Mike: Welcome back to the Discount Property investor podcast. Our mission is to share what we have learned from our experience and the experience of others. To help you make more money investing like a pro, we want to teach you how to create wealth by investing in real estate. The discount property investor way to jumpstart your real estate investing career. Visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. Thanks for tuning in.
Dave: Hey, guys. Welcome back to the Discount Property investor podcast. I am your host, David Dodge, along with my co host, Mister Michael Slane. Hey, Michael.
Mike: What's up, guys?
Dave: Hey, Dave.
Mike: How are you today?
Dave: I typically call you Michael.
Mike: Uh, yeah, Michael. It's my name.
Dave: I don't know why I did that.
Mike: I don't call you David ever, either, so. Yeah, try not to be too formal. I guess around here, if you're watching the video, you'll.
Dave: You'll see why. I guess that's true.
Mike: Yeah, man. So how you been?
Dave: I've been good, man. We haven't podcasted in a while. I'm excited to get back into doing some podcasting.
Mike: No, we're playing with the mics again, so, you know, means we're gonna do some podcasting, I guess.
Dave: What are we talking about today, brother?
Mike: Taxes.
Dave: Taxes.
Mike: In honor of April 15, which was today.
Dave: Yes.
Mike: Whatever. Close enough. Today is close enough.
Dave: Today is April 15.
Mike: Tax day.
Dave: Let's go with it.
Mike: April 15 it is.
Dave: It's the 16th.
Mike: 15Th or 16th doesn't matter. Taxes are top of mind, so we figured, talk about taxes, because it's our favorite thing to pay. I say that facetiously. It is quite literally the vein of our existed. The bane. Bane vein. I don't know. Whatever of my existence. Yours as well. I know it's a sore subject, especially with them being due so recently. Yeah. So I think we all want to think about how to pay less taxes, if that's possible. I mean, that's one of the reasons I personally got into real estate, because taxes are probably most people's biggest expense, and they don't realize it 100%.
Dave: Man. I was. I was hanging out with one of my buddies over the weekend. He's a high paid attorney, and he was telling me that his quarterly tax taxes are 100,000 a quarter. And then he had a $900,000 tax bill due yesterday, and he obviously makes a lot of money. But I was thinking, man, not having a bunch of real estate doesn't help him at all. I mean, he's in.
Mike: Sounds like we found ourselves an investor.
Dave: That's right. That's right.
Mike: No.
Dave: Yeah.
Mike: Taxes are the worst. And I cannot imagine having a $900,000 tax bill. I would not be super thrilled. So let's talk about a few ways to avoid them or to decrease them legally. One of the things, Dave, you always say it is the tax bill or the tax code or law or whatever. It's like, what? Isn't it 900,000 pages or like 800,000 pages, something like that. And there's like one or two pages.
Dave: 70 or 80,000 pages, something like that. Something like that. It's crazy. Not 900,000, but.
Mike: Well, that was the number in my brain because you said, yeah, yeah, yeah.
Dave: It's a lot. I mean, call it like 75,000 pages. Yeah.
Mike: And there's like three pages on. This is what you need to pay. And then there's. The rest of it is basically just like loopholes and ways that you can get. You can decrease your tax liability. Say it like that. So again, that's most of what tax planning is. And here's the honest truth. I'm not a CPA. Dave's not a CPA. We are not experts on this, but we can relay to you what the experts have told us, and we will connect you with the experts. If you're interested, check out our website, discountpropertyinvestor.com, comma. Go to the growth tools and then go to prime corporate services. They will help you with everything from creating your corporate structure all the way down to tax planning. And they've helped us with that. They've helped a lot of our students as well. And they'll help you decrease your tax liability. I'm not going to say avoid paying taxes, because I know that's not the right thing.
Dave: They definitely can help you decrease your tax liability. We're working with them for entity creation. We're working with them for bookkeeping. We're working with them for tax filing, both on the business and the personal level. Prime's great, dude.
