Business Innovators Radio - Interview with Linda Jensen, Principal and Owner of Heart Financial Group Discussing How Business Owners Can Lower Expenses & Save Taxes

Episode Date: June 7, 2023

Linda has been self-employed for her entire life. A successful financial advisor since 1994, she has enjoyed all aspects of entrepreneurship, especially problem-solving, sizing up dilemmas, and working through complexities with creative solutions. She is a lifelong learner. In addition, she has a passion for establishing a good rapport with business owners and clients helping them access a wide range of resources. “Business owners are in a lonely place,” says Linda. “I want to develop a relationship with the business owner, offer counseling and serve as a referral service.” Linda began her career in 1994 with Prudential Preferred Financial Services; for three years Linda was an agency leader in Tacoma, Washington.Since starting her own firm in 1997, Linda has enjoyed working with individuals and business owners helping them achieve their financial dreams and goals. She is an expert in all aspects of retirement planning.Linda has lectured widely on financial topics to both the general public and business professionals. She is passionate about helping business owners leverage corporate cash to create benefits for the owner(s), and key employee(s) and to identify estate-planning solutions.Linda calls the Pacific Northwest home. She married her college sweetheart. She and her husband Brad have two children and five grandchildren. Linda loves learning, reading, hiking, sewing, and cooking.Learn More: https://www.heartfinancialgroup.com/Investment advisory services are offered through WealthWatch Advisors, an SEC-registered investment advisor. Wealth Watch Advisors and Heart Financial Group are independent of one another. Please note that registration with the SEC does not guarantee the success of investment advice.Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-linda-jensen-principal-and-owner-of-heart-financial-group-discussing-how-business-owners-can-lower-expenses-save-taxes

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us Linda Jensen, who's a principal and owner of Hart Financial Group, and we'll be talking about how business owners can lower expenses and save taxes. Linda, welcome to the program. Hey, thank you, Mike. Hey, get us started with a little bit of your story and background

and how you got into the financial services business in the first place. Great. I appreciate that, Mike. So I'm in my 29th year, and I can tell you, I think probably the main reason I wanted to get into this business is watching how my parents didn't do things right, by the way, from the time I was a girl. And so kind of seeing that up front and all the mistakes that they made,

I knew I wanted to do something very, very different. And ever since I was in college, I wanted to be in this business. And I've been my 29th year. I'm a lifelong learner. I'm a certified financial fiduciary. And basically I'm just really passionate about helping folks. I love it. And I love that you say lifelong learner because when someone feels like they have attained

in any area of life, personal, financial, spiritual, physical, then all of a sudden that's a problem because you stop striking. So I love that you're a lifelong learner and kind of get us started here with what you're seeing in the economy these days. Yeah. Well, you know, recently the yield curve became inverted. And for those of you that don't know what that means, that is a predictor of a recession ever since 1969. This has been a very consistent predictor. And in a nutshell, what that means is that there's this difference between short-term and long-term interest rates.

And so that's what's going on right now. So probably within the next 12 months, we're going to have a real recession. Of course, last year was terrible. And of course, we've got this inflation issue happening. And I really believe this inflation, Mike, not only affects us as consumers and the economy, but it really affects business owners because, you know, the cost of doing business is a lot higher. There's been a lot of layoffs. And I'm in the camp that really believes that this could be with us for the next 10 years.

Corporate earnings, by the way, are down about 20%. nationally. And so there's going to be less consumer spending. That's going to affect everybody, let alone if we have a recession. And then I think to top it off, one of the things I'm highly concerned about is the rising cost of the national debt. We're up to almost $32 trillion. And we can't really wrap our arms around a number that big. And so I'm going to explain this to break it down to one trillion. So if you can imagine one trillion, one dollar bills, Mike, you would need 44,000, 25 tons semis to fill it up with one dollar, one trillion dollars. Isn't that just astounding? Yeah. And also to put that in context,

we've accrued all this debt in 21 years, believe or not. Back in 2002, there was no debt. And so what does that do? Well, you know, the government is they've been printing a lot of money. I believe that's why we've had this hyperinflation is printing a lot of money. And so we've got all that printing of money, borrowing of money. And Congress is really going to be faced with, I think, two things, having to lower spending, and I don't think that's very popular, or raise taxes. And I think what really is going to be in the crosshairs of Congress is raising corporate taxes, which is going to put even more pressure on our entrepreneurs. Well, you bring up a great point, and I know we can point to a lot of research that small

businesses are the backbone of our economy. And I think that the SBA deems a small business, any business that's less than 500 employees, which feels like a pretty big business to me. But a small business is the backbone of the economy. And if we are seeing the right indicators and inflation is going to happen and recession comes in. Then that affects the business owners supply chain, which means they have to increase prices, which means this whole domino effect happens. And so I think that's a huge point you're bringing up is we need to be ahead of the curve.

