Tips For Lowering Your Taxes – Episode 136

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[00:01] Welcome to the Prosperity Podcast, fresh alternative personal finance talk for independent thinkers who prosper outside of Wall Street. Here’s your host, bestselling author, Kim D.H. Butler and No BS Money Guy, Todd Strobel. Hey everybody, welcome to another edition of the Prosperity Podcast. This is No BS Money Guy, Todd Strobel. Once again, we’ve got bestselling financial author and our co-host, Kim Butler with us today. And today we’re going to be talking about the dreaded three-letter word or four-letter, five-letter taxes. So however many letters you want to put in it and some ideas that, nothing that’s illegal, but some ideas that maybe most people haven’t thought of. And this is ways that you can lower your taxes.

[00:51] And you know, anytime you lower your taxes, this is the way that I look at it. The money that I give to the government is supposed to being used on my behalf. Or if that money were able to be put back into my business and grow so that I was even able to pay even more taxes, where does that money do the most good? And with that question, welcome Kim Butler. Well, thanks, Todd. I’m happy to have this discussion today because it’s something that we’re doing work on all the time and just being as efficient as we can with our tax structure amongst the companies and the way that we handle how we get work done. And I’m a big believer in paying people to do work that you either don’t want to do or are not as skilled at.

[01:45] Because there are other people who love the various types of work that we don’t. And I truly mean that. There’s a job for everybody. And one of the things that we’ve done in our company, and I know many other companies do, is hire children. And this is an area that you definitely want to check with your CPA on because it has some limitations. So we’re just going to talk about it generically today. But you’ll want to check with your CPA so that you get it all straight and proper. But it is a fabulous way to teach your kids some good money habits, as well as help them understand your own system of values around money so that they can start to develop their values around money, as well as get some good legal, totally above board tax benefits,

[02:37] as well as get some jobs done in your company that you don’t want to do. The fun thing about kids, so we’re using the term kind of generically here, maybe I would say, I don’t know, maybe 12 years old on up to who knows how old, is that they will do anything the first time for fun. When my kids were six or seven or eight, so now I guess I’m saying even younger ages, you have to be careful because they’re not going to be able to do a lot. But they thought stuffing envelopes was a ball. And I remember sitting around the kitchen table and us all hanging out stuffing envelopes for a while. I guess this was pre-internet era. But it is something that they thought was fun to do. And so that’s a completely legitimate strategy is take your corporate dollars

[03:25] or your LLC dollars, deduct a payment to your children for jobs that they can do, that they will enjoy doing, and then furthermore you can help them take that money in and realize what happens with dollars and how they can make some choices with those dollars about where they’re going to spend it, et cetera. And it just can really solve a lot of family dynamics because the children then have some of their own money. Now there’s some other things that you can hire kids for. Todd, I think you’ve got some ideas on that area as well. I’ve watched this be done in several different companies. One of the most creative things I saw or witnessed was using your children’s pictures in marketing. So in other words, let’s say that you sent out a Halloween newsletter and you took a

[04:18] picture of your child in their Halloween costume and you included that in the marketing or you put that on your website for that month. You can actually compensate them and believe it or not, the compensation for people who pose for professional pictures is relatively high. So this is just creative ways that you can use and nobody enjoys looking at anything more than kids and dogs. So unfortunately you can’t figure out a way to pay the dog, but maybe you could have the dog stand next to the kid and pay them that way. So yes, I’ve seen a lot of creativity on that. And then the second thing that I would like to bring up is that so many times, especially when teenagers are involved, there’s this pressure to wear expensive designer clothes.

