Do I need a CPA?

About the Video

The talk revolves around why it’s crucial for business owners to bring a Certified Public Accountant (CPA) on board when tackling taxes. The discussion really hones in on the perks of having a pro on your team, helping you maximize your earnings each year. The conversation touches upon the peace of mind that comes with having a professional handle your taxes. By outsourcing this critical task to a CPA, business owners can free up valuable time and resources to focus on core business activities, driving growth and innovation.

Prefer to read? A full transcript is provided below.

Cort:

Hello and welcome to another edition of Wealthy and Wise. I’m your host Cort Christie, here at our NCH studio. And today, we’re going to be talking about taxes and specifically why everyone should take advantage of a great CPA. And today I brought in a fantastic CPA. In fact, the CPA that I’m going to introduce to you here shortly. 

He and I have been working together for just about probably 17 years. We have a long history together. He’s one of my favorite tax professionals that are out there because he’s got such a wealth of knowledge and the fact that he worked for the IRS for so long. He knows the inner workings of the IRS, the agency that we all love to hate, love to, not love. 

Jack, welcome to the program. We have Jack Cohen here of Campbell, Jones, and Cohen, everyone. And of course, thanks for coming in. 

Jack: 

You’re very welcome. And yes, it has been 17 years and I’ve had fun all 17 years. That’s all I can tell you. 

Cort:

And we were just reminiscing earlier about, you know, the first time that you were on stage and how I well, you present to an audience and just a wealth of knowledge that you have to share. 

And I remember when I first got to know you, your background was extraordinary. But then you couple that with wittiness and a great sense of knowledge to back it all up at the end of the day. So thanks for joining us. 

Jack:

You’re very welcome. And I used to do this a lot for the Internal Revenue Service. And, you know, I think one of the things you always want to do when you’re talking to people who don’t have expertise and taxation, you want to kind of dumb it down a little bit to think of a way to people understand. And I think people I think that resonates with people. They don’t want to they don’t want to hear me tell them about code sections. That would be pretty boring. 

Cort:

Code Section 384.7 

Jack:

Wait, I got to look that one off.

Cort:

So today, you know, we just got through tax season, and I know it never ends for you, but for a lot of Americans, they had their business tax filings earlier and now they got past the personal filing deadline of April 15th. 

And a lot of people will try to do it themselves, too. And there’s software, you know, that was blasted on TV ads and radio ads.

Jack:

Do you mean like TurboTax?

Cort:

I won’t say the names, but, you know, there’s a lot of them out there. And you could do your personal taxes yourself. You can do your business and taxes yourself. But at NCH we would never recommend either. 

I do tell my kids every once in a while, that for the $10,000 you might have made working a part-time job while they’re in college, you can file it online if you want to with one of these software programs. But certainly any of our investor clients or our professional business owners, you never want to do your taxes on your own. 

And I think you probably, I’m assuming over the years have cleaned up a lot of messes.

Jack:

I mean, we often all take over an account where they have used like the TurboTax’s and there’s like a number of different off-the-shelf kind of tax software. And I’m not, listen, I’m not saying they have no value at all. 

But the truth is, if you have any kind of investment property or business, you can’t rely on those tax software as it is. You know, what was that old saying about software? It’s garbage in, garbage out. And just because you get a green checkmark when you’re done doesn’t mean the tax return is correct. So very often we follow up with clients who had done their returns in the prior years and the amount of mistakes we see is just unbelievable. 

And again, people, you know, you try and do it yourself. It looks like it’s a it looks like you get the green checkmark, darn it, you got a refund. But you also forgot a lot of stuff, too. And so so some people just don’t realize it and then they go to a CPA and then maybe we fix it for them as well. 

Cort:

I think the software are, you know, they’re only so intuitive, right?  And with your experience, you’re going to sit down and start unwrapping what it is they’re doing and how they’re doing it. And then all of these ideas are popping up along the way. I had a recent experience that had to do with a rental property that I went out to go visit and work on and check on. 

And I did a number of things and, you know, it came up like, Well, did you deduct your travel? And I’m like, the flights? And then did you deduct the meals that you had while you were there and did you deduct the things that you ended up buying to fix some of the stuff that needed to be fixed? 

And I’m like, yeah. And you know what? I didn’t do that. And the flights and everything involved. My wife was with me. It was about 2500 bucks that I didn’t take advantage of writing off. That was prompted by the questions that were so important. 

Jack:

Yeah, I totally agree with you. And again, it’s funny because sometimes people do such a bad job doing their own tax return. 

By the time I take a look at it, I mean, this is like shooting fish in a barrel. It’s so obvious. I’ve seen them where they missed depreciation on rental property. It’s like, how do you know things that you don’t know? So you do it on TurboTax or some other commercial software. It’s not going to tell you you’re missing something if you haven’t answered the questions correctly or put the data in. 

