Episode 64
Ron Parisi, CPA, JD, has more than 25 years of experience in accounting and technology, which he leverages as a Virtual CFO & Accounting Service to assist other entrepreneurs. His articles have been published in national publications, including the Wall Street Journal and Accounting Today. In this episode, he will talk about the ideal path of a successful business, which highly depends on the owner’s ability to get organized and understand available credit vehicles and tax deductions.
Let’s listen to Ron and learn from the CPA on Fire!
[00:01 – 04:13] Opening Segment
- Let’s get to know Ron Parisi
- Why he loves working with entrepreneurs
[04:14 – 14:19] A Reminder for Entrepreneurs
- The biggest hurdle for entrepreneurs according to Ron
- Don’t miss these tax tips from Ron!
- How entrepreneurs can leverage credit vehicles
- Paycheck Protection Program (PPP)
- Economic Injury Disaster Loan (EIDL)
[14:20 – 22:34] Credit Vehicles and Taxes Explained
- Are you eligible for the PPP?
- Learn from Ron
- Want some Amazon refunds? Check out Getida
- Promo code: FTM400
- The top tax write-offs you’ve probably overlooked
[22:35- 36:42] 20% Income Tax Deduction
- Should you start off as an LLC?
- Listen to Ron’s advice
- Do you want a 20% income tax deduction?
- What you’re missing when you don’t file a tax return
[36:43 – 41:47] Closing Segment
- Get to know Ron more in the Fire Round!
- Connect with Ron! Links below
- Final words
Tweetable Quotes:
You don’t necessarily need to have a business before you can start planning for tax deductions.” – Ron Parisi
“The future is so bright [and] has so much opportunity to grow. Don’t let 2020 split you down.” – Ron Parisi
Resources Mentioned:
- Book: A Confederacy of Dunces
- Firing the Man Episode 58: Joel Bower on Getting Intentional with Your Time
Email ron@cpaonfire.com to reach out to Ron or connect with him on LinkedIn.
Schedule a free financial review with Ron’s team by visiting their website or check them out on Facebook, Twitter, YouTube, LinkedIn, and Instagram.
WATCH OUT for their Prosperity Report, a roadmap for eCommerce and online business.
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Email us –> support@firingtheman.com
Ron 0:00
In my world, it would be perfect that we could work with as many online businesses as possible, allowing them right to use their unique skills to sell their product or services and really sort of off board all of the complexity of their financial operations right you know, when you when you’re starting off and I know hey man, it’s life. We starting off you’re using your personal credit card you’re using your business credit card you’re using, you know, different accounts to you know, push money and acquire money or get money or get credit for you know, your inventory waters or to pay, you know, your search or your Facebook ads. Like, you know, you got to get organized. And you know, the IRS will tolerate a little cross pollination between personal and business. But once you get to a certain place, you need to have a business credit card, you need to have a business bank account, and you need to operate as if it’s a business. The future is so bright has so much opportunity to grow. Don’t you know, don’t let 2020 slow you down. The next 10 years. You know, what we’re doing, we’re marrying accounting services with technology right?
Intro 1:13
Welcome, everyone, to the Firing The Man podcast, a show for anyone who wants to be their own boss. If you sit in a cubicle every day and know you were capable of more than join us, this show will help you build a business and grow your passive income streams in just a few short hours per day. And now your host serial entrepreneurs David Schomer and Ken Wilson.
David 1:37
Welcome everyone to the firing the man podcast on today’s episode, we are joined by Ron Parisi CPA JD. Ron is dedicated to utilizing his 25 plus years of accounting and tax experience to assist other entrepreneurs. Ron’s accounting and business insights have appeared in The Wall Street Journal accounting today in other national publications. As a senior executive, Ron built a multi million dollar national book of business based on his accounting and tax experience, and its relationships to modern business landscape and risks. Welcome to the show, Ron.
Ron 2:10
Hey, pleasure to be here, guys. Thanks a lot for inviting me. And, you know, again, just you know, for your listeners out there just trying to, you know, deliver some value to them try to put some arrows in their quiver, as they go about, you know, operating your business every day, and just, you know, educating them a little about the accounting and tax world that that we live in every day.
David 2:32
Well, very nice. Well, first things first, tell us a little bit about yourself and your story.
