in this video i'm going to be discussing the difference between
tax preparation and tax planning uh also how it's tax planning not preparation
that actually saves my clients thousands of dollars in taxes
and also my thoughts on my on what your approach should be
to um tax planning and so if you're a real estate professional or small
business owner you're going to want to listen up
because this is probably one of the most important videos you'll watch
in regards to how to save money in taxes quick introduction for those of you who
don't know who i am my name is Navi Maraj
I'm a cpa that specializes in helping real estate professionals so that's your
real estate agent realtor or broker save thousands of dollars in taxes
and i help clients throughout the country but if you're a you know
regular more traditional small business owner these same strategies
are gonna apply to you and you know we're gonna get into
some of the stuff that i have on this board here but before i jump right into
this which is more of the tax planning side of things
i want to define what tax prep is and so you know it's unfortunate but i would
say 80 or more of you know even cpas or
accountants or tax professionals or whatever you want to call them
they really just do tax preparation which means you know
unfortunately the relationship is very transactional in nature so
you're dropping off maybe your revenue and expense detail
they're plugging it into their software maybe one of their staff is plugging it
into their software they give it a quick review you pay
their invoice you pay your extra large tax bill and
you move on like that from year to year to year but
what you don't realize is happening behind the scenes there is
you know uh the majority of those folks aren't actually
trying to help you reduce your tax bill they just don't have time to do it
they're charging you you know one small fee
here's your taxes move on with life they got to get to the next client or for
them to like make any money in that business model right it just makes
just makes sense they can't spend a lot of time reducing your tax bill
so i think a lot of clients or prospects that come to me think that their current
tax advisor is actually saving that money in taxes
by when they prepare their taxes but it doesn't actually
work that way in real life what tax planning looks like is
at least for my clients is i have about an hour long conversation with them to
find out about their business which of these
strategies are they not using and can be using and how much is that
going to save them money and taxes um and you know at the end of that call
or when we're having that conversation you know we made an uncover you know
anywhere from as little as 5 000 or as much as you
know 15 20 000 in potential tax savings and this is not
for clients that are not working with cpas
currently this is this is you know these numbers that i'm
kind of throwing out there are for even with clients that have had a 10-year
relationship with the cpa so um tax planning saves thousands of
dollars in taxes because it's proactive in nature not reactive as in
the tax preparation um and you know you enact
these strategies throughout the year not during the time when someone is
preparing your taxes because we really you know we're typically we're
preparing your return in the year after in which the events
uh took place so for example uh preparing your uh your 2020 tax return
in the first quarter of 2021 and we can't go back in time and implement
implement some of these strategies so thanks for being patient with me i
needed to def you know have uh a definition of tax planning versus
tax prep before we jump into the content here so
let's talk about tax planning at a high level um so
here are what i refer to as sort of the steps to tax planning right
so it might sound like super obvious but step one
is to earn revenue you've got to be if you're a real estate professional
closing deals making commissions or if you're a more
traditional business owner selling product or your services and earning
revenue in order for us to implement any of these things right i can't really
save you money on taxes if you're not making
money to begin with to be taxed on that income right
sounds super obvious but the reason why i want to highlight that is step one
is a lot of people jump to these different you know forming a legal
entity and all these different things before they even made their first dollar
and i really think you should you know probably have a business plan and some
other things should take place prior to worrying about some of the tax
structure and the legal entity structure but that being said you know after
you're making money and you're earning some revenue the next step
is maximizing deductions and so what i mean by that is let's take a look
and i've just put a few of them for example there's more than this but
let's look at home office deduction now let's talk about that for a quick
second so a lot of people are like oh there's a red flag so
for an audit so i don't want to use the home office deduction others of you
are working with tax professionals who they just want to use the simplified
method which is basically saying hey you know five dollars a square foot of
business space in your home is is what the calculation will be but i'm
telling you there's other strategies around home office to where
you could be deducting a percentage of your mortgage interest your real estate
property taxes your utilities uh cleaning service for
your home um there's there's other things that go
into that calculation to make um the home office strategy
like three times more powerful than just using that simplified method
same sort of thing applies for auto a lot of my clients are real estate
professionals so they do rack up a lot of miles on their car
and you know the sort of mileage method is
is is the is the best for them but that's not always the case you know
