47: Increase Your Business Savings with Shauna Wekherlien

SaCola (00:00:00) - Hello everyone, and welcome to this week's episode of Work it, Live It, Own it. I'm your host SaCola Lehr, and we're going to cut to the chase today. We're going to cut all through the red tape because we have an incredible guest, Shauna Wekherlien, a seasoned accountant with a passion for not just crunching numbers but transforming the lives of entrepreneurs. And how does she do this? Well, with a track record of saving over $1 billion in taxes, let me say that again one more time. Saving her clients over $1 billion in taxes, Shauna brings not only her expertise, but also the touch of the unexpected to our discussion today. So get ready for actionable insights and a glimpse into the person behind the financial wizardry. She is also known as the Tax God, as she has three books out there that are bestsellers. She's been on the cover of Entrepreneur and Forbes. As you can see in her backdrop, if you are watching this on YouTube. But guys, we're going to cover three main areas today.

SaCola (00:01:11) - We're going to talk about the overlooked tax deductions for entrepreneurs, how to balance your personal and business expenses. And then we're going to talk about how you can minimize the tax liability and maximize the savings. So Shauna, without further ado, you know what I want to say. I'm so tempted to say it. Show me the money.

Shauna (00:01:31) - I love.

Speaker 3 (00:01:32) - It. I am 100% to show you the money., that is me in every opening ever, I thank you, I love it., well, where do you want to start? With showing you the money. There's, like, 10 million ways to skin the cat. I'm in. Let's go.

SaCola (00:01:47) - Well, hey, let's roll. Let's roll up our sleeves and get started. Because I'm pretty sure that working on an audience wants to know how to save some money as well. So can we talk about the overlooked tax deductions and what are some of the most overlooked tax deductions that we as entrepreneurs, should be aware of when it comes to optimizing our returns?

Speaker 3 (00:02:10) - Absolutely.

Speaker 3 (00:02:11) - So there are so many of them. So let me start with what we consider to be the low hanging fruit. Now I need to I'm going to explain the concept here before we get into the strategies, because it's going to be important for each listener to determine which strategies they want to take and which ones. Maybe they don't. Okay. Because in our world we have something called the aggression scale. So 0 to 10 zero, meaning the IRS never calls you. Never ever, except for random audit. Can't do anything about that. Ten I mean, we're all going to jail. So very important, right? That face. Right. Nobody wants to go to jail. I'm a redhead. Red and orange do not look good together, right? Like, not something you really want to do. So when we talk about strategy, it's very important for the individual, for the taxpayer to understand. Well, where do they sit on that scale now if ten is we're all going to jail. Nine is we're basically Al Capone, okay? We're doing shady stuff and hoping we don't get caught.

Speaker 3 (00:03:11) - Right. And then an eight, which is the highest level the tax goddess is a company is willing to go to an eight means you might get a call from the IRS. Right. But you have all the backup, all the documents, everything like here's all the records, right? And they basically leave you alone. Okay. So goes down in risk. Now, the reason why I bring up this aggression scale is that most entrepreneurs, when we ask that question, they're going to be at like a seven or an eight, right? I don't mind if the IRS calls me or I really don't want that call, but like push the envelope, right? I don't want to leave any money on the table. I need every penny of my hard earned cash to stay in my pocket so I can reinvest in my business, hire new staff, buy new equipment, you know, like whatever it is that you need rather than handing it over to the government. So as we talk about strategy, when I say low hanging fruit, these ones are typically either 0 or 1 two.

Speaker 3 (00:04:08) - This is the stuff that every business owner should be doing, right., but often you have a traditional CPA. Now let me back up. I am a CPA, master's and tax certified tax coach. Certified tax strategist, right? I specialize in tax strategy, but many people have a traditional tax preparer, traditional CPA. If you were to ask them where they are on the aggression scale, you can't do that. There's no way. Right? They might be a negative two on that scale. Okay. And so especially for my entrepreneurs, especially when you're in the first five years of business, you're just kind of starting up. You're really kind of getting your feet under you., often you'll be with a CPA that maybe did your personal stuff for a long time. They don't really understand business 100%. They're not specialists in it. So I always really like to bring up this idea of aggression scale, because if you're thinking about you and you're thinking about your CPA and where are those levels? If you're a seven and they're even if there are two, there's a huge gap of what you could deduct that they won't let you, period.

