from the IRS as possible what all is involved for a driver to work with the tax coach the way our tax coaching service works is we will kind of do it in a multi-step process one will be gathering information from our truckers possibly why they’re on the road and not only do we work with the truckers but we work with their wives and and family members to help us get the information then being able to sit down and go through that information with them on the phone again there’s no sense in having to be at our office when we can handle all this stuff via phone there will be some paperwork that will be needed but we can accomplish most of everything we need to do just asking the questions and getting through the answers if there’s anything we do need we ask them to gather it and you got plenty of time to do it what we want to do is avoid all the most expensive mistakes that people make on the tax returns that end up costing them thousands we want to keep those thousands in their pocket okay it looks like we’re completely out

of time if you’ve got any questions or comments about this program or if you’d like a certificate of completion for this program just send us an email to business education at OU o ID a comment and don’t forget to tell us which program you’re referring to before we get off the air let me take a minute to remind you to thank our sponsor taxation solutions incorporated if you’re having a tax problem or you’re in need of strong aggressive representation to deal with the IRS the professionals at Taxation solutions can help you reach a resolution by providing the proper knowledge action advice planning and preparation it’s not too late contact the staff at taxation solutions you can reach them on the web at www.intuitionsalonandspa.com you