Mike Jesowshek: How to Maximize Tax Deductions in Your Business

Welcome back to the Authority Is podcast, where we help you to grow your business, attract new opportunities, and outpace your competition. My name is George Wright III. I'm your host, and I've been partnering up with Valiant CEO Magazine to bring you the hottest entrepreneurs, thought leaders, and experts from around the world that are crushing it in business. Together, we're going to unpack strategies and tactics that they're using to become the authority in their field. And my goal is to help to inspire and motivate you to do the same. So let's get right into it. Welcome back, George Wright III. We're joined today by an expert, a guy that I've really enjoyed speaking with, Mike Jeziszczak. How are you doing today? Good, George. Thanks for having me. Listen, man, I'm super glad to have you here because I want to talk today with the audience about a topic which not everybody gets excited about, which is taxes. but they do get excited when they talk about things on how they can really maximize their benefits. I hit all the time that saving money is a lot easier than making money. And before we get rolling, I just wanted to let them know a little bit of your background. Mike has been a CPA, owned his own business, owned multiple companies actually. And he's also the host of the Small Business Tax Savings Podcast and has some incredible resources for small businesses and investors and larger businesses as they scale for information on how to minimize and eliminate taxes, minimize taxation, maximize deductions and things. So we're going to talk about everything related to that today. But before I do, Mike, can you just give our audience a quick brushstroke of your background? Because it's not just accounting, but you're real deep in that vein. So tell us what brought you into the doing your own podcast and really the business part of it, the business side of it when you have this background in tax? Yeah, it's funny. I've been an entrepreneur pretty much my whole life. So I was working for myself, but started at a young age of 14 in the online marketing industry and was in different parts of that industry, affiliate marketing industry, different parts of the online marketing industry. Eventually got to college and was like, okay, I'm going to go for accounting as my backup plan. Went for accounting and started a couple businesses. There was businesses that we had a bunch of partners with. And I started to then get into the finance side of that online marketing industry and got the CPA. And then we got into a business. There were seven partners of us at our final business, and we were all really good at different things. And so we were trying to pull this company into a bunch of different directions, which was just leading to frustration for everybody because we couldn't focus on what we did best. And so it was at that time when we said, hey, let's go off and do our own things. And so it was that time where I started a digital online accounting firm back in 2013. And now when you say digital accounting firm, it's a pretty common thought or idea, at least especially after COVID. Yeah, but that was early on in 2013. Yeah, there wasn't much online accounting firms. But the industry I was in was a younger generation, all working remotely. And we had a good reputation in that industry. And so it was an easy entrance to me for starting that firm. Started off on bookkeeping, partnered with tax people that we would send our bookkeeping clients to, and really got frustrated because I could never get a clear answer from our partners. Ask a tax planning question or how would our client do this? And they'd be like, well, it depends. And I could never really get a clear answer. And so eventually led me down to do my own research, starting to do taxes and really found a love in this tax planning space, which is where we kind of are now. And so how the podcast started, really by accident, we were doing some YouTube videos on different tax strategies, things like that. and someone from our team said hey why don't you try putting this on a podcast and i wasn't a listener of podcasts back then this was a little over five years ago i was like okay let's try it so we put three videos in tournament audio on a podcast and about six months later we had someone reach out that said hey i love your podcast how do i work with you and i was like what podcast i had no clue what they're even talking about and then it clicked oh yeah we put three videos back on six months ago and so that was our cue to start doing this and really turned into a passion project of. My goal is to help business owners understand what tax strategies are available to all of them out there. And so then we started doing weekly episodes, doing videos with it, blog posts that accompany it, and so everything like that. And so that's where we're at. Kind of started growing from there, huh? Yeah, no, it's been a fun ride so far. So what's nice about your background is you come from business into accounting, and you have the mix of both, right? So you do understand the day-to-day workings, the operations of growing and building a business, scaling a business, which is great. And it brings up this topic that I've hit on a few times. And I know you're a big advocate of distinguishing between tax preparation and tax planning, right? People think of my accountant and they don't think about as they grow their wealth that they need a team of people that are specialists. The tax code is so completely freaking overwhelming that nobody could understand all of it anyway. And so I feel like have to dig deep into areas that you specialize in. Help us to understand from your perspective this difference between tax planning and tax prep and the importance of each. Yeah So tax prep is obviously required by law That just taking but all is taking information sending it up to the state agency send it up to the IRS And that something that gets done after year end And so tax planning are those things that you doing throughout the year So what can you do between January and