Avoiding Tax Debt: Tax Tips for Small Businesses (with Morgan Anderson)

Angela Frank: 00:00:00

Welcome to The Growth Pod.

Today on the podcast, we have Morgan Anderson, who has been relentlessly representing her clients before the IRS and state tax agencies for over 24 years. During that time, she has resolved thousands of clients personal and business tax debt issues for income, payroll and sales tax.

To say she has pretty much handled any tax debt problem you can imagine is an understatement. Morgan, welcome to the podcast.

Morgan Anderson: 00:00:25

Thank you so much for having me, Angela. I'm really excited to be here.

Angela Frank: 00:00:30

I am just as excited. We were chatting before we hit record, but your expertise is not represented on the podcast at this point.

I think that the tax knowledge that you have is going to lead to such an important and interesting conversation you are going to be sharing. One, how we can avoid tax debt and two, what to do if you find yourself in a situation where you're. Where you are surprised come tax time.

But before we get started, can you share a little bit more about how you ended up working in tax debt resolution?

Morgan Anderson: 00:01:04

Yeah, it's actually a funny story. I was in retail, managing a retail shop in Boulder and I was bored out of my mind.

I knew there was something more, something more meaningful that I could do with my life. And I ended up answering an ad for an administrative assistant. And it happened to be with one of the pioneering companies in tax debt resolution.

And I tripped into a world that I fell in love with. I got to deal with numbers, I got to deal with law.

I got to be a problem solver and really step in and help people when they're at one of the scariest financial points they will ever face in their life, which is having a tax debt and fearing the tax man showing up on their doorstep.

And yeah, it's a world that even though I'm getting ready to start my 25th year of just focusing in this area, I'm still inspired by it every single day. And it's because of the people and the companies that I get to help.

Angela Frank: 00:02:19

I love that.

I think that it is so interesting how you got started for one, but also that it just happened to be something that you've really loved and stuck with for a long time. So let's get into the meat and potatoes of our conversation today and bring it back to the beginning.

What's the best advice that you can give somebody who is just starting out in business and how that relates to how they can set themselves up to avoid text debt?

Morgan Anderson: 00:02:47

Great question. And this is something that people ask me frequently. How can I. If I'm looking at starting a business, how can I Avoid falling into any tax traps.

First thing first, whenever you're setting up a business plan up, whenever you're writing it all out and you're anticipating expenses, always anticipate about 25% more than you can foresee at the time that you're writing out this plan. You always want to make sure you have enough of a financial cushion.

The second thing I would say is absolutely find a CPA or somebody who is a professional accountant who has an, an experienced history with the industry that you're looking at getting into. You want somebody who knows what our standard deductions and typical business expenses so they can guide you through that.

If you can align yourself with a really good CPA or accountant who has experience in your industry, they're going to be able to shortcut and guide you around some of the typical things that they see cause problems for new business owners.

So funding and finding a fantastic CPA accountant, somebody who can almost think of them as a board member for you because you want them to be that heavily involved.

Angela Frank: 00:04:22

I love that the importance of having somebody involved in your business really takes the stress out of, you know, having to figure it all out yourself. And also as somebody who's starting a business, you probably don't know the tax law. I know I don't.

And the different, you know, like you mentioned standard deductions and things that are available. So I think that's such an important tip.

When you are preparing your books with your CFO or your accountant, are there any other strategies that you recommend, questions that you recommend asking them to make sure that you are maximizing your tax deductions in a way that won't leave you surprised come tax time.

Morgan Anderson: 00:05:01

Boy, that is. That's another really good question and one that is completely dependent on what you're doing.

If you are producing a product, you know, obviously it's looking into the line items of everything that goes into that finished product. If it's a service, same thing. It's just a matter of how do you cut your expenses.

Kind of getting creative with how you're arriving at your finished product or service that you're selling. Beyond that, I really can't, I can't give any guidelines about the line items.

But one thing I can say is when it comes to taxes for the self employed individual, right, just a sole proprietor, you have estimated tax payments you need to make throughout the year in relation to the income that you're earning your net profits from your effort.

Now the IRS and the states say, okay, you have to make deposits four Times a year, okay, for the federal government and sometimes the state differ a little bit.

They try to typically stay on the same schedule, but for the federal government, it's April 15, June 15, October 15, and then January 15 of the next year. However, what a lot of people don't realize is you can make a deposit every week if you want to.

