Episode #160- Are you missing this tax break? (Reboot 133) - w/ Derick Van Ness- BigLife Financial

What if you were sitting on a goldmine of tax credits without even knowing it? 

You're not going to want to miss this extremely valuable interview with Derek Van Ness, founder and CEO of Big Life Financial, as we reveal hidden tax advantages for your small business. With his vast experience in finance, marketing, real estate, and wealth strategy, Derek takes us through an eye-opening journey into the world of the Research & Development (R&D) credit, a tax advantage many shop owners are unaware of. Additionally, we touch on the Employee Retention Credit? This could still be your tool for saving up to $26,000 per employee!

Unsure of how mindset and self-development play a crucial role in your business? Derek, who has mentored over 1500 business owners, is here to enlighten us on this often-overlooked facet of entrepreneurship. Listen in as he discusses his journey through sales, real estate investment, and his eventual destiny in founding Big Life Financial. You'll learn why leaning towards self-development can be the catalyst you need to propel your business to the next level.
 
Whether you're running an auto service shop or a collision center, our discussion with Derek is a goldmine of information that promises to empower you with strategies to not just survive but thrive in today's economy. Join us as we dive into the financial errors you, as a small business owner, might be making. Derek will share insights on controlling expenses and balancing sales and profits. He will also tear down the misconception that your CPA will automatically snag all the tax breaks for you. Don't miss this enlightening conversation that could potentially save you thousands of dollars on your business taxes!


Guest Info:

Derick Van Ness -CEO/Founder of Biglifefinancial.com - derick@biglifefinancial.com

Websites:  https://www.biglifefinancial.com/tax-rebates or  bringpurposetolife.com 

LinkedIn: linkedin.com/in/derickvanness

Book your FREE 15-min call w/ Derick CLIC

Chapters

• 0:01 Discovering Tax Credits for Small Businesses
• 12:54 Tax Credits for Small Businesses
• 27:17 Tax Break Awareness for Collision Industry
• 35:58 Tax Strategies for Businesses
• 43:53 Maximizing Tax Breaks for Business Owners

Transcript

Speaker 1: 0:01

Yeah, the thing that kind of got us into the tax credit game is we were helping clients with a lot of financial strategy and doing a lot of things for them, but everybody kept saying I'm paying too much in taxes. I'm paying too much in taxes. So we started looking around and what we discovered was for a lot of our clients and we work with a lot of auto shops and also a lot of doctors and dentists so I guess we just work with people who fix things. But the research and development credit, which is, I think a lot of people have like heard about it somewhere, somehow people don't realize that it applies to small businesses, not just big businesses, and there's a good reason for that.

Speaker 2: 0:42

Welcome to the MindWrench podcast with your host, rick Selover, where minor adjustments produce major improvements in mindset, personal growth and success. This is the place to be every Monday, where we make small improvements and take positive actions in our business and personal lives that will make a major impact in our success. Next level growth and quality of life.

Speaker 3: 1:11

Hey, what's up everybody. Welcome to the MindWrench podcast. I'm your host, rick Selover. Thanks so much for stopping in. If you're a returning listener and haven't done so already, please take a minute and click the follow or subscribe button, and then rate and review the show. When you rate and review the show, the algorithms for Apple, spotify, google podcasts, iheart radio, amazon music and all the other platforms will see that it's valuable and show it to more people that have never seen it before, and hopefully it can help them too. I would really, really really appreciate your help, sharing this word with your friends and family as well, and if you're a brand new listener, welcome. I hope you find something of value here that helps you in your personal or professional life as well. Please make sure to click the subscribe or follow button so you never miss another episode.

Speaker 3: 1:56

Well, the Holidays of History 2024 is all settled in. It's almost Valentine's Day and each and our block ads are popping up everywhere, and we all know what that means, right? Yep, it's tax season once again. So, as we approach that stressful time of year and business owners everywhere are scrambling to get their receipts and financial documents together and prepare for meetings with CPAs, lawyers or advisors, I thought it'd be a great time to reshare an interview I did last summer with someone that might present some tremendous value before you have those meetings with a virtually unknown tax break available to auto repair and collision shop owners for doing some things they've probably been doing all year and didn't even realize this break was available to them.

Speaker 3: 2:41

This week I'm resharing an interview I did back in July of 2023 with Derek Van Ness, the founder and CEO of Big Life Financial. Derek Van Ness is a well-seasoned financial professional, a wealth strategist that's helped thousands of business owners by demystifying money and financial strategy to allow them to live their biggest life. Derek wants to share with you some of those hidden tax advantages that used to be exclusively just for OE manufacturers. So let's take a few minutes and re-listen to this financial gem from someone that has helped others take advantage of this very old but still beneficial tax break, and let's reboot episode 133.

