Patrick the Tax Advisor 🔥 Profile picture
Money Twitter’s Tax Advisor 🏛️📈CPA with 15 Years of Tax Planning Experience🔑🪁💡Follow me for weekly threads that could save you $10k of tax per year! 💵💰
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17 Oct
Get PAID to go on VACATION using the tax code!!!

Two simultaneous transactions: one generates a tax DEDUCTION and one generates TAX-FREE INCOME.

This might be my second favorite thread I’ve ever written!

Let’s bounce this through all of our friends via like/RT!!

***THREAD****
First, the DEDUCTION:

Vacations might have airfare, lodging, and food costs in the $1,000s or more.

In general, none of this is deductible.

BUT!!!

When I'm on vacation, I like to be on vacation, but I know how most of us on MoneyTwit are...
You are going to spend a couple hours per day working, even while on vacation.

Even more, at the resort bar or the pool, you are going to be naturally networking and making connections. Talking shop.

You might even be there looking at property to buy and rent out.
Read 10 tweets
17 Oct
Save $1,000 per year in tax!

Rent your home to your business, no more than 14 days per year.

This one has some hoops to jump through, but doable...

***Thread***
In general, renting your home creates taxable income to you.

In the US there is a 14-day exception:

Rent your home no more than 14 days in a tax year and you don't have to report the income.
If you have a business where you would occasionally rent out space for meetings/other reasons and your home is sufficient, you can charge your business (a deduction) and not pick up any income to yourself (if under 14 days).

Here is an example:
Read 7 tweets
17 Oct
If I'm freelancing, how much should I set aside for income tax?

What are quarterly payments?

***Thread***
Find your estimated income in this table - include all sources of income: from your 9-5, PROFIT from freelancing or a business, and taxable investments:
So say you are single and your total taxable income is going to be $80k. You would be 22% above.

Then add in 15% for self-employment income tax on any profits from a business/freelancing. THIS DROPS TO 3% AFTER $131K.

Then add in your state tax - 0 to 7% for most of you.
Read 8 tweets
17 Oct
How to hire Patrick the Tax Advisor

I get asked this question DAILY.

I'll be honest, it's possible, but difficult.

Here's how to increase your odds.

***Thread***
1) Table Stakes: Follow me. I'm committed to Money Twit, but even more committed to those who follow my account.

2) Share my threads with others. If you are commenting, liking, and RTing my stuff. I'm naturally going to pay more attention to you.
3) DM me or use my "ask a question" link in my bio.

Ask me anything you want.

Don't apologize. I'm here to help.

I've made several friends via DM. They will of course have my attention.
Read 7 tweets
9 Oct
How to get to ZERO income tax.

This will cover ANYONE in the WORLD.

HUGE VALUE THREAD!

THIS IS MY CURRENT TWITTER MAGNUM OPUS.

Bookmark this, print it out, mark it up, don't try to get through it all today, and for f*ck's sake RT it so EVERYONE can benefit!!!

***THREAD***
Section 1: The basics

Income tax is based on income

Your wealth, your sales, and your ad spend don't have income tax.

Your income/profit does, BUT not all income is taxable.

So first, if you want to get to ZERO income tax, you need to get to ZERO TAXABLE INCOME.
So how do you get to zero taxable income?

There are two ways.

Subject yourself to jurisdictions that do NOT tax income.

OR

Only have income that your jurisdiction does NOT tax.
Read 42 tweets
9 Oct
You asked for this with 250 Likes!

As promised, here's how to avoid the NASTY situation with the IRS described below.

Don't fall prey to a sideways situations on an IRS AUDIT of your side hustle!

and AVOID PENALTIES!
Step 1 - Use the right tax treatment on your transactions.

Learn some tax or hire someone.

I'm not promoting myself here because I'm not currently taking clients.

I don't tinker with my car's powertrain or grow my own penicillin to fight a sinus infection.

Hire a tax person.
It doesn't cost that much and they usually pay for themselves in stuff you would miss.

@DaveRamsey even says this and who is cheaper than him?!

If you just have to DIY, then learn some tax. Take a little course. Read a book. Not recommended, but might be better than nothing.
Read 17 tweets
27 Sep
Tax Loophole Alert!

Are you handy? Do you like interior design? Have you considered (or do you currently) flipping residential real estate?

Here's how to pay ZERO tax on your real estate flips!

***Thread***
Buy your fixer-upper house to flip.

Move in.

Make repairs and upgrades. Do whatever you do when you flip a house.

Stay exactly two years (or more).

Sell for a huge gain.

Pay $0 tax on the gain!

Repeat every two years.

It's called the home sale exclusion.
Think about it...

If your sole income is from flipping residential real estate, you could have a 0% tax rate (US).

Insane!