December to ensure that you're paying the least amount of tax as legally possible? And then when you see your accountant in February or March, we're just taking that information and send it up to the agencies. And I think so many business owners just lose this idea of tax planning or don't think about this idea of tax planning. because there's so many accountants that were facing the same issues I was. We're trying to get answers. We're trying to get help, but we're not getting that feedback or it's not coming in clear. We ask the question, how do you hire your kids? It depends. And then we just lose focus and say, okay, it depends. I'm not going to focus on that anymore. I'm just going to move on to growing my business. And they walk away from that idea of tax planning. And so really that's my hope is that we say, okay, no, whether you're making $1,000 a year or $10 million a year, there's a ton of tax strategies out there for you that are easy to understand, fairly easy to implement and completely legal and also encouraged by the government. And so it's getting that done. And that's that tax planning piece is that thing that's done between January and December. Yeah. And what I can tell you from, I can tell you for a fact, a lot of people spend the end of their year finding deductions rather than the beginning of their year planning deductions. And I think it's the same. And the reason like my whole message on the Daily Mastermind is that it's never too late to start creating your life, but you have to be consciously aware and proactive in creating a vision that you're moving towards. not, and this is the same principle, I think, with tax planning, is that when you have a vision of where you want to go, it's not just about planning what you've got. It's when you know you're going a particular direction and you make certain decisions around tax planning, whether it's structuring of your business or your deductions or how you do things, whether you're outsourcing or spending money or leasing or buying or whatever it is, when you have a vision, and I think that you can make a better plan and have more success. But I think that extends to taxes. So help me to understand, let's take a minute here and let's go with the million dollar question, which is most people, they just want to know how to pay less taxes. They want to maximize those deductions. And I know we don't have as much time as I'd love to have today, but where would someone start there and help us to understand your mindset around maximizing deductions for businesses? Yeah. And I always say this idea of maximizing deductions is exactly that. It's a mindset shift that we have to walk business owners through. Because so many business owners, when they hear maximizing deductions, and this is probably the number one strategy that comes from a traditional accountant, a tax preparer accountant, is, hey, it's getting close to the end of the year. You want to go buy a truck and take some bonus depreciation on that truck, get a big deduction this year. I don't really need a truck, but yeah, I could use a new truck. And if it's going to help my taxes, then we can go do that. And so that's what most people think of when they hear maximizing inductions is it's going out and buying things that you don't really need, but you want to get a tax deduction, which ultimately doesn't make sense. If you buy a truck for a hundred thousand dollars and sure, if you're in the highest tax bracket, you might, you know, save taxes on that, but you're just getting a truck at a discount. You're still out overall money from it. And so when we take this idea of maximizing deduction, we say, no, no, we want to change that mindset. We want to shift that mindset a little bit differently and say, how do we look at spending that you're already doing? And how do we turn that from after-tax spending into pre-tax spending? And so, sure, if you need a truck, go and buy a truck. That's a great tax strategy. But we don't want to encourage people to buy things that they don't need simply for tax purposes. I love that. I love what you just said. I want to just make a note of that real quick is that I think the way people think determines their success. But I also know that's the way it determines their wealth. So when I always talk about people, are you investing or spending your money? Are you investing or spending? It's just the way you think about how you spend your money. But I also love this idea of thinking pre-tax, not after tax and beginning of the year, not at the end of the year. It's this whole shift behind being proactive and reactive. And yeah, so keep going with your thoughts on the deductions. But I think you're right. I think a lot of people are looking for deductions or spending money at the end of the year to get deductions. And it's like that idea that I'm going to get this because it's on sale. If you didn't need it, it doesn't matter if it's on sale. You're still spending money you didn't need to spend. And I think a lot of businesses are, unfortunately, they're stuck in that mode. So how do you generally, what do you recommend businesses do? What are some tips or some specific strategic things or tactical things that you recommend businesses for deductions maximizing? So the first thing that I like to talk about is what is after-tax versus pre-tax spending? Because sometimes that doesn't make sense. And I think the easiest way to describe that is compare a business owner to someone that's a W-2 worker. As a W-2 worker, you make your gross wages, all these taxes get taken out, and then you get your take-home pay. And any spending that you do with that take-home pay is after-tax dollars. That money has already been taxed. Yeah. But as a business owner, you get your sales or your revenue, and then you have all these expenses that go into it and then you're taxed on the profit of your business. So any expenses that are inside that business are what we would call pre-tax spending. You're spending that money prior to that money being taxed. And so when we look at after versus pre spending we saying okay how can we take items