The Best Finance Business NO ONE Is Talking About

I could not think of a better business right now in America than being a tax advisor. Holy crap. You are their tax advisor. You're a holistic quarterback for their financial freaking life. Accountants are scared to death to admit they may have missed this. When a client feels that you move around and you sit down next to them, they'll never leave you. And then you're going to go, yeah, and my advisory services are now 1500amonth. Okay, I'll pay it. You win. You have happier clients, you make more money, the client saves more. You have fewer clients and making more money, and you're respected by your clients. Clients don't remember what happens in your consult. They don't remember everything you say. They just remember how they feel and your goal in a consultation. And this, again, could be just in your business with your team and your family or whatever you're doing. Consults, three or four a day. My lawyers are doing four to five consults a day. We drive home. I want to make sure they had that client had a good feeling when they finished. Even if you didn't have the answers, I'm going to go research it. I'm going to get you the answer. I don't know. We'll figure it out. But they feel like you're their advocate. This is all part of my morning. Welcome. Please, this is important. I'm not just rambling. There's got to be this connection. And for the clients. I was on a podcast this last week, and I was talking about the family board meeting, which we're going to get into a little bit later. And. And he's like, yeah, I just want to find an accountant so I can just, you know, set it and forget it. And I'm like, whoa, whoa, whoa. Did you just not hear me? You've got to captain your ship. This is your ship, your accountant, your lawyer, your financial investment advisor. They're just a mate on the boat. If they're not doing their job, throw them over. But it's your job to get the boat to the destination you want. And so much of it's the journey, and you've got to be engaged in this. So you clients, you business owners that are watching or here, you're not here this weekend to find an account so you can just turn it over and walk away. You're trying to find that accountant or that tax advisor or the lawyer that you can have a relationship and discuss. And my advisors out there, we're not across the table. We're on the same side of the table. And when A client feels that you move around and you sit down next to them and the problems out there, they'll never leave you. Oh, I want to pitch you an advisory service. It's X dollars per month and I'll be with you every quarter. And we're going to knock it. Where, where do I sign up? You know, I go to dinner parties all the time. I tell them about my tax advisory program and they're like, oh my gosh, how do I find one of these people? I've been dying for that. You as much as you want to scale, and we're going to talk about scaling on the last day here. The world is our oyster. I could not think of a better business right now in America than being a tax advisor. Holy crap. And it's going to be a crazy next six to nine months because the Tax Cuts and Jobs act should be phased out. Whoever's president is going to be a third edition of the tax playbook because we're going to get a whole new role. And people are like, where do I turn? I would love all of you to have your own podcast. All of you to have your own YouTube channel. Sending out blog articles. Use and abuse anything I say and throw it out there. There is so much work to be had. There's so many clients out there that need you and that's what makes this exciting. And when you can go to work knowing I'm freaking changing lives, that's pretty good feeling too. So it's just so exciting. This is where you throw underwear and clap. I mean, I don't know how to do that. You know, like, come on. Damn it. Freaking a. Jeez. All right, we're gonna have fun. It's only day one, you know, watch out. After midnight I'll be at a bar playing the piano, you know, just taking requests. Okay. My vendors do you know, I turned vendors away that wanted to be here. Kirby and I were like, do we want them? No, we don't want them. No. So these vendors are hand picked that all play an important role in your life or your clients lives. And that passport program was genius. Aaron Halderman introduced us to that last year where you get some kick ass prizes at the end of the week, I'm giving away $1,000. I'll have a thousand in cash sitting here. So plus every one of the vendors, I said when you come, you got to bring some cool gift. I want Bose speakers, I want this, I want that. 2 or 300 bucks. So on the last day, for those of you that get all your little stamps. We're going to do a drawing and give away a bunch of stuff. So please take advantage of that. There really are. And when you go to see a vendor, don't be just thinking of yourself, which I'd like you to, but think of the clients that could use that vendor because you're a connector. That's what a tax advisor is. And when I say tax advisor, gosh darn it, you don't have to be a cpa. You don't have to be an enrolled agent. You don't even have to be QuickBooks certified. You don't have to be. Those credentials are great. They're wonderful. I like most of my tax advisors to at least get the enrolled agent status. I want you communicating with the IRS if you have to, but you don't have to go through all that if you don't want to. And if you want to, great. But this tax advisor situation is you really. There's still one person business owners have to meet with throughout the year and you've got this perfect opportunity to say, so, how's your debt load? What are you doing for your retirement? What's your plan for kids? College education? How's your health care? Accountants are afraid to ask those questions because if they go, yeah, I don't know, should I do an HSA or an rhra? I don't know. Talk to you later. Bye. We've had an accounting firm for 15 years. I couldn't, I begged. I begged my CPAs ask the client if they're in too much debt, what they're doing for retirement, college savings and their health care. And I can't ask that. Why? Because I don't know what to say. If they have a response, this is what business owners are up against. They want it. They want to have this conversation. But the accounts like. But I might say the wrong thing and then I'm liable. No, you're not. Just talk, just be excited. Talk about life and what you're trying to do and help them. So we're just some case studies on that. Alrighty. Okay, I got one last point here. This is a good one to me. Tax planning can best as an advisor and the client relationship can be best personified with the home office deduction. It's not a big write off. We all know that, but it's a manifesto. It's the principle. For example, I grew up in Washington state on a farm. It was alfalfa and hay, wheat. And my dad was a microbiologist, but he bought a farm because he wanted to work my brother and sister. And so we'd move, pipe and do all this work. Completely meaningless. As I look back, it was a losing proposition, but for him, it was a winning proposition to teach his kids about the law of the harvest. Hard work, get up early, it was miserable. But at night he ran clinical labs. And so at night I would. I can just. And God rest his soul, every night he'd be at a big table downstairs where we had our atari and Nintendo 64 and a beta machine and the VHS, because you had to have both, you know, if you got to Blockbuster and you couldn't get the right movie, you had to have both. And I know for you young people, I'm talking