So for a lot of our clients who are, let's say, for example, realtors, right. Usually it's feast or famine. They may have three or four big sales and then nothing for three or four months and then a couple more.

Well, we typically will look at their tax rate and say, okay, every time you have a sale, let's take 28% or whatever their tax rate is, carve that out of the commissions before you spend a dime, and make your tax deposit right away. So you could have four or five tax deposits within two weeks of each other and then nothing.

But it's because you didn't have any closings and then the same thing a couple months later. So it's just leveraging your diligence on your end and being hyper attentive to the taxes to stay ahead of them.

Angela Frank: 00:07:32

I really like that tip.

One of the things that I talk about a lot is creating systems that support your existing behaviors instead of creating things that, you know, sound good in practice but are really hard to follow through on.

And so I love your example of if you are in an industry where there's a little bit more of that feast or famine cycle, you know, setup processes that, you know, you can pay your taxes right then and there instead of, oh, now you've already kind of spent your commissions and it's the quarterly time to pay in your taxes, and you were hoping another sale would come through, but it's going to be delayed. And now you're in a tough spot. So I think that's so important, what you were saying.

Let's say it's tax time and, oh, our tax bill is larger than expected. This episode, maybe they didn't hear or something in time to prepare. What tools are available at that point.

You filed your taxes and all of a sudden, whoa, I didn't realize I was supposed to be paying in quarterly taxes. My tax bill is huge and I'm in a tough spot. What is your advice to that person?

Morgan Anderson: 00:08:41

So this is a situation. This is where most of our clients come to us. I have a tax bill. I don't know what to do to start getting in front of it. First things first.

Know that with an older tax debt, meaning Something that is not this current year, we can always set up payments to address it. What you want to do is stop pyramiding or adding new debt on top of the old.

They call it pyramiding because people who have tax debt, right, this is the older layer, and then they add a new layer and then a new one on top of it. And so pyramiding is a common phrase that the IRS and the states use when referring to a tax debt issue. So what you want to do is stop pyramiding.

e quarters of the way through: 2024

So you may not have made tax deposits leading up to now, but you can start this month, start making your estimated tax payments or your federal tax deposits. If you have payroll, start now. Draw that line in the sand and say, okay, I'm going to stop accruing new debt.

And once you make a couple of deposits, once you are showing that you are compliant with the current obligation, then the tax agencies will open the door to solving the old. But you always want to make sure that you put a thick, thick line in the sand and stop the accrual moving forward.

Angela Frank: 00:10:26

I think that is so important. Don't let more and more and more pile up. Like you said, draw a line in the sand and deal with it.

Now, if somebody is in a situation where they have that pyramiding debt, as you've put it, what options are available at that point? Let's say it's old. You mentioned that you know, older than the current or the most previous tax year. What do you do then?

What options are available to entrepreneurs who have created this peer pyramid debt situation?

Morgan Anderson: 00:10:59

If it's income tax, the first thing I would do is take a power position with it. Not let the debt and the unknown aspect of it intimidate you into a paralyzed situation. We call it analysis paralysis. Right?

You can, you can paralyze yourself with fear over the unknown. Know that there is always a solution. I don't care if you owe 10,000 or you owe 10 million in tax debt. There's always a solution.

And when you start being proactive, you take the power position back with it. Right? That's my first recommendation. Don't let the fear of the unknown just quake you in your boots.

It's just not necessary because there's always a solution.

I would say if you are tending to your current obligations, then it is put in a phone call, call them and say, you know what I've got this debt I'm focusing on not accruing anymore. What can we do? If you owe, income tax wise, less than 25,000, don't hire anybody to handle it.

Call the agency and say, look, I need to tend to this with monthly payments, right? Or I can't tend to the debt now, but I have a new contract starting in three months. It's going to allow me to full pay it.

Explain your circumstances to them, and nine times out of 10, they're going to work with you.

If you are in a position where you simply have no money to pay the debt back, the IRS has a currently not collectible status that they will recognize and put you in to give you breathing room to rearrange your financial condition with the hopes that within the next 12, 18 or 24 months, you'll be in a position to start addressing the debt. And during that timeframe, you have no fear of them coming and taking collection action because you've been upfront and honest with them.

They've recognized it. There's also ways to negotiate the total debt through an offer and compromise program.

But they will do a full deep dive on your financial condition and you will have to prove without a shadow of a doubt that you have no way to pay the debt now and you won't have a way to pay the debt for the foreseeable couple of years. Now, the offer and compromise program, a lot of people have seen the ads.

