 All right, we'll go ahead and get started. Glad you're right here on the very front row. I'll probably point at you about 50 times today. Good. Let me give you just a quick little story. You know, I got to tell you that I've only been involved in the WordPress community for a few months. And I'm an older guy. I'm looking around. Probably one of the older guys in the room. And so my background, I used to come through Dayton before I-75 was built. So that tells you kind of how old I am. But, you know, I used to tell everybody, because when I was in college, we didn't have computers. So I couldn't learn code and do all that because we didn't have any computers to do that. So I'd always say to people, we didn't have computers when I was in college. Well, in 2003, I became a grandfather. And my grandson, smart little guy, came up a little bit. And in 2011, I had my fourth grandchild. And my granddaughter, when she was two years old, was sitting on the floor, playing with the iPad. And my grandson, who at that time was eight, leaned over to my wife and said, you know what, Grandma, when I was her age, we didn't have iPads. So I thought, no, that's pretty interesting. So that's kind of the way I was. So I got involved with the WordPress community. And I got to meeting people that were all business people. They were doing WordPress for various and sundry reasons. They were doing coding. They were doing it independently. And so I thought, you know, with my background, there may be something that I have to offer to this community because I certainly can't offer coding advice. I can't offer any computer advice, but I can offer some tax advice. So my background is in the tax industry. I've been around for a while. And so I just wanted to share some things so that you all may be helpful to you. But Benjamin Franklin said it in the 1700s, there's only two certainties in life, death and taxes. And then Dennis Waitley came along in the middle 80s. And he said, you know, there's another certainty in life, and that is change. So when you put taxes and change together, there's a lot of stuff going on. So we're not going to talk about death today. We're going to talk about taxes and change and changes in the tax law and how you can take advantage of them either as an individual or as a business. Is anybody apprehensive about the IRS? Everybody nervous about the IRS? You hear all these stories about the IRS and how they'll come and do all kinds of things to you. But the IRS was established or founded in 1862. And then in 1953, the name was changed to the IRS, the Internal Revenue Service. And they are responsible for collecting the taxes. Now they don't do the tax code. They are responsible for upholding and enforcing the tax code. Now the tax code is created by Congress. So the Internal Revenue Code is created by Congress and it is 74,000 pages. So when you do your income tax return, whether it's for your business, whether it's for your personal, all of the laws and all of the rules for 74,000 pages become a part of that. Well, last year in December, we had the Tax Cut and Jobs Act. And it was signed on December 22, 1917. It shows you how old I am still thinking the 1900s. But it was signed into law on that and it was the biggest overhaul in a generation. They haven't had as many sweeping changes in the tax law in 30 years. So this was a big deal and it's impacted everybody. And I'm sure you've read about it, you've heard about it in the news, you've heard about it online. Every day there seems to be some kind of a story. And now we're right in the middle of tax season. How many of you have done your taxes this year? A few of you. Did you get more back or less back? A little less. A little less. What about you all? More or less back? The papers say that early on in the season people are getting less back. But now they say they're getting more back. So one thing that we'll say when we get into Q&A, the answer is, well it all depends. It depends on your situation, it depends on where you are. So the IRS was responsible for taking the laws and in a short amount of time putting them into documents so that they could be executed this year. So with the government shutdown, we're a little bit behind or they're a little bit behind. So here we are. It's time for us to do our taxes. And this is a cute little joke here. So when you are a WordPress community and you work on programming or if you do websites for people, one thing that you have to determine is whether you are a business or a hobby. A lot of people, they get involved with programming, they get involved in doing websites for people and they do one here and one there and they don't do it on a regular basis. And they might not claim any deductions for any of that. So they might be doing it for a hobby. Well on this new tax law, a lot of changes happen and a couple of them were this. You can no longer claim deductions for business losses on your Schedule A. Used to you could claim that. So anybody that itemizes deductions this year cannot claim any kind of business at all. In addition, you cannot claim any expenses for a hobby. You could before, but in the Tax Cut and Jobs Act, they cut out all expenses for a hobby. And I'll give you an example of that. If somebody were a painter