Real Estate Tax Strategies Every Investor Should Know with David Perez

Hello and welcome back to the Owner Meeting Podcast. I'm Christian, your channel host, joined today by David Perez. I am super excited for today's episode. David has one of the most important job titles in all of your real estate network, which is an EA, an enrolled agent. And if you don't know what that means, you're going to learn a lot of really cool stuff today. So this is an episode for you. David, welcome to the podcast.

Hey, thank you for having me.

Absolutely. Well, let's open with the big question. I did not know this when I started my real estate career and I will tell you for a fact, it would've saved me about $183,000 if I did know what an EA was early in my career. So what is an enrolled agent, David?

Well, it's a great question because a lot of people do ask me that. When I, by the way, when I say EA, people think executive assistant. That's kind of funny, but yeah. Although we do serve a lot of executives and EA stands for enrolled agent in the So in accounting, there's many forms of accountants, right? There's tax accountants, audit accountants. There are people who serve as business owners. There are CPAs. There's all these terms, bookkeeper. Just think about it this way. A CPA is somebody who studies accountancy at a high level, learns all forms of accountancy. So they basically dabble in all areas, and then when they graduate, they pick an area of focus. And that's a cool career choice. It takes about 6 years to become a CPA. Very prestigious certification designation. I respect them. An enrolled agent is somebody who takes a different approach. You know, I hold a bachelor's degree as well, but I didn't go to school to be an accountant. I was more business-focused. And so when I got into accounting, it was more so for the tax and communication, the relationships. I really enjoyed And so I pursued my career at the highest level, which is an enrolled agent, which is a designation that you get through the IRS. So as CPAs focus on all areas of accountancy, an EA only focuses on tax specifically. So we only work with the tax, so we can represent a client in front of the IRS courts. Uh, we master the tax code. We have the same continuing education requirements that a CPA would have, and it gives me more focus, an area of focus, and I, The way I like to see it is, or to say this is, is where your focus goes, your energy flows, and that's where we focus our energy in tax.

And that's, I've, this isn't exactly what it is, but like as a business owner, the way that I kind of put it in my head is like, they're like 10%, they're like 10% lawyer. They can represent you specifically in tax reasons. They're 90, what, 80% accountant, 10% lawyer, 10% business owner. They're, It is a different focus. An EA would typically, and I'm guessing this is probably your structure, would typically work with a team of CPAs to put together tax filings to where CPAs and they work together so that you have a as bulletproof as you can tax strategy.

Definitely. But CPAs don't necessarily, me signing on a return is no different than a CPA doing it. We both represent the client. We both stand behind the return. We both have been You know, tested through the IRS. There's a lot of things that go through that. But what I would say is when you say 10% business owner, that's a very good observation. An EA is an intentional track. You actually do not, there's no school for this other than it's self-study. You have to take examinations through the IRS. They're very rigorous. This is a very strict process and they hold this very high. And so what I find more than most is most EAs are ambitious people. Who have a drive to serve, because in most cases when you go for a CPA, you really don't know where you're gonna go until you get into college or till you get to your master's area. 'Cause then you're like, what area do I wanna focus in? Somebody who's an EA said, I just wanna do tax. Like they're, they're ambitious people. I mean, I would consider myself that person.

I love that. And I, little backstory of me, I went to, uh, my first 3 years of college were accounting major. I swapped at the last minute to general business 'cause I realized, uh, around the time I hit cost accounting, I hate this. And then I went into real estate, which involves a ton of accounting. So it turns out I use more accounting than I thought I would.

That's awesome.

And it's not all the accounting that I learned in school. Accounting was— what I found personally weird about accounting is that you think of it as math or as objective. It's a lot more subjective than you think it is. There's a lot of different ways to interpret different things, even down to the bookkeeping level. It's as much a science and an art as it is Which is where I swapped majors. I'm like, man, I wanted something that was more empirical.

I would agree with you. I think that there's, I think it just depends on what industry you're in, right? And the size and the scope of your business. The larger the company, the more predictable things become, as well as the way standardization becomes. GAAP plays a bigger role, which is General Accounting Principles. Those things happen. And then obviously cash versus accrual, the size of the business. But when it comes down just to accounting, you're right. Like the way we interpret things really plays a big factor on the way you get taxed and the way that your business can borrow money. Those two, by the way, those are our two components in our firm. What we focus on is we want to make you look rich to a bank, but poor to the IRS.

