Tax Strategies & Estate Planning In Your Business #EEP Podcast #226 Jerry Lynch

In today's episode, we're going to be talking about tax planning. Now don't get all bored and say, "Oh my God, there's nothing worse." If you're a business owner, you've got to prepare for taxes. The only boring part is you're going to hear from Jerry Lynch about it. You're about to hear that and so much more on today's episode of the Proud First Podcast. Give me a grunt. That's how you start.

Feminine.

Yeah, women really aren't.

I feel so pretty when I do that.

It sounds very pretty. Welcome to the Profit First Podcast. If you haven't figured out this grunter, I am Mike Michalowicz, the author of Profit First and Clockwork, my brand new book, and some others too, like The Pumpkin Plan, Surge, etc., etc. You, my friend, you're listening to the Profit First Podcast. It's the only show on the entire interweb. We do that for Amy. She doesn't know it's called the web anymore.

World Wide Web.

World Wide Web.

Thank you.

The www.

I've heard of that before.

The only show dedicated to your bottom line and making it your top focus. I'm joined in studio by my co-host, Amy Cartelli.

Hi. You can find us on iTunes, Stitcher, TuneIn Radio, Google Play, Spotify, profitfirstpodcast.com, and any podcatcher anywhere you hear a podcast. And if you take a screenshot, we will mail you Profit First for free.

Ha! Amy's doing a great job.

She's doing a great job. This is her second— she's one hour into this, Jerry.

She's doing a very nice job.

She's doing a very nice job.

I'm gonna have to step up my game.

You gotta turn it up.

No, Mike's gotta give me a raise.

Yeah, I like how you go off microphone asking for a raise.

Sorry about that.

Oh my God, uncomfortable. So yeah, send us that screenshot of the review, send it to Kelsey@MikeMcCallows.com, and we will send you a hardcover copy of Profit First for free. That's my kind of bribery.

That's really cheap.

And Jerry, maybe you'll throw in one of your water bottles.

You get a free water bottle.

Free water bottle from Jerry. Also, in the meantime, you can go to mikemcallouts.com or mikemotorbike.com if you can't spell my last name. Check out what we got going on there. We got a free copy of Surge up there. And if you are a YouTube listener, yeah, we're broadcasting these live. There's video. See, I'm waving the video camera there. You can just click on the subscribe button, get our weekly broadcast. All right, you told me you may never grow your hair back, and I think that's nonsense.

Well, you have no idea. As a guy, I'm sorry, but I think as guys, you guys just don't know the hell that it is to grow your hair back.

Why don't you talk to me?

That's funny. That's funny. Do you like long hair on women or guys?

Oh my gosh.

I don't know how to respond to that. As long as they look nice, they could have long hair, they could have short hair. I'm flexible.

Yeah, I think I'm biased toward long hair.

I just think if they like me, I'm happy.

Yeah.

Keep it simple. You're not picky. Keep it simple.

I think his long hair profiles the face nicely. I think.

Thanks, Mike.

But there's some guys like, uh, that are walking, they're walking away from you, I'm like, wow, she must be pretty. Turns around, full beard.

That's bad.

Yeah, yeah, I do that more often than I expect. My favorite long hair person of all time was Fabio. Oh, he had great hair because he had long hair. Do you remember when he got hit by a seagull in the face on the roller coaster? What?

Oh, Michael, you know these things.

YouTube this.

You know these— I don't think they exist. And then you YouTube them, or you, you have them made and you get them up on YouTube before I get a chance to look, and then they're there, and I'm convinced you're—

Do you remember Leave Britney Alone, Jerry? There, there was this guy, he's like, leave Britney alone.

I have no idea what you're talking about.

Jeremy's nodding.

Jeremy over there saying yes.

It's probably a little older, you know, that's why I don't know it.

This was a meme from maybe 8 years ago. Britney Spears had a nervous breakdown. Oh yeah, very public. This guy went on YouTube and started defending her breakdown and people's assaults and making fun of her, her verbal assault. And so he has this breakdown, which is hysterical. It got millions of views. The second runner-up is Fabio on a roller coaster. You gotta YouTube this. Gets on a roller coaster, it's a promo video, so they're showing him with his hair flowing, and a goose smacks him in the head.

Oh my God, poor man.

Poor guy.

I hate when that happens.

Fabio.

That's terrible.

Alright, so today's episode we're gonna talk about taxes. We do have to thank our corporate partners. Oh, and we got a listener shout out, right, Amy?

Yeah, we do.

Who said what?

Who said what? Shout out. Rachel Luna says, "I read the second edition of Profit First sometime last year and implemented what you taught. This morning I was able to write the binder deposit check for our dream house. Because of what I learned from you, not only is my business now profitable, but I have a beautiful savings account and we have plenty of liquid cash to secure our dream home comfortably." Boom, Rachel!

