Hidden Cost on Your Federal Tax Return

Clear DirectoryTM member, Drew Miles from Tax Saving Professionals, is back on the show to talk about hidden costs on your federal tax return. So many business owners are afraid to take legal tax deductions for fear of an audit. Drew talks about how they work with business to maximize tax return opportunities. Listen to this episode to find out how to implement a solid tax strategy in your business.

 

 

Welcome to the In The Clear podcast! I’m your host Justin Recla. And today we’re talking to an expert who’s going to help you, not only save some money, but save some time. We like to bring our members back on to the show and really highlight what it is they’re doing and how they’re doing it because members of the Clear Business Directory are doing things differently, they’re really at that point in recognizing that the old ways of doing business the longer work and you’re in for a treat today because our guest today is Drew Miles from Tax Saving Professionals. And I really love what Drew does because in the area of taxes, you know, most business owners, at least from a due diligence perspective, it’s one of the areas that a lot of business owners really advocate their power to. And Drew is doing a lot of great things really making sure that you’re not only just doing your due diligence in the tax arena but he’s helping you save time and money as well. Drew, welcome to the show.

Thanks, Justin it’s really good to be with you.

Drew, so taxes I know you’re not…in full transparency here, it’s one of those things that I think every business owner dreads. It’s one of those, one of those necessary evil types of things. But you know I know in conversations that you and I’ve had, you know, paying taxes is not necessarily a bad thing. Matter of fact, paying taxes is a good thing because if you’re paying taxes, then that means you’re making a ton of money. And at the same time, there’s a smart way of going about doing that. So can you can you fill us…fill that in some?

Yeah sure. And I think you’re exactly right. So you know if you’re like most business owners you hate taxes. You hate thinking about taxes. You hate having your taxes prepared. It’s all very painful. And that’s the way it is. But…but you do have to do that every year. So you know a little kind of a footnote because something popped into my head while you were going through that list and you said very right, very accurately. Every business owner has to pay taxes and that’s true. I contrast that with there’s some folks out there to this day who are teaching that you don’t have to pay taxes because the Tax Code was never properly passed. The 16th Amendment, I think it is, was not ratified and dot, dot, dot. And you want to avoid those people. If you hear that kind of conversation, go on and run. Just run.

So, the other part of it is that there’s a great deal what we’ll…none of us likes taxes. none of us likes paying taxes, preparing taxes or any of that stuff. There are lots of things that business owners can do to effectively and legally minimize the amount of tax that they pay and that is perfectly OK to do, Tax Planning, we call that. And so that’s what our company is all about.

Yeah. And what I love about what Tax Saving Professionals does…what you guys do there is you look at taxes completely differently. I know a lot of CPAs, a lot of accountants, a lot of people in the industry that are either far to the left on how they do things, or far right on how they do things and the way I kind of see this, you guys are somewhere more in the middle because the people that are on the far left are the ones that are going to jail, the ones that are on the far right are really airing on the side of conservativism. And they’re, you know, they’re the ones that are not really willing to dig into the Tax Code and they’re playing it extremely safe. And unfortunately, I think that’s costing businesses more money in the long run because either through their own ignorance or because they’re not willing to dive in or whatever it is that they’ve got going on. But it keeps businesses so far to the right that they’re actually losing money because if they come back to the middle just a little bit, they’ll find that they’ve been overpaying on taxes, that there’s other deductions that they should have been writing off and so forth. And that’s what I love about what you guys do is you really help them uncover that stuff. Just…just center of where the conservative tax people are. What does that typically look like for your clients?

losing money

They are likely overpaying between $5,000 and $100,000 a year.

