Don't use TurboTax or a CPA...hire a Tax Strategist instead. Here's why...

are you a small business owner and you're kind of wondering when should i take that leap to sort of hire a cpa you know should i stick with turbo tax should i hire a tax preparer should i work with a cpa should i hire one of these tax strategists what do they do right so in this video i'm gonna attempt to explain this to you guys right so i encourage you to stick around because i'm going to really show you some eye opening stuff and to an extent expose some of those you know secrets in the tax prep industry that you may not be aware of right so what i mean by that is like you're gonna learn like the type of individual and the type of practices that sort of take place with these various types of services so like i said i'm talking about the sort of the the person that has a tax preparation business a cpa and a tax strategist and how much these services are costing you as well as how much it's really saving you in taxes right so if it's your first time watching my name is navi mirage i'm a cpa that teaches tax strategies and i share them all over social media so if you're into that sort of thing please consider subscribing so in this video i'm gonna be sort of the tax strategist meaning like i am the tax strategist in this video when we get to that area okay so that's how i help my clients but i'm gonna do my best to be neutral and objective and just give you the truth about how all this stuff works so how i've decided to present this to you is i'm gonna assume that you have a business that earns a hundred thousand dollars in profit and i'm gonna explain the cost of doing you know tax prep uh by yourself um using like a service like turbo tax or the strategies that a tax preparer might introduce to you or what a cpa may do differently than a tax preparer and i'll be able to show you what the cost of these services generally are as well as how much they can save you in taxes so if you're wondering like you know should you make that leap into the next sort of tier of tax professional you know watch this video i think you're going to learn it a lot so i'm going to share my screen and start with turbo tax all right so if you're not from and i'm just picking on turbo tax here it could be any sort of self-prep tax prep service okay so how turbo tax cuts kind of works is like they guide you by asking questions and based on how you respond to this question the software puts the numbers where they belong the problem with this approach right is sometimes you don't quite understand the question right and i don't expect you to you're just trying to run your business and make money right and so you may answer that question incorrectly so ultimately that number goes in the incorrect place right and when you use a service like turbo tax don't expect to get asked questions you know related to tax strategies right in other words they aren't going to advise you on when to be taxed as an s-corporation and how much to pay yourself and you know hey do you think about hiring your minor children you mentioned you have minor children when we're going through the tax prep guided questions things like that they're just not going to do that they're just trying to get the numbers you give them in the right box all right so the cost of a service like this is going to range it's probably anywhere between about 120 to 175 dollars depending on how your business is taxed right and so again assuming that you have a profit in your business of a hundred grand then you're probably just gonna answer the questions and when you complete this it's gonna say hey you owe social security and medicare taxes of around fifteen thousand because social security and medicare taxes are about fifteen point three percent so i'm just rounding down to fifteen thousand and you know where you can see here where it says federal income tax um i'm assuming that you're in sort of a 15 effective tax rate you may not know what that means that just means like not all 100 000 dollars is gonna be taxed right you're gonna take the standard deduction uh you might have some tax uh some of your profits tax at 10 some at 15 some at 20 and so anyway the effective tax rate is 15 so that math is easy right 15 000 in federal income tax so your total tax owed here is going to be 30 grand between social security taxes medicare taxes and income tax you might even have estate tax right as well so that's not even figured in here additional administrative costs well that's not really going to apply if you're using turbo tax because turbo tax is just going to charge you the cost of sort of their software all right so that's what you're getting your total cost is your tax owed plus the cost of the tax rep software which is 30 120 dollars but what about you know going up that next tier in service right so what about hiring a tax preparer right in my opinion a tax preparer is basically a human version of turbo tax okay so what i mean by that is like a tax preparer is really going to ask you probing questions to find out about your business okay usually they just ask you for your income and expense information and based on what you provide they put the numbers in the correct line and check the correct boxes for you so they might be a slight step up from turbo tax meaning like hey if you don't understand the guided question that was getting asked via turbo tax at least here you have a human you can call or talk to to make sure that you know whatever numbers you give them kind of end up in the proper spot right um but in reality these folks that kind of run this tax preparation business they're really simply just a document preparation service all right and they um not to criticize them too much but they often make mistakes or they just don't know how to do certain things properly so the mistakes are usually made with the best intentions by the way but really you should know who these people are the tax preparer type business is sort of that business that's on the corner of a business plaza they may not be there uh 365 days a year right they may just kind of open up open up this pop-up location during tax time they crunch out all these tax returns they close up shop and maybe they have a regular day job during the regular part of the year um or maybe they are there 24 7 because tax season can run from you know about uh february through october or so all right but expect to pay as it relates to the tax preparation um service expect to pay sorry excuse me one second here let me just show you the visuals here that we have but expect to pay around 400 for this type of service all right so what are you going to pay in terms of tax prep well again they're not implementing strategy so you're probably gonna save