crazy. Anyway, I go downstairs and he'd be working, he'd just be right, and he'd have on the movie. He'd have a Star Trek movie on. And that was his go to or Star Trek show. If he could get Wonder Woman and Lynda Carter on the TV that was on. But he. That was. That was our family. Like, at night, he'd be just doing office work. It was the home office. I'd be doing homework, getting, watching, playing video games on a, you know, with a joystick. I know it was a Neanderthal back then, but I saw my family live small business and the home office was a part of our life. So fast forward, when you're meeting with the client or it's you, the business owner, and. And you ask your accountant, hey, can I take the home office over the majority of the time? What's the accountant going to say? Not worth it or too, too risky? Yeah, you're going to get audited over $750. Okay, so it's too risky or not worth it. But for you advisors, this is the perfect opportunity to go, yeah, we should take the home office because that's what it's about, right? You working from home constantly. And your client goes, yes, I eat, street, eat, sleep and drink my business. You get it? Yeah, I get it. We're going to take that effing right off. Now. We might just do the, you know, pro rata, 500 or 300 square feet, $5 simplified method. We might do that. Put it on your schedule E with your rental, but we're going to take it. Okay? What you just did, you went to the other side of the table and you said, freaking, let's do it, damn it, it's a thousand dollars. I've met with clients that have an AGI of a million or more and When I talk about taking the home office, they're like, damn straight we're taking it. I mean, yeah, we just saved $300. They're like, yeah, stick it to the man. I took the home office, you know, but what you're doing is, is you're showing them you're. You've got some balls. I can do this. I'm not afraid. I'm an accountant that can freaking take the home office. You know, live a little. I know it's crazy. You'll probably be awake for a couple nights, you know, oh, my gosh. I can get, you know, the IRS is going to plow through my window with tables and they're going to, you know, you know, did you take the home office? Oh, my gosh, get over it counts. Holy hell. But you want to find that superpower or use that superpower and find that little golden nugget that resonates with your client. It could just be the simplest write off, but you're showing them I'm on your side. And I've had. How many of you. Some of you may have said it. I'm sorry, I'm just kidding. But I hear all the time of accounts that are like, yeah, well, you know, you made some money, you got to. Oh, you should just be happy. You owe. You're making money. We've heard that one, right? Holy crap. Do you work for the IRS or do you work for me? You know, and it's not like I wanted. I'm on a board of aicpa. I'm licensed in X states. I carry malpractice. I've never been sued for giving you bad advice. I've never had a client get sued for a client get audited for paying their kids. I've never had a client audited for too little payroll ever. Never a reasonable cop case in my career. But I had. This week, Patty and I were teaching a workshop to a real estate club, and a woman said, you really think I could use the S Corp? We have a schedule C and we netted 250 grand. And my accountant said, yeah, you got to make more before we can take reasonable comp. I literally got emotional. I. Can we sue them? No, but I've researched all the preparer penalty. You can't get sued for missing a strategy. You can only get sued as an accountant, a tax preparer, under the preparer penalties and malpractice if you make a mistake where your income was understated or your expenses were overstated. But if you miss a strategy, the IRS Was like, team irs, let's get that guy some more clients. You know, so it's okay. You know, it's okay. So I just want to give you all a big hug. You know, you're in a safe place here. We're not going to teach wild and crazy strategies. But you know what? We're going to push the envelope, damn it. And so buckle up. It's going to be good. All right, so I was going to have the song let's Talk About Sex play here, but we're going to. I didn't want to, like, you know, give you a false. So anyway, we're going to talk about medical now. This is one of the topics Aaron Siegel is teaching. Aaron, are you in here when you teach? Oh, thank you for doing that. I appreciate it. Yeah, thank you, thank you. Aaron's teaching the medical class, debating between the HR and the hsa. He's super smart. It's a great class. But I want to do a case study. This was a real. Every one of these is a real consultation I had with a client, a couple or family. And so I want to walk you through my mindset and how I approach it. Now, before we even talk about it, there's an important point here. As a business owner, you should ask your accountant, can we talk about medical now? If they turn white, they freak out, they start crying, or they run out of the room. And you know you have the wrong advisor. It could happen. But you as advisors, this is on our 34 point comprehensive checklist. When you. This is what we're teaching in our advisory program. I give you a checklist of 35, 34 different topics, and a whole section is on medical. You should feel empowered and emboldened, strong and confident to say, let's talk about medical. How much do you have medical expenses? What are you doing for health insurance? What's your deductible? Are you doing an fsa, an hsa, or an hra? And your client's going to gloss over and go, no one's ever asked me that. You know, they're going to say that because I've had it happen to me so many times. And they go, we can talk about that. Who's going to talk to them about it? Their banker, their insurance agent, their lawyer? Who? You're the perfect candidate. You are their tax advisor. You're a holistic quarterback for their financial fricking life. So I. So the point here in this is if some of you aren't asking this in every one of your comprehensive consults, think about owning it because your client will be like, oh my gosh. And so when you're selling an advisory service package where they're paying monthly to get all their taxes and bookkeeping done and you're meeting with them quarterly. Here's one of your quarterly meetings done. I meet so many advisors that are afraid to sell advisory packages because like Mark, what am I going to talk with them about all year long? You might want to meet with a monthly. Let's jack it up because they're going to love you because this is just one topic. So pretty cool. You having fun? Isn't this good? You know. Damn it. Alright, so here are the facts. This husband and wife, this was. I don't have many, but this was an in person consult. Now it's just zoom, you know, but whatever. So husband and wife, four kids, husband was a realtor, 200k in this situation. Stay at home mom, we've got stay at home dads and all that. Don't get your whatever in a bind. We're cool. Whatever. We're not going to be all this PC stuff here. We're freaking Americans. All right. Be okay. So we're just having fun here. All right. He's an S corp. And that's all I knew. That's all I knew. He's an s Corp, realtor, 4 kids, 200k plus they flopped their tax return down in front of me. And then I said, well let's take a look. And one of the things I felt drawn to right away is I was going to go, let's just look at schedule A and we're going to talk about that here and let's just see what's going on with medical because over the years a lot of people throw their medical on schedule A to find out