Taxes can be a daunting part of any business owner’s life, but they do not have to be. Today, on the show, we have CPA and Tax Strategist Chika Obih. Chika has been in the tax game for over ten years, helping many clients shift their mindset and practices and increasing their savings!
In our chat with Chika, we hear about how she found her way into this career and the kinds of clients she has attracted. She generously shares some of the pivotal moments from her journey, explaining what it took for her to step up and start to take herself and her business seriously. This episode is jam-packed with great lessons, and Chika’s story is truly inspirational.
We cover the most critical aspects of returns, deductions, credits, and much more. Some of the biggest takeaways from this conversation are the numerous reasons that Chika gives us to stop fearing taxes and embrace the part they play in the life of any successful business owner.
[00:00:00] AW: Hey, welcome back to another episode of Transcend the Podcast. Today we’re talking about taxes. Now I know, I know, taxes may invoke some butterflies in your stomach or some heart palpitations because we generally have a fear of taxes in the US but I will tell you, Chika Obih, my guest for today does a great job of breaking down some tax strategy, some things we may need some clarification about, and why we really shouldn’t be afraid to pay taxes. She is an expert consultant and tax advisor to service-based businesses that are making multi six figures, at least six figures, and her focus really is on providing the strategy so that people can maximize their tax savings and build wealth in the future.
So, hang on just a second and we’ll get right to the interview.
[00:00:45] AW: Alright, I’m so excited to welcome my friend Chika Obih here. Welcome, Chika.
[00:00:50] CO: Hey, thank you Asha for having me.
[00:00:51] AW: Of course. So, Chika is like my go-to tax referral person. I’m always asking her, what’s going on now? What is this update? What are these things mean? And she’s such a resource and has such a commitment to helping folks really maximize their tax savings and just have more control over like business, right? More control over your money.
So, Chika, how did you get started? How did you decide that tax advising is what you wanted to do for folks?
[00:01:18] CO: Yeah, good question. It just felt natural to me. I mean, it takes me back to college days. I studied business and we had the opportunity to intern and I chose a public accounting firm. And within that firm, everybody, all the other interns were going towards audit, but audit meant driving to all these client sites. And I’m just like, “I want my own desk. I want to go come and go to my desk.” I just chose tax because of that. And it’s so crazy that it was just a fit, right?
Just learning tax law and applying the tax law to the client. Because if you ask me a question, “Hey, can I deduct this? Hey, what business entity is right for me?” Literally, the answer is always, “It depends.” I need to know your situation. I got to apply the proper tax code. So it just fit with my personality of loving research, like putting puzzles together, and then being able to discuss with the client in a way that they understand. It was just all fitting. So yeah, I’m just thankful that I chose the right major based on my personality. Yeah, like fast forward, shoot, I don’t even want to know, how many years, at least a decade, and yeah.
[00:02:39] AW: That’s awesome. I love that, because – so two things are coming to mind. One, when you said you have to do the research, because most answers are “It depends”. So people ask me all the time, “Can I just run my business on LegalZoom?” And I’m like, “No!” And I’m assuming that you would have the same or similar answer when people are like, “Can I just use TaxAct or TurboTax or something like that to file my business taxes?” So why would you tell people, “No, don’t do that.”
[00:03:03] OC: I get it. I love that people, they want to find the easiest way, and perhaps maybe the cheapest way to get it done, right? So I love that they want it to get done. However, the problem with using some of these websites is that you don’t know what you don’t know when it comes to tax law and your situation. Same thing with LegalZoom, when it comes to law in general, you don’t know. And so, maybe like with TurboTax, yes, you can follow the prompts and answer the questions. But sometimes, TurboTax is a software they don’t know your particular situation and how just one little detail can change the whole situation of the filing, right?