the same amount in social security and medicare tax but i'm gonna assume that they found a thousand dollars in additional you know deductions that you didn't sort of come up on your own with when you were using turbo tax right so you're going to pay 14 769 dollars in federal income tax so your total tax owed is 29 769 you didn't have really any additional administrative costs when you go this route and so now your total cost is actually thirty thousand one hundred and sixty nine dollars it's actually forty nine dollars more than using turbo tax because yes they found you a thousand dollars in uh additional tax deductions but they charge you a bit more and that amount that they charge you is not enough to uh compensate or the amount that they found you in additional deductions is not enough to compensate for their fee right so if you use a tax preparer you probably feel better about it right you feel better than the situation when you use turbo tax because a real human helped you right and a real tax preparer helped you prepare your tax returns right from here in my opinion probably the next sort of tier up or the next step up would be working with an actual cpa or another type of licensed professional so there are many different types of cpas out there and they all specialize in different things but for the purposes of this video let's just assume that you've got a cpa that decides to work with small business owners and they kind of specialize in tax and accounting now to become a cpa there are a ton of educational requirements and honestly some pretty challenging testing that takes place in order to qualify additionally even if you you know have sort of this bachelor's degree or even a master's degree because that's just the you know amount of credits that you need to sit for the cpa exam requires you to get that type of education even if you have that you still have to pass all those tests and even if you do that um you need to then work under a licensed cpa and they're sort of going to sign off on the fact that okay now this person yes they have the education they have the lice sorry they sat for the cpa exams they passed their exams and i've worked with them for a year and you know they know enough to sort of be a cpa now right the reason why i'm taking the time to mention all this is because because of that you know rigorous process that they went through to become a cpa their sort of reputation and license is on the line and so they don't really like to put that at risk for any particular reason um you know in other words you know saying that a different way is you know they're probably not gonna be the person that's telling you it's okay to you know deduct your veterinarian expenses because you know your dog is uh the security for your home office right you know it's likely not a strategy they're gonna talk to you about or approve of it and neither am i by the way that that's just something i kind of made up but um so the bottom line is you know they're gonna tell you if if you can't deduct something they are more than likely to call you out on that and at least educate you on why you can't based on the way the tax laws written or revenue rulings or or cases that have come out that kind of talk about what you're doing and why it's not proper okay now the cost for uh a cpa to prepare your taxes is gonna fluctuate right so let me kind of just show you those various um costs so i'm gonna put this at 650 this could be a little bit more it could be 750 or 800 you know um but here i'm gonna assume the following i'm gonna assume that your taxes owed for social security and medicare taxes is around nine thousand dollars right i'm assuming that they also too found the thousand dollars more in deductions that the tax preparer found for you um and they also informed you hey did you know you can contribute to an ira so you can you know put six thousand dollars and get a tax deduction for it and the reason why there's a difference between social security and medicare tax here is because i'm gonna also assume that they said hey maybe you shouldn't be taxed as a sole proprietor anymore you should probably make that leap and be taxed as an s corporation and so there's some tax savings related to the social security and medicare taxes all right so your total tax owed is 22 thousand uh 22 848 again this is assuming you're now an s corp you're implementing that strategy and you uh contributed to an ira um and again you had a thousand dollars more in deductions that turbo tax didn't get you right so there's gonna be some administrative costs associated with this right if you're an s corp you're probably at that point want to have a payroll service want to have bookkeeping software and um you know might have annual costs associated with um filing reports for your llc or corporation whatever you decided to uh form when you elected to be uh ns corporation all right so um at this point your total sort of cost if you will is twenty three thousand four hundred ninety eight dollars so this is great right your savings over using turbo tax is six thousand six hundred twenty two dollars and your savings over using like your regular tax preparer is six thousand six hundred and seventy one dollars so this is great right now you're really feeling good right you got a cpa doing your tax returns you're sleeping good you got no stress you're not worried about an audit so much and you save sixty six hundred dollars in taxes you know nice this is perfect um but i'm here to tell you that you can do even more than that right so let's talk about what it might look like working with a uh tax strategist so i'll kind of show you these numbers now right so they're going to charge you more for their services so let's talk about the tax strategist a little bit more um so you could get lucky in the sense that you know your cpa is also a tax strategist but you know i don't want to downplay some of the other folks out there you can have what's called an enrolled agent implementing these strategies or you could find a really savvy tax preparer maybe they're not licensed maybe they don't have a cpa license but they've studied under one they've read books and they're aware of all these various tax strategies right so i don't want you to think that only cpas can then take the next leap into tax strategies tax strategist is really not an official title right but basically this is someone who is proactive in nature when i say proactive i mean they're gonna ask you hey why are you paying yourself such a high salary why aren't you paying your children if they're sort of involved in your business or how can you get them involved in your business to pay them why aren't your medical insurance premiums incorporated in your payroll to save money