And the balance of those two are really difficult. I've had many years where I looked fantastic for the IRS, I have, I personally have what, $55, $60 million of debt. A lot of it direct with Fannie now.

Wow.

I still have to use bank statement loans to close my house. Fannie will gimme $50 million for multifamily. Don't qualify for a conventional home loan. It is really hard to strike that balance. There is a, there is certainly an art to it. Which is where you start introducing EAs into your universe. Is that is the—

Yeah.

When your business is the size where you're like, hey, I need to manage my accounting like a business. That is where I think everyone needs to have an EA. Like very specifically, I have a huge—

Oh yeah. That's totally correct. And it's funny that you mentioned that and a lot of maybe, I know your community is very real estate related, but what you're mentioning is that there's a, you're getting income-based or income-producing-based loans, meaning that properties will will, will cover their own debt. And so that's, that's why you can borrow money without having good tax returns or maybe tons of income because the, the property itself is an income-producing property. So the bank uses that to qualify you. And the same thing with DSER or any of those other non-traditional standard loans. They, they just use it based on income. And that's those, by the, by, by no means is that a bad thing. Not, not whatsoever. The way I see things is interest rates are really irrelevant. It's more of a ratio to income that we should look at in all things in life. Like in all things, like when somebody says the interest rate's 8%, I'm like, well, it's high, but in comparison to my income, is that $5,000 note, like, is it, is it 10% of my income? Is it 5% of my income or is it 50% of my income? That would make a difference to me.

Yes.

Versus the interest rate.

That's one of the— I love that you said that because I have loans at 3% interest. I have loans at 13.5% interest.

Yeah.

The 13.5% interest loans are still on some of my highest cash-on-cash returns. My debt service coverage ratio, which I think is a fantastic metric to look at, that's your— I mean, that accounts for all expenses, is sitting on those deals at like a 1.6 debt service coverage ratio. I pay myself 60% when I pay the bank. If you're paying the bank 13.5% and you're paying yourself 60% of that, I would argue you're doing pretty darn good on that deal.

Yeah. Yeah. And if you can refinance in the future, you'd be not doing good. You'd be doing great.

Yes. I did one of those last week. I brought a deal that was cash flowing while at 13.5% debt to 6.6% debt. Cash flow increased $10,000 a month with, well, I was going to say one signature, but it's a bank loan. So 50 signatures later, one sitting. Yeah. That's $120,000 a month income increase.

Like that is—

That's freaking amazing.

But, but that's amazing.

You nailed it. It's, it's people, especially in today's market, and this is for all business, this isn't just for real estate. They focus on the rate and they're like, rates are expensive, so deals don't work. It's like, well, your deal doesn't care what the rate is. Your deal cares how much money it makes in proportion to your expenses, which is exactly how I found this one.

Correct. To service the debt. And that, that leads into other things. Like I think about it from like an SBA perspective. You know, interest rates on SBA is higher than it was, let's say, 4 years ago. But when people are like, well, it's really hard to borrow money for my business. I'm like, well, it just means your business isn't making very much money to cover the debt. Right. Because if you had an unlimited customer base that was begging for your product, whatever that may be, then the debt doesn't matter. The rate would not matter because you'd outbeat that debt by sales. Right. But most people have a sales problem. Mm-hmm. Or a rental income problem. They don't have a rate problem. They see that as a reason for them to not move or take action. And it's like, nah, just, if it makes sense, it makes sense. A deal is a deal. It does not. And I just actually had this conversation with my team last week, 'cause we're all looking at a deal together and they're just saying like, well, you know, how do we know if it makes sense? Let me just get a napkin. Let me show you guys, like, this is how much it costs to buy this thing. This is how much we're gonna put into it. This is what it's gonna take to rehab it. This is what it's gonna take to service it. And here's how much we're gonna make. Does it cover it? No. Then the deal doesn't work. Like, that's it.