And I know that a lot of hockey players or people remember this quote from Wayne Gretzky that he skates where the puck is headed, not where it is now. So we need to be looking ahead to where the kind of. is going for the business owners. So talk a little bit about what you are going, what you do working with business owners to help in this respect. Yeah, absolutely. Thank you. So we have a few areas that we're really helpful for business owners. One is being able to lower expenses. You know, all businesses have to pay for workers' comp insurance and a lot of businesses provide medical insurance for their employees. That's another issue, Mike, is trying to retain

employees, right? And really good employees. I work with a CPA who tells me he has about five, six hundred business clients. He tells me that's the number one problem for the business owners is trying to get good employees. So a lot of employees employers are trying to provide benefits. Of course, workers comp, no choice on that. But we can actually save real tax dollars in both of those areas, Mike. And so those tax dollars then can be helped to help that business you know, deploy those funds into other areas, maybe to be more competitive, right? Well, that's a huge point, too, because I know that you hear HR, you know, reports that come out to say that there is a massive dollar figure that's associated when an employee leaves and you need to find a new one and bring them on board and get them up and running. And it's a literal dollar figure and it's massive.

So if you can retain top employees, that's huge. And then if you can help a business save tax dollars, that kind of is the connotation of the bucket with holes. And if you can help plug up a little bit of this hole and a little bit of that hole, now they can redeploy those money that normally would go to taxes that now they can put into the business. Yeah. And, you know, these are not small savings either. I mean, we're talking probably averaging about 20%. That gets to be significant. Yeah.

So what are some of the low-hanging fruit places you begin working with the business owner to help? help them to save money on those tax dollars? Well, you know, that's, I think, a good place to start because those are definitely concrete expenses, you know, for the business. And then we've got another one that I really like, and that is the ability to save $500 for every employee on FICA taxes. And this is year after year, by the way. And this program also has a component where the government will pay for $3,000 worth of

employee benefits. Could you imagine? So you say, $500, FICA taxes for every employee, and every employee gets $3,000 worth of benefits paid for by the government. I like that, you know? Yeah. I happen to be in Washington State. So Washington State is one of the weird ones in that our workers' comp is actually a state agency that's a moneymaker. And so, but for the rest of the country, pretty much everybody is just having to buy insurance through an insurance company. So With that workers' comp reduction of premium, we also have this program that's tied into that. So it's kind of a combination here where they can save money on workers' comp and also save FICA taxes and provide benefits for their employees.

And I think adding those benefits, Mike, can be another way to help retain employees. Well, of course it can. And I think that if you were a business owner listening to this and going, okay, here's someone talking about adding benefits. word ad means it's a cost. But you're able to say, look, we're able to find some money where we can lower some of these expenses that you already are paying because there's only two things in life that, you know, that are assured death and taxes.

So if we can help reduce that and your employees get more benefits and it doesn't cost anything but you're saving something, it's like, okay, now I'll at least give you a seat at the table. Come explain that. That's awesome. I like that. And then also, you know, for businesses, when they go to something, they have to pay capital gains tax. And right now, the top rate is 20%. So capital gains is not only the sale of a business, but also the sale of any real estate that the business owns. And Mike,

I don't know if you know this, but the end of 2021, Congress was debating, raising that from 20%, if the sale was over a million in gains, to 39.6, just about doubling the capital gains tax rate. Wow. So I think that's another one kind of in the crosshairs, right? That depends on Congress and then they'll revise that one. But, you know, so we actually have a strategy to eliminate capital gains on the sale of a business, which again is just huge, right? If you want, you know, because a lot of businesses, you know, it depends on the business owner.

Some want it to be multi-generational. Some would really like to cash out so they can enjoy their retirement. And so saving a lot of tax dollars can be really helpful. Well, saving tax dollars helps them right now. And then saving that capital gains tax helps when you exit. So you've got like the bookends. You know, you're helping them on the front end. You're helping them on the back end. And then I'm sure you also have some help where they can lower some cost and expenses in the middle too. Yeah. So along the way now, if a business is highly successful, and I know this is a very small percentage of privately how businesses across the country. But the business is, but the business is, very successful and the owners are paying at least 350,000 in taxes, we can actually eliminate it and give them a tax deduction. So how on earth does that work? Well, this is actually a section of the code. The tax attorney that developed this, worked for congressman when he was

out of school, and then worked for a lobbying firm, and he discovered this section of the tax code. And so this is the real deal. They've actually survived 14 audits, no contest with the IRS. for 25 years. The last one was last December, not too long ago. So this is kind of, you know, firm ground that we're standing on. This is not, you know, going to change any time soon. And for a business today, if they're in that category, they can literally stop paying their quarterlies now, right now.

And then, and they get a tax deduction instead of having to pay the taxes. Now, that's music to your. years because businesses that are paying at that level and more, those quarterly are a big old chunk of change. Yeah. It's huge, isn't it? So I think it's so interesting when sometimes people say, hey, I'm a business consultant. I can come in and help you, you know, 10x your business or increase your revenues.