and they painted, not houses, but they painted pictures and they sold the pictures and they made $3,000 for selling their paintings to people around the country. And it cost them $1,000 to pay for the paints and to travel to fairs and that kind of thing. They have to claim $3,000 in income and zero expenses. So if you're in that situation that you're doing WordPress and you have some expenses and you're doing some work, you need to then decide, do I want this to be my business so I can lower my taxable income or do I want it to remain a hobby? And if you want it to be a business, you have to make noise. And what that means is you have to have records. You set up a separate bank account so that you can have all of your income separate. You write your checks out of a separate bank account. And you can then start continuing education. Something like this is continuing education, getting you more knowledgeable about what you're about as far as your business is concerned. So you have to make that determination. And if you want to take advantage of the tax laws and take advantage of the allowable deductions which we're going to talk about in a minute, then you need to make the noise and you can set it up as a business. So in setting it up as a business, we need to understand the business structure. And so whenever I talk to you, I want to talk to what the majority of you may be involved with and that is sole proprietorship. So a sole proprietorship, sole means one. And so you have to be the only person involved in the business as far as the management of the business. Now a husband and a wife work together and they do things together in the business, then it's not a sole proprietorship. If the husband makes decisions for the wife or the wife makes decisions for the husband, it's not a sole proprietorship. It is a partnership then and there are different tax laws and tax rules. So most of you that do work and that do programming and don't work for a company, you're a sole proprietor. Now you can work for a company and still work on the side and still be a sole proprietor. So sole proprietor is not really a legal entity. So if I go out and sell Mary Kay, I'm not very good at that by the way. If I go out and sell Mary Kay and they pay me because I collect money and I turn the money in and I get expenses, then I'm a sole proprietor and I'm not a legal entity, then I take the income and put it on a schedule C of my tax return. Income, expenses is a schedule C. So it's just what I do. A partnership would do the same thing. But if I sold Mary Kay and I did something so that somebody was hurt or injured by the product that I sold as a sole proprietor, if I were sued then they could come after me, my house, my car, my furniture and I would be in big trouble as a sole proprietor. But there's another entity called a limited liability corporation that you can be a sole proprietor and establish a limited liability corporation. You can do that as a sole proprietor. You can do that as a partnership. And so when it says limited liability, I want to kind of clarify for you that it's not full liability. Because if you have to use your personal assets to start the business, then they could attach a legality to your personal asset. So you have to get this set up properly and hopefully get your business going so that you can start getting loans in the name of the business. And it could still have your name attached to it. What's your name? Shannon. It could be Shannon's programming company LLC. But the LLC is the liability, the limited liability that Shannon has in order to protect herself in that company. But here's the interesting part. An LLC is what they call a pass-through entity. So if you're a sole proprietor, I'm selling Mary Kay, I'm not an LLC, I fill out a Schedule C on my tax return and I just do my tax return and I can lower my liability. As a limited liability company LLC, the taxes do not go to Shannon's LLC. They go on to Shannon's personal tax return. So it's a pass-through. There's a pass-through for partnerships. It passes through the partnership. If you make a $1,000 profit and you have two partners, one partner gets a $500 income and the other partner gets a $500 income. If you have five partners, it's equally divided or it's divided according to the percentage of partnership that you might own in the business. So it passes right through to your personal. Now if you're a corporation, that's a separate entity. It's a separate legal entity. So you could be Shannon's software company Inc., you could be incorporated, then the corporation pays taxes and you don't. Unless the corporation pays you and then you pay taxes only on the amount that you're paid by the corporation. The corporation is taxed and sometimes people don't want to get into a corporation because they feel like they're being taxed twice and that could happen because your corporation gets taxed and then you get taxed, but the taxes are a lot lower. Then the other pass-through part is, well it's not a pass-through, but the other kind of catch is you can be a sole proprietor, LLC, and select to be taxed as a corporation. So that then you can pay yourself a salary. So if you're an LLC and you're a sole proprietor, you can't pay yourself a salary. You can