Speaker 3: 3:21

Are you missing this tax break? This week I got a very special guest. Derek Van Ness from Big Life Financial is joining us and he's going to kind of clue us in on some neat things in the financial and tax worlds out there that we may not know about. Derek is the CEO and founder of Big Life Financial and it's a financial wealth management company. He's got a great background that goes through real estate and marketing and wealth strategy. He even spent some time coaching right.

Speaker 1: 4:00

I sure did.

Speaker 3: 4:01

Excellent. Well, Derek, welcome to the show. I appreciate you taking the time and a special shout out to your friend, Heather, who persisted that I connect with you so quick. Funny piece of my business is being a podcast host. I hear a lot of people reach out and it's usually marketers, right, and they're looking for, you know, trying to sell me something on how to promote my podcast. Or you know I need this or I need that, and I do get some people that reach out out looking to be guests on the show, but a lot of it is scam stuff. It really is.

Speaker 3: 4:35

So I shined away from it and she approached me several times through Facebook and LinkedIn and sent me an email. Once I talked to her, you know, I got an idea of who you were. I was like, oh yeah, I got this guy at the show. So glad we got this connected and I'm glad you're here today. So, without any further ado, let's jump right in. So if you can give us just a brief background of how you got from where you started into running your own financial account, All right.

Speaker 1: 5:09

Well, it's a long story and you know I just really appreciate you having me on Rick Love to work with. You know shop owners and small business owners, so this is really fun for me. You know my background. I went to business school, got out of business and I knew at some point I wanted to own my own company and a lot of people listening can probably relate with that, right.

Speaker 1: 5:30

But I also, if I'm honest with you, I was a little bit scared of selling things and talking to people like I was good one-on-one but like over the phone or professionally wasn't really my thing. So I took a sales job and it happened to be with an equipment finance company. Well, most shop owners probably know about those, right, like their high interest kind of tricky loans and. But it taught me a lot and made me realize that I really loved teaching and helping people with financial stuff, whatever that might be Right. And I did that for a while and it was really good because basically the interview for that job was can you make 200 cold calls a day? And if you didn't flinch when they said that they would hire you, right.

Speaker 3: 6:12

So, it was like they would scare a lot of people right there.

Speaker 1: 6:15

So yeah, they literally were like we have a, we have a call counter, like it's hooked up as software. We post the numbers at noon, at three and at five. If you haven't hit your number at five, you're fired. Wow, hi, Hi, yeah, you Right, that's great.

Speaker 1: 6:28

Yeah, it was pretty hardcore and I thought this is the scariest thing ever for me and also exactly what I need. So I ran toward it and it was tough, but I learned so much about that and that kind of got me started in the financial world and working with business owners. And then, you know, that kind of grind wore me down so I became a real estate investor. This was long before like house flipping was a thing. I thought of it as buy a house, fix it up and sell it. There wasn't like a name for it back then. This was about 2001 and started doing that and got really good at that, built a business around it. We were doing 25 to 30 a year for many years and then 08 came.

Speaker 1: 7:13

I was in Southern California. I had 16 flips going and managed to get hit while snowboarding and by some of them broke my femur. So I was laying in bed, tuning on bike and as the market crashed with 16 houses with hard money on them. You could only imagine how fun that was. That was another huge financial lesson, and learned a lot of lessons about what not to do and what was really important in my life.

Speaker 1: 7:43

And then, from there, a friend of mine, who happens to be kind of a financial guru, hired me and he said hey, you've got the financial background, you've got the, you know the different strategies. You've been a business owner, so you know what that perspective is like. I'd really love to hire you to coach business owners. We teach all these financial and tax strategies and so I went to work with them coaching business owners on a bunch of financial strategies, tax strategies, mindset, purpose you know really the whole thing and worked with about 1500 business owners over the next seven years. Right, and that got me to about 2016, which is when I started my firm big life financial, and primarily that was because, as a coach for someone else's business, you can only go so far.

Speaker 3: 8:33

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Speaker 3: 8:42

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Speaker 3: 9:36

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Speaker 1: 10:15

Right and there were some things I wanted to be able to do with clients, but I just couldn't do it because it wasn't my business. So we parted ways on good terms. We're still very close and started this business, really being able to help business owners be smarter with the money that they make, keep a lot more tax wise and really build a life that you love. My company's called Big Life Financial, not Big Money Financial, right, because the game we're playing here is quality of life. If you have more money but your life sucks, that's not a good trade. We want to know.