Yes. So it, depending on who…on the client’s income and their current tax obligation that…that means that they are likely overpaying between $5,000 and $100,000 a year. And again, you know, we’re talking to a broad audience, right? So that’s completely dependent on how much you’re making and how much you’re paying. If you’re an…if you’re a new business owner…if you’re a business owner of any kind making very little money in business but you still have your job, you know, salaried position then there are tax benefits that your business can bring you that can…that can greatly reduce the tax, your taxes even though your business is making very little money. On the other…on the other end of the spectrum are folks that have ongoing businesses. They’re making, you know, upwards of a million, million and a half or more a year. And those are the folks that are paying two, three, four or five hundred thousand dollars a year in taxes, may be more. And we often save them you know $100,000 a year. So the amount we can save is going to be dependent on your income and your current tax liability. But I’m not even…I was going to say I’m going out on a limb. I’m not going out on a limb I will tell you categorically that you are if you’re in business and you’re paying taxes using the system that most people are familiar with, you’re overpaying. And I say that because we’ve worked with tens of thousands of people. And I’ll tell you there’s one person in our history, one person that was using every strategy that we use and a little side note, she is an attorney, formerly worked for the Department of Justice prosecuting Tax Fraud cases. And so she kind of she had a head start. Her name was Angeline Hall or she liked to be called Annie Hall and I hired her. She had…she had things so you know done, was doing things so, so well that we hired her and Annie worked for me for three or four years. The good news is that we, that we never stopped growing and learning and improving. So we had added strategies that were not available when she was, when she came on board. So if she came on…she came to me today then I’m sure we could save her taxes too.

So Drew what is…I know…I love what you just said about using the tax system that we’ve all been using for the last…for years. It is…what’s your opinion on why…why that…why that system is being in place, why it is being taught like that for business’s use, and the accountants’, the people in the industry? Why do they use it like that? Why do they continue to stay there?

Great, great question. So the system’s got its problems but I’d say that the biggest problem isn’t the system. It’s that most business owners think

tax system

I’d say that the biggest problem isn’t the system

their CPA’s job is to minimize their taxes. And that’s not the case. I mean I challenge our listeners to call up your CPA and say, “Are you finding me every deduction that I’m legally entitled to?” or something like that. And they’re going to say, “No that’s not what I do. What I do is I make sure you’re compliant” and what they mean by that is they make sure they go through that you’re filing the right tax form with the right numbers on the right line and you’re filing it you know, prior to the deadline and paying the right amount quote unquote based on that calculation. So it’s not that they’re not doing their job, it’s that their job, what you think their job is, the business owner, and what they think their job is, is two different things. And because of that, you know, it’s like you go to the wrong doctor. They’re going to give you the wrong answer. They’re going to give you the wrong result.

It’s like going to the foot doctor when you got gout.

So. Yeah. You know it’s like….exactly. So and you can’t blame the doc and you can’t blame medicine. There’s, you know, there’s problems in both of those areas but you don’t have the right expert to deliver the results we’re talking about. And that’s why, you know, I know and again, we’ve reviewed tens of thousands probably hundreds of thousands of Tax Returns and without fail, folks are overpaying because they don’t have somebody doing the tax strategies. And that’s what makes Tax Saving Professionals different. It’s about the strategies and implementing those strategies at a very high level to get you the results.

Awesome so the great question here is that, do you then work with the CPAs of those businesses to make sure that, not only for the compliance stuff but, you know, the work, you work with them directly so they know exactly what they’re doing or do you have your old people at the house?

Yeah great question. So currently probably 80 to 90 percent of our clients continue to work with their own CPA and it’s only in the last year or so that we brought a team on board to do Tax Returns because we found that more and more clients…well, two things. One is more and more clients were asking us for a referral to another CPA because they just…their CPA just wasn’t getting it. And then the second thing is and I think I’ve shared this before is that, we found that working year after year with clients, we began to get feedback that was something, you know, something along the lines of, “We’ll I’m not getting all the benefit of your service because my CPA refuses to take certain deductions.” And well, you know, you have to understand we know the Tax Code, pretty well. We know how to document really well. We’re very confident. You know it’s not like we’re hedging our bets or you know kind of hoping and praying that what we do works. We know our stuff. So when a CPA or Tax Professional, Tax Preparer says, “No I’m not comfortable doing that.” it’s because they don’t know the rules and so they’re applying their misunderstanding to the facts and they’re coming out with the wrong answer. So you know it’s putting bad advice on top of good advice. And so because of that we just we said, “You know what, if you can’t get the result, we’re happy to have somebody here do your taxes.”

