Episode 32 - Tax Planning for Firefighters with Mike Canny, Vice President of Tax Services with Firefighters First Tax Services
In this episode, Mike Canny, a retired firefighter and vice president of tax services at Firefighters First Tax Services, shares his experience in the fire service and his transition to a career in taxes. He discusses common financial mistakes made by firefighters and provides insights into deductible expenses for firefighters. Mike also explains the risks and penalties associated with incorrect deductions and offers tips for long-term financial planning. The conversation covers tax planning for charitable gifts and the impact of 2017 tax law changes on itemized deductions. Mike emphasizes the benefits of investing in real estate and provides information on tax services offered by his organization, an affiliate of Firefighters First Credit Union.
Transcript
Peter
Welcome to the Firehouse Roundtable podcast, brought to you by the Ventura Fire Foundation. I'm one of your hosts. Peter McKenzie, retired fire captain with the city of Ventura Fire Department and my co-host Jason Kay, Active Battalion Chief with the City of Ventura. Fire department. We are going to bring awareness to real issues that face firefighters and their families. We want you to feel like you have a seat at the kitchen table, which every firefighter knows is the heart of the Firehouse. Let's get right into the episode. Alright, welcome to another episode of the Firehouse Roundtable. I'm your host, Peter, and today we have a a special guest host. Anyway, Jason is tied up. Wasn't able to be here. So we have Joe Booth, who's our executive director, who really is the guy who who does all the behind the scenes work for the foundation. Yeah, Joe, welcome. Welcome to your first time Co hosts.
Joe
Yeah, it's exciting. I feel like I'm a minor leaguer stepping up to the plate for the first time.
Peter
I don't know. About that, I think it's the other way around. Probably you're you're we're coming down to your level or about didn't come out right either anyhow. Nonetheless, let's get let's introduce you to our guests. So we have Mike Canney who is a retired firefighter, which I'm sure we're going to get into. And it's also the vice president of tax services with the firefighters first credit union. Mike, welcome to the show. Correct me if I messed up your your title or anything along those lines, but welcome.
Mike
Welcome, Peter. Nice to meet you, Joe. Thanks for having me on the podcast. So yeah, you're correct. A retired firefighter out of Illinois.
Peter
Got it. Well, tell us a little bit about your fire service career.
Mike
Well, my dad, he was a firefighter for 30 years and then my brother got on the fire department, so I was kind of like destined to be on the fire department. Had one or two as a little kid. And I guess most of us wanted two as a little kid want to be a fireman. Growing up, I got on the fire department in 2003 in Springfield, Springfield, IL, Land of Lincoln. And I spent most of my time there on the engine. I did a little bit of time on battalion car as a safety office. There, but most of my time was spent there on an engine in Springfield, retired from Station 8 in Springfield, which was. It's a busier engine house, but mostly with like medical calls, a lot of retirement homes and you know, it's just.
Peter
How big? How big was the department? What? What are the numbers kind of.
Mike
So we have fully staffed for around 230 members, but nowadays we're down. You know, I think it's sitting maybe around 2:05, 2/10 at the moment they're short staffed. Just like everywhere. Else, but they've got 12 stations opening up a 13 to 1 here so. 1212 engines, currently three trucks, 2 Battalion cars.
Peter
Oh, nice. Nice. So. Good little department. Good size. So you guys probably raised some calls. So obviously we're here to talk about taxes and you, you you know, you have a career in the OR retired from a career in the fire service. But what tell us about your other the other half of your life? That you know that you're doing now.
Mike
Yeah. So before I was a firefighter, one of the things growing up, my dad was big on. He's like, I'll help you get on the fire department. But the deal is you have to get a bachelor's degree first. So I went and got a degree in accounting, became a CPA in 99. I did the public accounting thing. But as soon as I could, I started testing, trying to get on the fire department like, alright, I got my bachelors. And so I finally got on the fire department in 2003 leading up to that, I had worked in public accounting. And also I'd worked for a movie theater chain that was throughout the region doing books and stuff for them. And on the fire department, I'm like, well, I don't need to work for anyone else, but I'd love to start doing taxes for people. So I started doing taxes for other firefighters. Obviously, that's how it starts. So 2006, I started up my own business and the fire department doing taxes. And from there, it just kind of snowballed. I added bookkeeping. I added auditing. It it was a pretty, pretty decent sized company by the time I retired. So my wife, she's a CPA as well. She stayed at home with the kids while I was on the job and she was able to take over my accounting business. They could leapfrog over to firefighters first and start offering taxes to the firefighters of the credit union, which is firefighters first credit union.
Peter
Awesome. There's so there's. Go ahead, Joe, go ahead.
Joe
So I'm not a first responder, so I'm kind of learning how how, how things operate, but one of the things I've learned is that every Firehouse has guys that play, usually guys that play different roles. Were you the guy that everybody came to for financial advice and for help?