[05:16] And I can’t tell you how many parents have come back to me and said when the child takes their own money that they’re paid and goes to the store and realizes that they could have one pair of these jeans or four pair of those jeans. All of a sudden they get it. Whereas when you’re paying for it, it’s just jeans and they want the ones that all their friends have. Absolutely. What a great way to have the child really get connected with the dollars that come in and the dollars that go out. And again, there’s their own sense of values. Some of the other fun things that we’ve paid kids for and our podcast listeners may remember this is doing a podcast show. And it was a great interview to have a teenager’s perspective on money things

[06:08] at that point in their life. And it was also really fun as a parent of that, of that team to have the recording of their voice that will be held in perpetuity for, you know, just future listening, et cetera. So that was kind of a double benefit. Additionally, if your child is going to school, you can, depending on the price of the school, you can pay them to do some work in your company. Maybe they can help out with some social media posts. Maybe they can write the intro to an article. Maybe they can create some Facebook pages. Maybe they can pull some graphics or pictures for LinkedIn material or what have you, and you can pay them for that. And then they can pay their own tuition. And again, you have to be careful with dollar figures.

[06:59] And again, we’re recommending you check with CPA on this, but how much better for you to pay them and them to pay the tuition than for you to just pay the tuition straight out. And the same would go if you need to help them with car payments or car insurance. I think you’re better finding a way to pay them for something that they are helping you with and then letting them make their own car payment rather than just you making their car payment directly, because there’s just a lot of good that’s going to come to that child from seeing that money come into their checking account and back out and literally physically seeing that every single month. Super. And again, we like to rack up as many wins as we can on each

[07:43] transaction that we make. So let’s just kind of back up and look at this. Is it a win from the company point of view? Absolutely. You get a deduction, a proper tax deduction, payroll taxes and everything. Is it a win from the child’s point of view? Should be because they’re getting some money that you will want to make sure they get to have some choice with. You don’t want to dictate all of where it should go. And is it a win from the parent’s point of view? Absolutely. Because you get a chance to teach them values in a logical, relevant setting without having to pretend or create any false story around it. And then I’m going to throw in one more. And that’s that that child is either going to save or spend or some

[08:33] combination of both, which would help the entire economy. So I’ve got four wins so far. What do you think? I love it. So this is kind of like your dollars should do lots of jobs. We just created four jobs and they were all wins with your good thinking. So, yeah, any losses. Not that I can think of. Can you? The only thing I can think of is that, you know, if you just get carried away with this idea and you don’t listen to your CPA and you pay your child $70,000 for stuffing envelopes is a way to hide money from the IRS. You could create quite a hole for yourself. There you go. Very important. A literal loss, a tax loss, because if you do go overboard, it can definitely come back onto your tax return, which is not something that you want.

[09:27] I thought of another win. I just did this with my 20 year old son recently. They, depending on how far you go with this, they can end up with their own tax return, which if they’re over 18 is completely legitimate. And so we had an opportunity to sit down and go over a tax return. And of course, how much more meaningful was it to him because it was his income, his numbers, his name at the top, et cetera. So it was a true learning experience. Super. And again, that is going to enable him to get loans in his name, which is going to build his credit score versus having car loans under your name, he’s going to be able to show income another win. Yep. Love it. I think we’re at seven. Super. What, anything else you want to add?

[10:12] No, but let’s do open the door for questions. So if you have questions, we’re suggesting that you check in with your CPA, but if you have something that you want to check in with us, or if you have a great idea that you used in hiring your own children inside a company, please send it to us at hello at partners, number four, prosperity.com. And if you’d like any further thinking about how we handle people’s finances, there is an ebook available at partners, number four, prosperity.com slash ebook. There’s an audio version as well. It’s called financial planning has failed and talk about good reading for kids. It’s got a fun story at the beginning, some interesting history in the middle, and then some great suggestions that even an 18 year old can start to implement.

[11:03] Awesome. Well, thank you so much, Kim Butler. Thank you to our listeners. And again, like I said, I bet you guys have got some stories out there that are better than even the ones we told today. This is no BS money guy, Todd Strobel for the prosperity podcast, saying take care and see you again soon. Thank you for listening to the prosperity podcast to take control of your money and have it work for you. Visit us at partners for prosperity.com. If you liked this episode, make sure you subscribe and leave a review.