Mike: I just saw a post on this, and it's something that we're doing, and it was talking about. It was an article. It said, and I didn't verify if this is accurate or not, but it said, homeowner made, I think, was $200,000 in one week, tax free. And I was like, what are they talking about? There's no way you can make that much money and then not have to pay taxes on it. And then it was talking about how the masters was coming to town and this individual rented out their home.
Dave: The Augusta rule.
Mike: Yeah, yeah, it's the Augusta rule. And it has to do with these wild prices that people can rent out their houses for around these golf tournaments. So what the Augusta rule is, is it says that you can. And again, I'm gonna slaughter this. You've got to talk to experts. But you can essentially rent out your personal residence for up to 14 days per, per year. Per calendar year. And the income from that rental is not recorded as income or it does not have to be recorded as income.
Dave: Yeah. Which is basically means it's tax free.
Mike: So again, tax free, essentially. And we do that with our own.
Dave: Personal residences because we have meetings there and, you know, you got to do things by the book. But we pay ourself, not 200,000. It's like maybe twelve or 1300 bucks a month. And so I. That's tax free.
Mike: And I think if I remember correctly, what our CPA told us was it has to be in line with what.
Dave: It would rent for normally.
Mike: Yeah, it would rent for normally.
Dave: Yeah. One of the things that I love about it, Mike, is, is if you're doing it from your business, it also creates an expense, so it offsets your income from the business itself, but it also creates income that's tax free on the personal level. So either way, contact prime, learn more about how they can help you set up entities. Learn more how they can help you with tax filing and bookkeeping if that's something you're looking to do or need. They are. Awesome. So today's topic, obviously, is taxes. One of the reasons that Mike and I love real estate is because it gives you a lot of tax advantages that you often otherwise would not get. So I started with rentals. Mike, where did, what did you start.
Mike: With Reynolds as well?
Dave: Okay.
Mike: Dude, it's been so long, getting so old.
Dave: I know. It's wild, isn't it? So I started with rentals for a couple different reasons. Yeah, house hacking is really where I started, too. That's a good point. But either way, it was rentals. And the reason I love rentals. There's so many reasons. Right? So you have a, you have the ability to use leverage. I think that's the first reason why I love rentals. Next, you have the appreciation that you're going to get over time. It's not going to happen overnight. Typically it can, but it's not typically going to happen overnight where the value of that property is going to increase. You are also going to get to use depreciation, which is really a tax term. It's a way for the government to essentially incentivize you for owning rental properties. And you get to create what's referred to as a phantom expense. That's called depreciation. That you can use to offset your income when it comes to taxes, you also get cash flow with your rental properties, and you can write off the cost of your finance, your legal, your accounting. Let's talk management. I mean, you have so many advantages with rental properties.
Mike: Let's talk about why depreciation? Like, why is that even a legitimate expense? Why can I take my house that I'm renting out and say, well, now, this year, 130 of the 30th of it is no longer there. I'm going to write that off as an expense? Like, what is that? Why? So what's wild about it is because assets depreciate over time, or they, in theory, their useful life extinguished. So think about like a tractor, a farmer's tractor. You know, they're driving this thing. It's only going to last for so many years. So they depreciate the value of it. They're not holding that asset or the entire value of that asset for that, that time period. Well, this is the same thing with real estate. The house you can depreciate it over, I think it's 27 and a half years, right?
Dave: Isn't that the seven and a half years for a single family home?
Mike: And holy smokes, it gets messy on your taxes. Ours are hundreds of pages long. But again, you can depreciate the value and write that off. So that then is a. How does that, how does that work, Dave? Is that a straight off?
Dave: So it's a phantom expense, right.
Mike: So it just increases your taxable income?
Dave: It does. So if you make $100,000 in taxable income and you have a rental property, and let's say that it's 27 and a half years, you can depreciate it. So you take one divided by 27 and a half to get a percent. You then multiply that percent by the value of that property. Now, here's what gets a little goofy, but we don't need to get too far in the weeds. You cannot depreciate the land, only the building.
Mike: I forgot about that.