Congratulations.

Nice job.

Yeah, that's the kind of emails I like to get. Keep them coming. And if you, my dear listening friend, haven't achieved that yet, you can. Follow the Profit First system. Before we talk with Jerry officially, I want to thank our corporate sponsors. They are Nextiva and Receipt Bank. We'll talk about, like last week, what did we call it? Ass welts? Is that what we called the receipt? It prevents ass welts, we found out. An ass welt, if you don't know what it is, is when your wallet is so expanded with receipts that you put it in the back of your back pocket and it looks like you have this massive goiter.

As you lean to the left.

Backside goiter, yeah. And Receipt Bank gets rid of those receipts, therefore preventing ass welts.

That's good.

Yeah.

People come up with great ideas for this stuff, you know?

And the next thing was a voice over IP phone system. Okay, his name is Jerry Lynch. Jerry started JFL Consulting in 1997. Following a successful career with Aetna as Vice President of Marketing, responsible for their largest market, in 2012, Jerry chose to pursue his true passion, helping individuals and— I was going to say something totally inappropriate.

Yeah, I can understand that.

Helping individuals and business owners achieve their financial goals and started JFL Total Wealth Management. He's based right down here in Boonton. He's— Ron is a client of yours. Helped many people in this area, and really has a penchant for managing some of the, not tax compliance, but reducing your tax consequences by managing your money accordingly. Correct.

I mean, I think most of the time when people work with a CPA, especially if you're an individual, the only time you're really seeing them is in February. What we try to do is get involved during a full year. So once the tax returns are done, I don't want to do the tax returns, I want to review them, I want to find opportunities, run them by the CPA, and see what we can do to be a little bit more proactive. And again, if you, If you look at it and if taxes are a big thing, if there's something you could do to minimize it, I think people are very interested.

Oh, totally, right? And CPAs, I think, are very oriented toward compliance. They want to make sure you comply with the law, you pay what you do, and they try to reduce your tax consequences within the law. But you, I think, take it outside and you say, here's investment opportunities to grow your money while at the same time reducing your tax burden.

Yeah, again, there's two sides. As a business owner, you have a lot of control over your income. So you have the ability to set up retirement plans. You could control how your income is coming into the business. So that's half of it. The other half is that once you get it to your person, how do you make sure that that money's growing in a very tax-efficient way? So you had just mentioned somebody's buying real estate. I'm a huge fan of real estate. If you take a look at the most successful people in the world, it's either they were born into a family business, they did it in real estate, or they won the lottery. And that last one you really can't control. So I think if you could run a successful business and you could invest in very tax-efficient vehicles such as real estate, over a period of time you're going to do terrific.

So does someone like you, a wealth manager specifically, help people with real estate investments?

I'll help them understand what they're getting into. So for example, every realtor I've ever met has said to me, this is a great property, you should buy it. My response is always like, if it's that good, why are you showing it to me? If I have a golden egg, I'm not giving you the goose that's laying those eggs. Yeah, you know, I'm gonna sell you part of the egg. But the bottom line is, is that when people get involved with real estate, they generally don't understand how the numbers work. I could take a look at the financials and say, listen, you're never gonna make a dime on this, or you actually Actually have a chance to have a positive cash flow, which is really what it's all about.

Okay. So the people listening to this show, Jerry, can range from brand new startups that they're scratching a couple pennies together to people that are, you know, making some serious money and everything in between. So the question that begs to be asked is, when do I get started with this?

Now. Perfect time. We're here. I think, you know, right now what we're telling our clients is that you should be setting appointments with your CPA probably after October 15th, which is when they're doing their next filings, and sitting down with with your year-to-date numbers and just understanding where are we financially. Are we more profitable, less profitable, why? One of the questions, one of the nice things about the Trump tax plan, and again, I'm an independent, so I make fun of people on both sides of the spectrum. Nice. But with the Trump tax plan, a business owner could get as much as 20% of their income tax-free, up to certain limitations, if you are a, what's known as a flow-through organization. Okay, a flow-through organization is like an S corp, an LLC, and if you are a service business, Service business would include people like myself as a financial planner, a CPA, or a physician, or an attorney.

Okay.

Right? So 20% of their income up to certain levels could come back to them income tax-free. Above that, they lose that deduction. So you need to manage that. So if you're a family, the deduction gets phased out between $315,000 and $415,000 of income. $315,000 to $415,000 of income. In that range, you're getting taxed on $1.63 of income for every additional dollar you— that's a really bad place to be.

Yeah, so this is already confusing for me, so we got to just go through this real slow. So before I make $315,000— so say this year I make $300,000. Okay. How am I taxed?

