Today, tax expert Tim Berry and Matt Theriault share a simple method to tell whether or not your CPA is an idiot. The method can also be applied to car purchases, business purchases, and much more! Learn it all with Epic Real Estate on Tax Hacker Tuesday!
What You Will Learn About How to Know If Your CPA Is An Idiot:
- A simple trick to tell if your CPA knows what they’re doing
- What the use of the home office deduction can tell you about your CPA
- How the home office deduction can make you a liar on your tax forms
- What to use instead of the home office deducation
- Who can best use the advice from today’s episode
- A better way to buy a car
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Speaker 1: This is Theriault Media.
Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%?
Now, you can. Tim Berry, attorney-at-law, shares here each and every week current tactics and strategies that anyone can implement to hack the tax code. Protect your assets and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday.
Matt Theriault: Hello, and welcome to the Epic Real Estate Investing Show. It is Tax Hacker Tuesday with my attorney and friend Tim Berry. How goes it Tim?
Tim Berry: It is going good, Matt. How’s it going with you?
Matt: Fantastico. You know, on Mondays at Epic we show you new and creative ways, as well as time honored ways, of making money using real estate. Then here on Tuesdays Tim and I, well actually Tim, will show you how to keep it. So if you have a question for Tim you can go to TaxHacker.com\questions and post it there. Today, Tim actually has a question for himself. He wants to know if your CPA is an idiot or not. Or, I don’t know, however that went. We’re going to talk about idiots. We’re going to talk about CPAs.
God bless you if you are a CPA. We love you. But we’re going to give you some fire power to treat your clients better. How about that?
How we doing Tim?
Tim: What, I’m shocked you even saved this Matt. I mean, I’m really shocked and appalled at your use of the word idiot with the CPAs.
Matt: I know. You know, I’m easily offended by people that are easily offended and if you can’t handle it, not the right show. We say that with the utmost respect and please accept that within the spirit that it is said.
But anyway, lets get serious. How do you know if you have an idiot for a CPA? So, this was actually an impromptu episode because Tim had said something off air after we got finished recording last week and I said, “Lets talk about that.” Specifically what we are going to talk about, Tim, is the home office deduction. Which just about every single person in our audience can qualify for. There’s a right way to do it, and a wrong way to do it. Or a good way and a better way, or a bad way. I’ll let you take it from there but you were saying some interesting things.
Tim: Sure. This goes to the heart of the matter of what we were talking about and laughing about before. Is, how do you know if your CPA is an idiot? Is, if they’re taking the home office deduction whenever you’re operating through an LLC and S Corp or something of that nature I can’t tell you how many times I see that, and people may not know it but the home office deduction is an absolute pain to deal with. It’s setting you up for all sorts of problems later on down the road.
Number one, it’s making most people liars because in order to take the home office deduction you have to use that area exclusively for your business. If you have the kids come into your home office and play around while you’re trying to do some work or something, it’s not being used exclusively for the home office. So they can disallow it. If you, I don’t know, play computer games on your computer in the home office you’re busted. It’s not being used exclusively. Yet everybody says, “Oh, yeah. We used it 100% exclusively for our home office.” They say that on their tax return, so they’re lying. So they’re getting in trouble there.
Other thing is, if you have the home office you have to depreciate. You are effectively depreciating your house and now whenever your sell your house instead of getting the whole thing completely tax free under the so called 121 exclusion of the first $500,000.00 if married you actually have to recapture the depreciation you’ve taken on that property. That’s a nightmare to keep track of. Nobody keeps track of it. Then, once again, they’re being liars on their tax returns.
Another big thing on the home office is you can’t even use the home office to create a loss. If you’re already running a loss, okay, you can’t take a home office deduction. You can’t add on to the losses with a home office deduction. So in my version of reality the home office deduction is the biggest pain in the posterior on the face of the earth. You’re doing things wrong if you’re taking the home office deduction and you’re operating through a partnership, or through a S Corp or through a corporation.