the write off sucks. But let's back up now for. Let's do some basic here and bring it all together. Let's do a little tax return here. So here is our 1040. Now I know it might be a little. By the way, soon as this class is done, I'm dropping all the slides into whova. So you get all these slides but since I animated it, I just kind of want you here. So just stick with me. I wish I could highlight and I'm okay moving around guys. Right. Okay, so thank you everybody online. So right here you've now have. You've got your 1040 which is two pages and we've got our income with above the line deductions and we love deductions. Above line, below line. Sucks. Above line. We love those. And then we have our itemized or standard and AGI. Now, I know it's moved around over the years, the AGI line, but just work with me now. Page 2. Once we get through our standard deduction or itemized, which we'll talk about in a minute, then we get other taxes kick in and any credits. Then we get our tax, our payments. There's our bottom line. So that's kind of how it works. Above the line, AGI, below the line, deductions. Then we're standard or itemized. We get our taxable income, other taxes, credits, and whatever's left. That's kind of how it works. So for those who are kind of new to a tax return, you want to know this. Remember you're captain in the ship. Yep. The sails go up, the rudder does this. Whatever. You got to know the basics. It's okay if you can't open up your tax return and kind of get you around a little bit. That's a box to check. Because how can you have a, you know, a confident conversation with your accountant if you don't understand the basic structure of the 1040? And for you young people out here, don't be afraid of it. Death and taxes, you got to deal with it. So just own it. Okay, now with this, let's say you have a W2. W2 is going to pop into your 1040. And then the first two schedules that really matter are schedule B and D. This is interest and dividend income and capital gains stock and crypto. Now for those that already know this, one of the first questions on the 1040 is, did you have any transactions in crypto? And accountants are scared to death that they say yes. What? And then you want to go, just tell me you only made a couple trades. Oh, and then you mined and you staked and you did this and did that. And then you're like, what do I do? So we have a class this week on reporting crypto transactions. And in September we're doing a two day crypto tax certification in Orange County. It'll be online and in person. I'll get you the dates for that. But account, we can't ignore it anymore. It's here. And I'm excited about Darren's class on crypto with Bobby because they're gonna just talk about what in the hell is crypto. You gotta get over it. And we have our crypto grandma that'll probably be at the crypto summit. She's 87 year old trading crypto every day. So I'm gonna have her there. So if anybody thinks too old, I'll have her there and she'll teach you about effing crypto. So all right, so there's B and D. Those kind of pop in, easy schmeezy. Then we get these three other schedules. Schedule C is your small business. Schedule E is your rentals and the K1s for many other businesses, A farm schedule F. Now Nancy Pelosi said we're going to simplify the 1040, okay? So we're going to create the Schedule 1. And all we're going to do is put all three of those schedules going into Schedule 1. So Schedule 1 is kind of this grab bag of income and expenses. So these three come in and they're going to go down here, beep, beep, beep, into schedule one. And then schedule one pops over here above the line. So all of this stuff, the reason why I say this first, this is all above the line. We love that. And if we want any kick ass write offs, we want them in here. This is where you want them. And if you have a business S corp, it's going to kick out a W2 and it's going to, you're going to take all these write offs, maybe a management fee over to a schedule C and we're going to kick out a K1 to Schedule E. So when you have an S corp, it just kind of flows down into your schedule E W2 around the corner. And maybe I kick out some expenses over here to a schedule C. We'll talk about that a little. That's how it looks pretty straightforward. And now we're to the standard or I know my deduction. So this is the big one, Schedule A. Which brings us to our story here on the schedule A is where you think you get a write off medical, it's terrible. But the Schedule A is where we're going to. We could talk about this for hours. Right? So I'm just giving you a big picture. Schedule A is going to be the medical and charitable and the salt, the state and local income taxes and blah blah, blah. Schedule A is a big deal because that tells you whether or not you're going to take the standard deduction, which is super high. Now it was one of the changes, tax cuts and Jobs act or I'm going to go itemized. So as an advisor, you're going to be debating this on a regular basis. Right? So you want to know what's going on here, Then we're to our taxable income and Then after that we have all these extra taxes where self employment tax kicks in and then tax credits on Schedule 3. So Schedule 2, Schedule 1, 2 and 3 are machinations that created under the Tax Cuts and Jobs Act. So not a big deal, don't overthink it. And then that all flows down onto our 1040. So when you meet with the client, this is what you're looking at. And now you get to play Sherlock Holmes and you're like, what can I find in here, what can I do? And so when you go medical, the first place I look is over here at schedule A, because that's normally where it's going to get thrown. The old school accountants go there and clients will bring in their medical expenses and then they'll add them up and go, well you can only write off everything over seven and a half percent of your AGI. Let me repeat that for me. If you make 100 grand, you take seven and a half percent of that, which is $7,500. Any medical above that, not insurance, any other medical copays, deductibles, anything on publication 502, eyes, dental, blah blah blah. Anything above 7500, I get a write off. So if you had eight grand in medical expenses, you only get a write off, 500 bucks. So it kind of sucks. So we're going to go there first and look at schedule A. So with this client, I go look at their itemized deductions. So this is what schedule A looks like. And thanks for your patience. I know some of you are in the weeds a lot more than me and you're like, you're skipping over so much. There's people at different levels here. Chill out. It's the concept. So I come over here and if you can't see it, let me just say they had $28,374 in medical, 28 grand. Their AGI was 220 and change. So if you take seven and a half percent of that, it was 16 grand locked up, 16 grand couldn't take. So their only write off was 11,000. They had state and local and whatever, we won't worry about that. So over here, what happened was they missed out on $16,000 of medical expenses. So right there I'm like, I got an opportunity so I can hopefully change their lives. This is a bad thing. Sixteen grand is a big frickin write off. So I look at that and I'm like. And I asked him, why do you have so much in medical? And they go, well, we have an autistic child that does speech therapy and special classes. We had a surgery this last year and they go, we have over 25 grand every year. I'm like, oh, I'm so sorry. You can just feel the pain, you know, this is what you're gonna learn on Saturday. I was listening, I was connecting. I was hearing them. They felt heard, they