Latest / Glovisor Podcast / Business Owners: Stop Overpaying Taxes and Keep More Profit [Ep 91]
Transcript
- Hava Laudon: we can think that sweat equity is the only way to make money in our business. But the smart business owners, they actually use money to make money. So we're talking about working smarter and less hard, Joe Abreu - GLOVISOR.com: Welcome to the Glovisor Podcast, where we explore business growth, communication, and personal development through real conversations with people who make an impact. Our guest has nearly a decade of hands-on business management experience. She specializes in proactive tax strategy and helping business owners keep more of what they build. Glovisor welcomes Java. Laudon. Hava Laudon: Hey Joe, thank you so much for having me. Joe Abreu - GLOVISOR.com: it's a pleasure. All right, so Hava, let's start it off. What specific problem does your business solve and who do you help? Hava Laudon: Yeah, so we primarily work with business owners that are scaling and growing. I love that we live in a country where if someone has a product, an idea, a concept, you know, they can go to work for themselves. The problem is is it's getting very complex just to do that. And so what we do is we come alongside those business owners and we handle a lot of the financial side from bookkeeping to tax filing and tax advisory, helping them make those decisions so that they are paying less and growing better. Joe Abreu - GLOVISOR.com: Well, can you explain to us a little bit of what is the difference between tax filing and the advisory side of it? Hava Laudon: Yeah, absolutely. So in in the wor the accounting world we call it compliance, really, because everybody has to file a return. You know, when you when you do B2B, you're usually doing an ROI, right? So it's like, Joe, I have this thing, you know, whatever I do, marketing or whatever, but you expect to make more than what you pay me to do it. Like that's just the ROI. With what we do, there's this kind of complex thing where it's like, you know, you're not gonna make anything when I file a return. nobody wins there except really the government. But when it comes to advisory, what that is, is it's proactive tax planning. Cause there's a lot like you have to take the law to find the strategies and then you have to bookend it with the strategies, right? Or with the law. Because if you do one without the other, you end up in a bad situation. So compliance, filing and that type of thing, that is making sure that you're compliant and that you're not going to get in trouble with the IRS. That's really what they care about. What I really am passionate about is helping business owners like look at the law and say, okay, here's what's going on in my business, my family, my situation. You know, what opportunities do I have to capitalize on what the law is and apply it so I can save more in taxes? Joe Abreu - GLOVISOR.com: it seems really daunting, especially if you're starting a business and all of a sudden they're telling you that you have to file this and you have to file that, and then it'll be a nightmare even if you start crossing state lines, and then you have to file in different states. Is there an easy way to remember what you have to do? Hava Laudon: I think work with the right professional. but one of the things that especially with really new business owners, I think one of the things that absolutely blindsides them is that self employment tax. Because if if they've been a W two earner, you know, at number one, their portion of FICA has been like coming out of their paycheck, which is seven point two ish percent, right? But the other part is their employer's been paying the other half. And so when you go into business for yourself, and especially like you're not withholding all year, maybe it's your first year, or maybe this is the first year that you really made a lot of money. And then all of a sudden, I can't tell you how many returns I filed where the majority was that self employment tax, because you take your net profit and you times it by fifteen point three percent before you do federal, before you do state, before you do local, if you have those things. And so sometimes Oftentimes, especially with small businesses, that is the biggest tax. And so a lot of bit small business owners are blindsided by that. And it's something that, A, when you get to a certain point, there's things that can be done to mitigate that, but B, you do need to be planning for it. Joe Abreu - GLOVISOR.com: some individuals started off in their own name, right? Small business, you know, I'm Joe and I'm providing services. And at some point I have to make a decision. When do I go to the LLC? When do I go to the S-corp? Is there a dollar amount that you professionals have in mind where it would be the next step or next stage? Hava Laudon: This question because I find that business owners are very confused by this topic, right? So I want to first start by saying that anybody can do business in their own name with their own social security number. You can then become an LLC and get an EIN. That has no tax implications in its in and of itself. That's more of a legal structure. And I just want to, I'm not a lawyer and I don't give legal advice, but I do want to throw out there that I see sometimes people putting more weight on the protection of those three letters behind their business name than they should. That is absolutely a part of it. And I'm not disregarding I I think I think it's a great way to go again. That's not legal advice. But I think people need to understand that does zero for their taxes. On their tax return, they're still taxes though they're a sole proprietor. Now an S-core is a tax election. So that takes an ex typically an existing, you know, it can be done in conjunction with forming a new LLC. But it takes typically an existing LLC and say, okay, we want to be taxed as an S-core election, you know, do an S-Corps election, so we're taxed that way. Now, the thing about the S Corps election is kind of coming back to what I mentioned earlier about the 15.3%. Instead of like you just like, okay, let's say, let's just use really simple