74: Taxes & Accounting
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Welcome to Under the Radar,
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a show about independent iOS app development.
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I'm Mark Orment.
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- And I'm David Smith.
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Under the Radar is never longer than 30 minutes,
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so let's get started.
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So today, as the specter of April 15th rolls around,
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we thought it would be a delightful topic
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to dive into some accounting and tax discussion.
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- Everyone's favorite topics.
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- Everybody's favorite topic.
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I mean, you know, and if you don't like it,
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you can just put this on and it'll help you fall asleep.
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It'll be a nice sleep aid for you.
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- You gotta fall asleep quickly though.
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It's only 30 minutes.
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So, probably worth,
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as many of you dive into topics like this,
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it always seems like it's a good idea
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to have a brief disclaimer that neither Marco or I
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are accountants, tax lawyers.
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- Any kind of lawyer, really.
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- Any kind of professional qualified advice.
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- We have no idea what we're talking about.
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- Basically.
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But we have some experience,
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and I think what I'm gonna hopefully,
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I think makes sense for us to emphasize
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isn't so much to give specific advice about,
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these are the four things that you should do.
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There's a few things that I think universally
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like are good advice, but more is to say,
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here's the kind of questions you should be asking
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when you're setting up your business,
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when you're looking at your business
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and seeing if it's set up correctly.
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These are the kinds of questions to ask,
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and then if you don't have a good answer for them,
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go and find help.
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Either research yourself, get professional advice,
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however that makes sense for you,
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but these are the kinds of things
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you should be thinking about
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from the accounting and tax side
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of setting up a small independent software business.
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And my number one piece of advice
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that I wanted to start with is,
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goes all the way back, I mean,
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I set up my first LLC almost 10 years ago, I think it is.
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And the thing that I did back then
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that I was very glad that I did,
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and the advice I'd give to anyone starting out now,
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is that it's very important
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that you understand what you're doing.
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And if you can't, if you can't work out
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what you should be doing,
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then you need to pay someone to explain it to you,
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because it's very easy to kind of just make a few guesses
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or read a few articles online
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and then just kind of go for it.
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But if you do that, take that approach
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of just kind of winging it,
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you can be setting yourself up down the road
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for some very big problems,
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both in legal problems, financial problems,
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like there's lots of things that can come out of this.
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And what you don't wanna ever do,
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you know, like I just recently got my big stack
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of paperwork from my accountant.
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So I use a qualified CPA to do my books,
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'cause it makes it much easier.
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When she sends that back to me, I go through it,
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and I know enough about all the various taxes,
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all the various deductions and exemptions
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and credits and things,
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that I can go through it and it makes sense to me.
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I can read it with some competence.
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And that has come from, I've sat down
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and I've read through IRS publications and documentation
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and things that, you know,
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if I was just trusting someone else
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to always be giving me good advice,
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I would be setting myself up, you know,
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for potential problems down the road.
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Because at the end of the day,
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I need to sign my name on the bottom of this document
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and just, you know, send it to a government entity.
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And I'm affirming that everything in there is correct,
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that I agree with it, that I'm okay with it.
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Because what you'll find in a lot of things in accounting
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and taxes, you know, sort of the interplay between them,
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is accountants use terms like conservative versus aggressive.
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Right, there's a lot of deductions or games you can play
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where, you know, you get into gray areas,
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and it's like, does this really count as a business expense
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or does it not, you know, it depends on who you ask.
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And ultimately, you know, those are personal decisions
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that you have to make.
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But if you don't understand the law
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or you don't understand the policies,
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you can't be making those choices in an informed way.
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And your accountant might be making choices
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that you would disagree with that could come back to bite you.
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And so the most important thing, I think, with accounting,
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even though it's out of our comfort zone,
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even though it's not something that I think most developers,
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you know, have a lot of expertise or talent in,
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it's important to at least at a basic level
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understand what you're doing.
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And if your accountant is coming to you
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with some very complicated, sophisticated thing,
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and you don't understand it, it's probably, in my opinion,
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not a great idea to pursue something like that.
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It's like, if you can't understand it,
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it's probably not worth doing.
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And like I said, if you can't understand it,
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if you're having difficulty wrapping things around,
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you know, pay for someone to explain it to you,
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you know, talk to your accountant.
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Like I've, you know, I don't do it as much now,
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but in the early days when I had an accountant,
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I would, you know, every year or every quarter
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when we would sit down,
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I asked her all kinds of questions about things.
