some tax savings and some way to save some money because let's be honest, we all work hard in our businesses and we want to keep as much money as humanly possible. So, ⁓ so yeah, check out this episode. Hey, welcome back to another episode of freedom blueprint podcast. I'm your host Justin Deese and I am joined today with my lovely guest coach, Kristen Deese, virtual CFO. And we're also here with Matt Abbott, who's going to tell us about.

Let's go, hosts.

How to not spend so much money on taxes?

Yes, that is right. It's a problem plaguing all Americans right now and ⁓ I don't think anyone actually likes to pay taxes, do they? Okay, my house either.

I don't think

Not in our house.

So

can we take a second just real quick to describe the differences between the virtual CFO and the tax side of things? I think sometimes there's some confusion there. Business owners will hire a CPA in hopes that they get some financial advice or strategy when really what they're getting is a tax professional. And then a tax professional's goal is to have the net income be as low as possible for tax purposes, but the CFO's goal is to get it as high as possible for evaluation. So we look at the same

set of numbers just through two different perspectives. ⁓ And so I think that a lot of times it's important that we define the difference. It's kind of like an installer technician versus a service tech, right? We're looking at the same equipment. We're just doing it from a different perspective. maintain it in a different way.

Yeah,

and thank you for sharing that because I actually had never even really considered it from like that perspective myself and I talked to a lot of CPAs and I talked to a lot of CFOs but man that's like that's a hit you in the head kind of aha moment there. It's like wow they really do look at it from pole

Yes,

polar opposites. And then there's some times where it creates a rub, right? Absolutely. the CPA is trying to get that as low, like the tax professional is trying to get it as low as possible. But when we turn around and we want to sell our business to private equity or whatever, we're trying to get the highest value possible. And in order to get a high value, we have to have a high EBITDA.

So do you think you just time when you listen to one perspective more than the other, right? Like when we're in, you know, growth phase and when we're, you know, in viability phases where we're having the CPA side of things of let's keep that income down, let's keep our tax burden low. And then, you know, when it is time to sell, right, then you're like, okay, CPA, it's time to go into the closet. No one needs your opinion for a while and we'll come back to you when we're ready to like, you know, hit the ground running.

I know. I think that they can work cohesively together because I think that it is important to keep tax liability as low as we don't want to pay more taxes than we need to. ⁓ So I think that if the business owner can understand that ⁓ maybe from the operations side of things, from the CFO side of things, we might rework the perspective of the P &L. So we might put some add backs back in there or we might do some things to boost the EBITDA from the operations standpoint. It does not negate what the tax side of the

else is doing, but it does show what we would consider a true operational net income.

Right,

Yeah. All right, cool. Well that definitely sets the stage for, know, kind of where my puzzle is fitting into this because I do talk to both and both parties really do have to have that buy-in, especially in tax strategy specifically. It doesn't matter if you're doing like R &D tax strategy credits or, you know, in my case I'm in the insurance world and I do benefits tax credits and, ⁓ you know, not marketplace stuff. There is a difference, right? But ⁓ yeah, you know, when you blend those two things,

But you have to have the whole team's buy-in to make a decision about your tax credit. Yeah, for sure. So yeah, there's this new program that it's the Self-Insured Medical Reimbursement Plan. Sneakily enough, the big dogs have been doing it for a long time. These tax codes are not new. They're just...

this is not a big

beautiful building.

No,

it's not. It's not like a revolutionary tax code that just happened, you know, new administration conversation. It's technology has caught up to what the big dogs are doing and made these tax strategies turnkey. Right? Because like, you know, the Walmarts of the world and you know, those big Fortune 500 companies, they're already doing this tax strategy. They just did it for themselves. They have their own products in place. They have their their self-insured, you know, to the nth degree. So

these guys are already taking advantage of it. it's probably for the last couple of years been the biggest headache for me is like, ⁓ contractors are suspicious people. And you come to them and you show them something that's a tax strategy that actually puts money back into their business and the costs are less than the tax savings that it generates.

What's

the catch? Am I going to go to prison?

Am I going get audited?

Yeah.