that we would typically do after spending with and turn it into pre spending How can we find a business purpose for spending that we might already be doing and move it from after spending into pre spending And so this is an example. Let's say when COVID hits, you're working in an office now and you're a W-2 worker. You're working in an office. Now you're going home. You have a home office. You maybe went out and bought a desk, a computer screen, a chair. you don't get a deduction for any of that spending. But as a business owner, you get a deduction for home office use, that desk you bought, that computer, that chair, whatever it might be, you're getting a pre-tax deduction for all that spending you're doing. And so that's the beautiful advantage of being a business owner that we have, that the IRS and Congress encourages the use of the tax code to our advantage. No, I love that. And I think it's, It's, you know, do you ever have clients? It's funny because I have two thoughts. The first is, maybe I'll share my other thought first. There's a gentleman named Scott Estill, who's a former senior prosecuting attorney for the IRS. And he uses a certain way to help people to grasp the concept of really the benefits of this maximizing tax deductions. And he says a lot of business owners or individuals that may pay, let's just say, I don't know, say a 30% taxes. you have to think about it like you're working 100 days a year to pay your taxes out of 365 days, right? You're working 100 days a year. Wouldn't it be nice to only have to work 20 days a year to pay for your taxes or 30? And by adding deductions, you're minimizing all that time you're spending you can put towards your business and towards you rather than towards taxes. But do you ever get, and I know that new business owners are so worried about audits and they're so worried about different things that they almost feel, and it's a weird mindset to me because I'm just not that way. I'm thinking I'll pay as little as I need to pay as late as I can pay it and whatever else. And most business owners, I think sometimes they feel guilty trying to come up with deductions. They feel like it's, you know, it's like shady or something, but help me understand how your perspective, because obviously the tax code is there for the benefits of a business owner. And if you're smart enough to be a business owner, you should maximize those benefits, right? Do you run into that a lot with individual businesses where they're worried about how aggressive is a deduction or how aggressive can you get, that kind of concept? Yeah, absolutely. And we say the same thing. The tax code was written the way it was for a reason. It's our job. The IRS isn't going to come out and tell us, oh, here's how you can save on taxes. It's just hidden in that code or put into that code somewhere. And it's our job to unwrangle that and find out how does it relate to us. And yeah, so many people are afraid of the audit and then thus are now paying more taxes than necessary simply because they're afraid of this nasty word called audit. And what I always talk to business owners is say, okay, first off, in all of my years of doing this, people that are doing things the right way, dotting their I's, crossing their T's, the IRS is completely, they're normal people. The agents that you're working with are normal people and they are understanding. Now, if you're blatantly skating the law, doing things illegally, taking deductions that you absolutely are not allowed to, they're going to take you out and chop you up. But most of the time, people are doing it right. And so I'd say, how do we make sure we're doing it right? What are some things that we can put in place to do it right? And ultimately, Michael- Plus, isn't it an extremely low number that even get audited? I'm not trying to make any case at all for that, but it's not like one in 10 or something like this. It's like less than a tenth of a percent kind of a deal and they're targeted. So what do you, yeah, finish your thought on how do you move forward in really having a good solid plan? Is it the advantage of having a tax planning resource? Is it knowledge and education? Is it certain techniques and strategies? What's the best way for someone, let's say that doesn't have, they have an accountant and now they want to get into tax planning. Generally, where do you recommend they start? Yeah, so it's always my goal is I want people to be able to sleep at night. So you're doing a strategy and people have different risk tolerance, right? So some people are super scared of an iris audit. Some people come in and be like, I'm a 10 when it comes to risk adverse. Give me, let's push this thing to the limits. And those people that are on that low risk adverse area, our goal is how do we get you to sleep at night? How do we ensure that you feel comfortable taking these deductions that are legally yours. And so the biggest thing is creating documentation. If you're going out to a meal with a friend that happens to be a business client, that's a valid business deduction. That's taking after-tax spending and moving into pre-tax spending. But what do we just need to do to back that up? Who did you meet with? Why did you meet with them? Have a receipt, take a picture of it, put it on file, and it's there if you ever need it. Most likely you'll never touch it again, but if you do, you can easily pull that documentation out. If we're looking at hiring your kids in your business, which is another great example of how do we move after-tax spending into pre-tax spending? We're supporting our kids every day in all different activities. For sure. How do we get a business deduction for it? And so that's this idea of hiring your kids. Now, hiring your kids is not as simple as just writing them a check and taking a business deduction for it. They need to be doing things. They need to be being paid a reasonable rate. So that's that documentation that you have. You know, what are they doing for you? Do you have a job description? Do you have an employment agreement Do you have them tracking their hours Do you have something