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You know, what is this, what are we doing over here?
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Like, what does this deduction mean?
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Or, oh, you know, you said, if I do this kind of thing,
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then I can take this other benefit
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or like making sure that I really understand it.
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And I think that is in general, just good advice,
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that getting good help, you know,
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finding a good accountant in terms of some of this stuff,
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you might need a lawyer for, you know,
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setting up different business entities.
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And I mean, that's a whole massive topic
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that is so specific to your region, to your state.
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Like I live in Virginia, Marco, you live in New York.
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Like I imagine even with state to state,
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some of the laws are different.
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So you're going to find somebody who is local,
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who's knowledgeable, and ideally has some experience
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working with very small businesses.
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- Yeah, and I would say too, like,
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in the area of like making sure you understand it
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and, you know, getting good advice from a professional,
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I would say a little goes a long way.
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Like you don't need to spend a lot of money
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taking up a lot of someone else's time
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to get a good enough understanding of this
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to continue operating your business
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or to start operating your business.
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Like, you know, I've also been running LLCs now
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for about 10 years, something like that.
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And, you know, at first it was very intimidating.
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I didn't know what I was doing.
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It seemed like such a big deal to, quote,
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start your own business.
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And that seemed like an impossible thing
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that only other people do.
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That's not the kind of thing I do.
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I'm just a person.
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I don't know how to do that.
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Other people do that, I guess.
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And it only took, you know,
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a sitting down with a lawyer for like one hour
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who I haven't seen in 10 years.
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So like it was like one meeting with a lawyer.
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I'd be like, how do I do this?
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And then he gave me an accountant that he worked with
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and now I go to that accountant a few times a year.
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And I've asked a couple of questions here and there.
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But for the most part, if you set it up in certain ways,
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like in the US, for example,
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if you do like a basic pass through LLC,
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which is probably what most developers would do
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or would be advised to do,
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rather than, you know, various corporation forms,
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it's really easy.
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You don't have to do that much.
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And you basically get to just go back
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to doing your business as long as you follow
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a few very simple guidelines
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and we're gonna go through what some of those are.
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Again, you should definitely talk to somebody
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who has the authority to tell you this, not us.
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I think we will simply serve as pointers for like,
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here's the types of things you should be thinking about
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and the types of things that you should ask
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your accountant/lawyer about.
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But it really is, if you make it so,
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it is really a lot easier than you might think.
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If you've never set up a business entity
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or a bank account or business accounting before,
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it can be very easy.
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And you probably won't have to be constantly meeting
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with lawyers and accountants and burning all that money
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It's probably a lot simpler than you think.
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- Yeah, and I think too, it's probably worth saying,
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in the way that we also talk often on the show
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about structuring your products or structuring the apps
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or the businesses that you pursue
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to minimize the amount of inputs
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that you have to put into them
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and the amount of maintenance they take
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and that type of a topic,
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that if you're a small developer,
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you don't have, resources or not, in terms of time,
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is not something that you have a lot of.
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It's in the same way, I think, in this sense,
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that it is important to structure things
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proactively at the beginning to take less maintenance.
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And when you're talking to, say you go to see a lawyer
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to help you set up your business in the first place,
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it's like being upfront about that
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is probably something that is worth being explicit
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and saying, 'cause they're gonna ask you
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all kinds of crazy questions about,
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well, if you set it up in this particular way,
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if you're an S corp, Texas, a C corporation,
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or you get this benefit,
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'cause then you can have this thing,
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and it's like, if one of the biggest things
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that they're optimizing for is your time,
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they're going to probably steer you in a different way.
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And you may potentially be giving up
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on some theoretical deduction
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or some benefit that you may have theoretically,
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but in practice, I think,
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you're gonna enjoy your life a lot more
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with a business that is designed to optimize
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for the lowest maintenance possible.
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And so having something that basically,
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my business entity's maintenance is,
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I think I write a check to the state corporation commission
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every, for $50 once a year.
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And that is the extent of the paperwork that I have to do.
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There's no board meetings I have to run
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or all this kind of stuff
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that you can sometimes have to get into,
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because I chose the approach that was minimizing
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the amount of time and maintenance going forward.
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And so when you're getting a setup,
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when you're getting advice,
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be sure that you're explicit about that,
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if that's important to you.
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If you wanna just go crazy and optimize
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for every possible deduction or benefit that you might get,
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like, great, that's, by all means, go crazy.
