Scaling a Business Through Effective Tax Management with John Briggs

There was a lot of like client communication stuff was simple as like hey can you give me a copy of this? Just a lot of admin stuff or hey client, can you get. I still need this. So simple follow up things which now we can build automations around which we have done with our salesforce. It's like client still owes us information. The system sees this, client still owes us the information. So now I can automate an email saying hey Bob, we still need your W2 Bob, we still need this K1. And no human labor cost is actually going into that reminder now that we have it set up.

Hey everybody, Roland Frazier here with another episode of Business Launch and I am very excited to bring on not only a brilliant guest that I think is going to drop a lot of knowledge for you guys, but also one of my business partners and his name is John Briggs. And John's got a company called Insight Tax that does all kinds of cool things. John, how you doing man?

I'm doing well. Thanks for having me.

Thanks for being here. And we, we even overcame the unplug it and plug it back in to make it work computer challenges that we had at the beginning of this.

We're geniuses.

Pro tip for everybody, unplug it and plug it back in. Would you give a little bit about your background and Insight Tax and then we can dive in?

Yeah. So married, four kids, got my master's degree in tax from byu. And it's interesting, most universities kind of teach you to become a cog in the wheel of the bigger companies, which makes sense because the bigger companies actually pay the universities to help with their recruiting efforts and that. So that's fine. But then through my own experience as an accountant, I realized this whole idea of job security in the form of being a W2 owner, a bit of a farce. And so I don't get it.

How did that ever get solved? It's like you've got one client, your employer. If that client is unhappy with you and fires you, you're screwed. Compared to, let's say you only have 10 clients and one of those 10 clients, as an entrepreneur lets you go, you still that 90% of your, you know, it's like how is that secure?

Working up unemployed every day is a little bit more secure than. I mean I worked for a company that did 30 million in revenue and declared bankruptcy the same year and the company went kaput. 30 million in revenue and a lot of people were out of jobs. So I learned through the trial of, you know, hard knocks that I think Owning a business made more sense. And so we just kind of started off. I was coming from a situation where I just needed to put food on the table to support my family. Working in a windowless office, lovely times. Getting to know the janitorial staff that came around at 2:00am, 3:00am in the morning. And then from there, my inability to say no. My desire to provide an experience for accountants. It was very different than the kind of like just squeeze every ounce of soul out of people like most of the companies do. I wanted them to enjoy life, too and build them a culture that could do that. And it kind of grew from there. So just me to now we have 215ish team members. We do have remote team members across the country, but we have two physical locations here in Utah.

Okay. And just because I don't think it's completely clear. So what was your vision when you were saying, I just need to put food on the table so that that company goes under. You're out there. What happens next in that entrepreneurial journey?

Yeah. So unfortunately, that wasn't enough of a pain moment for me. So I went from working for that company to joining my neighbor's accounting firm. And within a couple weeks of me being there, I thought he was rewarding me for hard work. He. He said, you know what, Let me give you two and a half percent ownership of the company. Let me just make you a partner, because I think you're going to provide a lot of value. Come to find out, I think it had more to do with the fact that if you don't have money and the company goes under, you have to pay your employees. You don't have to pay partners.

Oh, my goodness.

So this is a neighbor who it turns out not to be much of a friend.

Yeah, yeah, it wasn't great. I won't go into all the details there, but he and his mom, who were the majority shareholders of this firm, were doing things outside of the tax world, making a lot of money that way, but then also using the business as a personal piggy bank. And so I ended up working for them for six months and received a total of $2,500 in compensation. Because as partners, you know, I mean.

In fairness, that's a few hundred dollars a month, so.

So, you know, yeah, it worked out to be about 3 cents an hour, I think. Something like that.

