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Financial Literacy for Small Businesses and Self-Employed Workers with George Azar · Marci talks money (and life)

• Marci Grossman (00:15) Hello, I am MoneyMarci and welcome. I am thrilled to welcome today's guest, George Azar. George is a certified public accountant with over a decade of experience helping self-employed individuals, freelancers, and small business owners navigate their finances with confidence. After years of watching clients feel overwhelmed by the U.S. tax system, George founded Bright Budget, a financial education platform dedicated to simplifying tax and money management for the self-employed. Through Bright Budget, George empowers people to understand their taxes, make smarter financial decisions, and build a brighter financial future without the stress or jargon. Welcome, George. George Azar (00:58) Thank you so much Marci, it's so nice to be here. I really appreciate it. Thank you for the intro. Marci Grossman (01:03) I am thrilled to have another CPA on the podcast. We kind of look at financial things and business things differently than other business professionals because we are really looking at the tax ramifications and the planning and the budgeting in just a different way due to our profession. George Azar (01:21) Absolutely. we have a very, you're right, we have a very distinct perspective that people, I guess, engage us for. Marci Grossman (01:27) Right, right. So tell me, how did you become an accountant? What brought you here? George Azar (01:33) Yeah, great question. So it was actually a long journey. I always knew I was good with numbers. ⁓ My dad recently told me that, I guess my elementary school teachers told me that numbers were my thing. And then, you know, I decided in high school that I wanted to serve in some sort of capacity in the financial sector. I was turned on to law in school, but then realized that, you know, I have a lot of anxiety in you know, making a defense, if you will, in front of a court of law. And so when I took my first accounting class in college, I realized that it was the beauty of both worlds where it was being able to deal with numbers and also being able to interpret the law specifically related to taxation and the IRS. And, you know, if it ever goes to court, essentially, the only plaintiff you're defending against is the IRS. And so For me, it was a no-brainer to go into taxation because of my love for law and also accounting. So it just kind of fit perfectly. I started my career later in life. I ended up taking a break between community college and completing my undergrad just to do some work and had a different life, if you will, just trying to figure things out. And then when I was 28, I decided to go back to get my accounting. degree and then shortly after that get my CPA and the rest is history. Marci Grossman (02:53) Fair enough. I love the intersection of tax and law and that's no dig at tax attorneys who have even a farther, broader into the legal aspect of it. But I often tell people that accounting isn't about high-level numbers. It's the merging of the laws and the way to make the numbers work based on the laws. George Azar (03:15) Exactly. It's funny because everyone always that they always say like did you love algebra and geometry? I was like no I hated that like when you threw letters inside of the equation. It was a whole different story But essentially like yeah, it definitely you're absolutely right, especially as accountants, you know, we're we're looking how to make those numbers work As opposed to you know solving these massive equations. That's you know, it's basic math in some regards. I You may have some sort of algebraic ⁓ equations at some point, but the majority of what we're doing is adding, subtracting, dividing, and multiplying. Marci Grossman (03:50) Right, it doesn't go beyond algebra. So anyone who's considering accounting out there, you don't need calculus. George Azar (03:55) Mm-hmm. Exactly, exactly. Marci Grossman (03:58) So how long have you been practicing as a CPA? George Azar (04:01) Yeah, so I got my certification October of 2016, but I've been in the profession since actually 2014. Basically, I got my first job at H &R Block during tax season. That kind of got my feet wet. then essentially after, actually while I was getting my certification, or I had gotten two of the exams under my belt, I ended up going to Ernst & Young. Getting a job with them and basically working into it. So I've been I've been doing this for over a decade But I've been a CPA for almost ten years now it's been it's been an interesting journey and just you know learning learning the different ways that other accountants and other tax Professionals, you know do certain things on their tax return Taking more aggressive or more conservative approaches and just kind of finding my niche in that, you know, once I got more comfortable with the law and how I apply things. I remember this one firm that I worked at, was the second firm that I worked at, they were taking certain