Fantastic. Drew, just one second I want to make sure we take a quick break for a commercial. A commercial message from one of our sponsors and we’ll be right back.

Awesome. So Drew, prior to the break, we were talking about the misunderstanding that CPA is having that you do work and that 80 to 90 percent of your clients are in fact with…stay with their CPAs. But oftentimes, you find people leaving their CPAs or wanting recommendations and so you offer those services. Part of that conversation was that oftentimes business owners find that the   CPAs are uncomfortable with taking some of the deductions based on the strategies that you solve for your…find for your customers. How long have you been doing this? I just want to kind of put a frame or reference in place so our listeners know that this is not just something new.

Thanks. So I’ve been an attorney almost 30 years, about 29 years now. And on our team, our folks, like Tax Attorneys, CPAs, enrolled agents, who have a minimum of 10 to 15 years experience either preparing taxes, handling audits et cetera et cetera. So folks that are highly trained to know the Tax Code and all with good results. In other words you know our clients get audited from time to time. Anecdotally it appears that they get audited about half as often as the general public. But I’ll tell you that they, that the few audits that we do hear about during the year, they actually have come out as, well, actually better. If I told you…if I told you they come out better, it’s almost that you think of…I’m making up stories. But in fact they come out better as a result of becoming a client and here’s one of the reasons Justin. It’s pretty simple. It’s not…it’s not magic. It’s that most CPAs don’t collect or create the proper documentation to take deductions in the first place. So they’re the ones playing the lottery. And you won’t hear CPAs talk about it, you know. Normal people, normal business people don’t understand the language. So when you hear a CPA say, “We don’t want to raise any red flags.” that sounds like they’re telling you don’t do that thing that one strategy because it’s a problem. But that’s not what the problem is the problem is all the other stuff that they’ve done in your Tax Return without the proper documentation that they don’t want to be found out for.

Yes. So it’s only it’s only a red flag because none of it’s been set up right. And it would be a red flag. So if you did get out of it, there was no paper trail, there’s no documentation, there is nothing to support the strategy, so therefore it’s going to be a red flag. But what you do is you come in and your team puts all those things in place, in accordance with the Tax Laws. So you can take that, right?

That’s exactly right. That’s exactly right. So you know they often don’t know where the…what the rules really are so they don’t know where the line is drawn. And the only way that they can keep from getting themselves and their clients in hot water is to be so far away from the line that it’s not them giving up the money. It’s the client, you, the business owner that’s paying the penalty for that…that lack of clarity. And so, yeah, we come in, we know where the line is drawn, we follow the rules and our clients are in good standing because of that.

And I would imagine that there’s some…a lot of other things that go into that. I mean, you know, a CPA is also a business owner and so they’re all, you know, they’re protecting their own, their own business interests and so forth and they may have some fears because if they are doing all that additional work, they might charge the client more. You know that conversation that goes into place when you’re running your own business. But I think you highlight a fantastic point of, you know, from a due diligence perspective that, you know, asking your CPA, “Well why is that a red flag?” You know, “Why would that be, if it’s a deduction I can take, why would it be a red flag?” And I think that’ll give the business owners an insight as to exactly what that CPA is doing for their business.

That’s a great point. And to educate them because they’re going…they’re going to get an answer right? But they can’t…they don’t have typically…I want to give them the tools to evaluate the answer. If the answer says, goes something like, “Well in my experience…” or you know, “I’ve come to learn that.” or something like…something that has to do with their…the length of time they’ve been in practice preparing taxes as opposed to, “Code section such and such provides for the following…” Then what you’re getting is their educated opinion and that’s why you’re over paying taxes because they’re educated opinion is based on a misunderstanding of the Tax Code.