So again, I mean, I think there’s a reason that software like that exists. And for some people it’s okay. But the truth is, you know, it’s really not worth it, to be honest with you. And what do I tell people all the time? You’re not paying us to do data entry. You’re paying us to be thinking for you and to be able to strategize with you, consult with you, and give you ideas going forward. 

So it’s not just the current tax return. It’s what about next year or the year after? The last time I heard, TurboTax can’t talk to you. Well, maybe. Maybe if you call them again.

Cort:

They probably have a hotline. But you’re not going to get a Jack Cohen hotline to strategize with you.

What I think is so interesting is too, is that so few people do any type of planning. And when do you bring your documentation to your tax preparer or your CPA? It’s at the end of the year. You know, maybe you get an extension filed if you’re not quite ready and then you sit down, but you’re talking about ancient history. 

Jack:

That’s right. And I tell people all the time, well, first of all, the time to start planning for next year is when we’re finishing the current year’s return. But the other thing I tell our clients is you should be calling me in November of that year because if you call me in November, you’ve still got two months left to figure something out. 

And so it’s a combination of if you call me in November, there’s time to make changes to the current year return. But then flip to the next year when we’re doing your tax return. We already have it done. Now tell me about what’s going to happen this year. So what do I always say? You try and always think ahead, not back. 

You know, the Wayback Machine was only in Rocky and Bullwinkle, as it turns out. So you got to be thinking ahead. 

Cort:

Absolutely. And, you know, you think about how much money people are spending on taxes, right? You start adding it up in the federal tax, estate taxes, the whole trickle-down sometimes city taxes on top of it.

Jack:

That’s a great point of it. 

Cort:

And how little planning people do and I know people that are listening right now can attest to this in their own lives. It’s not a lot of fun to do tax work and get the documentation and the planning. You know, I could think of about a thousand things I personally would rather do

Jack:

Me too.

Cort:

But when it comes to saving money, you know, spending a little bit of time, not a ton of time every year, planning and getting ahead of it can save you so much money and it goes right into your pocket. 

Jack:

What’s ironic is, is business owners will spend tons of time to try and save money on their on their company. Taxes are one of the biggest ticket items that you pay, but you won’t get a tax deduction. So they’ll spend hours trying to how to reduce cost of goods sold. But yet when it comes to doing taxes, they do nothing.t And it’s one of the biggest items that’s coming out of your pocket is that you’re right, federal tax, state tax. 

You realize if you were in California these days between federal tax and state tax, the talk and you could be talking 50% of whatever you make, the IRS is getting 37%. California is getting 13%. I mean, that’s insane. And that’s, by the way, a reason why people are leaving California by the boatload. 

Cort:

Obamacare taxes, self-employment taxes, or a payroll tax holiday. It goes on and on, you know, and it’s so insane. Even the people that are so close, they don’t like doing the work or doing the planning.

My wife, God bless her, she’s a wonderful woman. I would never say anything bad about her. However, 

Jack:

Especially while recording this.

Cort:

She is a sole proprietor as a commercial broker in real estate because she’s done this forever. And trust me, I’ve had plenty of conversations and she’s just happy doing it this way. And when I say, Do you know how much money you are paying and have paid in self-employment taxes over the last ten years alone and together, it’s ridiculous. But I think of small business owners just when it comes to how they handle their payroll. 

And, you know, as a sub-S elected LLC or corporation, however, they run their affairs, just a little bit of planning around how much payroll you take and how much profit you distribute. You can save yourself a fortune.

Jack:

I see that a lot Cort were people, that have sub-assets will take far too much in officers compensation, which forces them to pay Social Security. 

And what I tell them, while the IRS says that compensation has to be reasonable for the most part, you want low compensation, high distributions. So the truth is,  the funny part is they make this so easy for me. They think I’m some like Albert Einstein or something, but this is like common sense kind of stuff. And I don’t know about you, but when I talk to people and they even have had other CPAs, the other ain’t telling them any of this stuff. 

Well, jeez, Jack, I didn’t know. I thought I was supposed to take all my profits as compensation. And so even other existing CPAs are not being very helpful, to be honest with you.

Cort:

And I think so many  people just think that you just get a bill like, okay, somebody does the documentation, they compute it and then they tell you what you owe. 

So I go to my tax professional, my CPA, wherever I am, and this is just the outcome of what I’ve done. Yeah. And you have to roll with it. And there’s so much opportunity to move things around in the right way. Ask the right questions, you know, What did you spend on your business? What are my expenses?

What did you spend that maybe you took out of pocket that you didn’t have to? That would have been a business expense. And when they’re prompted by a professional like you to ask the right questions, or all of a sudden you start packaging this amazing gift and the gift comes back to them in the form of, sure, more revenue in their pocket and less to the IRS. 

