How To Take Charge Of Your Tax Plan—Why You Need To Know More Than Your CPA

Hey, it's Mark Panolski, the land geek for your favorite niche real estate website, www.thelandgeek.com and I'm really excited for today's guest because he's kind of a big deal and it's one of my favorite subjects because a lot of people don't realize that typically for people and businesses, their biggest expense, if they're doing it right, is taxes. And our guest today is going to talk all about different areas of tax savings and just cool stuff. But before we talk to our guest, I'd be remiss if I didn't properly introduce my co host, Six Sigma. You know him, you love him. Scott. Todd from scotttodd.net landmodo.com and most importantly, you're not automating your Craigslist and your Facebook postings. Postingdomination.com Todd, how are you?

I'm good, Mark. How are you?

I'm great, I'm great. I just want to remind listeners, today's podcast is sponsored by GeekPay IE and forget them to automate getting paid from your borrowers. Get your first Note free@thelandgeek.com GeekPay let's talk to our guest. Scott, are you ready?

I'm ready, Mark.

Mark Kohler, cpa, JD is a best selling author, national speaker, radio show host, writer and video personality for entrepreneur.com. he's a real estate investor.

He's a senior partner in the law.

Firm Kyler, Kohler, Ostermiller and Sorensen and the accounting firm of kohler and ear CPAs. Mark is a personal and small business tax and legal expert who helps clients build and protect wealth through wealth management strategies and business and tax remedies often overlooked in the challenging, ever changing economic climate. Let's face it, he's the smartest guy in the room. Mark Kohler, how are you?

Well, I don't know about that. Thank you for having me stoked to be here. It's an honor. Thank you, gentlemen.

So Mark, I mean, let's face it, taxes, really, it's probably the least fun thing to think about, right? Like I know when, when you know, like somebody asked me about taxes, I just kind of like, my eyes get real glazed over and I kind of start yawning and so what is it about you that drew you to tax savings?

Like, oh, well, okay, well, I think, I think I can respond to that about my personal approach and as well as I've got two arguments to help get your listeners over this mental hurl because I want everybody do not Shut down this podcast today and go. I'll wait for Mark and Todd Scott's new podcast. No, you got to hear this. There's probably two things that really drive me and I think are important to understand. Number one, it's the ying and the yang. Everybody loves to hear someone, smart guy or gal, talk about ways to make money. Oh, I can make money here. I can make money here. But the yin and the yang is the other side of the equation. What can I do to save money? So many business owners love to make money, but they're terrible at accounting for it. Saving, taxes, being responsible with the money, reinvesting it appropriately, because it's not as sexy to talk about saving as it is making money. And so my first admonition and what makes me excited is that they really do balance each other out. And my successful investors, my successful business owners, and have a healthy respect for both sides of that equation. And I'm hoping that some of you listening today buy into that, because it'll make you far, far more successful when you're responsible on the back end as well as on the front end.

Scott. Todd, are the hairs on the back of your arms standing up right now? And excitement.

Look, look, man, like, my entire, like, I don't know. Mark's like, my. I got two marks here, and they're both like my brothers. Because, I mean, like, Mark is saying, like, all the stuff that that, like, I have spent my career doing, right? Like, you know, a lot of people don't realize, Mark, but, you know, like, I have an accounting degree. I spent years and years and years as a controller in corporate America. And then I kind of moved into some operations, and then I kind of moved into it. It's kind of a weird, weird career path. But that said, like, you know, for a long time, my job was about, like, shutting down the expenses, keeping what we were earning, questioning everything. And I think it's something that a lot of people get away from. A lot of people are all about, let's bring in the money. And you got to spend money to make money, and you do. You need to spend it wisely. You need to invest the money into your business wisely to get back the return that you want.

Well, I'm glad I'm speaking to Scott Soule, my soulmate here. Now, let me give you my second argument. My second argument is this can be fun. You just have to get excited about it. My wife came home the other day. She was buying some new home decor, and I won't give a plug to the store she was at. But she spent a good chunk of change this day and came back and her SUV was all full of this new decor for the house for the spring. And I was like, what the hell happened? Of course. What did she do? And some of you, whether male or female, your spouse comes out and shows the receipt and says, no, no, no, look at how much I saved. And that's how I want you to be about your tax return. I want you to be like, look at my tax return, guys. Look at how much I saved. And it can be fun. It can be. It can be tactical. It can be engineering. It can be like, man, I am. I'm saving so much more money when you just apply yourselves a little bit.

And.

And it can be really exciting.

Okay, so let's kind of get into that. That last sentence that you just said. If you just apply yourselves a little bit, what do we need to apply so that we can start, you know, having like a. Like a parade with our tax return?

