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Craig Cody

Episode 21: The Tax Planning System that Will Save You Money, with Craig Cody

Craig Cody is a Certified Tax Coach, Certified Public Accountant, Business Owner and Former New York City Police Officer with 17 years experience on the Force. In addition to being a Certified Public Accountant for the past 15 years, he is also a Certified Tax Coach. As a Certified Tax Coach, Craig belongs to a select group of tax practitioners throughout the country who undergo extensive training and continued education on various tax planning techniques and strategies to become, as well as remain, certified. With this organization, Craig has co-authored an Amazon best seller book, Secrets of a Tax-Free Life.

What you’ll learn about in this episode:

  • Craig’s background and how he went from NYC Police Officer to CPA and Certified Tax Coach
  • Craig’s tax planning system that helps his clients save significant amounts of money
  • Why Craig’s system is based on proactivity (and why most people do their taxes reactively)
  • Why Craig works with his clients all year and not just during “tax season”
  • Why a computer cannot do Craig’s system
  • “Secrets of a Tax-Free Life”: Craig’s book
  • Things to look out for on your own taxes (like choosing the wrong entity)
  • Why your accountant can’t do what Craig does
  • How you can work with Craig from anywhere in the US

Ways to contact Craig:

Transcript:

Welcome to System Execution, the strategy and system behind today’s successful companies. Systems can make or break your company, but here we’ll solve your physical, technological, and psychological system’s issues by connecting you with experts that have succeeded in overcoming those challenges in their own business, and providing you the guidelines and tools you need to implement those same strategies for immediate results. Now here’s your host Vera Fischer.

Vera Fischer: Today’s episode is sponsored by 97 Degrees West an Austin, Texas advertising agency built on the belief that when you combine creative talent and humanity, you can help companies make their products, services, and brands relevant to the life of their customers. 97 Degrees West specializes in finance, healthcare, manufacturing, and energy. For more information go to www.97dwest.com.

Welcome to System Execution, a podcast devoted to using processes and systems to drive to a better outcome for your business. I’m Vera Fischer your host. All businesses, no matter the size, relies on systems. Some of these are physical systems such as a factory. Some are technological like project management software, while others are psychological systems such as checklists and organizational charts.

Many of these systems are going to overlap in your business. Today’s guest, I’m so excited, is Craig Cody and he is a former New York City police officer with 17 years on the force. After he retired from the force, he made the logical next step and turned into a certified tax coach and certified public accountant. Craig is also the founder of his growing CPA firm Craig Cody CPA.

Craig belongs to a select group of tax practitioners throughout the country who undergo extensive training and continuing education on various tax planning systems, techniques and strategies to become, well really remain, certified. With this organization, Craig has been able to co-author an Amazon best seller book “Secrets of a Tax Free Life”. Welcome to System Execution Craig.

Craig Cody: Vera, thank you very much for having me, so excited.

Vera Fischer: Well Craig I am really excited to hear about your experience regarding this tax planning system, but before we get started please tell us how you made the logical jump from police officer to CPA.

Craig Cody: It was interesting you know being part of a very big organization. I think at the time I was part of it there was about 35,000 police officers which is a pretty big size. Now you’re part of a bureaucracy. I got to a point where I no longer wanted to belong to a bureaucracy and wanted to be able to have a little bit more independence. I was lucky. I had a great 17 years. I worked with a lot of great people and did a lot of great things but it was time to move on.

One of my loves was accounting and taxes. Originally thought I was going to work in Wall Street and I just became more and more fascinated with taxes and made the leap and worked for an international company for a number of years and then branched out into my own firm.

I kind of like to tell people because I get asked how do you go from being a cop to being a CPA with a pocket protector. I said, “It’s more exciting to save someone $20,000, $30,000 a year than it is to chase a perp down the streets of Manhattan.”

Vera Fischer: Well I don’t know, some of our listeners may think that chasing somebody down the streets of Manhattan might be pretty exciting, but I’m going to take your word for it. So Craig, let’s get started on this tax planning system. I know that the goal of it is to help your clients save as much money as they can keeping it in their pocket.

Before we started the interview you had mentioned that there’s a lot of systems that are involved in this tax planning process. Why don’t you just start as you would be talking with a client and kind of walk us through that particular system of how you get to saving them so much money.

Craig Cody: Okay, you know the first thing we do and typically we’re dealing with business owners or real estate professionals, people that have real estate because if somebody is just a W-2 employee there’s really not a whole lot we can do for them.

So we’ll be approached by a business owner. Maybe they had a bad year the following year, or the preceding year where they paid a lot or what they thought was a lot in taxes. They went to their accountant or CPA who is typically very good. They put the right numbers in the right boxes, but they’re used to being compliance minded and not being proactive.