Hey, Ryan Deiss here, co host of Business Lunch. And before we get to the show, I have an exciting invitation for you. My business partner and Business Lunch co host, Roland Frazier, and I are hosting a live in person event. And if you're a bootstrap business owner who wants to build a 10 million and even hundred million dollar business in the next three years, you need to be there. This event is called Get Scalable Live. And over the last four years it has transformed from a small gathering of entreprene into the largest bootstrapped entrepreneurship conference in North America. Now I know what you might be thinking. You're probably thinking, Ryan, really another business event? Is that really what we need? But trust me, this isn't just any other event. You see, unlike most conferences, at Get Scalable Live, you'll have dedicated time to take action and actually work on your business instead of just in your business. Over three days, you'll work shoulder to shoulder with like minded entrepreneurs to implement what you're learning and get valuable feedback that you're just not gonna be able to get during the normal day. Today you're gonna be immersed in fresh ideas, strategic insights, and you're gonna get the support and guidance that you need to actually reach your business goals. So this is your opportunity. This is your chance to step out of the day to day, to eliminate the noise and finally work again on your business, not just in your business. And if you implement, I'm confident about this, if you implement just one or two key insights from any of our sessions into your business, you are bound to see a return on investment much higher than what we could ever charge for admission. And by the way, speaking of admission, right now, business lunch listeners can save an additional 10% off of our already low early bird ticket pricing. So just head over to getscalablelive.com and use promo code Low lunch at checkout. Again, that's getscalablelive.com promo code LUNCH. It is truly amazing what can happen when you step out of the day to day and spend just a little bit of time surrounded by other powerful business owners. And since this opportunity only comes around once a year, you don't want to miss it again. The link is getscalablelive.com and don't forget to use Promo Code Lunch at checkout to save up to 67% off the full ticket price. That's all I got. I'll see you in Austin. All right, back to your regularly scheduled programming.

And.

And so you thought maybe you could do better?

I thought literally it couldn't be worse. I don't even know if I was arrogant enough to think, you know, maybe I could do better's life, but it couldn't be worse. I mean, working for six months. It's funny, when I came home and asked my. Or told my wife, I think I just need to leave, she's like, it's about freaking time. Because she's like, you've been miserable.

So then rather than get another job, you said, I'm gonna do my own thing.

Yeah. After those two experiences, which were the two in a row, I'm like, literally, I just. Let me just do this myself. Cause I can't get any worse. Like, I'm already not putting food on the table. I'm already not making money. And I went from a bad situation with this company that declared bankruptcy to now this firm that was being poorly run. Like, yeah, let's just go out on my own.

So was the initial idea to open an accountancy or a tax practice or to do the thing that you ultimately ended up doing, which we haven't explained to people yet, but I want to, but not until we get to it.

Yeah. So I had worked with Deloitte prior, so I had some tax experience. I had a master's degree in tax at that point, and I enjoyed it. I enjoyed the game of being able to look at all the different rules going through the tax return and saying, wow, you know, if we claim this year as an itemized deduction, it's a little bit different if we claim it here as a business expense. And your outcome, like, I loved that game. So for me, it was, you know, that's a bread and butter thing I can fall back on. Let me just start preparing tax returns. And so, yeah, then my life became your typical accountant until I realized, there's gotta be a better way. Yeah. And then we. How did you do that? I was on my own for about a year and a half, two years almost. Then we hired my first assistant. You know, the first hire, that's always terrifying. And then. Yeah. And then from there, it's like, okay, we need this person. Let's hire. And. Yeah.

So you were kind of going on the traditional trajectory there for a bit, right?

Yeah.

Mostly a tax practice. Okay. So. And then what happened that made you say, I think that. I think I can grow differently? That led you to where you are now.

It was kind of one of those moments where you finally. Things were going well enough that I could pause for a second and reflect on kind of the bad experience that Deloitte taught, which it happens to be the same model that the smaller accounting firm I worked for followed, which happened to be as I'm now networking more and meeting other accountants. That they're going through and, you know, memories of my wife when we first started off kind of having her annual breakdowns during tax season. Like, you know, I'm a single mother. It's like, you're not. I'm supporting you. But, you know, it hurt because she was. During tax season. She was a single parent.

Yeah, absolutely.

