Dashboard: Taxes, Regulation, and a Punch to the Face

[Music] welcome to another 21 hats dashboard brought to you by our sponsor the great game of business I'm Lauren Feldman I'm here with Gene marks to talk about the things we think business owners should be following this week welcome Jean hello Lauren the great game of business is an excellent organization I just want to say I was on their website last week and I'm very happy they are sponsoring you and um I I I recommend people check them out I didn't ask him to do that folks uh he just did that on his own thank you Jean I'm sure the great game of business will appreciate it too very very happy to hear that so there you go trying to get we want them to continue sponsoring this so like come on yes we do it is legit it is legit so go ahead Jean as usual you've been uh writing and talking about stuff that matters to business owners unfortunately you've been writing and talking about some stuff taxes and regulations that aren't particularly uh good news uh you wrote recently that some tax deductions for small businesses are going away want to tell us about that yeah so you know everybody loves taxes there's two big tax issues this year if you're a business owner that you need to make sure you're aware of number one which is really huge actually is um research and development expenses now you know it used to be that R the R&D expenses were only for like uh like the pharmaceutical industry but I've had a much larger share of my clients I have a manufacturing client in Pennsylvania that gets you know has research and development expenses um and they actually claim the R&D tax credit that's a separate conversation by the way um but theyve you a lot of people have either if you're developing new products or new Services uh materials labor you know whatever anyway do you have the sense that people who who should be taking that deduction have been fully aware of it or do you think I don't I don't I think we're even applying for the the tax credit as well they're not aware of it it's been I talk so there's some people who are only find may only find out about it now as as it's going away to late so this deduction is like if you had R&D expenses you're developing new products for the future you up until you know last year 2022 you could deduct you just deduct the the cost even though it was for a future thing usually in the accounting world if you're spending something for the future it's considered to be a capital item and you would have to advertise you know put it on your balance sheet and advertise it that's so that went away so what that means is just to make sure I'm clear if you have R&D expenses you are no longer allowed to deduct all of them in your first year you have to now amortize them over five years so say you've got $10,000 in R&D expenses this year it used to be you could take a $10,000 tax deduction boom now you have to amortize that over five years 2,000 a year and in the first year you can only take 50% of it so instead of it even being a 2,000 deduction it's only ,000 deduction which means it's only 10% of the entire R&D tax deduction that you used to get is now just gone away and I don't know if a lot of companies know that and a lot of accountants are con concerned because this happened in 2022 and now they're you know filing their taxes and they're realizing like oh [ __ ] you know we had a big deduction that we used to take and now we don't have it anymore and now suddenly we owe taxes that we never had to owe before does that make sense Lauren it does but for those of us who are not CPAs and not fully comfortable with financials how big a difference does it make that you can't take it all in one year as opposed to having to spread it out over five years it depends on how much research and development expenses you had um if you're a business and you had a million dollars in R&D expenses well guess what you're only you you expecting to deduct a million dollars you're only going to be able to deduct 10% of that this year so you're not deducting you have 9 you'll be able to deduct more next year that you be able to deduct it you know in over five years period of time but you're still taking a much bigger hit than you were expecting to in the first year you know so that's a wakeup call for a lot of for a lot of people at the end of five years you end up in the same place you do at the end of five years you do end up in the same place but again you know it's still it's a shock that you have to pay in the money now you would ow the taxes so talk to your accountant about that if you've got research and development expenses it's a big issue the second tax thing is depreciation because if you buy there's something called bonus depreciation particularly for smaller companies if you buy a capital asset equipment Furniture computer software computer hardware you could just deduct the entire thing 100% in one year Well starting this year you can only deduct 80% of that next year it goes down to 60% Until It ultimately gets phased out so um if you are looking to buy Capital items like that do it this year and put it into service so you can at least deduct 80% of that cost right away uh otherwise if you wait until next year you're only going to be able to deduct 60% of that cost right away and then depreciate it over a period of time does that make sense it does anything we should know about what qualifies for this depreciation bonus depreciation uh it's anything with a long-term you know value that you're buying for your company so it's not inventory but it's anything else you put on your balance sheet so again uh it could be cars could be uh you know it could be furniture and fixtures