How To Save Big Money On Your 2022 Taxes

When you first realize that your most significant personal and business expense—bar none—is taxes, it can come as quite a shock. Seeing so much of your hard-earned money wind up in the government’s hands can feel like a shakedown. That said, spending a relatively small amount of time and effort strategically reducing your taxes can pay major dividends.

Some people resist implementing creative tax strategies because they’re worried it will get them in trouble with the IRS. However, as long as you do things correctly, there’s absolutely nothing illegal or risky about strategizing to pay the least amount of taxes possible.

On the other hand, it is illegal to evade taxes. As the late Martin Ginsburg, Georgetown Law professor and husband of the recently deceased Supreme Court Justice Ruth Bader Ginsburg, said, “Pigs get fat; hogs get slaughtered.” In other words, you want to be smart when it comes to saving on your taxes but not greedy.

As the end of 2022 approaches, we’re entering the most critical time of the year for tax strategy, and this two-part series outlines how you can get fat without getting slaughtered.

PREPARE YOUR FOUNDATION

To save big on your 2022 taxes, your first step should be either building or rekindling your relationship with your team of financial professionals. These individuals will support you in establishing the foundation for developing and implementing your tax-saving strategies. At the very least, this team should include your Business lawyer, your bookkeeper/financial manager, and your tax advisor. They each have an essential role in your success.

If your bookkeeper’s job is more about data entry than financial management, you should look for someone new—or quickly get your current staff trained and up to speed. An effective bookkeeper will manage your books on a week-to-week basis (if not daily, depending on your business). Note I said “week-to-week,” not just month-to-month or quarter-to-quarter.

Your bookkeeper’s primary responsibilities should include daily/weekly cash-flow management, monthly review of reports and categorization of expenses, and quarterly updates of your forecast and projections. Again, if your bookkeeper isn’t providing these types of services for you, your business is missing an essential part of its financial foundation. 

Outside of your bookkeeper, your tax advisor is the person who files your taxes. Ideally, you should meet with your tax advisor AT LEAST twice a year. We encourage you to meet once in May/June (after tax season) and once when approaching the year’s end in October/November. If you haven’t done that, DO IT NOW!

The purpose of the May/June meeting is a general catch-up and mid-year review that lets your tax advisor know what you’re financially on track to do for the year. Then, your advisor can consider the most effective tax strategies based on that information.

When you meet again (NOW) in October/November, that is when you’ll really get down to business. This meeting is when you’ll project cash flow through the end of the year and get a tax estimate using different assumptions, both with and without tax-saving strategies.

If your tax advisor cannot provide this level of service and is merely a tax filer, it’s time to get a new advisor. Your tax advisor should communicate with your business attorney to ensure that your financial strategies are supported with the legal tools and systems necessary to tie it all together and ensure it works properly.

PUTTING YOUR STRATEGIES INTO PLAY

Next week, we’ll discuss how to develop and implement creative tax strategies that will enable you to keep more of your money in your hands rather than the government’s.

5 Ways to Ensure Your LLC is Doing What It Is Meant to Do

Many business owners operate their business as a limited liability company (LLC) due to the personal liability protection an LLC allows. Owners of rental properties also use LLC entities to protect their assets. Why? Because they are smart and because LLCs are not required to adhere to the burdensome formalities and administrative hassles required of corporations.

However, whether you are a full-fledged business or in the business of protecting real estate or other assets, make sure you do it right. Unfortunately, many LLC owners fail to abide by basic operational guidelines and therefore put their assets in DANGER. If you want to maintain an LLC’s personal liability protection, be sure to adhere to the basic operational details.

What Happens If You Don’t Dot the I’s and Cross the T’s?

If you fail to do the basics in operating your LLC, a court can remove the personal liability protection barrier that shields your personal assets WITH A STROKE OF THE PEN! They call is “piercing the veil!” Once the veil is pierced, you and ALL your assets become vulnerable as you are personally liable.

So, what is a savvy owner to do? By implementing and adhering to the following best practices, you can help ensure your company stays in compliance and that your personal assets have the maximum protection possible.

1. Create an Operating Agreement

I hear from LLC owners that an Operating Agreement is not legally required in Colorado. Although that is technically true, it does not mean that it is a smart practice not to have an Operating Agreement. Just because the law does not “require” something doesn’t mean it is not vital or important. Having an Operating Agreement in place provides the essential legal guidelines and framework for how your company will be run and clearly establishes your business as a legal entity separate and apart from you as a person. 

You will be glad you have an Operating Agreement with the protection it provides when your creditors, the IRS, or other people that want a piece of your pie, come calling. We can help you create a robust operating agreement that suits the specific needs and circumstances of your particular business.

2. Conduct All Business in The Company’s Name

All business should be conducted in the company’s name. Your company name is the complete business name, including the limited-liability abbreviation (LLC). And do not forget that you never, ever, ever, ever sign a legal agreement in your name. Every legal agreement and every financial transaction should be signed in the name of your LLC. All business material, including business cards, correspondence, invoices, advertising, websites, and social media, should also use the LLC to identify your company. Otherwise, someone can claim that they didn’t know he was dealing with an LLC, sue you, and seek to get into your personal assets.

3. Keep Your Company Banking Separate. Never Mix Personal and Business Funds

As part of setting up an LLC, we obtain an employer identification number (EIN) for you so that you may set up a bank account in the LLC’s name. Your business account should be used for ALL company transactions, including major and everyday purchases. And, it goes without saying that ALL payments to the business should always be made to the company account. Company funds should never be used to pay your personal bills. Commingling personal and business assets are one of the main reasons courts “pierce the veil” of an LLC’s liability protection. For this reason, keeping your company’s finances separate from your own is a top priority. 