Mike
You know, throughout throughout the day, especially during tax season, you know, I had a lot of, you know, impromptu 2 tax appointments throughout the day. So whether it be calling the station or hey, I'm working higher back today. You know, you might if I pick your brain for a little bit on taxes and so it it always always kept me busy during tax season.
Joe
That is then.
Speaker
So it.
Joe
You turn that into a business for yourself.
Peter
I want to I got a question about how this all started because I mean you were CP, a respectable career and then you said no, I don't want to do this. I want to go be a fireman. But you kept doing it. Like what? What made you not want to be a CPA professionally and want to go during the fire department is just because your dad and your brother was doing. It or or.
Mike
No, I wanted to be a firefighter long before I wanted to be a CPA, so I just it was, you know, at the time I was, I was good with numbers during growing up, I was good with math and not so good with science. So I'm like, alright, I'm going to try the accounting route and. I I did that. I actually enjoyed it. Much to my surprise I enjoyed the CPA route, but I was sitting around a lot and I'm like, I don't want to be doing that. I want to be. Working with my hands and so. I started testing for the fire department and I mean there's no better job than the fire department. But yeah, I just, I I wanted. I wanted to be working with my hands and I enjoyed the fire service and it it was fun.
Peter
Interesting. Yeah. Not, you know, we don't get a lot of CPA's, you know, joining the fire department. Not that it hasn't happened before, but it's not like a common path that people take. Like, I'm gonna go become a CPA, then join the fire. Department a lot of people you know. Anyway, very, very interesting. I always find it in the fire station. You got people from all walks of lives. You know, we had an attorney that would became a firefighter at ours and he didn't last very long. But he was an attorney, went to USC law school. Had this great career as an attorney and he was like, it would be a fire. I'm going to be a fireman. And comes in and it's like, OK, this is interesting. But anyhow, so you have an interesting perspective, which is just before we lay a little groundwork that one of the things in with the podcast that we're trying to bring awareness to is like financial awareness and teaching. Firefighters and their families like these are the things you need to be looking out for. These are this is how you can improve your finances. This is, you know, how you can maintain your stuff. This is how you all the type of things like that. And this obviously is going to be one of those episodes. But you have a unique perspective because. Not only do you understand. The finance side, but you, you know, understand the firefighters. Point of view as well, which is unique. So what? And I'm sure since you were the guy in the fire station that everybody went to. Which makes sense. Like, what are some of the common themes you common things that you see firefighters doing that they, you know, maybe you shouldn't be doing or mistakes they're making financially like could be broad, could be specific, But I'm I'm sure you have a list of of things in your head that you see over and over again fireman. Doing so.
Mike
Yeah. Well, I mean, a lot of it is. Yeah, I I can't stress enough. Just getting the advice of a tax professional because a lot of the guys, you know, firefighters or do it yourself or as we like to do everything ourselves, we like to understand that. So we find a little bit of knowledge and we start going down the path and then we think we're doing it right. It just to find out we did it wrong. So a lot of times with people. The businesses, that's something that it's you. You know, as many firefighters as you know, you probably know as many businesses as they've started up, right, because every firefighter seems has their own side gig and just getting that set up right, like S Corporation, they can be a great idea for some people. But there's a lot that goes along with it. And so people start down this path of, oh, I hurt. I hurt so and so tell me. I need to be an S corporation, so that's what I'm going to do, or I've got to be an LLC, because that's that's what so and so did. Well, it may have worked well for one person, but it's not going to necessarily work well for you. So you just need to understand, consult with the tax advisor and you know lawyer for entity type selection to make sure you get the right entity because that's something that can be really costly down the road when you're trying to set up your own business.
Peter
Interesting. So you, Springfield mid, Middle America, I I think there is a difference probably in general like pay wise with firefighters on the coast versus someone in the Midwest. In your experience at your department did most of the guys have other jobs or other business?
Mike
They did, they did. And we our department paid well, but we had a lot of people that in the downtime that was just like, oh, I'm just, I'm going to sell. I'm going to make leather Shields. I'm going to, you know, we had our own lawyer too. We just like you had a lawyer on. Your department, we had a lawyer on our department who did some of that work, so. It just seemed that to fill up that void that extra time that they had a lot of people had their side jobs. It wasn't necessarily financially motivated as much as it was, you know, just just a little bit to get ahead and just something to do in my downtime, stay out of trouble.
Peter
Gotcha. I yeah, I find that interesting. So I guess so in California? It's not as common as it once was, so if you talked to some of the guys that you know the generation before, like a lot of guys had their own, a lot of them were in the trades, plumbers, electricians, doing other businesses. We don't really see that as much now. It's almost like the minority that do that. I was one of my own, a property management company while I was at the fire department. But and I don't know if it's because we're understaffed, guys are working in an incredible amount of overtime. I just don't think they have the capacity to do it. But I think it was a lot more common the generation before and not so common now. Interesting to hear your perspective that no, yeah, they're still doing that in in other areas and. I don't know if it's a staffing issue or what the demands are on the on the guys, but this interesting different perspective.