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But it may mean that you're doing all this busy work
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down the road that isn't core to your business,
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that isn't actually the thing that you want to be doing.
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- Right, I think those kind of strategies
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of taking every possible deduction
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and having a more complicated corporate structure
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to get certain rates lower and everything else,
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I think that makes more sense
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the bigger of a company you are,
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because the overhead of doing that,
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as you're a bigger and bigger company
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with more and more people involved,
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the overhead in doing that becomes a smaller percentage
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of your total time output that you have.
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And also, I think it matters more
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if you're in a really low margin business,
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where saving every possible penny in tax liability and stuff
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can have a major impact on whether your business
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is profitable or not and how much it's profitable.
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But for individual software developers,
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that's almost never the case.
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Both of those are usually not true.
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Usually it's just you or maybe you and a partner or two,
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it's usually a very small group of people.
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And also, you usually have a pretty large profit margin.
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Like, either you're making it or you're not.
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And if you're not, you know, the extra, like, 15%
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from a tax change might not help you.
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And if you are making it, you probably have more room
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to play with in the profit margin.
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So, like, optimizing for your time, as you said, David,
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like, you know, optimizing for needing as little
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from you as possible, keeping things as simple
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from you as possible, so that you can actually spend
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your time improving your products and making more money,
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is usually the better trade-off for most small developers.
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And so I think probably the next place that it works,
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makes sense to dive into, is a little bit of just
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some high-level advice, things that I know have been
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very helpful for me from an accounting perspective.
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And the first one, and this is, I think,
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the most universally accepted, like, good advice
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for starting a business, is that your business needs
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to have separate accounts from your personal accounts.
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- Like, if you do nothing else, like, that will almost,
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like, that solves, like, half the problems in accounting.
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- Oh, at least.
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- That's like 90% of what you have to do.
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Just have separate accounts.
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- Yeah, and so I think for most, for most kind of businesses
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like ours, it means you'll probably need to set up
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a checking account and a credit card,
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are probably the two things that you'll kind of
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need to have set up.
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- I don't even do that, I just do a debit card.
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Like, I just, like, the account comes with a debit card
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from the bank, I just use that and charge everything
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to that, because, again, it's like, trying to keep things
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as simple as possible, I don't even want to worry about,
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like, a business credit card that I have to, you know,
00:12:26
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set up some kind of new auto-pay thing, it's like,
00:12:28
◼
►
no, just use the debit card.
00:12:30
◼
►
Like, again, over time, if I was a big company,
00:12:33
◼
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maybe getting the extra 1% of benefit from having
00:12:36
◼
►
a credit card with some kind of reward system might pay off,
00:12:40
◼
►
but at my scale, it doesn't make sense to make things
00:12:42
◼
►
that complicated.
00:12:43
◼
►
- Perfect, yeah, that's even simpler.
00:12:46
◼
►
So you just need to create an account,
00:12:47
◼
►
and the main reason why you want to create that account
00:12:50
◼
►
is because then your bookkeeping, which is, like,
00:12:53
◼
►
one of these big, remember when I was starting out,
00:12:55
◼
►
with, like, this big scary term for, like,
00:12:56
◼
►
what does that mean, am I need to need, like,
00:12:58
◼
►
double-entry accounting, do I need to balance my checkbook,
00:13:01
◼
►
and all these things that I don't do in my own, like,
00:13:03
◼
►
personal finances very much, it's, like,
00:13:05
◼
►
becomes incredibly straightforward,
00:13:07
◼
►
because essentially, all I'm doing each month,
00:13:09
◼
►
you know, it's like, all of the income are all of the credits
00:13:12
◼
►
to that account, and all of my expenses are all of the debits
00:13:15
◼
►
from that account, and that is my books.
00:13:18
◼
►
Like, the statement I get from my bank each, you know,
00:13:23
◼
►
each month, that is essentially my books,
00:13:25
◼
►
and I take that data and it goes into QuickBooks Online,
00:13:28
◼
►
it's the service that I use,
00:13:29
◼
►
'cause that's what my accountant likes,
00:13:30
◼
►
but it'll ultimately find its way into there
00:13:33
◼
►
for, like, the actual accounting side of things,
00:13:36
◼
►
but it makes everything really straightforward.