have an owner's draw so you can take money out of the corporation, but at the end of the year when you do your Schedule C and you do your income tax return, the profit is taxable and you have to pay self-employment tax on that. So you pay tax on the profit of that business minus all your deductions. So there's an opportunity there and my company is an example, I'm an LLC, but I selected to be a corporation because I have different entities and so I have to pay, I file what they call an 11-20 tax return and the corporation is taxed and if I pay myself, then I have to either pay self-employment tax or I pay myself as a W-2 employee. I can't do that as a corporation, but I can't as a partnership or a sole proprietorship if I'm one of the owners. I have to get a K-1 or something like that. So all of these are interesting ways that it's part of that 74,000 page document that all of this is marked up in. And then you have an S-corporation where you can have partners be taxed as a pastor. You divide up the profits again and that passes through to your personal income tax. But you file a different tax return, you file an 11-20 S and it's sometimes called a sub-S-corporation. So that's kind of the business structure. Now, when you have a business, the IRS allows you deductions and they have to be necessary and ordinary. So what that means is if you have a deduction that is necessary for your business, then you can claim it. But if it's ordinary and something that is common to the business, I mean if you have a business and you have to give people documents and print them out, then the paper that you buy, that's necessary. And to be necessary, it doesn't have to be, by golly this is it, but it can be things that you need. Like I need a clicker if I'm going to click on a slideshow. So I'm clicking and I buy this clicker, it's necessary, but it's not mandatory necessary. So there are things that you can claim that are necessary, but this isn't necessary ordinary if I don't do presentations or if people that are in my line of work don't do presentations. So that's just, excuse me, a small example of that. Ordinary is things like coming to a conference or mileage. So what I want to do is just tell you about some of these deductions that are most common. There are over 100 deductions that are allowable to you. And a lot of you may claim every single one of them, but there are 100 deductions. But the ones that are most common are right here on this slide. And I've highlighted the yellow because I wanted to speak to them and just address them for just a moment. Education and training. So if you're coming here as a hobby and you drove here from Michigan and it was 200 miles and this is your hobby and you paid $40 to get here and you went out to dinner last night and you had a nice glass of wine and you had, you know, a $52 stake. If this is your hobby, forget it, you can't claim any of it at all. But if this is your business, then you can claim 58 cents a mile to drive here the 200 miles. You can claim your meal, but the rules for meals are a little bit different. You can only claim 50% of your meal. So you've got a little math to do when you do your income tax return. You can claim your hotel room and you can claim the $40 that you paid to come in here. So that's all a tax deduction. So if this year you made, or if you got some business while you were here and you made $400, but your mileage and everything added up to 300, then you only made 100 bucks according to the IRS and the law. Equipment. You all work in computers. Just about everybody here has a computer in front of them and you can claim the computer. Now in the past you had to depreciate the computer and you could only claim a portion of it each year. But with the new tax law and the deduction that's called Section 179, I think is the number on it, you can claim the entire computer and you don't even have to list it as inventory. You might want to in case you sell your company, but you can claim the whole entire computer effective on this 22nd of December last year. So if you bought a computer last year, you can claim the whole thing. So equipment and interestingly enough, you can claim, if you want to buy a car for your business, 100% now. Yes. That's a great question and I'll get to that in another slide. I've got you covered. Meals, we already talked about meals, but you can claim 50%. But here's the interesting thing about meals. Meals you eat all the time. And the rule that's allowable is you have to talk about business before the meal or during the meal or after the meal. So I go to Chick-fil-A and I take my wife with me and we talk about business. I claim that deduction because we talked about business. Or we may be sitting talking about business because she's part of my company. We may be talking about business and then say, hey, let's go get something to eat. We go get something to eat immediately and we can claim that meal. We can only claim 50% of it, but guess what? If she eats a meal and I eat a meal, we get to claim one of them and that's good news. At the end of the year, those add up. Yes. She's an employee. She's a partner in my business. Right. Right. She's not claimed because she's my spouse. But I talk about business with everybody. And everybody's