Speaker 3: 10:50

No, it's not, and actually in this sector of the business that I deal with there's a lot of that. There's a lot of really successful shop owners out there that have multiple shots but they're miserable inside just because they haven't gone through the things mindset-wise that they've needed to. They've had those hard life lessons like you have. They've been kicked in the crotch multiple times. But you really have to go. You got to go internal and fix what's going on between the ears and it makes all the other things so much better. So that's why I?

Speaker 3: 11:21

thought you'd be a great guest for today because I know you have that history and that background of going through those life lessons that were very difficult and it pushed the desire for you to be out there helping somebody else, which is awesome.

Speaker 1: 11:36

Yeah, really, I was kind of lucky. The whole meltdown in real estate forced me to have to reevaluate my life, because when you've built a successful business, you can get trapped in it. I'm making good money, I'm doing this thing, but honestly, we systematized everything. I was bored. I didn't even have to show up in the business work, which was great, except that I was bored and everybody else had to work. So I was trying to figure out what to do with my life and then, of course, the whole thing burns down, which is probably karma. But I had to rebuild my life and say what do I actually want, what's important to me? And that was not an easy process at the time. So I would urge, if anybody's feeling trapped like you're talking about, like, do the reevaluation, just don't burn your business down to do it right.

Speaker 3: 12:28

You can grow on the outside. Well, you still doing stuff on the inside, so it doesn't have to be all or nothing, but it's good that you did dive in. You open your own place up and so now you're you're helping People from the financial standpoint, but it's not about you know them making millions of dollars. It's not big business, it's more quality of life stuff, which is huge, and that's that's a great segue for for having you out here today. There's a lot of things we had a discussion earlier we had a little discovery call it and you mentioned some things that you're helping small business, including the automotive sector. They don't know about and, quite honestly, everybody's looking for a break everywhere they can find.

Speaker 3: 13:12

So whether it's, you know, squeezing something from our discount or getting you know piece of equipment for a better price or better Financing these shop owners, you know the struggle is real. They're trying to gain wherever they can, but there's some things that are right under their nose. You mean that know about. So what you know? Two questions. So number one what do you think the biggest financial mistake most small business owners make?

Speaker 1: 13:38

the probably the biggest one is People seem to be one of two things. They either be seem to be focused on the top line, which is sales, sales, sales, or they're focused on the bottom line, which is profit, but they're really like pinching pennies on the expenses. But you really need to be both right. How do we drive sales, bring in revenue? But then also, how do we get really efficient? If you only have sell, sell, sell, you have a real lucid, goosey organization.

Speaker 1: 14:08

All this money runs through your, through your hands and, you know, slips through the cracks in the floor and somehow evaporates if you go the other direction. You live in this world of like Anxiety and penny pinching and fear and scarcity and it's really frustrating and you can't ever get to where you want to go. We kind of help people to balance that and, and the big thing is, get really good at your business and and the expense a lot of people aren't seeing is taxes, because that's, whether you realize it or not, even if you got a bunch kids, taxes are the biggest expense in your life, which is kind of crazy. If you make a scary, really, it is because college is expensive but taxes cost even more. Yeah, I don't know if that's a true stat, but it sure feels that way. So yeah, that's the big. The big thing I see is people are Are paying attention to one or the other and they're not really looking at the the tax opportunities that are out there right.

Speaker 3: 15:03

So you found in your, in your works, that there is a little piece of the tax code that has been largely overlooked, and I don't know if anybody in In my audience is gonna notice I hope a few of them do but I know there's something that's very beneficial. I I know that since COVID, there was this ERC thing, which was the employee retention credit, which which still was not. You know, I talked to a lot of shops owners that Didn't really know about or didn't take advantage of. Just they thought it was too much work, it really wasn't worth the hassle, or they just didn't understand what it was. Yeah, and there's some people that took advantage of it and ended up being, you know, quite a bit of money. Yeah, that they could have missed out on it. So, but there's something else out there too, right?

Speaker 1: 15:52

There is. So just to quickly touch on the ERC thing, I mean People can get up to twenty six thousand dollars per employee, so the money can really add up right. If you've got five guys in your shop that aren't related to you because it doesn't relatives, don't count that could be hundred, twenty five thousand dollars coming back. If you've got ten guys, double that. So it's definitely Worth looking at.