00:13:39
◼
►
If all of the money that comes in to the business
00:13:41
◼
►
is going through that account,
00:13:43
◼
►
and all the money that's coming out, you know,
00:13:44
◼
►
all of your business expenses are coming out of there,
00:13:46
◼
►
and if you're not doing this,
00:13:48
◼
►
like, you're just asking for trouble.
00:13:50
◼
►
I mean, you're asking to be audited,
00:13:51
◼
►
and when you are audited, that all of a sudden,
00:13:53
◼
►
everything becomes super problematic,
00:13:56
◼
►
and I'll have a link in the show notes too.
00:13:58
◼
►
There's a great episode of the Free Agents podcast,
00:14:01
◼
►
which is another show here on Real AFM,
00:14:02
◼
►
talking about sort of starting up new businesses,
00:14:04
◼
►
and they had an interview with Andrew Carroll,
00:14:07
◼
►
who's a CPA, and this was his, like, number one advice,
00:14:10
◼
►
was you absolutely have to have separate accounts,
00:14:12
◼
►
and he says, I remember him saying
00:14:14
◼
►
that the biggest benefit of it is
00:14:16
◼
►
it changes the dynamic if you're ever audited.
00:14:18
◼
►
I mean, and hopefully you're never audited,
00:14:20
◼
►
but it's like suddenly, all of your,
00:14:22
◼
►
if you're running any amount of business stuff
00:14:25
◼
►
through your personal accounts,
00:14:26
◼
►
suddenly, now you have to justify
00:14:28
◼
►
every single one of those expenses
00:14:30
◼
►
to prove that they're not personal,
00:14:32
◼
►
because they're intermixed with all your personal things,
00:14:34
◼
►
whereas if your accounts are super clean,
00:14:36
◼
►
and it's just all these very basic, obvious things,
00:14:39
◼
►
then it sort of changes it, and the IRS,
00:14:42
◼
►
or whoever's auditing you,
00:14:44
◼
►
they then sort of in a different way
00:14:46
◼
►
need to prove that that's a personal expense,
00:14:48
◼
►
like it changes the burden of proof a little bit,
00:14:50
◼
►
in a good way, and like, it's in a very,
00:14:51
◼
►
it both makes your life easier,
00:14:53
◼
►
it makes you better in that regard,
00:14:55
◼
►
and so, number one thing, if you're starting a business,
00:14:58
◼
►
it needs to have its own business account,
00:14:59
◼
►
and it's very straightforward and lightweight, typically.
00:15:03
◼
►
I mean, I remember, it's been a long time
00:15:04
◼
►
since I set up my business account,
00:15:06
◼
►
but I basically, you know, once I went through the part
00:15:08
◼
►
of forming the business, and you know,
00:15:10
◼
►
got my LLC number, and my tax identification number,
00:15:13
◼
►
it was basically just a question
00:15:14
◼
►
of going into the bank that I chose,
00:15:16
◼
►
which for convenience is this, you know,
00:15:18
◼
►
the same bank that I bank at personally,
00:15:20
◼
►
and I just like created a free, basic business account,
00:15:23
◼
►
like it's just a checking account,
00:15:24
◼
►
it doesn't do any, you know, there's no,
00:15:25
◼
►
there's nothing fancy about it,
00:15:27
◼
►
and it was just, you know, filling in a few forms,
00:15:29
◼
►
and now I have a checkbook with, you know,
00:15:31
◼
►
my business's name on it, and I can go from there.
00:15:34
◼
►
- I've done this so many times that now,
00:15:36
◼
►
whenever I walk into my bank branch,
00:15:37
◼
►
the account manager is like, hey, start a new business?
00:15:42
◼
►
- I don't know if that's a good thing, but.
00:15:43
◼
►
- Yeah, right, no, I mean like,
00:15:45
◼
►
and I would also say too, like, you know,
00:15:47
◼
►
regarding like your, you know, accounts
00:15:48
◼
►
and personal versus business, you know,
00:15:51
◼
►
regarding what we said earlier about keeping things simple,
00:15:52
◼
►
one of the, one of my flaws I've operated on
00:15:56
◼
►
for the entire time I've been running business accounts is,
00:16:00
◼
►
I, if there's any question about whether something
00:16:03
◼
►
is business or personal, or whether it's mostly business,
00:16:07
◼
►
'cause like, you know, the IRS has all sorts of guidelines
00:16:09
◼
►
and requirements on like, what qualifies
00:16:11
◼
►
for a business deduction, and if it's something
00:16:14
◼
►
that is for both business and personal use,
00:16:17
◼
►
or if it's mixed, like, if you went on a vacation
00:16:20
◼
►
and you happened to talk business with one person
00:16:22
◼
►
while you were there, like, that's a part business trip
00:16:25
◼
►
or something, but my philosophy is always,
00:16:28
◼
►
if there's any ambiguity about whether something
00:16:30
◼
►
is business or personal, just charge it personally
00:16:32
◼
►
and don't deduct it from the business.
