For years I’ve talked about the importance of having a tax strategy. It’s a proactive, future-based plan that puts you in the driver’s seat. With enough planning, you can plan WHEN you pay your taxes and HOW MUCH you pay in taxes.
Let me say that again: YOU can choose when and how much you pay in taxes.
But there is a secret, you have to plan in advance. In fact, years in advance to get down to the low tax rates like 16% that Warren Buffet (billionaire) pays. By the way, his secretary makes $60,000 per year and she pays 30%. The difference? A tax strategy.
I’ve said that for so many years that there are now imitators out there. “Just like Diane Kennedy, only cheaper” I always get a kick out of that because the reality is that the two guys ripping me off the most in the market had gotten a tax strategy from me. They then copied everything I did and started selling themselves as experts. i got an email from someone about a month ago who said that it seemed like one of them seemed to sound a lot like my books. Of course, the books that were quoted were ones I wrote years ago. And yes, they sounded a lot like my books – in fact, exactly like them and we went after him for plagarism.
The main concern, though, is that the things these strategists are talking about years and years out of date. There are new innovations in business structures such as layered systems, Trust Sandwiches and (my new favorite) the Trust Sandwich layered structure with a Series LLC. Wow, it’s a little complicated but once it’s set up you’ll save THOUSANDS of dollars in state filing fees and legal fees. And it’s the one way I’ve seen to legally change nexus. You’ve got to see it to believe it.
Anyway, the thing through all the discussion about strategy that has been forgotten is the need for good tax preparation. The person who prepares your tax return is just as important as the guy who puts together the strategy. In fact, if the tax preparer doesn’t understand the strategy there’s a good chance that he’ll goof when he’s putting the tax return together. It can cause a red flag. It can cost you extra tax. Or it can just be plain wrong.
In the past few months I’ve seen hundreds of tax returns (maybe thousands, I didn’t count) and I keep seeing BAD tax prep mistakes. These are returns that have been done by paid preparers, often CPAs, and they are just plain wrong. No wonder the IRS wants more money to hire more auditors They know there are mistakes and they’re going after the preparers who make them and their clients.
Who is doing your taxes this year? Be careful how you answer, it can make a big difference in your future.