They’ll come to us and they’ll say, “I think maybe my accountant isn’t doing everything he can be doing.” We’ll say, “Okay, let us look at your tax returns.” We’ll review their prior year tax returns, the business and personal and we have a system to go through where we look for missed opportunities and mistakes.

More often than not we’ll find a number of missed opportunities. On some occasions we will find a mistake and sometimes we’ll find a better way to do something. We’ll sit down and we’ll say okay we see, we found you; you know $50,000 in missed deductions. That’s going to save you in your tax bracket, you live in New York State, it’s going to save you $20,000. We’ll do a tax plan and help the client implement it and they get to actually keep more of what they make.

Vera Fischer: Craig, so the first thing I’m thinking is the legality of it and I certainly don’t want to offend, but I’d like to understand is it … How is there different ways to do it? I assumed that taxes were just straight forward.

Craig Cody: If you think about it, most people don’t work with their accountants throughout the year and when they do work with their accountants throughout the year, they’re not being very proactive. They’re being more reactive. The accountant is keeping the books. He’s putting the right numbers in the right boxes, but he’s not giving them ideas on what they’re legally allowed to do; the same thing that Donald Trump is allowed to do, the same thing that Warren Buffet is allowed to do and they have huge staffs to take care of that. Most people don’t have anyone doing that.

Then you have the people that really only deal and communicate with their accountant during tax season where the accountant is obviously typically very overburdened and he doesn’t have the time to think and it’s typically too late anyway, of additional strategies you can be using to save yourself taxes.

When we actually do a plan, we actually put together a book, and everything in that plan has the code section and little notes about things you need to make sure that you do correctly, so it is perfectly legal.

Vera Fischer: Craig is this a software thing that you put someone’s tax return through, or is this eyeballs on the tax return?

Craig Cody: It’s eyeballs on the tax return and we have a system that we go through to check for a number of … After doing this for awhile, we know that there are certain things that most people miss and we go through this checklist and we see which of those opportunities they missed. Then we think about it in a broader view what they’re doing, what they’re trying to do, and what maybe tweaks and changes they can make to accomplish them in a more tax efficient manner.

Vera Fischer: Is this system something that you learned through being a certified tax coach, or is this something that you came up with through your experience?

Craig Cody: Oh it’s something that I learned from my experience, but I was able to systemize it being involved with Tax Coach and Certified Tax Coach yes. They helped really put the system together for people like me that think of things from a planning perspective versus a reactive perspective.

Vera Fischer: I’m assuming there’s a step by step process that you take each of these tax returns through and then based on those results of those steps, gets you to that final result.

Craig Cody: Yes it does.

Vera Fischer: Is the rest of your team trained on this?

Craig Cody: No, the rest of my team isn’t. One other person is trained on it. I have three other CPAs in my office that do more of the compliance type of work. I’m actually in the process of training a CPA on doing exactly what I do, but I have a lot of experience on it and it’s not something that you pick up overnight. That training in itself is a process.

Vera Fischer: So a little bit more on the training. I’m assuming this isn’t like a standard operating procedure binder that you can just hand over to someone because everyone’s business and real estate, etc. is so unique to them, it’s not a one process fits all if you will.

Craig Cody: Correct because everybody’s situation is a little bit different and sometimes things in the tax code, they have to be done exactly a certain way for a certain type of position and if you don’t meet that certain perspective, then you can’t do that. It’s definitely not you can’t take the binder and doing it. If that was it, it would just be you could pop it into software. It would produce everything and you wouldn’t need me.

Vera Fischer: Oh, that’s a very good point. See technology can’t do everything.

Craig Cody: Exactly, exactly. The value comes in what I’m able to do. The system is great for printing out the reports, but the value comes from my knowledge and the perspective that we look at things.

Vera Fischer: Craig, did you, did it take a long time for you to come up with this process?

Craig Cody: Yeah, it developed over time. The more you did it I guess the more ingrained the process became and then you realized how you can save some time if you had specific processes in place. It definitely wasn’t an overnight operation. It took some time.

Vera Fischer: Were any parts of it where you had to go back and start over just because a particular instance didn’t work to your satisfaction?

Craig Cody: Yes, and that’s typically … The process is never perfect because everybody’s situation is a little bit different so that’s why you have to really take the blinders off and look at things from a big perspective versus a really narrow perspective.

Vera Fischer: That is really interesting. Okay, so let’s go back to the tax free life, the book that you wrote. Can you give our listeners just one or two examples of things that they could watch out for while they’re looking at their taxes?

Craig Cody: Sure. One thing is a seldom used; it’s called a medical expense reimbursement plan. Most people they have medical expenses. Thankfully most people don’t have enough to meet the criteria to take the deduction on their tax return which is typically 10% of your gross income. You could have a lot of out-of-pocket healthcare expenses whether they’re eyeglasses, whether they’re braces, whether they’re special tutoring that would normally not be deducted, but if you have a certain type of business and you set up a medical expense reimbursement plan, then you do get to deduct those expenses dollar for dollar without meeting a certain threshold.