00:16:34
◼
►
And again, this is one of those areas where I could
00:16:37
◼
►
very easily take more deductions and keep more money
00:16:41
◼
►
from being taxed, but that would then increase my risk
00:16:46
◼
►
at audit time, and it would also increase the complexity
00:16:50
◼
►
if I ever got audited, and so, the way I do it now,
00:16:53
◼
►
where I don't deduct every possible thing I could,
00:16:57
◼
►
because that's just complicated, and things like,
00:16:59
◼
►
you know, a home office deduction,
00:17:00
◼
►
I don't deduct that either, because the office is mixed use,
00:17:03
◼
►
home office deductions are historically known
00:17:05
◼
►
to be massive audit red flags, because so many people
00:17:08
◼
►
cheat them, you know, cheat their taxes,
00:17:10
◼
►
or don't follow all the rules by using
00:17:12
◼
►
home office deductions, same thing with vehicle deductions,
00:17:15
◼
►
like, I'm a software developer, I don't need
00:17:16
◼
►
to drive anywhere, so there's all sorts of things
00:17:20
◼
►
that a lot of people try to do if they're trying
00:17:22
◼
►
to max out every deduction, but that puts you
00:17:24
◼
►
at a higher risk, and I don't want to live my life
00:17:27
◼
►
in fear of an audit, I know, because of the way I do things,
00:17:31
◼
►
that if I ever get audited, I have nothing to hide,
00:17:35
◼
►
I'm not scared of anything, I'm not ashamed of anything,
00:17:38
◼
►
there's nothing that I hope they don't find,
00:17:40
◼
►
or that would even be vague as to whether
00:17:42
◼
►
it should be deducted or not, as far as I'm concerned,
00:17:44
◼
►
it's like, this is incredibly clean, and like,
00:17:47
◼
►
and you know, there are just certain things
00:17:49
◼
►
that I don't bother, things like, you know,
00:17:51
◼
►
if I go out to lunch with somebody to talk business,
00:17:53
◼
►
I don't deduct that, if I take the train to the city
00:17:55
◼
►
to get a meeting, I don't deduct that,
00:17:56
◼
►
'cause it's like, I'm gonna save like four bucks
00:17:58
◼
►
because of deducting that, and at the risk of what,
00:18:01
◼
►
and at the complexity of what, and so,
00:18:03
◼
►
by doing it the way I do it, the business account
00:18:07
◼
►
has so few transactions, really, like there's so few
00:18:10
◼
►
actual expenses charged to my business,
00:18:13
◼
►
it's basically like, you know, Linode hosting bills
00:18:16
◼
►
every month, and occasionally, like, you know,
00:18:19
◼
►
a domain renewal or an ad I bought somewhere,
00:18:22
◼
►
or something like that, but for the most part,
00:18:25
◼
►
I have so few transactions that everything else
00:18:29
◼
►
becomes easier and cheaper, so accounting is really simple,
00:18:33
◼
►
I don't pay a bookkeeper, I don't have bookkeeping services,
00:18:36
◼
►
I too use QuickBooks Online, which is terrible,
00:18:39
◼
►
but it doesn't matter, it's what everyone uses
00:18:41
◼
►
and it's what the accountants know, and all I do is,
00:18:44
◼
►
my account doesn't even need to log into my account,
00:18:47
◼
►
I just export the reports of the profit and loss statement
00:18:51
◼
►
and give that to him when he has to file taxes,
00:18:52
◼
►
I go in a few times a year and go through all the imported
00:18:57
◼
►
transactions that are automatically imported
00:18:58
◼
►
from my business bank account and just classify them,
00:19:01
◼
►
just, all right, this is this, this is this, you know,
00:19:03
◼
►
and that's all I have to do, so I'm saving tons of money
00:19:07
◼
►
and time and stress by keeping things this simple
00:19:10
◼
►
that I think make up for any possible smaller deductions
00:19:15
◼
►
that I'm missing by doing this this way.