Oh, I owed $50,000 to the IRS and I hired XYZ Company and they settled it for $500. And it's always like a family in front of a big beautiful home with a manicured yard. That is not a reality. That that picture is, is fraudulent.

It can be done, but you have to be pretty much destitute.

I have a case that we just finished negotiating and offering compromise for with somebody on the east coast, somebody in the real estate profession, and just their entire area has become depressed. And she's in her early 60s now, and that's all she knows how to do. So she's kind of locked into that agency and into that profession. Right.

She has two dependent children, both have severe medical issues, so they aren't able to live on their own. And she really has no assets other than a vehicle and no savings, no investments, no nothing.

So we ended up negotiating on a $200,000 income tax bill a settlement of $4,800. But it took almost a year to get through all the negotiations and all the financial disclosure. It can be done.

It's just a matter of can you qualify for it.

Working with a specialist is really the best way to ensure whatever program is available that is in your best interest according to your current financial condition and your short term and long term goals. Working with a specialist is the only way to make sure that the best scenario is realized.

Angela Frank: 00:15:38

tax bill down to: 4800

Morgan Anderson: 00:16:18

A huge sending your kids to private school. That's not an allowable expense when the IRS is digging in.

But, but I will tell you, if you owe less than 20,000 in income tax, it's something that you can handle. Call, explain your situation, set up the monthly payments and you'll be fine.

But if it's something where you have a business and you have unpaid payroll taxes, that's a very sticky situation because they can pierce the corporate veil, LLC veil and hold people personally accountable for the unpaid payroll taxes. Sales tax. Same thing if you have a sales tax that you haven't filed and or paid. And I've seen some that have gotten up to 50 or 60 thousand dollars.

The states get very aggressive about that because they see it as money you took from the public to hold in trust to turn over to them and didn't. So they get very aggressive with it. Payroll and sales tax situations get a specialist involved.

Any income tax situation above 20, maybe $25,000, get a specialist involved.

Angela Frank: 00:17:41

I love that. I think that it's so important to know where the line is, where you can do it yourself or where you need to bring in that additional help.

Morgan, you are somebody who's helped thousands of clients deal with their personal and business tax debt. You are a published author and I'm sure that all keeps you pretty busy. But I'm curious to know what's next for you. What are you working on?

Morgan Anderson: 00:18:04

Boy, you know, I don't have a goal other than just helping the people who come across my desk. You know, my husband and I, we have kids that are in grade school and we try to keep a pretty healthy work life Balance.

I think that is the key to anybody who's in business. Right. You have to kind of compartmentalize your work from your personal and keep a healthy balance.

Physical exercise, being properly paying attention to proper nutrition and trying to just keep a good balance with everything in life.

Taking time out to stop and smell the roses, but also being focused and inspired every day by what desk you're sitting at and what you get to do for a profession. It's all about balance. So just keeping focused on that.

Angela Frank: 00:19:01

That I love that. And creating that space and time for yourself. You are speaking my language.

If somebody is listening and they are in a situation where they want to bring in somebody to help with their tax debt resolution and they want to get in touch with you, where's the best place for them to do that?

Morgan Anderson: 00:19:20

They can find us on our website, Golden Lion Tax Solutions. I'm on LinkedIn. My personal phone number is on both. So reach out to me, our email address. I've got a great team that works for us.

You can reach out to us anytime, any way that you can find on the web. And we always are very attentive to people who are saying, I think I have a problem. Because we know how it is to have that weighing on your mind.

It's really tough.

So we always make it a priority to reach right back out to people if we aren't available to answer the phone because we're handling another situation. But best thing you can do is reach out and say, is this something I can handle on my own or is it something where I need a professional involved?

And we will always give you the guidance if it's not appropriate to bring somebody into the situation. We'll always give you the guidance of here's who you call, here's what you say.

But if it's a situation that warrants a professional being involved, we'll sit down and talk about the situation and the steps that we would take to work to a solution and see what we can do about working together.

Angela Frank: 00:20:37

Wonderful. And the link to your website and your LinkedIn will be in the description.

So if you are listening and any of that sounds good to you, it's right there for you. Morgan, thank you so much for joining us today.

Your expertise really leveled up my knowledge about tax time and I know that our audience got a lot out of it as well.

Morgan Anderson: 00:20:54

Well, it was a pleasure to be here. Thank you so much.

Angela Frank: 00:20:58

Thank you so much for listening to this episode of the Growth Pod. I look forward to seeing you in the next one.