losses on capital assets that was way too aggressive for my liking and knowing the code and diving into the code and being like, yeah, we shouldn't be doing that. So along the way, I kind of learned my style of how to be aggressive and how to be more conservative, I just kind of stumbled into it. Marci Grossman (05:19) And now you have your own firm. George Azar (05:21) I do. Yeah. So after the third firm that I worked at where that's really where I learned a lot. That was actually where I became an S-Corp specialist. I learned a lot of tricks, something called an S-Corp close out and just basically dealing with different clientele. I realized that after being with them for almost two years that I, you know, I had this passion and that's the thing, you know, really why I went started my own firm was that, you know, CPA practices are very regimented. And what I mean by that is that there's a certain formula that I've seen that ⁓ CPA practices follow where they're looking at the higher billable clients. when they're providing tax planning, it's almost cookie cutter in some respect, where what I saw was I was acquiring clients. Even when I was at Ernst & Young, I was starting to acquire clients. And everyone's situation was different. Specifically a lot of the people that needed the help couldn't afford the help because CPA practices are looking at the higher billable clients. So I decided during the pandemic to leave the last firm that I was at to start my own firm to really focus on providing high level, you know, white glove services, CPA services to the underserved communities being able to, have a reason obviously have a reasonable billable rate. without actually detracting from the middle and lower class individuals who actually needed my services. And so with that principle and with that practice and understanding, knowing that, you know, my goal wasn't necessarily to find the highest billable client, but it was really to, you know, scale with more clients who needed these services and not necessarily jack up the price. That kind of became the baseline for, you know, building my own firm and eventually finding success in that. Marci Grossman (07:10) Yeah, most of the firms that I've worked with have also been boutique firms. So they've been the smaller firms that are serving a different clientele. When you talk about the much larger firms like Ernst and Young and the others you're talking about, they've got huge overhead and you have to have the higher bill. I mean any business, the bigger your overhead the larger your billable hours, more profit you need just, or I should say the more billing cost you need to be able to cover those expenses so that you can have a profit at the end of it because in the end we all do work to earn a living and maybe a little bit extra. George Azar (07:49) Absolutely. Marci Grossman (07:50) So you're especially into self-employed and you've talked about S-corp, but I assume as self-employed you're also Schedule Cs. You're also, I don't know, are you partnerships? Do you consider that self-employed if a couple of people go into it together or what are the areas that you like to cover? George Azar (07:54) Mm-hmm. Yeah, great question. I started my own firm back in 2020. so I have a wide range of clients. I have C corporations, I have S corporations, I have partnerships, have individuals, I have trusts. But really where what happened was, and that kind of ties into where Bright Budget comes into play. So I was acquiring all these different types of clients. And I'm in Los Angeles, so I have a lot of real estate and obviously entertainment. But the common thread was that I was picking up lot of Schedule Cs, so self-employed individuals. And a lot of them did not understand just the basics of taxation. A lot of them, I think the most common issue is that people think that when they pay their taxes, that's all income taxes, but not realizing that the self-employment tax is actually the bigger culprit in that equation. So being able to understand their deductions and obviously, being able to legally reduce their tax liability. And so for me, it was a lot of education at first. And so what happened was during the pandemic, I realized that there was this really, this subgroup of individuals who consider themselves either self-employed gig workers, freelancers, all of, as we know, that's basically the same thing schedule C. But a lot of them had this confusion as far as, What does it mean to be self-employed? What are the taxes? How do I, you know, take care of my books and records? Do I have to, you know, start a single member LLC? All of those things. So as I started to continue during the pandemic, I ended up writing out, it was about a 17 page script, basically outlining all the things that I, the common themes that I saw amongst my clients. And then also the, you know, additional resources that I could provide my clients, you know, to basically curtail the questions and basically answer them ⁓ right off the bat so they're not in this weird space of what do I do with my