Episode 30: Did You Leave Money On The Table This Tax Season?


The 1st returns under the new tax code have been filed, and many of you could have done better. In this episode Tom explains the common areas you and your CPA may have overlooked, costing you money. Tom also offers tips on how to avoid mistakes next year.


02:04 – Are You Taking The 20% Pass-Through Deduction?

03:01 – How Do You Talk To Your CPA?

11:03 – Is Your CPA Willing To Learn?

11:54 – What You & Your CPA Need To Know About Bonus Depreciation.

13:58 – How Often Should You Meet With Your CPA?

14:37 – Why Do CPAs Avoid Calling Clients?


Announcer: This is The WealthAbility™ Show with Tom Wheelwright. Way more money. Way less taxes.

Tom Wheelwright: Welcome to The WealthAbility™ Show, where we're always learning how to make way more money and pay way less taxes. Hi. This is Tom Wheelwright, your host, founder and CEO of WealthAbility™.

Tom Wheelwright: Here's my question for you: Did you leave money on the table this tax season? I presume all of you know we had a major tax law change in December of 2017. The first full year of this tax law was 2018, which, for a lot of you, that means you just filed that 2018 tax return, others of you have your 2018 tax return on extension.

Tom Wheelwright: I had the privilege over the last several months, really, during the tax season speaking to a different entrepreneur group about every week, anywhere from pharmacy owners to Amazon resellers to collision shops to real estate investors. I mean, I got a really full gamut of people. It was so interesting talking to people because I'm up there talking about some of the new changes in the tax law, and I'm seeing these looks on people's faces of, “What are you talking about? I never heard about this stuff before.” So much so… I mean, I was at an event. Just after April 15th I'm at this event. It's a small group. I have 50 entrepreneurs in the room. I asked them. I said, “How many of you have heard of this 20% pass-through deduction for small business owners?”

Tom Wheelwright: Not one raised their hand. I'm just like, I'm in shock here. I'm going, and I ask them, “How many of you have professional tax return preparers like CPAs or enrolled agents?” They all raise their hands. What's going on here? There is a disconnect between the tax advisor or tax preparer and the client. Clearly there is a disconnect here.

Tom Wheelwright: I do have a show for CPAs, The WealthAbility™ Show for CPAs, and I've talked to my CPAs about this, and now I want to talk to you. You're their client. The question I have for you is what's your relationship with your CPA? How do they talk to you, and how do you talk to them because that relationship with your tax advisor is going to have a bigger impact on your financial future than any other relationship in your life other than your spouse, more than your children, more than your parents, more than your business partner because taxes are your single biggest expense. What kind of relationship do you have? Are you talking to them on a regular basis?

Tom Wheelwright: Here's what happens. Remember, us CPAs, we are not known for our stellar personalities. That is not our great skillset. We need to make an effort to make sure that we're talking to you, our clients, on a regular basis. The other side goes as well. You need to make sure you're talking to your tax advisor on a regular basis. Let me give you just a few of the stories I heard during this first post-Trump tax reform tax season.

Tom Wheelwright: First of all, I'm in Dallas, and I'm talking to a bunch of Amazon retailers. Their business is on Amazon. I'm telling them about this new deduction for inventory, and I'm not off the stage 30 seconds… First of all, when I'm on stage, I tell them about this, and I get this humongous round of applause, I mean, spontaneous round of applause when I tell them about this new tax benefit. I get off the stage, and I'm not off the stage 30 seconds, and two of them, two of the participants come up to me. They say, “That's illegal. You can't do that. Here's what the IRS website says.” Actually, it scared me. It scared the daylights out of me. I'm doing, “Did I just tell 200 people something completely wrong? I'm not that sure myself.”

Tom Wheelwright: I went up, and I actually spend four hours researching it until I found a footnote in the explanation of the law, it's called The Bluebook, I found a footnote in the explanation of the law by the people who wrote the law, the staff of The Joint Committee on Taxation, that actually spells out how to do what I just told them to do. I'm going, “Whew. Thank goodness.”

