Craig Cody
My father used to say as a business owner, “Your goal should be to complain about your high tax bill.”
Apparently, he was wrong. If you are in the business, you should do more than just focus on increasing revenues by finding more new clients.
“Most people think higher-paying clients will translate into more wealth and more money in their own pockets,” says CPA Craig Cody. “Often overlooked is the fact that an increase in business revenue without tax planning results in more money going to the government.”
Cody and I met when he was speaking at the Build A Better Agency Summit in May 2022 in Chicago. His advice can benefit all those in the business of selling expertise, such as agency owners, business coaches, strategic consultants, speakers, and authors.
In no way is this former NYC cop advising business owners to break, or even bend, the law.
“After 17 years on the force, I retired as a lieutenant from the NYC Police Department in September 2000,” says Cody. “I saw an opportunity to put my financial skills to work and joined an international CPA firm in their accounting practice. In September 2003 I added tax planning services to my practice, and realized that saving clients thousands in taxes—and seeing the look of delight on their faces—gave me the same rush as chasing ‘perps’ down the New York City streets.”
Here are two perfectly legal strategies that Cody recommends:
Rent your home. Cody says to take advantage of the Augusta rule, Code Sec 280A. The IRS allows you to rent your home out for up to fourteen days a year and not pay the tax on that rental income. If you rent your home to your business, your business receives the tax deduction, and you pay no tax on the rental income. “This is a tax efficient way to move a sum of money from your business to your pocket, once again, tax free,” says Cody.
Share your home gym. “Another example of strategic tax planning is using a home office and coupling it with a home athletic facility,” says Cody. “The IRS allows you to deduct the cost of a home athletic facility assuming you have a home office. This facility can be a home gym, or a pool, if they are available to your employees as well, per Code Sec 132(j)(4).” Cody recommends including the availability of these benefits in your employee handbook.
Cody says business owners need to take the initiative about creating wealth outside of their business.
“The two examples referenced above are a start,” says Cody. “As business owners we need to embrace a mindset of planning for ways to legally reduce our tax burden.”
Spoken like the son of a man who served for 33 years for the NYPD and whose mother is a retired legal assistant.
Cody says your CPA needs to embrace that same mindset. It is all about planning and not just about placing the right numbers in the right boxes. He says start by speaking with your CPA and ask questions about strategies you can implement to keep more of what you make.
He is also the host of The Progressive Agency Podcast, which helps agency owners make and keep more of the money they make.
“My practice has evolved over time and now focuses on proactive tax planning, small business accounting and tax preparation,” says Cody. “My most valuable work involves helping clients spot mistakes and missed opportunities that cost them thousands in taxes. I find the prospect of helping clients cut their taxes rewarding, and although hectic at times, it is what I enjoy the most. No two days are alike.”
Bottom line: A CPA once told me this old cliche: “Pigs get fed, hogs get slaughtered.” That means do not get foolishly aggressive with tax avoidance (which is perfectly legal—it is tax evasion that is criminal). But when it comes to revenues, remember what you don’t spend or pay in taxes you get to keep.