You bet.

The first thing is, is, folks, remember, you are the captain of your ship. You don't need to know where it's going to go on the tax return. You don't need to know the exact little, you know, basis calculations and the tax code down to the min. You don't. But you do have to be responsible for going, okay, I know what my plan is, and I can speak intelligently with my tax advisor. You should not get pushed around by your tax advisor. You should be pushing them around. And if they're more conservative than you, they demean you, they talk down to you. You got the wrong tax advisor. And they should be bringing you ideas, not you bringing them ideas. And so today's show going to give four or five, six major tips. And if you don't know those generally, then you got to roll up your sleeves and get to it. Because you need to be in control of your financial strategy, not letting your accountant tell you what your plan is.

You know, it's so interesting that you said that, because when I think of my cpa, I honestly think of somebody that's just doing the task of preparing my taxes, and that's it. Right? My CPA doesn't call me on a quarterly basis and say, mark, here's a new tax strategy to save you money. Right? They don't do that. They are in the business of preparing tax returns. And if you get a CPA that's really conservative, they're in the business of helping the IRS get more of your money so that they avoid Any type of red flags. Scott, Todd, do you agree with me?

I do. And you know, it's funny that Mark just said is, you know, Mark, Mark just said, hey, you know, you don't get pushed around by your cpa. And you know, Mark, I teach the class Accounting for Land Investors. Right. You know, and I teach this class and one of the things I talk about is the fact that, you know, you don't, you can do, you can pay taxes on our land on an installment basis. Okay. And it's right there in the tax code. It's very clear right there. And I can't tell you this year alone how many times someone who took the Accounting for Land Investors class went into the Facebook group and said, hey, wait, my CPA says no. My CPA says that's not right. And I'm like, dude, your cpa, they're like scared of their cpa. I'm like, your cpa, you should be able to tell them, hey, man, listen, here's the tax code. Get it done. Figure out how to do it. But it's Amazing how many CPAs out there don't even want to, like, listen to their client when their client is educated. And that's really why I created Accounting for Land Investors, because I wanted them to have the ability to say to their cpa, you're wrong. And then next year go find a new cpa.

Yeah. So, Mark, what are the tips?

Okay, so here's a couple important points when it comes to land investing and Scott, Mark, we're all on the same page. I love it. We're having a great, great conversation here. I want my land investors because that's what you're teaching, which I love. And so I want to make my comments centric to your listeners that are doing your strategy. So that's what I'm focused on right here. And I think it's important the land investors realize they're in one of two camps. And it's not good or bad, but you have to decide, am I going to be doing passive real estate land purchases and sales? Am I considered a passive investor or am I considered active or real estate professional? And there's pros and cons to both. And so I wanted to give some strategies that are really important, maybe even define those two camps, because all of us want to pick and choose the nice tax strategy. Oh, I want long term capital gain. Oh, I want short term. Oh, I don't want self employment tax. And everybody tries to pick and choose the strategy and then shoehorn themselves into that strategy. When the reality is you may not want to do that or you may not be allowed to do that. So two camps passive. That means you're not doing a lot of land flipping, you've got a day job, you might be doing three to five deals a year at most. You're not making your primary living off of this. And so those gains are going to be short term or long term capital gain. They're not going to be subject to self employment. Tax freak. I might even do some 1031 exchanges on some long term pieces that you've held more than 12 months. So I've got all sorts of options. There's now is that the get all end all? No, I've got clients that don't want to be in that camp. But if you are in the passive camp, you're going to get the benefits of that long term or short term capital gain. Your all of your land sales are going to go on a schedule D. You're going to be able to do installment sales that Scott's talking about. Not everybody can do installment sales. So if you're passive and you're in that category, then I'm gonna focus in on that and go down that path. So that, that's camp number one. What are your guys's thoughts on that?

Well, I think that everybody can, even the dealers can do installment sales because of the loophole that I'm talking about, Mark.

So yeah, there is an exemption.

It says that residential lots, if you're selling vacant residential lots unimproved, you can do the installment sale on that too, even if you're a dealer. So you know that, that's really the thought. But you're right like there, there's a balance between being the passive, the passive investor or a dealer or an active piece and choose wisely.