Q: How many times can I do this?

A: Once every two years. No lifetime limit.

If this was valuable to you, please RT so your friends can see it, too.
Read 4 tweets
27 Sep
Tax Loophole Alert

Employ your child in your business.

Teach your child a skill and save $1,000s of tax per year!

***Thread***
If you own a business and there are jobs your child can do for it, employ them and pay them.

Your child gets to be part of the family business and learn skills.

You get a deduction.

Typically they are in lower tax bracket than you, if they pay tax at all.
Example

You hire your 14 year old to send out cold emails and set up sales calls.

You pay an hourly rate, which ends up being $10k per year in wages.

You deduct $10k, which saves you the following:

-Fed Income Tax: 24%
-State Income Tax: 5%
-SE Tax: 2.9%
Read 8 tweets
27 Sep
Tax Loophole Alert!

Deduct your meals.

Business meals are deductible. How many of your meals are you not deducting, that you could be?

This could save you $500-$1,000/year.

***Thread***
If you own a business, chances are you are having A LOT of meals that could be deductible that you are not deducting.

For a meal to be deductible, it needs to meet the "ordinary and necessary" test.

-"Ordinary" simply means that it isn't lavish and customary in the industry.
If you work in sales, is a steak dinner with a client "ordinary?

-"Necessary" means it had a business/profit purpose. Did the meal further the business?

If you have a "working lunch" with your business partner to talk about next quarters goals, does that have a profit motive?
Read 7 tweets
27 Sep
Tax Loophole Alert! How to deduct your vacation!

This could be worth $1,000s every year.

***Thread***
Other, than in 2020, many of us go on vacation every year.

Vacations are not cheap (usually).

Some vacations might have airfare, lodging, and food costs in the $1,000s or more.

When I'm on vacation, I like to be on vacation, but I know how most of us on Money Twitter are...
You are going to spend a couple hours per day working, even while on vacation.

Even more, at the resort bar or the pool, you are going to be naturally networking and making connections. Talking shop.

You might even be there looking at property to buy and rent out.
Read 9 tweets
25 Sep
How to make your child a $5 millionaire,

with NO TAX to your child,

deductions for you,

on an amount less than your bar tab...

***Thread***
You need to be a business owner to do this.

You need to employ your child to do this so they can contribute to a ROTH IRA.

There are a few things you can employ your child to do.

On easy example is being a "model" in your business marketing materials. Think happy family pics.
Create an employment contract with your child for being in your marketing materials.

Pay your child $6,000/year (must be a market rate of pay). This is deductible to your business so net a couple $100/month.

Contribute this money to a ROTH IRA in your child's name.
Read 6 tweets
22 Sep
Tax Loopholes

Your tax advisor should help you find them (legally).

Ask these five questions when vetting your tax advisor - if their answers leave you feeling other than aligned, move on.

“Planner” below = tax advisor that does tax planning.

***Thread***
1) Knowing what you know about my situation, where am I currently leaving tax on the table?

Judges their ability to see tax inefficiency in real time - indicating they naturally plan.

It’s okay for them to ask to come back later with an answer here, just as long as they do.
2) If I were location independent, what would be my ideal tax jurisdiction?

Judges their ability to make creative suggestions and their understanding of tax in other jurisdictions, which is important for a complete tax advisor.
Read 8 tweets
21 Sep
FBA Brand Purchase - Taxation

Buying income isn’t limited to dividend stocks.

At some point you may buy an income producing asset, a functioning ecom website, or even another small business.

How you do this can have significant tax consequences.

Here’s what to think about.
Let’s say you want to buy a functioning FBA business. The business has the following in a corporation:

-A couple of successful brands,
-Supplier contracts with favorable terms,
-Ungated for toys and health on Amazon
-A warehouse lease,
-An engage employee, and
-A website
You and the owner have agreed to a $150k purchase price, but what are you buying?

If you buy the EQUITY/stock of the corporation, you will get $150k of tax basis in the stock, meaning you will likely never recover the basis in the form of a deduction unless you sell the company.
Read 5 tweets
21 Sep
Taxation of an Initial Coin Offering (“ICO”) or initial tokenization.

Want to tokenize some art, an piece of property, or even yourself??

How is the tokenization taxed?
Crypto is so new and unique that we don’t have full guidance on it for tax.

So in looking at an ICO, we have to think about how the token will behave.

Equity - if the feels like equity, long term participation and upside, it’s like an IPO and generally no tax to the issuer.
Debt - If it feels like debt, interest paid, and no upside, then it’s like a debt issuance and should not create tax to the issuer. Note if there is no interest, but determined to be debt, there could be deemed periodic taxable interest income to the investor.
Read 4 tweets
20 Sep
If you are a US Citizen or resident and own a foreign company do you understand the US Foreign Controlled Corporation Rules?