Mike
Now and I've seen, I've seen it change to over the course of my career. It seemed like a lot more guys stayed at home with their kids later. You know, the younger guys on the. Job when I. Retired. You could see it started ahead of that direction that you're talking where you know they're staying at home. They're. Those are, you know, oftentimes making more money than they are. So on their days off, they're trying to bring down daycare costs. And yeah, it's definitely been a stretch.
Peter
So yeah, so one of the most. One of the. I don't say controversial topics, but like when it comes to doing your taxes as a fireman, right, like somebody inevitably tells the fireman. Ohh all this is deductible. That's deductible station dues that this to that right. And it's always like a debate and like some CPA's. I'm like, oh, yeah, we conduct everything and some are like, you guys are crazy. You're all going to get audited, right. So what is your position? On like 1. I want to talk about the common deductions for firefight. And then let's try to bring some clarity to can you do this? Can you not do this? What's considered risky? What's considered conservative? Like, let's, let's open that can of worms if you don't mind.
Mike
Yeah, let's open it up. So we'll just start off with California is unique because in 2017 the tax laws changed across the country. And unreimbursed business expenses, they went away for at the federal level. So everyone lost at the federal level and most states followed suit. So California, though you can still have the unreimbursed business expenses, which is what everyone's talking about when they're like, oh, I can deduct, deduct my meals, I can, you know, all my mileage go through that so. So California, you can still deduct that it's called the unreimbursed business expenses and the easy ones are that you can deduct without much controversy. It's going to be like your union dues. Any clothing that you buy, if it has like a logo on it, that is for the fire service, for the fire, your fire department and stuff, it is specific to the. Job. So anything that's specific to the job that you buy, you can deduct so. A lot of guys on my department carry like personal tools, so those were always deducted. I always had a pair of trauma shares, flashlights, notepads, anything you think about that. You buy it, you know, you, you spend a lot of money throughout the year, you know, for the fire service. You just sometimes don't realize how much you're spending, just keeping track of all that. Even even use estimates as well. Just to kind of, you know, some of these lower dollar items just to kind of get a gauge as to what you spent. So those are easy ones, professional subscriptions are another easy one, but then we start getting the meals. So can meals be deducted? That's that's the hot button topic in most stations that that was in Illinois. And so that really comes down to what are the rules surrounding the meals so that meals for firefighters has been litigated quite a bit through the year. So there's some Tax Court decisions that kind of guide us. And one of them was based in California. And it said that if your meals are required as part of the job and you have to pay for them, whether you eat them or not. Then they can be deducted and this was a court decision. It was based back when they were there was integration within the fire service. And the fire department said you have got to participate in meals. Everyone. It's going to be 1 common fund and you have to do that. So under those circumstances they said, yes, you can. There have been a lot of other attempts to do it when they weren't required. And the IRS, every time they look at it, they say no, you can't unless it's required. You cannot deduct it. So if you deduct meals beyond that, then if you get audited, what happens if you get audited? Then you get in trouble. The problem is is most people never get audited, so they're like, Oh well I've I've deducted the last 10 years it's it's got to be. Mine. You know, I've talked to several people, have gone through the IRS audits state audits and when they start looking at these things, they they get removed right away. It's not something that you're going to be able to talk the auditor out of. You're going to be paying the taxes and penalties related to it if you, you know, do get audited and find it. So then it's about, you know, your risk tolerance. So maybe it's a Gray area because maybe your department requires it, but you're not quite. Sure. You know we're required to do it, but you know we we don't, we don't have to pay in in certain circumstances. You know, there's there's a policy for why you don't have to pay in. Well then that's kind of great. It doesn't quite follow what that tax guidance was, but I'm comfortable deducting it if there's if there's an SOP or SOG or something on the books that says you have to participate. Then we can say that yes, we are required to participate. So it's just it's trying to figure out where that Gray area is, but if it's black and white, like my department was black and white, you you didn't have to participate in any meals. It was a lot of people would bring, you know, their own food in. Sometimes they were on diets and stuff like that. It there was no requirement to pay in any. Kitchen duos. And so it was not deductible there. But California, there's a lot that have it written into either contracts, policies and procedures. There is the expectation of paying in those dues, which can make it deductible.
Peter
Gotcha. Yeah. At our department anyway, it there's no policy about anything. Like if you want to, if you want to chip in and participate together, great. If you want to bring your own food, that's fine too. There's literally nothing in writing. But that was, I think that that's the biggest potential deduction. If you're deducting every one of your meals. You know, for all the days you're there, it adds up. Let's talk about what the actual penalty is. What if, what happens if you get audited? And what are the the fines or what does that look like?