20% of that income, $60,000, is going to come to you tax-free, and you're going to get taxed on ballpark $240,000.

Really? So if someone listening to the show makes $50,000 this year, they get $10,000 tax-free? Tax-free. So it's interesting. So the more you make, the greater portion is tax-free.

Correct. The more dollars you get, 20% is 20%. But if $300,000, you're getting a lot more back. However, again, when you hit $315,000, it phases out from $315,000 to $415,000. So you're losing that 20%. So effectively in that range, $315,000 to $415,000, that's for families, you're getting taxed on $1.63 of income for every additional dollar you make. That's a really bad place to be.

So let me, let me make sure I understand this. If I make $314,000, $300,000 this year, I get 20% back, so $62,000, whatever. If I make $315,000, none of that 20%?

No, no, you still get part of it, but it phases out entirely from $315,000 to $415,000.

Okay, so $415,000, nothing.

Yeah, at $415,000 you lose everything. At $350,000 you lose half of it. So again, either you want to be below $315,000 if at all possible, or way past $415,000 so it doesn't really matter.

It doesn't really hurt so bad when you make $500,000.

You make a million bucks, it's fine. And these are for, again, what are known as service businesses. So if I am a widget manufacturer, I'm a manufacturer, it's totally separate. I don't have those limitations, and 20% of my income, up to millions of dollars, could come to me tax-free. I have a client who has a business, and he's a non-service business. I'm not working with him because of what he does, it's because of what he manufactures. 20% of his income is going to come tax-free. It's going to save him a million bucks. Wow. That's pretty nice.

That's super nice.

But again, for the service business, the key here is, let's assume I am at $400,000 of income. So I'm losing $60,000 of tax-free income. What I could do as a business owner is I could increase my expenses, right? So I could buy new computers for the people. I could basically set up retirement accounts where I could set aside as much as $61,000 a year for me, and I could even do a pension plan where I could get probably up to $200,000 for me. Yeah, so I could manage those tax brackets by understanding what kind of business I am. Am I a service or a non-service business? To speaking to the CPA and making sure that you're understanding how these numbers work. And then 3, using some of the tools that are available available to you to control where your income is, to stay out of that what I call the vortex where you're getting taxed at $1.63 of income for every additional dollar you make. You don't want to be there. It's a bad place.

I mean, yeah, it sounds like a very bad place, but are you actually getting— well, let me rewind. This $315,000 to $415,000 is personal income for the entrepreneur themselves.

And again, it's family income. Family income. Okay, so if I'm married, my wife is working and she has $50,000 of income and I'm at $350,000, now I'm at $400,000.

I got you. So combined income. So Amy, you're screwed now. You're working. Your husband made those very well for himself. You probably tipped him over. You're screwing him.

So thanks a lot, Mike.

Yeah.

She's like, I just wanted to work a little bit.

Like 4 weeks ago. Every day she comes in and she's like, I don't want to work more than 3 hours a day. And you've been working overtime a lot and I appreciate it. I now know why she's over the 3. So, okay, so I understand the vortex. Now you said I could use pension plans and other things to reduce my income, correct? Okay, got that.

Um, what was it though? It was pension plans and like, uh, and, um, like a 401k plan.

401k, you could do as much as 55 to 61 depending on the age that you're in. And a lot of these benefits can be skewed so the business owner gets the majority of the benefits. So we have you know, 401(k) plans that we set up where 90% of the dollars or more go to the business owner. We have defined benefit plans, pension plans, where almost 100% of the money goes to the business owner. So if you get a $200,000 deduction, first of all, that probably saves you in taxes close to $100,000. Yeah, just on that plan alone. Plus you recover that additional $60,000 that you lost when you went into the vortex. Okay, so there's some really cool things that you could do if you understand how some of the basics work. But the thing is, if you sit down with your CPA in January Yeah, the game's over. There's absolutely nothing, right? You do it now, there are things that we could do to basically research whether or not it makes sense to do some of these types of plans, see how the numbers work out. If the numbers don't work out, you don't do it. But if they do work out, at least you want to know it's an option.

Yeah, I guess saying, I mean, Jerry does Ron's personal financial, financial wealth management, but also for our company, you did our 401(k).

And your 401(k) is awesome.

It's awesome. But you set us up literally with days left. We met with you and you're like, it's too late, but I will pull off magic. And I wonder how much money that saved us. I mean, huge amounts of money because all the money that got contributed did not get taken— there was no tax liability.