a potential client. Everybody I talk to, even all of you, are potential clients. Yes. Well, typically, has anybody ever watched The Mad Men? Yeah, anyway, if you didn't, you need to go Google it and then watch it on Netflix or something. They're always going out and eating and talking about business. But it needs to be relatively, you know, soon. Yeah, you can't go eat lunch and then about eight tonight say, oh, let's talk business. But it needs to be a reasonable. And typically, it's dearing the meal. But before or after, you can grab a meal like we've done here. We just grabbed a meal downstairs and went up to a podcast, a live podcast. Now, if we were paying for that meal and went up, then it's immediately after. Yes. Did you say in a hotel? Okay. You're on a business trip. So you can claim that whole thing. Well, 50%. But you keep your receipt, keep paying 50%. Just like her, you're way ahead of me. I'll get to that. I'll answer that question in just a minute. You guys are awesome. You're way ahead of me. Travel. That's what I really want to talk about too. So if you, if I send you a check, because you did my website, I send you a check and you take that check and deposit it in the bank. The bank is five miles from your house. That's five miles to the bank and five miles back. You can claim 58 cents a mile because that's a part of your business operation. That's ordinary part of business. You have to deposit that check. Well, no, you don't since it's coming from me. But you need to deposit that check. Okay. So that's part of the ordinary business expense. So the mileage, that can add up if you go to a business lunch but it depends on kind of where you live and where your business is. You can't claim, if you work for someone, you can't claim going to and from work. Okay. You can't claim that kind of thing. And so they've got rules and it's allowable. You just have to play within the rules. Okay. And then the last is wages. How many have kids that are teenage, eight and nine, ten years old? Okay. If you have a child and you have a company and your child, if you put them to work and pay them, it has to be legitimate. You can't be a three-year-old and you're paying them because you need the deduction. But if they're ten and they can make copies, they can scan, they can do whatever assignment that you can give them, you can pay them. And you don't have to pay Medicare and Social Security on them. So you don't have to deduct it. Claim it on your Schedule C is wages and that brings your taxable income down. And what I like to do is see how much I'm supposed to pay. Get all my deductions in there and then see how much I pay. And then it's like, yes. But unfortunately all my kids are over 18. Unfortunately all my kids are over 40. But you can and they can only be 18. Okay. You can't claim them after 18. They've got to be in those teenage years. A child. Okay. No. Child. Child. Child. Your child. You can't do your needs. You can't do my grant. Hey, trust me. I've got four grandkids. If I could go beyond my children, I wouldn't be paying any taxes. It's got to be reasonable. You can't give them $100,000 a year. Right. Yeah. What the child does with it is no concern of the IRS. What you do with it on behalf of the child is no concern of the IRS. Okay. So you can put it in a cruise account and go on a cruise and pay for the child's cruise out of that if they've got to make more than $50. Okay. So it's a sole proprietorship or a partnership. C Corp. Different rules. Different, you know, you could pay 1099. You could pay them a 1099, but if they were your child, or you could actually pay somebody say you had a kid that mowed the lawn or something. And it was a legitimate, it's got to be legitimate. You can't just start making stuff up, but it's got to be a legitimate task. And they made over $600, then you'd have to give them a 1099. If they made under $600, you wouldn't. You could still pay them, and it's an expense. Oh, you're a C Corp. Okay. All right. So this is one that you all are going to be thinking about because if you're all in business for yourself, this allowable home deduction. So let me just say this about the IRS. I'm going to talk to you about a tax gap in just a minute, but a lot of people want to claim their office, and that's an allowable deduction if you do work from home. However, when you start looking at the number of tax returns that were done last year, 150 million tax returns were done, and you start looking at audits and you all said, yeah, I'm scared of the IRS. The percentage of audits to individuals and companies or individuals is very, very, very, very low. And I believe that with the government shutdown, the IRS that they were a year behind, I'm not sure how they got a year behind, only being shut down a couple weeks, but that's what they said. So the chances are slim for me as an individual to get audited if, you know, I got things in place, okay? C-corps, it raises, not C-corps, but a sole proprietor schedule C on your tax return, it kind of raises that opportunity for an audit. If you claim your home as a deduction, it puts a flag, a red flag, or a yellow flag. It depends on how much you claim, but that higher, it raises your, you know, the opportunity for you to get an audit. So