Jason Watson, CPA, sits down with Rachael Weber and Joseph Bassett of WCG Inc (formerly Watson CPA Group) to chat about our favorite part of tax season - tax deductions!
In this episode of our Bourbon and Business series, Jason Watson, CPA, sits down with Rachael Weber and Joseph Bassett of WCG Inc (formerly Watson CPA Group) to chat about our favorite part of tax season - tax deductions! The three most popular being car, meals, and travel deductions for both personal and business use. Stay tuned for part 2 of Business Tax Deductions, where we delve into the "odds and ends" deductions like your home office and country club dues!
This material is based on content from our website and our book, Taxpayer’s Comprehensive Guide to LLCs and S Corps.
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https://wcginc.com/book
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WCG Inc. (formerly Watson CPA Group)
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Special Thanks to Axe and the Oak Distillery for hosting our Bourbon and Business series!
00;00;14;20 [Jason]: Welcome. My name is Jason Watson with WCG
Incorporated. And I guess we're rocking the handheld mic today.
Joseph Bassett with WCG, as well as a Rachel Weber. This is a
Bourbon and Business tour podcast and we're hosted here by Axe
00;00;33;11 and the Oak in Colorado Springs. And real quick, WCG Inc. used to
be Watson CPA Group and we are a tax and accounting firm here
in Colorado Springs.
00;00;42;16 Today, we want to talk about some tax deductions, right? Because
that seems to be everyone's favorite topic, right?
00;00;49;29 [Joseph]: Certainly.
00;00;50;06 [Jason]: Yeah. People like to make money but then not pay any
taxes. So, which is great and all. We are going to talk about the Car
Deduction, that's always the one that we get all the time.
00;01;01;19 [Joseph]: Especially
00;01;02;00 [Jason]: I buy a car, should I not buy a car? We're going to talk
about Meals. Joe just did a whole video on that. We should have
people check that out.
00;01;09;29 [Joseph]: Yeah.
00;01;10;18 [Jason]: Yeah. And then Travel, that's not as big, but I think that the
car and the meals is the biggest stuff. And then, in our next
segment after this one, we're going to do Home Office and then a
bunch of goofy ones like Country Club Dues, all that other stuff
00;01;25;22 that we get asked all the time. So, Rachel, tell me a little bit about
when somebody calls up and says, "Hey Rachel, should I buy a car
for my business or not?" What are some of the things that are going
through your head?
00;01;39;12 [Rachael]: Do you need a new one?
00;01;41;05 [Jason]: Do you need a new car? Okay, so you're telling me that we
shouldn't buy an asset, a depreciating one at that, just for a tax
deduction?
00;01;52;27 [Rachael]: No, you shouldn't. Yeah.
00;01;53;29 [Jason]: Okay. So the purchase should have an operational
necessity to it?
00;01;58;08 [Rachael]: Yeah.
00;01;59;00 [Jason]: Okay. All right. So do you need a car? Let's say I've
convinced myself and needs and wants, sort of occupy
00;02;06;05 [Rachael]: Yeah.
00;02;06;08 [Jason]: the same space in my brain. So I want, therefore I need.
And I have convinced myself that I need a car.
00;02;14;09 [Rachael]: Okay.
00;02;14;16 [Jason]: What's your next, what's your next thought?
00;02;16;22 [Rachael]: Well, who's going to own it? Is your business going to
own it? Are you going to own it personally?
00;02;20;29 [Jason]: Right. And that's what I'm asking you. What
00;02;23;00 [Rachael]: So
00;02;23;02 [Jason]: Do you think I should do?
00;02;24;07 [Rachael]: What type of driving do you do and how much money
are you gonna spend? Are you looking at a purchase of an $80,000
car but you only drive 2 maybe 4,000 miles out of the year?
00;02;37;24 [Jason]: Okay.
00;02;38;09 [Rachael]: Maybe it'd be better if you owned that personally
00;02;40;28 [Jason]: Okay.
00;02;41;02 [Rachael]: And take the mileage.
00;02;42;02 [Jason]: Okay. Yeah, and that's great. So we've, we've talked about
this before in other segments too, where the book ends, if you will,
are if you have an expensive car, high miles or I'm sorry, expensive
car, low miles
00;02;55;08 [Rachael]: Mm-hmm.