felt seen. And I wasn't nervous because this is a scary conversation for a lot of accountants because they're like, I don't know if I have anything for them. So you don't even go there. But I went there, said, okay, well, let's keep talking. So I go, alright, well let's go over here and look at schedule one, page two. And what are we looking for here? The hsa? Zero. They hadn't even done a health savings account contribution. So I was like, all right, okay. I'm just thinking like, no hsa, big medical expenses, they're getting killed. What can I do? So this is what in my mind I'm thinking, well, I better throw out a Hail Mary. One of you doesn't have a corporate job, right? You don't have a flexible spending account. Now, the HSA this last year was 7750. So they lost out. They could have written that off plus the 16 grand in medical if we did it right. So there's 25 grand in write offs sitting there. So I go, okay, well do you have a flexible spending account at work? An fsa, either one of you? And he's like, no, I have an S corp. I know, I'm an entrepreneur. And the wife's like, no, I don't have a day job. But if they did, you'd see that on a W2 because it's tax free income to the employee. They get the money reimbursed tax free. And it would show up here in box 14. And Tammy's teaching the payroll class on our first breakout session. For anybody that wants this, doing payroll, wants to outsource payroll, whatever. You got to still understand it. Tammy's classes, first breakup. So that's where I would have found it. But of course they have no FSA this year. It's 3050, 3050. So I'm like, okay, so no HSA. They're all on Schedule A. They have no FSA. What's my last Hail Mary? Work with me. HRA. Health Reimbursement Arrangement. So I'm like, whoo, okay, maybe they've got this. Now is a HSA HRA. Sorry, is an HRA going to show up on the 1120s? No, because they're greater than 2% shareholder. So you cannot have a benefit plan for the shareholders in an. In an S Corp. So I know it's not going to be up there. I don't even look at the 1120s. Doesn't matter. Where am I going to look? Schedule C. So I look over here to see if there's an HRA deduction. That's where the money's at. HRA would be on the schedule C. And so we're going to push money from the 1120s down to a Schedule C. If they had an HRA at all. Nothing. So I said, okay, Has your account never talked to you about an hra? And they go, no. And I go. And I had to check all the boxes. I'm like, you have no other employees? Nope. You have all this medical. Yep. You have 1120s? Yep. W2 for husband. Little high. We brought that down. Save some money there. And I'm like, we need to do an hra. You could write off all your medical. I go, well, how much does that cost? I go, let me charge like 400 bucks, maybe 500 bucks to do an HRA. We give our tax pros an HRA document. You can sell it all you want. Just fill it out with the client. There's a great court case that supports this. For solopreneurs, there's no limit on how much you can drop into an HRA for a solopreneur. Now, if you have employees, it's a whole other story. Those are the QS HRAs and we have a class on that, too. But for this, it was like it was a slam dunk. So no HRA line on the front page of schedule C. Where do we see it, in what area it's going to be? Anybody want to throw out? Where do we put the HRA as an expense on a schedule C? Yell it out. Guess. Is there a line for medical? Maybe. It sounds tricky. It's another expense. It's going to go down here and other page two, and let's zoom in on it. So we're going to put the HRA right down here as an other expense. 28,374. So we rip it. We would rip it completely out of schedule A. Forget it. Now. We can't go back in time and do this. So it was moving forward. So instead of doing. Putting all this medical on schedule A, we're going to say we're going to write this off on a schedule C. And so what we do is we transfer from the S Corp to the Schedule C and hire the spouse for helping in the business. And there's no employment contract. There's a great court case on this. And the spouse is compensated through the HRA. You don't give them a W2. There's no withholdings. It's an HRA agreement for the services they provide to the business. And then you pick it up. So it's going to look like this on a Schedule C. Let's see if I can zoom in. So we've. I put here 29,000. See if we can zoom in. I think I did. There we go. So I put in 29,000 as gross income. Now that would be a management fee in the S Corp. You just do a management fee in the S Corp. 1120s. Then you're going to push down here and you're going to have zero on wages, zero on taxes. If I put it here, and if I put any wages here or taxes, they're going to be looking for a W2, which I do not want to do. So I put it as an other expense, which was back on page two and brings it forward. And I wrote off the entire $28,000, $600 in income and they get to write off all the medical. They started to cry, and I started to cry because they said, just in the last four years we've spent over $100,000 on medical. No write off. It was killing him. This is a game changer. And all you advisers have to do is to open your mouth and if you fumble through it, it's okay. Just tell them, I'll figure it out. But I know this works. We'll figure it out together. And you go around and you're sitting on their side of the table and that we've got the cases, we've got the law. And accountants are scared to death to admit they may have missed this. It's not liability. It's okay. Your clients are dying for you to show up and go, you know what? I learned a new strategy. I think this year we can save some more. You think your clients gonna be mad at you? Just own it. Just get in there. Just go. So, my friends, that is $28,000 write off. Plus we could do the HSA on top of that. Now Aaron's going to teach all those little nuances and rules in his HSA HRA class. It's in our training. We have a whole module just on medical. Because then they're going to go, what kind of insurance do I need for an hsa. You want to be able to give them some answers. Oh, we're going to go through bronze and platinum and gold and blah, blah, blah. We want to get a high deductible plan. Okay. And you just know enough. Just know enough to point them in the right direction, and they love you. And then you're going to go, yeah, and my advisory services are now 1500amonth. Okay, I'll pay it. You win. You have happier clients, you make more money, the client saves more. You have fewer clients and making more money. And you're respected by your clients. How novel is that? Crazy, right? Okay, that was case study number one. Any. I'll take any. I'll repeat the question. Anyone? Couple questions on this. Maybe just for fun. Yes, ma'. Am. Just want to know, if you're single, how can you take. Is there any way to take advantage of this? So the question was, if you're single, is there any way to take advantage of this? Yes. Two words. I think it's two words. C Corporation. So we would bring in a C corp, and now you're no longer employed under your S Corp. You pay a management fee to a C Corp, which we're going to zero out. And there's no fringe benefit rules there. So now we pay a management fee that picks up your W2 and your medical and zero out the 1120. Now it's an extra cost of a tax return, so we want to make sure the break even makes sense. So. And if you're in a state where the cost of a C Corp. California is more. You're like, holy shit. So you're like, maybe. So I want to see medical. Around five grand, eight grand. Now this is over and above health insurance because we're already writing off