And then this can bite you in the butt come years later, when the IRS send you notices saying “Hey, you did this wrong. You owe us tax and interest and penalties.” I just say, especially when you’re business owner or you have investments assets, just pay the CPA or the tax professional, because it’s their job to make sure that they got you, that they’re doing it correctly, and you have that person to ask questions to. To me that’s priceless.
[00:04:21] AW: Yeah, I agree. I mean, I get it like as starting out as business owners, oftentimes we don’t have a lot of money to put into a lot of stuff or into anything, especially as black and Latin entrepreneurs. Unfortunately, that seems to be a lot of our situations. But there’s a hierarchy of things that you should probably pay for. I think, obviously legal and tax advising and preparation is definitely one of those. Also, when you go to a licensed professional, we have a professional responsibility to do it accurately and correctly.
Whereas like your Auntie has been doing the books for years for the family business. If they’re not doing licensed and they mess up, there’s no recourse, like there’s an apology that you might get. But we as licensed professionals have to make sure that we are maintaining the standard. And if we’re not, then you got a bone to pick with us and we have to make it right for you. Yeah, just make it right for you.
So one of the other things I like, too, is that you’re also an entrepreneur, and sometimes it’s really – my conversations with folks who are working for other corporations are a little bit different, because there’s that “security” of being within a corporation. But when you are running your own business, there are so many different hats that you have to wear. Can you just share a little bit about your journey to entrepreneurship? And then we’ll get more or back into the sort of advising questions.
[00:05:45] CO: Yeah, for sure. This is a great question. I want to give the audience like the full picture, right? Because I love when people give the roadmap. And so my roadmap was I graduated college back in ’07, undergrad, and went into public accounting from ’07 to ’10, for three and a half years or so. The reason why I left public accounting was because it wasn’t because of the work. For me, it was the micromanagement, and it was the corporate politics, that I just did not see myself having longevity in those situations.
So, at that time, I was about 25, and I literally had this moment of like this Raven-Symoné moment of like, looking into my future, and I’m like, “Dang! Right now, I’m single, I don’t have kids, I don’t have any commitments outside of me. This is my time to explore, to do whatever I want to do with special because I wasn’t happy.” And so that’s what led me to quit that job, and I did take about a year, year and a half off. I traveled to Thailand. I became a Bikram Yoga certified teacher. I became a nutrition consultant. I had some nutrition clients. I traveled a lot. I was dating. And in the midst as well, I started taking on some tax clients through Craigslist, of all places.
[00:07:13] AW: Wow, interesting.
[00:07:15] CO: Yeah. When I look back, I love that I wasn’t so committed to any one thing. Because that year and a half, two years, it helped me to land in this space of, “Okay, no, I want to do the tax thing. And I want to be an entrepreneur and focus on that.” So, that’s when I started taking it serious. Think about Craigslist, right? It’s all free and you don’t know who you’re going to get, and so I dealt with some clients where they didn’t want to pay me or they’re like, “No, H&R Block charges this, so this is what I’m going to pay you.” Again, I was like, 25, so this was 11 years ago. I’ll tell you my age.
At that time, I was just like, “Okay.” I did not have a backbone. I said yes to everything. But then through the years, I’m just like, “This is too much work. I have my CPA. I have the expertise. And it’s up to me to take myself seriously. Otherwise, no one else will.” So, I think just through the years, it’s like, I went from taking on all the clients, saying yes to everything to filtering, right? No, I don’t do sales tax. I don’t do inventory. I don’t do audits. So, no, no, no. This is my price. If you can’t pay it, it’s okay. I understand next. I started to filter. As I started to filter, it was hard. Yeah, there was guilt. I felt guilty. I felt bad. Some days, it’s like, after saying no, or just even going back and forth with a person, which they’ll recommend. Once you say no, move on.