business entity, and my DBA, all of that. And so I ended up packaging it into a financial literacy. And so when I first started my firm, I really prided myself in being the CPA that teaches people. And so what I saw was this opportunity to create another organization called Bright Budget and provide online courses, consultations, essentially moving away from the tax preparation and having people, you know, having confidence whether they're working with a CPA now or, you know, they want to be able to do it themselves but just feel, you know, heavily ill-equipped to do that. That's really where Bright Budget came into play to be this place of financial, you know, a more broader environment for people to have knowledge and expertise so that they feel confident filing their tax return, whether it's with a CPA or by themselves. Marci Grossman (10:54) I think that's great, obviously. If you know any of what I do, it's a lot of financial literacy based education at this point because people need to learn about their money. Do you have a lot of people checking into Bright Budget that are not your clients? They're maybe from other states or maybe they're not self-employed. George Azar (11:12) Yeah, so that's actually the whole heart behind Bright Budget. So I have my clients and I don't advertise for my firm at all. I actually don't want to grow my firm. I want to keep it where it's at. It's usually just word of mouth. I've never had to advertise. It's always been word of mouth and I plan to keep it that way. Where Bright Budget really is for the broader community. It's for anyone in the United States who considers themselves self-employed or even if they just want... to learn about taxes. It's funny, I was on your website and I saw where you did the W-2 explanation. I loved it. It's cool because it sounds like you have a very broad financial literacy. It's open to everyone. I'm a little bit more niche in the sense of self-employed specifically. Because that's essentially what I consider myself an expert in. So it's cool because I think that's exactly it. We're both hitting on these pain points for people where you know, there's this inherent dependency upon a system. And understandably, the tax code is super complicated. You know, we aren't taught this stuff in schools. So, you know, we're taught, you know, chemistry, but we're not taught how to prepare our own tax returns. And so it really gives this opportunity for us to be able to step in and, you know, reach a broader group of people where the need is there. It's just, they just don't feel like those resources are available. Marci Grossman (12:31) Fair enough. George, what do you think is the difference between full-time jobs and side hustles? Because you talked about gig workers and a lot of people do that to pick up extra income. It's still going to end up on a schedule C. So are there things that people should know about that are different, whether it's their full-time job or a side hustle? George Azar (12:50) Yeah, great question. I get this one a lot too. And especially after the Tax Cuts and Jobs Act, the elimination of the 2 % deductions, and I'll get into that in a little bit. But I have clients exactly in that situation where their primary job is from a W-2, but they have a side hustle. And it really comes down to the intent. Is this really a quote unquote hobby where someone is just trying to, I guess, you know, cover other expenses and or they actually enjoy doing this. Or is it something that, you know, they're working a W-2 job, but they essentially plan to transfer, you know, transfer into doing this side hustle full time. And that's really where, you know, the hobby loss rules come into play with the IRS. So I'm always very cautious with my clients that have this because again, especially after the passage of the Tax Cuts and Jobs Act with the elimination of the 2 % deductions what that means is that you know you have to report all of your income but it used to be where you were able to deduct the expenses related to that hobby on the itemizable deduction sheet if all of you have other you know deductions that qualify for the itemizable deduction where now after the tax cuts and jobs act those are eliminated so essentially all you're doing is reporting the income the gross income and not being able to take those expenses. you know, my concern there is that, you know, if a lot of people are throwing stuff onto a Schedule C that isn't with the intent of actually having it into a self-sustaining business, then they do run the risk of not that they're going to get audited, but they do run the risk of that income being recategorized as hobby income. and then subsequently not being able to take those deductions. So I'm very careful. Like have a handful of clients that are in that situation where it's very clear that their main job is coming from W-2, but they have like 10, 15, $20,000 of side hustle income. You we basically want to just make sure that, you know, we're reporting this and also, you know, obviously not running a loss. Cause a lot of people