Note there is more exceptions in this space than rules, but I'm going to try to give a basic example.

These rules are very complex so hire a tax pro.
Say you are an Irish citizen and have an Irish company.

A move takes you to the US for a few years.

Assume you become a US tax resident (not hard in this case).

A US tax resident is a tax "US person."

The US taxes the worldwide income of it's citizens and residents.
A foreign company that is owned at least 50% by US shareholders (US persons that own at least 10% of the company), is determined to be a controlled foreign corporation ("CFC").

Historically, a CFC was an exception to the US taxing worldwide income.
Read 9 tweets
20 Sep
If I have multiple business, should I have them all in one LLC or each in their own LLC?

This is probably more of a legal question than a tax question.

A properly maintained LLC may limit the legal liability of one business from other, in they are separate LLCs.

That said...
As long as I'm not doing something risky (e.g., selling my own physical product that could be dangerous), I don't like to form a new entity until I've proven the business has some longevity.

That's not legal advice. Just my own view. I like to avoid hassle until necessary.
For tax, it doesn't matter unless you want S Corp treatment.

An LLC with one owner (single member LLC) defaults as disregarded by the IRS. They see right through it to you.

So you can have 12 and the IRS just sees 12 lines of business that are you, not the LLC.

BUT...
Read 8 tweets
20 Sep
Flippers/FBA Sellers

What is a CFO?

Do you need part-time CFO services...

Of course not!

If you want to continue to run a semi-directionless operation, not crush a three-year plan, make investment decisions that flip on what you ate that day, and ineffectively use cash...
What is a CFO

It's not the big corporate executive you see glamorized in the media.

It's someone that runs three processes for your company:

-Financial Planning & Analysis
-Cash Management
-Reporting & Controls

These things exist and matter, no matter how small your business.
Do I need a CFO?

Nope, just some part-time CFO services.

What would this look like?

1) A three-year financial plan with monthly monitoring.

2) Analysis on all business investment decisions - e.g., ROI on marketing dollars or products to flip.
Read 5 tweets
20 Sep
FBA Sellers

How many of you have received a tax notice from a state like California saying you owe back sales tax, even though you don’t have a presence there?

***Thread***
I’ll skip the court history, but prior to the fall of 2018, a state couldn’t require you to collect and remit sales tax unless you had some physical presence there.

Like an office, a warehouse, employees, etc.

Basically if you were just selling from out of state, no problem.
The gray area in the law was if you had an independent contractor in a state that was acting more like an employee and doing significant things for your business.

Think a person devoting most of their work time to your business and basically reporting to you on operations.
Read 9 tweets
20 Sep
It’s September.

Is your bookkeeping up to date so you don’t have a mad scramble at tax time?

Here’s how to get caught up in <1 hour and stay on track through the end of the year.

***Thread***
Gather Income Data

Open a sheet.

List all the platforms you have made money on this year.

Have a link to the login page for each.

Pull your year to date sales report and drop this number in.

Manually add any cash sales or platforms that don’t give you a report.
Expenses

Ideally you’ve kept receipts on purchases. No worries if not.

Pull year to date reports on every account you spend money on for your business (ideally you don’t mix business on personal on the same account. Ha!)

Quickly scan and mark anything you think is business.
Read 5 tweets
19 Sep
Taxation of Crypto Currency Trading

Taxable Events:

-Selling crypto for fiat
-Buying one crypto with another crypto
-Spending crypto
-Earning crypto

Non-Taxable Events:

-Buying crypto with fiat
-Transferring crypto between your wallets

***Thread***
Taxable Events

The IRS views cryptocurrency as property so it's taxation is more like when trading as stock than a currency:

-Gains or loss are calculated on transaction value vs. cost basis.

-Coin held for >1 year is benefited by long-term capital gain rates.
Considerations

Gains need to be calculated when coin is sold for fiat, exchanged for a different coin, or used to make a purchase.

It's very hard to assign basis to a tranche of satoshis you are using to buy a cup of coffee.

If you are HODL, this doesn't matter for now.
Read 7 tweets
19 Sep
How people do one thing, they do everything, whether it’s ordering take out, building a business, or monetizing a social media following.

This principle amps up the more successful someone is.

I’ve read enough tweets and had enough phone conversations to tell you this:
@oliviercantin does everything methodically and systematically. He’s precise and has a great idea where the bullseye is. If he misses, he’s got enough other calculated bets that will hit home.
@lawrencekingyo will not be controlled. He’s his own guy and while he loves making money, he’d die on a hill with two pesos in his pocket before he’d let anyone else call his shots. He’s also a nice guy and generous - genuinely likes helping others.
Read 6 tweets