Tax Reduction Podcast
Introducing your host, Boris Musheyev, CPA. In this podcast Boris debunks the tax code by teaching you simple and effective tax strategies, so you can keep the most of what you make. His mission is to help you cut taxes and build wealth using the power of proactive tax strategies. Every episode you will gain a better understanding of how the tax code is designed to be in favor of money-making entrepreneurs like yourself.
🆓 Download FREE PDF: 7 Write-Offs Every S-Corporation Business Owner MUST Know: https://bit.ly/podcast7writeoffs
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Tax Reduction Podcast
Episode 17. Your Bookkeeping Sucks Tax Strategy
Are you a profitable business owner paying more taxes than necessary? It's time to turn the tables with strategic bookkeeping, and I'm here to show you exactly how.
In this must podcast, I dive into the often-overlooked power of bookkeeping, not just as a means to keep your financial records straight, but as a critical tax-saving strategy every business owner should be utilizing.
I've put together this FREE resource for you:
7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/
Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/
🤩 If you are looking for easy-to-use payroll software, I personally use and recommend to my clients Gusto Payroll Software - https://gusto.com/r/boris466
P.S. When you sign up for Gusto, you get a $100 Visa gift card
*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...
As a profitable business owner, I can tell you right now that your bookkeeping sucks. My name is Boris Mushaev. I'm a CPA and a certified tax strategist. I will show you how you can use your bookkeeping as a tax strategy, where you can save tens, if not hundreds, of thousands of dollars on taxes simply by using your own bookkeeping. Ready. Let's go.
Speaker 2:Welcome to the Tax Reduction Podcast for money-making entrepreneurs with Boris Mushaev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy to understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.
Speaker 1:All right, awesome, let's get started over here. So I've broken down to you in three simple steps. Right, we're going to first're going to talk about what is really bookkeeping and understand it. You probably don't have the understanding of bookkeeping that you think you do, even if you have a bookkeeper. Then we're going to talk about how can you use the bookkeeping as a tax strategy and why a lot of business owners are actually overpaying in taxes by not having a proper bookkeeping. We're going to talk about how to stop that and we're also going to talk about how to stop that. And we're also going to talk about how to implement the things that I'm going to give you in your business, in your bookkeeping, to save money on taxes. All right, let's get started over here. First of all, let's really talk about what is a bookkeeping. Right, you are a business owner. Right, you are a business owner and you have a profitable business, but you probably have no clue what is going on with your numbers, even if you have a bookkeeper. It could be that your bookkeeping is getting done on a quarterly basis or even annual basis okay, and your accountant's probably too busy, your bookkeeper is too busy giving you that information, but it's not supposed to be that way, because bookkeeping, by definition, is an organization. Okay, it's an organization of your income and expenses. All the income that is coming in gets booked as an income right Sales income, gross revenue, however you want to call it. All the expenses then get categorized. Okay, they get categorized by expense category. When you look at a profit and loss of financial statement, you need to be able to see hey, how much money have I made and how much money have I spent. But, most importantly, what have I spent my money on? Okay, because bookkeeping measures the success of your business. If you're not looking at your bookkeeping on a monthly basis, if your financial reports, financial statements, your balance sheet or your profit and loss, how do you know how to operate the business?
Speaker 1:A lot of business owners think, hey, I go by my bank statement, so if I have the money in the bank, I'm profitable. If I don't have the money in the bank, then I'm not profitable. And then when the tax time comes, they're like wait, what do you mean? They talk to their tax preparer. What do you mean? I made $500,000 profit. The money is not in my bank account. That's because the bookkeeping haven't been done properly. That's number one. Number two when the bookkeeping was not done, you had no idea how much you actually paid yourself and because you didn't know how much you paid yourself, you didn't pay the estimated proper taxes. So now you've got a big tax bill and on top of that you've probably got penalty for not making estimated tax payments.