Yeah, again, when people take a look at their taxes, they say, all right, I made $100 grand, I paid $25,000 in taxes, I'm in a 25% tax bracket. It doesn't work like that. Again, what happens is when you hit certain levels, your incremental money gets taxed at a much higher rate. And let's just say in New Jersey, you could be at 37% for the federal government, 9% for New Jersey. So you're saving 46 cents on every additional dollar that you're using into these plans. And again, if you could recover some of the additional 20% we were talking about before, you're getting over 50 cents on the dollar in tax savings. And more likely than not, Mike, you're not retiring in the state of New Jersey because nobody retires here. You know, they don't retire in New York, New Jersey. You know, we're licensed now in 22 states because everybody, once they retire, unless your kids are in this area, there's no reason for you to pay $20,000 a year in property taxes for a third of an acre.

You know, I know. I know, actually my wife and I were talking about that. The only reason we're staying is because of family. Yeah. So, okay, so let's talk about— that's only people listening in, you know, we're talking like $315,000. These aren't the numbers that some people are doing. They're taking home $25,000 or $30,000 a year. Can they still do stuff to reduce their tax consequences?

Well, again, you got to take a look at the numbers, and that's why I say everybody's different. So right now, if my income was $24,000 and I'm a family, I actually owe no income tax because there's a $24,000 standard deduction. Above that level, You know, you have to start saying to yourself, hey, do I need the cash?

Yep.

If you need the cash, you're not sticking into a retirement account that you can't touch for another 20 years. You got to do what you got to do. But I think first of all, whatever you could do to save on a systematic basis as a business owner— and what I refer to as non-correlating assets that have absolutely nothing to do with your business— you know, it may be a bank account on the opposite side of town where if something goes wrong in your business, you got access to cash. Yeah. As a business owner, the most important thing you need is liquidity because you will have some bad times, and if you don't have access to cash, you will be out of business shortly.

Yeah. Yeah. So we started this, we started a ladder strategy with CDs. And, um, so we took some cash and put it aside, uh, so that there's an emergency. How we do the ladder strategy is every month the CDs renew at 0.25%. No, no.

1.83%. All right.

That's not bad.

That's not bad, right?

I mean, we're a little bit below inflation, but, uh, they're 9-month ladders. So it's a 9-month, every month for 9 months we've done this. Now they're cycling through.

True.

So we have access to cash. I'm thinking though, as an entrepreneur who's making a lower income but has the ability to save some for retirement, maybe a CD ladder or something, that's not appropriate. Should they start a 401(k) or is that premature and you got to have a business of a certain size?

Well, again, a 401(k) I would start if it makes sense. You know, you could defer $18,500. If it doesn't make sense for you to defer $18,500, you don't. You know, you could always just start with, if my income was that low, I would do a Roth IRA.

Okay, that's where we're starting.

Yeah, I would start with a Roth. Like my kids, I have my son at Virginia Tech.

Yes! Virginia Tech, we got the best tailgate spot. So if you want to join us—

Oh, I'm going to totally be there.

Oh, I'm going to grab that party like you read about. You got to make some of your wings.

It's going to be tough getting them from New Jersey down to—

You have to.

All right, I'll figure something out. Do you have a grill?

I have a grill, yeah.

All right, then we'll figure it out.

I grill everything. Just bring the wings and stuff. I'll make it happen. Let's talk about that and line that up to make it happen.

So just getting back to my son again. Where does he go to school?

Virginia Tech.

Wow! Hokies! Alright, so his income, since he's in college, is not that high. So what I'll do is I'll set him up on a Roth IRA. He's in the lowest tax bracket of his life. I want to take advantage of that. I don't want to defer income from a low level to a high level. This will give him the best tax-deferred growth on his money. Literally 40-something years. And he's in a 0% tax bracket, so why would I want to defer income out of a 0% tax bracket into the future while I pay income tax. So again, if you're starting off and you don't have much money, I would say if you can do a Roth, a simple S&P 500 fund, do whatever the market does, let it fly, that makes sense. Once you start getting into a higher tax bracket, that's when you want to start deferring income in a 401(k) or SEP plan or SIMPLE plan. Those are a couple different types of retirement accounts that work great. But again, initially, if your income is low, do the Roth, set it aside. But that's only after you have enough cash on the side where if you have a problem with your business or your family, you have access to cash. Retirement accounts are not designed to be banks.

Okay, so first make sure your security and safety is set, then start saving with a Roth IRA. A Roth IRA, anyone can do that? Do you have to be a business owner?

You don't have to be a business owner, you just need to have a certain amount of income. So you could defer up to 100% of your income up to, I think it's $6,000 is the amount that they have this year. And as long as you have earned income, you could set up a Roth.

So okay, so you can put $6,000 into a Roth IRA. What's the minimum? Can I put a dollar in this year?

You could, but again, most I don't think Wells Fargo wants you to put a dollar in an account. I mean, their paperwork is going to cost you more to do that. I would just say it should be, I would say, a minimum of $1,000 and see if you could find the lowest costing custodian, a Vanguard or something like that, where they're not going to ding you with a bunch of fees.