they're pretty, you know, pretty snotty nose about this home deduction. And so it's written up there, what they're looking at is it's got to be your principal place of business, okay? And it's got to be on a regular basis. So you can't just say, oh, yeah, I did one website, and so I'm going to just claim my home as a deduction. So, but when you claim your home, you have to claim the square footage of the space, and you can claim mortgage, you can claim electric. So you can get your deduction, you know, up there, pretty good. However, it has to be used exclusively for that business. So that means, and the IRS will ask, did you check your email, your personal email in your office? Now, if you go off to an office somewhere and work for the man, you can check your email all day long. You can take your child to the office with you if your boss will let you, and it's no big deal. But you can't do it in your home office. You're not supposed to check your email now, people would do it, but if the IRS audits you and asks you that question, and you say yes, disallowed. Can't take the deduction. I heard a story of an IRS guy coming into somebody, their home office was right there, they had all their stuff, and the IRS guy came in and said, what's the baby cradle crib doing in here? And she says, oh, watch my little girl while I'm working. Disallowed, not exclusive. So they really, like I say, that raises a red flag. But there's an opportunity then for you to take a more simple option. So you can take $5 per square foot, maximum of 300 square feet, so you have to take the amount of space that you have, and then you can, but it's a maximum of a $1,500 deduction. So if you need a deduction, that's the best way to go it unless you are by golly sure that you're not going to have to worry about that audit and worry about the penalties for that. So here's why the IRS, they're tasked with actually keeping these, they're tasked with raising money, they're tasked with collecting the money. And this is why they sometimes get so snotty nose. So here's a tax gap. And the tax gap is the amount between what people say their income is. So I'm a server at a restaurant and I made like $700 in tips and I do my tax return but I only claim $300. So the amount that you're supposed to claim versus the amount that you claim. So there's a $454 billion gap and it's the IRS's job to try to close that gap. Now $122 billion of that is from Schedule C companies. That's why they take a close look at that because the opportunity for them to get more money back in fines and penalties is greater. And then a lot of people don't even file a tax. So go figure. So here's the answer to your question. You have to keep good records. You have to have documents. You have to have backup for everything that you claim. Now I've had clients come in with a box full of receipts and it's like... So you say well if you want to go over there and separate those receipts then we'll talk or you can pay me $100 an hour and I'm happy to separate them. Well how long is that going to take you? Oh about $2,000 worth. So they save $2,000 by separating the receipts after they bring them in but the reality is they should do it beforehand. So you came to Dayton. You keep a mileage log of your miles and then you keep a receipt. You make yourself out an expense report. You have a good record of that. You staple your meal receipt to your hotel bill and then keep it in a file. Say this was my trip to Dayton to WordCamp for the education slash training expense that I'm taking on my tax return. If that is a regular course of business or a marketing function you just have to document it that way and say this is part of my advertising campaign to do whatever it is or whatever the reason is so that you can have some kind of substantiation of that. And that's a tough one because that's one of those it depends answers because it depends on who you get to audit you if you were to get audited. If you don't get audited, it's no big deal. But you have to be ready that you're one of that smaller percentage of people that get audited. So you have to have canceled checks. You have to have receipts. Yes, correct. But the IRS guy may say, prove it. So anyway, that's one of those things that if that's what you do and you can take pictures of giving them out or have some kind of a record. We're running out of time. So anyways, here's the thing. Record keeping is critical. You've got to keep good records. And I keep records of records. I've got records of everything. I'd go on a trip. I come back with a pocket full of receipts. I fill out an expense report every month that says here's where I went. Here's what I did. Here's the mileage. You used to have to keep the mileage. You used to have to say 942,000 miles to 947,000 miles and subtract. But now with all these apps and all that stuff, you can just calculate. But you have to keep a good record of that. And keep track of any expenses you deduct and good record keeping also then helps you when you do your tax return. Instead of bringing in a box of receipts, you bring in a nice little folder with everything and then the tax guy loves you. Here's another deduction that you get this year. It's called the Qualified Business Income. Brand spanking new and