Speaker 3 (00:05:13) - They don't want to put their name on it because they don't know about it. So we'll hop right into strategy because I know that was the question, but I wanted to kind of lay that base layer. So does that make sense? My yeah explain.

SaCola (00:05:24) - It does. It does I don't want I don't want the IRS knocking at my door. But I also want to save money, I'm pretty sure, like most entrepreneurs do.

Speaker 3 (00:05:34) - So you're going to be a classic seven right. And eight is I don't mind to call a seven as I really, really don't want to talk to them like really really. So 6 or 7 somewhere in that range. So perfect. Do you mind if I pick on you and use you as my example today as we speak?

Shauna (00:05:48) - Go ahead. Oh.

Speaker 4 (00:05:52) - You're so thank you. You're so sweet.

Speaker 3 (00:05:55) - , okay, so so let's get into the meat and potatoes of this thing. Right. So basic deductions that every entrepreneur should be doing that get commonly missed okay. First one, getting your kids on payroll okay.

Speaker 3 (00:06:06) - At this point for 2024, the total amount that you can pay a child per year that is 100% non-taxable is almost $21,000. So if you have two or 3 or 4 kids, you can wipe out 2030 and 4060 $80,000 worth of income. One of my favorite stories is I've got a client with 11 children., there's eight of them that qualify because there are qualifications here. I'll go over that in a second that qualify for this deduction. So eight times 20,000. Every year the family gets to take home $160,000 completely tax free. And that money can be used on anything for the kids because kids of course are cute. They're also often very expensive. Right. So,, private schools or getting an iPad for school or,, their first car at 16,, karate lessons, swimming lessons, music lessons, daycare camps, I mean, you name it, right? Kids, money. It can be used on anything for the children other than food, clothing and shelter. So unfortunately, you cannot rent the room in the house to your kids.

Speaker 3 (00:07:14) - They cannot pay your rent for living in your house. It doesn't work. But let's talk qualifications. So child needs to be at least seven years old, okay? And they need to be doing a job for your business. So that could be sweeping. That could be running your TikTok profile. That could be,, doing your SEO. That could be,, driving you. I have some of my parents that have their 16 year olds get practice driving with the parent in the car and the parents on the phone making calls, you know, trying to close some deals for their business. Right. So the absolutely any job that the child can in fact do for you and you do need to pay them whatever reasonable wages are for an adult, for somebody else that you would pay to do this job. So if a driver, if an Uber driver makes, on average about $30 an hour with tips and everything else, you could pay your child $30 an hour to drive you around if that was the use case.

Speaker 3 (00:08:09) - So it's a great deduction.

SaCola (00:08:13) - Okay. What about spouses if you don't have kids, can a significant other spouse anyone can use that as well.

Speaker 3 (00:08:21) - So spouses are kind of a weird case because yes absolutely you can pay them. But if you marry file joint which most spouses do, that income is going to go out of your business and right back onto your tax return. Right. So it really doesn't make a major net effect, but it does work with any other family member. So if you're taking care of nephews or nieces or grandchildren, we see this a lot actually with grandkids., if you are, let's say you have an uncle that always kind of needs a little bit of spare money, and instead of taking personal funds out of your pocket to help him out, he's on the payroll and he's doing a job for you. Now, you get a business deduction and the uncle gets help. So lots of different options on who you can pay. Now, when a child is more than 18 years old, that $21,000 limit effectively disappears.

Speaker 3 (00:09:11) - So a lot of our parents will increase the amount that they're paying their kids. When the kids go to college, and the kids now need buku bucks to pay college fees and books and tuition and all the rest of this kind of thing, right? We've got some parents paying their kids 120,000 a year, and all of that money is going to the college, right? So but at least our business is getting a tax deduction. Yeah. Go go to college right. Yeah. It's it's expensive stuff these days. Yeah. So,, you know, I really like the paying the kid thing, but you're right, not everybody has kids., and so I'll use a perfect example. We were chit chatting before we got on today. I have five dogs now. Most people think, oh, that's nice, five dogs. You can't write them off on your taxes. You can if they serve a business purpose. There's a very specific rule. Uhhuh. I would love to help. I don't know, unfortunately.