Dave: So let's say you have $150,000 property, but the lands were 20,000. Well, then you can basically take the 20 off the top of the 150. You now have 130. You take 130 and you multiply that by the one divided by 27 and a half, whatever that percentage is, to get an amount and let's just assume, you know, this, this math is way wrong. This is from the hip. By all means, let's just assume that depreciation is $3,000 that you get to take off. Let's say you have $100,000 worth of income. Well, now you only have to pay taxable income on 100,000 minus the 3000, which essentially is $97,000. Here's the cool part, though. If you have 50 properties or 30 properties, let's go with 30 properties. And each one of them is giving you $3,000 worth of depreciation and you make $100,000.30 times three is 90. You then get to take $90,000 off of that hundred thousand dollars and you're essentially having a tax liability now of only $10,000, not a hundred thousand dollars. So depreciation is, is minor. It's not a huge, huge advantage. However, if you have 1020, 5100 properties, it will add up and it will save you tons of money. It is a huge value over time.
Mike: Yeah, on top of that, I'm just.
Dave: Saying it's not a huge value on just one. But I guess over time it can be.
Mike: It depends on your situation, too.
Dave: It does.
Mike: Your financial situation. Again, think about the, the average person here working the nine to five or maybe blue collar, like working whatever, and they buy a rental property or they're able to buy a rental property and then use that to offset their tax liability. Like, it's huge. It could be very, very big. If someone's entire tax liability for the year is only, say, eight grand. I mean, yeah, an extra thousand 2000 back at the end of the year is huge.
Dave: Yeah, it's really.
Mike: So it's good stuff. What else? Oh, the flip sided appreciation, though, you experienced this year.
Dave: That sucks.
Mike: So again, there's lots of ways to avoid this. Your accountant can help guide you. Sometimes we just kind of shoot seat of our pants or whatever. If you sell an asset and you don't do what's called a 1031 exchange, you don't pull that asset into another like kind asset. And again, you have to go through title companies, attorneys, all these people that, that actually do 1031 exchanges. If you don't do that 1031 exchange.
Dave: Custodian, essentially, if you don't do that.
Mike: You'Re going to have to recover that depreciation expense. So you've depreciated the asset down, down, down. Let's use that example of that $150,000 asset.
Dave: So here's what happens. Here's a better way to describe it. Whenever you depreciate a property, your cost basis decreases. That's essentially how they use it. They have a schedule. So let's say you have $150,000 property, 20,000 of it is land. So then, therefore, you have $130,000, you know, that you can start depreciating from. Well, let's say that you use the depreciation for five years and it's 3000 a year. That's $15,000. So you take $15,000 off of the 130, which puts you down to 120. No, 115. So now your. Your cost basis is 115 plus the land. Add the 20 back on because you can't depreciate that. So that puts you back to 135. But you bought it for 150. So you've essentially taken that cost basis off, or you've taken that depreciation off of the cost basis when you go to sell it. Let's say that you sell that property for 200,000. You're not paying taxes on the $150 to $200,000 gain. Now you're paying the taxes on the difference between the cost basis, which has been depreciated, in this case down to 135 to the 200. So you now have a bigger amount of gain. So that's the disadvantage of depreciation. Now, it's not necessarily a bad thing because it's going to be a long term gain, so it's going to be taxed at a smaller rate. And like Mike said, if you use a custodian of a 1031, you can offset that. You can create a new schedule of depreciation if you've used all 27 and a half years of it. Lots of advantages. If we're getting in the weeds here.
Mike: There'S almost no reason. I'm just trying to think why you wouldn't want to depreciate an asset or a house if you're. If you're.
Dave: You can't depreciate a single family home that you live in, a primary residence.
Mike: Correct.
Dave: It has to be a rental property. That's a.
Mike: So I'm thinking living from the investor mindset, like, why would you not depreciate? The only reason that we've done in the past is if we were going to sell that property like we knew we were gonna sell that property in a short period of time, then it's like, it's not worth setting up the depreciation schedule on your tax return. It's not worth the few hundred or few thousand you're gonna save if you do plan to sell it, other than that, it usually makes sense. And again, you're gonna need to talk to a CPA. So again, I'm going to refer you to that. Discountpropertyinvestor.com or forward slash tools. Growth tools.