Tom Wheelwright: Well, then what I get is I hear later that there was a CPA in the crowd that was going around telling everybody, “If you do what Tom Wheelwright says, you're going to get fined by the IRS. You're going to pay a 40% penalty.” I'm going, “Wait a minute. Let's think about the relationship here. First of all, should you just take what I say for fact? No. Absolutely not. You should not. You should ask your professional advisor about it. What I would hope your professional advisor would do is say, “Is there a way for me to get in contact with Tom Wheelwright because I'd like to understand this better.” Maybe, maybe your CPAs wrong. Maybe your CPA doesn't understand the law. Maybe I actually do understand the law.

Tom Wheelwright: I don't know. I mean, I'm not always right. I'm always open. That's why I spent four hours researching it, even though I'd already spent a good 10-20 hours researching it previously. I went back, and I'm going, “I will research this again until I know for absolute fact that there's nothing preventing us from doing what I'm suggesting.”

Tom Wheelwright: Your relationship with your CPA should including questioning them. For example, this CPA, first of all, if they're not your CPA, I don't know why you're listening to them either. But go to your CPA and say, “This is what I heard. I was at this conference, and this is what I heard. Would you look into this?” Now, that's exactly… A month later, I was in Florida doing a presentation to a group of independent pharmacy owners, and I'd actually done a webinar with them back last November. I had gone through this inventory deduction, because this inventory deduction is huge for pharmacists, I mean, huge, Because they're fundamentally retailers and they qualify, most of them qualify for this deduction.

Tom Wheelwright: I'm just walking in the first day. This is before the conference has even started. I'm walking the first day, and I'm stopped by two guys who own a pharmacy together. They said, “Tom, you must've known that we were just talking about you.” I said, “Really? Do share.” They tell me this story. They said, “We were doing our year-end planning with our CPA, and our CPA calculated that we were going to owe $400,000 in taxes. We were just like flabbergasted because we did not have $400,000. The CPA says, ‘Well, you should just be happy. It means you made money.' We told him. We said, ‘But we don't have that kind of cash. We made all the money, but it's not like we made that much in cash. Maybe that much in income, but not that much in cash.'”

Tom Wheelwright: They started thinking about it, and they said, “You know what? I remember Tom did this presentation on inventories, this webinar back in November. Let's go back and listen to it.” They went back, and they watched the webinar again. They went back to their CPA, and they said, “Would you please look at this issue? We think, could Tom be right? Would you please listen?” CPA says, “We don't want to mess with inventories. That's what gives us flexibilities.” They said, “Wait a minute. No, no. Please, go look at it.”

Tom Wheelwright: About a month later, they're driving down the road, and the CPA calls them. They happen to be in the car together. CPA calls them. CPA says, “You need to pull over.” I go, “What?” “You need to pull over.” “How come?” “Well, because I've got some news for you, and you really need to not be driving when I tell you the news.”
Tom Wheelwright: They pulled over. The CPA says, “I did some research into that new tax provision, and Tom Wheelwright is correct. I agree with him, and not only that, not only is he correct, but you absolutely have to do this.” “Why? What do you mean?” He goes, “This will reduce your tax liability from $400,000 to $45,000. They're just going, “Oh, my heavens. That 400,000 tax bill would've put us out of business. Thank you so much for going back and checking on that.”

Tom Wheelwright: Now, let's pause and look at this. First of all, this is a big deal. Putting an independent pharmacist at a small town out of business does not just affect the independent pharmacist. It affects everybody in that town because that's where they go for their medications. Not doing this… Had that CPA taken the approach of the CPA in Dallas, they would've been out of business. They would've been out of business, and all those people who depended on them for their medications would've been out of luck. Instead, the CPA said, “Look, I'll look at it.”

Tom Wheelwright: That's number one. When you're thinking about, “Is my CPA doing the right thing?” the first thing is are they willing to learn? Is your CPA willing to learn? Just like I was. When I got the comment in Dallas, I went back up and researched. Could I have been wrong? I could've. I'm going, “Whew. Man.” I mean, seriously, my stomach was churning so much until I found that. I mean, there was actually a cocktail party. I couldn't go until I researched this and figured it out.