That’s a big one, then the chapter in the book that I wrote because I co-authored it with nine other people, was “How to Make Your Child’s Cleats Tax Deductible”. Basically what it comes down to is how can you hire children and make the, let’s just say it’s their hockey school, deductible.

What you do here is you hire your child. You document it. He comes in on Saturdays and depending on what business you’re in, you pay him a reasonable salary for what he’s doing. You make sure everything is documented. The money goes into his account and then when the hockey bill comes, they pay the hockey bill out of his account. You can do this for private schools.

The tax court has actually allowed this for children as young as seven years old. I typically would not recommend it for anyone that has a child less than 12 or younger than 12. I don’t like to push the envelope. It’s perfectly legal, but I think sometimes you can…sometimes things get messy.

Vera Fischer: Right, I’m with you on that.

Craig Cody: That’s another one. A big mistake that people make is choosing the wrong entity. Typically people choose an entity because they go to their attorney and he says okay you’re starting a business; form an LLC, or you’re starting a business, form a corporation. They don’t look into what’s the tax ramifications of what they’re doing.

What we tend to like people to do is talk to us. Let us speak with your attorney. Let’s figure out what works best on the legal side and what works best on the tax and accounting side. That’s probably the biggest mistake that we see people make, wrong entity type selection.

Vera Fischer: You can change that at the end of the year, the entity type or is that not allowed?

Craig Cody: Well if you’re an S corporation you have to jump through a few hoops, but more typically it’s somebody that’s an LLC. They can change to a corporation in making their election. We’ve had a lot of success with making late elections so typically if somebody comes to me now, there’s not a whole lot I can do for them retroactive to 2016, but the code does allow certain late elections to be made and sometimes we can make a late election and save somebody significant dollars.

Vera Fischer: Craig coming back to the tax planning aspect of it, you’re clearly in New York. Can our listeners go to their tax accountant and get the same type of counsel or do we have to look for someone who is a certified tax coach?

Craig Cody: Well I like to ask people when was the last time your accountant came to you with an idea to save taxes? If it’s never then you need to look elsewhere. If it’s often, then you need to sit down with him and you need to take his advice and figure something out. More often than not, the answer is never because accountants are typically focused on the compliance work, putting the right numbers in the right boxes.

Vera Fischer: Craig whenever someone is in a different part of the United States and wanted to get your expertise, is their location a problem?

Craig Cody: No, we deal with people as far away as Oregon. The internet is a wonderful thing.

Vera Fischer: Oh interesting. Also, one more question. How long does it take? How long does this process take?

Craig Cody: The typical turnaround time is about ten days from the time we get the tax returns. Depending on the time of year, sometimes it could less, shorter periods of time, but I typically like to tell someone the turnaround time is about ten days.

Vera Fischer: Oh interesting, okay. Craig this is really interesting insight that you’ve provided around this tax planning system. Is there anything else around this system that you’d like to add before we wrap it up?

Craig Cody: Well I would like to offer your listeners a copy of my most recent book which is called “The Ten Most Expensive Tax Mistakes That Costs Business Owners Thousands” and I think we’ll have a link on your webpage taking them to the book request which will be craigcodyandcompany.com/execution.

Vera Fischer: Perfect.

Craig Cody: That’s a free book. I just think that if you’re out there and you think you could be saving more of what you make and you’re not, you need to find somebody that does what I do.

Vera Fischer: Craig thank you so much for the offer of the complimentary book to our listeners. That’s fantastic. If they’d like to reach out to you directly, how can they do that?

Craig Cody: Our office number is 516-869-4051 and my email is craig@ccodycpa.com. If you go to our website it’s craigcodyandcompany.com. You can request information about us, or from us and see what we have going on.

Vera Fischer: Well fantastic. Craig you have shown us that processes are needed to get the work done and have provided some nuances that our listeners need to hear regarding the execution of a successful system. System Execution fans no matter how many notes you took or how often you re-listen to this episode, the key is every successful business uses systems to drive to a better outcome.

Craig thank you so much for sharing your expertise and insight with our listeners today.

Craig Cody: Well thank you so much for having me.

Vera Fischer: Attention System Execution fans. Do you have a system that would be valuable for our listeners? We want to know about your system. Go to SystemExecution.com, fill out the contact form with your information. Don’t be shy. Systems are cool.

We hope you found this episode of System Execution on tax planning systems to be enlightening. For free examples, case studies, e-books and more, be sure to visit SystemExecution.com/resources. Contribute to the conversation by reaching out to Vera directly on email at Vera@SystemExecution.com. Until our next episode, thank you for the privilege of your time.

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