But again, I’m learning in my 20s. So I did have that guilt, but at the same time, I started to feel empowered. By saying no to what I didn’t want is focusing on what I did want, more what I wanted started to come my way, started to just attract me in it and I started to see how the universe really works. This law of attraction. I’m at the point now where like my business model and the type of clients that I serve, service-based business owners that are making six and seven figures because I want to impact and provide the transformation in such a high way, a high, excuse me, transformative way. And so, it takes a certain energy, it takes a certain energy mentally. My brain space is very limited, day to day. So, I realized like if I’m working with the complexity of these types of clients, I have to really niche and commit to only these types of clients.
Again, it’s been a challenge because I see new business owners wanting my service, and I’m just thankful that I’m able to – I have a group of referrals. So I’m able to give people various referrals that I know, they do good work. So, even though I’m not the one being their CPA, new business owners, I know that they’re going to be in good hands, even if I’m not their CPA.
[00:10:34] AW: Yeah, absolutely. That’s so true. There’s a couple of things, I think key gems that you hit on. One was that really stood out, you said, when you started to take yourself seriously, and I think that that is so important, because sometimes we’re out here like, not confident enough in the thing that we’re doing, because it’s new. And our brains are like, “Hey, this is new, this is scary, go back to what’s old.” So that’s why sometimes it’s so hard to break through into something new. But you said things started to change when you took yourself seriously. What were some of the changes? What do you mean when you took yourself seriously? I have my own assumption and like my own moment of taking myself seriously, but what did that mean for you?
[00:11:11] CO: Yeah. What that meant for me was, again, like, being serious about how many hours there are in a day, and not just that, but like – I had a point where I was working every day, and it would be sometimes close to midnight, or I’ll look up and it’s like, “Dang! It’s late or it’s nighttime.” So taking myself seriously in terms of what’s sustainable, right? What do I want in my life? That included, I want to travel and not take work with me while traveling. I want to date and prioritize dating.
Taking work seriously means okay, I can’t do everything. I need to have a schedule. So not feeling like it on that certain day, because maybe I stayed up late partying the day before or late date or whatever. I had to have boundaries. So boundaries is a way that I started to take myself seriously. Boundaries for myself. Again, about the timelines and the bedtimes and then also knowing that I have a limit, I can’t do everything by myself. So then starting to get a team and my first hire was a contractor who was an accountant. Just getting that accountant to help me during busy season, tax season. It’s so crazy, because that first year that I got the help, there was some mindset issues of like, “I’m going to have to pay this person.”
[00:12:47] AW: Totally, we all go through that.
[00:12:50] CO: But I made more that year than any other year, right? It’s like, “Okay.” So when you give help, you expand, you grow. Just learning things like that, learning by trial and error, as opposed to sitting in fear, but still feeling overwhelmed and not doing anything about it. You know what I mean?
[00:13:13] AW: Right. And being okay with the error part. That’s something that I’m still working on, still. I realized I’ve been – I don’t know. Mistakes weren’t really allowed in my childhood. Not that like the world would end but for whatever reason, and not necessarily because of any particular person. I just felt like I had to always have it all together and would get really upset. When I first started learning how to salsa dance, it took me three years probably to get comfortable dancing in public, because I was so embarrassed about the mistakes that I made. But I am still working on it in business, but being okay with the error part of trial and error, entrepreneurship is such a – let’s test this. See how it works. It didn’t work the way I wanted it to, so what can I tweak? And being okay with, “But that’s the whole thing.” Think about how these become – even Apple has started out with computers and then, “Okay. Well, let’s try this thing. Okay, well, that didn’t work. But let’s try this other thing. And this phone, and this iPad, and all these different things.” Businesses evolve and you have to put stuff out there, see how it works, and not be afraid to fail. So I really liked that part about the trial and error.
The other part too, that you were talking about is niching down. We talked about that a lot in the community and how scary it is to niche down. But you said niching down allows you to really become a better expert, and it helps you conserve brain space, which is a hot commodity, right? I’m not quite 40, but I walk into a room and forget what I came for. So I know there’s too much stuff going on in my brain. But niching down is so important. So tell us again what types of clients you work with?