00;02;55;19 [Jason]: Maybe that's best suited in the business because we're
going to get depreciation hits just based on time alone, right, of this
car aging, might as well make those hits be a tax deduction.
Otherwise we could do a car where we, it's inexpensive and we
00;03;13;01 drive ton of miles, I'm thinking like realtor in a Toyota Camry or
something like that.
00;03;17;20 [Jason]: Maybe that's best owned individually and then we take the
mileage
00;03;22;04 [Rachael]: Reimbursement.
00;03;23;14 [Jason]: Reimbursement from the business. Exactly. How about all
the soft squishy middle stuff? Let's say $60,000 car and you drive
10,000 miles a year.
00;03;33;04 [Rachael]: How long do you keep the car for?
00;03;34;15 [Jason]: How long do you keep a car
00;03;35;22 [Rachael]: Yeah.
00;03;36;01 [Jason]: For? Yeah. Are you one of those car recyclers? Yeah. So,
what do you think Joseph?
00;03;42;11 [Joseph]: Yeah, same thing. Do you, how long are you gonna keep
the car? Because, I mean if we take depreciation, you're kind of
stuck doing actual, right? And half of the mileage rate is made up of
depreciation, right? So if we take depreciation, you're stuck doing
actual.
00;03;55;29 [Jason]: Right.
00;03;56;05 [Joseph]: And now you're only getting half of the actual expenses.
00;03;58;18 [Jason]: Right. Yeah.
00;03;59;07 [Joseph]: If you're going to flip that car every three years, you know,
maybe it is good to have it owned by the business.
00;04;03;06 [Jason]: And that is a challenge where, if we're keeping the car
forever,
00;04;07;07 [Rachael]: Mm-hmm.
00;04;07;13 [Jason]: Even if it's expensive, we might be best suited to have that
car owned individually and take
00;04;13;12 [Rachael]: Yeah.
00;04;13;14 [Jason]: A mileage reimbursement. Our job as CPAs is not to save
you taxes just today, it's to save you taxes, you know, throughout
your lifetime or at least through the, the, you know, foreseeable
future. So sometimes people want that immediate tax deduction
and we will, "Well,
00;04;29;26 let's go ahead and pan this out over several years, you'll be better
off." So, we also leave room for the ego. We all have one. That's
okay.
00;04;39;22 [Jason]: But you know, when you say your car is owned by the
business, there's a little bit of a sex appeal to that, right? When you
go to the cocktail party and, "Oh yeah, it's a company write off for
me." You know, like, like it's magic money. It's not really real money
when it's a company car.
00;04;54;25 So yeah, you're exactly right. Let's kind of move on from that. Well,
let's talk really fast about depreciation. Right now we're living in this
cool world where we can do a 100% bonus
00;05;09;04 depreciation on heavy vehicles, right? And, and that's defined how?
00;05;14;05 [Joseph]: A, 6,000 pounds.
00;05;14;28 [Jason]: Six thousand pounds, right? I made the mistake of
confusing curb weight with gross vehicle weight. And there are
some cars, their the curb weight is less than 6,000, but the gross
vehicle weight is over 6,000.
00;05;26;28 [Rachael]: Mm-hmm.
00;05;27;22 [Jason]: So the technical difference, it is gross vehicle weight not
curb weight, but that allows us to do 100% bonus depreciation,
write that car off, deduct the 100% of that car in year 1, right?
00;05;40;27 [Joseph]: Right.
00;05;41;02 [Jason]: What happens if we have a car that's less than 6,000
pounds?
00;05;44;29 [Rachael]: Then we're limited.
00;05;45;26 [Jason]: We're limited?
00;05;46;23 [Rachael]: Yeah.
00;05;46;29 [Jason]: Alright, what's the max?
00;05;47;27 [Rachael]: It's not as great. Well, you got 10,000 or 18,000
depending upon whether or not you want to take bonus
depreciation.
00;05;55;12 [Jason]: Correct. Yeah, exactly. So really we're looking at 18,000.
00;05;59;21 [Rachael]: Yeah.
00;05;59;27 [Jason]: Because we're going to want to do the bonus, you know,
get a little bit of a bird to hand. What, one of the questions too that
we commonly are asking the client when we are looking at, do we
want to depreciate this vehicle as a company asset or get
reimbursed by the mile as a personal asset being used for business
00;06;18;18 use is, is this your great year compared to next year? Right?