Simple. Done. Yeah. Well, this is, this is where, okay, so, uh, one of the questions I was gonna ask, but I feel like you're kind of already answering it. The, I was like, well, why the EA track? And you mentioned you're business-minded. I'm like, well, this actually makes sense. 'Cause the way that you're breaking apart all of business, um, is just a, it's a straight up EA mindset. It is a, let's get in. Where are we making money? What? Where do things need to be categorized? And, and you just said it for most of business, if you have a decent product, doesn't even actually have to be a good product, though I advocate for having good products. You almost always, the, the constraint is either on the sales or marketing. Either you need more leads or you need to close more of the leads you have. And it's usually a combination of both. But if you have that part down, which is I think one of the hardest things to get right in business and also the most critical. If you have the income, you have to have top line to have bottom line, which is sales and marketing. If you can scale and you can convert, you can make more money. And then the constraint is, okay, so what is our actual cost of growth? And is it, if we are making money on it, you just need to be able to show a bank, which is where you come in. You need to be able to show the bank, yes, my business makes money. It is capable of making money. And if I have more money in my business, it will continue to return more money than I put into it. That's essentially what you need to show. If you put money out or you put money in, more money comes out than goes in. If you build that engine in your business, regardless of industry, you will find more money.

That's right. 100%. I agree with you.

How often, how often do you consult with clients where you're looking at your books and you're finding, you're finding like, hey, the way that you're set up, you actually don't have a business problem. You do have a sales and marketing problem, or you have a problem with the way you're portraying the books. What, how often do you look into the books and say, hey, there is a correct way to paint this picture where your business can take off in a different direction?

That's probably not something I do as much as I used to. Where the reason so is that we focus on a specific client these days. Typically their tax liability has to be greater than $500,000. And so that means they have internal controller, they probably have some sort of finance department within their, inside of their business. And we're coming in more for tax strategy. So the biggest—

Awesome.

Which is the biggest lever, right? I mean, we can give guidance and we can give some oversight, but I don't do as much anymore just typically because, you know, the type of customer we serve.

Yeah.

It's really that much.

Well, and that's so, so a story that I have, and this is how I found EAs, which is why I'm so excited for our episode today. The, my first year, no one had explained to me the difference between inside and outside basis. And so I bought a, I started with no money, so I bought a ton of real estate and I'm calling a ton. I started with no money. I used no money to buy about 120 rentals in my first year. And so I built this portfolio. We run a bunch of cost segs. I have all these tax benefits. I also had a pretty good year in active income. My assumption was, well, if I have all these tax benefits, I'm probably not going to be paying taxes. If you have no basis yet in your property, it's not that you lose the benefits, but you can't necessarily use them. So I had all these unusable tax benefits. They came up in other years. We increased our basis, but that's the, it's the little stuff like that where my budget neighborhood CPA had no idea how to counsel me to put together my taxes. I ended up with excess tax benefits that I couldn't use in that tax year. And owing $183,000 to the IRS when I was factoring for about $15,000. In your first year of business as an entrepreneur, that sucks.

Yeah.

You just managed to put aside about, I put aside about $200,000. I'm like, I just set aside more than I made in my active career in previous years. And then getting a letter from the IRS saying, hello, you owe us all of that. That was a huge bummer. So it is one of the most important —things that you can do when you start making significant money, you have a successful business, putting that money back into your business, especially in the growth phase of a business, is so critical. What I could do with another $180,000 of marketing would've been huge.

I agree with you on that.

So, so, so you have clients, take, take someone who was in my situation. I, I, I hope this is relevant to, to, to some of you listening to this. In my situation, you have someone coming in, They don't understand how the game was played. They're working with a, their business has grown beyond their neighborhood CPA. They come to you. What are the most common things that you are finding that you guys are correcting on the front end or opportunities that you see where like, hey, this is usually the low-hanging fruit?

Well, first and foremost, the number one thing that we encounter is that there is no strategy whatsoever. Meaning there's this, there, that's, and when I say that, I say that with To be jokingly, but at the same time, it's there, there's this mantra amongst most accountants today that paying taxes is a badge of honor. Paying taxes is something that is patriotic. If you will, I call them blind patriots. They believe that just paying a tax is part of the process of making money, which in some regards, there is a time in your career or in your journey of growing income. That you're going to pay taxes because there's nothing that you can do because your income's not high enough and it's not low enough. So meaning you, you're, you're, you're, you're in a position which that usually happens when somebody is making between, let's say, $200,000 and $400,000.