00:19:18
◼
►
- Yeah, and I think too, I remember when I was first
00:19:20
◼
►
getting started, it's easy to kind of have this feeling
00:19:23
◼
►
that like, a business deduction is like,
00:19:26
◼
►
it's like it makes things free or whatever,
00:19:30
◼
►
like, I remember I would have that person,
00:19:31
◼
►
oh, it's like, wow, it's a business expense,
00:19:33
◼
►
and it's like, well, sort of, it's, you save the,
00:19:38
◼
►
whatever your marginal tax rate is on those dollars,
00:19:43
◼
►
which is, you know, so at best, you're maybe,
00:19:46
◼
►
like, lowering your tax bill by a third,
00:19:49
◼
►
or a third of the value, and so, you know,
00:19:52
◼
►
it's a relatively, like you're saying,
00:19:54
◼
►
with like, small expenses, which are the ones
00:19:57
◼
►
that tend to be most questionable,
00:19:59
◼
►
like, a train ticket, right,
00:20:00
◼
►
you buy a $10 train ticket, you're saving $3
00:20:04
◼
►
if that's a business expense, say.
00:20:06
◼
►
I'm like, fair enough, that's $3 in your pocket,
00:20:08
◼
►
like, I'm not saying that's not valuable,
00:20:10
◼
►
but it's not that the entire trip became free,
00:20:15
◼
►
like, you're still paying for the whole trip,
00:20:18
◼
►
and so having that mindset, I think,
00:20:20
◼
►
it definitely makes a lot of sense that,
00:20:22
◼
►
and also probably it's fair to say that you,
00:20:24
◼
►
anything that you do, any deductions that you do take,
00:20:28
◼
►
you then will need to have the means to justify them later,
00:20:33
◼
►
and have a record of that, you know,
00:20:34
◼
►
so for things like Linode bills, like, that's easy,
00:20:36
◼
►
I have, you know, a folder in my email
00:20:39
◼
►
that just has all the Linode bills I've ever gotten,
00:20:42
◼
►
so if I ever need to justify it,
00:20:43
◼
►
and it's a lot easier than, you know,
00:20:45
◼
►
if you are trying to keep, you know,
00:20:48
◼
►
pictures or scans of every receipt
00:20:50
◼
►
for every little thing that you ever did,
00:20:53
◼
►
that becomes a much more complicated thing,
00:20:54
◼
►
and you know, like I said,
00:20:55
◼
►
this is very much just a personal choice.
00:20:57
◼
►
If you like that kind of thing,
00:20:58
◼
►
and you wanna push every little thing, go for it.
00:21:01
◼
►
If you wanna do something simpler, like, that works too,
00:21:03
◼
►
and it's just that balance of your time
00:21:06
◼
►
versus the money, probably.
00:21:07
◼
►
- Yeah, because any time you take all those deductions
00:21:11
◼
►
and make, and basically add more to your system,
00:21:14
◼
►
you need supporting costs around that,
00:21:16
◼
►
you need a way to, you know,
00:21:18
◼
►
save these receipts and track them,
00:21:19
◼
►
you need possibly more bookkeeping expense,
00:21:22
◼
►
you need possibly down the road more time
00:21:24
◼
►
if you ever get audited, you know,
00:21:25
◼
►
like the amount that you're gonna have to pay somebody
00:21:27
◼
►
to go through all this stuff,
00:21:29
◼
►
you might actually wipe out all the savings
00:21:30
◼
►
you had in the meantime if these are all small deductions.
00:21:33
◼
►
Like, you have to account for the costs
00:21:37
◼
►
of even tracking this stuff,
00:21:39
◼
►
and taking the risks on some of these
00:21:40
◼
►
kind of questionable ones.
00:21:41
◼
►
So for me, it's very simple,
00:21:43
◼
►
I just keep everything very simple.
00:21:44
◼
►
I don't, you know, I pay more in tax
00:21:46
◼
►
than I need to technically,
00:21:48
◼
►
but I consider that trade-off worth it
00:21:50
◼
►
for what I'm getting out of it.
00:21:52
◼
►
Anyway, we were sponsored this week by Blue Apron,
00:21:54
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00:21:56
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00:22:01
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00:22:21
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00:22:24
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I've used Blue Apron myself here at home with my wife
00:22:26
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for, oh jeez, a year and a half or something like that now,
00:22:29
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even before they were a sponsor of any of our shows,
00:22:31
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and we just love it so much.
00:22:33
◼
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I love being forced to cook this often.