on social security and medicare taxes also what about a health savings account do you have that and if so why is it to not incorporate in your payroll um these are actually tax strategies that you need to implement and honestly i see regular cpas making these mistakes all the time so this person not only knows about the strategies but also knows how to implement all of them properly because there are definitely rules around how all this stuff sort of works and how you got to tie it all together right so the cost you know this is probably gonna vary but you know anywhere from eight hundred to twelve hundred dollars i'm gonna put a grand let's let's say a thousand dollars is how much they're gonna cost you or charge you to prepare their taxes right well compare that to your taxes owed so now you owe 4 650 in taxes in between you know when i mean taxes i'm saying social security and medicare taxes so why is it so much lower than working with the cpa well the cpa probably had a pretty high salary number that they were telling you to go with the tax strategist has kind of studied this a little bit more and knows that you could pay yourself less additionally you know assuming that you've got medical premiums of 600 a month and you contributed 3 600 for the year in an hsa then there's ways to implement that strategy into your payroll and so you're going to pay less social security and medicare taxes right so you're paying 4 fifty dollars now your federal income tax is ten thousand six hundred and seventy six dollars right so why is that a lot lower well now you're implementing the strategy of hiring your children right and let's also assume too that you're now instead of just using an ira that can save you you know or give you a six thousand dollar tax deduction let's say you're gonna contribute ten thousand dollars towards your retirement all right so the total tax owed now is fifteen thousand three hundred and twenty six dollars all right again you have those administrative costs right you've got the tax prep costs and the bookkeeping software the payroll software and the cost of having your llc for example but your total cost is still seventeen thousand eight hundred and twenty six dollars right this is twelve thousand two hundred and ninety four dollars less than turbo tax was and five thousand let's just round it five thousand six hundred dollars less than using a regular cpa someone who you thought was going to save you the most amount of taxes right so how are you feeling now knowing that you could be working with a tax strategist and that tax letter just saved you over 12 grand in taxes right these aren't tax deductions this is actual money that you don't have to send to the irs and you kept it in your pocket right now i know what you might be thinking some of you are probably thinking well navi i don't have all that extra money to pay my children and and and contribute to an hsa well let me ask you aren't those same kids costing you you know 500 bucks a month between you know clothing and food and this and that right you were giving them them the money anyway but now uh they're earning it they're working in the business they're earning it and you're going to receive a tax deduction for it so it's not like you're not you're out this 500 a month that you decide to pay them right it's no they're earning it your business is paying them and then you're going to use they're going to use that same money to pay for those expenses that they have the hsa you know you probably have some medical expenses right so you're going to put let's say 3 500 in there for the year assuming you're single if you're if you're married you can do over seven grand um so you know that same money yes you put it in an hsa but then you could take it right out and pay for your medical bills and so it's not really costing anything to have it right what about the ten thousand dollars that you said i was going to put in my solo 401k navi i don't have ten thousand dollars laying around well yes you do because i just created it for you right i saved you over twelve thousand dollars in taxes or your other you know the tax strategists you're working with save you over 12 grand in taxes so you do have the money to save for your retirement right you have this okay so listen i like i said i just wanted to create this video to kind of show you you know stop worrying about the cost of a tax strategist being a thousand dollars or these additional administrative costs that you might incur because you really need to be focusing on the savings right the savings is seventeen thousand eight hundred and twenty six dollars um or i should say this the the savings is the difference between um you know working with uh a tax strategist and turbo tax is going to be around 12 grand right so um i i hope this was insightful you can understand like hey i don't want to use turbotax anymore i don't even want to work with a tax preparer down the street and quite frankly i better find a cpa or another tax professional that's more of a tax strategist because if i make the mistake of working with a cpa who's very you know muted in their tax strategies well then i can still be overpaying by fifty six hundred dollars a year every year that my business is in place right so um if you wanna learn more about this sort of stuff you can visit my website it's navi miragecpa.com and um on there you could see all different types of things so all of my videos are on there i've got tools on there that you can download for free to sort of manage your income and expense detail throughout the year but it'll even show you if you use that tool properly it's got some deductions for home office cell phone internet and your auto if you're if you're driving around for your business you can go to my website and even form your business for free so if you learn about the s corp today you can go on there form your llc for completely free and there's even a course on there so if you would like to you could go there register for the course that course is going to teach you all of these strategies that i implement with my clients i don't leave anything out you can learn all of them uh if the co if the course um is something that resonates with you that's something you want to do you can court sort of not work with the tax rather just become your own tax strategist and implement the strategies all right so coming up soon here if you're watching on youtube are some other videos that i can recommend watching after you know watching the content of this video and with that said i'll see you in the next one

Channel: Navi Maraj, CPA

Views: 10,466

Keywords: TurboTax, CPA, Tax Strategist, Tax Preparer, Hire a CPA

Id: KGrgKg42Dnw

Length: 21min 27sec (1287 seconds)

Published: Thu Mar 03 2022