00;06;24;03 [Jason]: So let's say I go, "Rachel, I want to buy a company car."
You're like, "Do you need it?" Again, needs and wants occupy the
same space in my brain and I say "Yes." And then you say, "Well
Jason, it's December 31st. Is this your, an
00;06;40;09 exceptionally good year or will next year be a good year?" And if
next year is going to be a much more of a bang up year, a higher
income year, we would probably just, you know, delay the
purchase.
00;06;52;28 [Rachael]: Postpone it, right.
00;06;53;08 [Jason]: That way we can match the deduction against the higher
income. So that's another factor that goes into all this as well. So,
what are the things that we get from cars? Leasing versus
Financing, that's a common one.
00;07;05;23 [Rachael]: Yeah. Yeah.
00;07;06;29 [Jason]: What else were you going to say?
00;07;08;06 [Rachael]: Whos name does the insurance need to go in?
00;07;09;20 [Jason]: Yeah, that's a
00;07;10;12 [Rachael]: Title?
00;07;10;20 [Jason]: Big deal, that's a really, really big deal because I think, just
kind of go back to like the basics of rights and obligations and risk
of title or I'm sorry, risk of loss and title and all that stuff. For a truly
it to be a business asset, it has to be titled in the
00;07;26;28 businesses name, right? What happens to insurance though,
sometimes?
00;07;30;14 [Joseph]: It usually goes up.
00;07;31;12 [Jason]: Yeah, so your insurance agent's like, "Oh, you have a
commercial
00;07;35;04 [Joseph]: Yeah.
00;07;35;21 [Jason]: Policy." You're like, look Dude I just drive this around like I
do any other car, I'm not like on the, I'm not a trucker, you know.
00;07;43;28 [Rachael]: Mm-hmm.
00;07;44;23 [Jason]: So what sometimes can happen is you can title the vehicle
in both the business name and you individually as tenants in
common and that allows us then to maybe have some wiggle room.
00;07;57;17 [Jason]: It's titled in the business, yes, and maybe from the
insurance perspective, it's a, a person.
00;08;04;08 [Rachael]: Personal vehicle.
00;08;06;10 [Jason]: Yeah. And you know, folks have to check with their
insurance agent on something like that. But that's another big
conundrum as well, so. Can we, can we have the company owned
the vehicle and get reimbursed for the miles?
00;08;18;24 [Rachael]: No.
00;08;19;07 [Jason]: No. And how often do we see that every year?
00;08;22;14 [Rachael]: Often.
00;08;23;11 [Jason]: Thirty, 40 times we'll see auto fuel, we'll see auto
insurance, we'll see payment, then we'll see mileage
reimbursement. It's like, do you have two cars? And sometimes that
happens
00;08;34;26 [Rachael]: Mm-hmm.
00;08;35;26 [Jason]: But typically they're double dipping, right? Which is
frowned upon?
00;08;39;14 [Rachael]: Mm-hmm, sometimes, yeah.
00;08;41;15 [Jason]: Alright, let's move along. Joe, Joseph, you just got done
doing a big video on Meals.
00;08;48;18 [Joseph]: Yes, my favorite subject.
00;08;50;05 [Jason]: Favorite subject, yeah, I like to eat too. So I have to work
out every day because I like to eat. You know, tell me about the,
you know, you'll give us a little bit of history, like what was the rule 3
years ago and then talk about how it was
00;09;03;05 in flux for a little bit and then tell us the rule today.
00;09;05;27 [Joseph]: Right, so, you know, we're kind of back to the same place
it was 3 years ago. So, deducting 50% of your meals, entertainment
is gone now, though. And then it was kind of in flux for a little bit
when the Tax Cuts and Jobs Acts came out in 2017 because you
know, nothing against them, but it looked
00;09;21;13 like it was written in crayon, so.
00;09;23;01 [Jason]: It was written in crayon.
00;09;23;27 [Joseph]: Yeah, so. So, you know, they kind of re-issued it and
cleaned it up a little bit so it was, you know, legible? And then we
interpreted that so that we could tell, you know, clients, you know,
what they can and cannot deduct now.
00;09;37;25 [Jason]: Yeah. So the old rule is now today's rule minus
entertainment, like you said.