[00:14:41] CO: Yeah, for sure. So I work with service-based business owners. A lot of them are coaches, consultants, creatives, and they are more seasoned in their business. So at least three to five years as entrepreneurs and a lot of them are, maybe they’re the only employee or full-time person, but then they might have some contractors that they also work with. So, they are grossing multi-six. So 200k, and up to seven figures per year, and they’re just at a point where they either been doing it themselves, in terms of the accounting, the taxes, or they’ve been taking shortcuts. So maybe they have used TurboTax, or maybe they have used the neighbor who is not a CPA, is not licensed and say, “Hey, I can do your taxes”, type of thing, right? Because we all know those people. But they also see these crazy five-figure, sometimes even six-figure tax bills, and they’re like, “Wait, something’s off. Let me focus on this and let me talk to a CPA who can help me”, right?
So, that’s when they’re ready. They get that tax bill, and they’re like, “I can’t continue with this.” That’s when they find me and then that’s when we work together. We can do either one of two things. So I offer either a tax strategy plan, VIP day. And what that is, is I give them the step-by-step strategy as to what they need to do based on what the situation is, right? So I looked at their financials, their tax returns for the past three years, and I’m able to assess. Okay, this is what’s going on. These are red flags. This is what you can do to turn that around. If you do it, this is the type of tax savings you can expect to see.
There are various strategies. And by the end of it, I’m able to lay out, at least, 20k, 30k. I had one client over 100k in tax savings just based on the plan. So with this plan, they can either continue working with their tax professional or accountant. Someone who they’re not strategy focused, they just want to do the tax return, but they have a knowledge. Maybe it’s another CPA. They have the knowledge to take the actions per the plan that’s laid out. So they can take this plan to their accountant, or the other way, I work with my clients is bundled services.
So this is where it’s all done for you. We can skip the whole tax strategy plan, and instead, I’m your CPA, we do it all. That includes tax strategy. That includes tax preparation for both the business and your personal. It includes the bookkeeping and the monthly reconciliations, and includes payroll. You’re going to need some payroll, especially at that caliber level, within your business. And then it just includes me, like us building a relationship is not transactional. You have me all year, utilize me. And I make sure that we talk, we do a situation like this at least once a quarter.
Because again, I noticed that when people are successful, or even not successful, I think, or just starting off, I just say, they want to cut corners and we all do it. Whether it’s like trying to do the detox, instead of just eating regularly. We all want to cut corners. So, I’m like, “No, let’s check in. It’s not to intimidate you. I understand numbers and can be intimidating. But it’s like, no, let’s have a conversation.” I’m going to ask you about your business. Hey, what’s going on? What happened this past quarter? What challenges did you face? And it doesn’t have to be numbers related, maybe you’re going through something with a team member, or maybe you’re going through this mindset issue of how to increase your prices? I feel like as entrepreneurs, we’ve all kind of been there done that, even if it’s outside of the service that we offer and feel like again, for instance, increasing prices.
So I can tell you my story, and we can have that conversation. And hopefully, you feel better or you feel empowered to take action, even though it was like, “Dang, my CPA just gave me some advice, non-tax advice.” You know what I mean? That’s what I mean about the relationship building that is all bundled into the done-for-you services.
[00:19:20] AW: Yeah, that’s awesome. I mean, there’s no replacement for mentorship and coaching too, and to work with someone who has also been down that road as an entrepreneur is priceless, really. Even though there’s a price on it, but really, that mentorship was priceless. So you were focused on service-based entrepreneurs, how important is it for the business owner who needs tax advice or tax services to find a CPA that is working in their niche? Is it okay to just have a CPA who does things generally? Or what would be the advantages of finding someone who’s niched in their particular area?