Yeah.

Usually there's just like, there's no way to avoid it. Either you're going to expense to zero, which means you report no income, or you're going to report income and pay taxes. One or the other is going to happen. And so most people just try to not report income. But once you start passing around $500,000, you get opened up to the world of advanced strategies. And that's where we come in and we say things like, well, what have you done in the past, right? Nothing. What investments have you made? Because almost 100% of strategies that really impact the bottom line of a tax liability are going to be from investments. Now, it could be in real estate as an example, energy, which is a big sector right now.

Mm-hmm.

It could be in assets that have depreciation that are tied to them. There's, there's, we probably have a dozen strategies that would be just like, wow. And, and once you realize that they're like, whoa, so if I just made investments, I could start saving taxes. And I'm like, yeah. So what do you do for your investments? Well, I just put them with my, you know, my financial advisor. He just takes it and he puts it into the market. And I'm like, well, why don't we not? Well, I said, you can always still do that because the truth is I'm not even trying to help them. I'm not even trying to get some of the money that they're giving their financial advisor to go to investments. I actually just want them to reallocate the tax. That they would have paid to an investor. And then that would offset the tax liability and they just don't know that. So it's like mind-blowing and it really has no structural change. In most cases, I'm not coming in and saying, you know, hey, we need to open up 3 more LLCs or we need to start, you know, funding that, like none of that stuff, all that stuff that people talk about, which is definitely important for asset protection really has no bearing on tax.

Mm-hmm.

Uh, really, really nothing. I mean, it's negligible to the point where if you save, if you're paying $500,000 in taxes, and I give you something that's going to give you a $3,000 savings, you're like, bro, like, please, you know, $3,000 isn't— I mean, you might— I'm not saying it's nothing, but you're still paying $497,000. Like, you don't give a shit about the 3. You want me to work on the $497,000. And so we work primarily on those. And that's where people don't know there's this whole world of advanced strategies that gets— appears when you make enough income, like this whole world. And When somebody says to me like, well, why do wealthy people not pay taxes? Well, they just have income sufficient enough to make smarter investments. That's it. It's not, that's it.

And you mentioned blind patriotism and here's always been my opinion on it. So I intentionally remain very apolitical because honestly, I don't typically care very much, but when it comes to taxes, I do have really hard stances on this. I don't think any party would disagree that the government sucks at spending money.

Yeah.

Depending on what business you're in, you getting to allocate the same dollars for the good of other people, you can do a lot more than giving it to the government, which is typically what you end up doing. And that's what mostly the tax code tries to incentivize. So you could take as an example, I'm in housing. Look at the cost of the government to house people and how the quality of government housing. Then look at how many people an entrepreneur can house if you do a great job creating great housing for great people. You can typically do a lot more good with the money in most of these tax strategies. You're giving significant economic benefit greater than what those same dollars would do if you paid them in taxes, like ethically. Then also saving more money is also awesome.

But, but what you, what you just said is very, very important. Everybody pick up because even the government incentivizes entrepreneurialism through building of apartment complexes to serve a specific income demographic.

Mm-hmm.

Every state is allocated credits, tax credits every single year that then get deployed to developers to build low-income housing. So the government incentivizes entrepreneurship and business ownership by tax credits.

Mm-hmm.

So that people will build more houses. And so, you know, like if you really just want to win in In the game of taxes, just do what the government wants to incentivize. And real estate is a big one. I mean, it is, it's, it's, it's, it's just to be clear. And I know this audience is a group of real estate investors. And so I, you're already in the right track, but just know not every real estate deal is going to give you tax benefits. I don't want anybody to pick that up. And I want you to know that real estate always has to make financial sense before it makes tax sense.

Yes.

Just know that.

I hate those strategies. Be like, well, I bought a deal. It was kind of bad, but I saved so much in taxes.

I'm like, You did not.

Conversely, you could have bought a deal that was good and then also had the same benefits. Buy for cash flow. Do not buy cash flow negative deals hoping for taxes. Your taxes are a beautiful, beautiful side effect of doing good deals.

And never buy a deal. This is a rule we live by. Never buy a deal on anticipated rent growth.