could be you know Machinery or equipment or computer software computer hardware those are the general you know General classifications and the bottom line is it's it's not as good as it was but you still want to make use of it especially before it gets worse correct before it continues to phase out that is exactly right your piece indicated that it's not all bad news you referred to the inflation reduction act and uh a few tax incentives that that provides that is correct so you know the inflation reduction act which you know is is now law does provide some pretty nice rebates and credits for both individuals and businesses uh that buy uh you know electronic you know electronic electric cars hybrid vehicles uh those kinds of cars uh plus uh if businesses are actually doing work in certain green areas um for you know in the Energy Efficiency industry um they can also be open to certain types of tax credits so again talk to your accountant because that might be something you could take advantage of do you think Most accountants are up on that and qualified no no so if you if you're not confident that your accountant knows enough do you turn well here's the thing if you've got a good accountant as an accountant you can't know everything right sure so you know if if a client calls me and asks me a question like that I'm like oh yeah I definitely have some thoughts let me look into it and I'll get back to you I'm a little busy right now which basically means I don't know what the [ __ ] I'm talking about but I need some time to research this and come back to you and a good accountant will do that okay you don't have to say they know everything right off the top of their head but if you have a good account they'll they'll look up the rules they'll figure out what applies to you and they'll come back to you and they'll make the recommendations all right the next piece of bad news involves regulation and um you you take seem to take this one pretty seriously the sentence that left out to me in your piece is this one the federal government is going to throw another punch in this fight and it's going to land right in your face what are you talking about right in your face let me explain to you why uh I've been talking about this and now I finally put it all down in print well online uh youo there's a bunch of rules regulations that are hitting uh us now now that the bid Administration is two years in and they're really all ramping up they've filled out all the different agencies the National Labor Relations Board the OSHA EEOC the Department of Labor the FTC um so they're they're they're now in place and in the driver's seat and doing their thing and they're definitely doing their thing and their thing is going to impact a lot of businesses over the next couple of years in a negative way the Department of Labor is working on changing worker classification rules that's going to happen this year which means uh people that we were classifying as independent contractors uh you know many of them may need to be classified as employees the Department of Labor is also looking into raising overtime that's not set in stone yet is it no it is it is not it's gotten a lot of push back even from you know places where you wouldn't necessarily expect to find it I think yeah it has um it has got like Freelancers for example a lot of them oppose this law they don't want to be employed um it is the final rule is expected out sometime before midyear so that that will happen uh they're also working on changing overtime rules uh meaning that they want to increase the uh maximum level of pay or the minimum level of pay excuse me that you would need to pay for an employee for overtime right now if you pay somebody three $ 35,5 68 a year and they're like administrative they're not a manager they don't supervise anybody uh you know their salar and other things um you don't have to pay them any overtime if they work more than 40 hours well right now the Department of Labor is looking into increasing that number to as high as and I am not kidding to as high as $80,000 a year although I don't think it'll be that high but in that case that means that if you've got an employee that meets those requirements again they're admin they're not a manager they're not supervising anybody they're they're salor and and again there's some other factors and they're making up to it could be as much as 80,000 a year and they work more than 40 hours a week you owe them overtime okay so that's a big issue for a lot of businesses to have to comply with them let me ask you this this is something correct me if I'm wrong but I think the Obama Administration did this and then the Trump Administration rescinded it how how high did the Obama Administration raise it 48,000 in change so I think the number is going to wind up between the 50 and 60,000 limit and you bring up a good point also Lauren is that the the Trump Administration actually um they they didn't necessarily resend it exactly there was a bunch of lawsuits from business organizations about this change so it clogged it up in the courts and then when the Trump Administration took over they just didn't pursue it any longer so it just died in the courts got it so that could you know that could happen it won't because the Biden Administration will you know will pursue it to the extent that they can the number 355,000 doeses seem kind of low would you be do you think it's reasonable to raise it some well it it really depends on whether or not you feel there should be any rule for overtime for people if they're salaried and whether the government needs to be involved in that decision um I am just not a believer in the government telling employers what