168 \\ Part 1: Your CPA Might Be Working Against You – Here’s How to Tell (Part 1)
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You've been lied to and told that your biggest expense as a business owner are the wages that you paid. I'm here to tell you that is not the truth. And...

By misunderstanding what you really need to focus on, it is leaking your profits, reducing the amount of cash you have in your bank account. So I wanted to explain what exactly this biggest expense is and what you can do to reduce that moving into the new year. Let's go ahead and jump in.

Hey friend, welcome to the small business finance podcast. Do you want confidence and clarity with your business finances? Do you find yourself up late at night searching for tax deductions, how to track your business finances or for QuickBooks tips? Do you wake up with big ambitious goals, but you end up feeling confused and frustrated because accounting and tax is really foreign?

Hi, I'm Tiffany. I've heard this so many times from clients who used to feel this way. They felt overwhelmed about what to do with their numbers and wish that they could stop the financial madness. They wanted clarity and the ability to grasp the financial basics, know who to call when they had a question, and to stop worrying about owing money to the IRS.

but they thought they weren't good with numbers and the overwhelm kept them stuck without any solid financial plan until they realized that business systems are the ticket to gaining financial confidence. In this podcast, you will learn step-by-step systems, easy to understand financial tips and mindset transformation so that you will gain financial confidence as an entrepreneur. Dust off your spreadsheet, warm up your coffee and let's get going.

Too many times I have heard over the years, business owners say that their biggest expense is their payroll, the amount of wages that they have to pay out to either themselves and or the employees and team that they have. And make no mistake, that is a very large expense. It is definitely a big ticket item.

in your business. The only way it's not is if you're a one man band and you really don't pay yourself. Otherwise, payroll is a huge expense. The problem is that it's not your biggest expense. Your biggest expense, if you really were to put pen to paper, are the taxes that you pay. There are so many different types of taxes from the biggest one being federal income tax. That is what is paid into the IRS.

State income tax is right behind it. And then you get into things like sales tax, property tax, etc. There's fuel tax. There's a tax when you die. There are literally so many different taxes and it has become so normal and commonplace that I think that most people look at that and don't really even consider asking the question, what can I do to reduce these taxes?

And it's unfortunate because there are actually quite a few things that can be done to reduce your taxes. And it's a matter of just looking at it and partnering with the right people and knowing that it is within your control. Now, I will say before we dig in too much to this topic that the likelihood of you reducing your taxes to zero is basically zero.

It is possible to do some strategies to actually reduce the taxes to next to nothing or technically down to zero. There are treaties with U.S. territories that allow you to move to them. U.S. Virgin Islands is one of them. You can actually move to St. Thomas and then you get some pretty amazing tax benefits for doing so. There are a couple of those.

In actuality, most people are not willing to do that. Don't get me wrong. I would love to live on a tropical island. Being in Houston, we do get impacted from hurricanes from time to time. And I can tell you that being in the middle of the Caribbean on an island with a hurricane coming probably doesn't sound the best to me. I love to visit islands. I'm all about it, but I try not to do that during hurricane season. So for me personally, that's probably out.

So the question is, what can you do to reduce your taxes? The short answer is there's quite a bit that you can do, but you have to work with a professional that knows what to do, knows where to look and how to do it legally, ethically, and in a way that makes you audit proof

And that is really the driver for reducing your taxes, because it's really not a matter of if you can reduce your taxes or can you reduce your taxes. I'm here to tell you, you can. You absolutely can reduce your taxes. So the question is, what professional do you need to partner with to make that happen?

And taking it a step further, my guess is you already are working with a CPA. If you're a business owner and you don't have one and you're doing all of your taxes by yourself, then I can tell you for sure you're overpaying in taxes. But even with working with a professional, you are definitely overpaying as well. You are not exempt from overpaying in taxes simply because you're working with a professional. The only caveat that I would say on that is if you're working with someone who heavily focuses on

tax strategy, tax advisory, tax reduction, and that sort of thing. And you can tell the difference when you're partnering with someone that does that versus your tried and true typical accountant that my guess is the most of you are working with. So with that said, the real question is, how do you know if your accountant, your tax preparer is on your side or the IRS's side? Which side are they on? Because they have to pick a side.