Tom Wheelwright: But then the next question is why didn't that CPA know this in the first place, and why didn't they communicate with their clients? Well, I get it. This is actually a pretty unusual situation. It's one, frankly, I think I'm the only one talking about it. Let's talk about a bigger one. Let's talk about bonus depreciation. Now, bonus depreciation is… Everybody should know about bonus depreciation. I don't care who you are doing the tax return, you don't understand bonus depreciation, this is a problem. You should be communicating with your clients if you're a CPA. I can't tell you how many discussions I had with syndicators. “We're not going to take bonus deprecation.”

Tom Wheelwright: I actually had one come back to me and said, “Well, if you do a cost segregation, you can't do bonus deprecation.” Well, they had it backwards. You can only bonus deprecation if you do a cost segregation. What was the difference in deduction? This syndicator was going to take a $45,000 deduction when the bonus depreciation would've provided $1.1 million deduction. That's almost 25 times the deduction. I mean, that is incredible. I've had people tell me this season that their CPAs told them that they were in sales, and their income was too high, so they couldn't take the 20% deduction. Well, there's no income limitation if you're in sales. There's income limitation if you're a CPA providing CPA services, and there's one if you're a doctor providing physician services, but there's no one if you're in sales.

Tom Wheelwright: Well, guess what? The CPA had not read the rules. This gets back to what's your relationship with your CPA? See, your job is to get educated. I mean, it's the whole reason I wrote Tax-Free Wealth is so that you, and the whole reason I'm doing this podcast is so that you can get some education. Now, I applaud all of you listening because you're getting education, so you are doing your job.

Tom Wheelwright: Now, your CPA should be doing their job too, great. Now it's the relationship. You probably like your CPA. We don't do business we don't like, so making a point for you to take control of your life and sit down with your CPA at least once a quarter, at least once a quarter, go through your numbers, go through your taxes. Okay, you're going to pay him $400 for an hour. It may be the best $400 you ever spent. Seriously. It might be the best $400 you ever spent because the ideas that they come up with, once they understand your situation, the opportunities that they present to you… These are smart people. I love my profession. The smartest people I know are CPAs. They are. They're the smartest people I know. They're not real good with words. I say they. We. We are not really good with words. We have a tough time picking up the phone and calling.

Tom Wheelwright: Sometimes, while it's not ideal, you picking up the phone and calling them, there's nothing wrong with that. You're getting some education. If I were a client of a CPA, I would get a copy of Tax-Free Wealth and require them to read it, and then let's study it together. Let's figure out what are these incentives that I might be missing. CPAs, they're doing their best. They are running like crazy. They're trying to get tax returns done. They're trying to get financial statements out. They are doing, I think, as a profession… Like I said, I love my profession. They are really trying to serve you. They're just not good with words.

Tom Wheelwright: You taking the time… First of all, recognize that they're not good with words. You didn't hire them because they were good with words. That's why you hire attorneys is because they're good with words. You hired them because they're good with numbers, they're good with tax law, and maybe you will have to prompt them once in a while.

Tom Wheelwright: Now, I would tell you, we have a CPA event coming up just for CPAs at the end of May 2019. It's a CPA Leadership event. It's like CPAs never take leadership, go to leadership conferences, but communication is one of the things we talk about in a leadership event. We would love if you would send your CPA to our event. We would love that. Your CPA would love it.

Tom Wheelwright: My point is, is that we can do better as a profession. CPAs can. I do believe that my experience with business owners is… I think that as business owners, we can do a little better with our relationships with our advisors. Our advisors are key to us, whether it's our legal advisor, our financial advisor, our tax advisor. Doesn't matter. The more you do with your team, the relationship you have with your team, and that includes your CPA, who may be a little shy and maybe a little hesitant to pick up the phone, I would just recommend, take a minute, pick up the phone, call your CPA. Just say, “I just want to check in with you.”

Tom Wheelwright: Now, I've told the CPAs on my CPA podcast the same thing, pick up the phone, call your clients. Yeah, they should do that. There's nothing wrong though with you picking up the phone and calling them. What happens is, is they're going to come up with ideas. They're going to be able to show you how to make way more money and pay way less taxes. We'll talk to you next time.

Announcer: You've been listening to The WealthAbility™ Show with Tom Wheelwright. Way more money. Way less taxes. To learn more, go to wealthability.com.