Small Business Quick WINS Episode Summary: End-of-Year Tax Planning Strategies with Gary Milkwick

Podcast Information:

• Title: Small Business Quick WINS w/ Jay Schwedelson Presented By Thryv
• Host: GURU Media Hub
• Guest: Gary Milkwick, Chief Financial Officer at 1-800-Accountant
• Release Date: November 14, 2024

Introduction

In the episode titled "End-of-Year Tax Planning Strategies," host Jay Schwedelson welcomes Gary Milkwick, the CFO of 1-800-Accountant and a Certified Public Accountant (CPA). The focus of the conversation centers on strategic tax planning for small business owners as the fiscal year draws to a close. Gary brings his extensive experience from both large-scale accounting at PricewaterhouseCoopers (PwC) and hands-on work with small businesses, providing listeners with actionable insights to optimize their tax positions.

Guest Background

Gary Milkwick shares his journey into accounting, highlighting his early exposure to the field through his father, a CPA. This foundational experience led him to work at PwC, where he handled accounts for massive corporations. A pivotal moment arose when he transitioned back to working alongside his father, allowing him to engage directly with small business owners. This shift underscored the significant impact that tailored tax planning can have on smaller enterprises.

Gary Milkwick [01:51]: "I really enjoyed working with small business owners. That was the key difference... I saw the value that tax planning could help these small business owners."

Key Tax Planning Strategies Before Year-End

Gary delves into several critical tax strategies that small business owners should consider implementing before December 31 to maximize their tax benefits.

1. Entity Structuring: S Corporation Election

   For businesses operating as LLCs, making an S Corporation election can substantially reduce self-employment taxes. Gary explains that without this election, all business profits are subject to a 15.3% self-employment tax. By electing S Corporation status, owners can potentially save approximately half of this tax liability.

   Gary Milkwick [03:21]: "If you set up an LLC and have not made an S corporate election, all of your profits are subject to self-employment tax. By doing the S election, you could save roughly half of that."

   This decision must be made before the end of the year to apply the benefits to the current fiscal year. For new businesses, ensuring that this election is in place can lead to significant tax savings.

2. Accelerated Depreciation: Section 179 and Section 168

   Accelerated depreciation allows businesses to deduct a larger portion of equipment and asset costs in the current year rather than spreading them over several years. Gary highlights the 2018 tax cuts that introduced accelerated depreciation options, which are gradually being phased out.

   Gary Milkwick [05:15]: "If you buy equipment or a vehicle before the end of the year, you can take immediately 60% of that as a deduction this year. Next year, it drops to 40%."

   Investing in business assets before year-end can result in substantial tax deductions, enhancing cash flow and reducing taxable income.

3. Retirement Planning: Solo 401(k) Setup

   Establishing or contributing to a retirement plan such as a Solo 401(k) can provide significant tax advantages. Contributions made before the year-end not only set aside funds for retirement but also lower the current year's taxable income.

   Gary Milkwick [06:20]: "Setting up a Solo 401(k) can put money aside for retirement and offers big tax benefits if done before the end of the year."

4. Home Office Deduction

   Small business owners operating from home can take advantage of the home office deduction, which allows for the deduction of a portion of household expenses proportional to the workspace used for business activities.

   Gary Milkwick [07:54]: "There are two methods for the home office deduction. The standard method calculates a percentage of your home expenses, while the simplified method allows for a flat $5 per square foot deduction."

   Ensuring that this deduction is accurately claimed can lead to additional tax savings.

The Importance of Year-Round Tax Planning

Gary emphasizes that effective tax planning is not a once-a-year task but a continuous process. Many small business owners rely solely on bookkeepers who may not provide comprehensive tax strategies. 1-800-Accountant differentiates itself by offering year-round tax consulting, ensuring that business owners are always aware of opportunities to minimize their tax liabilities.

Gary Milkwick [11:43]: "Tax planning is a year-round process. The actual planning is the piece that really provides value to people."

1-800-Accountant Services Overview

Gary provides an overview of 1-800-Accountant's services, highlighting their ability to cater to a diverse range of small businesses across various industries and geographies. With hundreds of specialized accountants, the firm matches clients with professionals who have relevant experience in their specific industry and region.

Gary Milkwick [10:02]: "We match clients based on geography and industry. For example, if you're in California running a restaurant, we'll find someone with experience in that specific sector."

The company's focus remains on businesses with annual revenues under $5 million, ensuring personalized and relevant accounting support.

Conclusion

The episode concludes with a strong endorsement of proactive tax planning and the comprehensive services offered by 1-800-Accountant. Gary encourages listeners to reach out for tailored tax strategies that can lead to significant savings and improved financial health for their businesses.

Gary Milkwick [13:21]: "The best place to get in touch with us is 1-800-accountant.com. We'll connect you with someone who can help."

Jay Schwedelson wraps up by urging listeners to apply the discussed strategies and consider professional tax planning services to enhance their business growth and financial stability.

Notable Quotes:

• Gary Milkwick [03:21]: "If you set up an LLC and have not made an S corporate election, all of your profits are subject to self-employment tax. By doing the S election, you could save roughly half of that."

• Gary Milkwick [05:15]: "If you buy equipment or a vehicle before the end of the year, you can take immediately 60% of that as a deduction this year. Next year, it drops to 40%."

• Gary Milkwick [11:43]: "Tax planning is a year-round process. The actual planning is the piece that really provides value to people."

Key Takeaways:

• S Corporation Election: Small business owners with LLCs should consider making an S election to reduce self-employment taxes.
• Accelerated Depreciation: Investing in business assets before year-end can lead to significant tax deductions through accelerated depreciation.
• Retirement Planning: Establishing retirement plans like Solo 401(k)s before the end of the year offers substantial tax benefits.
• Home Office Deduction: Properly claiming home office expenses can provide additional tax savings.
• Year-Round Tax Planning: Continuous tax consulting ensures that businesses are always optimized for tax efficiency.

Connect with Gary Milkwick:

• Website: 1-800-accountant.com
• Phone: 1-800-222-6868
• Social Media: Available through the company's social channels

Implementing these strategies can position small business owners for enhanced financial performance and reduced tax liabilities, setting the stage for sustained growth in the competitive marketplace.