Ron 2:37
Oh, yeah, sure. I’ll try to keep this short. You know, I always look at myself, I’m a kid from New Jersey, I grew up outside of the Big Apple of Manhattan, and went to school for accounting, accounting has always come easy to me and tax and started off in the New York area with a big four accounting firm PwC. Worked both in their audit and their tax departments at a certain point, you know, left there and took a right hand turn, and went to law school. And little trivia fact is our newest Supreme Court Justice Amy Coney Barrett was my classmate at Notre Dame. So I was really impressed. Hopefully, you guys were to with her delivery, there are confirmation hearings, but went to law school practiced corporate and tax law, and essentially ended up you know, with a large company, and you know, managed, you know, 35 people, budgets, things like that, and brought me out to the Bay Area, California, and six years ago, I decided I was going to give all that up. And I now own two accounting firms. And the one we’re talking about today is CPA on fire, but it’s a virtual CPA firm dedicated to online businesses. And you know, what motivates me like my why, as you’re talking to my staff about this is, I love working with entrepreneurs, I love the fact that people are out there making something out of nothing, and just contributing to society. And, you know, I look at our role as CPA on fire, you know, we say we’re the V CFO, you know, virtual CFO services for growing online businesses and entrepreneurs. And what that means is the biggest hurdle that I see with entrepreneurs, and why they aren’t as successful as that or they possibly could be, in its regulatory the regulatory environment here, you know, grow to a certain size, you know, for e commerce, you know, you got to deal with income taxes, sales, taxes, local taxes, you want to bring on staff, right, whether you’re an independent, the hire independent contractors, employees, all of a sudden you have payroll taxes, there’s a lot of complexity. And what we try to be is we try to be the who, right for their financial operations. Like, in my world, it would be perfect that we could work with as many online businesses as possible, allowing them to use their unique skills to sell their product or services, and really sort of off board all of the complexity of their financial operations, right. And then additionally to that is just giving them the tools to be successful, you know, that all you know our team, we’re not just accountants, per se. We’re also, you know, really strong analytical people. And, you know, with technology, today, we’re able to see, you know, how these companies are performing, really take a deep dive and looking at the profit drivers of individual companies. So it’s been really I guess, to go back to my story. So CPA on fire has been in existence for six years, those first few years were really dedicated to the tax environment, the last two years, we really evolved and saw the needs of our clients and becoming more and more of that virtual CFO for our clients. And not all our clients are on the program. But we’re always looking for, you know, there’s different packages underneath of V CFO. But we’re always looking for businesses that have the opportunity to grow and grow into those packages. And that’s kind of like it, my challenge to all my clients is, hey, I want you to grow into the fact that you need a virtual CFO sitting at the conference room table with you operating your business and giving you and taking away the complexity and giving you the tools to run your business optimally. So I know that was a long one. So I apologize.
Ken 6:42
No that was great. Yeah, I like the connection with the Supreme Court Justice. It’s always good to have contacts in good places, right?
As you say, I don’t know if she’ll help me with speeding tickets, but if I have some constitutional law situations maybe.
That’s great. Excellent. So full disclosure to listeners, I’ve been working with Ron and his team at CPA on fire for over two years now successfully. And it’s been a pleasure to have experts on tax, you know, in my corner on my team. So with that being said so my background, Ron, as you know, I’ve been a network engineer for about 15 years before, going full time in e commerce and tax is complicated, you know, unless you’re an accountant and a tax accountant. You know, it’s complicated. And it doesn’t really need to be. So what is one thing that you see, or you know, your advice to new ecommerce sellers? They’re just starting, what should they focus on in terms of taxes? The top thing?