And while that might be helpful and necessary in many cases, the first place to start, I would say is create that foundation of solid business practices and saving some money so that the incoming revenue doesn't go flow right back out to unnecessary expenses and taxes. And that's what you're talking about here is helping to lower cost, expenses, taxes, so that now when they do start refocusing on their business growth, more of every dollar stays in their back pocket. Yeah. You know, Mike, businesses, you know, they're going to have to be leaner and meaner right now, I think to survive this economy and which could be coming down the pike. And so anyway, ways that they can save real dollars, I think is going to be very helpful. Another one that we have,

it's another section of the IRS code, believe it or not, is for research and development. And this is an area. And all we need is a simple questionnaire, by the way, that we fill out to determine if the business qualifies. But the business can actually get a tax refund for R&D. And I'll tell you what, this could be as simple as a dentist office. Think about that. How are earth can a dentist office be doing research and development? Well, the dentist has to take x-rays, right? I mean, that's where it starts. And so even in my business, Mike, as a financial planner and having a practice, I can even take advantage of this section of the code. I think that's really amazing to, you know, so this is not a tax credit, which is pretty valuable, right? This is not a tax

refund. This is actually a tax refund, right? I mean, it's not a tax credit. It's not a deduction. It's a tax refund. The business can check in the mail. And guess what, Mike? They can get it every year. This is a year after year. Tax refund. That's, well, you know, I just think that if someone hears this and they say, why haven't I heard of that before, it's probably because the IRS tax code is 50,000 or 60,000 or more pages. And why would you know what all is in there? And even as a tax preparer, things change so much. So these are things that if like you said, they are tried and true and proven and surviving of audits and things like that, well, why would you not want to take a look at how they could possibly impact your

business? Yeah. And this particular section of the code was actually, it was, how can I say this? It had to be approved every year by Congress, right? And the intent was to make sure that we had American jobs, right? Thinking that the business could be more profitable and we could keep more employment here in the States. But this was made permanent in 2015. So this is not going away. And I will tell you, I've been at this 29 years.

I have no complaints. You know, I want to keep it that way. And everything that I would recommend, I very much want to vet, right? So because my reputation is on the line. The last thing I want to have to tell a client is, oh, whoops, I'm sorry. You know, that is not going to happen, Mike. I've never had to have that conversation in my 29 years. And the other thing I'd like to mention is, you know, when we talk about exiting a business,

my opinion of business owners, Mike, is this. They're so busy taking care of business. make a payroll, doing everything, you know, worried about competition, trying to be, you know, ahead of the game all the time and all that pressure, that they're actually not taking care of themselves. It's typically what I see. And I think a big area of that is to do planning for themselves and their families. So, for example, estate planning is really important.

Right now, the federal estate tax limit is quite high. It's over $12 million. You can double that if you're married and you have a living trust. but that is not staying. It's floating back to probably about $5 million when the tax cuts and job acts ends January 1st, 2026. So there's another section of the code. There's a different partner in mine where a business can get a minimum of a 65% estate tax reduction. And these estate taxes, by the way, of 55%. That's not chump change. I'm in Washington state. You could take a on another 20%. So I think this planning is highly important for a business. Every business that we

work with, we make sure that we're discussing this, because especially if the business wants to pass it on, the owners to their children, and this is a multi-generational kind of business, it's highly important. And the reason I'm bringing this up, Mike, is I have actually seen businesses that weren't aware of these taxes that had to be sold to pay the taxes. So that business did not survive the next generation. You know, that's huge and it's unbelievable, like we said at the start of our conversation, the domino effect. When one thing changes, it causes something else to change and then this whole rippling effect. And that's important to think about because if what happens today in the business impacts your legacy,

if you're going to transfer the business to the next generation or you get less money to transfer to your next generation, these are important things. It's not just like, oh, we ought to just save a buck or two. So these are just massively important. And I'm really appreciating how you are focusing on this. And just from a kind of like a summary wrap-up, 30,000 foot view, once you find these savings for a business, boy, I'm sure from financial planning and wealth building strategy, you've got some wonderful ways to say, okay, let's not squander these savings because they could be substantial. Let's put them to good use. Oh yeah, well, we definitely have things like that to do planning for our clients, you know, and just, you know, we're here to help them. We're here to advise them. And, yeah, we have some really interesting programs that I really would have to show somebody.

I think a visual is worth of, you know, I'll talk about words. But, yeah, we have some fantastic methods to be able to help that business owner or key employees, you know, deploy some of these funds to really take care of the business. owners, by the way, and, you know, for their future. Absolutely, Mike. Well, if someone is interested in learning more and reaching out and connecting with you, what's the best way that they can do that, Linda? Well, you know, email works, call on the office. The office phone number is 360-8-8-0-6-5. And my email address is Linda. It's just L-I-N-D-A at Heart, H-E-A-R-T, financial group.com. Excellent. Well, Linda, thank you so much for coming on.

Today's been a real pleasure talking with you. Thank you, Mike. I appreciate the opportunity. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www. www.influentialentrepreneursradio.com.