Podcast 107: Mastering Tax Season: Insider Tips from CPA Jude Heath


In this episode of “Ask Gregory,” we dive into essential financial strategies with special guest Jude Heath from J Heath & Company CPA. Jude shares insights on managing your taxes, the impact of recent IRS changes, and the importance of proper tax preparation. We discuss the growing trend of remote clients, especially from California, and the new beneficial ownership interest rules. Jude also provides valuable tips on how to prepare for potential audits, emphasizing the need for accurate and substantiated tax filings. Tune in to learn how to better control your finances and navigate the complexities of tax season.


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Gregory Ricks  00:01

Oh my goodness, we’ve got a lot to talk about today. But hey, um, I’m going to talk about what we can control and where we need to go with our finances. And we have a guest in today with us this morning right out the bat Jude Heath of Jay Heath and company CPA. So we’re gonna have a tax talk, as well. I look at that as something we can control as well. It’s it’s probably your your largest expense you pay every year. So hey, Jude, welcome to the show today. How are you? Terrific, Gregory. Anything new these days?

Jude Heath  00:50

Well, we just got finished, or we’re trying to get finished with April 15th. We’re still mopping up at the firm. It’s, it was a great tax season, we saw a lot of new folks, many from the radio show community listeners, we had a really good tax season. And we’re, we’re rolling right in the summer.

Gregory Ricks  01:12

Any unusual things about this tax season versus the past few some different quirk or just like kind of like, well, that was interesting. And I’m not talking about a client’s individual case. But it could be if you had a number of things that kind of came up.

Jude Heath  01:33

While we are seeing the continuation of what happened in COVID, where we’re no longer I’m sure you’re the same way. We’re no longer just a local CPA firm. We have clients all over the country, and we’re seeing a good population of new clients from California. Interesting, because you do you do great work for all your clients. And so they talk about it. And you know, they’re sitting around a campfire or something down there and complain about taxes, I found a great firm. And so it’s kind of nice, when you see like a little, just a little population of you know, a dozen new clients come up out of some part, California really didn’t even know existed,

Gregory Ricks  02:21

when there’s great service, great experience.

Jude Heath  02:26

They share. That’s right.

Gregory Ricks  02:30

So that’s, that’s a good following. To have when you take care of clients, there’s a theme I’ve emphasized at the firm. And you know, from our show standpoint, you know, we’ve always said, if you need some help, you need to use us as a sounding board, call us call the office, you know, what we look for as is we’re not everything to everybody, but we’re everything to a select group of people. And I loosely define that how we do that is we, we like to work with nice people, nice to our staff, and believe in our process from that standpoint. And I don’t have some hard set of assets size, but to utilize our philosophy, a few dollars, is that going to get you there, I’ll just put it that way. With that said, Our objective in using that process, that fit process is not to weed out people. It is and how I speak to the team is what I the Spirit I won’t is find a way to help find a way to work with them. And even if it isn’t a fit, leave them with value and how to work towards that. So kind of what defines fit is you know, I like to work with nice people. And when people say well, you know, how’s it going, I said we’re blessed. We get to work with the greatest people, we enjoy our meetings, if we’re going to have to go into a meeting and it’s like, oh my gosh, this is Fred again. Well then, that’s not how we want to live life. And the other part is we do want to add value Are you to them? And they have to feel that way. Yeah. And then we, and I know, you feel the same way about that, from that standpoint, but that makes it where we’re, then if you’re taking care of people, and they feel that, they’re going to share that story. And that’s where we kind of always want to end up is let’s find a way to help. And that will take care of everything, given them value, because so, so often out there, they’re just not getting the help, and having the team concept. And if you, it’s a great time to use him as a sounding board, if you got tax situation, something you’re worried about. Maybe you’re one of these rich people that had been filing tax returns for a few years, I’m still stunned by that we’re gonna talk about that, as well, because that’s kind of part of what the IRS has kind of put out on the news feed this week that they’re going after some big ones out there that haven’t been paying their taxes, let alone filing returns, that that has to worry you a lot tude from that standpoint is like looking over their shoulder saw, like, you know, they make an income million plus and not filing a tax return?

Jude Heath  06:35

Well, one of the things that’s going to come up as we get further on into the year is so IRS partnered with the FBI, the Financial Crimes Unit, which is called FinCEN. You know, FinCEN is they created beneficial ownership interest rules that are implemented January 1 of 24. Now, there’s an Alabama court that is overturned it, but we don’t think that’s gonna go very far. We don’t think the Alabama courts gonna get very much play. So we’re talking to our clients, we’re we’re going to file beneficial ownership interest at the FBI, financial crime site, on everybody starting this summer. And we and and if if we don’t file we’re going to confirm that you filed. Because it’s so important, not just to you that penalties are large for not filing this by January 31st, I’m sorry, by December 31 24, for an existing entity. But it’s also important to the Treasury, it’s also important for the country, because this goes back to 911. One of the major ways that 911 was financed was through entities, not for profits, corporations, LLCs. And this is important because there are certain entities, like some single member LLCs that don’t get matching notices. And so when you ask about how can people get away with this? This is part of the IRS is push for financial crimes is they want all the LLCs to register with homes at home addresses and driver’s licenses of all beneficial ownership interest for that entity. And presumably the ones that don’t, then they’re going to presume that those folks have something to hide and might be involved in either some type of illicit activity, or it’s certainly are they reporting that taxes correctly?