Ron 7:39
Yeah, sure. I think they, you know, hopefully, you know, the entrepreneur is ready to get serious about doing this. Right. And, you know, I’ll be honest with you, we have really successful e commerce, clients that have full time jobs, and do this at night, and are just absolutely killing it. It’s, you know, so I mean, it’s possible, you know, that, hey, this isn’t my full time gig, but either way, you know, you need to take this seriously, have a conversation with somebody on structure, you know, and the importance of setting up, you know, whether that’s an LLC Corporation, where, you know, where are you going to be doing operations? Are you going to be using a third party to handle your inventory? These are all important considerations, where you live, you know, if you, California, or you’re in Texas, Florida, so definitely important consideration. So structuring would be the first thing. And then second, is being proactive, again, you know, there’s very little I can do for you Ken you know, you and I, and my team work with you, right, year round, right, there’s very little I can do regarding your 2020 planning and how to reduce your taxes, you know, in 2021, when I’m preparing your return, you know, it has to be you know, understand that it’s a fluid situation, right, that we’re tax planning. And we’re also planning for your tax liabilities. Cash Flow is a huge situation or a huge issue for startups. And man, horror story after horror story come April, and they realize what their tax bill was or is and where, where that money went. And, you know, we’ve had some really, we were just talking to the client, really some horror stories about how to get back on their feet after getting that large tax bill that first year, not understanding, you know, the true the true taxes that go into that. So, hopefully, that will help, hopefully, you know, help some startups and, you know, structuring and being proactive with your accounting professional.
David 9:40
Now, Ron 2020, has been an odd year with the pandemic and there have been a number of different government programs, the PPP the EIDL. And so what are you seeing with some of your clients, you know, now as some of these programs are in the rearview mirror as it relates to forgiveness or perhaps PPP, round two what do you see in there?
Ron 10:02
Yeah, sure. So, you know, unless you’re, you know, abundantly successful in 2020, I would suggest people reach out and get the original PPP, the original PPP loan, you know, even if your schedule C, you know, sole proprietor, you’re still eligible for, you know, some form of PPP. And what the, you know, this last round in December came out that if you have a PPP loan under $150,000, the forgiveness, I wouldn’t say it’s automatic, but it’s darn close. It’s a one page forgiveness application. And it just says that you intend to spend that money, either on payroll or related activities, and there’s a certain percentages, but essentially, you know, that’s free money for business owners that own businesses, and that I, you know, jump up and down to tell my folks tell my clients to go out and get the PPP loan, the talk of the town right now is PPP, version two. And so the Treasury and the Congress threw in this little caveat that said, you got to look at quarter to quarter 2020, to 2019. And you had to, essentially, to be eligible for the PPP v2, you had to have a drop in revenue of greater than 25%. And a lot of my clients, I mean, you know, if you’re in the e commerce business, even any online business, very, very few of my clients actually are eligible that that’s a pretty big drop one. And two is, you know, I’ve seen a general increase in e commerce clients, and just general clients all over on the online space did terrific in 2020. So I’m not seeing so much activity with a PPP, v2 because of the hurdle. And then let’s just switch over. And just Yes, please stop me, if you have any questions. On the EIDL, there was a lot of confusion on the EIDL when it got rolled out. So essentially, there was an advanced quote, unquote, Grant, that was anywhere from 1000 to $10,000. And that kind of came and went, and that was an advance, non taxable, and I don’t, you know, at least that as far as I know that programs been shut down. But there’s one thing that I think that, you know, entrepreneurs should think about, and that’s the EIDL loan, I like it, because it’s 30 year amortization period. So you got 30 years, the Treasury takes care of the first six months of interest payments, and that the interest rates 3.75. So it’s pretty good. And, you know, if you’re looking for some type of credit, it’s a pretty darn good vehicle to go out there and to get. Application process is pretty simple, straightforward. There’s, you know, some criteria that once you get the loan, that the SBA can, you know, tell you how much money you can take out in distributions, and you can loan yourself from the company, definitely need to walk into this with your eyes wide open. But it is a pretty nice vehicle to be able to finance if you’re looking for financing for your company. And that’s the EIDL. Well, you know, the application process is still open on the sba.gov. website. So just let me just flip over to the taxability. Right. So, you know, ABC e commerce company, you know, received a $50,000 loan under the original PPP plan, essentially, what Congress clarified is upon receiving forgiveness, there’s a lot of questions whether you know, what was going to be tax deductible and what wasn’t. So essentially that $50,000 it’s been now ruled that that $50,000 is non taxable, that’s huge. So we have a lot of clients that received 150,000 plus in PPP money. Now all of a sudden, you know, there’s there’s no tax on that money. So it’s a huge, huge win for folks that received the PPP, and you know, at this point to the PPP, version two. So if you’re able to demonstrate that you did, you were negatively impacted in 2020, and you’re eligible for the PPP, v2, you know, that money is also tax free. And so I was just gonna mention that grant money as well is tax free.