Speaker 3 (00:10:04) - You have cats. Cats don't qualify. I'm so sorry. Yeah, so all my dogs qualify. I know, I know, it's not fair. I know,, but with dogs, if you have a business and the dogs provide a business purpose. So in my case, I'll use myself as the example. Okay. I have clients come to my home all the time. We have a business meeting, we have dinner. Maybe I have a vendor that comes over, does a presentation. Like, whatever it is, I have a mastermind group. I have staff that come to my home. Right. So I have a lot of business use in my home. Okay, well, in my home I also have client information which needs security. And I promise you, of the five dogs, two of them are German Shepherds. One is a Great Dane, Connie Corso, and the other two are basically boxer mixes. So they meet the qualifications. We'll talk about qualifications here, but I have had multiple people tell me when they come up to the house and they see five dogs in the window going, who are you? Right? Talk about security.

Speaker 3 (00:11:03) - No arguments.

SaCola (00:11:04) - Okay, well, look where I grew up. If you got German shepherds and bark and pitbulls. Yeah, they they're security. They're not the warm, cuddly kind of pets.

Speaker 3 (00:11:15) - No, no. Now, I will say, and I don't know if I should put this on public recording, but my big boy, German Shepherd, who looks all big and mean, is the biggest fluff ball in the whole. Whatever. Okay, but I'm pretty sure if you tried to do something against mama, right? So. But let's talk qualifications, okay? So because you actually brought up one of the qualifications that a lot of people don't know about pitbulls. Okay. So the three main qualifications from the court case because this came from a very specific court case. The dog's shoulder I'm sorry. Yeah. The dog shoulder needs to be taller than the height of your knee. Okay. So a Chihuahua, even though they're the most vicious dogs on the planet, not going to qualify. Okay? Just.

Speaker 3 (00:11:57) - Sorry. Not not qualifying. Okay? However, a pitbull, sometimes pitbulls are wider than they are tall. You know, they're the big the big chunky ones, right? Yes. Pitbulls. There are certain breeds that even though they're not tall, they will qualify. And Pitbull is one of them. Okay. Because as you said, ain't nobody messing with a pitbull, right? Like it's not happening. Right. So that's the first qualification. Second one, you got to have a business purpose, right? If nobody's coming to your home and you don't take the dog, some people will take the dog with them to jobs. Right?, if you're a traveling,, courier or a signing a notary or something like that, and you take the dog with you security, that'll work. Okay. And the third bit. So business purpose, height. Right. And the dog has to have some training. Now that's a very vague word. Right. So basically everybody kind of agrees sit stay calm.

Speaker 3 (00:12:51) - It doesn't have to be turned or like any of the super fancy training. But sit stay calm. Basic training. Now you have a massive deduction. Now, as I'm sure you can guess with five dogs, my food bill is a is a little much, especially with big, big dogs. Right. So yeah,, you know, depending on what kind of dog you have, depending on how you use the dog, as far as with relation to your business, that would give you a write off. It would include food, grooming,, vet bills. Right., toys., my biggest dog is a puppy and she is destroying every toy in about ten minutes flat. So a little bit of a bill with that, you know. So this is another tax strategy that a lot of people have dogs that just nobody's ever told them this. They had no idea. Right.

SaCola (00:13:36) - So you can't get a tax deduction for stress relief because I mean cats are great stress relievers you know.

Speaker 3 (00:13:43) - Oh okay.

Speaker 3 (00:13:44) - So let's talk about the medical end now actually maybe maybe okay. So here's the deal okay. You can have a service animal that does exist. And I have seen crocodiles as service animals which I that would not be relaxing to me I get it I understand the face, I know okay. But there have been crocodiles. There have been,, all sorts of birds and hamsters and ferrets and cats and dogs.

SaCola (00:14:10) - Guinea pigs. Yeah.

Speaker 3 (00:14:11) - If your animal. Right. If your animal can qualify as a service animal, yes you can. So maybe with the cats, but with that you're going to get a medical deduction and not a business deduction. Right. And the major difference right. Yeah. One medical you may or may not have enough medical expenses to be the 10% of the AGI limit. Maybe maybe not okay. And two, certainly if it's a business deduction you're not only saving income tax, you're also saving self-employment tax, which is an extra 15.3% on every dollar of profit that you make. So it almost like double dips on the taxes.

Speaker 3 (00:14:49) - If you can get something to be a business expense,, ordinary, necessary and reasonable are the three words that the IRS applies to every expense. So is security ordinary, necessary and reasonable? Yep. Right. So.