Mike
So if if you get all that, basically they're going to go back and they're going to look at, you know, a year under audit. So they're going to pull up a year, they're going to start looking at that year. If they find that there's an issue with that year, they can expand the scope of the audit. And so that means they can go back further. The penalties related to it that depends on their view of why you misstated your deductions. So if they thought, you know, if they think you're doing it as a misunderstanding of the tax law, it would be treated differently, as you know, trying tax evasion would be treated more seriously. So most likely you're just going that you're going to have penalties, you're going to have the interest on it. The penalties can be pricey. Just because it it depends on how far back they're going. So I've had people get audited, they go into one year, then they open it up all of a sudden into three years. So it's, you know. It it can be frustrating, it hits you all at one time, but the true risk of an audit. I think the IRS is roughly 1 to 2% that you're going to get an audit. So out of 100 guys on your department, the likelihood of an audit is, you know one one of those hundred guys is going to get an. Audit a year. Also target if you look at the audits, they target high income people and low income people and usually people in the middle are not targeted as frequently for audits.
Peter
Yeah, I know my personal experience was. When I first got on the fire department I I mean, I was doing my own taxes and then we I found out, oh, there's these these tax professionals that cater to firefighters. OK. I'll go see one of them. And and there was a lady down in San Diego that did it for all the guys. And it was great. I was like, oh, man, I'm getting these big refunds now. This is awesome. And then then I started investing in real estate. And then then from that point on, I was like ohh so all these fire department deductions are really like pennies compared to like the benefits of investing in real estate. So then I started focusing on that. And then my personal opinion now is like. Yes, some of those deductions matter, but they're not good. They're not going to be the what makes the difference in your financial future is is not how much you're deducting a flashlight for or a meal that you make, like the guys are better off focusing on things that are actually going to impact their net worth long term. And for me, that was real estate. But I know I was reading through your bio. It sounds like you have. Some opinions on on this topic as.
Mike
Well, yeah. No, I I do. I love real estate. I think real estate is a good thing for guys to. Get into you know, it is a lot of the firefighters in our area, they'll they will invest in property it as a firefighters kind of easy to get into property a little bit. You're in the neighborhood that you just feel, you know the neighborhoods, you know, the area of town. And you know where properties will do? Well, have good resale value. And so I think you kind of have a little bit edge also a little bit of. Construction background a little bit, even if you aren't in the trades as you go through as you as you overhaul the house, you learn a lot about construction where you've never, you know, lifted a hammer before in your lifetime. You you learn on the job. So I think real estate is a good, good Ave. for people to get into and invest for their future. So the burn method with the whole buy, rehab, rent, refi, repeat, that is something that was really popular, people being able to go. That the nice thing about real estate is when you go to sell your property, if you invest in another property so like say you start in a smaller low income housing and then all of a sudden you want to go into a Multiplex, you could, you know, sell your low income houses and do what they call like a like kind exchange where you can sell. You know one type of property and go into a similar type property and then you can defer that gain that you would have had on those lower income properties and just roll that into the other one. So that's a nice feature. Also real estate is if you do the longer term rental, it's what they consider like passive income and a lot of not a lot of people realize the difference between passive and active income. But I'll try to be concise about but active income is when you've got your own side business and you're actively. Going out and doing something, so maybe you're doing CPR classes or you're selling leather belts. That is active income. Active income is subject to self-employment tax, which is 15% in addition to your income tax. Passive income if you're not passive with the rental that income, it's not subject to that self-employment tax. And so that's a big tax savings there. So saving 15% on the money you make off of that rental property, that's that's huge. So it's it's always nice to have that passive income in there, but you have to be careful because with. The rental properties you can have nowadays with the Airbnb short term and long term, those are treated differently. And so those short term rentals, you know if you operate it like a hotel then you get taxed like a hotel. So hotels are a business that's active, active management of the property. And so if you are actively managing those properties, you're in there. Day and day in and day out, that income is treated like a Schedule C, which would be subject to the self-employment tax. There's other ways to do if you. We have, you know, we've got on my department, we have a realtor who also does real estate investing, too. So firefighter by trade, but does real estate and then also flips houses and that's it. So he would be. Potentially considered a real estate professional with the number of hours he puts in. So. That offers some other unique tax advantages. If you can become a real estate professional, but a lot of it, you just kind of got to sit down and understand what your situation is. But I I love long term. Term rentals as a good way to build wealth. It's a great way to plan for your future plan for retirement if you can. If you can handle the tenants. Then it's a great way to build wealth.
Peter
Yeah, I mean, the Holy Grail of of tax planning is if you can figure out how to take your passive losses against active income, right. And you bring up short term rentals and there's a short term rental loophole that everybody tries to do or or real estate professional status that allows you to do that too. That's. A lot of that stuff's over a lot of the guys heads, but there are, there's guys out there that understand it and that they're they're doing it. I can think of our apartment. We have probably like two or three guys that have Airbnbs. So it's not out of the question, but I think a lot of it goes to education like you just don't know what you don't know and it's good to have things like this. So guys can be exposed to it. Joe, I feel like I'm dominating. The conversation you got anything you want to chime in on?
