What Your CPA Isn't Telling You

Life-Changing Tax Strategies

Mark J. Kohler

• Publisher: Entrepreneur Press
• Year: 2011
• Print ISBN: 9781599184166
• eBook ISBN: 9781613080269
• Topic: Business
• Subtopic: Small Business
• Index: Business

Tackling the fundamental question asked by all taxpayers – "How can I save on my taxes?,” attorney and CPA Mark Kohler empowers frustrated taxpayers to dismiss the common CPA jargon that their tax payment "is what it is” and ignore widely used tax talk like "you just make too much money.” Kohler reveals 8 life-changing tax principles, and teaches both wage earners and business owners how to apply fundamental, but underutilized tax strategies to achieve huge tax savings, greater wealth, and ultimately, a winning pursuit of the American Dream. Kohler presents wage earners with applicable strategies beyond writing off mortgage interest and contributing more to their IRA. Following the story of a typical family, tax payers discover the undeniable benefit of owning a side/or small business, how hiring their spouse and children can help their bottom line, the financial windfall that comes with owning rental real estate, and the secret success behind self directing their retirement plan, which is something 9 out of 10 CPAs don’t know or don’t talk about! Small business owners uncover new avenues for adding to their bottom line including how to save on health care and legitimate bookkeeping techniques that can put thousands back in their pocket—all illustrated through checklists, charts and templates available in the additional resources toolkit provided by Kohler.

CONCEPT 1

THE SECRET TO TAX PLANNING

dp n="19" folio="" ?dp n="20" folio="3" ?

THE MEETING

It was a dreary day in March. You know the type of day. It was cold. The flowers had not yet started to bloom. One didn’t know if it was about to rain, snow, or just stay cloudy and bleak.

What made the day even more unbearable was it was the day we went to see our accountant. It wasn’t a meeting we looked forward to. Sometimes we would talk over the phone, or simply drop off our paperwork. Today, however, we were to “meet.”

Any red-blooded American knows what my wife and I were feeling as we walked up to the building. How much were we going to owe in taxes? Would we have the money to pay or would we be lucky enough to get a refund?

In years past I had sometimes taken it upon myself to prepare our own tax returns relying on what claimed to be the most cutting-edge software. But I still always felt I was missing something in the process. Maybe it was a particular deduction or just the lonely feeling of hoping to have someone tell me the tax return was OK.

Nevertheless, this year my wife and I had decided we ought to try IT again—that conversation with our CPA. The hope was that a planning meeting would actually help us save on some taxes. Maybe it would even benefit our retirement plans and we would accomplish “wealth building,” as some have termed it.

My wife had confided in me on the way there that all she wanted was to simply understand the concepts we discussed in the ominous meeting about to occur. She was embarrassed to admit feeling vulnerable and uneducated when it came to discussions about taxes and our finances. I didn’t belittle her or make fun of her. Deep down I felt the same way, but couldn’t admit it. I was trying to lead us into the lion’s den with as much faith and confidence as I could.

We arrived a few minutes early hoping to become familiar with the surroundings and thus lessen the intimidation we would soon feel. The waiting room was worse than a dentist’s office. At least you knew the pain would be over soon with the dentist, but with taxes we assumed we would be paying the bill to Uncle Sam well into the summer. What have they said now? We don’t start earning our own income until some time in April? Ironically, it will add insult to injury when tax freedom day finally falls on the filing deadline of April 15th.

The meeting started out as it always had in the past. “Let me see your records,” our CPA said. He lowered his glasses, started thumbing through everything—asking a few questions that we thought were insightful, at least for a moment, but the feeling was fleeting. We realized he was just looking for a number to plug into a specific box or place on a line in some forsaken IRS form.

I asked a question about saving some taxes this year, and he immediately brought up the list of itemized deductions. These I was familiar with, but really wondered if they had an impact. He said they did, but who knows? One just answers the questions hoping your CPA will smile and say, “Great! I was hoping you would say that.” But he never does.

“Where is the interest statement for your second mortgage?” ... “Didn’t you have some unreimbursed employee expenses at work this year?” he asked my wife. The typical questions simply caused us to regurgitate information, and no real planning was even considered.

Then came the comment from the CPA I most hated, “Well ... thanks for bringing in your medical expenses, but you phase out because of your income.” He usually then chuckles and says, “I’m sorry, you just make too much money.” I wonder to myself, it doesn’t feel like I make too much money. Why does he say it that way? Damn him.

dp n="22" folio="5" ?

This time was not like other meetings. No, this time my wife and I had prepared for the upcoming precious moment: THE MOMENT before we get up from the table and he says to come back in three weeks to pick up our tax return.

My wife squeezed my hand under the table, and with as much courage as she could muster, or out of frustration, or just pleading, she asked, “Isn’t there something we could do this year to save more in taxes? There has got to be a strategy of some sort.”