Speaker 1: 16:14

If you had double W2 employees and the big thing to understand there is you didn't have to have a decline In your revenue, in other words, your numbers didn't have to go down for you to qualify. If you were really, if you were really impacted like you had to follow mandates with I know there's a ton of cleaning with shops, right, and social distancing and everything if that had an impact on your efficiency or effectiveness of more than 10%, you can still qualify. So if somebody wants to talk about that and get into the nuance of their situation, just know the door is open and there there are a bunch of. You know, anytime the government's doing some sort of giveaway, there's a million guys out there. It's not our main thing, although we've done hundreds of them for clients. Okay, I'd be happy to talk with someone about it, but but yeah, that's the one-time thing. What?

Speaker 3: 17:03

you're in, that door is still open, so people could still take advantage of that. Yet. Yeah, yeah yeah, how much longer do they have to To do something with that?

Speaker 1: 17:14

So the refunds you can get for 2020 will expire next April 15th. So April 15th of 2024, and the and, but that's only 5,000 per employee. Of the 21, there are 26,000, so 21,000 of it is for 2021 and that expires the following year. So you have, from the time of this recording, almost two years where you can file for something, and you've got almost a year to be able to get that full $26,000 per employee. If that's how your numbers work out.

Speaker 3: 17:44

Okay, that's great and that's good to know, because I guarantee it that not every shop was aware that that's still still available to him, so thanks for sharing that. So you found something else out, though. That was that I thought was really interesting, so let's dive into that.

Speaker 1: 18:00

Yeah, the thing that kind of got us into the tax credit game is we were helping clients with a lot of financial Strategy and doing a lot of things for them, but everybody kept saying I'm paying too much in taxes. I'm paying too much in taxes. So we started looking around and what we discovered was for a lot of our clients and we work with a lot of auto shops and Also a lot of doctors and dentists so I guess we just work with people who fix things right, perfect, yeah, yeah, for whatever reason. But the research and development credit which is, I think a lot of people have like heard about it somewhere, somehow, you know, in reference somewhere. But people don't realize that it applies to small businesses, not just big businesses, and there's a good reason for that.

Speaker 1: 18:42

The credits came out way back in the 80s, but they really were targeted at big businesses, but they worked so well, in fact, because you guys are working with automobiles. Actually it was the automotive industry that started or Inspired Congress to create the research and development credits. It was so that American cars could compete with a lot of the Japanese cars coming over in the 80s. Yeah, america, up to that point, had dominated the auto industry, and then all these toyotas and Hondas and Dotson at the time came over and America was falling behind. And so Congress said, hey, we, we want to incentivize you guys to innovate, try new stuff, figure things out, take some chances, and if you do that, we'll reimburse it with some credits. And so that's really where they started.

Speaker 1: 19:28

But it was so effective that they made some rule changes in 2001. They made they changed the rule that you didn't have to invent something new to the world. It just had to be new to your business. So obviously, shops are making changes and trying new stuff for their business all the time, right, and and it's not new to the world, but it's new to you. And then the second thing was they simplified the credit in 2007 and they made a version that was more applicable to small business owners. It's called the alternative, simplified credit, but essentially what that did was it dumbed it down enough that now a small business could do it. You didn't have to have like all these crazy records and everything marked out to the quarter of an hour and you know Every penny accounted for is a little more broad strokes. You get a little lower reimbursement, but you don't have to have all the record keeping to the same degree. So that really opened up the door for shops.

Speaker 1: 20:27

And then this thing was getting Rerodified every year because it wasn't permanent. It was kind of a temporary thing. In 2015 they made it permanent and that's really what opened the door to shop owners being able to do. This is is that it became permanent. Once it became a permanent part of the tax code, people said, oh, we should be in this business. It's going to be here next year. Up to that point, nobody really wanted to be in that business because it could go away at any time. So since 2015, the specialty groups have popped up who just do research and development credits. Your typical CPA doesn't, because it's such a different thing. It's all about the activities and the things you're doing in your shop, not so much about the numbers.

Speaker 3: 21:14

Like a typical CPA would be working with, not in their wheelhouse, so they're not even bothered with that Right.

Speaker 1: 21:20

Yeah, yeah. So these guys got really good at it, which brought the cost down. So between the simplification and the lowering of the cost, it's really been available for the last seven or eight years. It took people a couple of years to figure it out, right, but I'd say for the last five years it's been getting more and more prevalent. So we've done hundreds of them for clients and have really found that this is something you could file every single year. It'll save you in taxes and you can even go back and amend for the last three years. So for a lot of our clients, the first time you do it you get three years of tax credits. It's a pretty nice shot in the arm, depending on the business.