think that, oh, well, if I have a side hustle, could run everything, you know. Marci Grossman (14:59) it doesn't become a hobby loss until it's a hobby. Other than that, it can be on a schedule C even if it's a side hustle. It doesn't really become a hobby until it has a loss for what three of five years, but before that, even if it makes a hundred dollars, it's still a side hustle income that you can put on the schedule C. It's just yeah, I have run across some clients that are like, George Azar (15:15) You Marci Grossman (15:25) That's okay. I'm doing it as a business, but it's got a loss again this year. And it's got a loss again this year. It's like, well, then that's a hobby. You have to have showing that you're trying to make money, showing that. yeah, that's the problem is the people who want to... Because there is a side hustle. I need to make more money than my W-2. I'm going out there whether it's doing gig work, George Azar (15:29) Yeah. Exactly. Marci Grossman (15:51) or whatever it is that brings in more on a 1099 because if it's a W-2 it becomes a non-issue. So it brings in more on a 1099. I've got expenses against it but my goal is to make money and I am making some money and as long as you're making some money then it is a side hustle as a job and not a hobby. George Azar (16:15) Exactly, and that's the thing a lot of people want to basically run losses to reduce their other sources of income and that's where they really get into trouble. It's like, well, that could be perceived as a hobby. And then there's also people like, throw it into an SMLLC. it's like, no, actually the code actually says specifically not to do, that doesn't exempt you from it being categorized as a hobby. yeah, there's exactly, it depends on the intent and what they, do they plan to make this, net positive income exactly the three out of five year rule. Marci Grossman (16:45) I think a big question for people is, okay, I've got this job I'm starting. Whether I'm starting it as a side hustle and planning to grow it or whatever, it's making money. How do I decide whether I want it to be a Schedule C or an S-Corp? How do I know if I should Marci Grossman (17:02) Create an LLC. Marci Grossman (17:04) What are the best ways for them to try and figure out what they should be doing there? George Azar (17:08) Yeah, great question. would say first of all, don't listen to TikTok. Don't listen to social media. I can't tell you how many times I've had clients come to me like, this TikTok tells me to start an SMLLC. Well, I'm in California and you know, an SMLLC for federal purposes is considered disregarded, meaning that they don't recognize that as separately taxed Therefore, it's treated as Schedule C income. Marci Grossman (17:11) Hahaha! George Azar (17:30) But in California, there's a minimum $800 tax. And that's the thing, these TikTok videos, they only talk about the good things. They don't talk about, you know, the downsides to doing that. And so I'm always having to talk my clients off of cliffs from stuff from TikTok. So. Marci Grossman (17:44) Off financial cliffs they put themselves on. George Azar (17:46) Exactly, exactly, exactly. you know, and that's the thing, like, you know, know that social media, its intent is to provoke some sort of ⁓ attraction, some sort of attention, because that person gets money for the amount of time you watch it. If you like that video, if you share it, all of that. So that's the first step. The second step is to consult with a professional because it's not a one size fits all situation. Perfect examples, S corporations. have many clients that have been thrown into S corporations but were never talked about the reasonable salary rules. All they heard was that, you could save thousands of dollars by going into an S corporation. Yes, but there's also certain requirements that you have to meet by having a reasonable salary. That salary is subject to both income tax and the payroll tax, equivalent of self-employment tax. So what I would say is talk to a professional to see if it meets your specific circumstances. You know, the other thing, and that's why, again, why I created my courses and all of that was because it gives general information. The good, the bad, the ugly, the great, you know? So get as informed as possible. Don't just be looking at, you know, a blog. Don't be looking at, you know, social media. Really do a deep dive. If you're serious about committing to something that, potentially has that type of commitment, it's definitely worth talking to your professional. about it as well as doing your own research and getting your own information, not just taking the good out of that situation. Marci Grossman (19:14) Yeah, it's, you know, people don't understand what an LLC is. So, you know, I've got a schedule C, should I turn it into an LLC? I'm still going to be the only, I'm not looking at making it an S-Corp. Well, what is it you want to get out of that LLC? Because certain types of professions aren't really protected by creating the LLC. And one of the reasons that people