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FINANCIAL PLANNING
“Horse racing is our passion through and through but let’s remember that this is also a business.”
your CPA to see about creating an LLC if you haven’t already. Using your personal checking account for revenues and expenses could create a reason for an IRS agent to assume you are engaged in a hobby rather than a legitimate business. Another tip that was given to me was having a professional team in place and meeting with them regularly. At Peterson Wealth, we preach the same thing. We like to work together with our clients’ preferred professionals to ensure everything is full circle. If you have a large tax bill, meet with your CPA to discuss how to lower that in the best way possible.
If you have a large profit or a large expense coming up, meet with your financial advisor to discuss what to do with the funds or where to get them. I would introduce your professionals to each other just so they have each other’s contact information. I truly believe this is an instrumental part of your financial situation. If your professionals work together and have an idea of what your goals are, then your situation is much more likely to be in the best possible position. An estate planning attorney should
WHAT SHOULD YOU DO MOVING FORWARD?
• Document everything. To ensure that
you’re not caught off guard, it is very important to document all your financial transactions. Use quick books or other types of budget tracking software and keep all business receipts.
• Stay in touch with your professionals. When I say professionals, I’m referring to a financial advisor, CPA, and estate planning attorney. Make sure you are keeping them in the loop with your business activities.
It may also be wise to introduce your professionals to each other so they can help you to the best of their abilities.
• Don’t push the envelope when it comes
to business expenses. Too often, business owners slide everything but the kitchen sink into business expenses. If it isn’t necessary and reasonable, you might be on the losing end of that battle.
• Separate personal activities from your horse racing activities. Establish separate checking
obtain a separate tax ID number.
• Have a plan. This is perhaps the most
important tip I’m going to leave you with. There are several moving parts that go into a good, well thought out plan. If
you don’t already have a financial plan in place, I would highly recommend doing that. This can give you financial comfort and peace while navigating through
the year. I would also encourage you to position yourself in a way so that you
are prepared for an audit by one of the 87,000 newly instated IRS agents. You should feel so comfortable that if an audit were to come, your mindset would be, “Okay, bring it on.”
• Register your horses in the name of your racing operation.
• Try to show a profit at least one out of every three years. Continuously reporting a loss will drastically raise your chances of being selected for an audit.
Regardless of how the economy is reacting, we can all still be hopeful for fast horses at the
also be in this conversation. accounts and create an LLC or S-Corp and end of the day.
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