Dave: Growth tools. Just go discountpropertyinvestor.com and you can see.
Mike: It up in that growth tools. And then go to prime. And again, chat with them. They do free consults. So yeah, get, get onboarding with them, use our link and you get a free consult with them. But again, I can't think of a single reason why you wouldn't necessarily want to decrease your taxable liability from year to year.
Dave: Yeah. Another cool thing about taxes, if you are a full time real estate investor, you can essentially use the depreciation to offset any and all income. If you are not a full time real estate investor, you can only use the depreciation to offset the income from the rentals themselves. You have to basically operate in buckets.
Mike: Yeah.
Dave: You are a full time real estate investor. All of it funnels into one bucket, which is, is, and can be an advantage.
Mike: Yeah, I'm just thinking through that. I mean, I think it would be rare that your depreciation would ever exceed, I mean, I would hope. Well, if you have a loss income, you have expenses.
Dave: Yeah. Like, let's say you bring in ten grand, but then you have to do turnover and you spend ten grand and you have a $0 worth. That's income.
Mike: That's true.
Dave: All of a sudden you have a bunch of depreciation that you can't really user. So you can move that over to income from flips or your, let's say you do have a part time job or so you have come from another thing. Okay.
Mike: So yeah, if you're a full time real estate investor, but what if Dave prime helps you set up a company and you have an LLC?
Dave: Mm hmm.
Mike: Well, then it kind of changes too, right. Because your LLC can now start expensing things.
Dave: Right? Yeah.
Mike: So would you still lose that depreciation if you're not a full time investor? And maybe that's a question for them.
Dave: You know, that's a question for them. Again, you had mentioned neither one of us are tax experts here.
Mike: Yeah, we're just talking about our experience.
Dave: The advantage of having a business and LLC versus not having a business and LLC. Number one, you're gonna have some liability protection. Right. But really, the main reason, in my opinion, more importantly than the liability protection in itself, is the ability to use the tax code. Use the 75,000 plus pages of tax code to minimize your income. And you do so by writing things off. In fact, one of my favorite Seinfeld episodes, Kramer's, like, trying to, trying to get the radio fixed. It's like a CD player. And they ended up doing some, some, like, fraudulent stuff with the USP's. It's Seinfeld. It's an episode. This is not us. This is Seinfeld. But Kramer's like, they're gonna write it off. And then Jerry's like, you don't even know what a write off is. And he says, well, they're the ones that are writing it off. And it's hilarious. But either way, getting sidetracked here, when you have an LLC, you have the ability to write off all of those expenses. So you can use the expenses, the finance expense, accounting expense management expense, maintenance expense, capital expenditures. Expense what? And most travel expense.
Mike: So most of this stuff is actual expenses. It's not like write off. It's just like, oh, I'm just taking money off of things.
Dave: No, it's literally spending that money. It's literally just depreciation.
Mike: It's your expenses. So the things that you spend money on to run your business. And that's where it gets interesting because you can write off essentially a lot of things that are mostly business but somewhat personal. So this is. This is why people talk about write offs as this amazing thing. Because real estate investors, notorious for this. Where are you going to do your training? Well, we're going to do it on a beach or we're going to do it in Vegas. Right? So that's why going to these seminars in different places that you would want to go to on vacation is so cool because it's a business expense.
Dave: When you do a seminar or something.
Mike: Business related, you're going to the seminar. So that is now an expense that travel becomes an expense for your business. But it's still a nice place that you'd like to go visit even though you're attending a seminar for a couple days.
Dave: Right.
Mike: You still get to enjoy that trip. So that's why write offs are so neat. In addition to something like your mileage.
Dave: Too, all your marketing can be a write off. Your mileage, the travel. Assuming you're doing business related travel. And here's some things I mentioned a minute ago. We can kind of circle back on cost of property management, cost of taxes, cost of insurance, all the interest that you spend on your mortgage is.