And, you know, so all those things kind of combine to one of these moments where you're just sitting there like, you know what? I know there's gotta be a better way. I know that we can help accountants have a great environment. I think the company can be profitable and we don't have to work 70 to 80 hours a week. So then from there, yeah, we start evolving into what can we do to make sure accountants don't have to work so many hours, but we still get the job done.

Okay, what did you come up with?

Well, come to find out is interesting. I actually just had this realization the other day as I was putting my own thoughts on paper. So as a cpa, you have to get CE continuing education credits. You know, almost all of those focus on how to be smarter at being the tax person. And over the years, I've noticed not very many, if any, actually focus on how do you become a better operator. And being smarter at taxes does not help reduce the hours that you work. But being smarter with processes, turns out there's a high correlation. If you can improve your business operations, efficiencies, systems, then you actually can work less. So it became a matter of what's the biggest. Just focusing on what is the thing in our firm right now that's taking up the most time. How do we make that more efficient? Cool. We made that more efficient. And almost just from a lean six sigma standpoint, looking at what's the next bottleneck that we can fix. But in this case, we were looking at what's the biggest time consumption. And is there anything we can do? I remember one time we sat down with all of our accountants, and at this point, they were doing a lot of the work. And we just lit like, everyone, let's do a giant brainstorm dump. What are all the tasks you're doing? And so then we did. It's like a spoken wheel. What is it? It's an exercise that some consultants use, but it's like a hub and spoke modeling out. So we said, okay, this is Lynn, and Lynn, what are you doing? And then we would draw spokes to the length of time that he was spending on the different things. We had a visual and come to find out as we did that with the whole team, about 80% of their work could be done by someone who has less experience and not even necessarily tax knowledge. So now I can bring in. They're not lesser people, they just are less expensive to the company because their skill set isn't the same. Right. And so we could hire areas there to help free up time so that our accountants could spend time on the highest deliverable possible, which is something as all business owners we should be looking at anyways for ourselves. Right.

And what, what was that? What, what were like, was there one or two spokes that were particularly long?

There was a lot of like client communication stuff was simple as like hey can you give me a copy of this? Just a lot of admin stuff or hey client, can you get. I still need this. So simple follow up things which now we can build automations around which we have done with our salesforce. It's like client still owes us information. The system sees this, client still owes us the information. So now it can automate an email saying hey Bob, we still need your W2 Bob, we still need this K1. And no human labor cost is actually going into that reminder now that we have it set up.

That's great. And are you doing anything with like that rpa, the robotic process automation, to try to kind of go the next level and remove the humans and save them from having to do that terrible drudgery?

Yeah, yeah, we actually started that about five months ago. Our first project is, we're in the final stages of testing it out and so we're past the beta stage and now like called the hypercare stage. But yeah, we identified in the process of our tax returns this step. So for us specifically it's like getting the client to sign authorization to let us file the return. So in order to do that we send them a copy of the return, we send them instructions and just during tax season alone we calculated we paid about 65 grand out in human labor cost to do all that. And so now with this robotic process automation it's going to do all that for us. The computer is going to do it because it's the same steps and every single time and it's going to cost about 12 grand a year. And so that's better. It's better. Yeah, it's better. And so with the success we wanted to try it out with this company to see if they can deliver because as you know, sometimes people promise the moon and can't deliver anything. They can't even give you a Rock.

Yeah.

And so we're, then we have, we have some other identified that are going to free up even more time. But anytime, it's been great. Anytime you look at your process and say like, this is the exact same every single time. Why not take advantage of technology?

Yeah, 100%. So one of the things that you found was a big challenge for you, which I think happens to a lot of people, is as you scaled, you needed a lot more people. And so really like recruiting the skilled labor, accounting people became a challenge. And it's one that I hear across the board from marketers, operators, just kind of everything. But you addressed that in kind of a cool way. Would you mind sharing that with everybody?