And they might even be alluding to the fact that they are on your side. But in reality, if they're not reducing your taxes, they're playing on the IRS's team. And while those words may not come out of their mouth, that is the hard truth. So how do you interview your CPA or tax preparer to know for sure

if they are on your team. Are they working for you or are they working for the IRS? I have three questions today that you can ask them by no means is this an all-inclusive list of questions, but these are really good ones to at least start the conversation and allow you to know once and for all if your CPA is on your team and helping you out in reducing your taxes or not. And if they're not, then this gives you the information that you need to make a change.

We are almost at 2025. We're into the year right now as you're listening to this episode, which means a lot of people are considering the various services that they have and trying to figure out if the people they've been working with are the ones they want to continue working with. Is the strategy that you've been doing previously, is it the one that you need to continue with? What changes need to be made into the new year?

And if you don't have a tax strategy, then getting one and putting that into place in 2025 needs to really be at the top of your list. So let's talk about the three questions that really will indicate what you need to do and the approach that you need to take as far as your tax strategy in 2025. The first question is very telling. I'll just put it to you that way. It

It is how often will we meet during the year? It's a very seemingly innocent question. How often are we going to meet? But it actually is very telling. Too many times what ends up happening is you only meet with your CPA when you've got a question.

or when you're getting the tax return, if you're lucky. A lot of times that's not even happening. And I can say that with conviction because prior to making a switch in my own firm, where we started transitioning to tax advisory and really focusing heavily on reducing our clients' taxes prior to that, that was me. I didn't have a lot of time to meet with my clients. And so I let them dictate when we met and said,

The only time that really happened was when the client was asking for the meeting. I see the error in my ways now. At the time, it was really a survival of the fittest and trying to get through all this IRS paperwork and documentation and all the things. And it was a lot. And trying to juggle all those things and even begin to consider being proactive was just, it just wasn't happening. And it was next to impossible from just...

just all the time constraints that I had as a business owner. Obviously, that has changed now. And so what I can tell you is that with us, with our tax advisory clients, we meet with our clients at a minimum four times a year, once a quarter. And in reality, it's more often than that, especially when a new client is coming on board. We're onboarding a new client. We meet more than that in the beginning because obviously we've got to get you in our ecosystem. There's lots of questions. There are just a lot of things that have to be done at the front.

And then it becomes once a quarter at a minimum. And then if there are other things going on with the client, then we meet more regularly than that.

So the bar that you need to set with that is you need to be meeting multiple times a year and the CPA needs to be reaching out saying, hey, it's time for us to meet. We need to go through, get some updated financials. I need to know what's going on. Really being the one that is driving the conversation and dictating, hey, it's time. Let's have a conversation. If you're the one dictating the meeting time and you're the one requesting it and the

you're out of alignment, it is backwards, and that they are not proactive. The second question that you need to ask is, how much do you normally save your clients in taxes every year? If your CPA is actively helping clients reduce their taxes, they probably have a really good idea of what that looks like. I can tell you on our end, at a low end, we're helping clients save 25 and 30% every year.

And often much more than that, depending on some of the strategies that they decide to do. We bring strategies to our clients. We explain them. We list out the pros. And if there's cons, we always share that as well. We back up everything that we share with IRS tax codes and U.S. tax court cases and a variety of different things that back up and solidify why we believe various strategies are within the tax codes and legal.

And when we do that, we are explaining from start to finish what it looks like, answering these questions, literally holding the hands of our clients to make sure things are done the right way. And in doing that, we've just gotten really good at knowing how much we're saving our clients. We actually go through and do an entire report at the beginning of the engagement that we

shows exactly where the savings comes from, how we do the savings, what it looks like, and we provide that report to our clients. So we can say with definitiveness, we save X dollars with our clients. And if your CPA is serious about tax tragedy and serious about helping you reduce your taxes, they should be able to do the same thing with you. They should be able to tell you how much you're saving in taxes each year. If they are not able to

give you some sort of a definitive answer or tell you we saved you X dollars in taxes by doing this strategy and that strategy and literally give you a list of the things that have been implemented, then they're not reducing your taxes.

