Making Taxes Easy with Ron Caruthers

True Transformation Podcast

In this podcast episode, Josiah Novak talks with with Ron Caruthers, a tax coach, on how to manage taxes and create wealth for his business. They discuss the basics of tax management and how to take advantage of tax laws to increase revenue. They cover topics such as understanding tax rates, different business structures, keeping accurate records, and taking advantage of legitimate business expenses. They also emphasize the importance of being audit-ready and shifting the mindset from taxes to wealth creation. Overall, the episode provides valuable insights for new business owners on tax management and wealth creation.

TIME STAMPS:

Resistance to Taxes [00:00:06] Josiah and Ron discuss the resistance that comes with taxes and how to reframe it as wealth creation.

Importance of Tax Management [00:02:15] Ron emphasizes the importance of tax management for business owners, especially as the business matures, and how it can bring money back into the business.

Foundational Tax Planning [00:04:28] Josiah and Ron discuss the basics of tax planning and where to start with creating a wealth creation plan that includes tax management.

Understanding the Tax Code [00:05:33] Josiah and Ron discuss the complexity of the tax code and how to stay updated on changes.

Marginal vs Effective Tax Rates [00:07:46] Ron explains the difference between marginal and effective tax rates and how they affect tax planning.

Taxation of the Rich [00:08:45] Ron debunks the myth that the rich don't pay their fair share of taxes and explains the revenue they generate for the country.

Understanding Tax Brackets [00:10:19] Ron and Josiah discuss the basics of tax management, including understanding marginal and effective tax rates and the impact of living in high tax states.

Compliance vs Tax Planning [00:12:51] Ron explains the difference between compliance and tax planning, emphasizing the importance of forward-looking strategies to legally lower taxes, especially for business owners.

CPAs and Tax Planning [00:14:47] Ron warns against assuming that CPAs have covered all tax planning strategies and encourages proactive meetings to save money, or self-research for those who enjoy it.

Entity Structure [00:16:32] Ron explains the importance of testing business ideas as a sole proprietorship before incorporating and recommends LLCs taxed as S corporations for profitable businesses.

S Corporation [00:20:02] Ron discusses the benefits of S corporations and management companies for businesses making consistent sales of 500k to 1 million.

Taxes and Profitability [00:21:47} Ron advises a pool contractor on how to reduce taxes by incorporating as an S corporation and explains the importance of seeking advice on tax management.

LLC as Vanilla Ice Cream [00:22:51] Ron compares LLC to vanilla ice cream and explains how it can be taxed as a disregarded entity.

IRS Refund Delay [00:25:27] Ron and Josiah Novak discuss the delay in IRS refunds and the need for more agents to answer phones.

Fear of Audit [00:26:41] Ron addresses the fear of audits and how it affects business owners' tax planning decisions.

Auditing and Reasonable IRS Agents [00:27:20] Discussion on the audit rate and how the IRS is reasonable and can be reasoned with.

Dealing with the IRS [00:28:36] The importance of being nice to the IRS and how it can help resolve tax issues.

Paper Audits and Revenue Officers [00:31:24] Explanation of paper audits and how the IRS can conduct audits without kicking down doors with guns drawn.

Keeping Good Records [00:32:31] Ron explains the importance of keeping good records for tax purposes, including the need for an accurate mileage log.

Section 179 Deduction [00:35:52] Ron discusses the Section 179 deduction and how it can be used to write off business expenses, such as laptops and vehicles.

Hiring a Bookkeeper [00:36:51] Ron recommends hiring a bookkeeper to manage finances and avoid the stress of doing it oneself.

Tax Planning [00:38:38] Ron explains the importance of tax planning and how to project tax returns to make informed business decisions.

Prepaying Expenses [00:39:41] Ron discusses how prepaying expenses can help businesses save money on taxes.

Augusta Rule [00:41:48] Ron explains the Augusta rule and how it can be used to rent out a home for business purposes without paying taxes.

Paying Kids [00:43:04] Ron explains how to pay kids under 18 in a sole proprietorship or partnership, and how to income shift up to $13,000 a year in their names.

Teaching Kids Business [00:45:10] Josiah and Ron discuss how to teach kids business by having them work for the family business and paying them age-appropriate wages.

Age-Appropriate Work [00:47:53] Ron emphasizes the importance of having kids learn the value of hard work and connecting it to the family's income, and how the IRS allows paying kids for age-appropriate work.

Accountability Plan [00:49:31] Ron explains the importance of having an accountability plan for business owners to reimburse themselves for the use of their home office.

Travel Expenses [00:53:04] Ron and Josiah discuss the benefits of tying personal travel to business expenses and how it can be legally written off.

Utilizing Business Trips [00:53:42] Josiah shares how he proactively looks for reasons to call personal trips a business trip and how it benefits his business.

The Importance of Being Audit Ready [00:54:39] Ron emphasizes the importance of being audit ready and how it can save time and money during an audit.

Historical Tax Rates and Retirement Plans [00:57:51] Ron explains why she is not a huge fan of loading up set plans and retirement plans, and gives a brief history of tax rates in the US.

Tax Rates in the Early Years of the IRS [00:58:45] Ron gives a brief history of tax rates in the US, from the early years of the IRS to the present day.

Tax Rates During World War II [00:59:37] Discusses how tax rates changed during World War II, with the top tax rate being 94% and the entry-level tax rate being 23%.

Personal Tax Meridian [01:00:56] Introduces the concept of a personal tax meridian, which is the tax rate that one is willing to accept, and how to make decisions accordingly.

Postponing Taxes and Government Debt [01:02:48] Discusses the risks of postponing taxes via set plans, the increasing government debt, and the potential for taxes on 401ks and sub plans to increase in the future.

Trillion Dollars [01:05:24] Ron explains how much a trillion dollars is and how long it would take to spend it.

Tax Management [01:07:49] Ron advises business owners to keep tight records, take every legal deduction, and not be afraid of audits.

Wealth Creation [01:09:52] Josiah Novak and Ron discuss how business owners can use tax laws to their advantage and shift their mindset towards wealth creation.

Taking Legal Advantage of Tax Laws [01:11:31] Ron explains how taking advantage of tax laws can stimulate the economy and create jobs.

Consequences of Tax Fraud [01:12:25] Ron shares a story of a client who committed tax fraud and the consequences that followed.

Connecting with Ron Caruthers [01:14:39] Josiah Novak asks Ron Caruthers how people can connect with him and Ron shares his email and social media handles.

Redoing a Recording [01:17:04] Ron mentions that she will redo a recording that is three years out of date and will inform the audience when it is ready.

Five Day Class in May [01:17:04] Ron mentions that they will be doing a five-day class in early May and will inform the audience when it is ready.

Thanking the Host [01:17:04] Josiah Novak thanks the host for having him and mentions that he enjoyed the conversation.