Yes.

Base it on today's market. And because things change, like if I'm going to buy something because I think that I will make more money in the future off the rents and that's going to service my debt, that's not a good deal.

Yeah. The appreciation over the long term is what makes you rich in real estate. Holding a lot of real estate for a long period of time, that will absolutely do that.

And long-term—

You get paid to wait. That is the strategy. So you buy in areas or deals where you anticipate high appreciation, but you buy based on cash flow for long-term growth. You don't buy based on potential growth, hoping for future income. The difference is extremely, it's the difference between bleeding on every deal you buy or getting paid to wait on every deal. And that is where you see people go under or the people who are in their 70s are like, yeah, I have hundreds of units and I paid most of them off. And a lot of the clients who are like, hey, I need an EA are the people who bought cash flowing businesses and cash flowing real estate and they're making a profit and they need to figure out what to do with it. That is the problem that you want to have. Yep.

That's exactly right. And just, you said the keywords, it's over time. To be clear, appreciation has to happen significantly. Like appreciation is the only thing you can really bet on if it's not cash flowing at a high level. And I mean, it's gotta be cash flowing significantly more than what you have to pay. And that's hard to find these days. And so I just, I mean, the real estate just kind of market is, unless you're in the game every single day, there is a high likelihood that you're not getting deals.

I would agree to that. And I'll caveat that with, you need to be in the game like 15 minutes a day. It's not like you need to be plugged in all the time. Go, go, go. But it is absolutely daily. You should be, you need to be negotiating and conversing in real estate daily. It will cost you, in my opinion, less than watching an episode of Netflix every day. But you do have to be actively playing to find deals.

I agree. You gotta be in the game to play, right? And so I think 15 minutes is a very, I've never heard that approach and I actually like it. I think that's a, It's a fair statement. Many people want to be, you know, passive in investing in real estate. And that's true. You can be, but then you're going to need somebody who's active to actually do the work and find the deals. So, that's why investing is either you're going to get in the game or you're going to invest with somebody. You don't want to do, well, I think I can do it half the time or a quarter of the time. Nah, it's just like get in or out. Because if you're being presented a deal, let me put the quotes up there right now. If somebody calls you with a deal and you're not in the game every day, You're— that is not a deal. Like they're looking for a sucker because they've, they've already given that deal to somebody. Right? Like if coincidentally you haven't talked to anybody about real estate for the last, you know, 3 months and all of a sudden this guy calls you out of nowhere and it's like, hey, hey man, I got this one deal, bro. I haven't told anybody about it. You really want to try and check it out? It's like, bro, no, no, nobody's just calling you randomly. You gotta be in the game.

I absolutely agree. I absolutely agree. And like I have found that there's, so I've had friends who are like, hey, I make like 1,000 calls a week and I'm on the phone. I'm with brokers all the time. The reason that I settled on multifamily personally is I can move forward massively financially every year doing 2 or 3, maybe 4 deals, like at most a deal a quarter. And if you have to succeed once every 3 months, Talking about like, it's mostly talking to brokers about listed deals or pre-market deals and talking to some of the local owners. But that 15 minutes a day, that's 2 7-minute phone calls on deals and markets you're interested in over the course of a year. Sure. That's a lot of calls. That's the most I've ever spent. Unless your goal is, hey, I want to have a 10,000-unit portfolio and I want to be some real estate titan. For 99.9% of people who are like, hey, I want to, I want to build an income of like $10,000, $20,000, $25,000 a month in real estate. It is really a 10, 15 minute a day process, but it's being continuously involved. It won't cost you a lot. One of the lowest demand, like time demand, part-time jobs you can have. But if you don't treat it like a business and you don't dedicate time to it daily, you are not going to find deals. If you're someone who's like, hey, I check in every week, the people who are checking in every day are going to destroy you. Like you just won't find the deals that I find with the little bit of time I allocate daily to it. That's, that is the model that I found that works. It's sustainable, it's easy. And that's why I advocate for buying a little bit bigger deals is succeed 3, 4 times a year. You're 100 units ahead while someone else bought a duplex. Like it's a phenomenal, phenomenal strategy. When going back in time a little bit, I'm just curious, how did you, how did you get started, like anywhere in the accounting field is a, a very specific mindset and personality. And I'm curious, what was, what was the starting point where you were like, hey, this is something I want to do. And how did you end up on, hey, I became an enrolled agent. It's just a very specific path to find yourself in.