00;09;42;27 [Joseph]: Right.
00;09;43;22 [Jason]: The old rule is, and still is now, where 50% of the meal is
deducted provided that you are meeting with a business associate,
let's say, and the meeting has to be for business purposes, the
meal is just
00;09;58;10 secondary. Now in reality, probably not, but that's how the code is,
wants you that to, to think, "Hey, we got together to discuss
business. Oh, and by the way had a meal" right?
00;10;09;21 But yeah, Section 274 was butchered badly with the Tax Cuts and
Jobs Act. They didn't change that section, it's still is just as bad as it
ever was from the Tax Cuts and Jobs Act, but the IRS came out
with a, a notice because the AICPA, us professionals, business
owners were all like, what
00;10;30;08 are we doing?
00;10;31;03 [Joseph]: Yeah.
00;10;32;01 [Jason]: So they basically came out and said, it took them 5 pages
to say this, but it says, Hey, old school's new school. So don't worry.
So tell me a little bit about Entertainment. What happened in
Entertainment, Rachel?
00;10;45;00 [Rachael]: It's no longer tax deductible
00;10;46;19 [Jason]: What?
00;10;46;25 [Rachael]: So it's all personal.
00;10;48;05 [Jason]: So I can't take you to a baseball game? Do you like
baseball by the way?
00;10;51;21 [Rachael]: I do not like sports, I'm sorry, but
00;10;54;23 [Jason]: Wow, that's
00;10;55;06 [Rachael]: Yeah.
00;10;55;15 [Joseph]: You can take me to a baseball game!
00;11;02;16 [Jason]: [They all laugh.] That's some fine print in the Profile that I
overlooked.
00;11;02;26 [Rachael]: But you could, you know, maybe buy a meal at a
sporting event if it's separate and still get a partial deduction if it's a
business, you know.
00;11;11;22 [Jason]: Yeah, exactly. So, so we, and that's the example the IRS
uses, A, taxpayer A takes taxpayer B. No one has names, you
know. So, Mike takes Bob to a baseball game and buys him a hot
dog. The tickets for the game, No, the hot dog, Yes.
00;11;26;18 [Rachael]: Mm-hmm.
00;11;27;10 [Jason]: So, provided that, again, there's a business purpose for
that meeting and stuff. So talk to me about disguised
Entertainment. What are your thoughts on that?
00;11;36;27 [Rachael]: Are you talking about staff functions?
00;11;39;03 [Jason]: Well, disguise Entertainment where the price of the meal is
so exorbitant
00;11;43;05 [Rachael]: Oh.
00;11;44;12 [Jason]: It includes entertainment?
00;11;44;26 [Rachael]: Yeah, it's not supposed to be lavish.
00;11;46;27 [Jason]: Yeah, like these baseball tickets are free, but the hotdogs
are like 100 bucks. So we can't do that either.
00;11;54;17 [Rachael]: No.
00;11;55;08 [Jason]: So, how about the de minimis stuff, the office stuff, all that.
How's that work?
00;12;00;09 [Rachael]: If it's for your employees?
00;12;01;28 [Jason]: Yes.
00;12;02;11 [Rachael]: Then it's tax deductible and
00;12;04;11 [Jason]: Okay.
00;12;04;17 [Rachael]: There is no
00;12;05;29 [Jason]: At what rate?
00;12;06;07 [Rachael]: There is no limit if it's on your premise.
00;12;08;20 [Jason]: Right.
00;12;08;27 [Rachael]: Yeah.
00;12;09;13 [Jason]: Yeah.
00;12;09;19 [Rachael]: And it's for your employees.
00;12;10;24 [Jason]: Right.
00;12;10;29 [Rachael]: For the public, maybe it's part advertising, then you have
a regular 50% business purpose.
00;12;16;17 [Jason]: Okay, perfect. So Tina, in her benevolence, wakes up one
day and decides to buy us some pizza so we can work through
lunch.
00;12;24;19 [Rachael]: Mm-hmm.
00;12;24;26 [Jason]: Right? So we can get more things done because that's her
motivation, right? [They all laugh.]
00;12;30;09 [Jason]: So that's 100%, right?
00;12;32;04 [Rachael]: Mm-hmm.
00;12;32;29 [Jason]: Coffee and donuts?
00;12;33;27 [Rachael]: Sure. 100%?