00:22:36
◼
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It's just wonderful because I've learned so much.
00:22:38
◼
►
We've both become such better cooks,
00:22:40
◼
►
and we try all sorts of crazy new things
00:22:42
◼
►
that we either previously didn't think we'd like
00:22:45
◼
►
or had never even heard of,
00:22:46
◼
►
and we've discovered so many new foods that we just love.
00:22:49
◼
►
So some of the meals this week include
00:22:51
◼
►
sweet and sour salmon with bok choy and ginger fried rice,
00:22:54
◼
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baby broccoli and Fontina paninis
00:22:56
◼
►
with hard-boiled egg and arugula salad,
00:22:58
◼
►
and lemongrass and ginger turkey burgers
00:23:00
◼
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with marinated radishes and roasted sweet potatoes.
00:23:03
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Tell you what, marinated radishes before Blue Apron,
00:23:05
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I would never have eaten that.
00:23:07
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That would sound crazy to me.
00:23:08
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They're really good and super easy to make,
00:23:10
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so now I know how to use crazy things like radishes.
00:23:13
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Anyway, Blue Apron delivers to most of the continental US.
00:23:17
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00:23:18
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00:23:19
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You can always pause or cancel or suspend service
00:23:22
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00:23:23
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00:23:25
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00:23:28
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00:23:29
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00:23:48
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And thank you very much to Blue Apron
00:23:50
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00:23:52
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Blue Apron, a better way to cook.
00:23:54
◼
►
- So the last area that it seemed like
00:23:56
◼
►
probably worth winding up our discussion on
00:23:57
◼
►
is just a little bit about the actual,
00:24:00
◼
►
like actually the tax side of these things.
00:24:03
◼
►
You know, the not so fun part
00:24:04
◼
►
where you write a check to the government.
00:24:06
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Though in some ways I always do kind of like
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when I have to write a big check,
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it means that I had a good year.
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So it has a slight upside to it.
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But the thing that I was trying to think about
00:24:18
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in terms of like basic advice for taxes,
00:24:21
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and I think the biggest thing that I've learned
00:24:23
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is the importance of planning for taxes ahead of time.
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That it shouldn't be something that
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you get to the end of the year
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and suddenly you're trying to work out
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what your tax bill is going to be.
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That I check in on my sales about once a week.
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I go through and I have my big crazy spreadsheets
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we've talked about before where I'm looking at my income
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and kind of getting a sense.
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And on about a monthly basis,
00:24:47
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I'm kind of doing overall kind of how the business is going.
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And on a quarterly basis, I do like a proper analysis of it.
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And that's sort of where I'm going.
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And while I'm doing that,
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one of the things that I'm always looking for is,
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you know, how is the business going
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and how is this going to affect my tax bill?
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There's a bunch of reasons for this
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in terms of like, you know,
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you have things like estimated taxes
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that you may have to do to make sure,
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'cause the government doesn't want all your money
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just at once.
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They want it throughout the year.
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So either you're doing payroll withholding
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or estimated taxes.
00:25:21
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But most importantly, I think is the reality of,
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you know, it's easy in some ways
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when you're running a business
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that you have this money in your bank account.
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And in your personal life, typically,
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you know, when you have money in your bank account,
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that's yours and you can spend it.
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And it doesn't behold into someone else
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because all your taxes were taken out of your paycheck
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before it got there.
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But when you're a business, like,
00:25:45
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there is often, you know, non-substantial amounts of money
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in my business checking account
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that is essentially earmarked to go off to the IRS one day.
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And exactly when it goes that,
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there's, you know, a whole discussion
00:25:58
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about the way in which you pay your taxes.
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But it was just the importance
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of thinking about that ahead of time.
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Yeah, that, you know, when you,
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it's like, hey, wow, this is awesome.
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I landed a consulting client.
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They're gonna pay me $10,000.
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It's, at that very moment,
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it's important to keep in the back of your mind,
00:26:16
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they didn't pay you $10,000.
00:26:18
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You know, maybe they paid you $7,000
00:26:20
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or they paid you $6,500 or whatever it is.
00:26:22
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And take that, you know, take that money out
00:26:25
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that you are going to have to pay to the IRS
00:26:27
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or to whatever your local, you know,
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if you're listening to this outside of the United States,
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whatever your local, you know, tax entity is.
00:26:34
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'Cause I'm sure somebody's gonna be coming
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and taking a chunk of that.