health insurance. Now we're talking about all the out of pocket medical deductibles, co pays, dental, eyes, everything. Publication 502. I have publication 502 on the. On my desktop of my laptop because clients are like, can I write that off? Let's see. I send out 502 all the time. One other last question. Anybody? Yes, sir. Do the service within the US or can they, like, great question. His question was, can you deduct the medical expenses even if they're outside of the US I don't know if the top of my head. Does someone got that? This is the beauty of our freaking network. There's people, so many people in here smarter than me. Is Aaron in here too? Can I do in 502? I know it's going to talk about it. I've heard it before, but I can't remember. Can I do a medical procedure in Mexico and write it off as a medical expense on my U.S. tax return? I think so, but if I had to bet $1,000. But anybody? Yes. So you're saying you know of hospitals in Mexico that will take an HSA payment. Okay, American insurance and all that too. Anyone else? Are we good? Writing it off in 502 if anyone know for sure? Oh, someone. Oh yes, But there are limitations, like prescriptions you can't buy in Canada using an agency. Gotcha. So he said yes you can, and it's probably going to. And he's alluded to, it's going to come down to the same issue of is it over the counter or not? Was it a prescription drug prescribed by a doctor, Was it in clinic, out of clinic, and was it woohoo so science or whatever. So just probably follow the same rules of 502. Okay, well let's go to case study. Case study number two. Now this one I doctored up for Mandy. Where's Mandy? Is Mandy in here? Is she back there? This one's for you, Mandy. Okay. All right. So what's your plan for your dream home when you retire? Where are you going to live? How novel. Your tax advisor might say, hey, what's your plan for retirement? Where are you going to live? Maybe there's a tax strategy we could employ. Your client goes, who are you? You know, all right, so facts met these clients, couple in their 50s, live in a high tax state, choose any of the five or six that you hate, and they imply in our conversation they plan to move to a zero state tax state upon retirement. So think they're going to go to Nevada, you know, or something like that. So they're going to go to a zero state. Tax state. Met someone last night that's like, we're headed to Nashville. I'm like, all right, so the consult begins now in my mind I'm like, okay, let's see if there's an opportunity here. What's going on? So we start to get into it and I start to draft their trifecta. Every advisor in my program, you learn how to draft a trifecta. I give you trifecta templates. You play with this. I use PowerPoint. Some people like Darren Freaking A. What do you guys like? Not Canva. LucidChart. LucidChart. Canva's Q. Canva's QT too. Okay. Anyway, this is on PowerPoint. So I start to draft out their stuff. Okay, so we're just going to hit the highlights for those that are not exposed to the trifecta. This is our foundational tool to make sense of everything. So we got our trust down here. The 1040, they had an S corp. They had a restaurant. Spouse had a day job. With the day job, 401k. He had employees in the restaurant. So they had a group, 401k, a safe harbor. And they both had kind of some Roths. Not a lot going on in their Roth IRAs. And they had a couple rentals, had a home. But this was their. This is what the issue was. They had this dream home. No, they loved talking about it, and they were frustrated. This is what came to light in the conversation, is that they had picked out the house they want. Literally the house, not the town. Not only the town and the state. They had found their dream home, but they knew they couldn't get there for 10 years. But they found the home, the neighborhood, the street, the whole nine yards. And so they were just like, damn, I wish we could get into it. And I go, let's talk. And this was the goal. We wanted to try to figure out how to get this dream home locked down. And the problem was they were kind of business rich, cash poor. How many clients do we have, like, a lot of money in their business? You know, businesses making enough money to pay the bills. They had some 401ks and IRAs, but they didn't have a lot of liquid cash to just go out and buy this home and sit on it for 10 years. They wanted to. And I said, hmm, two options. So the first option. And I confirmed this with Scott Saunders, who is teaching our 1031 class this week. Make sure you dip in there. He could teach it all day. There's so much. And so he's just. So I confirmed with a couple strategies with Scott on this. So option one, 1031 exchange. They're like, mark, hold it. This is going to be their home. What are you. What. So work with me here. So my point to them was, let's take one of your rentals, 1031, into this dream home. And they're like, okay, because I had equity stuck in it. But they were like, it has to be for investment. And I go, it is. And Scott talks about this in his class. The 1031 rule is, what's your intent during the exchange? And Scott talked to me about making sure that there's some emails, some letters back and forth with your tax advisor, the qi, which we'll talk about. And for those that are not familiar with 1031s, we're going to go through the basics for a minute. But I told them, let's trade one of those rentals for the dream home. And then when you're ready to retire, you can move into it. You know, you can do that. I could move into a property I 1031 into, and it's not a taxable event. It's only taxable if I sell it after I move into it. It's what was my intent when I originally did the 1031. Now I'll repeat that here in a minute. So the beauty of it is it's a non taxable event in the exchange. I don't pay any tax on the rental sell. It's non taxable event when I move into it. A portion of the deferred gain is taxable, but only upon the sale of my dream home in the future. And I want to beware of the five year rule. Scott will teach you the five year rule. I want to stay in that dream home once I move into it. I want to stay in it at least five years. They're like, we're gonna die in it. I'm like, all right, we don't need to worry about the five year rule. Whatever. Okay, now for those that are kind of new to this. All right, Mark teacher, let's just do a little base hit here. So the 1031 exchange is this. The taxpayer says, all right, I got this rental and I want to sell it, but this buyer doesn't. The seller of my dream home doesn't want my house. How am I going to do this? And so this is where the QI or qualified intermediary comes into play. Think of it like a escrow. And so I'm going to sell. The taxpayer is going to sell their home to a buyer that wants their home and the money is going to go sit in the QI. They have 45 days to identify a new home and 180 days to close. I'm just hitting the surface level. There are so many nuances, but 45 days to identify. They already identified it. They knew which one they wanted. And then the money is going to kick out to that seller and they're going to transfer the replacement property to taxpayer. Taxpayer is going to make it cash flow, put a renter in there. Maybe they Airbnb it. Short term rental, midterm rental, long term rental, their cash flowing, and they locked down their dream home and they could move into that dream home at Any point when they're ready. Because at the, at the time of this exchange, the intent was for investment property and they're going to document that. Scott does these all the time and they could die in that property and the