Exactly. Now and from that misunderstanding, is that…is it just that CPAs are more…..because they don’t understand it they are more likely pulling to the right and be more conservative or is it your experience that they just don’t want to do the work or they might think it’s too much…costs too much or is it too big of a risk to their own business. What’s the…you know, if they’re aware of it, what’s the number one cause that…why CPAs don’t follow those strategies?

Well, a couple of things. Number one is client often…they often don’t collect the right documentation from a client. And without that documentation, they can’t take the deduction. Gone are the days where you could, where you could put something in the Tax Return and kind of hope that: a. they wouldn’t get…they wouldn’t get pulled for audit or b. if they did the client would, you know, miraculously come through and provide you with the documentation. CPAs actually pay a penalty and put their license in jeopardy, not for taking deductions that they’re entitled…the client’s entitled to take, but if they take those deductions and the client or they don’t have the documentation to support it, the CPA can get in hot water. So you take a conservative group of people, you add a few rules and you make them ultra conservative. And by conservative, I mean they’re not taking valid deductions. They’ve got a reason for it. And that is they don’t have the documentation. But that’s what we do is we create it. And let me give you a concrete example because I don’t mean to be mystical about this. One of the classic examples of a deduction that a CPA will forego is the Home Office Deduction. Now most small business owners and I’m talking about businesses with zero to five employees. Most of those owners have an office in their home. They’ve got a computer in it, they got a phone, they got a desk, you know, it’s a real office…I’m not talking about the stuff that’s not real…a real office…honest to God they do work there. And yet the CPA will say, “You’re better off not taking the deduction, that deduction, because it will raise a red flag.” And here’s where that thinking comes from. Number one, they don’t know what the document, proper documentation is and they don’t collect it from the client. So it’s not the deduction, it’s the fact that they don’t have the documentation. Let me tell you what the documentation if it’s easy enough. It’s a floor plan of the house, could be on graph paper that you, you know sketched out. I’ve done that myself. Or if you had the house built fairly recently you got a set of blueprints or a floor plan, bang, that’s all you need. Take a few pictures. Everybody’s got a smartphone now. Just take a few pictures. And then you can do the calculation or the CPA can certainly do the calculation. Here’s the total square footage. Here’s the square footage for the office. The common areas, the lavatory that’s the office lavatory et cetera et cetera…that’s what you need. When you don’t have that documentation or when you stretch the truth, and I’ll give you some fun examples of that, that’s what gets people into hot water. So back, oh I don’t know, probably 15 years ago, there’s a cosmetics multi-level marketing, I think, cosmetics company. Yeah they’re an MLM that provides pink Cadillacs for certain qualified sales people. And they got in the idea of somebody, some, not from the company, but some rep got this idea that if they displayed inventory in each of the rooms of their house, they could deduct their entire house.

So they had…they had some makeup in the bathroom and some make up in the kitchen and some makeup in the living room and some whatever. Whatever they do, whatever they sell and they spread it around the house and they said 100 percent of my house is my…it’s basically my retail store. So I’m going to deduct the whole thing.

Creative!

When people do…very creative…very creative. But the IRS had a different word for it. And so they not… so this is how the IRS works right? It’s a Federal government. When they see somebody that belongs to a group doing something wrong then they go, “Aha! I bet you there’s some other people in that group that are doing it wrong.” So then they went out, you know, to all the people in that cosmetics company and they looked for that and they found a lot of it because, you know, that creative idea spread like wildfire, and then they said, “Oh it’s not just the pink Cadillac people, it’s all most multi-level people so then they started going because these folks do talk to one another and before you know it they see this rash of Tax Returns that are coming in with 70, 80, 90, 100 percent of the home being deducted with the same strategy, it’s just a different product. And they take…and they slammed down on it and they were talking about disallowing the deduction but also charging penalties and interests.

Wow.

taxes stress

It’s not that the deduction is risky, it’s that misusing it is risky.

So that’s where, you know, the IRS has got a lot of power right? They can…penalties and interests often accumulate to be a multi…many times what the actual tax little on the savings was going to be. So somebody went from saving a thousand bucks a year to owing the IRS 10, 15 thousand dollars and it wasn’t one person, it was tens of thousands of them. So the CPAs in response went, “Whoa. The Home Office Deduction is risky. I’m not going to let you take it.” It’s not that the deduction is risky, it’s that, that misusing it is risky.