Speaker 3: 22:00

Right, and so this is research and development. So we talked a little bit about this and I didn't realize what that really covers and how much of collision shop, what they've had to go through the past let's say five to eight years, but more specifically probably the past three or four years there's been a ton of advancement, massive advancement in the technology in today's vehicles when it comes to crash worthiness and calibrations and scanning and different substrate materials and how to correctly repair them, weld them or whatever. This kind of applies to all that, doesn't it?

Speaker 1: 22:44

It really does. So anything you're doing in your business that's adding new capability. So if you're bringing in new diagnostic equipment to improve profitability, efficiency, accuracy, that's going to be a project is what the IRS thinks of it as that you're trying something new, you're innovating. You haven't done it this way before. You're putting man, hours and time into it and they want to reimburse you for a small portion. I mean, this stuff isn't like over the top, but a small portion of every dollar you spend in that direction.

Speaker 1: 23:17

Well, like you're saying, rick, we've seen all the changes with automobiles, the people who service that industry.

Speaker 1: 23:24

Every year there's a new piece of equipment, there's a new thing you have to figure out how to deal with. There's new regulations, cars are changing, so you got to figure out how to deal with the, like you said, the structural and safety of that. So every time you come in and make a new change to your business, in what you offer, in how you approach it, with the intent of improving profitability or reducing waste or reducing costs or increasing efficiency, it's going to happen. And you know shop owners are doing one, two, three, four projects a year where they're going in and overhauling a system of their business or making things better to keep up with technology or get better market share. So all of those types of technology changes, process changes, are going to likely qualify. One of the rules with the R&D credit is it has to be based in what they call hard science, and I say hard science in quotes, so they define that as biology, physical science, computer science and engineering. So a ton of what you guys are doing is computer science and engineering related.

Speaker 3: 24:31

I know for the technology changes that they've made, just adapting to how to repair vehicles. You've got the whole EV push that's heavy coming from the manufacturers and we're seeing them in all the shops now and that is a totally different way of repairing a vehicle takes totally different equipment, processes, safety stuff. So all those things are those would qualify, and this goes towards reduction in taxes that the businesses pay right, not their personal but their business tax. Is that correct?

Speaker 1: 25:07

Well, yes, so really how it works with businesses is everything except for a C corporation. And just so you know, I'm not a CPA, but we work with taxes a lot, right? And so check this with your CPA. That's my, my disclosure, right? Double check this. But everything other than a C corporation and most people don't have a C Corp the profits happen at the business level and the credits happen at the business level. They run through. You pay all your expenses, whatever the profit is at the bottom rolls through you personally, and then you write the check personally for the taxes. So everything else is a pass through entity. So same thing here. The credits happen on the business level, but they impact the amount of taxes you will pay personally. A dollar for a dollar. It's not like $10,000 of credits, isn't like a $10,000 right off, because if you're in a 25% tax bracket that would only be worth $2,500, right? $10,000 right off. This is $10,000. You don't pay in taxes dollar for dollar.

Speaker 3: 26:11

Wow, that's incredible, Do you see? And now you've worked with in the automotive repair side, so you've got some clients there, so you've seen them doing. Have you seen much in the collision side where customers are now taking advantage of that tax break?

Speaker 1: 26:28

Honestly, I haven't worked with a lot of collision shops. I think I have one or two automotive repair shops that also do collision, but I don't know if I've worked with any kind of collision, only type of groups. But we'll fix that. Yeah, it sounds like it. Much of the same ideas are translated right. The types of, like you said, just the industries change so much. There's always new technology, there's always new diagnostic equipment, there's always new calibrations. You guys deal with a bunch of probably structural issues and things that aren't quite as prevalent on the auto repair side. So I feel very confident that the same things are going to apply. But I'd be lying to you if I said that we've done a bunch of auto collision shops because we just haven't yet.

Speaker 3: 27:16

Right. Well, like I said and I think it could just be a lack of awareness out there in the collision world that there is a tax break. I mean, they, some of these guys have some very sharp CPAs and some very sharp financial guys and tax guys that work with them. But I'd say a larger percentage of shops do not. They have the same CPA they had 20 years ago guys in his late 70s and he's his buddy of the family and I can't fire Bill. He's a great guy. So people are, they're creatures of habit and in the clothing industry it's not different from other industries. We get so many of them, we're comfortable if we stick with them. Maybe they're not bringing everything to the table. We like them too. But all we don't know doesn't hurt us. Unless it's a tax break, then that is hurting us and we don't realize it.