[00:19:52] CO: Yeah, so that’s a good question. I feel like when it comes to which CPA you work with, a niche based, and I guess you can say, I’m niched, service. But there’s other CPAs that are super niched. For instance, CPAs who only work with dentist practices, right? So it depends on your industry. For instance, I mean, working with service-based companies and really seeing that the people that come to me are, again, consultants and coaches. I get some graphic designers, so creatives. It’s kind of cool to see, like I lay the ground as to who I work with. And then it just comes my way. It’s just a natural thing.
But I think that when it comes to working with a niche based CPA, it’s going to depend on your industry. I advise folks that are in like, for instance, construction, because construction and then like restaurants, and then even product-based businesses. Retail, because they deal with sales tax, and sales tax is a beast on its own. There are CPA firms that only deal with sales tax. So unless you know, just the ginormity of having sales tax, and what that can mean for your business. When you are in those industries, again, my construction and restaurants or retail, where there’s sales tax, or where there’s inventory, or even if you deal with like foreign situations outside of the US, you want to ask those questions to the CPA before you hire that CPA to make sure that they have that experience, and that you are going to be in good hands. I think that’s my recommendation when it comes to niches. It depends on your industry. If your service base, I think it’s more general and it’s okay to kind of work with a CPA who, again, you feel good about, and that you know that they can do what they say they’re going to do for you.
[00:21:57] AW: Yeah, absolutely. That makes perfect sense to me. Here’s another thing, as we hinted about earlier, like money, people get funny around money, right? We all have a money story, whether it’s like money is abundant, or money is not abundant, or learning that you have to keep trading your time for money. We all have some issue around money, and a lot of new business owners, as you said before, are really hesitant to pay taxes. How can we reframe that so that taxes don’t have to be this scary thing?
For example, what I tell people is that, I’m not obviously not a CPA attorney. But when people are like, “Well, what if I” – I get this question all the time. “Well, what if I closed down my LLC and then refile it next year? Because California is not doing the $800 minimum tax for new LLCs right now?” I’m like, “Really?” I’m like, “Okay, first of all, let’s check your mindset. Because you’re moving out of scarcity. You’re thinking about this $800 fee is going to be two more $800, minimum tax is going to be too much. But if you’re making any money this year, you’re going to be, probably a minimum of $800. Possibly, right?” So what does paying taxes really mean as opposed to you just given all your money to the government?
[00:23:11] CO: Yeah. This is such a good question. And it’s crazy. I’ve not come into what you’ve just said about closing down the business to avoid paying $800. So, I will say that new business owners – think about it, you’re a new business owner, so maybe you you’ve incurred all these expenses to start your business. Or you’re thinking about all the additional expenses that are to come your way, including the taxes. So I can understand the mindset of like, maybe I can avoid the taxes. I understand it.
However, let’s fast forward. You’re new, I get that mindset. But five years from now, you want your business to be in a thriving position, a profitable position, six figures, seven figures. And so when you think about it like that, when there’s profits, there’s going to be taxes. So you think of any anyone successful, they know that taxes is part of the equation. I think just getting that mindset that if I’m successful, I will pay taxes. Fine. But at the same time, there is a way to maximize your tax benefits so that you are paying the least amount of taxes that is still legal in the eyes of the IRS. So that’s where the whole tax strategy planning comes into place. Because it’s not that we’re avoiding taxes, we’re not trying to pay any taxes, it is how do we do it in such a way that is legal? Making sure that you’re not losing out on any deductions or any tax credits, and that’s a whole another approach to thinking about it. We’re not avoiding, we’re leveraging and we’re making sure that we are maximizing the benefits available to us.
[00:25:04] AW: Yeah, leveraging, that’s a good word. I mean, the Internal Revenue Code, the tax code, is written to support and reward business owners, corporations first, and then LLCs, right. If you’re going to step into this space as an entrepreneur, you better learn, or you better hire someone who can help you take advantage of what’s out there for you to take advantage of. The other thing I tell people too, because you’re talking about five years down the line, it’s so true. When you go to buy a house, or when you have to fill out the PPP loan application, or you’re getting money based on your income, they’re going to look at your income, right?