00;12;35;14 [Joseph]: Sure.
00;12;35;20 [Jason]: How about parties, like picnics and all that stuff?
00;12;39;25 [Rachael]: Mm-hmm.
00;12;40;11 [Jason]: One hundred percent as well, right? So, things that you
know, promote Goodwill and all that stuff, you know, you know
those are 50%, but like when you talk about picnics and all that
stuff, that's different. So great. Talk to me a little bit about this guy
Sutter.
00;12;53;17 [Joseph]: Right, very ambitious man. He tried to
00;12;56;27 [Jason]: Dr. Sutter.
00;12;57;15 [Rachael]: Oh.
00;12;59;12 [Joseph]: Dr. Sutter, yeah.
00;12;59;16 [Jason]: Got to make sure
00;12;59;23 [Joseph]: You got to get that
00;13;00;17 [Jason]: Title, title correctly. Yeah.
00;13;02;18 [Joseph]: But he attempted to essentially write off every meal that
he had as a deductible business meal and he now has a rule
named after him
00;13;10;05 [Jason]: Yes.
00;13;10;11 [Joseph]: Because of that.
00;13;11;13 [Jason]: Yeah. So he was a, clever I guess, and maybe audacious
is a fine line between those two. But yeah, he just made every meal
that he had with the business associates, so he never ate alone.
You know, so, and IRS basically said, look, you can't have
substantially
00;13;30;01 all your personal expenses being business deductions, it doesn't
make sense. So, and we talk about unreasonableness.
00;13;38;23 [Rachael]: Mm-hmm.
00;13;39;07 [Jason]: Right? Those are all disallowed. He probably had some
that were legitimate but because he was so unreasonable and so
audacious, they just said
00;13;47;02 [Rachael]: Disallowed all?
00;13;48;08 [Jason]: Yeah. I'll have to look at the court, but oh, the court case,
but yeah, it was pretty bad. Um, no entertainment. We've, we've
kind of gone over that. Tell me a little bit about travel, meals. We
have a lot of business owners
00;14;01;07 who say, "Hey, I drive around all day."
00;14;04;27 [Jason]: So they, they're a sales rep for big pharma, right? I
whipped through Chick-fil-A, you know, and grab me a chicken
sandwich. What do you say to that?
00;14;14;15 [Rachael]: If you didn't travel, would you have to eat lunch anyway?
00;14;17;05 [Jason]: Yeah, exactly. Yeah. When, when, how could they convert
that travel or what type I should say that differently. What type of
travel would they have to do to make that business meal, to make
that meal a business.
00;14;29;18 [Rachael]: A business meal? I think you're looking at long distance
travel, where you're
00;14;34;13 [Jason]: Overnight rest.
00;14;35;01 [Rachael]: Yeah.
00;14;35;06 [Jason]: Yeah.
00;14;35;21 [Joseph]: Substantial rest.
00;14;36;16 [Jason]: Yup. So yeah, so they travel far enough where they need
substantial rest, now that becomes a business
00;14;41;20 [Rachael]: Mm-hmm.
00;14;42;11 [Jason]: Meal, deductible at 50%. But yeah, people are like, I have
to, I drive around on all day and I have to eat. I'm like, well
00;14;47;23 [Rachael]: Yeah.
00;14;48;06 [Jason]: Like you say, if we didn't have to drive around, would you
still have to eat? Well, yeah. Okay. So, no, that's great. Let's, let's
kind of move on here to travel. You know, travel gets kind of
interesting as well, and we're to just kind
00;15;02;20 of focus on domestic travel. I think international, with their one week
rule and all that stuff, we don't really see a lot of that, with the
clients that we serve. But talk to me about, travel deductions in
general, Rachel. Does the IRS happy with those?
00;15;17;16 [Rachael]: No.
00;15;20;00 [Jason]: You say that so quickly
00;15;22;27 [Rachael]: Right, so coping with travel deductions that maybe
doesn't have a business purpose, so.
00;15;27;04 [Jason]: Okay.
00;15;27;09 [Rachael]: Know if, if you're incorporating your travel along with
your vacation
00;15;31;15 [Jason]: Right.
00;15;31;22 [Rachael]: Your family, you know, you've got to think about what is
the valid business purpose
00;15;37;05 [Jason]: Right.