Yeah. So there's two prong approach we've taken I think with this one was looking at the volume that was coming in thanks to our partnership. We knew that we needed a system. The always be recruiting method became always be hiring method. Um, so first thing, we actually have enough volume that we can justify hiring a full time recruiter. And we've actually even hired a full time assistant for her. And we're like, we're still expanding that out. And then the other thing that we did was we looked at where are possible accountants hanging out because of the unique model that we've set up for accountants, which we can get into. But the idea was, you know, we identified a website that already exists where taxpayers come to it and tax professionals come to it and we're like, hey, let's see if we can own that. Because now I can start supporting these tax pros and they can realize, oh, there's like, maybe a better way to do this. Because that still goes back to man, how do I change the industry? Not like we, I want to be significant enough that the Deloitte's will look at us and say, huh, maybe we can have our team members work 42 hours a week on average during tax season instead of 50. That's what we've averaged the last three tax seasons. And our numbers are not insignificant. They're just, you know, Deloitte's a multi billion dollar organization. And so we look at that and then we say, I can influence the people I hire, but now how can I influence more people outside of that? And so that's kind of where we went with the recruiting model and it's working well. We could still hire a lot more though.

And you went, I mean really just over the last, let's say over the last three years, from how many people to how many people on the Team. The total team.

Yeah. So three years ago, we were probably at 25 to 30.

Okay.

Yeah. And now we're 215.

So you're 10x basically.

Yeah. In three years.

How do you do that and not go crazy, not go broke? Because I think that's a big challenge that a lot of entrepreneurs are facing is I just don't know how to get a team built like that.

Yeah, well, luckily my wife doesn't listen to podcasts, because she'd probably say, I am going crazy, but probably for other reasons. We have four kids. You guys can imagine it really came down to systems. Like, I knew that in order to scale, systems was going to be super critical because I had seen this already, and in any organization, you have steps. It's like, oh, I can operate like this, probably to 250,000. Well, how do I get to a million? You can't even say I'm going to Band Aid. What I currently have to try to get to a million. You actually have to reinvent the way you do it. And so one of the things three years ago was, which at the time, we were probably like a million 5, 1.5 in revenue. What would it take to be a $10 million company? And we just started with, what would an org chart even look like? And so we looked at what would an org chart, guessing, what would a $10 million accounting firm with the model that we have look like? And then we backtrack into that. Okay. So then as we grow, which, for the record, was very different than what we had, like 1.5 versus 10 million, you have a new layer of management that you need because it's not feasible. Like, wow, man. How many companies have added min management? Not thinking about it. And then I ended up putting them broke because I didn't actually think through where is this structure taking me? And so that. That was so many, so critical to us because then we could create all of our processes based on we want to be a $10 million company.

And did you do that with a consultant just yourself? Did you get some books about it? How did you go about kind of solving?

Yeah, I had a consultant help me see what I didn't see for sure.

Okay.

Which.

Okay.

Yeah. All the different consultants over the years have been so good to me, and, you know, you kind of outgrow some and you move on to the next one based on the stage of your life. But I'm a firm believer in consultants. Clearly, it's been working well for me. Great ROI for us. And so with that in mind then now all of our systems like, well this software is not going to support us at 10 million because we're likely going to have this many clients and likely this many team members. So what software can we get? And we did that and then comes along you and the business partnership that we have and it's like now it's what do we look like as a hundred million dollar company? Because even at 10 million, like 10 million to 100 million, it's going to be different. And so that's why a year and a half ago we jumped to Salesforce and like we've upgraded our systems and we've even added the recruiting person that's going to be necessary. We just added a person whose sole job is to basically quality control and train people which something I get at 1.5 was, would have been a luxury. But now to get to 100 million is absolutely necessary because we want to move accountants from I don't know very much. Maybe I have some educational experience to experiential experience and how do we get them to that as soon as possible so that we can serve people faster and faster. So I think there's a long answer, but at the end of the day, the way you don't go crazy or go broke is you have to start with your processes. If that doesn't work, like that's the foundation of everything. And if we hadn't done that work when you came along, what you guys have been able to do for us would have probably put us under. But luckily obviously you saw it and we believed in it, that the foundation stuff was there so that we were ready to scale when we needed to.