Yes, right, exactly. Are you going to get audited? Probably someday. Is it going to be because of what we're doing? No.

We better not put that out into the universe. True.

Yeah, right, realistically speaking, I'm not holding the crystal ball, right? And what I'm doing for you and your business isn't going to be the thing that makes you show up on the IRS's crystal ball. Right? So there's that reassurance there, but from our perspective...

We have been through audits. We're heavily in the public sector, school districts, know, 501Cs, they do get audited annually. like, that's just part of our process. But we actually can tout that we're one of the only players in the game in this tax strategy space where we guarantee 100 % of any audit. So when our strategy is in place, we can put your fears to bed because it's actually in your master service agreement that will guarantee your audit because, we do it already.

attorneys on staff. We've got it all put together. ⁓ What this really is, and I don't think anybody ever really wants to talk about insurance. Or taxes. Or taxes.

You're like it's like the worst of two worlds. It really is.

business.

contract.

that's really the only thing that held me back from being a contractor myself. You know, I did, I did almost eight years in the military and that just losing that career path was a huge shock for me. And God blessed me with the great financial headwinds that came with, you know, the post COVID trading world, go AMC, go GameStop. But that really gave me my freedom. And I was in a situation where it was kind of a tumultuous renaissance.

for my raise and my bonus package. was running a plumbing department. I was a service manager. man... ⁓

I was studying financial things. I knew what inflation was. They're trying to give me a 7 % raise and inflation's like 12 % right then. I'm like, dude, like I'm losing money this year because, you know, so, and we just had banner years back to back with the post COVID era. I'm like, I want to get paid, like something more than less than inflation. And they,

They wouldn't move the needle on that, so I ultimately signed to keep my pay what it was, what they offered me originally, and I just couldn't sleep. I couldn't sleep, and I turned and I turned and I turned, and I was like, you know what? We are okay.

Like, if I decided not to work tomorrow, I'd have 10 years before my current bills would come to haunt me. And I was like, you know what, I'm just gonna bet on myself. What can I sell from a chair? So then started going on Indeed and I found life insurance and health insurance at first, and I learned that. And then I started to see the opportunity in employer benefits. It's really hard to get in to employer benefits. mean, it's definitely not a short sales cycle. Timing is everything.

with company benefits, right? Everybody does things on a cadence. So it's really about just being in it for a long time. I've got this money set aside, like I can really like float myself for a long time, have this business and get it going with the time that it takes. And here we are three years later, we're the number one benefit administrator for contractors in the country.

Beautiful. So for any of contractors listening or watching on YouTube, how do you help them? Yeah. In very contractor terms.

Yeah.

Yeah, absolutely. So we do technology enrollments. like your employees, they get like a very simplified link that has a portal and a menu that they can pick all their sponsored benefits through. And then additionally to that, our tax strategy component. We are one of less than 50 players in the country that are utilizing this benefit the way that we're utilizing it. And we're talking about serious implications, especially the larger you are.

So because we're affecting fixed costs, right? FICA, FUTA, SUTA taxes, which everybody hates today because it's match.

Right? So we're shrinking that by $14,000 per employee per year of taxable income. And then that stacks up to be about $600 in net revenue per employee per year. So for every employee that you have, not only are your employees getting better benefits because of the tax strategy, you're also getting revenue back because you're not paying Uncle Sam more fixed costs. you tie that piece in with the benefits that we offer, it's a no-lose situation for our contract.

that are out there because it's great for your recruiting and your retention to have these benefits. It's communicated at a high level to your employees and then ultimately, you know, it's simplified in the sense that they don't have to go and do a bunch of research on their own to figure out their insurance. It's all right there in a nice little menu for them. It shows them their copays, their deductibles, their doctor's networks and all that.

So are these benefits that are being offered through the mainstream carriers?

Yeah, yeah, we use a lot of the mainstream carriers. But one of the cool things about us is because we are a privately owned and family operated shop is we have some nimbleness to us. So there's something called a TPA. It's like third party administrators for plans. So you can like go and buy like a United Healthcare Doctors Network, but then have a TPA plan on top of it. it's someone else is cutting the check, you just have access to that doctors network. So we're able to get really competitive prices.

for the same plans that your normal United plan would be double that, right? For the same product. So we have that flexibility to do creative things that some of the bigger guys are just unwilling to do, right?