And then he said it. I actually couldn’t believe it. “Well, let’s see ... we could put something in your IRA. You know the limits went up a little this year.” I wanted to reach across the table and slap him!

I can’t count how many times I had heard this fall-back comment from our CPA. “Let’s just contribute to your IRA ... that will help.”

Is that really all I have to look forward to as part of the planning process? Couldn’t my CPA come up with something better than that?

Suddenly I had the overwhelming feeling I should have just bought another version of the infamous “software” at Costco last month. I could do better than this, and I don’t even know anything about taxes. I started to hyperventilate and was torn between yelling or falling back into my chair in complete exasperation.

My wife and I stared at each other wondering where the meeting would go next and hoping it would get better—and fast.

EXITING

I don’t know what I was expecting. My CPA was as old as my father. In fact, he was my father’s best friend for years. The irony was that we actually felt lucky to be working with him. He had expanded his firm over the years, but instead of having us work with one of his junior CPAs, he had agreed to work with us personally because of his relationship with my dad. Truthfully, I wondered if this was a favor or a curse.

Of course, a few years ago I had pressed him a little harder and demanded a different CPA in the office, one that was a little more creative. This was before I gave preparing my own tax returns a shot. That meeting went even worse.

The CPA was apparently creative, but we couldn’t understand a word she said. She was trying to elicit facts and goals from us and promised a plan that we could rely on to save on taxes. She started to explain how the tax code worked; I mean actually worked.

My wife left to go to the bathroom during the meeting that year and never came back to the conference room. I found her outside on a park bench drinking a latte from Starbucks and talking with a friend on her cell phone. She had gone into denial or flight . . . or something.

In the conference room I tried to fight it out for as long as I could. At one point I leaned over the table trying to understand her references to the Master Tax Guide, as she quoted chapter and verse. We even sketched out a few ideas, but they didn’t make sense to me. I seriously started to daydream about the summer vacation we were planning and forgot she was even talking. So much for a creative approach.

Why is it that CPAs are such poor communicators? It’s as if the IRS chooses the students they want to go through the accounting programs at college and become the future CPAs. That’s it! It’s a conspiracy!

If the IRS couldn’t confuse us themselves, they would leave it to CPAs to implement the plan of complete apathy and disinterest in tax planning or any hope of any tax savings.

The meeting this year was over. After the IRA comment, I just couldn’t muster up any more interest in the conversation. I looked over at my wife. She couldn’t even look me in the eye. She was just looking down at the table. I knew she had given up like I had.

To add insult to injury, we had a long walk back to the lobby. The illustrious CPA we inherited from my father was actually a partner and thus we had to meet in the corner office at the end of several turns and hallways. I couldn’t take it. I started to feel like I was going to have an anxiety attack and had to get out of there. I told my wife, “To hell with it! I’m just going to call back tomorrow and pick up our information. I can prepare our own taxes better than this.”

dp n="24" folio="7" ?

I grabbed my wife’s arm and headed for the nearest stairway exit. It was like a breath of fresh air smelling the cement in the stairwell. I didn’t even want to talk. I knew she didn’t either. We just started to walk down the stairs in a trance.

I can’t remember how many floors we descended before we realized we were at the bottom floor and we weren’t actually going to be able to exit directly outdoors. We would have to weave our way through someone else’s office.

As we opened the door into a darkened hallway, I quickly realized this unknown office was closed. I knew we needed to hurry and look for an exit to the front of the building. Although I felt like we were trespassing, the last thing I wanted to do was go upstairs and back through our CPA’s office.

We turned down the hall, and I realized that we were headed in the right direction and essentially the only way out. Hoping not to see anyone, I was a little nervous when I noticed a light coming out of an office door ahead of us.

My wife looked at me and without saying a word we started to smirk at each other. I whispered, “Do you feel like you are on America’s Most Wanted?” I loved to see her smile at my dumb jokes. It was my standard protocol to quote a familiar movie whenever possible. This little throwback was from Tim Allen in Santa Clause.

As we started to tiptoe down the hall and past the door—as if it would help on carpet—I could hear the people in the office laughing and talking with excited voices. I was immediately confident they wouldn’t hear us.

I then heard something that utterly shocked me. A female voice said loudly, “I can’t believe how much we are going to save in taxes this year! Why didn’t our old CPA tell us this?”

I stopped in my tracks and looked at my wife with wide eyes. I didn’t have to say it, but she could read my mind. Did you just hear what I did?

My mind was reeling. We were several steps past the door at this point, but I couldn’t bring myself to keep walking down the hall. What do we do? We couldn’t just eavesdrop. Awkwardly, we stood there frozen in our steps, and both of us wondered what conversation they could be having that was so powerful.

dp n="25" folio="8" ?

Wasn’t there a movie quote I could pull off the top of my head for my wife that would justify listening in? I couldn’t think of anything.

We just tried to listen through the crack in the door.