David 14:20
I’ve got two follow on questions about PPP. You know, a lot of our listeners are trying to grow and scale their e commerce business to ultimately fire the man, right. And one thing that we’ve talked a lot about on our show is to delay the longer you can delay paying yourself, the more money you can bootstrap into growing and adding more products and perhaps hiring somebody. And I can say in my own business that was true for the first three years was I didn’t take a penny out of the business. And so for people like that, who don’t have payroll expense, how can they, or can they leverage the PPP loan? And the second thing is I’ve heard a lot of people say the money ran out. And you had mentioned that you could still apply for it. So can you comment on that as well?
Ken 15:13
Yeah, I will say, you know, certain things change every day. So, you know, when we talking today might change tomorrow, but for my understanding is that the PPP, original PPP is still available. And that before you apply for the PPP, v2, my understanding is that you should apply for the first version. And that may not be correct at this point in time, but at least when they rolled it out, that was, that was the understanding. But the one thing I tell you, since since April of 2020, you got to be flexible. And you got to understand, you know, it’s a day to day situation. And just to address your first question, and that’s, you know, okay, I don’t have any employees, I don’t pay any payroll, am I eligible? And the answer is yes. You know, so if you are a Schedule C, or you don’t have any employees at this point, you’re still eligible, and they basically marry that, you know, figure how they based the PPP loan amount on your net income. So, you know, we’re saying, you know, we saw a lot of, you know, solos go out there and receive PPV money. And, you know, there’s special rules for those guys. But it’s definitely possible, and you should apply for it.
So, Ron I’ve got a couple of follow ups on that as well. So two of them. So one, if you took a PPP loan, on the first round, do you have to have that forgiven before you can get in on the PPP, version two? And so the second question would be so I know we mainly discuss online businesses and e commerce. So what you’re saying to qualify for the version two of the PPP, hypothetically, let’s say I have an online business and I sell you know, neck pillows for flying, right. And that’s my only product. Well, my revenues would drop by, say, 75% in 2020 versus 2019. That would be the type of business that would qualify for the second round?
Yeah absolutely. So you got to look at, you know, quarter to quarter, you know, unfortunately, it’s not any three quarters, it’s actually calendar quarters. So you got to look, you know what revenue you did in 2020 1st quarter compared to second quarter, and respectively the rest of the year, but I’m sorry, Ken, I kind of missed your first question. What was your first question?
yes, sorry, I jumbled them together. That was my bad. So if you took a PPP loan, or Yeah, if you took a PPP loan on round one, do you have to have that forgiven before you can get a loan on PPP round two?
no, so you just have to have the intent that you’re gonna use the money accordingly. So with the original PPP, I believe at this point, it’s 60% on payroll 40% on other expenses, which would be your mortgage interest, your rent, utilities, things along those lines. So as long as you have the intent to use that original PPP money, and you have the ability to use that on those expenses, then you’re eligible for the version two.
David 18:12
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Ken 19:03
Alright, let’s get back into some tax stuff here. What is one of the top tax write offs that is you know, overlooked?
Yeah. Well, I always like to answer these questions like, you know, let’s just talk about first of all, what’s the biggest place people miss deductions? organization. I mean, you know, when you when you’re starting off and I know Hey, man, it’s life. You’re starting off you’re using your personal credit card, you’re using your business credit card, you’re using, you know, different accounts to you know, push money and acquire or get money or get credit for you know, your inventory or to pay, you know, your search or your Facebook ads. Like, you know, you got to get organized and you know, the IRS will tolerate a little cross pollination between personal and business. But once you get to a certain place, you need to have a business credit card, you have a business bank account, and you need to operate as if it’s a business, but I find that when people start off, man at this organization, we miss a lot. So it’s important to get things under control, and I understand you’re working, and you’re trying to start it off. But, man, it’s nothing worse than leaving money on the table and paying additional taxes, you don’t need to pay, I guess one. But two is, when I talk to entrepreneurs, man, everybody wants to talk about home office, and travel expenses, you know, a little less 2020 and entertainment and meals and, and I find that people are really on top of that, you know, you have to have, I don’t know, somewhere along the line. This is all business write offs, you know, there’s definitely, you know, by having an accountable plan, you can deduct, you know, certain expenses for yourself, that relate to business. So, I find that most people, you know, would be like, looking at like, meals and entertainment home office, like we just have to direct them and help them, you know, be organized and be able to have those and know those expenses and be able to present those, the IRS. But the last thing I think people miss if a new client comes to me is healthcare. And we all know how expensive health care insurance premiums are you both as a S corp owner over 2% as well as a Schedule C filer, you’re eligible to deduct your health care premiums. And this is, this has nothing to do with Schedule A. And for those who are not, you know, technically or don’t know what Schedule A is the, you know, standard deduction versus itemized deduction. And, you know, with the standard deduction being so high $12,000 $24,000, a lot of folks don’t qualify to write off their medical on Schedule A. So this is really good way Hey, if it’s 6000 10,000 $15,000 a year, that’s that’s a full deduction on your tax return. And something that you know, folks need to be mindful of.