Speaker 1: 28:02

So Well, and here's the reality, Rick. Most people's expectation of what a CPA does is, in my opinion, flawed. We most we think our CPA or our tax person is like the BL and all with taxes, but the truth is, most of them are tax recorders. You come to them and say, hey, we did this list of things this year, we bought this equipment, we, you know, we invested in these things or whatever, and they tell us how much we owe. But what CPAs generally don't do, or most tax pros don't do, is they don't tell you how to create or proactively go out and find strategies for you, and the reality is, for most of them that's that's not really their job. That's where a tax strategist comes in. Or a lot of times you get these kinds of things from your investment advisors because there are ways to put money into investments and create tax breaks. Life insurance, you can do it donation strategies, entity structuring that's not what CPAs do, and so people sometimes get frustrated. But it's a little bit like someone coming to you and you know your collision, a collision guy like if they came to you about something that is related to cars, like maybe interior leather. Why didn't you tell me I could have this better interior leather and you're like, well, we work with cars, but that's not really what we do, right? Right, we do collision Same kind of thing here, where most CPAs don't do R&D, A lot of them didn't do ERC and most of them don't do those other areas.

Speaker 1: 29:33

I was talking about that kind of create the tax breaks. Once you create the tax breaks, they'll record them for you, right, and they'll tell you how to classify them and how much you owe and all the benefits and drawbacks of that. But that's not what they do. So there is a big misnomer CPAs. You know, people get frustrated with them for that and it's not really their fault, it's not what they do, and most of them have many hundreds or thousands of clients.

Speaker 1: 29:58

It's very difficult, unless they've become a specialty firm, for them to proactively come to you and say here's what you need to do, unless you want to pay a premium for it. There are groups that do that, but they cost a lot more money because they're creating additional value, they're putting a lot of extra time in and they're customizing a solution. A lot of these guys just record, turn and burn. I don't want that to come off wrong. It's just a lower price solution, and then clients get frustrated with that. So just for the sake of clarity, I don't want to like beat up on CPAs. It's just people expecting them to do something that's not their job.

Speaker 3: 30:35

Right? No, that's why there's specialty divisions of every kind of business, because there is specific things people are looking for. Then there's generalists that you know. An auto mechanic shop could be a generalist type of repair shop, but they don't do ferrari's or they don't do some specific brands right. So you got some specialists. So I think everybody understands that out thinking CPAs will. Well, they probably won't listen to this anyways, but probably would be terribly offended because we're, you're right, we're not throwing dirt on them right now, but it's great that there's professionals like you that that could point this out and help those looking for the help. So this, this R&D credit, I want to make sure I have this right. Everybody here's it right. So this is what they call section 41 of the tax code. Is that what they, if they want to do some research, before they called it, reached out to you? Research R&D tax credit, section 41, right?

Speaker 1: 31:27

That is correct, yeah, and if you look at the tax code it won't make any sense to you. But if you get the tax guidance, the memorandums, then it. Then it'll make a little bit more plain English sense. But yes, that is the section, and there's something called the four part test. That really is the the governing thing. Every dollar that you spend in your business that checks the four boxes for the four part test will be eligible for reimbursement and just for really quick sake, what those four boxes are is are you looking to improve I'm going to paraphrase here a product or process. You guys do a process right. So are you looking to make your process better and I would argue most businesses are doing a lot of that be a yes, yeah, yeah.

Speaker 1: 32:14

Second one is are you looking to their languages? Are you looking to reduce technological uncertainty, how we interpret that is? Are you looking to get more consistent outcomes? When we do X, our intended outcomes Y, and that happens more often. So we're doing things to make that happen more often and I would say most businesses are doing that. But where you lose a lot of businesses that could apply to to, you know, automobiles and collision is is it based in hard science, like we said biology, physical science, computer science or engineering. Like my business. We do some quote, unquote, financial engineering and such, but I wouldn't call that really true engineering, so we probably wouldn't check that box an inclusion world.

Speaker 3: 33:00

You would, though, because I believe you really would you got all that OEM technology, everything's specced, everything's been tested, everything's you know? Oem repair procedures themselves are telling you hard science says this is how you have to repair this vehicle right, so that definitely checks that box.

Speaker 1: 33:17

Yeah, and then the last one is is there a process of experimentation? In other words, are you trying things that may or may not work the way you think? Every time you bring something new into your business, a new diagnostic machine, or you do a new approach, or you try different materials, different structural approaches, whatever all of that is experimental. Right, sometimes try it, it doesn't work, and they know that. When you try new stuff, it doesn't always go well. And that's really the spirit of the credits is, when you try new stuff, you're going to lose some money somewhere. We want to encourage you to continue to do that, so we're going to give you a credit for some of that money.