numbers. Let's say you grossed 20 grand and you netted 10. And but and I just want to insert this too. This is another mistake I'm seeing is. Business owners will look at their gross and not their net. The net is really, you know, what I mean, both numbers matter, right? But like let's say you netted, so that's what you're going to be taxed on. You know, you grow your gross minus expenses minus everything that comes out, and then your net. That's what that 15.3% is on. Now, if you make an S Corp election, you are mandated to go on payroll yourself. Now you're an employee of your own business. So you're paying that FICA, you're paying federal, you're withholding that as it's coming out of your check. But what happens is now it doesn't have to be the entire net of the business that gets taxed that way. It's what's coming out of your check. So the additional profit from the business that does not it's not subject to that 15.3%. So it can be a massive savings. However, I do like to be very clear that it does come with additional requirements. It comes with its own tax return. It comes with monthly or quarter, whatever payroll file, you know, there's stuff to it, right? And so I think we had chatted about this earlier. I think that between 50 and 100 grand is often the most painful like portion in an entrepreneur's life. Because once you cross that 50 grand net, and I'm talking net here. That the the on the FICA self employment task is really high. Like it can really, you know, side blindside you. But then it's like it becomes a trade off. Like, do I invest in like what it takes to go into an S Cor and like set all that up and maintain it and stuff like that? And different tax advisors like have very different. I mean, some will say 40, some will say 60, some will say a hundred, you know. One of the things that I look very heavily at for a business owner is what is their trajectory? Right, because there's there's two parts to it. There's the initial setup that you're going to pay for, but then there's ongoing maintenance. So if your trajectory is good, I might say, you know, let's do it a little early because bite the bullet now or later. It, you know, it doesn't, it might be a washout this new year, but next year it's gonna be great, you know. But if you're kind of up and down, I might say wait a little bit until you stabilize. The first thing is to get that cash flowing. And then was that cash flowing though? Don't forget to go back and look at what you need to do to capitalize on it. Joe Abreu - GLOVISOR.com: one thing that came to mind right now is that I've heard from some of the business owners that it really you have to net over a hundred thousand to have a tax professional really get involved. Otherwise, maybe I can go to one of those franchise locations and just have them help me. what do you say about that? Hava Laudon: Well, I I'm probably a little bit unusual in my field from the vantage point of like just inherently I think it's sad that people have to pay somebody to tell them how much they owe. Like that whole scenario is just just a difficult one. So I'd never begrudge someone who's like self-filing or you know, finding an inexpensive way. Again, the first thing you wanna do when you start a business, aside from like making sure you're set up safely, you know, but is to get that net see that net growing, right? And so if you do what you gotta do, as long as you're compliant, you know, I'm just gonna say do what you gotta do. I would definitely say the closer you get to a hundred grand of net, the easier it is. And the hard truth is the more tax liability you have, and the easier it is to mitigate it. Part of that's just because you have more liquidity, but part of it is just because more things come in. I mean more complications come in as well, right? So that's where you're gonna really see the importance of you know advisory. You're gonna see the ROI. So that part of it, I do like my clients to see ROI. So I'm like straight up with people. one of the things that you know we do for so we do bookkeeping as well. So sometimes what I'll do is I'll with an with a new client, I'll be I'll say, you know, let's let's just start doing your bookkeeping. Let's because that is a an overlooked thing too. You know, the the data from that to grow your business is so critical. So What I'll do for my clients sometimes though is, you know, I I'll just check in on it and then I'll be like, maybe it's time to have this conversation. Like I have we have the October 15th deadline right now. but after that, you know, I have a list of clients that we're gonna have the conversation of what does this look like now for you. So I would say as soon as you can, start working with a tax professional that's at least open to those conversations, even if you're not like in an advisory package immediately, at least like if you possibly can work with someone who's sympathetic and open to it. Joe Abreu - GLOVISOR.com: depending on your training and experience that you have, you may not know some of the deductions that might be available to certain business owners at different levels. So that was one of the reasons I had asked that question. And with that, I wanna ask: what is like one of the most common things that people overlook that they can deduct Hava Laudon: So I'm gonna answer this a little bit different because this is a a con I'm this is more of an uncommon concept that is just grossly, I think, overlooked. And that has to do with the home office deduction. I mean, you're familiar with it, right? The power of the home office deduction is actually not the home office deduction. It's really not that great. I mean, unless you're going to like itemize and you're gonna like throw in depreciation, which can also come into Issues like later on, things you have to look at. you're maxed out at $1,500. And that's not like tax credit. Like that's just like an expense on your profit and loss, you know. And so it's it's not great. But what is great about the home office deduction is having in a home office means that your mileage can c kick in the moment you leave your house. So let me give you a scenario. Let's say you