Okay, so to sum that up, you would say the structure and being organized right out of the gate is probably the top one, and then you know kind of health insurance a close second?
Yeah. Yep.
David 22:13
So Ron a lot of our listeners are just getting started with their businesses. And we often get the question, do I start as an LLC? Do I start as an S corp? And I know every situation is a little different. But can you give some general guidance there? And also answer the question why there are so many corporations registered in Delaware? What’s that all about?
Ken 22:35
Now the hot area is Wyoming.
David 22:37
Okay.
Ron 22:38
Yeah. But yeah, a couple things is, you know, you got to look at the intentions of the business, right? If you have the intention, you’re starting off, you have the intention that this is going to be you know, you are going to make a go of this. I tell people start off with an LLC. And you know, your listeners need to be mindful, like when I say start off with LLC, there’s two ways of looking at LLC, one from a legal perspective. And one from a tax perspective. Okay. So, you know, I tell people to organize as an LLC, in the eyes of the legal world, the court system, you have to look at that LLC, as a third person in a chair, when you’re meeting with me. So there’s the owner, there’s the company, and then your advisor, right. And that’s how you need to look at that LLC. When you’re 100%, owner of that LLC, for tax purposes, is called a disregarded entity. So essentially, there’s no difference between, you know, you and the company in the eyes of the IRS. So you got to kind of look at that from two spectrums. I think my clients have a hard time understanding that perspective. So you basically start off and organize as an LLC. And, you know, I see the reasons why, you know, particularly on a corporate side to organize in Delaware or from an asset protection, a lot of my larger clients are reorganizing in Wyoming. But, you know, for me, when you organize, or when you start off, I would just organize your LLC, right in the state that you live, you know, if you’re going to be there temporary, okay, maybe you start thinking about, you know, different states. But if you live, you know, I’m in Ohio, if I live in Ohio, I’m pretty much going to organize my LLC in Ohio, without getting too legalistic. I mean, you still have to, you know, register with the state. And as you’re doing business in Ohio, even if I organize in Delaware, so they’re still in California, a lot of people try to escape. There’s $1,000 fee every year for having an LLC in California and people like, well, I’ll organize it outside of California, California is why so that you’re still going to be responsible for the $1,000 if you live in California, and you do business in California, but I guess at the end of the day, you know, I think that folks should look at organizing as an LLC, you have the legal perspective the IRS perspective. as far as an S corp, people just jump into the S corp, I think that, you know, again, you got to talk to an advisor talk to, you know, cpaonfire.com you can talk to us, or you can talk to your own financial adviser, there’s a lot of understanding about s corps. And I think people kind of knee jerk react, okay, I’m big enough, I’m going to be an S corp, and so be it. And then in two years, they find out that was a mistake. Because whatever their plans are, you know, whether it’s an exit strategy, a merger, or things like that. So, you know, before you, you know, make what’s called the S selection with the IRS, you know, definitely talk to your advisor, all the, you know, implications, and what you want to do. I mean, I, I have a lot of clients that, you know, want to build brands, that’s their business, right? It’s not necessarily ecommerce you know, business, it’s a brand building business, and then they flip it and sell it, and then they start up another brand, and they flip it and sell it, you know, so there would be a perfect example, you know, hey, let’s just think about what we want to do, as far as structuring as an S corp. And I know, you didn’t ask me about this, but I’ll still answer it. And that’s the C Corp. And I get a lot of questions about C Corp. The one thing I mean, the C Corp, you know, if you have a Canadian investor, or a European investor, you know, or maybe, you know, you don’t have status here in United States, but you want to operate a business here in United States. That’s where like the C Corp comes into play, and there’s also other tax strategies with a C Corp. But just to be mindful of that, you know, if you are anticipating getting some foreign money as investors, owners, really the S corp is probably not the way to go.