to pay so if you're paying an employee 35,000 or 60,000 and their salary listen I'll give you an example when when I was a manager of KPMG you know however thousand years ago uh I was salaried I didn't earn any overtime I mean I I worked and it's not like I was making big bucks but you know I worked a lot of hours and didn't get paid any overtime why because I wanted to do a good job and you know and be promoted and move further in the business or whatever you know so I don't know I I just I just don't buy into government mandating employers to have to pay their employees even you know mandated vacation and things like that um I just it irks me sometimes I know it's the right-wing guy inside of me sorry that I feel you believe in minimum wages yeah no I I I actually don't believe in minimum wages and that's another conversation that we can have but I do believe it should be left to the market and I do believe that um although workers should certainly have some protections I think the the minimum wage is something that I don't have a single client that pays the minimum wage they all it's ignored it's like this irrelevant number well it's become irrelevant especially because wages went up um that's the reason well so there so if it's become irrelevant why do we still have it just doesn't make sense well there there have been times and places where it has been relevant right in in right in very you know in very isolated situations I mean I think Industries and you talk about the fast food industry and whether or not they should pay you know be mandated to pay a certain minimum wage and I don't know if I'm working for B King and I'm making 12 bucks an hour and you know and McDonald's across the street is paying 13 I'm going to go and work at McDonald's you know well one thing we can all agree on I think is it's just crazy to have one number for the whole country it just doesn't make any sense laen do you know who also thinks that's crazy ran Paul thinks that c that's crazy you just agree now you got me worried Paul I know you you better stop this podcast and have a drink all right next regulation what else is coming uh other regulations uh ocean now has 20% more inspectors so there's going to be a lot more inspectors they're coming out on our workplace and they're increasing fines for companies they've already increased it for inflation and now they've increased the definition of what is considered to be a Ser that's not hiring more inspectors isn't increasing regulations I mean that that's like the IRS hiring more people to my clients that are then going to have to be subject to more safety inspections now I listen I I I want to make sure I'm clear on this there is there's there's benefits to to employees and benefits to society through these kinds of things so I'm not saying like that's a bad thing all my it well my whole point in the article is it's just GNA be more costly for small businesses that's all fair enough it's gonna be more costly okay you can argue separately whether or not this is good for the world or not it's just going to cost us more money you know and that's in the end what the point of my my peace in the hill was all about I think you you also mentioned non competes so nine P agreements I think we talked about this a few weeks ago we have are no longer allowed according to the um is it's the FTC I think was the ones that was involved in that not the nlrb but there's litigation here too I think right there is and they're actually coming out uh there was lit they're going to come out with a rule the FTC based on litigation um disallowing non-competes which basically means that if somebody leaves your company um and goes to a competitor down the street they they're allowed to do that and obviously they bring with them whatever proprietary information you have there are some States California New York that don't have never allowed for years have not allowed non-competes so it's not as if this is like a new thing but for a lot of businesses around the country I mean that can they they can no longer protect themselves um and their customers and their their lists and their data and their knowledge uh with a non-compete anymore that's going to go away too and I think that's going to hurt some businesses all right let's move on um the Biden Administration just released a budget is that part of the bad news or part of the good news it's part of the no news it is you know it's really funny like I I I wasn't even like following the story because it's like this is stupid and irrelevant I mean whatever you know your President Biden is recommending for his budget um it'll never pass a republican house and a divided Senate we and everybody on Earth knows that it's just he's setting his playbook for his reelection campaign and that's Fair good enough for him but now you know what he is you know what he's proposing and my only thing that I listen I mean he's I I am a fan of some of his spending initiatives I get that I am super concerned about the deficit I am not convinced that you know his measures are really going to significantly address our national debt I mean even the Congressional budget office still says it's going to grow by 19 trillion dollars over the next 10 years despite his budget um my my biggest pet peeve with um his going after the wealthy for more taxes um it just so many small businesses rely on corporations who he wants to tax more and Wealthy individuals you know we we provide landscaping services to marketing services at corporations and we sell pizza and dresses and do car repairs for wealthy individuals and we go in and we fix stuff in their I don't because I can't screw in a light bulb but contractors go and they make