were creating LLCs as well, then that protects me and no one can... can pierce the veil and come against me for money. And pierce the veil means that they can go beyond the corporate entity to go to the individual if they have a ⁓ problem to sue for damages or whatever else. So it's a level of protection for the individual, but that only works for certain types of businesses. And there's much more to it than that as well. George Azar (20:04) Exactly. And that's a great example. here in California, for instance, as a professional, if you have a professional certification, you could only have certain types of entities, like a professional corporation. I can't, as a CPA, start an LLC and run my CPA practice through that. Essentially, that entity is null and void. And so I always say, if you're thinking about forming an entity, always talk to a business attorney as well. We can advise generally about laws and protections and all of that, but it's really a business attorney that's going to advise on that. But exactly to your point with the single member LLC for tax purposes, and I have yet to someone prove me wrong on this, there is no tax benefit whatsoever. Because people think, if I start a single member LLC, I get more tax deductions. Well, it's on a schedule C as a single member LLC. you're entitled to the same deductions no matter what. If anything, you're opening yourself up to a tax deficit because of those franchise tax fees that you pay just for having an entity. Like you could have zero activity. You could have negative income in that, you know, a net loss on that LLC. You still have a minimum franchise tax, at least here in California, of $800. So it's really just, you know, talk to an attorney. in regards to the business legal entity structure, talk to a CPA for the tax ramifications for having an LLC or any entity. Marci Grossman (21:31) Right, right. I love watching the TikTok videos about how you should form your entity or what you should do about taxes and saying, nope, nope, I hope they don't listen. I don't bother engaging because then it just becomes a he said, she said. But all I can do is tell people you have to go to a professional. You want to go to a professional that you know and you don't want to keep secrets from them. George Azar (21:42) Yes. Marci Grossman (21:53) I can't help you if I don't know what you're doing when I'm not around. And then at the end of the year, you give me your information and I'm supposed to make it all better when you've just gone willy-nilly spending money and taking tax advice from TikTok. George Azar (22:09) Exactly. I mean, I remember there was a client that that he was at the car dealership about to buy a G wagon. And he's like, he's like, Look, here, this is here's this TikTok video I was like, what is going on? Like, the lady's like, you could buy an expensive luxury car every single year and write it fully off, you know, 100%. I know. Trust me, and I was like, okay, let's put aside the bonus depreciation rules, let's put aside the luxury vehicle rules. Let's just say that you're able to deduct that $200,000, $300,000 vehicle all in one. Again, I'm putting aside all of the rules. You deduct the full thing. What happens when you go to sell it next year? If you sell it for $150,000, you have $150,000 gain because you have a zero tax basis because you deducted the full amount of that vehicle. That alone, like, you know, again, I didn't have enough time to talk to him about, because he's again, was at the dealership. I didn't have enough time to talk him, you know, into the full ramifications of that. But just that analogy alone, essentially brought him away from the dealership. And I was like, okay, let's talk about this. And then we had a longer conversation about, you know, auto, auto rules and depreciation and all of that. But that's the problem is that with, with social media, whether it's, you know, tax advice, politics, lifestyle, anything like that. They're only giving you what you want to hear, not necessarily what you should be hearing about that. Marci Grossman (23:31) I like the people who talk about the money you can spend because you get a deduction for it. I'm like, you know what? You can get a deduction for your accounting fee so you can just pay me more. The question is, you want to maximize what goes in your pocket at the end of the day to get this deduction. Even if it's 100 % deductible, I have to spend $100 to get that deduction. That's $100 less than I have. George Azar (23:42) Yeah. Yeah, and that deduction maybe is only $30 on that. it's, know, Marci, that's exactly it. I always have to tell my clients too, because they're always like, I don't want to pay taxes. I don't want to pay taxes. I'm like, if you're in a position where you're paying taxes, that's probably a good sign that you're doing something right. You know, it's like, like the mentality of paying as little taxes as possible. Yes, we all want to pay as little taxes as possible. But if you're in a situation where you're having to pay taxes, I would say nine times out of 