Speaker 1:So bookkeeping is again an organization of your income and expenses. At the same time, it measures the success of your business. How else can you know how you're doing in a business? I've met a lot of business owners, especially when they start reaching a few hundred thousand dollars in gross revenue and then up to half a million, then to a million and more. It's so frustrating. They're working all day long, money coming in, they have enough to pay themselves right, they pay themselves enough and they live you know whatever comfortably, but at the end of the day they have no idea what they're spending their money on, what type of expenses they have in the business, because they have no organization, because they do not measure their financial statements, profit and loss and balance sheet. Okay, that is the real definition of bookkeeping. So you need an organization and you need to be on top of your numbers Now that we have defined what bookkeeping is.
Speaker 2:Let's talk about tax strategies and we'll be right back right after this break write-offs every S-corporation business owner must know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.
Speaker 1:Welcome back. Now let's talk about how to use bookkeeping as your tax strategy. Okay, so number one you have to understand some definitions and some terms as a business owner. Now you might say, boris, why do I need to know these definitions? You need to know these definitions as a business owner because this way you will be able to question your accountant, your preparer, your bookkeeper, whoever it is that you're working with hey, was this and this or that done in my business?
Speaker 1:For example, monthly reconciliation. What is monthly reconciliation? You probably hear your bookkeeper asking you a lot hey, I need your bank statements to monthly reconciliation. The most, one of the most accurate ways to measure whether your bookkeeping was done properly or not, or if the information on the books is correct or not if you're using quickbooks online or zero, whatever that may be is, if you did monthly bank reconciliation, what? What does that mean Basically? You open up a bank statement or your bookkeeper looks at the bank statement, looks at the final number, the ending balance of the bank statement, okay and it compares this ending balance with the ending balance in your bookkeeping software in that bank account. If those two match, then everything that came in from your bank into your bookkeeping software is accurately recorded and it's checked off and it's reconciled. That means it was reconciled and the month is closed.
Speaker 1:Now, in order for your bookkeeping to be properly correct, you need to do this on a monthly basis, not annual basis. Okay, annual basis, everybody can just do this. Boom, boom, boom, get it done and get it done, and here you go, let's file your taxes and here's your big tax bill. Okay, no, you as a business owner need to track of your profit and loss every month. You need to remember what I said Measure success of your business. One of the ways you can measure success of your business is by looking at financial statements. Financial statements need to be reliable reliable, so you need to do monthly reconciliation once you open up your financial statements. The second, what I like to call the tax strategy, is to measure the, the financial stability of that month, so to speak. Right, so you're going to compare, or you should compare. What I recommend to all of our clients in our tax advisory firm is to do month two-month comparison. You pull up the month of February let's say this month is February and then you pull up last month, january, and then on the report you can say you know the percentage change in revenue of a certain expense, or by the number, you're like oh man, how can we spend so much on this month? Oh wait, our sales are down. Why is that? And that is you measuring the success of your business and keeping track of it.
Speaker 1:As a matter of fact, I want to go back to monthly reconciliation for a second. We have a tax advisory firm and we also have a bookkeeping team. We're the bookkeeping. When we're doing monthly reconciliation, we're able to catch $29,000 of fraudulent transactions on one of our clients. So basically, what happened? Somebody was cashing his checks. He had no idea there's a lot of money coming into the account and a lot of money coming out to the account. So by doing monthly reconciliation, we came up with a list of questions like wait these checks? They seem questionable, we don't know what they are. We emailed copies in the list of those checks to the client hey, can you confirm what these expenses are? He's like oh, that's not me. Call calls the bank, files a fraudulent claim and gets the $29,000 back. All because it was being monthly reconciled and, as a matter of fact, we give them a month-to-month comparison.
Speaker 1:So your accountant or your bookkeeper, whoever it is that you work with should be doing these things for you. Like people don't know. They think, hey, when I save money on taxes, it's like IRS writing me a check and getting money in my pocket. This is not an insurance claim. A tax strategy is not an insurance claim. A tax strategy means reducing your liability. So if you would have owed $100,000 on taxes, well, now you owe $45,000 on taxes, $55,000 at the year's end saved. That's why some people are like, like, well, how can bookkeeping really help me? Believe me, if you've got a proper team doing this for you, there's a lot of money that's being saved on a back end. That is going to be reflected on your tax bill at year end.