And we had tried a couple of partnerships before and we definitely put them on. So it's, it's so just kind of to summarize and then I want to get into some, some tax stuff. But basically from a business generating side, one of the big things that you did was a strategic partnership, which is what we did. So that's a, that's a fantastic way to think about blowing up your business really, really fast. Blowing it up in a good way so that it doesn't blow up in a bad way. The other side of that was that you created a model that allowed you to get the key people that you need at scale and at speed, which was really the. Let me solve the problems that are out there for other key people that are accountants, which is your target market of people you wanted to get more of and let me find them faster by hiring a recruiter. Does that sound right?

Yep. That's great. Yep.

And then how do you not have the wheels fall off? Which is what has, I've watched happen. Like, because I'm usually on the, on the marketing growth side. If we come into a business and say we can give you all the business in the world and all the entrepreneurs, every single one, I've never had one say, whoa, whoa, whoa, wait a minute, no, that's going to be too fast.

They're all like, we can totally handle it.

And then you do it and the wheels fall off and it blows up and clients are unhappy and everything that did not happen with you because you said in advance, what does the company look like in the future? That like, what does it need to look like to be able to handle that? And then you brought in the resources consultant wise to kind of create the structure that you needed to do that. So it's really. Those three things are pretty key. And the business is up I don't know how many times in sales and profits at this point from just a few years ago.

Yeah, what would it be? 2, 3, 4, almost 5x.

That's pretty good.

And I wasn't significant numbers before either.

Yeah, right. And you actually have a life, right. You're able to Talk to your 4 kids, know your name and everything.

They do still know my name. They even know what I look like. I'm not the stranger. I still can't get the stupid dog to stop barking every time I come home. But it's every day.

You don't ever solve that problem. So let me jump to. Well, actually, do you have any resources about like that as far as if people were interested in, you know, what's the story of how you grow and how you grew your business and that kind of stuff?

Yeah, actually I know you have tax resources.

I do.

I wrote a book that I published in January called the 3.3 rule. And I not only share my story in it, but I also talk about, I identified what were all the things that I did. And you know, sometimes we end up focusing on fixing the causes of problems, not the root of the cause. I kind of identified there's like 11 things for small businesses, specifically firms like, you know, here are 11 things that if you focus on these 11 things, a lot of the other stuff that you have problems with get fixed as well. I talk about that in my book, the 3.3 rule.

Okay. And is that Amazon?

Amazon, yeah.

Okay, great. And then on your podcast, is it more about tax savings or is it the business stuff too or what.

What's the most.

Yeah, so our podcast, Insightful Podcast is a lot more tax related. Occasionally I have a guest and we'll focus on their expertise, whether that's marketing or operations. But yeah, a lot of it is here's what's going on tax wise or here's some strategies that are still great for people to do that you may not have heard of. Yeah.

Okay.

So the book is one more time the 3.3 rule. And you can find it on Amazon.

Amazon. And the podcast is Insightful.

Insightful Podcast spelled I N C I T. That's right. To incite a riot. Because we're aggressive that way with our taxes.

I like that. Okay, so now I want to talk about the things that you. That you can do or that people. What are the big things that you would say? Most of the folks that own businesses that are listening or watching this are doing incorrectly or they're doing and missing significant opportunities based on everything you see. And let's go individual and business wise.

Yeah. So as a business owner, like all your individual stuff is going to be tied into your business stuff. Like your business is your greatest vehicle to save taxes. You know, it's amazing even when I meet some people who've been around for a while, like 10 years. Plus the entity selection that you choose. So the llc, partnership, C Corp, like that's a big deal when it comes to taxes. And a lot of people don't even set that up the right way. So the lowest hanging, I think they.

Go to attorneys and they. And the attorney's just like, yeah, we'll get you an llc. Or maybe they go to the attorney and say, hey, I hear I need an llc. And they're like, okay. And they just set it up and there's no conversation about it, which is tragic. Right, right.

Because I mean, the attorney's thinking about liability protection. Yeah, yeah.

And the attorney is not a business person, nor generally a tax or accounting aware or finance aware person. They were told to major in English or poli sci to go to. You're getting your business advice from somebody that's never been in business and doesn't have any training.

