Avoid These 4 Costly Mistakes Landscape Business Owners Make
Fellow business owner,
Theres a number of highly educated people who do not want me to share this information with you. Thats why its critical that you read every word that follows. Im about to give you step-by-step instructions to help you put more money in your own pocket and less in the fat bank account of the bureaucracy known as the Internal Revenue Service (IRS).
Before I share these step-by-step instructions, I must provide a clear disclosure. Im not an accountant. I dont provide tax advice for hire. My goal in writing this letter is to simply inform you of your options as a business owner. You should consult a tax advisor before using any of these tactics. By writing you today I am fulfilling part of my goal to teach 10,000 landscape business owners how to double their profits or double their sales in 12 to 24 months. The best news is each of these techniques puts CASH in your pocket! In fact use tactics 1, 2 and 3 to lower your taxes (or much more) $12,912.25 for 2015.
Im Tony Bass. Im a consulting advisor and coach to the landscape industries top business owners. If you and I have not met personally, this letter may come as a total shock. You might say, Why hasn’t my accountant explained this to me? Many of my most profitable clients had this question in the past. Once they learn these strategies, they manage their accountant more effectively to pay careful attention to important details in the tax code. You can do it too!
If we have met and you have been a student of mine for a few years, consider this communication as a courtesy reminder of past education. Make certain you are using all four of these tax reduction strategies in 2015.
Mistake #1 Failure to Claim Your Pre-Paid Tax Credits
The IRS owes you a refund! If you own a lawn mower, weedeater, skid steer, tractor, dingo, back-pack blower or a stand on spreader/sprayer, its highly likely you can lower your taxes with this strategy. Its called the Off-Road Fuel Tax Credit. One simple form and correct record keeping could save you hundreds or thousands of dollars!
It works like this. Each time you buy a gallon of gasoline at the retail pump, your company pays a federal highway tax. If you use this gasoline in a lawn mower, weedeater, skid steer, tractor, dingo, back-pack blower, or stand-on sprayer/spreader, its highly likely you did not drive on the highway. Therefore by using IRS form #4136 you can claim your pre-paid tax credit. Heck, even if you lost money this year, you can claim your refund!
Understand&a tax CREDIT is a dollar for dollar reduction on ANY INCOME TAXES you may owe. Again, Im not a CPA. But if youre not claiming this refund every year, youre overpaying your taxes. Let me share a simple example of how this works. Lets say that you own a 60 inch zero turn lawn mower. You track your hours of use for each year. In 2015 your company put 500 hours on the machine. You track your fuel consumption and you learn this machine burns 1.5 gallons per hour. Heres the math:
500 hours x 1.5 gallons/hour = 750 gallons of fuel
750 gallons x .183 cents/gallon = $137.25 Tax Credit
If you have 10 similar lawn mowers, the tax credit becomes $1,372.50. Over-paying your taxes is like a kick in the teeth. It hurts most AFTER it happens. That is, when you write that check to the IRS, its hurts! If you have one lawn mower but use this tactic for ten years, you just added $1,372.50 to your checking account. You get a pay raise without more work!
Lets consider the impact of this strategy if you own and operate a diesel powered skid steer. You know the one Im talking about? Its super fun to operate, does a ton of work and makes landscaping and hardscaping a lot of fun! Well, diesel fuel you buy at the pump also has road-use taxes. Lets look at the math for a skid steer:
500 hours x 2.5 gallons/hour = 1250 gallons of fuel
1250 gallons x .243 cents/gallon = $303.75 Tax Credit
Do you think this idea might help you lower your tax bill for 2015? You bet it will. And the more you track your fuel use, the more money you save on your taxes. Ive got one more example for you. Consider the impact of fuel use in a back-pack blower. Heres the math:
500 hours x .75 gallons/hour = 375 gallons of fuel
375 gallons x .183 cents/gallon = $68.63 Tax Credit
How many blowers, weedeaters, hedge trimmers, chain saws and gas powered two cycle equipment do you own? Hopefully you see that these numbers can really add up in a growing landscaping company. So do yourself a favor. Consult with your tax pro. If they tell you the tax credit is a bad idea, go get a second opinion.