money you know working with the the less money that people have to spend because they're being taxed you know out of it I think they'll probably still be able to afford somebody to come in and put in their light bulbs maybe maybe not but then the other is the other factor is he he is going after now our beloved pass through deduction for small businesses which was part of the 2017 Tax Act uh which is this big 20% deduction that we got for um you know if you're a pass through on your income and um he wants to limit that based on uh the income of the you know of the business owner and I can assure you we know spe the specific of that how the last I looked at was $400,000 household income okay that was the last number that I saw and um $400,000 is not exactly wealthy I don't care go ahead and tell Mee I don't want to get into that debate 400 for a business owner to have earned $400,000 in their business in a year trust me when I tell you Lauren that nobody they're not looking at $400,000 in cash sitting in their Bank it is more likely than that that they've taken most of that money and reinvested in their business hired employees you know bought equipment did whatever so you know they're being taxed on money that has already been spent and resent and I think doing that is going to limit the amount of money they can spend and resend so I'm not quibbling with that I just if if you're looking at the curve across Society I think it's it's toward the high end is all I would say yeah I mean it is um I I I I just I I do bristle as well when we have the whole tax to wealthy the other thing that concerns me also is uh taxing unrealized gains um is is a real Pandora's Box to open but I don't think that'll ever I don't think it's constitutional so I don't think that'll ever happen so is that really it from the budget that affects small businesses those are my thoughts for now not that it's going anywhere anyway right uh last thing Jean I think you knew I was going to throw this at you um I I I can't even do this with a straight face um we've had the great resignation we had quiet quitting and now the latest Buzz phrase to go viral is bare minimum Mondays which started with somebody on Tik Tok saying that that's how they kind of get through the weekend um by telling themselves that they can just survive Mondays by doing the absolute bare minimum at work yeah I'm wondering how you feel about this Jean well I say for all of you people that support bare minimum Mondays I support a bare tus Tuesday I'm not sure all of our listeners know what a tokus is Jean I will I will hold a zoom call with all you bare minimum Monday people and I'll be happy to show you my bare tokus okay now we're getting a feel for it that's exactly how I feel about bare minimum Mondays it's in it's insane and I only put it to you this way Lauren say you're getting heart surgery on a Monday and you're car your surgeon practices bare minimum or say say you're on a flight on a Monday and the pilot is like it's bare minimum Monday I'm just gonna really you know Wing this I'm I'm hoping my pilot is not on Tik Tok that's what I'm hoping yeah it's it is just anybody that is actually pushing bare minimum Mondays they're just they're just [ __ ] employees and should not be hired I would never hire if I saw if I was looking to interview somebody and I saw them on Tik Tok talking about bare minimum Mondays I would cross them right off the list I mean who wants to hire somebody that's an interesting do you check people's social media feeds when you um I actually have not recently and I just hired somebody recently I never checked their social media feeds so maybe it's not something I would you know but I I I'd be able to figure it out I think even before asking before looking at their social media there's a certain type of person out there that would be a bare minimum Monday supporter and I'm hopefully I can sniff that person out before it gets too um you know too serious what are you working Gan anything you can tell us about so yeah um pce for the Philly inquire next week on the um New Jersey has got a really interesting program that I hope goes uh National they are funding um they're helping small businesses in New Jersey um you know um get found online and and upgrade their website they're giving them marketing support digital marketing support and they put together like a few million dollars and about a handful of marketing agencies in New Jersey and they're B it's like kind of like Workforce developments you know like you know you get trained and then the state will reimburse you you know to give these employees skills now the state will reimburse these marketing agencies to help their small businesses and um I think that's a cool idea and interesting yeah I'd like to see that grow you know around the country um so that's you know that that's my big thing right now and I'll I'm still up in the air as what I'm gonna write for the guardian but I'll let you know well we'll look forward to that Gan Marx is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times the Chicago Daily Herald Forbes an entrepreneur you can also hear him on ABC radio's eye on the world with John Bachelor Jean hosts two small business podcasts of his own with paychecks Corporation and the Hartford this episode was brought to you by the great game of business which helps businesses with open book management and employee ownership you can find them at Great game.com Jean it's Monday and you have certainly put in far more than the bare minimum good point I should have made that joke thanks Lauren uh enjoy your uh bear tuus Tuesday as well I know the my audience well that'll never happen don't worry see you take care [Music]