Mike: Yeah, I mean, it's any.
Dave: Any expense, any expense is going to be right, written off, essentially, maintenance, paint, carpet, you know, anything. Cost of evictions, if you have to do that, if you're flipping all the materials and labor that go into the property, I mean, essentially anything you have that's an expense is going to be able to offset the income. You can't do that if you're operating outside of an entity or an LLC or a corporation of some sort. You have to use the tax law, which essentially says, open a business, create a business. And then all of a sudden you can. You can use those.
Mike: Dude, this is a great topic, too.
Dave: So we're actually reading from real estate school.
Mike: Guys, we just had a go ahead.
Dave: I was just going to say I made a post over in real estate school. I wanted to make a comment here. If you guys are not in real estate school, come check it out. It's the most cost effective way to learn how to get started investing in real estate. Learn how to flip wholesale, buy rentals, all this stuff. I made a post in there the other day, and our friends commented. Our members in the community commented on the post. The post actually said, hey, I need some podcast suggestions. And that's what Mike and I are doing today is we're going through the list, looking at some of this stuff. And our friend Tim Place had some questions about taxes, appreciation, depreciation, write offs. And then our friend Stephen Townsend had some questions about taxes as well. So that's why we decided to do this episode.
Mike: So, guys, because of April 15.
Dave: And because of April 15. Right, right. All that so seem to work out well.
Mike: This is wild. We had a contractor, and we're no longer working with them. I'm not gonna use names, but they were upset with us. When we issue, they're 1099 at the end of the year.
Dave: What is 1099? Let's start with.
Mike: Okay, so as a business owner, you can either pay people in one of two ways. You can write them a check, or you can put them on payroll. And we put someone on payroll. You've got to work with the government, Missouri and federal and all this. And you've got to pay taxes out.
Dave: Of there with Medicaid, unemployment, Social Security, all this.
Mike: All those taxes come out. And then as the employer, you have to match some of that as well. So there's a lot of tax stuff involved in the pain in the ass, in the w two.
Dave: Huge pain in the ass it is.
Mike: It's not fun. There's a lot of taxes built in, baked into these w two. And that's where most people get most of their money, and that is some of the highest taxed income. It's, it's wild. Anyways, we're going down a rabbit hole here. So you can also just write someone check. Well, if you write someone a check out of your business account, that's fine until you pay them more than $600 in a calendar year. Once you pay them over $600 in a calendar year, the IR's requires you to issue them a 1099. So then at the end of the year, you're basically saying, hey, mister contractor, I paid you $7,500 and that gets reported to the IR's so that the IR's knows, hey, our business is claiming this expense because we paid 7507,500. And then that contractor then has to claim that as revenue, not income. So what's wild to me is this contractor did not realize that the checks that we wrote them was not just saying, hey, this person made, it's all.
Dave: Taxable, it's not the case.
Mike: It's not taxable. Exactly.
Dave: There's a difference between income and revenue. Well, net income and revenue, because gross income is revenue, net income is profit. And what Mike was saying is, we have a contractor that we were, we had him fill out a w nine. I don't know if you've defined these. I was typing here.
Mike: No, no.
Dave: W nine essentially gets their information, their Social Security number, or more importantly, an Ein. If they have a business, you get their Ein, which is basically a Social Security number for a business, and you get them to fill out a w nine. This allows you to pay them directly from your business account to their business account, or if they don't have a business, just directly to them. And it allows you to use that payment as an expense to offset your own income. When they receive that payment, it becomes revenue or gross income to them. But gross income, aka revenue, is not the same thing as net income, aka profit. And this particular contractor thought that all of the revenue that we paid him was taxable. But what he didn't understand and neglected to know was, is that any cost that he spent on materials or any subcontractors that he paid out of that income was an expense for him. He needed to then go out and get w nine s from his subcontractors. I don't know if he was doing that or not. So a w nine is basically a document that you get signed and filled out by, by a contractor or a subcontractor, or even a supplier. Could be a software supplier. Could be. It's basically anybody that you're going to be paying money to. And you can then give that to your accountant, your CPA, or if you file your own taxes, you give it to the government when you file your taxes, and you can use that expense to offset your income at the end of the year. You need to. You need to. What would you call this?