Shauna (00:15:04) - Yeah, okay.

SaCola (00:15:05) - Wow. Guys. If you have dogs and you got, I don't know, Rottweilers, German Shepherds, pitbulls, Great Danes, I guess you guys got security, especially if you have people.

Speaker 3 (00:15:19) - Coming to your home.

SaCola (00:15:21) - Right? If you've got people coming to your home, if you got kids. Yes. You know, up to what? 18 kids.

Speaker 3 (00:15:28) - Are your employees.

SaCola (00:15:29) - Right? You said up to 18.

Speaker 3 (00:15:31) - Your kids are your employees, and people are coming up to 18. You can get that $21,000 completely tax free after 18. They do have to start paying like self-employment tax. And there are some taxes, but depending on how much income they make, a big portion may still be on taxable.

SaCola (00:15:46) - So okay. So I don't get tax breaks on that one.

SaCola (00:15:50) - All right that's fine. But hey you guys fit into these categories. That's great guys. And I hope you all by now are downloading this episode and making sure if you're not driving and because we don't want you distracted while you're driving, make sure that you're taking notes. Okay? But don't forget to download this. Share this with your other entrepreneurs because we're going to delve in a little bit more. Seana and I we're going to talk about balancing the personal and business expenses. So maybe maybe I may fall into this category I don't know. But how can we as entrepreneurs effectively balance personal and business expenses for tax purposes, ensuring that we make the most of the available deductions. So say for example, years ago someone said, yeah, someone said if you're buying clothes for work, that could have been a tax deduction. But then I was told years later, no, it's not. So, you know, you wear clothes the sudden necessity.

Speaker 3 (00:16:59) - Well, and that's really what the IRS went after. That's what the IRS went after.

Speaker 3 (00:17:03) - So so let's back up. There is a specific clause okay. And it's more court cases a lot of a lot of deductions are based on court cases because the law the law is very simple ordinary necessary and reasonable for for the job you do. I mean period, that's the law. Those are those three words ordinary, necessary, reasonable. It's a very simple law. So when we start to talk about can we take dogs and kids and clothes and medical and all these things, then it becomes court cases, really. Right. In this case they won because of XYZ set of factors in in this scenario. So one of the court cases that has come up is specifically related to actors on screen personalities. Okay. So I'll use myself as an example okay. Okay., as a CPA, as a tax strategist, you know, I need to look professional, right? I mean, I couldn't come in with my hair sticking up and, like, all over the place, right? I have to look at least somewhat professional.

Speaker 3 (00:18:01) - But my job and people paying me money is not 100% based on my appearance. This is not right. I mean, I could look a little bit more sloppy or a little bit more professional or whatever, right? Like whatever people are, people are hiring somebody like me for my knowledge, right? For the ability of my company to save you a ton of tax. So the appearance is not really such a big thing. Okay. But if you're an actor, your appearance is everything, right? If you need a six pack abs to be on TV to film whatever movie you're doing, right, you're playing the new Spartan movie or whatever, you need to look like a Spartan. So the food you eat, the clothes you wear, the personal trainers, the workout shoes, like all of those things for you are now ordinary, necessary, and reasonable because you couldn't play that role if you didn't look a certain way. I know you're making the face of me right? So how does that help the rest of us, right? Right.

Speaker 3 (00:18:59) - The rest of us get to look like poor slobs. We're not professional actors.

SaCola (00:19:02) - Well, no, we're not gonna look like poor slobs. But I'm just saying. I mean.

Shauna (00:19:06) - Just saying just.

Speaker 3 (00:19:07) - Well. But, you know, this is the question. So the IRS, in the court cases, the IRS has expanded this, this, this,, these indicators to other people that are commonly visual. Okay, okay. So TV anchors, for example, this you and I are both right now are visual. Right. And this could get a client for me or for you or more people to join the podcast or whatever. The visual here is important. Now the one thing about clothes because you hit on clothes specifically okay, so makeup, hair, nails, whatever you need to look professional when you're doing presentations or whatever. This. Yes. You're good. Okay., things like dry cleaning clothes. Right. So let's say you have a suit that you're going to do a presentation in and you get the suit dry cleaned, you know, before you go on the presentation.