that backs up why that a reasonable rate That the type of documentation that says okay now we hiring our kids We not just hiring our kids now but we also have the documentation that the IRS comes knocking. We have everything ready. We have everything that we already need to help support that and back that up ready for them. And my hope is for those that are on that, say one, when it comes to risk takers, that this helps them make them feel comfortable saying, hey, we have the support. We have the support to back this up. that's all that matters. Yeah. No, I think like anything else in business, wealth, mind, money, business is you have to be willing to learn. You have to be proactive and you have to have a plan. And if you have that plan, you are going to find that there are, it's funny because this is like a big domino for people. If they could just spend less on taxes, they'd have more money to invest and grow their business. They'd have more money to invest in things that will give them a return that they can then reinvest. And so it compounds. It's not as simple as just reducing your tax liability. When you're talking about growing wealth, which is something I'm a big proponent of, these little, these small incremental pre-tax dollar changes compound over time in your business and in your life. And so it's why it's such an important topic. Let me ask you a question because you guys have some great resources and things. How do people connect with you? Because we're going to have you back and I know we're going to probably go deep in a masterclass with our academy group, our private mastermind group, but what is the best way for people to connect with you? And I generally don't, I don't offer things on the podcast and whatnot, but you guys have some great programs and I really would like people to get access to them. So where can they go to get more from what you guys have? And then also to connect with you as well, Mike. Yeah. So the best place to find us is taxsavingspodcast.com. We do weekly episodes and all that's free content. So we do an episode, we have a blog post, we have YouTube videos. And I always say, again, my goal, my mission is to help business owners pay the least amount of taxes legally possible. And so what you're going to find on our podcast isn't just a bunch of fluff. We're going to get you to where you need to be to start to implement that actual strategy. But with every tax strategy, there's a point where there is some tweaking that needs to be done. You know, when we talk about hiring our kids, what you have, George, when you're hiring your kids is going to look different than me. Now, the concept of hiring our kids and the tax benefits and the documentation that we need is exactly the same, but it's going to look a little bit differently for us based on amount of kids, their ages and everything else. And for those that need that extra piece where they want to dive deeper, they want access to our team, we have a software that we're launching in the near future called Tax Elm. It kind of digs deeper into that, builds out tax plans for the users and gets them into that deeper level of training on, hey, how do I make sure that my tax bill is as low as legally possible? No, I love that. I'm going to put the links to these in the show notes. And the last thing I'm going to leave everybody with is, I think it's important to remind you that the reason the daily mastermind is called what it is is because it's this principal Napoleon Hill had two or more minds working together in the spirit of harmony towards a common goal or purpose. and I think tax planning, tax prep, wealth creation, business strategy is the same thing. Guys, you gotta align yourself with individuals that can help you to grow your wealth, grow your business and this doesn't mean you need to change your accountant. Mike and I were talking about this earlier. A tax planner or tax prepper, tax planning knowledge, preparing yourself better ahead of time in the beginning of the year is just another augment to your arsenal to grow your wealth and grow your business. And I'm sure, Mike, you would agree with me that tax planning and tax prep work hand in hand. One doesn't replace the other, and there's no one accountant. And so people that are thinking, I've got this accountant for 20 years or something, we're not talking about replacing your account, right? Yeah, no. And I have so many people that listen to our podcast that say, hey, I love what you're doing. I'm taking this stuff to my accountant. And then there are accountants coming and reaching out to me and saying, hey, can you help me out with this strategy here and going through that with them because, yeah, it's just this idea of tax planning that so many accountants are really good accountants. They do tax prep amazingly, but they just have never spent the time, energy, or focus, or they're just too general that they work with W2 doctors, and then they work with business owners, and they don't have the time to really do and learn about that tax planning piece. And we have so many people in our program, podcast listeners, wherever it might be, that have an accountant working elsewhere, and this is just that combination that they work with. I think you'll find most accountants will be grateful for the direction and the organization that you'll have to be able to help them with their work. I agree. Brother, this has been a great, great bit of content. I know people would agree. So thank you so much for being here today. Guys, if you can do me a favor, it'd mean the world to me. Share this show, share this episode. There's people out there that need this content. And I look forward to hearing back from you. Hit me up on The Daily Mastermind on Facebook or Instagram. I'm going to put in the show notes here. I'll put some ways you can connect with Mike. But once again, do whatever you can to be proactive with your vision of growing your business, but also maximizing these tax deductions, eliminating taxes so your business can thrive. So thanks for being here. And I will talk with you again tomorrow. Have a great day.