Mike: Issue.
Dave: Issue. That's the word I'm looking for. I was gonna say print and mail, but issue is the right word. A 1099, which basically is just a summary of all the monies paid to each person. What's the business that you have a w nine from?
Mike: So it's not just mailing it to that contractor, though. This is reported to the IR's.
Dave: You mail them a copy. Yeah. And then you give the other copy to the IR's or your accountant, who then basically gives it to the IR's. Yeah. We don't submit it directly. They do, but we pay them to do that. So w nine is basically who is the individual? And how can we let the IR's know who you are? Is it a business or an individual? We keep track of that. At the end of the year, due by January 31, I believe you need to issue the 1099s for the previous year to all the people that you have w nine s from. And then they use that on their taxes, essentially, to report the income. So the w nine just is a record of who the money is going to and who they are. The 1099 is actually kind of like a ledger or more of a summary. At the end of the day, very simple. Usually it's like a third of a page, just a little piece of paper. But it's the summary of who that information, who that tax was paid to. They use it as income. We use it as an expense, or, you know, the ability to offset our gross revenue. Then the gross income. And then at the end, you have all your gross income, minus all of your expenses, minus all of the 1099.
Mike: And hopefully there's money left over.
Dave: And hopefully there's money left over, and then that becomes the net income and or the profit. So Stephen had to ask over here on real estate school, by the way, school is school. Sk o l real estate. It is the best place online to learn how to get started investing in real estate, and it is also the most cost effective program. We have a community over there. We have courses on flipping and wholesaling and all types of great stuff. Guys, check it out. We'll link it in the show notes our friend Stephen Townsend over here in school had asked, hey, guys, do a podcast on taxes. I'm just learning from my accountant that I need to issue a 1099 and receive w nine s. And if I spent over $600 on any of my contractors, I never knew that. Bottom line, as a real estate investor, we need to learn how to play the tax game so we can keep most of our money. Absolutely. Steven, we hear you. The w nine s are things that you are going to have contractors fill out when you plan to pay them. If you are a contractor or any business owner and you plan to get paid by another person or business, then you need to fill out the w nine and send it to them. So the w nine, essentially, is the record of who's getting paid. So you can then submit it to the IR's. The 1099 is typically submitted in January for the previous year. Right. And that is the summary of all the monies that were paid to that w nine contractor or subcontractor. When you're using a w nine or in a 1099, these two things, these terms that. That is essentially the opposite of what you would be paid as a w two. A w two employee doesn't get w nine s or they don't get to 99s. It's either one of the other. You're either a w two employee or you're a w nine independent contractor. Am I wording that right?
Mike: Yeah. So I think it's a w two or 1099. I never heard it called a w nine.
Dave: Well, you're right. It's. Well, just. You fill out a w nine. That's the. That's the tax document. So you can then get a 1099. So at the end of the year, you either get a w two from your employer. From your employer, or you get a 1099. But in order to get to the. If you're lucky, you get both nine. Exactly. So it doesn't. It's really not that confusing. It's one of the other, Michael. We pay ourself through our business w two, but we also pay ourself bonuses and commissions, and that comes over in the form of a 1099. So you're gonna be essentially paid one of the other. But, Stephen, great question. When you are paying your subcontractors, yes, the rule is $600. That is correct. Anytime you pay somebody less than $600, you do not need to get a 1099 filled out. You do not need to issue them to me. Sorry. A w nine filled out or issue them a 1099. To me, this is such above that you do this is such a gray.
Mike: And kind of silly thing, though, too. So, like, we spend thousands of dollars at Lowe's. We don't issue them a freaking 1099. We spend thousands of dollars at Home Depot, Menards, Walmart, all these places, just because they're big companies. They don't need it. So it's really just all the small companies you do business with. I don't know what the definition is, Dave. Yeah, that's a good point.