Jack:

Sure. Effectively, what I do basically is interview the clients to find out. The first thing I’ll say is tell me what happened in this career. Anything significant? Sure. I always look because there are things that could happen in their business or their lives that they don’t think have anything to do with taxes. And they’ll say, well, I lost money in this in this business.

So they’re not thinking in terms of taxes. I just get them talking about what happened and going back to a point you made a couple of seconds ago, people don’t like change. So I go to this. I hear this all the time. I’ve used the same accountant for 20 years and I really, really, really like them. And I said, That’s fine, but this is a business decision. 

This has nothing to do with the fact that he’s not a nice person. 

Cort:

You see him at the grocery store.

Jack:

Yeah, I’m just saying. He went to your daughter’s graduation. I get it. 

Cort:

Or at the rotary meeting. 

Jack:

Yeah, at the rotary meeting. But if you’ve overpaid by 20 and $30,000 in tax. You need to make a move. Not because he’s not a nice guy, but it’s a business decision like any other. And people just don’t like change. 

Cort:

And I think when you’ve been used to working with somebody for a long time, that’s all understandable. But why notgive somebody new a chance? And you can always go back to the person that you used in the past. 

Jack:

So again, the second opinion, is how many times you go to a doctor and you and maybe you don’t like what the doctor says or you go online you ask doctor Google, what’s wrong with you? Or you go see another doctor. There’s nothing wrong with getting a second opinion. And you know this already. I mean, we don’t charge anything to do this. 

Cort:

Yeah. Yeah, it’s it’s crazy. How could you say no to that free? We’ll take a look at your tax return. Give me an assessment. Give an opinion on it. And this is something that Campbell, Jones and Cornell do for you. And you can find out more about them soon and there’ll be a link as well to get more information once we get going here. 

But let’s talk about some of the most common mistakes that you experience, that our clients are made up of real estate investors. About 50% of the clients are, and then the other half are small business owners. And some of the real estate investors are small business owners as well. Sure. So as you’re working with these folks, what do you run into most commonly, even when they’re well-represented? 

Jack:

Well, I think I think a lot of tax return preparation starts out with document preparation. So how clients are maintaining their records because we don’t want them to miss anything. And even if they’re using tax software like QuickBooks, you could be spending money out of your personal bank account or personal credit card that doesn’t get run through QuickBooks. 

So the first thing I tell clients when we’re getting ready to do a tax return is just make sure you give us everything, any money that you spend in connection with that business. I don’t want you to decide whether it’s deductible or not. I want you to give it to us and let us decide. And so I think that a good return starts out with decent recordkeeping by the clients. 

Again, I realize that that’s not easy to do sometimes, but you always do the best you can. 

Cort:

Yeah. And so and it’s a little bit of work sometimes to put it all together. And this is the misery that oftentimes people put together with it. But when you think about if you make $150,000 a year and you live in California, you’re going to probably be paying $75,000 in tax, if not more. 

And even at 150,000, I know people make a lot more than that. People make a lot less than that. But it’s such a significant amount of money. What if a professional, a CPA who’s researching, reading, and dealing with thousands of clients every year, knows the inner workings of how the IRS does things and reviews things, can come back to you and say, I’m going to give you a gift. 

I have a $10,000 gift that I got you because I found three things that you could have done differently or missed.

And when you’re making 150,000, paying 75,000, you only have 75,000 left over to pay your bills. When somebody gives you a gift of $10,000, that goes a long way. 

Jack:

That’s why clients stay with us for a long time. That’s all I could tell you. And and you’re right. One of the things we’ll do also, if it’s a new client and they need a little extra help, we have a tax organizer, which is basically a list of common business expenses. And we give that to them to kind of use as a checklist because they’ll say, what can I add it up? 

And I’ll say, Well, anything that’s connected with the business. But here’s a nice little checklist for your reminder. So go through that and see if there are any other expenses you had that you had forgotten about. it is kind of a team effort in a way, when you think about it, how to get the best results. We need clients who are willing to work with us and then let us use our expertise to come up with ways to save taxes. 

Cort:

Yeah, and as much time as business owners put into finding more revenue, and finding the next client. If you just drop down, put on your big boy pants, you know, go in, sit down with your CPA, have that conversation, or work remote with like a Jack Cohen that’s so important as you can do. That is you’re going to find out there’s a whole trove of things that are opportunities. 

Let’s talk about our real estate investors in their unique type of person. They’re out there maybe flipping properties, they’re buying and holding properties there. They’ve got a lot of different strategies that they’re working on, but there’s a lot of things they miss along the way or don’t track properly.