Id hate to know you made the same mistake one of my past clients made. He had access to this tax-saving information. He took it to his accountant. The accountant told him the special record keeping was not worth the tax credit. Thats simply not true. The more your company grows, the bigger the tax refund! If you find road blocks in getting this tax credit for your company, call me. Ill refer you to an accounting firm that can coach you on a streamlined record keeping process that will make this tax credit as easy as pie. Dont overpay your taxes! Here comes mistake #2.
Mistake #2 Failure to Fund Your Personal IRA, Simple IRA, 401-K or SEP
PAY YOURSELF BEFORE YOU PAY THE IRS! For those of you who run a really profitable business, this may sound like a very elementary tax reduction strategy. But just because you are aware of these tax-reduction techniques, it doesnt mean you maximize their impact on reducing your taxes. Let me give you a very simple illustration.
Johnny owns a contracting company. He works hard everyday to provide his customers with top-quality workmanship and excellent customer service. His company is profitable at year end. He understands that he has a responsibility to plan for his familys financial future. Therefore he opens an Individual Retirement Account (IRA). Johnny makes certain that he places the maximum allowable contribution to his IRA account of $5500. Paying yourself first is a terrific wealth strategy! This becomes a tax deductible expense reducing his taxable income by $5500. Heres the math:
$5,500 x 35% federal tax = $1925 federal tax reduction
Depending on your personal income, your federal tax could be higher or lower. The higher your income, the more you save! If you have a state income tax like we do here in Georgia (6%) where I live, funding your IRA will lower your state tax liability as well. Heres the math:
$5,500 x 6% state tax = $330 state tax reduction
Advanced business owners learn that by implementing a Simple IRA, 401-K or a SEP inside your company, can drastically lower your taxes by a factor of 2x to 4x on the numbers above. There are countless rules, regulations and requirements for company sponsored retirement accounts, so consult with your tax professional regarding this strategy. Its silly to overpay your taxes. As a business owner, the government gives you tools to lower your taxes. Failure to use tools like these is just bad business. You and your family can make much better use of YOUR money than the federal or state government. If youd like help on advanced tax reduction strategies, contact me. Now&get ready for mistake #3.
Mistake #3 Failure to Maximize Your Section 179 Deduction
Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It’s an incentive created by the U.S. government to encourage businesses to buy equipment and invest in themselves. So use this! Invest in YOURSELF and lower your taxes!
Breaking News Alert For Business Owners! – 12-19-15 President Obama has just signed into law new tax code that allows section 179 depreciation deductions up to $500,000 per year…and this tax deduction has been made PERMANENT. So, the example below will be updated on 12-21-15. You’ll learn that investing in NEW equipment can lower your tax bill MUCH MORE than the example below.
As of today, the section 179 depreciation deduction is set at $25,000. This is the lowest its been in years. But, theres talk of this number going up to the 2014 deduction level of $500,000. Regardless of the section 179 limits, failure to take advantage of this deduction means you may be overpaying your taxes. Lets look at an example of the math regarding a section 179 depreciation deduction with todays published limit of $25,000.
Johnny decides he needs to replace an old truck in his company. He buys the new truck for $55,000 using attractive financing to keep his payments as low as possible. By buying at year end (Dec), he spends little to nothing in 2015. Payments begin in 2016. Johnny is ready for the 2016 season and he enjoys a huge tax deduction. Heres the math:
Purchase Price of Truck/Equipment – $55,000
Section 179 Deduction – $25,000 (maximum for 2015 as of this writing)
First Year Depreciation $6,000 (20% of balance for 5 years)
Total First Year Deduction – $31,000
Cash Savings Year One @ 35% Federal Rate – $10,850
Actual Cost of the Truck/Equipment – $44,150
I’d like to point out two important mistakes business owners make regarding equipment purchases. First, equipment doesnt last forever. Failure to update or replace your equipment leads to downtime in the field. Downtime (labor cost) is MUCH more expensive than equipment payments. Just look at your payroll each month and compare that to your equipment payments. Labor is your biggest expense. It always will be.
Speaking of labor cost… updating your equipment can lead to increases in productivity, employee retention or better positioning in your target markets. So don’t think keeping an old truck will increase your profits. Rarely will you be able to pay for major repairs without it greatly affecting your cash position. Rarely will you ever recover the cost of a replacement engine or transmission when you sell old equipment. Further, many banks will not finance equipment like trucks that are over 10 years old. When equipment gets beyond ten years old, the market for that equipment gets dramatically smaller. This means when you sell it, you get pennies when you could have gotten quarters.