they've got a lot of rules attached to it. But in a nutshell, if you make $1,000 on a Qualified Income for your business, you can take 20% right off the top, right off your taxable income. So it's a Qualified Business Income. You have to make under, then I'm sure most of you make over $315,000. So maybe you can't claim it, but you got to make under $315,000 joint and under $157,000 whether you file a joint or whether you file as a married filing separately or as a single filer. These are the tax rate changes. There's four different kinds of categories that you're going to fall in. You're going to fall in as a single. You're going to fall in a married filing jointly. You're going to fall into a married filing separately or a head of household. So your head of household, you have to be single or separated or divorced and you have to have a dependent. So you get a little higher deduction for that. These are for last year. 2019 is going to change. So you can look here real quick and see what your tax bracket is. Married filing jointly is a little bit different. Married filing separately is a little bit different and then head of household is higher. So anyway, I started this presentation telling you that I was not a computer guy. Remember that part? So let me just say this to you. I'm happy to send you these slides, but I got to email them to you because I don't know how to do it on anything. I actually have a Twitter account and the only thing I know about Twitter and this is a segue to your next guy is I get these notifications in my email and it says Nathan Ingram has posted on Twitter. I get them all the time, almost every single day and I go, delete. So President Trump is on there too. It's you and President Trump. Whoever is on Twitter gives me these notifications, but Nathan's always the... You're always the top one, Nathan. Always the top one. So anyway, just take a picture of that. Send me an email and if you have any questions along the way, feel free to email me or you can send me a Twitter post. I'll never respond, but you can still send me one. Any last questions for our time is up? Yes, a short one. You might slide by... Let me give you two examples of that. One, I'm going to use you again. He goes to the hotel and he goes to... He gets room service and he gets a massage but his total bill for the hotel for the stay is $113, or $150, depends on where he stays. But the bill is $342. So he just turns in the receipt for the hotel. Well, if he were to get audited and claim that $340, the IRS is going to want a breakdown. They're going to want a receipt for the room service or they're going to want some kind of tracking of that because it comes out of different categories. You're going to pay for lodging, you're going to pay $150. For the meal, you're going to pay $65, which you can only claim half of. So they're going to want a breakdown rather than the whole thing. You got a credit card account and you go to Walmart. Well, they want to know what at Walmart you bought. Did you buy notebooks or did you buy candy or did you buy, you know, water? Well, you can use the water in your business. So you could claim the water. I claim coffee. I drink coffee all the time. So if I get coffee, I'll claim the coffee. Okay? But then I'll get one thing of coffee that's for me because it's mine. Right? But you've got to kind of separate them out because that record keeping is important. I always say this, you know, there's a lot of people and there's a lot of gray area and you've got to let your conscience be your guide and, you know, do what's right. And that's why they call them allowable deductions. The IRS doesn't care if you claim meals. They don't care if you claim coffee. They don't care if you claim mileage. They just want it to be right and they want you to do it right. And if you don't, they're going to penalize you. They're going to disallow the deduction. And when people get audited, they're really afraid. They're going to get an audit with documentation, substantiation, which just means prove it. And you can go in and prove it. They'll say, okay, thanks, and off you go. As a matter of fact, the first business I ever started, I got audited and I'm going, oh my God. And there was a basis and I hadn't claimed any basis. And I said, hey, you can audit me every year. Yes. Again, it depends. It depends on who your agent is if you get audited. If you don't get audited, it's good enough. Because it's legitimate. It's just like with her $2 giveaway. It's a legitimate expense but it's hard to prove. So she gives away $100 and she gives away actually $52 bills. But she claims that she gave $502 bills so she can get a bigger deduction. That's where the IRS says we've got to substantiate that. But if you can say and look at the calendar, there was a WordPress in Phoenix and I was there. And so here's the receipt and I know I saw it. I said here's the receipt from that trip. I was there. I was on the speaker. Here's a picture of me on the program. You've got yourself covered. You have an argument. You have a position to argue. Thank you for your... Scan receipts are perfect. And there's apps right now that you can just take a picture like that. That's perfectly fine. You just have to have that documentation. Thank you.