So if you have spent the last five years trying to show that you aren’t profitable, because you don’t want to pay taxes, you’re terrified of taxes. Well, when you get ready to go buy some property, and the bank says, “Let me see your tax filings.” And then you’re like, “I have all this revenue that’s come in, but I made it look like I wasn’t making any profit”, that means you can’t afford the loan that you’re seeking to get.
[00:26:07] CO: Think about it. If I’m the person that’s going to loan you money, and I’m looking at your numbers. Cool, you made 200k. But then I get to the bottom, and that profit is a loss. Now, I’m thinking like, “Dang! You have money management issues. How can you go from 200k? I have doubts that you’ll be able to repay this loan.” The answer is no, you’re not going to get this loan. You know what I mean? You got to think about the long term, and so avoiding taxes is not the way, especially when it comes to like you said, PPP. There are a lot of companies because they were just focused on no taxes, no taxes. They were showing losses, and they couldn’t get any PPP money or grants, because there’s no profits. Same thing, if you’re eventually going to purchase a house, it’s like they want to see profits. You know what I mean? It’s not increasing what it shows on the tax return so that it’s incorrect. It’s just knowing that taxes is not the bad guy.
[00:27:12] AW: Right. Not at all. It’s truly just a shift in mindset. I feel like we’re starting businesses because we want to have some money, but then there’s this fear that we got to shake off, like all those things we’ve heard about, “Oh, the taxpayer is going to get my money.” Go talk to somebody to see what it really is, because we could hold ourselves back from so much from not just operating in fear, but really just being ignorant of what the laws and the strategies are. With that being said, is it ever too early to start tax planning? When should someone seek out a tax consultant or a financial planner to look at the global strategy for their business?
[00:27:53] CO: Yeah, that’s a good question. So is it ever too early? Honestly, the answer is, no. It’s never too early. For example, let’s say you’ve been an employee for all your life, and then all of a sudden, you’re like, “Oh, I think I want to become an entrepreneur, I want to branch out, I want to do my own thing.” I think it’s great to, at that point, when it’s just a thought process to have conversations with, again, a lawyer, business attorney, just to see like, what do I need to be ready for? What do I need to be prepared for? Same thing with a CPA. What do I need to be prepared for?
A lot of CPAs, they love that type of person who for it to happen, proactive, exactly. Talk to me now and let me know what you’re even thinking. What’s the business idea? Where will you operate? Because there’s things that might impact your decisions. So I think it’s never too early to have those conversations.
Now, again, when we think about the potential cost to having these conversations, I understand that that can be something that limits or challenges someone to have these conversations in the beginning. So I would say that as soon as you feel ready, financially, and not like, “Oh, I have profits, but I don’t want to spend the money.” As soon as you can, even if you have put it on a card, but knowing that you can pay it off within the 30 days, so you don’t accumulate interest or anything like that. Have the conversation. Don’t be afraid to spend money on a business attorney, on a CPA, to really move your business forward, move your legacy forward, move your wealth-building forward, all those things. It’s an investment into your future, and that’s how we have to look at it.
[00:29:45] AW: Don’t assume that it’s going to be too expensive, right? Like there are people – everyone prices their stuff a little bit differently. So make that phone call and say, “hey”, or send that email the inquiry form and say, “Hey, this is what I’d like to do. Can you tell me how much it would be to chat?” I promise, you’ll find somebody that you reach out to who you’re going to be able to afford or who is going to want to work with you. Kind of the theme, is don’t let what you don’t know hold you back. Go get that information so you can make a better decision about it.
In addition, we’ve talked a lot about like tax savings, and not paying taxes. But in addition to reducing taxable income, what other kinds of things do you do when you are filing a tax return? So what I’m thinking about is like tax deductions, and like tax credits. Not just reducing the income, but what are these other two categories? What does that entail?