have an office or a place of work, right? But you're going to a conference. And the conference, you know, is fifty miles away, whatever, how or even to the bank. Like let's say it's even to the bank, because the the miles add up, right? By the law, like you need to drive to your office and then start tracking your mileage to the bank or to the conference or wherever you're going. And then essentially when you come back, like to that ending place, that's where your mileage tracking ends, and then you come home. What the home office deduction does is it lets you start tracking for the moment you pull out of your driveway. Now let's not like there's obvious always fine apprentice stuff, right? Like you can't use it for commuting, like just running back and forth to your office. Like you have to have like a legitimate thing you're doing in your office, like I do all my administrative tasks in my office, you know, those types of things. So those are all things that we make sure our clients are aware of. But the office has to be exclusively used for your business, but it can be tiny. Just having that dedicated space. allows you to start that. in many cases the the mileage deduction from when you leave in that is usually the bigger savings. Joe Abreu - GLOVISOR.com: Hmm, that's a great tip. Now, can you share a client case study that really shows some of the work that you've done with someone? Hava Laudon: Yeah. So this actually happened late last year. It was it was very, very late last year. But again, it was a bookkeeping client that her tax accounting firm had just kind of dropped her. So she was like, How am I gonna need you with tax? And I'm like, Well, let's let's look at your situation here, you know? So netting about 130 grand for 2025. And this is where she didn't have an escort election. And In some cases you can do a late one. Typically, you know, you wanna do that election between January first and March fifteenth. But this was at the end of the year and she qualified for that late election. And so we did it at the very end of the year and saved her about fourteen grand in taxes. Joe Abreu - GLOVISOR.com: a win. Hava Laudon: Hundred percent, yeah. So on our website, mantletax.com, you know, like we have a it kind of asks you what you're looking for. Because we do some representation too, like sometimes when people are in trouble or like back taxes, those types of things. So if if that's what it is, you know, I'm gonna say book a call, let's talk about what's going on, let's see if we can help. if you're just needing filing, we we are still doing that. Like I say for those like lower, you know, new business owners, the first couple of years it might make sense. But For an ideal advisory client, I'm going to say, let's do a mantle blueprint. The mantle blueprint l takes and like maps out your whole situation. Cause this is one of the the issues that I'm seeing is disconnection, like through strategies and through like even professionals, right? I think we talked about this a little bit earlier where like, you know, you have a lawyer, you have a financial advisor, you need them. I'm not playing either one of those, right? But nobody's just like saying, okay, what all do you have going on? And as a person, you probably a lot of people wear multiple hats. You could be a business owner, you could also have a W-2 job. Maybe your wife does, maybe you're married, maybe maybe your dad, a husband. Like all of those different things, when you look at the whole picture together, can create opportunities for strategies if you interlock them correctly. So the first thing I like to do is get that all mapped out. Like what is going on in your life? What are your goals? What are your values? Let's take a look at what exists right now. and then I also do like to have some conversations like in that process with have you talked to your lawyer about this? You know, have you considered this with your financial advisors? Cause those things are so closely connected when you're building wealth. Tax is a is the nexus that all of that connects to. So we are a great place to start, but you need to have that coordination with others. so usually the mantle blueprint is a great place to start. And then after we see what all is going on. Then we in make an individual plan based on your situation and what we can do for you. Joe Abreu - GLOVISOR.com: is there a takeaway that you want our listeners to remember from this conversation? Hava Laudon: Yeah, I I think the takeaway, the really important thing is again, as business owners, we can get so lost in just like what we're actually doing to produce money, right? in that sweat equity portion of it, whether for you it is actually physical or mental or whatever, I'm just gonna use the word sweat equity, that we can think that sweat equity is the only way to make money in our business. But the smart business owners, they actually use money to make money. So we're talking about working smarter and less hard, you know, kind of bringing down some of that sweat. And so it again, you have to work hard. Look, I'm a business owner. None of us are going to get a away from that probably and be successful. But I want business owners not to forget that there's this whole other piece that actually makes you money, saves you money, you know, and so that you don't actually have to work as hard if you do it right. Joe Abreu - GLOVISOR.com: That's a great takeaway. Now, where can people connect with you online and find out more about your work and continue this conversation? Hava Laudon: So mantletax.com is our website, a lot of information on there, c connection forms, there's even a calendar on there. you can also follow me on Facebook, LinkedIn, Instagram, Hava Louden. It's H A V A L A U D O N. Joe Abreu - GLOVISOR.com: Hava thank you so much for joining us. We really appreciate your time. Hava Laudon: I enjoyed talking with you, Joe. Joe Abreu - GLOVISOR.com: Thank you. Thanks everyone for listening. If this episode inspired you, make sure you share it with someone who needs it. And don't forget to follow the Glovisor Podcast for more conversations that make an impact. Till the next time.