Speaker 1:Okay, loan tracking so many business owners that we, when we bring them on for tax advisory and like, hey, boris, can your team do a bookkeeping and we do their book. One thing we notice is that there is no loan tracking. Business owners take out loan, right, they take out loan to run to cover the operations. It could be line of credit or it could be SBA loan or whatever that may be, but very poor loan tracking. Why is this really important? Let me tell you why.
Speaker 1:Very recent case, we did bookkeeping for one of our clients. We took over from the bookkeeping from the previous bookkeeper. They received line of credit from American Express. That line of credit was reported as an income. That is a loan money. Okay, that is something that is an overly reported income. That means higher tax liability. So, number one you need to make sure you provide information to your accountant or bookkeeper. Hey, the money is coming into my account, it's a loan. If you cannot think of the fact that amex is sending me money, it's a loan, okay. The second thing is that when you take out a loan, you've got that. When you take out a loan, you've got interest. When you take out a line of credit, there's bank fees, there's documents fees and there's interest. None of that is being recorded, and clients and business owners, just like you, miss out on a lot of tax deductions.
Speaker 1:The fourth tax strategy I would strongly recommend is track your shareholder basis. Now, whatever business you have, whether you have an LLC, you have an S corporation or a C corporation, right, I'm just going to refer to this as a owner basis. Okay, we're not going to say shareholder basis, we'll say an owner basis. Track your owner basis how much money you put in personally into the business. How much money did you take out?
Speaker 1:Now, a lot of times, sometimes, business owners run short on cash. What they do is that they temporarily fund their own money into the business. The bookkeeper doesn't know that right. And then what happens? The bookkeeper, of course, has an income. Or if you don't have a bookkeeper, even worse, you give them the bank statements to calculate your income for the year.
Speaker 1:How do they know, for example, that you have deposited your money? That's because you haven't been doing monthly reconciliation. You haven't been measuring the success of your business. You don't have a profit and loss or a balance sheet. You've got to stop with that. You've got to get yourself monthly accounting and you have to make sure you track your basis. Now, if you don't properly track your basis, what could happen is that there could be an excess distributions or excess owner draws. So this is really really important. Please take to heart what I'm telling you right now. You need to measure the success of your business by constantly and when I say constantly, at least monthly review your profit and loss, review your balance sheet, work with somebody competent, make sure that you have those meetings scheduled on the calendar. And now we're going to talk about how to implement the strategies that I give you in your business when it comes to your bookkeeping right after this break.
Speaker 2:If all your accountant does is taxes, you may be overpaying in taxes by thousands of dollars every year. Every week, Boris releases a tax strategy on his podcast so that you, the business owner, can pay less in taxes every single year. Every week, Boris releases a tax strategy on his podcast so that you, the business owner, can pay less in taxes every single year. Be sure to subscribe to our podcast to be notified when a new tax strategy is released. If you're ready to work with a tax advisor on your tax strategy and planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. Again, that's wwwtaxplanningcallcom.
Speaker 1:All right, cool, welcome back Now that we're back. Now how can we implement everything that you told us so far, boris? Let's talk about monthly reconciliation. First of all, make sure you have a call scheduled on a recurring monthly basis with your accounting and tax team. If you don't have an accounting and tax team doing your bookkeeping and you don't have an accounting and tax team doing your bookkeeping and you think this is an extra cost to you, I am telling you right now all the taxes that you pay on improper bookkeeping, that is probably two or three times more than that. So, definitely have that call scheduled.