Yeah.

How did you find yourself here?

So 2008, I am a real estate agent at the time trying to sell properties that were coming up for foreclosure and I couldn't find a, just couldn't find a way to continue to grow, especially since I had only been an agent for less than a year.

Yeah.

And my buddy reached out to me and says, hey man, what are you doing these days? I told him what I was doing. He says, I'm going to open a tax office and I'm looking for a partner. Would you mind joining me? And I said, I don't like anything about that idea. In fact, he says to me, you know, what don't you like? I said, well, for one, I don't like taxes, right? I kind of want to pay them. That's all I know. And he convinced me with a few words, just like, hey, you know, this is a recession-proof business. You should just check it out, try it for a season with me and I had no background in taxation, but I mean, I'm savvy enough to figure this out. So we opened a little tax office, we're filing tax returns. And after the first season, I was like, man, this is, this is good. I really enjoyed it. I wasn't so much of a numbers cruncher kind of guy. That wasn't my, like my, my attractiveness to the industry. It was more so I loved learning how people made money. I love learning how people spent money. I liked how investments work. I liked how the tax return flowed. And I saw that the tax return was the most important document when it came when it came to business. And it just interests me. So I pursued it over the next about 12 years, a little over a decade. I built one of the largest tax preparation businesses in the country. We had prepared over 50,000 tax returns by 2020.

Wow.

And it was a fun ride. I would say that. And over the last 5 years though, was a different chapter of my life. COVID exposed a lot of challenges. My business was primarily in person. People dropped off paperwork, those kinds of things. I just didn't see the growth that I wanted. And I also just saw that there's the writing on the wall, things are changing. And so I started to see that there was a need for people to get more deep advice from their tax professional. I saw that there was a need for me to go deeper with clients, and a lot of them were paying taxes, including myself, and that was my pivot. And so in '21, I said, you know, this is the world I need to go to. I need to work with a specific client and back to the ambitiousness, right? The reason that I, I'm really good at what I do and the reason that I was good at that time is because the, the vast majority of the problems I was solving, I had, I had my own self, like, Yeah. I had a 7-figure business. I, I, I owned real estate. I had all the, the challenges that my clients or new clients were coming to me about. And I said, you know, I like working with these people. I, I enjoy talking about the same challenges either that I'm going through or overcame. And so over the last 5 years, we built a very successful tax strategy company. I actually work with CPAs and accountants all over the country to help them offer strategies. Last year alone, we saved over $900 million in taxes for our clients.

That's amazing.

We, you know, I found a groove in '22 or '21 through '23 on all real estate because real estate was booming and I was booming in real estate. We acquired about $10 million worth of real estate in that timeframe. And me and my wife. And so like, there's just so much of this story that ties back to real estate when I first started learning about how important a tax return is, learning about how bank financing works. And I just totally enjoy today what I do. I just work with specific clients on specific challenges that I've overcome in most cases myself, because, you know, you don't want to work with people who've never been through the problem. It's like handing the keys to your Lambo to a guy who drives a Toyota Corolla, which is what most people do. And, uh, you know, I know how to drive the Lambo because yeah, well, kind of, that's the kind of vehicle that I would drive, right. Or that I own. And it would be because not because I'm wealthy, it's just because I've been there.

Mm-hmm.

And it's very important to work with people who have been there. And so my journey started in 2008. Still today, um, we lead one of the largest communities in the industry today. I've kind of, I write in all publications, CPAAdvisor.com, um, Accounting Today. I'm a, I'm a big contributor and a big advocate that accountants today tax professionals specifically need to go deeper with their clients. They need to save their clients on taxes and they need to help their clients position them for wealth in the future.

