Wealth Podcast Post

Tax Planning with Shauna Wekherlien

George Grombacher August 25, 2022

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Tax Planning with Shauna Wekherlien

LifeBlood: We talked about tax planning, things you can do at anytime to minimize tax liability, how to deal with rising interest rates and inflation, and how to get started, with Shauna Wekherlien, CPA, and top 1% tax strategist. 

Listen to learn why there are always tax planning strategies to take advantage of!

You can learn more about Shauna at TaxGoddess.com, Facebook, Twitter and LinkedIn.  Access Shauna’s Facebook Group HERE

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Our Guests

George Grombacher

Shauna Wekherlien

Episode Transcript

Unknown Speaker 0:00
Come on

Unknown Speaker 0:11
blood places Georgie and the time is right welcome today’s guest strong Apophis shadow weckherlin. Shauna, welcome back. Are you ready? I am to talk to you any day all day. I love it. And in fact, this is the fifth time that Shawna is appearing as a guest on the lifeblood podcast. So super exciting. Just a quick refresher, Sean is a CPA she said the top 1% of all tax strategist in the United States. She specializes in business tax strategy and real estate. Shauna, always great to see you. Tell us a bit about your personal life’s more about your work and why you do what you do. Oh, the fun bits. All right, let’s see personal life. I’ve got three dogs just gotten into rowing because unfortunately for me, I tore my portable shoulder playing tennis, the love of my life. So now rowing and swimming,

Unknown Speaker 1:02
why I do what I do, I am very big on helping the little guy stay away from the man. And if anybody doesn’t know which man I’m referring to, in this conversation, we’re talking about the dark side, we’re talking about the IRS. So you know, huge, huge fan of using tax strategy, my specialty, to keep cash in people’s hands versus handing it over to the government. So definitely a passion of mine. Very long story short came about because my mother got an IRS notice. And as a little girl, my mother was my hero, my superhero, my queen. And I was not happy that she is not happy. So there you go. That’s I don’t know that I knew that. Isn’t that. So it’s so fascinating how we, how we end up where we’re at, and oftentimes can trace back good or bad experiences to when we were little kids. So every time every time when you see your mom get upset enough to push back a chair from a table to topple it over? It sticks in your mind. So yes, all the good bits, we definitely have to keep away from the man legally, legally. Keep away from the man legally. Speaking of the man is hiring a man is hiring 4000 open positions. Well, I mean, if you saw the notice, so this was now maybe a good eight, nine months ago, the IRS posted public notice saying listen, everybody, we understand that you’re calling we understand you want your stuff. We are 24 million returns behind, right. And what made me smile was so then of course, three, four months ago, they came out with a fort. We’re hiring 4000 People notice. And then about a month ago, they came out with another notice so proud. And IRS. You guys know I love you. I know you’re trying hard. I get that. Right. They came out with another notice about a month ago now saying Oh, yeah, you know, we’re doing such a good job. We’ve gone from 24 million to 21 point 3 million in seven months. Wow. And I went well. So anybody who’s currently sitting on or waiting on refunds, tax returns to be processed checks, payment plans, absolutely anything. I know it can be terribly, terribly frustrating. But the IRS is trying to help. They’re working on it. That’s as much as they can tell us. How many people how many tax returns are filed every year? Rough? Oh, geez. Yeah, that’s the hard bit right is all the additional returns that are continuing to come in. So you have a major difference between paper filed returns, and E filed returns. So with most of the E filed returns, and I’d love to tell you I have a specific number. Okay, but with most of the E filed returns, so it’s typically about 70 75% of everything is E filed. E filed returns process a lot faster, like very quickly because they have of course huge computer systems to confirm the W two that you received versus the WTO file on your tax return all the numbers match. Here’s your refund. Here’s you go. The place where we’re having problems is a lot of the special things that came up because of COVID. Right so we have ERC Money eidl Money ERC credits, we have PPP money, forgiveness for all of those things, especially as a business owner, all of those acronyms is way too confusing, right? So if you don’t have a good CPA, who doesn’t know what those are, go find one right away, especially ERC, we should probably talk about that. But anyway, the long story short is with a lot of those types of returns, you have to pay per file those returns. So these 24 million now 21 point 3 million returns are paper file returns. So if you’re e filing Yes, it’s definitely a little bit slower. But if you’re paper filing something like there’s a special form or some sort of change you’re making, at this point, you can be expecting to wait upwards of two to three years at the soonest to get responses. So yeah, amazing.