Jack:

Well, what helps me a little bit too, you probably remember this I’ve been a licensed real estate broker for years. I’ve owned a lot of real estate. So a lot of the pitfalls that that real estate owners have we can help them with. But there is a lot to tax strategy when it comes to real estate for sure. When it comes to depreciation, the latest and greatest these days is course segregation studies where you could basically upfront a whole bunch more depreciation. 

So there are many things that you can do that involve a little bit of strategy, not just key stroking data on the tax return. And so I like to think that our real estate clients are pretty happy with us because I’m always giving them ideas, right, what to do, you know, they’ll even call me and tell me, should I buy or not? 

Cort:

There you go. Now your real estate strategist is on top of that. So here we had a good client recently that has a, it’s more of a vacation home.

Jack:

Shh.. we don’t like using that term.

Cort:

Right? Well, that’s how they term it. But they ended up renting it in the wintertime to somebody who needed it and wanted it. 

And it’s in an area where it’s great for summertime usually, but there are some winter activities as well. So I figured why don’t I earn some rent off of it? And, and then it came up while are you depreciating it. And they’re like I don’t want to depreciate it because then I got to recapture it and all this crap that goes on with that and it’s like, wait a minute, that’s the whole point. 

First of all, you get the depreciation because now you have the income coming in. But on the other end of it, if you earn the income and you don’t appreciate it…

Jack:

The IRS holds it against you anyway,

Cort:

They depreciate it on your behalf for you. 

Jack:

So the other big thing in real estate too is the Airbnbs, which most of them really make a lot more money than your traditional long-term rental, and for tax purposes, you can treat it differently. And a lot of people don’t realize that normally when you want real estate, the perfect the perfect scenario is when you own real estate and have positive cash flow, but a loss for tax purposes. 

Sometimes you can’t claim the losses, but if it’s an Airbnb, you can claim the losses. And so in the last few years, we’ve got a lot of clients that are doing the Airbnb, now the problem with that is depending upon where the real estate is. 

For example, here in Las Vegas, a lot of times it’s not licensed. That’s been a problem. But the truth is, is they if they are money makers, there’s no question.

Cort:

So if you aren’t able to capture all your losses on that, there are ways that most people aren’t aware of is what you’re saying. 

Jack:

Yeah, for sure. For sure.

Cort:

Okay. Well, I think the most important thing that I always tell our clients is, you know what? Until you’ve sat down with the right CPA and you know somebody like you, Jack, that I know the strategies come out of you like, you know, you’re just this wealth of knowledge. When you sit down with the right person and you’re not the traditional CPA. 

And you know, people say, we’ll get a second opinion from a doctor, get a third opinion if you’re gonna have heart surgery, don’t just go to the first one that comes through with it. You get referred to, find the best. And even lawyers. I’ve had to work with lawyers over the years in many different situations. And some of them, you know, good positive as a transaction or something, but some of them involve litigation and they’re not all the same. 

And I will tell every one of you that are listening, you’ve got to find the right professional. It’s not always about just finding the one that was referred to you, but talking to a couple and making sure that the one that you’re talking to understands your business. If you’re talking to a CPA that does 90% of their work doing personal tax returns and very few investor returns or small business returns, you need to find a CPA that specializes in the interests that you are involved with, whether it’s real estate or whether it’s business tax returns. 

You’ve got to find the right professional because it’s not a cost as many people think when they get that bill. This is an investment because if you’re not getting ideas back, if you’re just getting your return back and that’s it and there’s no conversation, then by all means, use software because that’s about all you’re getting at the endpoint. 

Jack:

Good point. 

Cort:

But you got to have somebody that’s looking out for you, doing some planning, and asking the right questions, and Jack is someone like you that we are proud to partner with as an organization, 

Jack:

Proud to be here, Cort.

Cort:

And I appreciate that. And so just trust me on this one, everyone, I’ve been working at this for 30 years. 

We formed over half a million business entities. I know what I’m talking about. And when it comes to taxes, you’ve got to have the right person in your court. And so that’s one thing that you’re going to find out with working with us at NCH and working with the tax professionals that we team up with is we have vetted these folks. We use these folks ourselves and they are amazing. Otherwise, we wouldn’t be talking to them today and we wouldn’t be presenting the opportunities to work with these great tax firms on air with you. 

So please make sure you like and subscribe to this program today and also call out, and subscribe to us, and we will reach out to you. In addition, there’ll be a link so that you can come in and have a free consultation with us at NCH, which costs you nothing. 

And we’ll hook you up with Campbell, Jones, and Cohen, Jack Cohen specifically that if you want a tax return review at no cost to you, they’ll do it. And I’ll show you what kind of opportunities that you’re missing out on.

So, Jack, thanks for being on the program today. 

Jack:

Thank you for Cort.

Cort:

Absolutely. Thanks for coming over. 

All right. For those of you who tuned in, I appreciate your time and attention to another edition of Wealthy and Wise. I’m your host caught Christie. Have a great day.

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DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.