Ken 26:44
So, Ron earlier, we talked about kind of the number one, you know, way to save on taxes, I’d like to dig into a little bit more, maybe some of the hidden ones that are specifically for like online businesses and e commerce, you know, say you’re selling physical products on Shopify, or Amazon or, you know, omni channel. Now, what are some of the, you know, ways to save on taxes specifically for e commerce sellers that maybe you know, people aren’t aware of?
I mean, what is just in general is that just made up just provides the all online businesses was that I see folks are missing what’s called a QBI, the qualified business income deduction, that’s a 20%, income tax reduction. And I just, you know, just picked up a new client where their CPA just completely missed it. So that’s something that you really need to be cognizant of it’s a huge deduction that came out of the 2018 tax changes. So again, it’s the QBI deduction, super, super helpful for online businesses. The next is for e commerce, getting control of your inventory. And that folks have kind of lost their control of inventory. And hey, you know, if you don’t have the inventory, that’s a write off, and that can be deducted on your tax return. And I see that, you know, five years, they haven’t done a true up on their inventory. They’re carrying a huge inventory balance. These are opportunities that you know, you can take, you know, current year deductions on the e commerce. So having a really, you know, current inventory balance is super important. I don’t know, I mean, you guys see that with your own businesses, and how easy it is to lose control of your inventory.
David 28:22
I’ll tell you, so I actually, just last night, did an inventory count, most of my stuff is at Amazon warehouses, so I can pull reports and everything’s pretty organized. But yes, I have about 40,000 units in my basement. And it is not clean in stone, but every and I guess we’re recording this at the end of January. So approximately at year end, I’m doing an inventory count. I was about 25 days late this year, but any way, I could see how that really gets away from people. And then also, like, obsolete inventory that we’re not selling anymore, but we still have on hand, I could see how that could spin out of control very quickly.
Ken 29:01
Yeah. And to follow up on that, you know, as I’ve been scaling around with multiple brands and inventory and I think four different locations now between Amazon and a three PL and Walmart and my own warehouse. Yeah, that is a constant challenge to to manage inventory in an omni channel, ecommerce business. And so you’re saying do a true up, find out what you have? And then if you’re holding some on the books that can be a write off in terms of like, hey, that’s lost or damaged or whatever?
Yeah, I mean, David had a perfect example obsolete inventory, right? You have version one. Now version two came out, and nobody wants version one. What are you going to do with that? And you know, sometimes you can, you can maybe get some scrap value for it. But otherwise, if you got to eat that, let’s get that deduction today. Not tomorrow. So what happens is, I mean, hundreds of 1000s of dollars, I feel like you know, could be you know, it depends on your size, obviously, but could be written off today. And that just kind of carries over and that inventory balance every year and they never true it up and they just carry it. And they end up paying today’s taxes. I mean, you know, you got to look at this. I mean, you pay taxes today, right? That’s cash flow there, you could be reinvesting in the business tomorrow. Right? So that’s huge opportunity costs. Not only is it you know, people tell me, well, I’ll get that eventually. I mean, this, you know, cash is king, you know, if you truly believe in your business, you need every dollar to reinvest in that business and to grow it. And to scale it. I’m big believer in, you know, just being really mindful of your tax liability, understanding your cash flow, and then utilizing that money, you know, and David’s brought up, you know, he didn’t take any money out of first, you know, out of the company, first three years, you know, it’s constant reinvestment, because you believe in the business model you live, you know, and every dollar you reinvest in that business, how much is that going to grow? That keeps at 300% 500%? You know, these are numbers are you should, you know, you should have some type of prediction for, okay, so every dollar I invest today, you know, over the next three years, what can I do with that dollar as I keep on reinvesting it in the business and giving me a return on that. So maybe that $1 is going to grow 10 $20 $30, you know, the compound concept with money.