Speaker 3 (00:19:59) - Totally good. Get your hair done before you go on this presentation or to go sell a client 100%. The IRS is all good about that, because if you sell that client, you make money. They get a cut. So they're good about that, right?

SaCola (00:20:12) - So back up, back up, back up. Just just for a moment. I want you to lose your thought. So what you're saying is if I get facials done because I'm visual, and that may lead to a client or keeping my hair done, you know? And that helps me get clients or even sponsorships, then that could potentially be a tax that could work.

Speaker 3 (00:20:33) - Now this is probably because we talked about seven, eight, nine, like where are we at on the regression scale. This is probably like a 7 to 7 and a half okay. That's where I like.

SaCola (00:20:41) - To say the.

Speaker 3 (00:20:42) - IRS is this is yeah. The IRS argument is you cannot deduct anything 100%. Right. So so let's say you buy a new jacket okay.

Speaker 3 (00:20:52) - , 50% of the time you wear it for business 50% of the time you wore it out for dinner with your husband or whatever. Out with your friends, whatever. Okay. You could deduct that jacket 50% because you're using it for business. 50%. Okay. Okay. So yeah. So when we go to things like the hair and the clothes and whatever, right. It's really,, one of my favorite tax sayings ever. Okay. Pigs get fat and hogs get slaughtered. Okay. So if you're going to buy something, right, the famous example is the Rolex. Okay. Can I write off the Rolex? Because I'm on YouTube and I'm a star and I have to show signs of success, right? I have to like, you know, be flashy and you see them, like, posted on the Lamborghini and like, in front of the big house and. Right. Like and it's not even there's the renting it but whatever. Okay., yeah. That's a whole thing in the drama right now, but whatever.

Speaker 3 (00:21:43) - So, you know, are things like that a deduction where the court cases have come back. Right. And so this applies to what you're saying, where the court cases have come back and said, listen, if you can prove prove that you got that client because of the Rolex you were wearing and not because of your knowledge, we'll give it to you. Okay. So. So how do you prove something like that? Right?, you know, let's take the hair and the jacket or whatever. Did you get a written testimonial from your brand new client or brand new sponsor? She came across as so professional. And, you know, I was just so impressed with that diamond Rolex that she was wearing, you know, and that just really cinched the deal for me.

Shauna (00:22:23) - Yeah.

SaCola (00:22:24) - No, nobody's really going to say that.

Speaker 3 (00:22:28) - You know. So. So this is where the iris just gets really weird about things, right? Okay. Because. And do you mind, how can I be a little risque? Just just a little tiny bit? Because there's a very famous case that specifically relates to this.

Speaker 3 (00:22:42) - We're real.

SaCola (00:22:42) - On here. Real?

Speaker 3 (00:22:43) - Yeah. Okay. Okay. So there's a very specific case and it's famous and it ties in exactly to this. Okay. Okay., so everybody knows what a professional dancer is right up on stage. Professional dancer. Okay., there was a court case where this professional dancer had some,, physical enhancements made. Okay, okay. And so she went on stage, she made money, right? The. And she deducted them. She deducted them because to her ordinary, necessary. Reasonable. If I have these enhancements, I'm going to make more money. And the IRS is going to get a bigger percentage of the money that I made. Right? Because I made more. They get more. Everybody's happy. Okay. I tried to fight her on it. Iris tried to fight her on it. Okay. And they said, no, that's a personal thing. Absolutely not. Has nothing to do with nothing. Right. And everybody in the courtroom made the face you just made.

Speaker 3 (00:23:33) - And so the judge turned to the IRS and said, So I'm sorry, did you or did you not collect more money because of these enhancements and the. Well, yeah. Right. And the judge said, well, then why are you complaining? Like, no, it is clearly obviously ordinary, necessary, reasonable for her, specifically her job to have those enhancements to make more money, to pay you more. So drop it. So it gets very funny and very specific. And you know, I would suggest right. Number one, look at where you're at on that aggression scale. That Rolex is probably an eight eight and a half okay. Right. The Rolex okay., but if that's who you are as a person and you are willing to get 15 testimonials from 15 clients in writing, get them to stand up in front of the IRS and say, yeah, that person was showing signs of success. And that's why I went with that person. We see this a lot with,, business coaches specifically, right? I have all this success if you want to be like me.