Yeah. Wow that’s, that’s some good insight. That right there I know just from experience. I worked with CPAs in the past, took that and found our taxes that, you know, we didn’t stick around with. That’s what I think would…that’s probably one of the most common things that you hear of, “Yeah. You take it, but it’s a red flag.” You know, which is, if you’re…if you truly run your business out of your home, well that’s a deduction you should be getting. That’s a great example of how one little idea misused can get…can spread like wildfire and cause an entire industry to take action one way or the other. That’s absolutely awesome. Drew where what, what exciting things or new projects do you have working on? What would you like to share with our listeners about what’s going on right now with Tax Saving Professionals?

Yeah, appreciate it. So I would say that one of the several things that I’m really excited about but the one that’s going to be relevant to your listeners is really who now we are working with. So I built this business by speaking at seminars and traveling around the country and working with folks who either had one business and they were adding another one or they had one profession that was a salaried position and they were starting a business on the side. And for years that’s, you know, we built a very nice client base and for various reasons in about in 2009 we changed up our marketing and when we did, mostly because of the, you know after 2008, with the recession, those kinds of seminars were just not as popular, people couldn’t afford them and whatnot. So we changed up our marketing and as a result we began to get calls from people who were making more money, same you know variety of business owners all over the US, a lot of doctors, a lot of dentists, but folks that were making significantly more money. I’m talking about, you know, half a million to a million half, $2 million, as opposed to the folks who are making $100000 or $150000. So we had to retool the entire business because we’ve got to service the needs of the clients that want our help. And as a result. We left behind kind of, unintentionally, the business owners who were making 100, 200, $300000. So kind of opened up my eyes to that a year and a half or so ago, and we began to put together a different program that we’re now offering and it’s for that group of business owners. So basically our clientele, the folks we can help, our business owners, anywhere in the United States, whether their business is brand new and just beginning to generate revenue, or whether they’re bringing home, you know, a million and a half, two million dollars and anything in between. And so that’s really exciting to go back to our roots so to speak and work with the hard working entrepreneurs of the country that, you know, want to provide for their families, want to provide a financial future for themselves and have some financial security, that’s who we can help now.

Fantastic. Fantastic. Now I was just looking at your profile that said the Clear Business Directory. Drew, where can our listeners go to find out more information about what your services are?

Yeah, our website. I’ll give you our website and phone numbers. Our website is www.taxsavingpros.com.

Awesome.

And our phone number here in Vero Beach, Florida 772-228-7702.

Fantastic. Folks, you’ve been listening to Drew Miles from Tax Saving Professionals. If you are overpaying in taxes, if you think you’re overpaying in taxes or if you’re looking for new tax strategies that’s going to save you some money, give Drew a…check Drew’s profile in the Clear Business Directory. We got some directory in his website and the phone number he just gave. And have a conversation with their team. I’ve talked to several people in their office and they are just absolutely fantastic people. And I’m so grateful to have you on the show again today Drew, so thank you for being here.

Justin, it’s great to be with you and your folks and I appreciate your support.

Awesome. And before you get involved with anybody, make sure that business is in the clear. Perfect.

Good job man.

Thank you.

Good luck in everything you’re doing.

Awesome good stuff. Well we’ll be in touch. I’ll let you know when this one airs. It’ll probably be in two or three weeks out. And we’ll go from there.

2017-06-26T18:21:18+00:00

About the Author:

Justin Recla has over 13 years experience and advanced training with the US Army and federal government. He is a subject matter expert in tactical questioning, surveillance, counter espionage, threat and vulnerability assessments, and investigative techniques. He is an educator in concepts of effective communication and has taught hundreds of future federal agents how to conduct interviews and investigations. Justin brings his skills from the military sector and delivers them to the boardroom to help business owners protect their two most valuable assets: Time & Money.