Yeah, yeah, exactly. And so, you know, we fix a lot of that. Us in our business partnership with prime corporate services, like getting people in the right entity that alone can save people a ton of money. So that's the first area we look at.

Can you give us some, a little kind of some tips on that?

Yeah. So you know, LLCs of themselves, according to the IRS, so they were created in Wyoming back in the 70s and here we are, what is that 50 years later? Not enough time for the IRS to say we're going to figure out how to tax these. So even to this day they say LLCs don't really exist to us. We're going to make you tax it based on something else that already exists in the code. And so if I am the only owner of that llc, that's called a single member llc. And the default tax status is to be filed as a sole proprietor, which means all of my taxable income is subject to self employment tax, which is 15.3% which is on top of my current income tax rate. I mean we've had clients come in like door to door sales guys who made 35 grand and they're stinking paying 35 to 40% taxes. Like it makes me throw up in my mouth just because they set up the wrong structure. So if you, if that's your scenario, if you're filing on a schedule C, if that sounds familiar to you, meaning you're filing your business stuff with your personal return, that is not ideal. You are likely overpaying just because the IRS has. You either have passive income or you have ordinary income. And most people are. Well we have a big bulk of real estate investors as clients and so a lot of their stuff can be passive which doesn't have the self employment tax stuff that I'm talking about. So they have a little bit more of a leeway. But a lot of people have services related things and that has self employment tax. And so Single Member LLCs, not a great structure if you just leave it like that. Well then some people are like well I'm going to add my wife or spouse to this. And so now I have two members. So more than one member means it's a multi member LLC default tax status on that as a partnership. Well okay, we're a little bit better off because it's a separate tax filing. So we reduce our risk of being audited a little bit. But the K1 now that comes over. So an employee gets a W2, an independent contractor gets a 1099, a business owner gets a K1. All those are like the different reporting mechanisms of your income. Well also subject to self employment tax and so not, not even, not, not a great scenario. We like S Corps when, when you have the type of income subject to self employment tax. But then that would get to the other second thing that I would say people need to think about is S Corps don't have self employment tax. Tied to it. And the IRS said, well, hold on a second. How do we get money from these people? There's got to be a way. And so then they created this rule that says, okay, if you own the S corp and you work in the S corp by default, that means you're an officer, therefore you have to pay a reasonable compensation to yourself. And lucky for people like me, they don't actually define with some sort of mathematical formula what is reasonable compensation. And so a lot of accountants are very conservative and you may feel like they end up working for the government where, you know, we want to interpret the code in a way that benefits the clients that we can defend. And with that being said, a lot of people now that they have an S corp are paying themselves too much of a W2, they could get away with paying themselves less, which for most of them saves them self employment tax at a minimum. It could save them the Medicare tax if they're making so much that they're above the threshold.

But how do you pick like, what is your resource for like or guideline for determining what that reasonable thing is?

So we go off of 30% of net income as a starting point point. And then we look at other factors like do you have other people who are working in the business, whether that's W2 or other people who help. So are there other resources going into it? So depending on that like and what they're doing, maybe we can get less than 30%. How much time do you spend in it? Go ahead.

Do you ever look at like pay scale or salary.com or any of those for kind of to pick those numbers?

Not super often, because what we're actually trying to do is we're figuring out what exactly do you do. And most of the time we can list out their tasks in a way where it's like an admin can do that work for you. Of course we know that the business owner is going to be the best person to do that. But theoretically, from a market replacement standpoint, if I can take all the things that they do, even as a president of the company and say, well, technically 70% of your job. Sorry to tell you this, Bob, but you know, you could pay someone $20 an hour to get that done. We can say, well, that would be the market replacement instead of paying you $150 an hour for 70% of your job. Right. So we can back it down that way. Nice.

I like that. Yeah, I haven't seen people doing that.

And so like for me, for example, my W2 is way less than 30% of our net income because we have 215 team members. I personally, yeah. Don't even do the tax work anymore, you know, and like, at the end of the day, I'm a glorified host when we have team meetings. Like. Right. So that's the replacement cost for me.