Speaker 1: 33:56

So those are the four boxes, right, if people are checking those with their dollars. That's how you're going to going to qualify just for a little more in the weeds of section 41.

Speaker 3: 34:06

Derek, that's freaking awesome because I guarantee you that every collision shop will tick all four of those boxes. I mean, every day they're trying something. I mean they may not caught experimentation, but you try a new adhesive, try a new way of repairing a metal panel, try a new machine that you bought for pulling, for welding. I mean there's a lot of experimental just in every day, trying to get the jobs done, get them out the door as safely and as correctly as possible. So I think that's fantastic that that's out there and now people will start to hear about that in this industry. Yeah, I would say they definitely need to reach out to Derek if you need more information. I know he can help you out. Do you have like a almost like a one sheet on some of the qualifiers for this? I mean, if someone said, hey, can you, can you just send me a little list of things I got to make sure I the boxes, I got a hit and what qualifies me or may not qualify me? Is there something that, like you, already have built her?

Speaker 1: 35:10

yeah, well, we kind of do. We do a lot of it internally. Usually what we do, rick, is, rather than having people try and self-diagnose, right and guess, we usually do a phone call where we do. Eventually we do a questionnaire or we'll go through that with you and have our CPA look at it, because, to be honest with you, I've been doing this a long time. But also there are things that I sometimes don't realize because, listen, tax code is very interpretive, right open to interpretation, and there are things that our CPA team understands in the trenches and under the hood that even I miss.

Speaker 1: 35:44

So usually what we do is is we'll do a free estimate for a client so they can see okay, we did all these things. Maybe some of them don't qualify and we thought they did. Maybe some of them we didn't realize do qualify or qualify at a much higher level. Sometimes I get surprised, especially when we're doing a new industry and how, how potent it is. So I don't want people to say, oh, I don't do this or that, so I don't, I don't want to look at it. I think for everybody it's worth a 15 minute conversation to see I don't know, is this worth looking at? And then our team will do a free estimate for you.

Speaker 3: 36:19

So you can say at that point okay, this is worth doing or no.

Speaker 1: 36:22

You know what? It's not worth our time. It really isn't too time intensive, I would say. In total it's maybe an hour or two of the business owner, or if they hand it off to an office manager, somebody's time. So it's pretty non-invasive, but it can be, can be quite lucrative, especially if you're a shop, that's, you know, making these transitions, trying the new stuff like you're talking about, it's going to be pretty effective for you oh, that's, that's awesome and it's, and that's fair enough.

Speaker 3: 36:49

You know, free estimate and that way people will know if they can go further with this or not. Is there a potential cap on what a customer, uh taxpayer, can uh claim or try to reduce their taxes by or once it hits zero? That's it right, you go all the way to zero yes.

Speaker 1: 37:09

Well, you can go all the way to zero. So, like, if you're not paying taxes right now because you've got a new, you know a new business and you're reinvesting and you have all the right offs in that first couple years, maybe you don't need to worry too much about it yet, but you can carry the credits forward. So if you, you know, ideally, once you're paying, I would say, seven to ten thousand dollars in taxes, it's probably worth it to look at, because now you've got a pretty good chunk you can get back. Plus, you can carry the credits forward up to 20 years, so they do accumulate. Um, yeah, there's some some wonky things going on for 22 right now in the way that the credit, not how you qualify, but the way that it's calculated, and they want to. Right now, they just integrated something for 22 where you get the credits over five years instead of all in the first year, and that was something that happened in the 2017 tax rewrite.

Speaker 1: 38:03

I'm only bringing this up so that people don't get caught off guard, but Congress realized it was a terrible idea because they've already introduced the new bill to Retroactively get rid of that. So chances are really good. You know you'll be able to get that credit, but if it stays the way that it is, you can get the whole credit Against however much you've paid in taxes this year. That's kind of the cap. Okay, right, I can carry it forward, though.

Speaker 3: 38:26

Okay, oh, that's great. Any limitations or pitfalls of Approaching this is it? Can any shop size Look at doing this, or is there some limitations there?