Joe
No, I do. So, you know, interesting our interestingly our last two shows we had three guys who just recently retired. So they had probably we didn't talk about it, but I'm guessing they had pretty complex tax situations. Then the shows. Before that we had a bunch of brand new guys who just joined the department or just transferred over to the department. And so my guess is their tax situations for most of them are probably pretty simple. So focusing on those guys, the less complex folks like what are some of the things that they can think about or they can deduct like some of them like one of the guys had a six. Hour commute to. Work. You know, if they have an electric vehicle or if they have been paying for their education, what are some of the things? That those folks with less. Less complex situations might might want to think about and help. In their tax situation.
Mike
That's a good question. Yeah, I think. It may be less complicated. They won't have as many sources of income, but if they're starting out like a family or on the early stages of their career, their income is going to be low enough. They can take advantage of certain things. So one thing you know, we could talk about would be like education credits for kids. You get phased out of those as you get older, so as you're younger, like the education credits, it's 160,000 is where the American Opportunities Credit starts phasing out at and so. By the time you get later in your career, you are probably going to be phased out of that. If your wife works and you're working and you're picking up overtime, you're going to be phased out of that credit, potentially. And so it's good to start doing some of the like retirement planning and stuff and education savings. If you got kids focused on. Putting some money away in account for them, for their education. That way it's not going to be as taxing down the road when they do get to college age. If they do have young kids as well too, there's like dependent care credit. So if you're paying for daycare, you may be stay at home Dad on. Days off, but if your spouse, if you need daycare while your spouse is working, you can go ahead and deduct that you can also deduct that dependent care stuff if your kids are in school and they have to go like the aftercare program after school, before school care program, there's a cost to that. That can be a deducted as well. He also mentioned the electric vehicles. There's not a better time than now to buy an electric vehicle as far as tax credits are. Concerned federal government, they have $7500 tax credit available to people. California has another $7500. I believe that they you can get. It's like a rebate, it's not through the taxes but it's a rebate that they offer. So you that's a lot of money going towards the vehicle. The vehicles though they they keep changing so. Before you go out and buy an electric vehicle, there's only certain vehicles that qualify and the amounts vary by vehicle, so the dealers will know what qualifies. So if you go in and talk to the dealership, they'll be able to walk you through it. The IRS on their website will walk it through. But you know, in the last year, the vehicles that qualify have changed quite. A bit. Some manufacturers like Tesla. A year ago you couldn't. It didn't qualify. This year, it does qualify. So it's just that those laws keep changing and updating, and in 2024, they're going to offer it to where the dealers can actually take that credit for you in the dealership. So you could go in the dealership instead of waiting until next tax season to get your $7500 tax credit. The dealership can apply for it on your behalf, and they can do it so. Something to think about.
Joe
In that's nationwide.
Mike
That's going to be nationwide. The IRS one is nationwide $7500.
Joe
Just is there anything? Else new in 24 that that folks should be aware of before they they start tackling the their taxes.
Mike
So right now we're kind of we're recording this before year end and usually the last couple weeks of the year, there's usually some surprises. But right now, there's really not a lot of big surprises, the. You know the the new thing coming out would be the tax vehicle. There's some new changes with energy credits as far as improvements to your house that you make, they've gone up, they they calculate those slightly marginally higher and you know if you if you have new Windows, doors, furnace, geothermal. Something along those lines. It's a good time to go and reach out to your tax advisor just to see how that. Impacts you as well.
Joe
That's an interesting point. So can you walk us through like, say, I'm a firefighter or probably not even a firefighter? Anybody thinks they need some help doing their taxes, gives you a call, says Mike. I need help. Can you take it from there and tell us what does that look like? You helping somebody with their their situation?
Mike
Yeah, so usually I I start with getting a copy of the prior year tax return that's that's usually the you know first step because that prior your tax return gives me insight as to what's happened in the past where what they've previously done, what type of income sources they have. But from there we kind of look, look at their income, look at their family situation, their work situation. I try to understand like their whole picture because that's how you can uncover, maybe deductions and credits that they may qualify for. They've been married in the past. You know I need. To talk about, like their divorce and their divorce decree to see how kids get deducted. Year in and year out, and how some of that stuff split but. You know, it really takes getting a conversation to understand them from there. You know, we look at the documents and we can prepare it from there, but you really need to understand the client and understand their life situation, the work situation, before preparing the tax return.
Joe
And that that can all be done virtually, I'm guessing right?