And I think

benefits for any of the contractors out there, I mean, it's definitely going to be probably one of the top five expenses.

⁓

Yeah, when you're talking about employee retention, for sure. I mean, to be a peddative employer, have to be able to offer benefits.

And

I bet that most contractors fall inside that set it and forget it mindset and they don't do anything until they get a 25 % rate hike and then they're like, oh shit, I better do something. I gotta do something to fix that problem. And I think this is pretty cool. for anybody listening and watching, how would they get in touch with you to find out more about all the money you can save them?

Yeah, absolutely. So you can definitely find us on all the social media platforms on our website. One of the cool things is ⁓ recently we were at the tap event in Savannah, Georgia, and Marcus Sheridan came and spoke to us and he built the online pricing tool. And so I started doing some research and in my business, there is no online pricing tool in the sense that you're thinking of for employer benefits. So I'm actually going to announce this first live.

here to you guys. This is nowhere else. Right now this is hot and fresh information. We are going to have the very first employer benefits online pricing tool and contactless sales process. You'll be able to submit all your documents and get a quote right through a secure encrypted drop box to explore your benefits and then obviously ⁓ improve them without that cumbersome sales process that you might have been used to in the past.

I'm gonna need a link to that.

Yes

we do. so what you're saying is, is if I go to your website to get insurance, I'm not going to get 60 phone calls for the next six months from outside companies? Oh yeah.

that will give you all of the prices from the top plans in your area. obviously, we get thousands of plans back, you guys. So we'll take the competitive things and show that to you. We're not gonna show you a thousand plans.

But sure. So one of the bigger obstacles that we see, especially for the smaller businesses who are ready to take the step of offering benefits. But one, they have a budget, obviously. But they're they're like ready to take their employer side of their world to the next step by offering benefits. But you have minimum enrollment. So that's one piece. have minimum enrollment, minimum enrollments that we have to meet. And then the second piece is when they start pricing it out and they realize how expensive it is, they

to go the minimum contribution, which is 50 % of employee only, of the lowest plan. doesn't do anybody good. And then now they're fighting against each other because they don't want to offer more on the contribution, but they're not getting the enrollments because they're not offering enough. And it's like this double edged sword. There's been times even in our young business entrepreneur journey where I've worked for months to put together a health insurance program thinking that it was like the greatest thing ever. And then I couldn't get enough people to sign up for 10 % that sign up. Right. And I'm like.

What? You guys are asking for benefits. Here they are. What more do you want?

Yeah, that's, that is a

really common situation, but there is hope out there. I really hope that you reach out to us. We do have, like I said, a lot of creative options for that business that's just trying to break into benefits. If it really does come down to price, we have those price solutions for you. It's called Minimum Essential Coverage. It's a MEC plan. It's a piece of paper that allows you to get your physical, get a scan, like an MRI, an x-ray, and do very basic things.

And then you know kind of like why you know you had me on today Let's talk about the the simmer program and the tax strategy side well a component of that program is Afflac style benefits the hospital indemnity benefits so like if you wind up in the hospital like crap You're gonna actually get money for that event now with a MEC plan. There's no deductible or max out-of-pocket so this tax strategy would actually give

them a little bit of that peace of mind for not having that because the MEC is the thing that makes that's the minimum essential coverage right that little stamp of approval means that we could smurp you too. it's you know a program the smurp puts money back into the business so after you pay your invoice you've made money.

So, Meckan and Smurpin, sounds like

back into your business in the form of tax savings. And then we do a MEC plan, and that's for people that don't want to come out of pocket with extra money, it's like $150 for a family plan. For like the top one. So it's super cheap, not cheap, but it's affordable, it's cheap.

Yeah, mean compared to in...

Yeah, it's cheap. So there is hope out there for you. And then, you know, the beauty is, is we can always do a MEC and a regular insurance plan. So if there are employees that do want to buy up and get that traditional insurance, you know, we can have both options in place. Yeah, cool. Which, you know, you're not stuck into like one size fits all, which I think everybody hates.