So as a wrap up on those, talk to your tax professional about QBI, and do an inventory reconciliation, and those are kind of two low hanging fruits there.
Ron 31:24
Yeah. monsters. Yeah.
David 31:26
Let’s talk a little bit about sales tax. And, and we don’t need to dive too deep on this. But again, I’ll use my business as an example, Amazon is my understanding is they’re collecting and taking care of sales tax. And so I really have not done anything as it relates to sales tax. And I know a lot of our listeners are probably in the same boat. So what would you say? What general advice would you have as it relates to letting Amazon handle it? versus, you know, applying for state Nexus and doing it yourself?
Ken 31:52
Yeah, I think they like in your case, right? You’re 100%, Amazon seller, you know, it’s a no brainer, let them handle sales tax, you know, there’s a law there. It’s called the marketplace facilitator law, really requiring, you know, folks like Amazon and Walmart to collect sales tax. And it’s, you know, you gotta you look at it from the state’s perspective, right, the state doesn’t want to track down every ecommerce seller in the country, they would rather go and hold the big companies responsible. So if you’re 100%, Amazon ecommerce, you know, they’re going to withhold the sales tax rate, where people really get themselves in trouble is they got Amazon, Shopify, their own site there, maybe they even have a brick and mortar store. And man, it’s tough to track all that. Because then all of a sudden, these foreign words of Nexus come into play. And, you know, how many transactions are you doing in the state? You know, where’s your inventory? You know, where’s your third party? You know, though, all those questions now need to be answered. And now you have to go out and you have to apply for applications in those states, you have to withhold, you have to set up your Shopify correctly. So, it gets really, you know, a little wild at a certain point, and there’s, you know, I direct people, obviously, we don’t have the technology to do all of this, you know, I direct people to, you know, whether maybe tax jar or there’s two other, you know, that we recommend for people to kind of help them manage the sales tax process, because, you know, it can’t get a little unruly, if you have multiple channels of what you’re trying to sell.
David 33:26
Boy, am I relieved to hear you say that. I know, I’ve got you know, I’m not sure how many states but I know it’s in the double digits in terms of where my inventory is at. So we’ll just continue letting Amazon take care of it. One last question before the fire round, is we have, and this was the case, my first year, I didn’t make any money. And I hear a lot of people say I didn’t make any money this year. And so I’m not going to file a tax return. And can you talk about what these people are missing? Or why you may want to file a tax return even if you didn’t make any money?
Ken 33:59
Sure. Yeah. Well, I mean, other than you’re required to, but let’s just talk about losses IRS has termed called net operating loss. So when you have a loss in your business, you can do some things with it. And again, the IRS has kind of loosened up the rules on this a little, but you can carry that loss back five years, you can carry it forward, and that by you not recognizing that loss on a tax return, you’re not going to be able to utilize it. So let’s just take you know, Ron Parisi industries right. I go out there and you know, after everything I did, you know, really trying to market my brand and you know, have some expenses out there. I had a loss of $50,000. So what does that mean? And I just started say I just graduated college, I got a loss of $50,000 I can carry that loss into next year. Right. And now all of a sudden I made $150,000 in year two instead of paying taxes on that 150 I can carry that loss forward, and just pay taxes on 100,000, saving myself, you know, a good chunk of change on a $50,000 loss. So that would be your number one reason to file a tax return, you know, create the loss on your IRS transcript, and then utilize that loss going forward as you, you know, your company starts spinning off a profit.
David 35:22
I’m glad that you started that off with you’re required to, because often people talk about it, like a choice, you know, an elective decision to make, and I’m very by the book, as it relates to this type of stuff in so that’s often my response, as well. And in your comments on that operating loss. I mean, that really can be an asset in your business, right, you know, an asset that you carry forward to offset future tax deductions and future cash outflows to the IRS. So why not?
Ken 35:53
One of the things that I think people forget is that all the costs that go into, you know, researching, and, you know, taking classes, you know, whether you buy something, you know, class online, and maybe you’ve incurred those costs right in 2020. But you didn’t launch your business til 2021. You know, those are called what’s called startup costs. So we need to track those. And we need to you know, the first $5,000 is written off in the first year, but then you can amortize the rest. So, again, you know, you don’t necessarily need to have a business before you can start planning for tax deductions.