[00:30:37] CO: Yeah, so tax deductions are just – again, as a business owner, being able to write off whatever business expenses that you’ve had throughout the year, business expenses that were necessary within the business, and reasonable as well. For instance, and this is so interesting. Let me think of something that’s reasonable and necessary for your business. So let’s say you are going to a conference in a different state, it is necessary to book a flight, right? But let’s say a regular coach is $200, but you want the first class, and maybe that’s $10,000.
So the IRS might look at that, if you were ever to get audited, like, “Okay, you have this $10,000 charge as travel, but your business only maybe profited only 20k for the year, and maybe your revenue was only 60k, 70k.” Why would you spend 10k on one round trip? Or maybe that’s one way, who knows, right? That’s not reasonable to your business.
I want business owners to keep that in mind. Because I see extraordinary expensing this like, “Really? But you don’t have no money?” That’s the tax deduction part. Just making sure it’s necessary to the business, it’s reasonable for the business, and you’re good that way. Take your deductions. I’ve heard people say, “Oh, yeah, I work from home in my business, but I don’t take the office in home deduction, because I heard that it’s a high audit risk.” My answer is, like, “If it is like legit, you have that space in your home, you use for business, your completing the office at home form correctly. When it comes to the square footage space, and all that good stuff. Take it.” In the unlikely case that you are audited, you’re going to be able to substantiate right, because you know the square footage info is correct. You know that whatever rent or mortgage you pay, that you input it on a tax return is correct.
To make the deduction, I think we hear a lot of noise, and we’re like, “Oh, okay, I’m not going to do it.” But same thing with – and I think you mentioned, why are people afraid to pay taxes? I think we – again, the noise of people like Trump, or some of these companies, billion-dollar companies that pay zero in taxes, and it’s like, what are their situations? They have all these properties, and so they’re getting depreciation on these properties, and that’s what’s wiping out their tax bill.
So just putting things in perspective as to what is it, and how does it relate to you, and not all this noise out there that we’re hearing.
[00:33:35] AW: Right. And those companies also employ hundreds, if not thousands of people, as well. So that’s why some of those deductions are allowed for them, because they are also helping – the corporations are helping to support the economy. That’s not like, “Yes, go capitalism”, or in this country, it’s really brutal capitalism. But I’m just saying, that’s what the tax code is looking at. Just understanding what is the basis, I guess, the perspective, and then understanding how to apply what is already available and free for everybody. So that you can also take advantage of some of those deductions. Now, what about credits? What are tax credits?
[00:34:14] CO: So what are your tax credits? Okay, so a tax deduction, what that’s going to do is it’s going to reduce your taxable income. So then you have your taxable income, and then you apply your tax rate, and then boom, that’s how much tax you owe. But a tax credit is going to reduce whatever tax you owe dollar for dollar. So a tax credit is so much more powerful than a deduction. However, we want all the deductions, and then if we can get some credits as well, please bring it on.
One of the popular tax credits that actually got increased this past year is the child tax credit. So anybody who has children will know that this past year, maybe they received some advance payments of the Child Tax Credit, which used to be $2,000 per kid. It grew to up to $3,600 per kid depending on their age. That’s one where if you owe 5,000 at the end of the year, you have one kid eligible for the $3,600 credit, that $5,000 tax bill is going to be subtracted by or reduced by $3,600. So that’s the power of the tax credit. There is a dependent credit for adults, is way less. I want to say that one is $500, but still same concept of that $500 is going to reduce your overall tax by $500.
[00:35:47] AW: I think that’s so important too, just little things like that, right? Because in our communities, we are often taking care of our parents, grandparents, things like that. So there might be things that are happening in your regular life that if you’re using a TurboTax, you might not even know because it might not prompt you or you might not know how to answer that question. But meeting with someone live, who can ask you those questions knows what these kinds of credits and savings can be, can help you really, really change what your tax liability looks like at the end of the year.