there could be uh depreciation and bonus depreciation
that will you know save you more money in taxes than doing the standard method
if you will um travel you know i'm not talking about
just business travel here but how can you
um have business travel maybe bookend your business travel um with
um personal travel as well on the weekends and how could you make that a
100 tax deductible as opposed to just you
know 30 of the trip is tax deductible for
example hiring children is a huge one you know
stop earning money paying taxes and then paying for your kids expenses
like video games or whatever or or uh you know a new computer laptop
cell phone uh car insurance all that stuff get them
involved in the business at a young age from the age of you know 7 to 17 years
old and get a business deduction for paying
them and then have them buy their own stuff
i'm not telling you to go you know just get a deduction and you're
going to lose out i'm saying you get a deduction and they get tax-free income
it's another strategy but anyway the point of the matter is
after you're earning revenue i want you to maximize your deductions by using
strategies like the ones i've highlighted below
and by the way if you haven't subscribed to my channel yet
now is probably a good time to do so because in future videos i'm actually
going to go through all of this stuff in detail
and teach you or at least give you enough information
so that you can either ask your tax professional or you could run it by me
on how you should be approaching this strategy so
after we've maximized deductions depending on how much profit
is left over then we're going to start a visit okay well were you
or are you or should you be rather you know
in a specific legal or tax structure so you know i've got llc versus pllc so
that's like professional limited liability versus
or you're playing vanilla limited liability company should you be
a professional association or a professional corporation if you're not
sure what these terms are this is mainly for people who have
a license in their state to practice their business such as like a cpa some
real estate agents and what have you when should you become an s corporation
a lot of people jump straight into this s corporation
tax classification and they're not ready yet because once
they maximize their deductions they don't have enough enough net income
for the s corporation to even make sense just yet so i'm just saying
don't jump the gun don't form these entities until you
kind of map it out and speak to a professional who can tell you
when it might be wise to do so um the s corp strategy just
so i can hit on it i've got other videos that touch on it and
explain it to you in more detail but you know this typically makes sense when you
have about 40 000 or so in net profit meaning after you
earn your revenue and after you maximize your deductions
if you still got 40 grand or more net profit we should probably then talk
about this tax structure retirement i'm not going to talk about
this at length but the point i want to make here is
don't think that when you're a business owner you need to limit yourself to
the ira which you can put you know six or seven thousand dollars into per year
there's other strategies you might be the sep ira ra might make sense for you
depending on how much money you want to put inside put aside um
the solo one solo 401k plan so what i'm getting at here is depending on
how much you want to put into retirement um changes which plan is right for you
it could be six or seven thousand maybe seven to
fifteen thousand or fifteen thousand or more
changes what plan is right for you and also the deduction
that you be could be getting for it um step five legal loopholes and knit
strategies don't let this scare you when i say legal loopholes i mean
these are 100 legitimate bona fide tax strategies okay i'm just saying
using the tax law um to your advantage the rules are there
for everyone to use why not leverage it so this might be things such as like
the augusta rule which you know high level allows you to you
know rent your home out to your corporation
for maybe board meeting minutes with other
advisors or if you have clients or prospects at your
residence it's like a networking opportunity for you
real estate passive activity losses you know a lot of my clients are
real estate professionals and so their tax preparer needs to know
you know should they be a real estate professional
and so any losses that get produced from rental real estate property that they
own can be used to offset maybe not only their income but their
spouse's w-2 income so if you're not talking about
that and you're not aware of these strategies these this
is a strategy that i don't even get as a cpa
it's only available to real estate professionals 1031 exchanges
um that's basically saying that hey i invest in real estate property
i want to now sell that home and i don't want to pay taxes on the gain i want to
roll those profits into my next you know venture
related to real estate and so you don't have to pay tax on that money
when you sell you just keep kind of rolling that forward and
building your portfolio of real estate investments
so look this was just a high level overview of tax planning
as i said if you want to learn more you know subscribe to my youtube channel
or you can visit my website at navimarajcpa.com
i'll put the link in the description and everything uh below
and like i said make sure you subscribe because what i plan to do
to help you all out because i've been a lot of feedback on this a lot of
comments is to actually hit on these strategies
one by one sort of teach you about them so that you
can ask your tax professional or when we chat we can have an educated
conversation about it to see how powerful these strategies
could be for you and how much money you could save in
taxes so with that said i will see you in the
next video