Yeah. And here's my point. Yes, there's an exemption for that. But do you really want to get into a fight with the IRS over that and then go through each lot tick and tat and get into an audit scenario. If you're doing a ton of these and you're gonna hang your hat on that, you better have some darn good records because the installment sale does get audited. And you, if you've got a lot of transactions and you're going to hang your hat on that exemption, that's cool. I know it's there. But does it mean that we want to just go for it on every one? And I know that Mark, on our last call when you were on my show, we talked about the fact that most of your down payments on the purchases are going to cover the taxable gain, they're going to cover your acquisition cost potentially. So a lot of times if you do claim that gain up front, you're not going to have a tragedy on the back end if you don't do an installment sale. Now let me throw this out too. I'm going to get the other camp out there. Being a dealer and a professional is freaking awesome. It's a good thing. So many people are scared of that qualification and I don't agree with that because when you're a real estate professional, getting passive loss carry through on all of my rental properties. Now I know Mark's not a big fan of rental properties, but some of you out there are do have rental properties and if you don't qualify as a real estate professional, those losses are captured in a carry forward bucket. But if you do qualify, you're getting those passive losses deductible against any other income you have, which is huge and I love that. Also, if you're a dealer professional, you can solve any self employment tax problem by doing all of your flips in an S corp, which many of my clients do. An S corp is a wonderful solution and the new 20% tax cuts and jobs act deduction applies to ordinary income. So if you're out flipping properties, throw it through an S corp and you minimize any self employment tax problem, you're getting the 20% deduction which you don't get with capital gain. So you're leaving this 20% deduction on the table that you could grab. And also we can take the gains. Sorry, there's so much here. You can take the gains from your flipping of property and fund a 401k which you cannot do with capital gain in an installment sale. So there's pros and cons of both. Everybody don't think it's get all end all to be in one camp.

All right. Excellent, excellent. Scott, Todd, what are your thoughts?

No, sounds good. Let's see what the other tips are.

Man, I thought we'd beat that up a little bit. Some of you listening are like man, that was water over, you know that was like way over my head.

What else you got man?

Okay, all right. Okay, I'll throw down. So without going and reiterating what I just talked about, and I think there's a lot to be said there, so that balance between choosing the right categorization and where to use those profits, here's another major strategy. Opportunity shifting. Now what I mean by that is, hey, you hear from Mark or Scott and oh, and you're doing their strategy and you're learning from them and you find another property for sale in New Mexico and it's a great deal. Here's my strategy. Don't do it. Don't pay the tax on it. And you're like, Mark, what the crap are you talking about? I can make money on this flip. It's a no brainer. It totally fits into Scott's and Mark's strategy. What are you talking about? That's right. Don't do it. Let your IRA do it. Let your 401k do it. Let your health savings account do it. Let your kids college IRA do it. Let your kids Roth IRA do it. Shift some of your opportunities to a qualified retirement plan where you may never pay tax on it. Then all this bullshit of installment sale real estate professional, it doesn't even matter because you're not going to pay tax on the gain anyway. So many of my clients that are doing fix and flip strategies with complete rebuilds on homes or with raw land, they're doing five or six deals in their S Corp. They may be doing two or three deals in their own name, they might be doing two or three deals in their Roth IRA and paying zero tax entirely. And I love self directing with raw land.

Yeah.

We stop doing all of our deals in our LLCs and start doing them all in our EQRPs, don't we?

I know, I know. So Damian Lupo is the only guy that comes to our boot camp. And because I had Jay Massey on the podcast called the Best Passive Income Model Podcast and I would say to everybody, I'd walk them through our model, I say, do I have the best passive income model? And he said no, because you don't get any tax benefits, you don't get depreciation with raw land, it lasts forever. And he's right. And so the only real tax advantage. Exactly what you said. If you invest through a self directed IRA or a qualified retirement plan like what Scott and I do, you can either grow these 300,000% returns tax deferred or tax free through your Roth. It's, it's a brilliant strategy, Mark, and I'm so glad you brought it up. I feel like we're BFFs now.

Yeah, yeah. Well now, now here's where this gets working guys, because I know that, don't be offended. I know that many people that do raw land investing, they're all hot and bothered with long term or short term capital Gain. Well, think outside the box. If I do establish an S corp, I do my raw land flipping in an S corp. Now I can establish a sister 401k, so that 401k could even be a Roth 401k. So when my proceeds from my raw land flips go into my S corp, I can fund my 401k that turns around and does the next four or five deals. But you can't do that with capital gain. Also, I want to put my kids on payroll. I want all my kids involved. I want them working in the home office, stuffing envelopes, shredding paper, doing all the things that the passive income strategy these guys teach builds. My teenagers are my office cleaners, my janitors, my paper shredders, my envelope stuffers. Well, I want to put them on payroll. Well, when I put my daughter Molly, who's 15, on my payroll, which I can't do with capital gain, but I can through an S corp strategy. Now I've got my kids on payroll. They can fund their own Roth ira and that's a partner in my next deal too. And it could even be their college IRAs, which are called the Coverdell. So the theory is here. Sometimes we don't need to get all hot and bothered with one strategy and think outside the box and go, wow. I could be facilitating an income shifting strategy through my family members as well, with a ordinary income strategy, not a capital gains installment strategy.