00;15;37;10 [Rachael]: When you're taking you and your four kids along.
00;15;39;09 [Jason]: Yeah. My dad got in trouble because he, he would drive
from Madison to Keystone to go skiing. He took all of us.
00;15;46;13 [Rachael]: Mm-hmm.
00;15;46;16 [Jason]: And he would write it off for the business because he was
looking to expand out here. And he got audited and, and lost as he
should, so. I learned that lesson quickly when I was like 13, so.
00;15;58;07 But yeah, so absolutely it has to have a business purpose to the
travel. Can you do some, some personal things though
00;16;06;12 [Rachael]: Mm-hmm.
00;16;06;17 [Jason]: In your travel? Okay. So give me an example of one.
00;16;10;15 [Rachael]: I'm thinking like 25% of the time, if it was not business
purpose would probably be acceptable for your travel. So if you had
to go to a convention in Las Vegas and at the same time
00;16;25;15 you're bringing your family members to Las Vegas, and they're
going to do their own thing there
00;16;30;26 [Jason]: Sure.
00;16;31;16 [Rachael]: Then there is a business purpose, your time is spent
doing that business purpose. So a, a business deduction is going to
be available to you.
00;16;41;23 [Jason]: Right.
00;16;42;11 [Rachael]: You know.
00;16;42;16 [Jason]: On the travel for you.
00;16;43;29 [Rachael]: For, yeah, mm-hmm.
00;16;44;16 [Jason]: The hotel, who knows, might have to split that up.
00;16;47;12 [Rachael]: Mm-hmm.
00;16;47;16 [Jason]: You know, they're, the IRS, the way I read it, is that if your
business trip is more than 50% for business, then the cost of travel
is deductible. But, we were in an audit, the client wasn't ours we
didn't do the tax
00;17;03;15 return, but I was retained to help with the audit.
00;17;06;27 [Jason]: And the, the guy had a receipt from United Airlines showing
like $1,800 for, for some flights between here and there. And the
Agent, and she's now retired, she was great down there at the IRS
00;17;21;22 office here on Circle in Colorado Springs. But she was like, Well,
can I see their, the actual tickets? I was like, Why? We, we got a
credit card statement, we got this thing from United saying we, we
get all the things you need. She goes, I want to make sure he
wasn't traveling with his family.
00;17;36;16 And I'm like, okay fair enough, fair enough. You know, and he
wasn't, he just bought a very expensive first, you know, first class
ticket. But anyway, it was very interesting like you said that, hey,
you can deduct some of this stuff
00;17;48;21 [Rachael]: Yeah.
00;17;48;25 [Jason]: But, you know. Let's talk about like, let's say you go to that
Las Vegas convention on a Thursday and you also are going to do
some meetings in Las Vegas on Monday, but Saturday and Sunday
you're on
00;18;04;14 your own. What does the IRS say about that?
00;18;08;13 [Rachael]: Well, I'd assume that your convention and your trip on
Monday is a business deduction. And if you're looking at 50%, then
you've got Friday, Saturday, and Sunday, three days, so it might not
qualify.
00;18;21;19 [Jason]: Right. However, if you can demonstrate that going home
would have been inconvenient or too expensive
00;18;29;06 [Rachael]: Okay.
00;18;30;10 [Jason]: Yeah.
00;18;31;21 [Rachael]: Yeah.
00;18;31;27 [Jason]: So as I read it, that Saturday and Sunday is fully deductible
for lodging and 50% for meals like you normally would get, just
because yeah, you saddled business on the front and back end.
00;18;45;06 [Jason]: And 3 out of 5 of those days were business related
00;18;48;28 [Rachael]: Mm-hmm.
00;18;49;07 [Jason]: So then the travel is also deductible. So, anyway, that, you
know, those are kind of some, some interesting examples.
00;18;54;28 [Rachael]: Yeah.
00;18;55;10 [Jason]: You know, somebody spends an extra day somewhere to
see their Mom. We've had folks that have traveled to their rental
and usually their rental is somewhere where they used to live,
right?
00;19;06;01 [Rachael]: Mm-hmm.
00;19;06;19 [Jason]: That's how most people make rentals is they lived in a
house, couldn't sell it, made it into a rental and they go back to
check on their rental, may fix some tile or whatever. But they also
see Mom and Dad because Mom and Dad live in the same city.
