The most successful business owners and investors I know use “outside the box” thinking. That’s what we do at Tax Loopholes and DKAffiliated™ (CPA services). We disclose tax saving strategies you can use right now to put more money in your pocket. The part that is “outside the box” is how we work with our clients to create amazing results in the quickest way possible. In fact, people that meet with me are saving an average of almost $30,000 per year — after just one meeting. It’s often not big changes, but lots of little ones, done in the right way so you have a legal and efficient strategy that makes all the difference.
How do you know if you, or your advisors, are using Outside the Box Tax Thinking? First, see how they measure up when it comes to these three strategies.
Strategy #1: Your advisor doesn’tfollow conventional wisdom
It seems like conventional wisdom is often the worst thing you can do when it comes to financial and tax decisions. That actually makes sense when you consider what conventional wisdom gets people: average results. And, when you consider that the Census Bureau estimates that the average 50 year old in American today is worth only a few thousand dollars, I don’t think anyone wants to be average!
Here are some common myths about taxes:
MYTH: Pre-pay your taxes (state income, property tax) to get the best deduction.
FACT: In 2006, 3 million more Americans learned more than they wanted to learn about AMT. In 2007, it looks like 23 million additional will find out. And one of the things they’ll find out is that the state income tax is not deductible for AMT purposes. If you’re subject to AMT this year, you might not be next year (especially if you talk to me about a tax strategy early in the year) and so it is often a good idea to delay prepaying those taxes. They aren’t deductible in an AMT year and if you can avoid it next year, you’ll get the deduction then.
MYTH: A home office is a red flag for a business.
FACT: My first reaction is, “Are you kidding? Fire the person who told you that.” The truth is the law changed in 1997 — TEN YEARS AGO! Yet still I bet someone tells me they were advised that at least once a week. There are two things you need to have to legally take the home office deduction: (1) Exclusive business use and (2) Regular business use.
MYTH: Tax refunds are good.
FACT: Tax refunds mean that you made an interest-free loan to the government and missed out on investment opportunities. Or, even worse, you might have had credit card debt with interest costs while you made a loan to the government without interest.
Strategy #2: Your Advisor Encourages You to Expand Your Resources
Hire smart people who are better at certain tasks than you are.
If you’re the one who needs to be the smartest person on your team, it limits the growth of your business. Yet what makes most business owners and investors successful is the fact that they see opportunities and are prepared to act on them. In that sense, you probably were the smartest person on your team, at least in the beginning. As your business grows, though, you’ll want to expand into new areas such as accounting, strategic tax planning and legal issues. If you take the time to become the expert in those fields as well, you’ll slow down everything else.
Be prepared to look beyond your own backyard.
In some cases you want someone who knows the local market. For example, if you invest in real estate, it might be good to have a real estate expert advising you who understands clearly your market. On the other hand, accounting and tax are pretty much the same nationwide (with a few state tax nuances in states like California).
You might find that the best real estate and small business start-up accountant, for example, is someone located outside your hometown. I’m using that example especially because the one thing I find again and again is the result of poor bookkeeping. If you don’t have good financial statements, you can’t know how well your business is doing. You don’t know how much money you’re making, or losing, and what you should do to fix it. You don’t know how much your tax liability will be, and what you can do without it. The bottomline is you are driving with your eyes closed and just hoping for the best.
When it comes to accounting, it gets even worse, though. Did you know if your accounting isn’t good and your records aren’t sound, you can lose to an IRS audit? Or put it another way, the best way to get out of an IRS audit fast, without any additional tax, interest or penalties, is to have records that look good. I’ve shown up to an audit for a client with a stack of boxes (actually someone helped carry them in) and after a 30 minute look by the auditor, had him say “We’re done” and pass on every other item on his audit checklist. Good books will save you if you’re audited.
If you’re concerned right now about the state of your own bookkeeping, please hang on. I have a solution for you, but first I’d like to tell you one more story about what bad records can mean.
And as bad as an IRS audit sounds, a lawsuit could be even worse. You might have heard me tell the story of an elderly man who came to see me after he’d lost everything. In this case, he owned a fairly rundown strip mall. It was rented and cash-flowed like crazy. He held it inside a Corporation. So far, so good. Then one day a lady fell in a huge pothole in the parking lot. She sued and won a big judgment. (I’m guessing it was a really big pothole.) Her lawyer saw that the mall owner had a corporation, but he went one step further. He asked to have the records examined by an accountant. And, they found a mess. The judge ruled that the company had not been run in a business-like fashion and so allowed the lady to get a judgment against the owner for his personal assets. He lost his house, his car, his savings, his retirement, everything…. Good records would have saved all that.
If you’re concerned right now about the state of your books and records, I have a solution! Please drop us an email to books@TaxLoopholes.com and tell us the following about you:
Your name Your email address Your phone number Brief description of business Brief description of real estate owned
We’ll put you in touch with an experienced accountant who has been trained in TaxLoopholes strategies and has specific experience in your current needs. One thing – it’s getting near year-end. If you’re not comfortable with where you are right now, do not wait! Good accountants will start getting busy very soon. Please drop us a note at Books@TaxLoopholes.com with the above information and we’ll make sure you get in touch with the right person.
National CPAs bring other perspective & wealth-building tips
A few months ago we launched the new DKAffiliated™ CPA program. The response has been huge! We’ve saved clients thousands and thousands of dollars and gotten great testimonials like:
If you would like to get your tax tune-up before year-end (instead of waiting until next year to find out how much you COULD have saved) contact us today through DKAffiliated, or via email to CPA@TaxLoopholes or give Richard a call at 602.252.1500, extension 5.
Strategy #3: Your Advisor Helps You Ask Different Questions (and Knows How to Answer Them)
If you’ve heard me talk live before, chances are you’ve heard me talk about how changing one question can change everything.
For example, change “Can I?” to “HOW Can I?”
“Can I?” gives the other person an easy out. “Can I?” Easy answer: No.
Instead, “How can I?” means that the other person has to think.
What holds you back right now in your business? What can you do to change it?
Here are two more questions to consider:
- What if it was possible to make as much money as I possibly could and never have to worry about record keeping?
- How much bigger could my business or investment be if I didn’t have to worry about tax strategies or asset protection?
The fundamentals of business never change, but the Internet is changing how we work together, how we research, and how we network. You can harness that power in your business by expanding your reach of brainstorming partners, mentors, colleagues and advisors.