Mark, have you put your kids to work yet?

Like, okay, so my, my whole issue with that is that I love the strategy. And you know, it's, it's funny because.

How old are your kids? Let's go through. How old are your kids?

I have teenagers. I have teenagers.

Okay.

Could be doing stuff. The problem is, Mark, I don't want them in my business. You know, I know it's a little gray area, so I feel kind of bad.

It's not, this is not gray at all. And you need the kids in your business and you're leaving money on the table. And you're darn right you need your kids in your business. I have all my kids that know QuickBooks. They can sit down and reconcile bank statements, they can input data, they can stuff envelopes, they can shred paper, they can clean the office. I want to teach my kids entrepreneurship. You know, my 23 year old just bought his first fix and flip in his first rental. I've got my other two daughters that are now watching your passive land investing strategy. I've got. This is, this is where we can leave A legacy. And this is not high risk. This is the New York deli hiring their kids in the deli after school. This is the Oklahoma farm hiring their kids working on the farm in the winter or summer. And this is you with a real estate business in your basement hiring your kids. In 20 years I have not even had an IRS auditor question paying your kids. When we put it on our clients tax returns, we stand behind it. Now I'm not paying a 6 year old 5 grand a year. I might start a 6 year old at $100 a month cleaning the office, but then my teenagers should be at 5, 6, 7, 8 grand a year helping out in the business for 500 to $1,000 a month working in the business. And that's a tax deduction to you. And it's tax free to them. They don't even have to file a tax return.

Mark, think about this for a minute. Think about this. You put your kids to work, you tell them, listen, I'm cutting you off today. No more free money from dad, right? Like no, you want to go shopping. No, you got to work for it, baby. And they're going to hate you. But then you're going to start the money flowing, right? And then you tell them, oh, by the way, you got to pay for your cell phone bill. Oh, by the way, you do have to pay for room and board here at the house.

Right?

So now you've turned, you've turned your personal expenses into business expenses because you put your kids to work.

No, it's genius. I'm going to do it.

We're doing it today, Mark.

We're doing it. All right, I'm done, buddy.

Here, we're going to get this thing done. Yeah, you break the news to my kids.

Definitely. Like Uncle Scott has something he wants to talk to you guys about. So Mark Kohler, what else you got? I love this.

Well, that alone, man, I'm throwing out a ton. Let me throw this out. I've got an ebook on my website, the top 10 tax saving secrets Everybody needs to know. This is include ordinary income structuring. It's going to include self directing, putting your family on payroll, writing off home office. There's new auto deduction strategies this year that are amazing. The new 20% pass through deduction for business owners is huge this year. There's so much there. I have a weekly newsletter, it's free, a weekly podcast as well, refreshyourwealth.com. so anyway, if you. Here's my point though, for everybody listening. If you don't have a tax advisor that's excited and, or just at least bringing you strategies on a weekly basis, letting you know what's out there. Then you've got, you don't have an advisor. You don't. You just have, like Mark said, someone that's plugging in numbers on a form for you. You need someone that's going to strategize with you. So check out my website, markjkohler.com get my free ebook. Sign up for my newsletter. There's no cost to that at all. There's tons of videos and online content for where I talk about everything I talked about today for, gosh, a half hour here, 45 minutes there. So you can get more educated on this, people. But you're the captain of your ship. Don't give up on this.

All right, Mark, so before we go to our tip of the week, I want to ask you one more question.

Yes, sir.

What do you believe is normal or wise or cool that other people think is absolutely crazy?

A lot of people think owning a small business is crazy. It's funny how many groups I get up in front of and they're scared to death to start a small business and they'll say it's too risky. I say it's too risky not to start a business on the side. What are you going to fall back on when your primary occupation has a bump in the road? What are you going to fall back on if you have medical issues and can't work? What are you going to fall back on when you need to pay extra bills or expenses? Having a small business is not crazy. It is your solution to building the American dream. And so many people just don't. They miss out on just drives me insane. So I feel like I'm a huge advocate for just simply entrepreneurship and passive raw land. Investing is entrepreneurship. People get on board, own it. Be excited about it.

I'm excited. I love it. I love it. Scott. Todd.