Unknown Speaker 4:53
I literally just remember that movie Office Space and then it gets Milton and he’s down in like storage room seven or whatever.

Unknown Speaker 5:00
I see Milton is sitting in the IRS, the basement of the IRS building with 24 million paper tax returns stacked up on his desk a mile high. So kind of what’s happening, they’re trying. And even the worst bit about it. Now, this was a good probably 10 years ago, I remember I called into the IRS one day because I’d submitted a form paper case submitted a form, it had been like six months, and back then 10 years ago, that was super odd. Like normally, you got a response in 30 days, 60 days, something like that, okay, got a hold of the lady on the phone. And I said, Listen, I’m just trying to figure out what’s going on with this form, you know, we’re supposed to get this refund, what’s going on with it. And she literally described this to me. So I’m going to tell you what I remember of our word for word conversation here, okay? She said, Listen, there’s effectively a giant conveyor belt, effectively, going conveyor belts, stuff comes in, it falls into a box, people walk up to the box and take something out of the box, and give it to the people that have to process it. So the problem here is right, is that if you were the first one off the conveyor belt, you’re at the bottom of the box, they may either never find you, it might have gotten stuck in some it, this is what she’s telling me this is an IRS agent telling me this, they may never find you, they may never get to you, it might be stuck in somebody’s drawer. Okay, best thing you can do is continue to call because at some point, some agent is going to tell you, we have no idea where it is send it again. Okay, so the hard part about what’s going on right now is, as you said, you know, they’re trying to hire 4000 agents, they don’t even have people to pick up the phones. And I feel bad for the IRS. Right? Not Not that I like the man. But you know, there’s there are people to just trying to do their jobs, right?

Unknown Speaker 6:38
They literally hang up on people when you try to call because they just don’t have the bandwidth to even answer the phone. So especially for our taxpayers, you’re just trying to find out what happened.

Unknown Speaker 6:50
Good luck, right? More likely than not, you’re gonna get the automated system telling you we’re sorry, we’re too busy right now. Please try again, later, literally hanging up on me. So yeah, it’s it’s tough II file that you can I guess is the answer. Yeah, yeah. Well, that is a rough situation right there. All right. So

Unknown Speaker 7:10
keeping that in mind, and being patient and prepared and all that good stuff. And then even though we’ve done lots of good and important planning, then all of a sudden interest rates go from zero, essentially, for less 20 years to whatever they’re at today. I think that the Fed actually increased rates by 75 basis points today or something like that. And then we have the highest inflation we’ve had in generations. from a tax perspective, is there anything that you say? Well, here’s some things you can be thinking about, or maybe ought to be thinking about? Absolutely. You know, anytime in the finance world, or in the tax world, particularly when you get a bad you get a good, right? There’s always somebody that’s going to make money when inflation goes up, or when the interest rates go up these kinds of things. Okay. So there are a couple of cool things that you can look at doing. Right. The first one is if you haven’t looked at life insurance as a tool, okay? Now, I always have to phrase it that way. Because First things first, everybody, I don’t sell life insurance, okay, I’m a CPA, I do taxes and tax strategy. So I’m looking at this as a tool, okay? If you have a life insurance policy, or if you don’t have one, this might be a good time to look at them. Okay? If the interest rates are higher, typically, that means you also get paid higher rates, not always, okay, you have to look at the contract and look at the structure and these kinds of things. But if you have or you’re about to put into place an insurance policy, some of these insurance policies can actually be used as a private bank. Okay. So let’s go into the two different cases. First case, you don’t have one of these policies yet, okay. It might be a good time to go look at one, okay, depending on the type of policy that you get, you can lock in higher interest rates because the interest rates are higher right now. Okay. So that’s not true. In all cases, definitely look at your contract, make sure you’re working with your professional financial advisors to know whether this is good or bad, the right fit for you, you know, all the all the good things. Okay. The other side of this is how, if you already have an insurance policy, how can you use this as your own bank? Okay, so we have a lot of people right now trying to buy homes, but the interest rates are through the roof. Okay. There are certain types of insurance policies that allow you to borrow from your own insurance policy at whatever the rates are. Okay. Now, when I say the rates, I don’t mean the rate that you can get from the bank. I mean, something that’s called the A F are applicable federal rate. Okay. And yes, these are certainly higher than they were three, four months ago. But let me give you an example. The AFR from February of 2020 to was around 2.1%. Very, very low. Okay. The applicable federal rates for they just came out for August.