Speaker 1:If you have a bookkeeper that you want to hire, hey, I want to work with a bookkeeper. Don't just hire anybody who's going to charge you $125 a month to do bookkeeping. Okay, somebody's charging you like pennies to do bookkeeping. They probably have so many clients and they will not give you the attention that you need. On a monthly basis. Give you, like I said, the profit and loss balance sheet. You will not be able to measure the success of your company. Okay, there will be no monthly reconciliations. There will be no month to month comparisons. If somebody is doing a bookkeeping on an annual basis, you want to make sure you work with a competent tax team and if you have a strong tax advisor, most likely your tax advisor is providing bookkeeping services. We at our firm, we provide bookkeeping services to our tax advisory clients. But for whatever reason, if you do have, let's say, for example, a strong tax advisor but you want to hire an outside bookkeeper, I would make sure that those two talk. Okay, I would strongly make sure those two talk and you have a call scheduled on a calendar with whoever is doing your financial statements so that you can request this information that we talked about. It's really, really important. You as a business owner I can stress enough, doing this for many years I know how much business owners overpay in taxes by not having proper bookkeeping at the end. Now, always make sure you view reports, profit and loss and balance sheet. Do month-to-month comparison. When you have scheduled calls on a monthly basis with your bookkeeper, that bookkeeper will be held accountable by you because you will be expecting that month. Monthly reports are ready for the previous month. Okay, view reports.
Speaker 1:Now, loan tracking if your bookkeeper does not have access to your loan documents, you either give them an online access or send them loan documents on your own. If you say, well, that person is my bookkeeper, they need to know all of this stuff. It takes two to tango, I'm sorry to say it. I know you're a business owner and you're super, super busy with running a business, a multimillion dollar organization but if you hired accounting and tax professionals, they can't just do things for you in the background. They need to work together with you.
Speaker 1:Now, sometimes it hurts for business owners to hear that, but it's true. So if you've got a tax advisory team or you've got an accounting team or bookkeeping team, you make sure you provide them everything that they need right away. Why? Because by providing them access, they will be able, for example, to track all of your your accounts, any interest that you pay on that. If loan was deposited into your account, it will not be accidentally recorded as an income okay. The last thing is owner basis monitor it monthly. Sometimes, when you go out to a restaurant okay, and it's a business meal and you put it on a credit card, your your bookkeeper will be oh, this is an excessive dinner.
Speaker 1:It's like $500. It's a personal expense, owner's draw. What do you mean personal expense? I had like five people at that dinner. It was all business meeting, for example.
Speaker 1:I've seen this happen a lot when new clients came to us and we take a look at their books. So make sure you review your owner distribution account on a monthly basis with your bookkeeper. And hey, why is this account, why is this expense there? Well, this, this is a cvs pharmacy. You know the bookkeeper while saying there's like 300, I figured you bought something personal. No, I bought supplies for the office, right, and like things like that. Travel could be booked into shareholder basis by mistake. So there could be some expenses that are booked as personal, like I said, but they're not personal, they're business, like these things.
Speaker 1:I'm telling you right now, if you just give a little bit of your attention on a monthly basis to your financial statements, to your bookkeeping, you will save not even just cents, but even hundreds of thousands of dollars on taxes. Ladies and gentlemen, this message probably resonates with you and you have a profitable business. When you have a profitable business, I guarantee you right now, you're most likely overpaying in taxes. Why? Well, you probably don't have a tax advisor, you're probably not doing tax planning strategies and your bookkeeping probably sucks.
Speaker 1:And if you say, boris, my bookkeeping doesn't suck, I've got a bookkeeper, well, the question I want to ask you how often do you speak to your bookkeeper? Do you have calls scheduled on a monthly basis? Do they do monthly reconciliations? Do they provide you with month-to-month comparison? Do you measure the success of your business, of your profits, by reviewing your profit and loss and balance sheet? Do you track loans? Do you track own distributions on a monthly basis? If the answer is no to all of those questions, you are overpaying in taxes. So, ladies and gentlemen, until the next time. Thank you so much.
Speaker 2:That's it for today's episode. Be sure to check out the description below for some free tax reduction resources that Boris put together for you. If you're ready to work with a tax advisor on your tax planning, be sure to schedule your call by heading over to wwwtaxplanningcallcom. That's wwwtaxplanningcallcom. And be sure to subscribe to our podcast to be notified when the next strategy is released.