family would inherit it and get stepped up basis and pay no tax when they died. So this whole transaction, the rental never pays tax on its gain. The dream home never pays tax on its gain. If they were to keep the property until they die. Boom, ba da bang. So what it looks like on the trifecta is we're going to sell their primary residence at some point, use that to live on. We're going to transfer the dream home from the llc because see the, if we go back here, when we put, when we do the 1031, the dream home goes into the schedule E, down here at schedule E, that drops back into our schedule one, right back onto the 1040, we reviewed that. So the rentals up here and when I go to sell my primary and move into my dream home, I'm going to put the dream home in my trust. So I'm going to just do a warranty deed, grant deed and I'm going to transfer the dream home and take it out of the LLC and put it in my trust. Done. Now I'm calculating my sale of home exemption. I want to live there at least two years. Watch out for the five year rule. Living at least five, then I get a prorated savings on the equity that was in the old rental and then maybe die in the home and pay no tax at all. So that's option one. And some of you are like, mark, that's easy. Well, for some people it's not maybe a new concept. So chill. Okay, option two, we're going to do a Roth purchase as a rental property with an asset freeze. Now some of your Dairy Queen fans, I love a good freeze, you know, there, but this is a asset freeze. So the theory is, and I explained to him is you have two little Roth IRAs. We're going to get that dream home now and we're going to put it in your Roth ira. And they're like, my Roth IRA can own my dream home. Yep. And the cool part about it is there might be some possible taxes to fund that Roth. We got to see how much Roth money you have. But the Roths make cash flow and pay off the mortgage with a pay down strategy. So you take all the cash flow from this dream home and plow it back into the mortgage, if there is a mortgage, and pay off that dream Home inside the Roth IRA. And then there's no, there's at 59 and a half, there is no tax to convert it to a personal residence. So the day they turn 59 and a half and they're ready, they're like, okay, I'll just deed myself the house. I can deed a house out of my Roth IRA to me. Yep. It's distribution. Is there penalty? Nope. After 50, is there any tax? Nope. It's just like taking out 100 grand out of my Roth. I'm just going to take a piece of real estate out of my Roth. So now my Roth gave me my house and I can move in. Now if I was to move into it before the Roth deeded to me, that'd be a prohibited transaction. I can't live in a property my Roth owns, but I just kick it out. No inherited Roth IRA to family because it's out of the Roth. Complete tax free distribution of income. Done. So the family inherits the house and they get stepped up basis. Boom. But a bang. Now here's how it would look. Let's go through the step. Forget that animation. Screwed that one up. Okay, step one, we've got to get money into these Roth IRAs. So we have these Roth IRAs and we got to get some cash in there. So if you remember back in the trifecta, the wife had a day job, 401k and he had a group 401k, and you may say, well, Mark, I can't take money out of my 401k and put it in my individual Roth while I'm still an employee. True. But when I've met with these clients, both of them had old 401k money from a prior employer that they had rolled into their new 401K. That's, that's earmarked. It's sacred. Because you can go to your current 401k and if it's current contributions or deferrals and current matches, it's going to be tough to get that money out until you leave employment or there's some sort of vesting that allows for it, maybe your contributions down the road. But that's a whole other conversation. But the beauty of it is if there's any money in that 401k that came from an old 401k that I rolled into it, I can take that and throw it in an IRA anytime I want. I can just go grab it and go. And so you'd call up your administrator, go, hey, I rolled in an old 401k way back when, how much is that piece? And they go X. You're like, I want to do a rollover. I'm going to roll that over to an ira. Or you may say, I want to convert it to Roth first and then roll it to my Roth. So you have to decide. So what you would do is do an old rollover of money conversion and then transfer to the ira. And by the way, I don't want to use the word transfer there. Some of you I know are cringing. It would be, that's old rollover money that I convert and then rollover again. And I'm going to roll it out over to a Roth ira. That's option one. So because we needed to get more money in the Roth IRAs, now I'm going to pay tax on that conversion. But hang with me, the clients were more than willing to do it and I'll tell you why. So number two, they could also just put in this year's contribution into the Roth. They could just put more money into the Roth this year. And so we're going to take some, find out what the contribution is and go. I was meeting with a pretty well respected financial advisor in California last week and I said, well, I love the Roth. How much money is in your client's Roth ira? And he goes, mark, they're super rich. They can't do a Roth ira. I'm like, squeeze me. What? Have you heard of the backdoor Roth? This guy was an RIA and didn't know about the backdoor Roth. I'm like, what the hell? And so I walked him through the backdoor Roth and just brought up a couple of articles of mine and the web went brrr. And he's like, holy crap, I didn't know this. So the backdoor Roth is totally fine for the uber wealthy. Freaking Jeff Bezos can fund a backdoor Roth this year if he wants. No big deal. You make as much money as want still put money in a Roth. You just have to do the backdoor method. That's in one of our classes this week too. Okay. So then I said, well, there's one other way we could go. Do you have an old IRA laying around? Let's put some money into the Roth. So that's a transfer. Whenever you transfer IRA to IRA, that's a transfer. Whenever you go from a 401k to an IRA, that's a rollover, just vernacular wise. So we had two options. I mean, sorry, three ways. So we wanted to put money in this Roth ira, get as much as we needed to buy this dream home. And so that was step one. And I said, hey, you're going to pay tax someday when you pull that money out of the 401k, let's rip the band aid off now. Because for a third of them. Because, well, we need a, we needed 200 grand to buy this dream home. Okay, well we can pay tax on 100 grand or, and not do it or pay tax on the money in a 401k down the road. Let's just rip it off. Let's rip the band aid off now. And they're like, okay, even if they were on a payment plan with the irs, for crying out loud, who cares? So we wanted to get as much money in the Roth. We'll talk more about that asset freeze in a second step. So it's taxable, taxable, non deductible, no tax, but you're using after tax dollars. Okay, step two, we're going to transfer Roth IRAs to a self directed trust company or custodian and we're going to turn them into self directed Roths. So once we get enough money here, then we're going to take those two Roths and convert them or transfer them into self directed Roths. There's no cost, no, there's no penalty, there's no tax. And to open up a self directed Roth, I think we're around 400 bucks and directed Ira is here as one of our vendors. All of you could on a phone app open up a Roth IRA today for 3 to 400 bucks and then transfer these Roths into a self directed Roth. These Roths would go away and then you'd have these two new self directed Roths. That's step two. Step three is now I'm going to form an LLC with the two Roths. This is KQS lawyers. Chantelle's right around the corner. And we've been setting these up for almost 20 years now. A special purpose LLC. I think our cost for a two member Roth LLC is around 1500 bucks. Very affordable. Meet with a lawyer through the whole thing. So they should know it's not the end of the world. So now we're going to take these two Roths and put the money into an LLC. And it might be 60, 40, it might be 50. 