10, It means that you've done economically well where you have to pay taxes on it. Marci Grossman (24:30) Well, I'm hoping to win, you know, I think it's the Powerball or Mega Millions tonight. And if I do, I will have, I don't know, half a billion dollars or more, which I will have to pay a tremendous amount of taxes on. I will happily write that check for taxes because that means I'm still getting, I don't know, two thirds of the money in my pocket. And that's... George Azar (24:44) Yes. Exactly. Marci Grossman (24:55) That's a hard thing for people to understand and to understand that what they pay you in the long run saves them money. George Azar (25:02) That's exactly it. I mean, there's tax deferred strategies with your retirement. There's all these different types of ways to like put that money somewhere else without losing it altogether by claiming a deduction. Absolutely. The biggest thing too is that, you know, I see this, especially with self-employed people, where they're like, donate to charity, donate to charity, you're going to get a deduction. And everyone, you know, even for those that I've explained standard versus itemizable deductions, is that, you know, there's this misconception that, oh, if I donate to charity, other than what happened in COVID where they gave us $300, but if you're donating charity, great, that's awesome. But we also have to see if you qualify for itemizable deductions with the other deductions that you have, like the state and local tax with the mortgage interest if you own a home. If you don't own a home, I will say nine times out of 10, you're probably not going to see the benefits of the charitable deduction. unless you're donating more than the standard deduction in charity. it's those types of things. Marci Grossman (26:02) I believe OBBBA brought it back for 2026. George Azar (26:06) Yes. Yes. Marci Grossman (26:07) So it's coming back and it's higher in 26. I don't recall if it's for 25. I haven't gone to my OBBBA seminar yet. So there's a lot there. Then I guess you don't necessarily know if it had, and OBBBA is the One Big Beautiful Bill, but as accountants we try to be efficient, so it's just OBBBA. And do you know if there were any self-employment changes? George Azar (26:15) Yeah, same. Marci Grossman (26:35) from the tax law on that. George Azar (26:37) Not for self-employed, it was pretty standard. The biggest things that changed, was just basically the extension of the Tax Cuts and Jobs Act of 2017. They did have the 40,000 maximum deduction for mortgage interest, but it's also dependent upon your AGI. were some things, QBI is basically, so essentially, I would say for self-employed, it's the qualified business income deduction, the QBI, which essentially was a deduction of 20 % that you can deduct on your tax return. That was a 2017 tax law that basically got extended in the One Big Beautiful Bill Act. So yeah, there wasn't anything significantly that changed other than it being extended, if that makes sense. Marci Grossman (27:21) Okay, well before we wrap up, George, do you think of anything that you'd like to mention that maybe we haven't covered yet? George Azar (27:28) Yeah, I mean, I just want to reiterate the point that, you know, talking to professionals is the best way to make sure that you are doing the right thing when it comes to taxes, whether it's, you know, whether you're hearing the truth, the hard truth, the good truth, you know, really step away from the TikTok and social media noise out there and really, you know, hone in on talking to professionals. Marci Grossman (27:52) It's in your own best interest. It's your money and we really want to help you keep it. George Azar (27:57) Yes, exactly. Marci Grossman (27:58) Okay well George Azar, thank you so much for being my guest today. We appreciate you taking the time to join us here. George Azar (28:04) Thank you for having me. It's been a pleasure. Marci Grossman (28:06) ⁓ And to my listeners, I will be sharing a link to George's information and his social media in the show notes. So if you have or are considering self-employment, please check him out because he shares a lot of interesting information there. Marci Grossman (28:22) I want to remind you, even though this is two CPAs who have been talking, we're not looking at notes. and we're not giving you specific advice. We're trying to share overall information. You need to talk to tax professionals who are looking at your specific information. Even if the person you're following on TikTok is a CPA, you don't know when they recorded it. you don't know how up to date their information is and you don't know how it impacts you. So see people who actually see you, not who are talking to tens or hundreds or thousands of people about general tax advice. Marci Grossman (29:02) This show is informational and educational and should never be mistaken for professional advice. Marci Grossman (29:07) Don't forget to subscribe, leave us a review and stay tuned. I will see you next time. This has been MoneyMarci on Marci Talks Money (and Life).