You ultimately become a cat herder. Yeah. Okay, so structure is a big issue. What are some of the other big opportunities you think you get?

You know, the biggest opportunity is making sure they understand how expenses work. The tax code itself tells us in order for it to be a deduction, it needs to be ordinary and necessary. Those are the two words the tax code uses. And if any normal, logical human being with half of a brain thinks about it, they're going to end up with this conclusion. That's pretty vague. I don't understand. What does ordinary necessary mean? Because I can tell you our definition of ordinary necessary is very different than the IRS's definition of ordinary and necessary.

Right.

Well. And so it was a big enough of a problem that the aicpa, which is a big CPA organization, a little bit too political for my like, but they have a lot of influence. They came in and said, you know, this is confusing. We can you give us some guidance? So they. The IRS puts together a crack squad of their smartest individuals. And what they come up with is here. This is what they come up with. Okay. Instead of. Or in addition to ordinary and necessary, we'll clarify it. It needs to be helpful and appropriate. Wow, thank you.

That's really specific. That solves everything.

Thank you so much for that. And so what I tell clients is, at the end of the day, here's the best way to interpret those four really vague words. If you're spending a dollar and it's related to your business in any form, shape, or fashion, then that's a business expense and you should pay for it out of your business account and you should claim it as a tax write off. Because in those scenarios, the tax code is 77,000 plus pages because it's exception after exception after exception. But if I'm being audited, which is our biggest fear as taxpayers, and the IRS says, hey, why'd you write this off? And I have a reason why. I wrote it off because in my mind, it was related to my business. Worst case scenario at that point, the IRS says, well, there is an exception to that and we're not gonna let you take it. So then I'm gonna pay tax at that point. Okay, Like, I wasn't Intentionally trying to get around something. I just, I literally thought it was tied to my business and it's not.

If I'm audited, I found it helpful and appropriate.

Yeah, exactly. And if I'm audited and they're like, why'd you take this? And I say, I don't know, now I'm in trouble. Yeah. And so that's why.

What do you say to the. I just watched one of my, my sons showed me a video and he's like, these guys are all going to jail. It's a TikTok video, of course, and it's these, I'd say 20 something digital marketers. And they're, they're like, why do I have Lamborghinis?

Because I make so much money in.

My digital marketing business. My accountant tells me to pay zero taxes. I need to buy more cars and that's why I buy watches. And he's got like $100,000 watch on and all these cars. What do you say to that? Other than, oh my God.

Yeah.

Because to him he's saying it's necessary, ordinary and appropriate and helpful to his business. Because flashing all that stuff causes people to buy his courses on how to do things.

Yep. And that would be the reason why if he's audited, he may not go to jail, but he's certainly probably going to have five years. Like as far back as the IRS can go, they're going to open up for him on audits and they're going to disallow all that stuff. So I.

But you probably would, you probably do think it's a good idea for him to be out there on TikTok saying that and showing all that stuff off.

100%. That's a great idea. Hey, IRS, here I am. You know, I actually, I dealt with this even years ago, before TikTok, that I had a client network marketer making 100 grand a month in his business and he's like, I just bought a hundred thousand dollar belt buckle and I want to write it off. I'm like, why not? Yeah. You know, I love to be aggressive. I really do. There is a line though. And. Because what happens is the IRS actually would look at that because I'm like, first of all, I need a picture of this belt buckle because I don't believe you. What the. Why I get. I again, not my thing. Maybe some people. It's a form of jewelry. Okay. People collect expensive jewelry and that's what it was like.

No, it's a belt buckle that has my logo on it in Jewels. And everybody that sees it is like, oh my God, I gotta deal with you. Because that's cool. And so it gives my business all this free advertising that I would otherwise have to pay. You could probably craft something.

You totally could.

But you have a hard time selling.

You could. And I would have been more comfortable with it if it was actually his logo, but it wasn't. Yeah, the diamond encrusted, gold plated belt buckle.