And you can contribute consistently throughout the year portions of money?

Correct.

All right. So we could use the Profit First system, set up a bank account that says retirement or Roth, start putting money away. Correct. Then you said once you have the Roth in place, if your income continues to increase, you mentioned SIMPLE, SEP. What are those?

They're similar to a 401(k) plan. I mean, a SEP is an IRA on steroids. You know, on an IRA you can do like $6,000 a year. On a SEP, you could do up to 25% of your income, up to $55,000. The problem with that as a business owner is if I do 20% for me, I got to do 20% for all my eligible employees. So if you do that, that could get really expensive in a very short period of time if you're growing and you're hiring more employees, and that money is 100% there. So if they leave, it's there. Yeah, it's— yeah, in a 401(k), first of all, I could give the owner more than I can the individual, some of the core employees, and I could have it subject to a vesting schedule. So if they don't stay, at least I get a portion of my money back.

Gotcha. So with the SEP, everyone gets the same percentage? Correct. Could I set up a company that just I, the business owner, have, and then another company with my employees?

What do you think, Mike? Do you think the IRS would allow you? Let me just pay me and nobody gets anything else. Yeah, that sounds like a good plan. Let me run that by the IRS.

No. Okay. Damn. Damn.

Okay.

So close.

Nice try.

So a SEP is really designed for solopreneurs or if you're in a unique circumstance.

Correct. Either your income is substantially high, and again, there's a longer waiting period on the SEP, but basically everyone else is relatively low income. But generally, once a plan gets established or a company gets established for a while, most of the time a 401(k) makes a heck of a lot more sense than a SEP.

Okay. You mentioned pensions earlier. Can I set up a pension plan for myself?

Again, in the right situation, it makes sense. So again, like I said before, you can't just have one company here like I have JFL me and then JFL my employees, and only the benefits go through JFL me. I mean, you can't do that. So if you have a company, there's certain testing rules. But, uh, basically defined benefit plan is a pension, and they don't work well in big companies. But if you have a business owner that makes a couple hundred grand, they don't need this money, I could get them huge deductions. I mean, several hundred thousand dollars of deductions just for them. Plus what they're doing in their 401(k) plan. So I could get them $250,000 a year off their income, which again fits in nicely to trying to manage their income and stay within those brackets. Now the thing is, they're a lot more complex and expensive to set up than a traditional 401(k) plan. But if you get somebody in a high tax bracket a $250,000 deduction, they're liking you, man. You're their new best friend. I mean, you just saved them literally $125,000 in taxes in that first year that you're doing that. And again, it just helps build. Usually before I set that up, I sit down with the accountant, I tell them everything. I mean, if you're setting up a defined benefit plan, go into it, you're setting it up for 3 years or more. The IRS is not like you getting a $250,000 deduction this year and we're not doing it again for the next 5 years. You're committed to a period of time, but in the right situation, it's a home run.

So you've done this for clients, I presume? Have you ever gotten some amazing gifts in return? Not really.

Jerry, thanks for all the money. It's, you know, but again, I'm very fortunate where I work with some very nice people. And actually, there's another thing that for a successful business owner, I just want to throw this out there. Again, they just changed the tax law, so there's a standard deduction of $12,000, meaning if you're a single person and you have $12,000 of income, you pay no income tax on this.

Okay.

Hire your kids. If you go by my office every Sunday, you will see my kids out there cutting the grass. Yeah. And they're in there cleaning out my office, and I will pay them $12,000 a year, which is a reasonable amount of income. Yeah, I don't have to receive that as taxable income. They get it tax-free. And when they're in college— go Hokies— basically they have the opportunity to spend this money. So if I were to take it, I would lose probably close to half. I give it to them, they get it all.

Wow. But, but it's their money the second you give it to them, right? Or do you have it protected?

Just don't tell them where it is.

Okay, so you're kind of hiding it.

It's yours if you find it.

Hey Dad, there's a big cake party going on. Where's my $12,000? Yeah, you know where it is? Um, so I think for a lot of our listeners, wealth comes in a very sudden burst, right? So you start a business, you struggle for 5 years or 10 years or whatever, and then all of a sudden you hit that tipping point. It doesn't happen for everyone, but for many businesses, all of a sudden, wow, now the wealth starts flowing. And that's what happened for me. Totally unprepared. I never had two dimes to scratch together. Now I got some money. What should I do when you start coming into wealth?