Speaker 3 (00:24:37) - Do this right and this is what you are. Or with salespeople specifically, we say salespeople, right? Because if you show up, we see this with cars a lot. Real estate agents. Right. If you show up in the beat up Honda, right. If you show up in the beat up Honda, versus if you show up in the Lexus or in the Mercedes, what kind of level of respect do you have from the people that you're dealing with?

SaCola (00:24:58) - Right. That's why I was asking you because as a realtor, when I'm out, sometimes I have my husband drive me. That's why I was asking, could I pay pay him? And that be a tax deductible? The clothes? Yep. Could that potentially be a tax deduction as well? Because yes, you do have to look a certain way. Not saying that you got to look trashy or anything like that, but you do have to be professional.

Shauna (00:25:26) - You have to be professional.

Speaker 3 (00:25:27) - Well, and you have a couple of pieces here, right? With the clothes.

Speaker 3 (00:25:29) - Let's say we really wanted to hit on the clothes., 20 years ago, one of my very first clients ever. Okay. When I opened my own practice 20 years ago, tax cut turned 20 years old this August. So,, one of my very first clients. Thank you., one of my very first clients said, I want to write off all of my clothing. All of it. All of it. Socks, underwear, undershirts, all the things. And I'm like,, I mean, who's going to see your undershirt? Right? Like, what are you doing? Like, flash out or what are you doing? Right? And he said, well, no, I want you to figure out a way to do it right. I said, okay, well, I mean, if absolutely every piece of clothing you own is logos with your company logo, it now becomes marketing and advertising. And I was kind of half joking. He came back with, sent me a photograph, not on him thinking it's like, you know, on a counter or whatever of a picture at the top of the band of his underwear with his logo on it.

Speaker 3 (00:26:20) - And I'm like, whatever. Okay. If that's that's what you want to do. Okay. All right. Fine. Right, right. So I really and, you know, paying the husband, I mean, the good thing about paying the husband. So my previous statement holds true. If your business pays him, he now has a business. If you file jointly, the income is still there. Right. But if he doesn't have a business, if he's, let's say he's a W-2 person and he doesn't have a business.. Okay. Now he has a business which means whatever his business is Uber driver for the family. Right. His business can now write off reasonable expenses for him and his business which might be different.

SaCola (00:26:58) - Does he have to be a sole proprietor or does he have to have an LLC or S-corp. Good question. In order to.

Speaker 3 (00:27:04) - Do that, you do not buy in the US law, you do not have to have an entity to be able to take tax deductions.

Speaker 3 (00:27:11) - Okay. So he could just be a sole proprietorship. You know, I would recommend like if we're picking his specific case, I would absolutely recommend that he gets some other clients, not just you. Otherwise it looks a little weird right. So if you can drive friends to the airport, if he can drive for his kids to somewhere, you know, whatever, right? Get get a couple of clients., of course, track all of the normal stuff that you need for a business income, expenses, gas, repairs, maintenance,, insurance. Like all the things for the car., yeah. Okay.

SaCola (00:27:44) - All right. Wow. Okay, so now we're getting ready to move in to minimizing tax liability and maximizing our savings.

Speaker 5 (00:27:57) - So, yeah.

SaCola (00:27:58) - In light of recent tax changes. And we're probably going to see some more next year.

Speaker 5 (00:28:02) - Of course of course.

SaCola (00:28:04) - Or incentives. What are some strategic moves that entrepreneurs should be considering to minimize their tax liability and maximize the savings?

Speaker 3 (00:28:15) - Absolutely. I'm actually going to hit maximizing savings first because it will help with minimizing the taxes.

Speaker 3 (00:28:22) - So one of the things that I highly, highly recommend, there is an accounting system called Profit First. And it basically says that if for every dollar that comes into your bank account, you are going to decide ahead of time what profit you are willing to accept for all your hard work. Okay, so generally when you're a small business, so under about $1 million worth of revenue, those percentages work out to be about 10% owner's profit. Okay. Like I'm I'm not even going to do this business if I can't at least make some money for me. Right., typically you would put about 20% into savings for taxes. We're going to come back to that here in a second. So we got 10%, 20%. So we're at about 30 okay. And then I like to tell people to add another 10% for fudge. Something happened. Something broke something I need a new laptop. It fell in the sink, you know, like whatever, right. Something happens. So about 40%. Now, what you're supposed to do with this is that for every dollar that hits your bank account, you would set up, in this case three, three separate accounts.