Mike
Yep, yeah, we do. We are 100% virtual. So we don't have any people in branches. The credit union has their branches set up. But when we did tax services. The credit union has a federal charter, so we we have members throughout the country. So to serve all 50 states, we had to, you know, figure out how we could do that and virtual was the way to do it. So we have an online portal where clients upload their documents, we can share documents through there. It has a chat feature. We can chat back and. Forth and then. We do interviews just through teams. We use teams, Microsoft Teams to do the interviews and. It worked really well. It gives you that personal touch if people don't have the time. Firefighters are always busy. They're, you know, if they're on shift, whatever you, you know, sometimes the phone call is just you go back to the old phone call and we go through things that way. I've had several tax interviews interrupted by the alarm going off and running out the door. We work with firefighters. I say we're here for so it doesn't hurt our feelings and say, hey, gotta go and head off to the call. So you know that.
Joe
One of the other things I'm learning about firefighters in general, they like to procrastinate like they don't. They don't RSVP until the last minute, they don't do anything till the last minute and. I'm guessing that's. Probably the case with with filling out their taxes. How soon before the deadline do they need to contact you in order to to get it done? One time.
Mike
So if we haven't heard from people by April 1st and don't have documents a lot of times after April first we we have to start moving towards like an extension and so we can file tax extensions. We can give you up until you know the extended due date to get the tax return done. But the issue is is. In order to avoid penalties and interest, you have to make sure you. Paid enough throughout. The year. So the people that paid enough throughout the year, they're usually knocking on my door. January 15th say, hey, I got my W2. Let's go ahead get this file so I can get my money back. The ones wait until April. They're usually the ones that owe. So it you know, if you get to us a little bit sooner. Even if you. Owe. You know, we can at least tell you what you owe, and then you could settle up. There's also a lot of ways to settle up with the IRS, so if you do owe money, they offer like installment agreements, and there's different plans we can do. So if the reason is you can't pay, it's good to just have that conversation. Let's get the taxes. At least done and ready to go, so we know what we're looking at. That's one of the big things I try to promote to people, it's. Figure out what the damage is if you know the damage is going to be big, great, but let's specify big is it $10,000 big $20,000 big or is it $1000? You know we. Let's figure it out and then we can plan and we can make a game plan for how we address that.
Joe
Thanks for listening. This is Joe from Ventura Fire Foundation. We have an exciting lineup of free webinars for firefighter families in 2024. In February, James Boomhauer, a critical care transport specialist, paramedic and lead peer support director. We'll talk about PTSD, how to recognize it and build your resilience. The webinars are open to fire. Families throughout the US and will be held on zoom. They're limited seats available, though, so register soon. You can register on our website. Or through the link in the show notes, all of the webinars will be recorded and made available on our website and YouTube channel support from Vanguard Charitable made this series possible. We thank them now back to the show.
Peter
The guys around here, everybody knows the firefighters first credit union, but did, did they have? Did you have exposure to them in Illinois or were they or well, how did you, how did you end up here? How did that, how did that work?
Mike
I had not. So I had seen them advertise in my LinkedIn feed and I was. Like, huh this is. Cool credit union fire department looking for a tax person? I'm like, I kind of checked all those boxes because one thing and I I hadn't mentioned yet. But my family, my dad, he ran the we had a local credit union in Springfield and he ran that as long as I remember. And then when he passed away, my older brother took it over. And so I'm like, I've been on that board and you know, so I had the credit union. Exposure. I had the fire. I'm like, yeah, I'm just going to go and send an e-mail off to them and see and see what it's about. And from there, it's kind of. They they hired me as a consultant initially to help get the tax stuff set up, and then the more I got there, the more I, you know, met the people and learned a lot about them. I'm like, this is a great organization organization. I mean, they from the CEO's at the top all the way down to the branch people. They are truly committed to firefighters like that is they they don't just, you know, put it on a bumper sticker and, you know, say, hey, we care about firefighters, they live and breathe it every day. They they all care about the fire service, firefighters in general and so. Yeah, I I. Came up for eligible for retirement this may, and I'm like they offered me a full time position there and I hopped over to it. I'm like, this is a great, great position. So now I'm a full time employee of the credit union and it's been great.
Peter
Yeah, we're a big fan of the credit union, the their foundation, the Fire family, Fire Family Foundation, right? Yeah, they've they're. They're donors for our foundation. They've they've funded some pretty cool initiatives that we've done. So they've come to our ball that we put on and yeah, we, we we, we love us some. Firefighters first credit union people. What is the? What is the? What are they doing? What are they trying to put? Make a push towards doing people's taxes? Or is that a new program for them? I don't ever recall that like being.
Mike
So this is new. Yeah, it's it's brand new. So I they reached out to me or I I reached out to them, but we started up tax services last March. It went to the members. So March 15th, I believe it was the day the e-mail was sent out to the membership that said, hey, we're offering taxes. And so that was kind of late.
Peter
Offered. What's that again?