[00:36:18] CO: It’s so interesting that you say that, just being able to talk with someone or even if you’re not talking, but like you’re completing the CPA’s tax organizer, which is where like, they’re just asking all these questions about what happened this past year. And it’s so funny, because I have a client who the question was, did you have any dependents this past year? And she put, “No”. I imagine, like, let’s say she was just using TurboTax, and that question came up and she put, “No”, it wouldn’t have asked her anything about the child or the dependent. She would have went on falling single or whatever.
But because this person is my client, I’m looking at her organizer, “Why do you put no? You have a daughter.” She’s like, “Oh, my bad.” It’s things like that, that we can catch. That mistake is thousands of dollars of potential taxes. Yeah, savings. Just having that person, I feel like it’s so priceless, because – and I always say this, but you don’t know what you don’t know. Even in filling things out, like having a person to review what you filled out, I’m like, “Wait, this looks suspect. Let’s talk about it.”
[00:37:31] AW: It’s so true. It’s little suspicious right here. That’s funny. So two more questions for you. Of course, in the Transcend community, we talk about legacy leaving and wealth-building and stuff like that. So how does planning for taxes help someone with their wealth-building plan or thinking about leaving a legacy for their kids or for the community?
[00:37:51] CO: This is great. So I feel like when it comes to wealth building, it’s very important to have a wealth advisor or financial advisor, right? Because that person is going to look at your overall money situation, living situation, and make decisions based on the full picture. But then on the tax planning side, it’s also important to be like, “Okay, so we have all these properties or we’ve done all this stuff with our money, now how to we minimize what we give to Uncle Sam?” And then that’s where the tax planning comes in. So it’s very important to have both when you’re thinking about your legacy and wealth building and being able to – like before you make any purchases, let the CPA know. “This is what I’m planning, probably in the next year, two years. What do you think about that? How does that affect me now? What do I need to look into? When’s the best time to make this purchase or sell this property?” Things like that. So it’s just important to have that person on your side to be able to do the calculations prior to and then you see the numbers and you’re like, “Okay, I’m going to go with this scenario.
[00:39:02] AW: Yeah. I love it. Awesome. Thank you, Chika, so much. So where can people find you if they want to get all your tax tips and potentially work with you?
[00:39:10] CO: Yeah, for sure. I hang out a lot on Instagram. You can find me on Instagram and you can put my handle, but my handle is @chikaobihcpa. Just my first name, last name, CPA at the end. Definitely follow me. We love giving tax tips and business entrepreneur tips and doing reels, and just making it fun. Making taxes fun.
And then to find out about my services, you can go to my website, which is just chikaobihcpa.com. You’ll see about my services. And if you’re interested in working with me, whether it’s a VIP day or bundled services, the way to work with me is to just apply. Again, it’s on my website, you’ll fill out the application, and then we’ll go from there. We’ll have a phone call and we’ll have that conversation as to how to work with me. I think that’s it. Oh, and one more thing, so I do have a weekly newsletter, I call it Maximize because we just want to maximize all the goodness in your life. Join the email list and it’s a cool email that you receive, whether it’s about tax tips or boundaries or dating or whatever, like we talk about it all. You can join that through the link in my bio on Instagram or on my website, you’ll find it.
Thank you so much, Asha. This has been fun and I’m just excited. I think again, the topic of taxes can be intimidating, but it’s like it doesn’t have to be so.
[00:40:49] AW: Right. It’s easier when you love it because you how much you love it like makes it a little bit contagious, so that’s great.
[00:40:54] CO: I love that. Yeah, just find the person who loves the thing that you hate and you’re all good.
[00:41:00] AW: Golden, right? Exactly. Alright, you all, we’ll talk to you later.
[00:41:04] CO: Talk to you later. Bye.
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