Sell your old equipment, use part of the proceeds for a down payment if you like. Keep your productivity high… buy new equipment!
As a courtesy to you, I am linking to a list of discounted DEMO models of Super Lawn Trucks that have been displayed at the recently held Green Industry Expo in Louisville, KY. Although these trucks have a 1,500 to 2,000 miles on them, they have new warranties, attractive discounts and special financing rates just in time for year-end tax planning purchases.
These special offers are available on a first-come-first-served basis. If you have an interest in replacing, upgrading or expanding your company fleet, my team and I would like to help you. Simply print the model youd like to order, complete the credit application on the FOUND HERE and fax both pages to 478-822-9707 or email email@example.com.
Mistake #4 Failure to Continue Your Education
I started my career as a lawn and landscape contractor in 1987. I built that company to three locations and revenues in the millions. As a young business owner, I began to recognize the fact that my technical education in public schools and even my university degree did little (or nothing) to help me prepare to do things like take advantage of the tax reduction strategies above. Ill never forget asking my accountant, What are you NOT telling me? I didnt know what questions to ask. She didnt know what questions to answer. It was like the blind and dumb leading the blind and dumb!
The problem was, the accountant was not an expert in the world of running a landscape contracting company. She was a nice lady, but she was incapable of learning 73,000 pages of tax code and then applying it to my personal tax strategy. As I grew my company, I could afford advisors with specific expertise inside my career field. Over the years, with an army of the best advisors in the world, Ive unlocked dozens of additional tax-reduction strategies. Theres no way I can go into all of them in this letter. This brief report is a gift to help you reduce taxes even if we never work together.
You have 3 powerful questions to ask your tax advisor right now. So give them a call. Dont wait until December. Start your tax reduction planning right now! If you get stuck, contact me. We have additional tax reduction training available.
What Else You Should Do Right Now to Prepare For 2016?
Over the past 18 months, Ive heard the cry of lawn and landscape business owners seeking to grow and expand their company. It goes like this, I cant find good people who want to work outdoors. I cant find people to be loyal and trustworthy. My employees think Im making a killing and they are always asking for more money. My competitors are stealing my best guys for another $1 to $5 per hour. Its killing me. The young people just want a paycheck and to check their Facebook and Instagram page. They dont want to do hard work!
Just like the very specific tax reduction strategies Ive shared with you in this letter, Ive identified 5 simple steps you can use to find, recruit, hire and retain super star employees. My team and I have just released a brand new webinar training event for owners of lawn and landscape contracting companies interested in this topic. So if youre having trouble finding, recruiting, hiring or retaining employees for a price you can afford, I strongly suggest you visit the special webinar registration page below. Get signed up for this upcoming training event. There is a strict limit to the number of people we can allow onto the webinar due to technical license. Heres the address:
Theres no charge for the webinar today, but I plan on this becoming a paid presentation very soon. So go to this webpage right now. If you delay a week, dont be surprised if you are required to pay tuition for this training.
So& Lets review. Lesson #1. Get busy with a call to your accountant. Heres the math: Tax Credit of $137.25 for one ZTR mower plus a Tax Reduction of $1,925 by funding your IRA plus Section 179 Tax Deduction of $10,850 could be yours for total tax savings of $12,912.25. Your results could be much higher! Then& for lesson #2&visit my special landing page listed above. Ill explain step-by-step how you can get ready for the biggest challenge of 2016 and beyond.
Looking forward to hearing of your success,
Tony Bass, Founder
Super Lawn Technologies & Tony Bass Consulting
PS Even if you have been on one of my previous webinars on the topic of Finding, Recruiting, Hiring or Retaining Super Star Employees…
you must get registered for this event right away. My team and I just completed the New Rules for Marketing & Finding Employees Summit on Oct 21, 2015 at the HUGE GIE live event. I brought in a team of world class trainers to assist me in teaching the class. So we have added brand new tips, techniques and advanced strategies to find the best employees once and for all. Even my students who have been with me for more than 10 years are amazed at the breakthrough information I provided at the live event. Ill share more details on the upcoming webinar. Talk soon. www.findemployees50.com