He just wanted it.

Wanted it. And again, nothing wrong with that. But I'm like, look, at the end of the day this is going to fall. This is expensive enough. The IRS could come in and say this is a collectible. And collectibles have different tax rules and.

Just personal, it's just personal wear. It's not a uniform required for your business. So it's just. You're like your street clothes basically.

Right.

Too much for your street clothes. Not our problem.

Right. And that's where the logo actually would help. Because if you put your logo on clothes then you could say it was for uniform or advertising and things like that. Now it's hard because at the end of the day too, there's, there's a line there where, you know, with TikTok and media creation and whatever, like if you think about what big media studios do, the news and all that stuff, they have stylists on staff, they have makeup people, they have wardrobe people, they offer wardrobes. Like those are legit expenses. You could figure out how to justify if you're reasonable with them because you're doing your own videos. But then there, there just is a line and no, you're not going to be able to convince a single IRS auditor or anyone in the organization or anyone at court that $100,000 watches and Lamborghinis and really expensive cars are going to fall under those four rules. I get that. You see, it's related and I'm with you logic wise that yeah, you are convincing people that you're super successful because you rented the Lamborghini that you don't own. I mean, we know people who literally rent out their planes for influencers to come and take pictures as if it's their plane. So they like.

It's so funny.

I, yeah. Don't take a tax advice from people like that. Always check with an actual cpa because that's also the other challenge is most of these people who are on TikTok giving this advice don't have any repercussion when you find out they're wrong or they're right or they're either lying to you or they're telling the truth. And they're still just wrong. Like, as a cpa, they take away my license. If I'm just an influencer, they come in and say, I'm going to audit you and you're probably going to owe quite a bit of money in penalties.

And, well, plus you're giving advice, so you've got professional liability, whereas these people, you know, they're not at all.

Yeah. And so that's like, that's a good rule of thumb for people. Like, is the person giving the advice the one who's actually signing tax returns? If not, you have to understand there's a strong likelihood that what they're saying is, at a minimum, sensationalized.

Yeah.

Yeah. What?

So I want to get you back on to go deeper into this.

But.

Since we didn't have enough time to go into everything, if people want to find out more about this kind of stuff, because there's so much of it.

Right.

I mean, obviously we could spend 100 episodes and not, not really even get down into the surface of it too much. But what is the best way for people to find out more about this kind of stuff? Find out what you're doing, how you might be able to help them and all that sort of thing.

Yeah. So our website's going to be the best starting point. Insighttax.com we have a blog there, lots of free tax strategies for people to implement. There's a contact Us page on there as well. So if you want to reach out, we will get a hold of you really, really quickly. But that's probably the best. And then we have a YouTube channel, insight tax on YouTube, where we also share as much information as possible. Our belief is at the end of the day, you can know the strategy and I want to share it. And we have enough people in the world that are going to be willing to hire us to do their stuff. So we freely give with as much tax information as we can, knowing that we'll get enough people who are interested and our business will be fine.

That's awesome.

And that's insight. I n C I T E not I n S I G H T Correct. Insight like we're making something happen.

Yes. To cause to action is what the actual definition of insight means, but yes, insight. I n C I T E I love it.

Awesome. Well, thank you so much for taking the time to come in today and I really appreciate it and I hope that you guys, the two things that we clearly covered here on the tax side were the structure of your business and also the expenses, which I think is, if I Remember correctly, Section 162. Like what is ordinary, necessary, appropriate, helpful, all of that kind of stuff. And you're probably missing out on some opportunities. Also, avoid crazy people on TikTok and YouTube that are just going to get you in trouble. And if you do think about things in advance, I love the belt buckle example because to me that's a great example of something like if you really want that, you might be able to create it if you go into it strategically in advance in a way that would allow you to have what you want or some version of it that.

You'D have at least an argument as.

Opposed to not having any, you know, hope or prayer of it.

Right.

Just so a couple things to think about. John, again, thank you for taking the.

Time to be here.

We'll see you guys all next time on the next issue of Business Lunch.

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