Speaker 1: 38:40

Well, in theory any shop can look at it right, but once again we're looking at it as a business owner. What's worth your time? I think if you've got a half a million dollars top line right in sales going through the shop Now you have enough dollars going through that this little percentage really adds up to something worth getting. So I would say if you have over a half million dollars of sales it's worth it. And if you're paying taxes right, obviously, if you're not paying much in tax then Then you probably want to wait until you are. We'd be happy to look at it anyway, but you know, if you've only got $150,000 worth of sales, there's probably not enough for it to really be worth your time yet. I would say, work on building your business first and then come back any year or two once you kind of gotten over that home. Okay.

Speaker 3: 39:26

Any documentation or paperwork about someone that's curious or interested in this would need to have or need to warehouse or hold or gather anything like that not not too far outside of the typical Business operations.

Speaker 1: 39:42

I mean, if somebody wants to and we do encourage people as you try new things throughout the year document that not heavily, but like hey, we looked into trying this new system, we researched a bunch of different machines or diagnostics or different types of materials. You know, keeping track of that stuff can certainly allow us to be even more aggressive about it. But the documentation itself, because of that simplification I talked about, is pretty minimal. So, yeah, not a lot of documentation outside of the questionnaire. We do where we go through and we do document it for you as a client. To make the process real simple. That whole thing only takes about an hour, so it's pretty easy.

Speaker 3: 40:23

Okay, awesome. Well, that's fantastic. Derek is as we wrap up, I'm running out of time here, but Everything you're providing today is just extremely beneficial. I can't wait for for shops to hear about this. I appreciate you coming on sharing everything. When I put together the, the show notes, I'll make sure all your contact information is in there so these guys can reach out to you. Is there anything we missed on this that that the listeners need to know about?

Speaker 1: 40:51

You know. Just just to make it super easy, I'll say two things. One is Anybody who wants to get you know, have a free conversation and just find out. Could we be a good candidate? Possibly we could set up a 15 minute phone call. Just go to biglifefinancialcom slash Mw like mind wrench, right, mw. You can set up an appointment there. We'll talk with you and go over your options.

Speaker 1: 41:19

And the other thing I can say is even if R&D isn't the right thing for you, I recently did a presentation for for auto repair shops In front of hundreds of people where we went over 17 different tax strategies that most CPAs are not telling Auto these, these shop owners, about. That you could potentially use. So there's a lot more than just R&D We'd be happy to look at and help you see if there's a you know any opportunities there as well. We know that if we can help you keep a lot more of the money you make, every dollar saved in taxes is the same as a new dollar earned Without all the risk and employees and overhead and all the other stuff right. So we really do want to help. So just biglifefinancialcom, slash Mw and you can set up a call. We can talk through whatever. Whatever makes sense for you?

Speaker 3: 42:09

Awesome, I love that. That's great. I'll put that with that link in the show notes as well. And I didn't tell you before but I'm part of a group of Industry professionals that we do a monthly zoom meeting for the industry and it's it's free to anybody to join and it's called the collision cocktail, or so. I've got five co-hosts along with me. It's a blast. We have fun once a month on this. People come in. We try to share something useful, something timely as far as you know, things that are going on in the industry, and Bring in some. We know it will have special guests that talk about certain aspects of this business too, so you might make a great future guest on the show. So I'll make sure I get you an invite to to where that website is and you can check it out one these months.

Speaker 1: 42:57

So yeah, I'd love it. I love a chance to just share this information. I just feel like so many business owners work so hard, take all the risk and they just don't keep enough what they make. And you know, if you're making good money, depending on what state you're in, you're probably paying 40 to 50 percent to the government. That's a lot. We want to help minimize that legally and ethically. There's a lot of stuff out there that people just don't know about, so so, yeah, I'd love to.

Speaker 3: 43:24

Absolutely. I am like everybody else out there. I'd like to pay the least amount of tax possible Every year. So if there's something I need to do different, I want to do it. So anyways, thanks again, derek. It's been great having you on. I appreciate you working with me. I know the scheduling was a little tricky getting here, but I'm glad I worked out and I'm really grateful for every shared Thank you so much. I appreciate it. Well, that's all I had for you today.

Speaker 3: 43:55

I hope you found some valuable information in what Derek shared with us and you're able to start trimming that tax bill by claiming your own R&D credits along your path to implementing the latest in equipment, tools, materials and repair processes Needed for today's vehicles. Remember, derek has offered listeners to this show a free 15 minute consultation To see if your business qualifies for these tax breaks as well. Just go to www. Biglifefinancialcom, slash mw, to set up a call now. I'll put all of Derek's contact information in the show notes, along with a link to set up your free call. Thanks again for tuning in. I really appreciate your support and I hope you have a great week. I can always be reached at wwwricksellovercom or you can find all my social media links, podcast episodes, blog posts and much more.