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And if you think about it that way from the beginning,
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it makes it a lot easier
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rather than kind of getting to the end of the year
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and being like, oh man, wow, this is awkward.
00:26:46
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Like, I have this huge bill that I wasn't expecting
00:26:50
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or I wasn't aware of and now I have to deal with it.
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That's just gonna be a recipe for pain.
00:26:55
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- Exactly, and, 'cause yeah, I think the same thing.
00:26:57
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Like, when a big chunk of money comes in,
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like every month when the Apple deposit
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comes in for math store earnings,
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I just think of that as like,
00:27:05
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okay, well, about 40% of that's not mine.
00:27:07
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Like, here's all this money, I'm temporarily,
00:27:09
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it's temporarily in my bank account,
00:27:11
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but this isn't all mine.
00:27:12
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And so one thing I did, I've done for years actually,
00:27:15
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and it's changed a couple times here and there,
00:27:17
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but for the most part, I've done this very successfully,
00:27:19
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is that you, you know, in the US,
00:27:21
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you have to pay estimated quarterly taxes
00:27:23
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and then you get this big kind of settlement
00:27:26
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at the end of the year every April,
00:27:27
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and everyone's like, oh no, my taxes, I'm surprised by this.
00:27:30
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But one thing I did for a long time with great success
00:27:33
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is paying estimated taxes every month.
00:27:36
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Because you can pay more and more often
00:27:39
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than they require you to.
00:27:40
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There's no downside except that the money is, you know,
00:27:43
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not working for you, earning interest in your account,
00:27:45
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but interest rates suck these days.
00:27:46
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So you're not losing much.
00:27:48
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So like, it actually made things very simple for me
00:27:50
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to basically just estimate, you know,
00:27:52
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kind of a high amount of what I, you know,
00:27:54
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like, you know, look at your tax rate,
00:27:56
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and you can say, all right, well, you know,
00:27:57
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I'll give like, you know, 35% of this or whatever
00:27:59
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to the federal government and, you know,
00:28:01
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way too much of it to New York State.
00:28:03
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And then, you know, every time that monthly big deposit
00:28:07
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from Apple would come in, I'd do my estimated taxes
00:28:09
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for them, all right, well, you know, here's, you know,
00:28:11
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9% or whatever to New York and 35% to the federal government
00:28:14
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and then at the end of the year, you know,
00:28:16
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often I would have overpaid, but it was, you know,
00:28:20
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you'd rather have that error than the error of,
00:28:23
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oh crap, I owed them 50 grand, you know,
00:28:24
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or something crazy like that.
00:28:26
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And, you know, again, this is one of those areas
00:28:29
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where it's not the most tax efficient way
00:28:32
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or money efficient way to operate, but it is really simple.
00:28:36
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And it's not that far off, like, you know,
00:28:38
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you're not saving that much money
00:28:40
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by not doing things like that.
00:28:42
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And it keeps things not only, you know, safe
00:28:46
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from the point of view of like the law and audits and stuff,
00:28:49
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but it keeps things lightweight for your mind.
00:28:52
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You know that you're not gonna have
00:28:54
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a big surprise down the road.
00:28:55
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You know that you're covered, you know that whatever money
00:28:58
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is left over after you've done this kind of system,
00:29:00
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you know that this is pretty safely yours
00:29:03
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and it just makes things easier to get out of your mind
00:29:06
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so you can focus on what you actually want to do,
00:29:08
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which is definitely not taxes.
00:29:11
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- Yeah, and I think the best point there is
00:29:14
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the less you can think about this stuff, the better.
00:29:17
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And so having a system in place that does that
00:29:20
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is gonna be best, you know, in the same way
00:29:22
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that if you're coming from a nine to five W-2 job
00:29:25
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or where you can just get a regular paycheck every month,
00:29:27
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like all of this work has been done for you, essentially.
00:29:29
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Like this has all been taken care of.
00:29:31
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And so now that this is your responsibility,
00:29:33
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it works out really well in your favor to just say,
00:29:36
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I'm gonna simplify this, I'm gonna make it easy,
00:29:38
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I'm gonna make it nice and legal,
00:29:39
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I'm gonna make sure I understand everything.
00:29:41
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And if you do that, you know, then this can just be
00:29:43
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one of these boxes you've checked
00:29:44
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and you can just move on to the actual fun stuff.
00:29:47
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- Thanks for listening everybody,
00:29:48
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and we'll talk to you next week.