Speaker 3 (00:29:29) - Right. We're putting 40% away into three separate accounts. Those accounts would be at a different bank. Completely different. So if you're banking with Bank of America, these three accounts would be at Wells Fargo. Okay. Because what you're trying to do is move money out of sight, out of mind. If your main operating account is Bank of America and you put these these really savings accounts at Wells Fargo or whichever, whatever banks. Right. But you put them at Wells Fargo, okay. Your brain looks at your bank account of what's left. You only have 60% left, right? That's how much I can spend. That's it. When I'm out of my 60%, I'm out. I'm done. Does that make sense?

SaCola (00:30:08) - Right. So overall, and I've heard some people say. Have at least eight different bank accounts. How many bank accounts? Different accounts would you recommend? Yeah. Business owner having.

Speaker 3 (00:30:23) - Yeah I, I when you get to eight and I'm a CPA right. It's too many right.

Speaker 3 (00:30:30) - It's too many for me. Eight is too many okay. I understand what people are saying because, you know, you really do want to segregate., like, let's say you have a goal. I want to take my family to Disneyland, and that's going to cost $10,000. Okay. I don't mind having goal accounts. Right. I'm just going to stick money in there until it hits 10,000. Then I'm going to stop. So you can have as many as those as you want. That's okay. That's up to you. And it's custom to you and whatever. Right., for me, as a as a standard baseline of a business owner, there's your main plus three, right. One for taxes, one for you and one for just fudge. Right. Oh, fudge. Something happened. Right. And I need it's like an emergency fund.

Speaker 5 (00:31:09) - Emergency fund? Yeah, yeah.

Speaker 3 (00:31:11) - , because anything more than that and the system becomes really complex to try to run and manage. And who's moving what, all this? We've,, we've just heard of a of a really cool app that's coming on the market.

Speaker 3 (00:31:23) - It probably won't be out until later in the summertime., but it's called Cash Goblin., and it allows all of these transfers and stuff to be automated. So keep your eyes open for that cash goblin., but I like three plus your main checking account.

Speaker 5 (00:31:38) - Okay.

Speaker 3 (00:31:38) - And the reason, remember I told you we were going to come back to that tax account? That 20%. Okay. If you are a business owner and you do all the tax strategies, you can okay, the.

Speaker 5 (00:31:51) - I mean.

Speaker 3 (00:31:52) - Let's put it this way, if you do all the strategies you can, the average tax rate is about 6% six. Okay. So if you've put away 20 right. And your tax rate is six okay. This is the new book by the way., if you put save 20 and put away six you have 14% to invest in a new rental property., a tax strategy that goes above and beyond put money into retirement. You can actually take that money and invest it in something. And for a lot of business owners, I think that's one of the biggest pieces that gets missed is we all work so hard, like grind and day to day and we're running, we're moving whatever, right? And at the end of the day, if you run your account, if you run your accounting dollar in, spend all the money and I get whatever's left, sometimes there's there's nothing left because I thought I had to pay this, and I thought I had to pay that.

Speaker 3 (00:32:44) - If you switch that method and you put the profit first. And this all comes from Mike McLeod's book Profit First, and he's a lot more rigid than I am on my accounts and all that kind of stuff. But if you go with this more profit first accounting and your money is at a totally separate bank and you only have 60% left, you become really frugal really fast, right? Because you're like, I don't have the money to buy that cool new iPhone. I guess I'm going to have to stick it out with the old iPhone for another year or whatever, because this is how much you can spend. And so you are always guaranteed unless something catastrophic happens, right? You are always guaranteed to have the money to pay your taxes, to invest in things, to take home, to pay your own bills.

Speaker 5 (00:33:26) - Right?

Speaker 3 (00:33:27) - You're always guaranteed to have the money if you do it that way. So I love using this method. We use it ourselves and we have for almost 20 years and it's great.

Shauna (00:33:38) - So okay so four accounts.

SaCola (00:33:40) - Yep. One for the business. Yep. One for taxes.

Speaker 5 (00:33:44) - Yep.

SaCola (00:33:45) - One for you. Because you should be paying yourself first 100% right?

Speaker 5 (00:33:49) - Yep.

Speaker 3 (00:33:50) - And one for. Oh, fudge.

SaCola (00:33:52) - Well, yes. The emergency plan. Yes. So out of the business one. That's where you're paying your employees if you have employees, right?