Mike
And tax season starts in January and ends April 15th. So it was pretty late, but we did have really good response on the tax services. California last year they had the automatic extension with the wildfires. All but three counties in California qualified for that automatic extension. So I think that helped us out a little bit too. But our our plan was to offer, you know, the tax services to the Members because. About five years ago, six years ago, they did a survey and the members #1 service that they needed was help with taxes. And so they put a game plan in motion to, well, this is what the Members want. How do we get there? And so that is where we're at today. It's finally come to fruition with the tax services being. Preferred. We're getting ready shortly here to launch our bookkeeping and payroll services as well as part of the tax services. So if you come to us with, you know you, you have a small business, you need help with bookkeeping and payroll, we'll be able to help out there as well. But it's just their way of trying to circle back and make sure that the firefighters have the services they need to. Be successful financially.
Peter
What's the value proposition? Is it that you guys? You know firefighters, you know, the deductions, you know how the game is played like, is that this kind of selling preposition?
Mike
That is the selling proposition we we know firefighters, we know, you know, a firefighter in LA, firefighter in New York, Chicago, everywhere in between they they have a lot of commonalities. You know, they they all have very similar features about them. You can walk into a firefighter convention, you kind of pick out. Oh, that looks like so. And so from my. Department or you know? Whatever, it just seems like there's a lot of commonality, so that's what we focus on. We're focused on the commonalities that firefighters have. Rental properties is a big one. So we make sure we're up to speed on the rental properties, small business deductions, family deductions from education dependent care credits. We we focus on the things that the firefighters are focused on, so we're not focused on, you know, big corporations. We're not focused on some of the other earned income credits that, you know, lower income people get. We focus on the deductions and the taxes that our firefighters pay.
Peter
Yeah. What? What does this cost? What if someone wants to have you guys? Do the taxes.
Mike
So we start out it, it's posted on the website, but we start out at $250 for a tax return. And so from there it it'll go up, but 250 is kind of the base price. And so if you've just got a W2, maybe a couple W twos, you're married, you your wife W2, a little bit of interest from the credit union that's going to be $250. If you start adding in a small business, it's going to go up. From there, the. We kind of base the pricing off of the forms that are. Used just because the forms kind of approximate the amount of work that's going to take. So we wanted to be able to give people an estimate if they want to know how much it's going to cost before they get into it. We want to provide that estimate to them so they can call us up and say, hey, this is my prior year tax return, how much is it going to be and we can kind of look at those forms and say, OK, this is what it's going to be. So that they they have some frame of reference and that way it's fair and consistent across the board.
Peter
Nice, that seems totally reasonable that that seems not bad at all now that you've kind of seen under the hood of of I assume that were the majority of people that took advantage like California firefighters or.
Mike
You know, I think. We had returns and I think 2020 different states represented when we did tax returns last year. Yeah. So it was majority still is California though, I mean I.
Speaker
Oh, wow. Nice, nice.
Mike
I do have to say. California is the big one.
Peter
Any any insights on like the differences that that you can see from your perspective on California Fire service versus the rest of the country or or or is that not apparent from what you're looking at?
Mike
You know there there are some differences of schedules. A big difference. You know, with we I was a 2448 schedule California. The big, big change is trying to get with people and schedule appointments because some guys they'll be like, Oh yeah, you know, I traded some days. I'm going to be I'm. I'm work for the next week. I'm like your work for the next week. What? But due to all their time trades and all that it, you know they have longer times that they spend on shift. That's kind of one of the bigger, bigger things, more eye opening things, but the deductions, I mean it just kind of varies. We all have. It seems like every department has a, you know, a rental real estate guy. You know, there's probably a guy that teaches CPR everywhere. There's some that are just consistent from, you know, department to department across the country, but.
Joe
So I think that for the podcast we have most of our listeners are either firefighters or family of firefighters, but I think we have quite a few who aren't, who are just kind of interested in the fire service. So to take advantage of of your service, they have to be a member of the. Credit union is. That is that correct?
Mike
Uh, no, actually, we we can. We are a CUSO of the credit union, which just means we are subsidiary organization of it. So we we have flexibility on who we are able to do taxes for that was intentional. We wanted to make sure we could serve the firefighter family and sometimes when you go into a business business. Venture you may not have a firefighter who's your partner in that business. So we've opened it up to where we can serve members outside. The credit union membership, but our focus still is the credit union members.
Joe
For sure for. And then if somebody, so I think I think when I was talking to you earlier, you mentioned that and tell me if I'm wrong about this that the the Thousand Oaks branch of the credit union is like their their biggest branch or one of their has the most members. So if somebody wanted to walk into Thousand Oaks and get help with their taxes, what would they just connect them with you or or what would happen?
Mike
Yeah. So if you walk into a branch, they will connect you with me that, that, that is the process since everything is virtual, there's not really a way for them to, you know, conduct the interview or take the documents we need to keep the documents separated out. We don't want just all your tax documents. Going into a branch and then there, there's a lot of issues surrounding that. So we we've tried to avoid that.