Don't do stupid stuff. Define stupid stuff. Don't buy a bar. Don't buy a restaurant. Everybody thinks the coolest thing in the world is to own a bar. If you run bars and you do this for a living, that's fine. But to go out and buy a bar or restaurant or something that you have absolutely no knowledge about, I mean, you're going to get crushed. Don't buy a really expensive boat. I mean, those are pits and holes in the water you throw your money at. Take your time. Take a step back, develop a plan. How much do you want to save for the future? How much do you need now? You know, think about assets. Do they produce revenue or not? Yeah. So your home, even though it's an asset, doesn't produce any income. Yeah. My rental properties produce income. I get money in my pocket every month from the rental properties that we have. So, you know, again, I could buy a really expensive house with really expensive property taxes and I don't get any value of it. And it's a giant expense. And if you even take a look at NFL players, How many of those people go broke within 3 years of leaving the NFL? Oh, seems like a huge amount. Yeah, it's a lot of them because they go out and buy a huge house, they buy a Bentley with spinner tires and a restaurant, and the next thing they know they have no money. So take a step back, work with— I always suggest somebody who's a certified financial planner. You can go to the organization, they can refer you to people locally, and have somebody who first of all acts legally in your interest called a fiduciary standard.

So not from New Jersey.

Not from New Jersey, except for Booten. And then again, just Just kind of takes a step back and really before they start saying buy this, buy this, buy this, what is it we're trying to accomplish? I think you start with the plan, then you work on the products as opposed to you meet a bunch of people, sell you a bunch of life insurance, annuities, next thing you know you got a bunch of stuff that makes absolutely no sense.

Yeah. And what I found is people's lifestyles amplify to meet their income because I think there's this perception like, oh, this is my new life standard, but it could just be a spike and that's when you're in real trouble.

Yeah, a lot of people, they get wealth, they increase their expenses, their business suffers for whatever reason. Now they have all these assets that basically are really expensive to maintain and it causes a fire sale. You know, I drive a car, it's got 105,000 miles on it. The one I just gave to my son, which was my previous car, had over 200,000 miles on it. I don't need a fancy car to go up to somebody's house. It can't fall apart in the driveway. That's kind of a key thing. But you know, a lot of people are just going out and buying things that don't produce long-term value. And if they have a problem in the business, and they always will, everybody always will, then they're stuck with a lot of very expensive things to maintain. And then that's just death spiral after that.

Now, this is a true story about your cars. And your wife works for, or at least did work for, a major manufacturer.

Yeah, well, there was a period of time I would pull up, I think it was every 4,000 miles they would give me a new car. So imagine a financial planner who you give your money to, every month you see them, they have a brand new shiny fancy car. What's going on here? So, yeah, it just— I had a lot of people questioning, like, what are you doing with your money? Yeah. So now I just kind of buy and hold, and, you know, I think it's a little bit more reasonable. But it was nice.

Oh yeah, yeah. So when this broadcast— we still have time in 2018 for tax planning. It's gonna be mid-November when this broadcast— so you got, you know, you gotta move. Perfect.

What should people be doing? Again, run your— have your bookkeeper run your financials and take a look at them and see where you were last year versus this year. Okay. Sit down with your CPA. CPA, I would say, again, as soon as possible before the end of the year. At the end of November is perfect. That gives you at least 4 to 6 weeks to try to do some planning between mid-November through December. Once January 1st comes, it's gone. And I would say too, whenever possible, don't stop planning now. So if you do come up with a couple of ideas for 2018, well, what about 2019? Why don't we start that now? Get that rolling so that next year it makes the process a lot easier. Again, I know more about taxes than I would say 95% of the population. I reviewed more tax returns, and I've reviewed thousands of tax returns. Yeah, I sit down with my CPA every November. I discuss what I think are the issues. I make sure we're on the same page. I just want to make sure that before I make any financial moves, they've given me the blessing before I actually go out and stroke the check to to make the thing happen.

Yeah, gotcha. Any special tax advantages? Like, oh, here's some softballs you can take care of this year.

You can buy water bottles.

From Jerry.

You can buy water bottles. Again, I think there's not one thing. So as I said, I think the first thing is managing your tax brackets, taking a look at what can you do to bring them into the levels that you need to be in. You know, I think if you're in a high tax bracket, whatever you could do to defer income makes sense. If you're in a low tax bracket, do a Roth-type contribution. Love it. Taking advantage of your lower tax rate. Again, if you're a business owner and you are making good money and you got reasonably aged kids that you could hire for your business, pay them. They're in a 0% tax bracket, you're in a high tax bracket. And just consistently challenge how much you're paying in taxes. When I sit down with somebody and I review their tax return, I do the great Carnac, Johnny Carson. Yeah, I remember that. And I say, what is $112,472 do? And you have to answer as a question. Yeah, they never get it. And the reason why they never get is they don't want to know they're paying that much money in income taxes. I don't want to know I'm paying $100,000 or whatever that amount is. So I think when you, when you understand how big the problem is, you'll focus on it a lot more. And I think if you're proactive, you do a great job.