Better way to do it. Better way to do it is set up something called an accountable reimbursement plan with your business. All that is, that’s a fancy phrase for saying at the end of each month you’re going to submit your expenses to the business. Now the business is going to reimburse you for those expenses. So, let’s say that you used 1/10th of your house for an office. You say, “Hey, business. I used 1/10th of my house for a home office. Please reimburse me for 1/10th of my depreciation during that time frame. 1/10th of my mortgage during that time frame. 1/10th of my taxes.” You guys all get the picture. You submit that over the corporation just like what you would with a home office. Corporation gives you that money back.
Now here’s the mind blower. Tax code says you don’t have to report the money you received from the corporation on your tax return, and the corporation gets to deduct it. So you’re kind of double dipping in a certain sense. I just absolutely love it. So, that is the smart way-
Matt: Say that again, how you’re double dipping.
Tim: You’re double dipping in that corporation gives you the money.
Tim: You get that money tax free. You don’t even have to report it.
Tim: Yet the corporation gets to deduct it as well.
Matt: Hmm. I like it.
Tim: Yeah. It’s almost the double dutch hop thing, I don’t know. Anyway.
Matt: Maybe this episode should be called, “How do you know if you have a genius for a CPA?” I think that’s better, because … I don’t think you’re necessarily qualified an idiot if you didn’t know that. But, you’re certainly a genius if you did know that.
Tim: Yeah. It’s just the better way to do it.
Matt: Mm-hmm (affirmative).
Tim: I don’t know how many tax returns I’ve gone through over the years. Maybe one or two actually do it this way. I have no idea why more don’t, but they don’t. It’s insanity. There’s so many ways you could use this reimbursement. Anything for, gosh … Oh, and by the way super big deal on this. With the home office you have to use that area exclusively. With this thing, the reimbursement, I could use my kitchen table one night and use the computer on the kitchen table to do some work and I can charge my business for that. It has to be a reasonable rate and everything. So there’s no way I could deduct that with just the home office. So, there’s a lot more flexibility and it’s a much better way to go.
Matt: Got it. So, you could go from 1/10th to 3/10ths?
Tim: Seriously. You could break it up however you wanted to. It’s just amazing. Whereas before you couldn’t even qualify for the deduction, now that other stuff just goes out of the window. You don’t even have to play that game.
Matt: An accountable reimbursement plan.
Tim: Accountable reimbursement plan. Yes, sir.
Matt: I learn something new every day when I talk to you. It’s awesome. Well, thanks Tim. That was a good one. I think that’s applicable to just a darn bout everybody that’s listening to us right now. Yeah. Because they’re all real estate investors. They’ve got businesses, that qualifies as a business and you could do this.
Tim: Oh, easily. This is probably the better way to buy a car too. Because now you can buy it in your personal name and you can just ask the company to reimburse you for it, including the so called 179 deduction. So there’s just all sorts of neat things you can do with that that’s over and above the normal way that most tax preparers do.
Matt: Okay. I thought we were going to wrap this up but then you just said something really cool. Because, I’m in the market for a new car. So, explain to me this?
Okay, so I go out and buy a new car.
Tim: Yes, sir.
Matt: Under my name?
Matt: Okay. I buy it under my name. Then-
Tim: And by the way, who’s the insurance going to be under? Your name.
Tim: This is a biggie because if it’s in the name of the corporation, or of the business they’re going to jack you on the rates. They’re going to charge higher rates. Now you’re not going to be hit with the higher rates.
Tim: Other thing too, other triple bonus round. We did double bonus round, lets go to triple bonus round. Triple bonus round: How many times is the car company, the car dealer, going to actually make a loan over to your corporation? They’re not. But now how many times are they going to make the loan to you personally?
Matt: Every time.
Tim: Or, same thing with a lease. How many times are they going to lease to the corp? It’s not going to happen. But they will to you personally.
Matt: All right. So I got that. We just buy the car as normal.
Matt: Just like we were going to buy it ourselves. Now what do we do? We set up an accountable reimbursement plan.
Tim: Yes, sir.
Matt: Then we are going to charge the company for use of the car.
Matt: That’s what we do? Do we have to break that up into fractions or can we do the whole thing?
Tim: Well, I don’t know about you Matt. But I’m a pig. I mean, just look at me, you want me to do a profile?
Matt: No. Please.
Tim: That hurt, Matt. That really hurt.