Yeah, for sure,

for sure. So is the tax strategy something that you're able and willing to talk about on the podcast or is that something that is unique to each business like through a quoting process?

Yeah, no, it's widely available. Like I said, we're affecting fixed cost, so it's kind of a pretty standardized equation. for each employee that you have, it will amount to about an average of $600 in net tax savings per year. So if you've got 100 employees, there's $60,000 that I just put back into your business.

Okay, but so, but my skepticism says, but how are you doing that?

Yeah, that's a great question. we are using section 125 and section 105 tax codes and we are drafting cafeteria plans and then we are utilizing the subcode in there for reimbursements. There's a whole thing about medical reimbursements that are qualified inside of the IRS handbook. Well, we know what those things are. So we have built an aggregated program that qualifies for that.

reimbursement, is valued by the Department of Health and Human Services. So the actuarial value of the program is what the tax deduction is.

Right? And then that's what also qualifies for the reimbursement. So you're going to see in your employee's paycheck $1,173 comes out of that employee's paycheck every single month. But $1,173 of those dollars also goes back into that employee's paycheck every single month after taxes are calculated. Now...

those dollar amounts are substantially less than the actual cost to run the program. So the fee to like have the program is $129 a month and that is shared between the employer and the employee. So the employees pay $89 of that fee and that comes out of their tax savings side, right? Cause they're also getting tax savings. So they're going to actually get an increase in their net pay too. Right? So it's, it's this unicorn of a win, win, win all the way around.

Do you know if the reimbursement piece of that, if somebody, let's say we have an employee who's in that program, they've been in that program for a year. Yes. Okay, when they get their W-2, are they gonna be showing the full wages of the gross amount that they earned? is it a net amount and then a separate box is the reimbursement?

Yeah,

so it's a box 14, I believe it is on the W-2. Well, that's like the number that if you were to go and like try and get a mortgage. Yes, exactly. Or a car loan. That's the number they're looking at. That would be the whole number before the 14,000 is taken out. Got it. The 14,000 is only coming out of their taxable income. And then there's the reimbursement. So it makes them whole.

Great. And then is the same go for their social security like pay and all

Great

question. I have not actually had anyone give me that question live before, so I'm super excited to answer this one. So as you know, Social Security is not what you pay into it. It's based on the average of what, 35 years of work, right? So again, you circle back to what's your gross.

Okay, so it's still all fool gross.

Exactly. Yeah. it's not what you pay into it. Right? So your social security taxes will come down, but because even though you're paying into it less, you're actually not being affected by it.

Got it. Nice, I like it.

I don't have any questions. I mean, it's really cool stuff.

You

I'm glad to have you as a guest on the podcast.

Yeah!

This all falls in your lane, not mine anyway. it's great because I like to learn because I remember ⁓ we had an employee, were, I don't even know what it was, but that was their concern was like, well, if I'm going to buy a house, am I going to have a...

Yeah,

yeah, and we couldn't, unfortunately we were not equipped to answer it. We were like, how are you even, how are you even thinking about social security? of all, you're 25. Second of all, it's not gonna be there when you're to cash in on it anyway. yeah, Exactly. So yeah, no, that's super cool.

So for any of the contractors listening, watching, all this information, contact information will all be in the description. ⁓ So reach out, man. And thank you so much for coming on.

Yes.

Of course my pleasure it's ⁓ you know I feel like I'm back in that like part being in a service because you know the trades gave so much to my family, know, you've worked with my dad you know my dad and ⁓ Just any way that I can give back to contractors it lights my whole world up You know I I do a lot of business with other industries like HR companies and PEOs or you know like kind of more so Who usually talks to me because who likes to talk to the insurance man?

Honestly, if you're a contractor, I would love the opportunity to help you. ⁓ It is near and dear to my heart to give back to you. Contact information that I'm sure your team will put up here ⁓ for fancy on everybody. then obviously on my website, you will also find my new pricing tool.

So how can they reach you? ⁓

Nice.

Awesome.

Yes. Hail Caesar.

Ha ha ha!

We'll see you guys.