Speaker 5 (00:33:59) - Yep.

SaCola (00:34:00) - And then for profit, how much would you what was the percentage for profit again that you should be paying yourself at least with.

Speaker 3 (00:34:06) - Yeah. Normally I start with 10%., what definitely tends to happen is that as you start to work this process. Right. So I'm going to warn people right off the bat, the first three months you were going to hate me. You're going to hate the process. You're going to hate profit first. You're going to think because you're so used to just spending all the things. Okay. And so it really I mean, this this is kind of like a hard thing when you first get into it.

Speaker 3 (00:34:29) - Okay., but yeah, if you can start with ten and now some people don't make 10% profit like their total profit is 2%. Okay. Do half a percent do what you can to start because I'll be honest with you, it's not it's not so much about the amount of money that's moving. It's about building the habit of moving the money, of getting it out, out of sight, out of mind to another account. I'm not allowed to touch that. Like that's it's not my money, right? Like the tax account. I always tell people to label it the IRS, because if you put those two together, it spells the word theirs. It's not yours, it's theirs. Okay, so,, you know, there's so many ways,, money is such a psychological trauma for so many people that, you know, if you can just get in a in a very simple habit, right, 10%, just 10%. Right. Because 40% is a lot to start with right off the bat.

Speaker 3 (00:35:27) - 40% is like for a lot of people, it's too much. Start with 10%, split up 10% into those three accounts and just start raising it as you, you know, as you sort these things out or as you make more money, don't spend more, make more money, and then you can move more. Right? So.

Speaker 5 (00:35:40) - Right. Yeah. Well.

Shauna (00:35:43) - Shauna.

SaCola (00:35:44) - You have definitely worked us on how we should work it, live it and own it in our business. You you checked all the three boxes today? We talked about overlooking the tax deductions, how to balance your personal and business expenses, how to maximize the savings. First, in order to minimize the tax liability. I was listening, I was paying attention. And guys, we're going to continue our conversation Shauna and I. But if you haven't signed up for my newsletter, like what in the world? I need you to head on over to work@livonia.com and sign up for our newsletter, because we're about to have a podcast afterparty where I'm going to continue the conversation with Shauna.

SaCola (00:36:27) - She's going to give a little bit more insight in detail. But again, you got to be a part of my newsletter, the Work at Living Owner Newsletter. And if you're not part of that already, what in the world. What's going on? Let's go. Right, Shauna, say it again. Tell them to sign up sign up, sign up because we're going to have a podcast after party. So but before we go,, for the podcast for the main part of our conversation. Just a quick top tip time. So beyond the numbers so people can get to know you a little bit better. What is your favorite part about helping entrepreneurs with their taxes and how does it impact their lives?

Speaker 6 (00:37:09) - I love it.

Speaker 3 (00:37:10) - Well, my favorite part is the impact that it has on their lives. Okay, because so many people are terrified of taxes, they think if they even deduct the pen wrong, you know they're going to get in trouble, right? Right., so so education,, making it happen, like actually implementing it, getting that cash back in their pockets so they can do what they think is right rather than giving it to the government and hoping and praying.

Speaker 3 (00:37:34) - We like the laws they make. So,, yeah, I really, for me, it's all about helping the little guy, I guess.

Speaker 5 (00:37:41) - So great.

SaCola (00:37:42) - Thank you for sharing that. So again, guys, I need you to head on over to work at Livonia. Com and sign up for the newsletter. So that way you can check out the podcast afterparty in. Shauna and I are going to continue our conversation. I'm going to find out a little bit more from Shauna about how she got on the cover of Entrepreneur and Forbes, and any other quirky and unexpected moments that you may have had in your journey as an accountant. But most importantly, guys, I want to keep this conversation going with you. Drop your questions in the comments below. If you're checking this out on YouTube, hit me up directly on my email info@workitliveitownit.com. Or you can head over to Instagram and send me a message there to share with me about your successes or effective tax strategies or questions that you may have for Shauna, so we can go ahead and direct those to Shauna.

SaCola (00:38:38) - Shauna, we're going to put links down below to your three best selling books in the show notes. So that way you guys can check out those books as well. Well, that wraps it up for this particular episode of working on It. And again, don't forget to head on over to work and leave it on it and sign up for the newsletter for the podcast afterparty. All right, guys, take care. Bye.