Gregory Ricks  08:47

Yeah, I’m looking at one of the articles that was put out there where the IRS has said it is targeting a 50% increase in audit rates for individuals with a total positive annual income exceeding $10 million by 2026. tax year 16.5% of these wealthy individuals will be subject to an audit up from 11% and 2019. Well, it does seem like huge numbers like they’re auditing half the people or some It’s the trend they’re doing 11% Trying to get up to 16%. At the same time, the IRS assured that it would not increase audits on individuals and small businesses earning under 400,000. In keeping with the President’s pledge not to increase taxes on the population. Well, okay, they said they’re gonna get the 10 million and up to another percentage. Then they said okay, 400,000 shouldn’t see an increase in audience. Well, what’s your thoughts on between 400,000 and 10 million that well Like, there’s a little gap there,

Jude Heath  10:04

those folks are going to see a small percentage increase. And when you start talking about what can trigger an audit, and that’s part of our job is if there’s a number out on that return, that could trigger an audit, then we’re going to spend extra time talking with the client substantiating that number. We might even define that number differently on the tax return. So that the agent or two agents usually that beside an audit, the two agents that are looking at the return, can see, we knew the tax law behind that. And we’re defining it in such a way that you’re welcome to come as questions. But we’ve already answered the questions and we can substantiate that deduction. So from our perspective, anybody over 400, gets extra attention, extra process, so that we all know where that return stands. And through the years, what we’ve done is we’ve built a little bit of a wall, that the client can feel like in the event that the that the IRS comes in and looks at returns, at least the the numbers are paid attention to and cleaned such that are the is there a risk on that return that we don’t know about? And there’s not. And so from our perspective of providing service to our clients and a little bit of peace of mind, we have those hard discussions, really with every return if somebody tries to coagulate a, a number that doesn’t fit their percentages, we’re going to talk about it. And I and the client needs to know what the law is behind that number.

Gregory Ricks  11:56

They’re going after corporations as well. Besides the individuals, the They also plan to triple audit rates on large corporations with assets over 250 million as well as increased the audit rates of business partnerships with assets over 10 million. I guess they’re just maybe some folks are deducting more than they should.

Jude Heath  12:24

Presumably, they’re going to look at each individual line item in terms of what is the substantiation for example, let’s just take a very common one. You have a guy that he’s on the road every day. He’s got a sole proprietorship, we know that sole proprietorships are more heavily audited. He reports a mileage number that is almost impossible to drive that many miles, if you drive the speed limit on the interstate for the average number of hours that it takes in a day that that a reasonable person can drive. We we have those conversations to say, look, I’m gonna smell test sitting across the carpet from an agent. It’s, um, it feels impossible, that you could drive these many miles. And we’d so we talk about and we have those conversations and look, we’re not required to file we can extend if we if we can’t get a decent response, or if you know, if we get somebody who doesn’t own their their numbers, you know, we we can move them along to the next station.

Gregory Ricks  13:44

So have you seen more audits increase that you’re having to be involved in? We’ve

Jude Heath  13:52

had one since COVID. That the trigger on it was some UberEATS that one of the managers put through for late night eating, which is they were extensive. So it wasn’t allowed it was thrown out. We saw that. To give you an idea of our process. That was for 2020. We corrected that going forward. The manager even balked a little bit, get he had to pay tax on his UberEATS. And we said out no that IRS wants you once they come in and audit you on this very specific line item. I think this particular line item cost the owner of the company about 30 grand and tax. They watched that for a period of time you can’t ever go back. Now you know the rule. They’ve educated you they didn’t extend it to 21 We’re going to Fix It and we’re going to move forward so that they can see that, okay, you understand what happened in the audit, you didn’t know before you paid your tax and you’re fixing it going forward.

Gregory Ricks  15:14

I’m gonna looking at some comments here and an article on Fox Business and one of them posted. This isn’t about the wealthy, it’s, it’s because the wealthy hire CPAs to do their taxes. They hired the dude, he’s the ultra wealthy hire CPAs partnered with tax attorneys out there and they don’t take the risk of cheating. You know, I think part of it and we’ve talked about audit risks. You need to take deductions and take what you’re do and knowing that an audit is coming and prepare for it from that state.