Tim: So, what we could do is we don’t really have to break it up. What we can do is under the tax code to the extent a corporation would be able to … I’m not even going to get into all that. We can hit it for accelerated depreciation. Gosh, and I forget what the numbers are right off the top of my head right now. I think they’re at 18,000 a year. We can send … Even though we’re buying the car on payments we can send the bill over to the corporation for, lets say, 18,000 for the accelerated depreciation. We can write off the full 18,000 right now even if we put no money down and are making payments of $1.00 a month for the next 30 years.
Matt: So, the corporation could give you that $18,000.00, and that comes to you tax free?
Tim: Tax free.
Matt: Okay. Then, the company gets an $18,000.00 deduction?
Tim: Yes, sir.
Matt: That’s double dipping to the finest.
Tim: Isn’t it though?
Matt: I love it. Okay.
Tim: Actually, it’s probably more than 18,000 but I don’t know the exact numbers right now. I don’t to start off a session calling people idiots and then they’re going to come back and say, “You’re an idiot for not knowing the exact numbers.” So lets just say 18,000 right now.
Matt: So, essentially … Let me see if I’m … The government is paying you to drive your car?
Tim: Oh, big time.
Tim: Yeah, and there’s even more if you buy … The government incentivizes people to, gosh, buy a big gas hog. If it’s over 6,000 GVW, gross vehicle weight, they’ll let you write off the whole thing under many circumstances. So, lets say you go out and buy a fancy dancy car for $70,000.00 and it’s over 6,000 GVW, gross vehicle weight. You might be able to write off the whole entire thing.
Matt: Do they know about this?
Tim: The government?
Matt: Well they do now.
Matt: All right. Sweet. Okay. We got houses and cars. Can we do anything else with that?
Tim: Oh, anything that you use for business purposes.
Matt: Got it.
Tim: Your fancy computer. Your laptop. All that stuff you can do the reimbursement plan with. Anything that you use in furtherance of your business purpose that’s personal assets, you can ask to be reimbursed by the corporation. Just that simple.
Matt: Sweet. That’s a good one Tim.
Tim: Well thank you sir.
Matt: Yep. You’ve been holding back on me … Or with me on that one. That’s good.
All right. Well, you heard it here first. What your CPA is not telling you. Maybe we’ll change it to that.
Tim: There you go.
Matt: Sweet. All right. So if you’ve got a question for Tim … Maybe we don’t want questions because he just volunteered some stuff that I don’t know if any of us could have even imagined. But that was a good one.
But if you’ve got a question for Tim, and specifically if you have something about what we just discussed here that’d be great. So, you can take total advantage of this. You can go to TaxHacker.com\questions post it there. Then if you’d like a copy of Tim’s new book, his free book, “How to Take Advantage of Five Loop Holes in Trumps New Tax Plan,” blah blah blah blah you’ve heard it here before. It goes on really long. I could have actually finished the title in the time that I just went blah blah blah.
Okay. “How to Take Advantage of Five Loop Holes in Trumps New Tax Plan the Main Stream Media isn’t Sharing With You and Could Cost You a Small or Large Fortune.” Go to TaxHacker.com download the book there. Then after you’ve got the book in your possession you’ll have the opportunity to schedule some time. Some one-on-one time with Tim and either he or one of his team members will get on the phone with you for a short five to 10 minute call to assess your situation. To see if there’s even anything that they can do for you. See if there’s a good fit. They’ll take the next step and schedule a tax action plan. If there’s not a good fit what they’ll do is they’re going to share some alternative resources to where a better fit for you can be made. Either way, Tim and his team are committed that you are better off after the call than you were before. That’s just Tim, that’s what he does. He’s trying to help your CPA out. That’s just his … In his good nature.
Got it. Tim, any last bit of advice?
Tim: That’s all I can think of right now sir.
Matt: That was a really good one. I think this is my favorite episode so far. We’re just getting warmed up.
Tim: Cool. Sounds cool.
Matt: All right. So that’s it for Tim and myself, and we’ll see you next week for another episode of Tax Hacker Tuesday on the Epic Real Estate Investing Show. Bye.
Speaker 1: That’s it for today as we dream of a tax system that works just for you. But until then, you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday.