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Tax Planning with Catherine Tindall

George Grombacher January 23, 2022

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Tax Planning with Catherine Tindall

LifeBlood: We talked about tax planning versus tax preparation, the reasons people avoid proactive planning, the opportunities that are available to entrepreneurs, and the process for making it happen with Catherine Tindall, CPA, CTC and tax strategist with Dominion Enterprise Services. 

Listen to learn how to talk with your tax professional to be more proactive with your planning!

You can learn more about Catherine at DominionES.com and LinkedIn.

Thanks, as always for listening!  If you got some value and enjoyed the show, please leave us a review wherever you listen and subscribe as well. 

You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, YouTube and Facebook or you’d like to be a guest on the show, contact us at contact@LifeBlood.Live.

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Our Guests

George Grombacher

Catherine Tindall

Episode Transcript

george grombacher 0:00
Come on

warm lead. This is George G. And the time is right. welcome today’s guests on the powerful Catherine Tyndall. Catherine. Are you ready to do this? Yes. Sounds great. Right let’s let’s go. Catherine is a CPA. She is a CTC, Ms. Strategic tax planner with Dominion Enterprise Services. excited to have you on Catherine, tell us a little about your personal life’s more about your work and why you do what you do. Yeah, so I’m a CPA. It’s a little

Catherine Tindall 0:41
it’s fun for me this time of year because we’re the tax planning time of year. But a little bit about my personal life. My husband and I are wintering in California this year. So don’t shed any tears for us for missing a New England winter. And a little bit about what I do. So I’m a partner over here. And I work with clients, mostly doing tax work with them so closely held businesses, high net worth individuals, real estate investors. So it’s a lot of fun for me. Awesome. So normally, I lead the conversation. When I get on a call with a guest. I asked what part of the world you’re in, but I neglected to do that. You’re in California right now, Katherine? I am so I’m having a little bit of a it’s five o’clock somewhere. Do this pretty early for me. But yeah, it’s good work. It’s extraordinary. Nice early start today. What what finer way to start the day than then to record an episode of life blood podcast? Awesome. Right?

More energizing that?

george grombacher 1:39
Yes. Coffee unnecessary? Well, let’s not get crazy. All right. So I think that when a lot of people think about taxes, number one, they think yes, I’m so excited to be talking about taxes, but they probably think just about like preparing their income tax return and getting that done. Tell me the difference between tax planning and tax preparation?

Catherine Tindall 2:03
Yeah, I think I think the main thing I experienced when I talk to a lot of clients is, there’s a lot of fear that happens around tax, because it’s something that’s confusing. It’s really complicated. It’s really frustrating. And so they put a lot of their emphasis and effort into doing things that are going to increase their revenues or decrease their expenses, they’re really concerned with what’s going on in the operations of their business. And so they just kind of take the tax for granted at the end of the at the end of the year, right, you know, they know that it’s going to impact them, they know it’s going to be a problem. But because they don’t really feel like they have control over it, they don’t put any emphasis on trying to do anything about it is mostly been my experience. And so the kind of work that we do in our firm, we focus pretty specifically on proactive tax planning engagements, which is quite different than just taking your historical records at the end of the year and converting it into a tax return. Right. So we were pretty proactively with clients to try to use the strategies and techniques that are in the tax code in court cases, to really lower how much they pay in tax. And that’s how we manage our client relationships. So we do things during the year with our clients to help them actually reduce how much they’re going to be paying, which ends up being, you know, much more impactful relationship with them. Because instead of just using the tax knowledge that we have to meet a filing obligation, we’re able to actually be a profit center for our clients through reducing how much they’re paying. Because for a lot of people, I’m sure you’ve experienced this, it’s anywhere from 20 to 50%. gets wiped away by tax at the end of the year. And it’s just, that’s a lot, a lot of lost effort, you know?

george grombacher 3:53
Yeah, there’s no doubt, you know, it’s a it’s a weird thing, as you do start to become more financially successful that you spend, sometimes to your point half the year working for the federal government and state government before you actually start to get money in the door if you’re paying 50% taxes. And so I think people would would prefer to we’ll, we’ll leave that up to them. But I think that a couple of really important things he talked about, there’s there’s fear around tax, and then there’s the issue of not feeling like you have control over it. So those are compelling. Emotions are reasons why people don’t do this.

Catherine Tindall 4:33
Yeah, yeah. Yeah. And I just see a lot of procrastination that happens with it. I think for those reasons, you know, I feel like it’s me and the dentists in the room. Sometimes where it’s, it’s a really necessary thing, and yet, people just don’t deal with it until it’s just so painful, that they start searching for answers.

george grombacher 4:55
And so, and then the, the fact that there are opportunity’s being that our tax code is voluminous. And and I don’t want to say it’s confusing, but it certainly is confusing if you’re not familiar with it. But there are a lot of opportunities to be proactive and to do planning. So there’s not a reason to be fearful. And just doing productive tax planning doesn’t mean that you are trying to try to evade taxes necessarily.

Catherine Tindall 5:24
Yeah. And I think a lot of people, you know, kind of that that fear factor comes in with, you know, am I allowed to do planning, and it’s like, on the IRS website and your Taxpayer Bill of Rights, that you have a right to pay no more than the correct amount of tax. There’s been several judgments. There’s one that I reference, sometimes from a judge who is known for his literary observations and court cases. And one of the things he says is, you have, you know, you have no, this is a paraphrase, but you have no obligation to pay to pay the Treasury any more than you have to it’s a mandatory extraction and not a voluntary contribution. And so you don’t have to organize your operations in the way that’s going to best pay the government. Kind of sarcastically but, but it’s true. And you know, we see this with, there was a lot of scandal this year with some pro publica articles that came out about what’s going on with Jeff Bezos and Elon Musk tax returns. And this is a constant thing that kind of comes through the news every once in a while. And so I think people kind of have a sense in the back of their head that, that there are ways to get there are ways to, you know, plan for it. And you can be strategic about it, and it you know, it’s something that’s allowed for in the law, it’s like Jeff Bezos doesn’t go to jail for not paying income tax, because he’s, you know, he’s paid advisors to help them follow all the rules. So

george grombacher 6:49
yeah, it’s fascinating how I heard a story about how I think it was Facebook. And they just told the government, you know, we’re not going to pay taxes this year, we’ve, we’ve, we’ve we’ve done everything, and we came to the determination that we don’t owe you. And I thought, well, how in the world, is that possible? But then I thought, well, how in the world, would it be anything other than that, because there’s no way the government or the IRS could be able to really get in there and do a full accounting or an audit?

Catherine Tindall 7:13
Yeah, well, and a lot of those big companies, they, you know, they invest a lot of money into this, right, they’re very strategic about what they’re going to be how they run their operations, so that they can minimize tax as much as possible. And so they take advantage of a lot of things like research and development credits. And then for a lot of these big tech companies, they rack up net operating losses that carry forward. And so once they start showing those big profits, they have these carry forward losses that get eaten up. And so they don’t have to be they don’t have to pay tax, because they use those, those losses. So it’s all kind of tax planning is almost like a game, where we have like a certain number of strategies and pieces that we can play with. And the more you can align your behavior with kind of how the game is written through the tax code. That’s, that’s kind of, you know, just how it works. But

george grombacher 8:07
yeah, I appreciate that. So I think a lot of the time, complexity is the enemy to an entrepreneur, is they have so much going on anyway. So maybe, it how, how hard? How difficult? How complex is doing this kind of planning?

Catherine Tindall 8:27
Oh, you know, it’s, it’s fairly simple, because I break it down into three steps, you know, the first step is you have to know what your tax exposure is. And for a lot of people, that’s kind of an eye opening experience of just having, especially if you’re having a big growth year, you know, projection done of, okay, this is actually how much is getting lost attacks. Do you have to know that? And then we figure out, okay, well, what are you eligible for? Right? Are you operating an inefficient entity structures? Are you doing activities that could qualify for tax credits that you’re not taking advantage of a big one I see all the time is a lot of people don’t realize that they’re eligible for the research and development credit. And then especially during COVID, a lot of people didn’t realize that. And these are, this is accredited, still open as the employee retention credit, and, you know, five, six figure credits for people who were conducting activities that count towards them. And then we look at things like how are you deducting things, you know, how is your compensation set up? And a lot of these are, once we do the planning work of it, it’s just a matter of kind of massaging the numbers, often just massaging like the behavior a little bit so that you can qualify for things better. So especially anybody in real estate, you know, how active your participation is, in the real estate? Those rules are really specific. And so sometimes it’s a matter of, okay, could you be spending less time in this business so that we can qualify you for something or, you know, could Can we just change your behavior a little bit, and it’ll have, you know, a very impactful tax difference for you. And that’s just something that we quantify cuz I think for a lot of people, and you’ve probably heard this a million times, like you can’t let the tax tail wag the business dog. And so we keep that in mind when we do the planning work like trying to go out of your way and bend over backwards and add complexity to save 100 bucks to tax, it’s just not not a good idea. But there’s a lot of big ticket kind of strategy planning items, especially around entity structure that it can be really impactful without adding anything to the client, you know, the entrepreneurs workload, it’s just a matter of shifting around how some of the money’s flowing,

george grombacher 10:33
what are some of those those sort of common problems you see, and then the solutions.

Catherine Tindall 10:39
One of the big ones I see early on for people is, especially around entity structure is they wait too long to get an entity involved in what they’re doing. And so for a lot of people, they’ll operate out of that sole proprietor or single member LLC, which gets taxed the same way as a sole proprietor for way too long. And, you know, typically, once you start getting up over the 100k, Mark, it’s a good idea to consider getting an entity into the mix, because you get certain benefits between an S corp, which is what a lot of people operate out of. And then also, right now, C corporations have a really low flat tax rate. So depending on what you’re doing, and how many income streams it is, sometimes, you know, C Corp is going to be the right move for you. Even though, you know, historically, it’s been a little less popular of a move. But it really depends on what you have going on. And I see a lot of people where there’s a lot of inefficiency that happens around their payroll taxes, which, you know, usually for people the first year that they’re self employed, they, they don’t fully understand the sting of the payroll taxes until they’re the one having to cut the check for it, as it’s calculated with your, you know, your income tax return. But that’s, that’s a typical problem that I see is people just don’t have their their entity structure set up properly for how they’re operating.

george grombacher 12:02
And how difficult is it to change entity structure, once the business is up and running,

Catherine Tindall 12:07
it’s really not that big of a deal, for the most part, you know, on our end, you work with a business attorney to get the right paperwork filed with the state, we change things like you get a federal ID number for that entity. And then it’s a matter of changing over a couple bank accounts, and then just operating out of the new bank accounts. So it’s really not that big of a deal. You know, often, even with the banks, they can just switch over, you can continue to use the existing operating account that you have, and then just switch over the ownership to the new entity too. But so it’s really a matter of just filing the paperwork and knowing what the right move is for that job.

george grombacher 12:52
And so is it ever too early to be thinking about this?

Catherine Tindall 12:59
I would say on the on the tax planning side for most people, it isn’t until your your tax, you know, once you get up over that 100k mark, that it’s worth, probably, you know, I should take that back, it depends, it really depends on what your tolerance is for, you know what, what you have going on with your tax situations. So for some people, where it’s, they’re just starting to be self employed, they’re just starting to show good profits. And it’s your first year, you need to account for that right away. So you need to know what your tax exposure is, as you’re operating during the year, because a lot of people they’ll know, they’ll make all this money, and then they get to the end of the year and file their tax return. And then they have to pay a year’s worth of taxes all at once. And that’s that’s a really bad cash flow issue. And I see that happen so much just because you know, the, when you’re self employed person, you’re kind of like a black box to the IRS. And so they don’t really know what’s going on at will. They don’t really know what’s going on in there until you go to file your tax return at the end of the year. So nobody’s keeping up with you to get those payments, like when you’re an employee. And so that can be a really jarring experience for people. So I think that’s probably the first, the first hurdle that people experienced that it’s worth getting in touch with a tax professional, probably halfway through the year, the first year your operations if you’re showing good profits.

george grombacher 14:16
Does that make sense? Is Is there a typical life cycle for kind of lack of a better term where somebody does start, where they’re successful for a couple years? And then like, oh my gosh, there’s got to be a better way. Why am I paying so much money in taxes they engage with with Catherine Tyndall. What what is the experience kind of look like? How long is it typical engagement? I appreciate that it’s probably ongoing forever, but probably more work done upfront.

Catherine Tindall 14:45
Yeah, so what we typically do with people is they’ll they’ll come in, I just take a look at what their situation is. I talked to them about what their goals are, what’s going on in their life. And we see okay, here’s a here’s a blueprint idea of what I think Tax Planning would do for you. And then from there, they decide whether or not that’s a good fit for them. Usually, that process is a lot longer just because I do some things a little differently with our firm, that a typical CPAs. So we don’t do any hourly billing, it’s all we want to make sure that we work with people where we’re going to be a profit center. So we kind of engineer that into how we set up the engagement. And so I think the other thing too, is, I like clients to be able to budget for us and know what our fees gonna be. So that, you know, like I said, that we can guarantee we’re going to be a return on investment for them. And so that process, once we do the, the initial planning, I call it phase one usually goes for the bigger ticket items that are, you know, immediately problems. So if there’s errors in their returns, if there’s, you know, retirement contribution issues, compensation issues, and any structure issues, asset protection issues, all of those kinds of things we look at as a phase one plan, and that planning process takes anywhere from three to five weeks, it depends on what the client’s timeline is, and then also what time of the year it is. Because as I’m sure you’ve experienced, we have busy seasons and silver seasons when it comes to keeping up with the compliance work. But for the planning work, that’s typically what an engagement takes. And you know, it’s great, because for a lot of the clients, we can get everything achieved. And by the time we finish everything, you know, their next quarterly payment that cups comes up is, you know, cut in half, or they don’t even need to make it so it ends up, you know, be a quick return for them.

george grombacher 16:35
And everybody’s super happy. And from that point on, they’re always extremely on time and prompt getting you all the information that they that you need.

Catherine Tindall 16:46
Yeah, I think part of part of what I emphasized with people who talked to me is that, you know, something like tax income tax, you’re constantly generating it year after year, right. And so whatever the solution is that you’re going to deal with, that has to be an ongoing relationship. And for us, what makes the relationship work is what makes the savings happen is because the relationship works, and that we’re proactive. And so in order for us to be proactive, we have pretty, we’ve pretty rigorous Client Onboarding guidelines. And and, you know, we really emphasize that for this to be a fruitful and functional relationship for both of us. We have to really get to know each other and get to know how we operate and be sensitive to that.

george grombacher 17:34
Yeah, I think that that’s such a, obviously, in any relationship, the more that you can be on the same page, the better and certainly when we’re talking about anything financial, and certainly when there’s deadlines and important, important times of the year to be hitting, the more proactive that we can be certainly, and I’m fond of saying that you need to be you being the client need to be the most interested in your financial situation. And certainly I imagine that you probably encourage people to be the most interested in their tax situation as well.

Catherine Tindall 18:06
Yeah, for sure. And I think for most entrepreneurs, your tax professional is one of those key relationships, right? It’s your your CPA, your business attorney, your banker, your insurance agent, it’s just one of those key relationships, that is something that’s going to end up being somewhat central to your business, because those are the key areas where you’re going to constantly have needs, and the you know, filling those needs is not something you can really do yourself and, you know, substantial way, once you you know, kind of have a serious operation going.

george grombacher 18:40
I like it. Well, Catherine, the people ready for your difference making tip? What do you have for them?

Catherine Tindall 18:46
I think my difference making tip is if you if you already have a good relationship with your tax professional, I’d encourage you to approach them about doing a planning engagement for you if you’ve never done that before, because most Most tax professionals are not salespeople. And so when you engage them, they’re going to meet kind of the minimum requirement for you of filing your tax returns, and making sure that you keep a reporting requirement or you know, a compliance requirement met. But there’s a lot more that they know how to do. And so if you approach them saying, Hey, could you look at my entity structure? Should we change this? Is there anything else I could be doing anything else like it could be deducting? Can you do some forecasting for me, can we have Can we do some tax planning, a lot of them are really open to that, but they’re just not going to be the one that’s initiating that conversation. So I’d encourage you to, you know, reach out to them and see if there’s more things that you could be doing and try to be the one that’s activating that proactive relationship because often you’ll find, you know, if you’re the one that was having, you know, when you’re having your taxes prepared during tax season, they’re so busy with so many other things that the planning is not really something that usually comes into play. And so if you catch them in the offseason where they have less work and they’re able to accommodate. That’s something that you could, you know, turn them from being an expense into being a profit center, which is, you know, big plus?

george grombacher 20:09
Well, I think that that is great stuff that definitely gets Come on. Catherine, thank you so much for coming on. Where can people learn more about you? How can they engage with you?

Catherine Tindall 20:18
Yeah, so our website is Dominion II s.com, which I’m sure it’ll be in the show notes. And you can reach out to us there. There’s more information on the website, about what we do, how we work with clients, and you know, what makes us different. And then also, you know, if you’re interested in in any tax tips, keeping up with legislation and strategy, ideas, I’m on LinkedIn. And I’m sure we’ll post the connection below but I always like connecting with people because it’s, it’s interesting for me to see what everybody has going on and, and what’s kind of going on in their world.

george grombacher 20:54
Love it. If you enjoyed this as much as I did for Catherine, your appreciation and share today’s show with a friend who also appreciates good ideas go to dominion, he s calm and check out the resources and then you can find Catherine on LinkedIn as well. And she is 100% Right? You can find all this the notes of the show. Thanks again, Catherine.

Catherine Tindall 21:15
Thank you so much was pleasure to be here,

george grombacher 21:17
George. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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