4. File Regular Reports With The State

Nearly all states require LLCs to file regular reports annually. In Colorado, the annual report is filed with the Colorado Secretary of State and keeps that governing agency apprised of key information and changes to your company’s status. As a business owner, you must ensure that your company’s information is up to date.

5. Hold Regular Member Meetings & Keep Minutes

This is another area where business owners fail, as they have “heard” that LLCs don’t need to have meetings or document what is occurring. While it is true that there may not be a specific law or legal requirement that LLCs hold meetings and keep minutes, these are important for several reasons.

In addition to protecting your personal assets from liability, holding regular meetings with accurate minutes provides strong evidence that your LLC is real and observes the formalities necessary to be treated as a legal entity separate and apart from you personally.

Combined with your operating agreement, regular reports to the state, and diligent separation of personal and business finances, such meetings offer extra protection if creditors ever seek to pierce your corporate veil. Holding regular meetings and keeping detailed minutes makes good business sense, especially for multi-member LLCs. For instance, regular meetings facilitate consensus among members when making major decisions, keep members informed of business actions, and provide a forum to plan for your company’s future.

Meeting minutes also provide a clear record of member discussions, votes, and decisions, which can help reduce member disputes and conflict. Plus, keeping detailed minutes provides solid documentation of your company’s operations should the IRS or courts ever request such records.

We’ve Got Your Back

As your lawyer, we are here to support and assist you with setting up your LLC and teaching you how best to adhere to the necessary formalities. Protection from liability is what we do, whether that be through creating an LLC or a trust. Our brightest clients have both. Do you know why? It is to ensure the maximum level of liability protection is in place. Contact us today to learn more.

It’s The Most Magical Time Of The Year… Camp CoCo!

Camp CoCo

“Life starts all over again when it gets crisp in the fall.” F. Scott Fitzgerald

There is a coolness in the air today, which is a sign that fall is on the way. I will welcome the fall season this year, given the challenge we have endured through the past hot, hot summer months.

I hope your summertime was great. Mine has been a summer filled with wonder. For the first several months, the wonder came from you, the clients I serve. I feel blessed to meet and work with such special people. What I get to do every day is life-giving because of you all. To have that as the backdrop for Camp CoCo, which happens in August every summer, prepares me for the joy of being with grandchildren.

The Camp CoCo Crew

You’ve undoubtedly heard the key to happiness is to be fully present in each and every moment. So my estate planning advice for you as we move into fall is to make memories with those you love now! Let me share what making memories looked like for me this summer and how simple that can be.

Every August, I spend one-on-one quality time with my children and grandchildren at Camp CoCo. It is fast, fun, and full of delight. Most everyone knows me as Cris Carter, but my loved ones call me CoCo- hence Camp CoCo. CoCo was the name I chose 12 years ago with the birth of my first grandchild. I can’t believe it has been 12 years, but that is another story for another time.

Camp CoCo has become a family tradition where I get first-class time with my three grandchildren in Colorado. If you have seen me this summer, you know my face lights up when I think or talk about Camp CoCo. It is a challenging time as I find fun, stimulating, wholesome activities for the “grands” who are now twelve, ten, and eight and live in Texas. The days at Camp CoCo are some of the best days of my life, bar none.

The highlights of the 2022 Camp CoCo event included a couple of nights at the Great Wolf Lodge in Colorado Springs, a trip to the newly rebuilt Flying W Ranch also in Colorado Springs, the Larimer County Rodeo, a melodrama titled “To be ORE not to be” at Gold Hill, Colorado, just outside of Boulder and a stay in Winter Park Colorado. And, yes, after Camp CoCo is over, I need a lot of R & R!

From the perspective of the “grands,” they gave the highest score this year to celebrating old-time Colorado tradition at the Flying W Ranch in Colorado Springs. The Flying W is a working mountain cattle ranch that has provided family education and entertainment in the foothills of Colorado Springs, Colorado, since 1953. I lived in Colorado Springs in 2012 when the Waldo Canyon Fire destroyed the Flying W and was delighted that they were able to rebuild and reopen in 2020. That was also the year of the COVID-19 pandemic, so it is quite a testimony to the grit and resilience of the Flying W Ranch family that visitors can enjoy the nostalgia of the old west once again.

Fun at the Flying W Ranch!

The Flying W is open daily from May to October and features western-style living. With its humble beginnings as a mountain cattle ranch in 1947, the Flying W Ranch is a living symbol of western heritage and has many opportunities for adults and children alike. I suggest you arrive early so you can fully enjoy the fun activities, including:

  • Hands-on with the Ranch animals, including oxen, miniature horses, donkeys, goats, sheep, chickens, and turkeys
  • A hayride on the Percheron horses
  • Riding the train through Christmas Rock Train Tunnel
  • Watching the native Indian Sweetwater Plains Dancers around the open campfire
  • Watching Navajo rug weavers and silversmiths
  • Viewing a horseshoeing demonstration
  • Ranges where you can test your skills at axe throwing and archery

Here is a short video to glimpse the fun and beauty of the Flying W Ranch.

The Ranch is open until October 3, 2022, and will have special Christmas shows in December 2022. I highly recommend visiting the ranch sooner than later with your loved ones. You’ve undoubtedly heard the key to happiness is to be fully present in each and every moment. So as my estate planning advice as we move into fall, I say make those memories with those you love now!