So in my head, I'm trying to do a Johnny Carson. He kind of talked— I know he was like, uh, that wasn't good. No, it's not. It's I did not know that. He's like, yes, uh, that was pretty good. Asphalts. Uh, yes, my— the great Carson Yaxley's asphalts. And he'd open it up and say, what Reese's Bank prevents? That's my— that was a horrible joke. I did not know that. Yeah, that was pretty bad. Um, all right, Jerry, uh, how do people learn more about what you got going on? Because I know some listeners want to hire you.

Yeah, uh, well, again, we're, uh, we have a website. We're on the World Wide Web. You paid for that? We did. Uh, it was a big tax savings.

Www.jfltotalwealth.net.

I guess you could probably Google me and I would pop up.

Jerry Lynch. Yeah, Amy, you don't know this. This guy was on so much freaking television. You had a run for like 2 or 3 years.

That's when I put a lot of makeup on me. Yeah, I was good with makeup. Yeah, yeah, it was fun.

Yeah, it was fun.

CNN, was it CNN or CNBC? CNBC. We did a couple shows there, some Fox stuff. Again, right now the biggest problem is they call me up and they're like, can you come over here at 3 o'clock? They're still calling you? Yeah, but the thing is like, I'm here. I can't, I can't say, Mike, guess what, we can't do the podcast today, but you could catch me on this this thing, you know, that'd be kind of like—

you don't usually have an appointment at 3:00?

Yeah. Are you still doing a lot of TV?

Uh, not again. I just don't have the time. I mean, if it fits, I'll do it. I did, I did, I did one where they dropped me off at a Giants game when I was finished, which was really cool. I did one on a Sunday, and then I came and I had makeup on my face that I cleaned up, and then I put on my Giants jersey. Yeah, awesome. But, uh, yeah, I don't really do it that often anymore, you know.

If it works, great. So I learned something from Jerry. When you get on television send flowers.

Like, you would—

he and I were on the same show, The Big Idea, with Donny Deutsch. Donny. Yeah, long show, a long time ago. And so I was on there a few times. Jerry gets on the show, and then I never get on again. Like, what happened? Jerry sends flowers. The whole place, we blanketed with flowers every time he went on. He was— I was on the show maybe 10 times. You were on that show and other shows maybe 100 times.

I was on— yeah, it was getting out of control. But yeah, you just send them flowers. So every day, every time I would do a show, the next day, whoever was the producer would have a nice bouquet of flowers. And, uh, you know, all things being equal, they would probably say, you know, why don't I invite the guy who sends me the flowers? Yeah, yeah, that seems like it works, you know.

So, uh, yeah, and the vase he used, or vase he used, was one of his water bottles with JFL.

Yeah, it's the 800 number. Just say you can text me.

All right, Jerry, we're gonna let you go, but meaning you can stay in here. We're going to talk about you. But again, our dear listeners, go to jfltotalwealth.net to learn more about what Jerry's going— got going on, and I'm sure he'd be glad to answer your questions and make you a client, maybe.

Mm.

All right. That's the conclusion of the segment. We hit that sound effect. What the hell was that? All right, Amy, we got a few things to do. We're gonna share what we learned. We're going to do listener mail today. I think that's the big two. But first, I do want to thank our corporate partners who make this show a reality.

Bazinga!

Do you know who they are? Kelsey? Amy? You look like— Do you know who our corporate partners are?

Yes, of course I know who our corporate partners are.

Who prevents ass welds? Receipt Bank. Yes! Receipt Bank.

The answer is a question.

Jerry, you know this, like when you, when they, when you get receipts, you got to track it for the IRS. Yeah. Like if I expense something and there's a receipt associated with it, I have to be able to produce that, right?

Correct. If it's over, I think $75.

Over $75.

Yes.

So you buy your supplies, you buy gifts and stuff like this, you get a receipt, you get audited, they're going to ask for those receipts. And traditionally, traditionally people have like the shoebox, they're like, here you go. And they're like, mm-hmm, you know, we want this one receipt, you got to find it yourself. I don't know if you've heard of Receipt Bank. Every receipt you have, you just scan it, it sorts it for you, categorizes it, connects it to your accounting system, and you can produce it with a single click.

With your phone?

Yeah. That's a great idea.

That's kind of neat.

Yeah, that is cool.

Yeah, that's amazing. So that's Receipt Bank, highly recommend them. And Nextiva is a voice over IP phone system. Do you have a phone system?

Clearly, yeah.

Do you talk to people? Occasionally.

Phones, those things are great.

Yeah, you ever hear this thing? It has like a cord associated with it.

It's awesome.