A LEAP OF FAITH

Well, it seemed longer, but it was probably only a few moments. All of a sudden we could tell the meeting was coming to an end, and it was going to be an odd situation to say the least if we didn’t get moving fast.

We started down the hall quickly. We got to the lobby of the office when the door behind us opened and we heard a voice holler out, “Can I help you?” We were stuck. I had to say something.

I turned around and blurted out a few words to the effect that we were coming through from upstairs and were just headed out. “No problem,” the voice echoed down the hall. “I thought you were here for my next tax planning appointment.”

Almost in unison my wife and I looked at each other with that “I can’t believe it look.” Our eyes communicated silently, “Should we say something?” I then audibly said to my wife, “Why not?” and smiled. She shrugged her shoulders in agreement, and we turned towards the voice.

As we waited in the lobby area for a moment, the “happy” couple, as I later termed them, emerged from the darkened hallway toward us. They were wrapping up their involved conversation. We exchanged a pleasant glance with the other couple. Then a confident young man said hello to us as he bid the happy couple farewell. I couldn’t tell if he was actually young in age, but he certainly was fit and full of energy.

Again he asked if he could assist us in some way. In a tentative voice I explained that when we heard the words “tax planning appointment,” we felt we might be interested and asked what he did. He stated in a matter-of-fact sort of way, “I’m a CPA and would love to talk. What’s going on?”

I thought this was a little too cavalier and casual for me, and was visibly taken aback. My wife jumped in and said, “Well, we were just upstairs meeting with our CPA, and it didn’t go too well. We’re a little frustrated.”

In an empathetic voice and with tongue in cheek, he said, “Ohhh, one of those meetings, huh? Didn’t go too well?” I immediately piped in, “That’s an understatement!”

He then popped off and said, “Why is it that CPAs have the hardest time communicating?” He laughed and added, “We don’t mean to be. It’s just the nature of so many of us. We’re just nerds and hate talking. You should see us in a bar trying to pick up a member of the opposite sex. It’s not a pretty sight.”

My jaw almost dropped to the floor. I was immediately captivated with his self-deprecating humor. I think my wife was beaming, too, and we both shook our heads in agreement.

“It’s crazy,” he went on. “Taxes are the biggest expense in our lives, but no one wants to talk about them. CPAs think the topic is either too boring and complicated or a conversation isn’t going to be helpful anyway. Then to top it all off, you have an industry of practitioners that are introverts and generally don’t want to have engaging conversations to complicate the matter.”

What planet is this guy from? It was almost sounding too good to be true. I think he could sense I was becoming a little apprehensive, and he quickly interjected, “I’m sorry, I don’t mean to beat up CPAs ... there are many, many great CPAs out there that WANT to talk with their clients. It’s just they’re hard to find sometimes, and a lot of clients don’t help the situation either.”

“What do you mean by that?” I asked. He was almost sheepish as he said, “Well, most taxpayers have become accustomed to three bad habits.” With his fingers and the animation of an infomercial he said, “First, people don’t think that paying their CPA more is actually going to result in savings on taxes. They shop for the cheapest tax return preparation fees like they shop for new tires. Who is going to be the fastest and most inexpensive?

“Second, millions of Americans with their do-it-yourself mentality have started doing their taxes themselves with over-the-counter software. The rationale being that if I can’t save taxes, at least I’ll save on tax prep fees.

“I think most people deep down know these aren’t the wisest approaches to preparing their taxes, but they look at tax services as a commodity and not really helpful. Is that how we want to approach the biggest cost in our lives? I don’t think so.”

My wife and I concurred, gave a look of encouragement, and nodded for him to go on.

“Finally, many taxpayers think that your tax refund or payment ‘is what it is’—that their tax return will be the same no matter who prepares it, unless there’s a mistake. When in reality, if you take your tax return to five different CPAs, you will more than likely get five different results. It all depends on the collective risk tole...

Table of contents

• Praise
• Title Page
• Epigraph
• Acknowledgements
• AN ELUSIVE DREAM
• CONCEPT 1 - THE SECRET TO TAX PLANNING
• CONCEPT 2 - A NEW PERSPECTIVE
• CONCEPT 3 - FOUNDATIONS
• CONCEPT 4 - TECHNIQUES IN BUSINESS PLANNING
• CONCEPT 5 - RENTAL REAL ESTATE
• CONCEPT 6 - LEAVING A LEGACY
• CONCEPT 7 - YOUR HEALTH CARE
• CONCEPT 8 - DISCOVERING PLUTONIUM
• MY RESOLUTION
• APPENDICES - ADDITIONAL RESOURCES
• ONLINE VIDEOS TO SAVE YOU MORE IN TAXES, BUILD YOUR WEALTH, AND PROTECT YOUR ASSETS!
• WHAT PEOPLE ARE SAYING ...
• Subscribe to Entrepreneur Magazine
• Copyright Page