Ah, love that. I'm going to ask the question that we ask in every episode, which we call the stupid tax, which I realize that name is actually really relevant in today's episode since we're talking about tax. But the essential is the dumbest you'll ever be is the beginning of your career because then you're going to learn a bunch of stuff and you'll become wiser. As everyone goes into their business, and this podcast is called The Owner Meeting because we meet with owners, we learn from them. One of the best things that we can do as entrepreneurs is help people avoid the most expensive mistakes we made along the way. If we can make a mistake for you and you can learn from it here on the podcast, that's the goal of this question. So what was the highest stupid tax that you paid in building the business? This could be a personal relationship. It could literally just be monetary, but what is the most expensive lesson that you have learned on your journey?

Well, my, the biggest lesson, most expensive lesson I learned was 2015. I'm finishing up the tax season. It's April 15th. And I sit down to file the last return of the evening. And it so happens to be my own. And as I enter the information from all my K-1s, 1099s, all those documents, I started to realize that my tax bill kept on going up and up and up. And I had never really paid taxes because the first 7 or 8 years of business, all I did was grow. I was adding more businesses, locations, you know, employees. I had a lot of expenses. But this year was a little different. And as I saw the end result, it was $142,000 tax bill.

Hmm.

And I had never paid taxes that much and I didn't know what I was doing. I mean, I knew how to file my return, but I guess I didn't know what I was doing in the moment. So I called a buddy of mine who's a mentor, very successful CPA, and I said to him, hey, I need help, man. This is, I need, like, I'm going to file an extension. I need to go to your office tomorrow. I need help. So I went to his office and sat down with him. Now he's a millionaire. I mean, this guy is not just your neighborhood CPA, very, very successful retired CFO from Citigroup, CPA credentials like no other. And I say, hey man, here, help me to review this. So he reviews it, says the same thing to me. Hey man, it's $142,000, bro. Congratulations. You made money. You should be so lucky. Pay the bill. And, you know, I said, man, I don't, first off, I don't have the money to pay the bill. Number two, I don't want to pay this bill. And he says to me, David, this is just the way it is. When you make money, you pay taxes. I said, there's got to be something you can do. You know, Bill Gates doesn't pay taxes. Jeff Bezos doesn't pay taxes. Donald Trump doesn't pay taxes. Warren Buffett does. Like, how am I paying this much, but these guys don't pay taxes? And he says to me, David, that's a bunch of bullshit. Like, that's not true. You pay your taxes. Or he said this, and this always resonates with me. He says, if you don't pay your taxes, you shouldn't have the right to vote. And I took that so personal. I walked out of that office with my tail between my legs.. And I said to myself, this will never happen to me again. There's two things I learned that day. Number one, I was a tax preparer who had been preparing taxes for the last 7 years. At that time, we probably had about 20,000 tax returns filed in our organization.

Mm-hmm.

And I didn't know anything about taxes. Number one. Number two, in order for you to solve a problem, you have to have enough pain and you have to have the problem yourself. And so that was the spark of learning the tax code. Like that was it. I said, there's never going to happen to me. And over the next 5 years, by 2020, I paid zero tax. Today I still pay zero tax. I have a multi-seven-figure net income.

Mm-hmm.

Net. And I don't pay any taxes.

Yes. That is amazing. You're ahead of me. I paid about $17,000 on a seven-figure income. So you are netting better than me.

I had low taxes, but not no taxes. I actually get a refund because I have an S corp and I pay federal withholding, so I get a refund every year.

Oh, that's amazing. That is amazing. But what a huge lesson. And if you guys are looking for an EA, you're looking for tax advice, absolutely. This is what David does. So if you're in that category and you have this high taxable income, David, how does someone— I mean, you're actually relatively easy to find online, but how does one find you and how does one get connected if this episode resonates with them and you're actively solving problems right now that they have?

All right. Two, two ways. Go to our website, taxplanexperts.com. You can go to taxplanexperts.com and just form right on the main page, inquire. We'll schedule a call, see how we can help. Number two, you can message me on Instagram or Facebook. I am David A. Perez. Just, that's the handle. I am David A. Perez. Reach me anywhere there and message me, send me a DM. And, uh, we'll connect to see how we can get on a call and see if we can help you.

Perfect. Well, David, this has been fantastic. You have having you on, uh, links will be below in the show notes, uh, or the description if you're watching this on YouTube. Uh, but guys, uh, thank you so much for listening. This has been the Owner Meeting Podcast with David Perez and me, your channel host, Christian Osgood. I appreciate having you guys here and we'll see you all on the next episode.