Joe
And so I assume you guys. Have a website or whatever they. Could also go to to. To get the process started.
Mike
Yes. And we can maybe put that in the show notes on the website, but yeah, the website you can get get started through the website. You can give the credit union a phone call and Option 5 right now. And The thing is tax services. So you can reach us through there even if you put an inquiry on the credit unions website, they'll go ahead and put you in contact with me.
Joe
I have one last question of substance. I don't know, Peter. If you have any others that.
Peter
Go for it. Go for it.
Joe
So I should have asked this earlier, but you know, we're a charity and we make our our revenue, our income, the way we're able to do anything is through donations and and that sort of thing. How are charitable donations handled tax wise? What should we be telling our donors of of small gifts and our donors? Potentially big gifts. Who may want to leave the foundation of their estate plan. What what should we be telling them about the the tax benefits of donating to charity?
Mike
So it it kind of depends. On the donor bigger gifts, there's a lot more flexibility with what we can do tax wise. There's like charitable remainder trust. There's a lot of tax planning things that you can do with larger charitable gifts. And if they are planning a larger charitable gift, I would recommend. Having them consult with the tax person prior to that. As far as the smaller gifts, it depends on whether or not they can itemize their deductions at the federal level. The itemized deduction level is up pretty high nowadays that that was part of 2017 tax law changes. There's a lot of clients that no longer can itemize anymore, and so if they can't itemize, then they're not going to be able to deduct that on their federal tax return. But in California, they can. Still deduct it. If they itemize down there, yeah.
Joe
Awesome. Awesome. Anything else then that that's those are couple.
Peter
No, that that's the gist of what I wanted to chat about too. We appreciate you coming on. I think it's. Able to have someone in your role that understands firefighters, you know, available to do their taxes. And I think you know everybody, the the reputation of the credit union is good and I think people that bank there generally love you guys and I think yeah, I think it's a valuable service. And if if if you don't bank there you. Should definitely consider it, but. Yeah. Thanks for coming on and appreciate the advice and chopping it up about the fire department in general, any any, any, any last things you want to share, Mike or?
Mike
No, I just really appreciate you having me on, Peter. Joe, it's nice talking with both of you. Nice meeting you and yeah, just reach out to U.S. tax season is upon us, so. No time like the present to reach out to us and get that conversation started.
Peter
Awesome. Thanks for coming on. Appreciate it.
Mike
All right. Thank you.
Joe
Yeah. So. It was super interesting, you know, not the most exciting subject talking about taxes, but it's something that we all have to do and. I think the number one thing that that I learned is just talk to him, you know, when it's time to do your taxes, unless you just have one W2 and no property talk to him and they'll they'll lead. You down the right. Path for sure.
Peter
Yeah, I think the the one of the biggest blind spots for firefighters and we talked about on the show is thinking you can do it. All on your own. I'm going to do this myself. I'll get on the Internet. I'll research it. I got the. And when you're dealing with things that there's professionals out there who do, like CPA's. It's a no brainer, especially $250, to do a tax return like that's that's a no brainer. Like you, you're gonna if you make one mistake, it's probably going to cost you way more than that in tax. You paid when you maybe shouldn't have, you know.
Joe
Yeah. Yeah, yeah, yeah. So it was interesting for me, enjoyed stepping into Jason's toes. I don't think we ever actually mentioned on the show specifically, but Jason was promoted to Battalion Chief. And so his his time over the next year or so is going to. Be tougher to get him to, to schedule these so we may be looking in the future for other people to step in and help co-host for either him or you and just kind of widen the net a little bit about involving people with the show.
Peter
Yeah. Yeah, absolutely. Yeah. Big Congrats to Jason. That's a. Big deal for him, for sure.
Joe
Yeah, yeah. And then just a couple of other things. Since I I'm allowed to talk on this one that I want to get out one, you know, we have this webinar coming in February, February 20th on PTSD in the fire service and it's real. Geared towards not only firefighters, but families and spouses, and we have this great presenter, James Boomhauer, who's out of Massachusetts, who's recommended to us. He's going to be on the podcast in January. I think it will be the show that aired just before this one, so everyone can go to. Our website to sign up for that and then the last thing that that folks can do that will really help us out that we don't I think is a show really emphasize enough is to go go to wherever you listen to this show either Apple iTunes or Spotify and and Subs. Drive and then you know, put in a sense or two to rate the show because that will help us to increase in the the algorithms for those those podcast platforms that will show up much higher the more more subscribers we have, the more reviews we get. So if you like the show, if you've listened to an episode or two, please just go and. And subscribe. You don't even have to listen to every show, but just subscribe and then and put in the quick rating. We'd certainly appreciate it.
Peter
Yeah, for sure. Anyhow, thanks Joe, for doing the podcast with me. And yeah, maybe we'll do it again.
Joe
Picture it's a lot of fun. Thanks, Peter. Talk to you soon.
