Back in 2015, my income jumped significantly from about $220k a year to $535k that year.
Which was awesome…
But what wasn’t awesome was the tax bill I had at the end of the year.
Here’s a picture of it…
I owed $198,002 in taxes.
I remember thinking at the time that I had to be doing something wrong.
“There’s no way other people are actually paying this much in taxes on a $535k income“
So I went back to my CPA and asked…
“Is there anything else I can be doing to lower my taxes?“
I was hoping he would come back with a bunch of ideas of stuff we could do.
Nope.
He gave me the usual vanilla answer.
“You’re already taking as many deductions as you can take” he said. “There’s not really much else we can do. Be happy that you’re making so much that you have to pay that much in taxes”
I walked away from that meeting frustrated.
But I didn’t know where to turn.
So I just forgot about it.
And went about growing my business.
I didn’t really think about the tax stuff again, until February of 2016.
In February, I was hosting my yearly mastermind during Traffic & Conversion.
At one point we did a “quick share” round where each person shared one quick tip that would really help everyone in the room.
My friend Jon made a comment that “if anyone is making over $500k a year, and you don’t have a good tax guy, let me know and I can connect you with my guy who is saving me a boatload of money on taxes”
I remember my eyes lighting up when Jon said this.
So I pulled him aside after the mastermind and got some more info.
I found out that Jon was making similar to what I was making, and paying about $100k less in taxes!
I was pissed.
But I was also excited…
Cause I knew there was a better way, and I now had access to it.
So I immediately sent Jon an email while we were standing there.
“Reminder – connect Justin with your tax guy” I said.
Jon later connected me.
And after a call with his tax guys, I signed on to be a client of theirs.
It wasn’t cheap by any means.
But it was basically like free money.
I’d give them a dollar, and get back $10 in tax savings.
So fast forward to my first meeting with them…
I sat in their conference room for over two hours, and I had my eyes opened to all the shit I was doing wrong.
“There’s two types of tax payers in this country Justin, there’s the smart ones, and there’s the naive ones. Right now you’re one of the naive ones, but we’re gonna change that” he said.
During our initial consult, they laid everything out for me.
And showed me all the mistakes I was making.
Throughout the meeting, it dawned on me that the biggest mistake I was making was that I did not have a “tax strategist”.
Sure, I had a CPA…
But I quickly learned that most CPA’s are simply order takers.
You hand them your taxes, and then they tell you what you owe.
They don’t actually put in place ways to reduce your taxes.
They don’t setup multiple companies for you, and have them paying each other (thus drastically reducing your tax rate).
BTW this is what every major company does.
They have full teams dedicated to tax strategy.
But most entrepreneurs don’t do this.
And it’s usually cause like me, you’re just simply not aware of what to do.
At the time all of my income was just going from my LLC directly to me.
My CPA never told me I should be doing anything different.
So I was getting crushed on my taxes.
But when my eyes were finally opened to how powerful having a tax strategist was, I started to see the light.
And that’s the point I want to make…
The biggest mistake entrepreneurs make when it comes to their taxes is NOT having a tax strategist.
Right now, if you’re simply handing your tax stuff to your local CPA, and letting him tell you how much you owe…
You are basically donating hundreds of thousands of dollars to the IRS every year.
Sounds crazy, but it’s true.
And I know, cause I did it for years.
Which is the main reason I’m doing this whole series on tax stuff.
I don’t want you making the same mistakes as I did.
And I don’t want you paying more than you have to.
Make sense?
I’m gonna dig into this more over the next few days…
And share a few more of the mistakes I made…
And also what I’m doing now to save over $100k a year on my taxes.
Also…
Since I know people will probably want to know who I use for my taxes, I’ll talk a little bit about the guy I use on Weds or Thursday.
He specializes in tax strategy for high-income entrepreneurs.
And already works with most of the “big dogs” in our space.
He’s quite picky about who he works with.
But I’d be happy to connect you to him if you’re a good fit.
So be on the lookout for that…
I’ll be back tomorrow with another email about why you should run for the hills if your CPA says he’s a “conservative CPA”.
Talk soon,
– Justin
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