Dave: Because, like, if we were to work with, like, a lumber car, lumber yard, for example, they may want us to fill that out. It just depends. It's really.
Mike: You're right.
Dave: It's for smaller businesses, and it's really more of, like, it's really more. Well, not necessarily, but think about business, because we think about this.
Mike: Think about. Let's give a shout out to Brad Evans. We've bought a ton of flooring from Brad Evans. Flooring is his company. Right. It's like a great gray area. Like, do we really need to issue one to him?
Dave: I feel like it's more for labor than it is for materials. Mike, you're not buying labor from Lowe's and Home Depot. We're getting labor from, you know, one of our maintenance guys, Jason, for example. Like, we're paying him labor, but we're not buying in materials from Jason. So, you know. Well, here's the question. Did we submit or did we, did we get a w nine from Brad Evans and Evans flooring and submitted 1099, or issue him a 1099?
Mike: Probably.
Dave: I would imagine we did. Right. So, you know, that's, that's materials. But.
Mike: But he still has the expense on that, so it's not a big deal.
Dave: Yeah, I don't know that. So, again, we are not tax experts here, guys, contact.
Mike: I think you're right. It probably is mainly a labor.
Dave: Mostly for labor, though, I feel like. But it.
Mike: That's why it's so great of me, though, like, because, again, a lot of.
Dave: Our suppliers, when you tell the government, hey, we spent $80,000 this month at Lowe's or Home Depot, they're gonna be like, oh, yeah, we're familiar with Lowe's and Home Depot. The government might not know, you know, Evans flooring, they're like, who is that? And essentially, they want to see that we can use that as an expense and that that should be tacked on to his.
Mike: Dude, I get. I'm just playing, playing devil's advocate, though. Great. But Evans flooring's a big guy, you know, like, he's not a big guy.
Dave: But he's not nationwide. Not everybody knows.
Mike: Devil's advocate. Well, then again, there's so many local places to like, yeah, ace hardware or brainicky hardware or like a get right there storefront.
Dave: It's different. So, yeah, I feel like the 1099 is really for businesses that are smaller. It's mostly labor, but not always. And it's places that don't typically have a storefront. I mean, that's. That's my definition of it. But regardless, you don't need to worry about all of the little knickknacks. If you work with a good accountant, a good CPA firm, so on, so forth, here's what they're going to guide you. That's why we love prime, because they are gonna be there to guide you and they're gonna be there to help you. By the way, you can get a w nine online for free from the IR's website.
Mike: Literally just type w nine in that Google Chrome and it's gonna pop up.
Dave: Pop right up or whatever it is that gov, I guess. So don't overthink it. But, Stephen, if you're listening anything over $600 to a contractor that doesn't have a big storefront that you are paying for labor and or materials from, it's a good idea to get them to fill out a w nine so you can send them a 1099 at the end of the year. The main reason that you want to do this is so that you can use those expenses to offset your revenue. That's really all you need to know. You want to be able to use those expenses to offset your revenue and prevent yourself from getting audited or, you know, getting in the eyes of the government so they don't think that you're doing anything shady like, you know, trying to avoid taxes or launder money or anything along those lines. Don't. Don't overthink it. Keep it simple.
Mike: Thanks for listening, guys. Let's wrap this one up. Dave.
Dave: All right, guys.
Mike: Talks about taxes quite enough.
Dave: That's right. We'll talk about it again, I'm sure. See you guys. Have a great day. Signing off. Thanks for listening to the Discount Property Investor podcast. If you enjoyed this episode, please like share and subscribe to help us reach a wider audience to jumpstart your real estate investing career, please visit freewholesalecourse.com, the most complete free course on wholesaling real estate ever. We would also appreciate it if you left us a review on iTunes or stitcher. Thank you in advance for your support and remember, you make your money when you buy and you get paid when you sell. Now let's go build some wealth.