50 is going to be pro rata based on how much the Roth puts in. Okay, then step four, we're going to go buy the dream home. So the dream home gets purchased by the llc. And if they didn't have enough Money boom. We bring in a non recourse loan from the bank. The bank's usually going to want about a 40% down payment. When we were doing the math on this and I wanted, I couldn't find the actual file to share on this slide show, but they needed about 200 grand in their Roth IRAs to pull this off. And that was 40% of the purchase. So the purchase was around 400 grand. They were buying a home and that was their dream home. And they're like, hold it. So we can pay a little tax now, have our Roth IRAs form an LLC, buy the property, rent it out for 10 years, pay off this mortgage, maybe even over the next 10 years, just take all the cash flow and just pay down that mortgage. And at age 59 and a half, we can just deed it to ourselves and move in tax free. Yep, done. And why I call it an asset freeze is because no matter how much this dream home goes up in value, they're only paying tax on the conversion of the 401k right here. Like we're freezing the value. Any increase in value, they're not going to get taxed on. And we're only paying tax of maybe 30% state and fed on what we needed to do the down payment. So it's a fraction to lock down that price. And they're like, let's do it. And they are. I think we're in their sixth year right now and their Roth IRA owns their dream home and it's going to get paid off. And they're so excited to move into it. They'll probably remodel it, but it'll be a tax free deal when they get there. Okay, a question on that. So when they buy the house, they put the 40% down, right? How do they make payments? You bet. He said, how? Question for everybody at home too. He said, well, when they go buy this dream home, how do they make the payments to the bank? Who collects the rent? Who pays for the Terminator or Terminator Exterminator? Sorry, I was talking about Arnold. We started watching Twins the other night, which, you know, Arnold Schwarzenegger has made more money on the movie Twins than any of his other movies. Do you know that story? I should tell it real quick. He went to the movie house and said, I want to do a feel good movie. They're like, you're the Terminator. You can't do a feel good movie. He's like, no, I want to be a twin with Danny DeVito. I called him. He'll do It. They were like, no, this will lose money. He's like, okay, if you think it'll lose money, I'll bankroll it, But I want 20% of the profits worldwide. Blah, blah, blah. They're like, sign us up. Let's go over a billion dollar worldwide revenue on twins. Cutest shove. And Arnold Schwarzenegger breakout. You know, dramatic role. Love him or hate him, the guy's freaking amazing. Anyway, so not the Terminator, but who's going to pay for the exterminator and all the stuff? The llc. See, the LLC is the owner of the property. So you're the manager of the llc. You're going to collect the rent, pay the mortgage, call the exterminator, blah, blah, blah. And if any extra money's in here, you're going to have a little reserve for maybe some rental issues. But whenever possible, you're going to just pay down that loan. Okay? So he said, if you're in California and you don't have enough money to make the payment. Okay, now remember, they were trying to move to a new state. Let's say that they were in California. They were going to buy a home in a tax free state, and it's going to cash flow. See, they're renting it, so they're. They're going to be smart if they got a cash flow. So they wanted to rent it out, and the rent would pay the mortgage and some and more. It's going to cash flow you. And we're going to take that extra cash flow, build a little reserve, and then just pay off this note as fast as we could. So what the client had for money doesn't matter. This has got to be a sustainable rental property. So that was the plan. Great questions. All right, so those are the two options for when you talk to a client that's like, hey, I want to do something creative. I want a dream home. I want to use my Roth ira, and I can move into it later. I don't know. Kind of fun. I mentioned that the other day, and Mandy was like, I want to hear that again. So I told her, let's do it. Okay, case study number three. Where are we at on time? We can do this in seven or eight minutes. This is not that hard one. And for any of you that have watched me on YouTube or certainly my tax pros, you're probably sick of this, but we're going to. Oh, shoot. I didn't cut and paste the right words here. Okay, so here's the facts on this one. Single mom, three kids. I was going to talk about. I have a family business. I've got kids in the business, but I'm not paying them. And so this is. By the way, this week we do not have a class on paying family members. So I wanted to just touch base on this with a little case study on paying family members. Hit some highlights here, and maybe in December, we'll have another class on paying family. So some of you know this background's important, so be patient. There's others that haven't heard this before. So Anyway, single mom, three kids, two kids over 18, one kid under. She was a dentist with an S corp. And so the consult begins. Of course, I'm looking at payroll levels. I'm asking about medical. Are you in debt? I'm doing all the hot button questions. But of course, as soon as I started to look at her return, there was no board of directors or advisors. Her books were. Her corporate books were a mess. None of the kids were getting paid out of the business. The two older, 18 and under. And for you advisors, this is like, bam, I'm gonna make some money on this one. But you do not say this in the discovery call. You just say enough to look like you're a freaking genius. And you go, I can rock your world. I can save you money. I do a comprehensive consult for dollars, thousand, fifteen hundred. You know, whatever you do. And in this comprehensive console, I'm going to save you five times whatever you pay me. If I don't save you what you pay me in that console, I'll give you your money back. But that's how you get started with me. You don't want to pay that. Nice knowing you. I'm going to repeat that. My tax advisors, you get this speech every effing week almost right? You meet with the client, you do a discovery meeting or call for a half hour. No free advice. You should flex your muscles a little. You see what they got going on, and if you can identify, ooh, they're a good fit. Now, I've done discovery calls with clients W2, Verizon vice president, no side hustle, no rentals. I'm like, dude, do not give me money. I cannot rock your world. Bend over. That's what. That's all you can do with the irs. I cannot help you. But when I see a dentist with no kids on payroll and parents way too high a payroll, I mean, with S Corp and too high a payroll, I'm like, holy crap, I'm going to rock our world. So I'm like, hey, I can Help you out. Here's what I'll do for