Unbelievable. You can choke someone out with this cord if you're getting pissed. What kind of— do you have just your cell or do you have like a professional phone system?

Yeah, we have a professional phone. Again, I like the IP system because— Do you have an IP system? Yeah, we have people in our office who who sometimes work out of their home, and like the phone will ring like they're in the office.

What— how much do you pay for your phone system?

Geez, I don't even know.

Oh, hell, you're getting raped! That's what's happening. Yeah, you don't even want to admit it.

Nextiva—

millions, millions. Nextiva is the most competitive voicemail system feature for feature. I bet you it's 10 times better than your system. I don't care what you have, it's better. And I bet you it's one half the price. That's my prediction.

Cheap, cheap.

I'll mention Yeah, call Nextiva, say Mike sent you. They'll give you nothing, but just tell them Mike sent you. We love Nextiva. We have, I think, 20 phones on it because what we do is every employee here except for Amy has a second phone at home so you can—

Why does Amy have a second phone? I think she's doing a great job.

I know, I know. She doesn't want to work from home. She doesn't want to work more. But everyone— so you call me here at the office, it rings my home office. Office and vice versa. Simulring, they call it. Okay. All right, Amy, why don't we go to this— my favorite segment is called Listener Mail. You've got mail! Pattern baldness. Oh, that guy Jerry. Why are you looking at me? What's the question we got, Amy?

All right, we are hearing from Manny Martinez. If you have multiple businesses— oh, if you have multiple businesses— I'm sorry, if you have multiple business entities under a parent company, company. Do you run Profit First as the parent level or at the individual entity level?

So we just, uh, and we're just working on this. Me and J Bone— Jeremy goes by J Bone, uh, me and J Bone recording, uh, we call them Ask Mike. He's like, no, you know what you're talking about. Oh, okay. Um, so, uh, me and J Bone were recording, um, this thing called Ask Mike, which is a 30-second to 1-minute minute video segment, and this question came up. Here's the answer. If you have a parent company, and then these, all these subcompanies under it, you have to run Profit First at the subcompany level. The problem is, if you have one company, the parent company, with the Profit System, with the Profit First system, you'll think your entire business is profitable, every business therefore below is profitable, when you may actually have an issue in one. So you have to run Profit First at each level. We actually helped a company, they owned 4 companies below them. They thought they were profitable and they were overall. When we did this, they found one company which was a charter service, an air jet charter service. The chartering was actually costing them money. The mechanical business, repairing jets, everyone's jets, actually covered the chartering business. So they shut down the chartering business, became more profitable overnight. So boom. Yeah, you got this at every single business. Cool. All right. And what did you learn today?

What did I learn today? I learned—

So what did you learn today? Sorry, I'm a little late on the button.

You really were. Yeah, a little late. Using pension plans and 401(k) plans to manage your tax brackets to stay out of the vortex. That was a ding-ding for me. And also, don't buy a bar or a restaurant or a boat and consider if your assets are producing income. Something to definitely go home and reassess.

I love everything you said, and I agree. Mine was, um, the Roth IRA. Like, just no one has an excuse not to get started now unless you're at a survivability level and you are, you know, you're living hand to mouth. Don't do a Roth IRA, correct? But the second you're past that, you have no excuse not to start a retirement plan.

Yeah, just with that, one quick point. There's a clock in New York City and in Wall— and in Times Square that just shows the national debt. Yes, it's $20 trillion. And understand that a million seconds is 14 days, a billion seconds is 32 years, a trillion seconds is 32,000 years. When you start to understand the magnitude of how much debt we have, and you could say I could pay a little bit of tax today and I could have this money income tax-free, anybody young should be doing this because you're gonna get stuck paying this tab.

Oh my god. That's powerful. Yeah, I asked Jerry, said, Jerry, uh, I don't know if I should start my Roth now. Maybe I should push off next year. Should I do it now? And here's Jerry's response. We have a recording of you, Jerry. Here it is. Do it! Just do it! He gets a little bit fired up when he does consulting. All right, I think that's, uh, it. Why don't we get out of here? Aim, um, you take us out. Uh, do you have your script there? No. Oh, then I'll take us out. Here's what you can do, my friend. You can leave us a comment and a rating on iTunes, Stitcher, wherever you're listening, TuneIn Radio, Google Play, all those sites. And remember that amazing deal— Amy personally is gonna package your Private First book. We actually have them stacked up behind her, they're ready to go to you. All you do is take a screenshot of your rating and review on iTunes or wherever you do it, send it over to Amy, and she will send that third-class mail. So it'll take a while, but we'll send it to you. All right, and also go to MikeMcCallister.com and you get get your free Surge book, or you can go to mikemotorbike.com because that's a little bit easier to spell. All right, we're out of here.

Goodbye, bye, bye.