Look, Mark, I can tell you, I mean, kindred spirits, I lived this thing, right? Like, I went through. I did not have, I did not have a side hustle. I wanted one badly. I tried over years. I failed. And land was the only thing that I actually succeeded at in terms of starting my own business, right? Like, I had many little flops along the way. But you know, Mark is right in terms of the fact that if you don't have something, man, you are at such a great risk, man. You talk about putting all your eggs in one basket. It's crazy. And then you hear stories Sometimes about like oh, husband and wife work for the same company. Oh, even worse, like no side hustle. Oh man. Do yourself a favor and it doesn't matter. I mean I think that land is a great, great opportunity. But even if you decide lands not for you, you better be doing something because the day will come when the man says sorry.

Bye, bye.

Have a good one.

Yeah. It's so dangerous. So it's reckless not to be thinking outside the box. So there you go. So I love it. Ready for the tip of the week then?

Yeah, yeah. So what do you, I mean given us so much tips, so many tips, so much great mentorship. But let's just push you for one more. A website, a resource, a book, something else actionable.

Let me use this as the tip to give practical steps of what something I already talked about. That is I want to challenge all of you to set up a self directed IRA this week. It could be a Roth IRA, you could roll money from your old 401k, your old Iraq, but get it at a self directed custodian. If you want to email me, I can send you three or four contacts for great, that's mark@markjcohler.com Me R K markjkohler.com Send me an email, I'll send you some custodians to choose from, get your account set up and then number two, consider the IRA llc. You can be the manager of that llc. You can control the checkbook of that llc. And when you're doing these raw land deals, you never have to talk to your custodian again. You give them a report every January of what the crap's going on and that's it. Your IRA should own an LLC in combination with your other family's IRAs and Roths and Coverdales. I don't care. Do this in your health savings account. I own a rental property in my health savings account that pays for my kids dental care. Boom. Done. So think outside of the box. Open a self directed custodian account this week, work on getting an LLC structured and do a land deal before the end of the year in your ira llc. That's my challenge to all of you. Very doable.

I love it. I love it. Scott, Todd, what's your tip of the week?

Oh man, how do I beat that one?

Mark, I don't think, honestly, I'll give you a pass this week if you want.

I mean just, I should pull the Philip Ma card here and just say I don't want to overwhelm people, but here you go Mark. Here's an audiobook I've been listening to that is really kind of cool. I think it's the CEO next door and it's the four behaviors that transform ordinary people into world class leaders. And the reality is it ties in directly to what we're talking about here, which is everyone, everyone should be the CEO of their company. And you know, you do have greatness in you. If you just listen to this, it will help you to identify how you too can pull out the behaviors that will or could turn you into a world class leader.

Oh, I love it.

Like it?

Very good.

CEO next door.

If you want to learn about accounting for land investing. Scotttodd.net accounting accounting for land investors.

Yeah, absolutely. I mean it's, it really goes very nicely with this podcast, the, the accounting course Scott Todd and as we, you know, discussed, it is probably the, you know, it's gonna be your biggest expense. You know, when you're making these kinds of margins, if you're not putting in into practice good best practices for your accounting, you're not using a tax strategy like the ones that Mark Kohler discussed. You are leaving money on the table like me. So don't do that. And really it's, there's no reason to, it's just procrastination. And the only reason we procrastinate is because there's some type of pain that we're avoiding. And so for me it might just be, you know, that I have to do something else. Right. Because I feel overwhelmed. But get out of that and do it. So my tip of the week is learn more about mark@markjkohler.com just go to his website. He's got tons of resources, lots of books. It is a treasure trove of information. Everything from tax savings to asset protection, estate, anything. Any way you want to protect your family, you want to increase your wealth, it's all there. Markjkohler.com who's now the smartest man in the room. It's very, you know, we don't get a lot of CPA JDs on the podcast which by the way listeners, the only way we're going to get the quality of guests like a Mark J. Kohler is if you do us three little favors. You got to subscribe, you got a rate, you got to review the podcast. Send us a screenshot of that review to supportlandgeek.com we are going to send you for free the $97 passive income launch kit as well as the ebook Dirt Rich. So please do that. And I love it. Well, I really appreciate it, Mark.

Thanks for having me. I'd love to come back and talk about the other half of this equation. Finally, is the asset protection, where we put in these assets, these notes, potentially teenage drivers that Mark, you're dealing with and all the lawsuit risk that's out there texting and driving and all those things. So separate from taxes, we can talk asset protection, a huge other part of our business services and what I do. But I love you guys. Message. Thanks for having me. This is so freaking awesome. And feel like I'm talking to kindred spirits. So good stuff.

You definitely are. Thank you. Thank you so much. And Scott, are you ready?

We're just going to let freedom ring, Mark.

Let freedom ring. All right. Thanks, everybody.