you. You give me 1500 bucks, I'll give you a trifecta and a kick ass plan this year and then we'll go from there. And if I don't save you 1,500, I'll give it back. Stand up for yourself. Respect yourself. No free advice. Clients need you. They want you. And if a client's not willing to pay for a comprehensive initial onboarding, you don't want them anyway. And you clients out there, you business owners, pay it. Freaking A. I've got a whole list of tax advisors that love to rock your world. So I get on my comprehensive consult with her and I go, all right, we got to do some things here. More facts. One child had tuition of eight grand annually. The other child tuition of six grand because they were over age 18. All three, she was paying for their cell phones, not writing it off. She thought she couldn't. Her accountant said no. Corporate records for INC and LLC were a mess. The child number three was 14 years old. Clothes, school, food, etc. 6k annually. And then they had a holiday trip planned with all the kids. Travel, dining, Airbnb coming up for five grand. Wants them all to start saving more money and learning about finance and business. Because when I started telling her, let's teach your kids about money and finance, she was like, really? Do you think a single mom would want someone to help him teach their kids about financial literacy? Do you think she would give you anything to have you step into her life and help her as her tax advisor? That's why this isn't about tax planning. This is about changing lives on Main Street America. People need this and you feel so good. So 23 grand in write offs. None of it was getting written off, blah, blah, blah. I put on my super spectacles from my Nicholas Cage. What movie is that again? National Treasure. So I put on my spectacles, I'm like, all right, here's what we're going to do. We're going to form a family board. You guys know I'm a broken record. Family board. You're going to have regular meetings, training and support for your businesses. Clean up of your corporate records and update the minutes. Adopt several accountable plan provisions for better audit protection, writing off home, office and auto and all the goodies, better asset and audit protection. And we're going to write off your family trip, or as much as we can, because you're going to have a board meeting and you're going to freaking do minutes and you're going to get your BOI report done, and we're going to make your corporation and LLC legit again. She's like, all right. Each child will be assigned jobs and operations. And in the rental property, cell phones and other electronics are now paid for by the business. I love it when my kids at Christmas get packages with little electronics as corporate gifts. It's so special, you know, so I can stay in better touch with them. You need an iPad for your job. Merry Christmas. You're welcome. The kids over age 18 get a 1099 special gift. In every kid's stocking is a 1099. They love them. They really do. They cherish them. When you take your picture of your kids holding their 1099 by the Christmas stocking, please tag me. It's a special moment. Okay? Under age 18, we get paid through a sole prop and Ken Roth's for everyone. We're going to write off 23 grand or more and we're off to the races. So this is what it would look like. So the first thing is, boom. We're going to add two board meetings. We're going to have a board for the inc board for the LLC at KQSLR and Main Street Business Services. Brigham's out here. Our other table around the corner, Main Street Business Services. We do your company minutes, your BOI report, give you a checklist for you or your clients to take to your board meeting, and we fill it out. All done. 200 bucks a year. 200 bucks a year. Minutes, done. All the accountable plan provisions. It's incredible for you advisors. You get an affiliate fee if you want to bring your clients over and go, hey, here's a hundred clients. Take care of them and I get a check. Thank you. Talk to Brigham out there. Okay, Next, we're like, we're going to pay. It just popped up here. If you saw that boom, boom. See that? This is now an expense out of the S Corp. I'm going to 1099 the kids over 18. I wanted 1099 kids over age 18. Not going to do it through the LLC. Okay. I'm going to give away a book or something cool. Maybe something out of the tax pro shop. Someone could tell me you got to raise your hand. Why do I not want to 1099 the kids out of the LLC that are 18 or older. Why do I want to do it in the S Corp? Why save fast? Because the LLC by itself is only a C corp. I mean a schedule C. No, it's a schedule E. That's not It. There's no self employment tax in a Schedule E. Why am I not 1099 in them? Why am I not 1090? Okay, do you want to hint? What? No. They're still going to claim the 1099. It's a schedule E. Why would I. I want a hint. Why would a dentist not 1099 the kids out of a Schedule E? She's. She's a landlord. Joe, you can't answer. Why would a dentist not 1099 kids out of a Schedule E? She's not. She's not a real estate professional. Damn it. You stuttered. Get locked down. Any. Any expense in schedule E for a dentist? No good. It's just locked down. I mean, she'd get the write off eventually when she sold one of the rentals. Want the 1099 out of here now. They're still going to be on the board over here because we might write off some trips. But the 1099 is here because she's not a real estate professional. It'll get locked down. Whoa. Isn't this fun? Okay, last piece. We're going to add a sole proprietorship. See that come in. It's just a sole prop, not even an llc. We're going to add a little sole prop. Schedule C management fee, pay the kid under age 18. Done. Dollar in, dollar out. It's going to go outside labor, page two. Remember, we put health reimbursement arrangement page two. It'll say outside labor. No W2, no 1099. This is not required. And then boom. Roth IRAs for everybody. Because now all the kids have earned income and every one of the kids gets a Roth IRA tax. Down the road, we could go buy real estate, self direct buy crypto, blah, blah, blah. And this is an hour consult, hour and a half, fifteen hundred dollar comprehensive consult, and the client walks out of there feeling incredible. Holy shit. Someone worried about my kids gave me a strategy because the 14 year old that 401k. I'm sorry, that Roth, all the contributions can come out tax free for college. We may even add a Coverdell. We got two grand we can pop into the Coverdell. We got. The Roth contributions come out for college. The other two kids were teaching financial literacy and the mom feels like she's a great mom again. Because the biggest feeling we have as parents is, I just hope I don't screw up. My kids and a single mom, they need all the help they can get. So tax advisors, pull your head out of your butts and start freaking doing some planning. Be proud, be bold, be brave, learn strategies that actually make sense and don't get crazy. And, you know, you want to be careful. But as you're here these next three days, I want you getting as excited as you get educated and then take that energy and help other people around the country that are starving for this. And I know we got some technical classes. What are the 1% strategies are. That's on Saturday. We got some basic classes. There's so much here. You may be looking at our advisory program to, like, get just all the bells and whistles over time. There's no rush. You don't have to be credentialed to do that. Do it for yourself. Everybody. Thanks for being here. And I'll see you this afternoon myself, right here at 4:00'. Clock.