There’s a huge difference between a CPA who fills in the right boxes with the right numbers (tax preparer) and a CPA who helps you strategically plan how to alter those numbers so you don’t pay more tax than you should. Which do you have?
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Hey everybody, Drew McLellan here from Agency Management Institute, this week, coming to you from Richmond, Virginia. I've got a simple litmus test for you that will help you determine whether or not you have a tax preparer, somebody who just checks boxes and fills in numbers, but doesn't really help you think about mitigating or managing your taxes, or a tax strategist. Really simple way to know. If your tax preparer or your tax consultant doesn't have you take full advantage of the Augusta Rule, then you have a tax preparer. You have somebody who is not thinking about your taxes, is not trying to save you money, is not trying to help you manage all of the income coming in from whatever sources you have coming in from, from hitting your bottom-line personally and having you pay tax and influence your tax rate. If you're not taking advantage of the Augusta Rule, you need a new tax preparer. So, here's the Augusta Rule, just very quickly, and I've done a video on this before. But the Augusta Rule, basically, was created in Augusta, Georgia when people there wanted to rent their house during the Masters Tournament, but they didn't want to pay tax on the income that they made when they rented their home. So, clearly, somebody there had some influence, because there's a piece of tax code that is specifically about renting your home for business purposes that is nicknamed the "Augusta Rule". And what the August Rule says is that any person can rent their home for up to 14 days to a business, not necessarily your own business, but it can be your own business, for up to 14 days and not claim that income on their taxes. So, if you have a team meeting at your house, if you host a client dinner, if you use your home for a photo shoot, any of those kinds of things qualify for the Augusta Rule. So, obviously, what you want to do is you want to have your team over about once a month or you want to do something that uses your home, and then you can charge yourself a daily rental rate for your home. It's a deduction to your business and it's personal income to you, so you're taking money out of the business, you're moving it into your pocket. But, thanks to this rule, you are not having to declare that income or pay tax on it. So, the way you figure out how much rent you can charge is, you call around to three or four hotels in your local area. You ask them what a day rental for a meeting space would be and what their food and beverage minimum is. And there you go! That is your daily rental rate for your home. So, $2,000, $3,000, whatever it may be, and you just literally cut yourself a check from the company for the 14 days. Now, obviously, you're going to have to document when those 14 days are and what you used them for. So, again, team meeting, brainstorming meeting, a client meal, client stayed overnight, however you might use your home, and you want to max it out at 14 days. But the point of this video is this: you don't have to do anything, there's no complicated form, there's no income qualifications, everybody who owns an agency should be using the Augusta Rule. And if your tax person hasn't told you about it and isn't suggesting you do it, then I promise you, there are all kinds of other things that they're leaving on the table, and you are paying too much in taxes. All right? Hopefully, that's helpful. This is a perfect time of year, now that we've just all filed our taxes, perfect time of year to go shopping for a new one if you need one. But make sure that you choose a tax strategist, somebody who wants to meet with you monthly or quarterly and is really putting together and preparing a strategy that's going to mitigate your risk. Okay? I'll see you next week.