Just as a follow up for all the listeners filing a tax return is required. not optional.
I tell you, Ken, you don’t look too good in orange buddy.
David 36:41
Right. So going on to the fire round. Are you ready, Ron?
Ken 36:46
I think so. Man. Think so.
What is your favorite book?
Ron 36:50
Oh, wow. Favorite book Confederacy of Dunces by Jonathan Kennedy O’Toole or Tool. Super super funny book. Classic. Awesome.
Ken 37:02
I’m gonna have to put that in the list. What are some of your hobbies Ron?
Yeah, what’s something you probably wouldn’t realize like, obviously, I’m a I’m a desk jockey. But I love the outdoors. I love to hike. Love to grew up on the New Jersey Shore. And yes there’s waves grew up surfing when I was a kid surf a little now. And but anything outside anything to get me outside, hike, swim, things like that.
Nice. 2020 is a good year for that right? All right, the last one we have. What do you think sets apart successful ecommerce entrepreneurs from those who give up fail or never get started?
Ron 37:38
Yeah, wow. It’s weird, because, you know, I’m gonna say something that everybody’s heard before, but it’s so damn true. And that’s mindset. I cannot tell you it’s so funny. As I interview prospects, you know, that want to work with us, I can almost instantaneously tell whether they’re going to be successful or not just by the language they use, you know what they have, you know, the person that comes to me and starts telling me about the tax laws, is maybe somebody that’s not going to be successful as they could be. And I don’t mean that in a bad way. I mean, that you need to spend 98% of your time growing your business, don’t worry about the tax laws, grow your business, right? manage your business, understand your business, do everything in your power to grow the business. And with that, like me, I just sat through kind of a futurist conference, right. And they’re talking about these emerging technologies, both energy, food, medical, I mean, the future is so bright, has so much opportunity to grow. Don’t you know, don’t let 2020 slow you down. The next 10 years, you know, from our, what we’re doing we’re marrying accounting services with technology, right? That’s you know, analytics, technology, accounting tax. The next 10 years I tell people are going to look nothing, you know, 10 years is gonna look nothing like today, there’s gonna be so much opportunity for people for entrepreneurs. We hear about disrupting, I mean, man, the future’s unbelievably bright. And don’t let 2020 get you down. You know, fire back up. The future is incredibly bright from from Ron Parisi’s position here.
Ken 39:23
Excellent, excellent advice. Yeah, mindset is huge. And for all the listeners, we did a recent interview with Joel Bauer and it was specifically on mindset. So go take a listen to that one. It’s definitely worth the time. Excellent. Ron. So David, you want to wrap up the show?
David 39:37
Yeah, absolutely. Ron if people listen to this, like what you had to say and and want to get a hold of you for your services, how can they do that?
Ron 39:45
Yeah, I would say the easiest way to do it is to hop on our website www.cpaonfire.com. And you know, we have an opportunity for a free complimentary review Financial Review of your business. You know, we spend a relatively short time, but man, they are productive just to kind of reset both the prospects and people who just kind of want an independent thought on their business. And then, you know, I just wanted I guess, we’re gonna be launching what’s called a prosperity report. It’s really a roadmap for e commerce and online businesses. And that’s going to be coming out shortly. So if you put in firing the man in the little drop down box, we’ll ship that out to you shortly. It’s coming out in print in next couple of weeks here. But we’d really love to you know, if you see there’s an opportunity to utilize our services at www.cpaonfire.com. I’d love to talk to you guys.
David 40:39
Excellent. We will post all of that in the show notes. But Ron, appreciate your time. Thanks for being on firing the man.
Ron 40:46
Hey, David and Ken just wish you the best man.
David 40:49
Thanks Ron. Thank you everyone for tuning in to today’s Firing The Man Podcast. If you like this episode, head on over to www.firingtheman.com And check out our resource library for exclusive firing the man discounts on popular e commerce subscription services that is www.firingtheman.com/resource. You can also find a comprehensive library of over 50 books that Ken and I have read in the last few years that have made a meaningful impact on our business, for that head on over to www.firingtheman.com/library. Lastly, check us out on social media at Firing The Man on YouTube at Firing The Man for exclusive content. This is David Schomer.
Ken 41:31
and Ken Wilson. We’re out
Transcribed by https://otter.ai