Well, okay, what's the purpose of the trip?
00;19;20;06 Please, tell me that it's the rental.
00;19;22;25 [Joseph]: The rental.
00;19;23;02 [Jason]: And seeing Mom and Dad for lunch was incidental.
00;19;24;26 [Rachael]: Yeah.
00;19;25;04 [Jason]: Yeah, exactly. So, spouses and kids, you know, that gets
really murky when we start adding spouses to the payroll. You
know, we add kids to the payroll. Now if they have a legitimate
business purpose, great, and then we can also
00;19;39;15 bring them along, you know, on our travels, that's awesome.
00;19;43;07 [Rachael]: Mm-hmm.
00;19;43;18 [Jason]: But people who have their spouses tag along without a
business purpose, we get a back out those expenses, right? So,
Record Keeping. You did a whole
00;19;52;29 [Joseph]: Right.
00;19;53;19 [Jason]: Blog post
00;19;54;06 [Joseph]: Yep.
00;19;54;10 [Jason]: On record keeping.
00;19;55;14 [Joseph]: Yep.
00;19;55;19 [Jason]: So you're a record keeping expert.
00;19;57;00 [Joseph]: Yes, I, I would say so.
00;20;00;07 [Jason]: Tell us about record keeping.
00;20;01;13 [Joseph]: Yeah. So really the two big parts to record keeping is you
need a record obviously, and then you need something to
document the expense.
00;20;08;17 [Joseph]: So, you know, the record can be a journal, an Excel
spreadsheet, but then that documentary evidence, you know, it's
gotta be something to prove it. So bank statements, like you said,
depending on what it's for. Like, like that auditor said, you know,
she wanted to see that ticket to
00;20;23;01 see what's in there. Same thing if you go to Walmart, right?
00;20;25;26 [Jason]: Right.
00;20;25;29 [Joseph]: If I spend 200 bucks at Walmart, is that all office supplies
or you know, is there, are there some diapers in there?
00;20;31;25 [Jason]: Right.
00;20;32;03 [Joseph]: So that's always something that we go back and forth on.
00;20;34;24 [Jason]: Yup. No, exactly. So the record is that log, QuickBooks,
Excel, whatever, that's your log. And then the documentary
evidence has to show date, i.e. the business purpose in the
amount, right?
00;20;47;28 [Rachael]: Mm-hmm.
00;20;48;17 [Jason]: So, and you can get away with a little bit of just using your
credit card statement, not for typically not for travel, meals, those
things are just, IRS wants flat out receipts, period. But everything
else you can sort of introduce some reasonableness, i.e. the
00;21;07;11 Cohan rule where you can say, look, we're an accounting firm,
there's no way we're not going to buy paper, ever. So I don't have a
paper receipt, you know, I bought a ream of paper at Office Max.
00;21;18;09 It's probably legitimate business deduction. So anyway. Well great.
Well we talked about the biggies that we experience daily, maybe
even hourly. I'll have the car conversation probably 3 times a day
sometimes. But we talked about a car, whether, whether we should
buy it in the
00;21;33;16 business or not.
00;21;34;08 [Jason]: Do we need a car? Yes or no. All those questions we can
help people with that decision easily. We talked about meals,
nothing's really changed there. Old schools new school, just no
more entertainment. And then we talked about a little bit of the
travel expenses as well. One thing I did want to say too is that you
could travel in on a Tuesday
00;21;52;14 night and have a meal with somebody Tuesday night and then meet
with them all day Wednesday, like in business meetings. That meal
because it's nexus to the meetings is so close, that it becomes a
00;22;07;19 50% business deducted meal, even though it might not have, a
specific purpose, it was not business, it was so, so connected to the
purpose of the
00;22;19;00 [Rachael]: You being there, yeah.
00;22;19;12 [Jason]: Meetings the next day. Exactly. So. Anyway, Jason Watson
for WCG Incorporated. We have Rachel Weber and Joseph
Bassett, both tax professionals for us as well. We're here at the Axe
and the Oak, they've been gracious enough to host us
00;22;34;05 and super quiet too. While you guys are getting ready for opening,
we should, we should make some more noise, like some blenders
in ice and stuff. But anyway, this is a, the part of our Bourbon and
Business tour. And again, we thank you for joining us and we'll talk
to you real soon.