The third question that you need to be asking is, can you provide examples of tax strategies you've implemented in the past to help clients legally minimize their tax liability? We have an 85-point tax strategy system where we go through and determine where you can save taxes. And honestly, at this point, it's more than 85 tips. I haven't gone through to add up the things we've added since I developed that coined phrase of 85 tax tips.

and strategies, but there are a lot. And so when we are assessing a new client to see where can we save these strategies, there are so many different ways to save on taxes. And that's why I can tell you that it's

It's not a matter of can or if you can save taxes. It's just a matter of what is the best way. What's the best strategy in partnering with someone who can give you guidance on that and help you see a clear path, give you the information that you need to then make the choices. And at any point in time, if a client says, hey, what are some other things we can do? There are a multitude of different things that we can do.

share and provide and help clients implement. And it's the same thing whenever you're interviewing your CPA or a new CPA. You should be able to get definitive examples of clients

strategies and ideas that they've done historically to help clients. Typically, there are some various levels of tax strategy. You've got some beginner strategies that just about everybody can implement. You've got more intermediate or advanced. Sometimes those are niche specific strategies. So something like real estate strategies, things that are specific to your industry. And sometimes those advanced strategies really get into this

wealth accumulation. And so as you get into this plan to divert income from the IRS back into your own ecosystem of finances to build wealth and get to the next level, if that is happening or not. And my guess is your gut is telling you yes or no. It is happening or it's not. And the professional should be able to literally give you, we can do this and this and give you a series of

strategies and ideas that could be possible for you. That does not mean that they're giving you all the answers. We don't do that. We don't dig in and actually create a tax plan until someone becomes a client with us. By no means should the professional do a bunch of free work. I don't advocate for that at all. They should be compensated for the work that they do to help you reduce your taxes. So by no means do I want them to open up the hood, do a

and show you this stuff without there being some sort of an official engagement. But there should be a clear path, a clear plan, and clear ideas and examples of things that they've done historically. And as you can see, even with these three questions, and there's more than that, there are so many more than that, you should be able to go in and grade either your existing professional or one that you're interviewing to see where they...

align. My recommendation is to go in and actually create a checklist of understanding on a scale of one to 10, how the professional fits. How are they graded? Are they a plus student or are they failing miserably? If they're failing miserably, then I think it is safe to say that you probably need to make a change moving into the new year.

If they're doing okay, they're C plus, and there's some reason beyond your tax liability that you really feel that they're still the right fit for you, then obviously you're the one making that choice. It is your money, it is your business, and you get to decide that. No one gets to decide that for you except you. But at least you have a report card and you know what's going on. If you're in a good situation or a not so good situation, and then you can make a change if you decide to. And...

I hope that just these few questions are helping you jog your own memory and your own mind on things that could be done to expand your knowledge of just your finances and what's going on. Questions to ask. A lot of times we don't know what we don't know. And so having a little bit of direction to just ask the right questions and get to the answers so that you can solve the problem and find a solution, that's really a

A lot of times for me personally, when I'm trying to solve a problem in my business, I just need some direction to understand what's going on. And so I hope this has been helpful to you and you've been able to understand a little bit of some of the things that you should be assessing, especially going into this new year, especially getting into a year of a lot of changes in the tax law. I've had other podcast episodes where I've talked about the fact that

And there's going to be a lot of tax laws changing next year. You want to make sure that you have the right professional by your side to help you navigate those things. If you don't have that and you have decided after listening to this episode that you need it, go to the link in the show notes. We'd gladly review your specific situation, see if it's a good fit.

for us to help reduce your taxes. The reality is you might not be. We might not be a good fit for you. You might not be a good fit for us. And so the only way that we determine that is by having a little date. So we have to have a 30 minute conversation where there is literally no obligation and it's free. So book a time to talk. We can see if it makes sense. If it does, we can move forward. If it not,

then you have a little bit more information, a little bit more knowledge to find the right fit for you. With that, thank you so much. As always, I am appreciative of you. Thank you for showing up each and every week, listening to the podcast, sharing it with your friends, leaving me five-star reviews. It does not go unnoticed. So I appreciate you and I cannot wait until next time.