Unknown Speaker 10:00
The applicable federal rates for August are 3.3%. Okay, 3.3% is still a lot lower than you can get from the bank if you’re trying to buy a house. Okay? So you get two sides of this argument, right? One saying, well, great, I’d much rather borrow from myself for 3.3, then I would from the bank, okay, you also get to pay yourself back the interest. So you’re basically creating your own little tax free loophole here, right, because you’re giving the money to you and not to the bank, not to somebody else. But of course, you have to have one of these policies in the first place to be able to do that. So a tip of something to look at, for some people, that’s going to be a long term kind of tip. If you don’t have one of these policies you can borrow from, can you convert some other type of policy into one of these policies you can borrow from? Maybe that would help, right?

Unknown Speaker 10:53
Can you get into one of the policies now prevent for the next time we have these kinds of issues, right, you build this type of thing.

Unknown Speaker 11:02
The other thing to be taking a look at when we’re talking about interest rates and inflation and that kind of thing. What other kind of going back to this, this banking idea? Where else can you get money from? Right? So of course, hopefully, everyone has a job, right. But generally, when we see inflation, interest rates going up, generally, we start to see more unemployment the companies can’t afford to pay, right, we start Gen tends to be job losses, these kinds of things. So what are their hidden pockets of money do you have, okay? There’s a very fantastic tax strategy. It’s called a QP RT, that allows you it if you have a 401 K, if you have an IRA, right, normally, under normal circumstances, you cannot pull money out of those things to live on without paying a penalty, right until you reach a certain age. But strategy like a QPR T strategy allows you to convert a 401 K or an IRA into a life insurance plan that you can then borrow from.

Unknown Speaker 12:05
So especially if you’ve got questions and interest in money, and what’s going to happen with my cash flow, let’s look and see what other pockets of money you might have, that you could access without penalty without tax without problems. So fascinating. I appreciate that. It in. So if I have a traditional 401k, or even a traditional IRA, would it be like a Roth conversion taking place? nail on the head, brother? Absolutely. Yeah. So really what’s happening in in a straight up Roth conversion, right? Because of course, you could just convert a traditional IRA or traditional 401 k into a Roth IRA. In a straight up Roth conversion, you’re gonna pay tax on whatever you convert, right? Because it was pre tax, and now you’re converting it to post tax. Now, especially if you’re young, that might be okay. You might be in a lower tax bracket, or you have tons of time to make up all those taxes, you’re going to pay with the Roth earnings, right. But by using something like a que PRT, you’re effectively converting it to a Roth because it’s becoming a life insurance policy. And you still have to pay the taxes, right? We did say legal strategies, so you still have to pay the taxes. But because you now have this life insurance policy, and you can borrow the amount from the taxes from the policy. So you have a way to pay the taxes is that is not you coming out of pocket with a money.

Unknown Speaker 13:33
clinic. How interesting stuff.

Unknown Speaker 13:37
But yeah, I mean, that’s one of the biggest problems that we see when interest rates are going up and inflation is going up and people are worried about how am I going to eat? How am I going to pay my next bill? How am I going to do these things? Sometimes our brains get a little overwhelmed with the emotional side of money that we can kind of turn off sometimes about what are the other options for out there. So making sure that you’re working with a good financial adviser, a good CPA, a good tax strategist, these people in your financial life are going to have ways to help people as well. So as we’re coming, which is wild to think that we’re coming up on the end of the summer at some point, and then eventually the end of the year before we before we realize it. I was curious, I know that they changed some of the rules around charitable contributions and how that works with taxes. Is that still a viable thing? Should I still be thinking about making a charitable contribution? Absolutely. Well, and let’s back up, we always ask people as a tax strategist, we always ask people, where are you at on the scale of charity? Okay, so, from my perspective, you’ve got zero and you’ve got 10, right? I always have to tell people listen, no judgment. We just need to know where you’re at. Okay? Zero on that scale means listen, I’ll give away money. If it’s going to give you a really great tax deduction, like it’s going to make me money or it’s going to make money for my heirs. It’s going to do something right. And then you can

Unknown Speaker 15:00
At the other end of the scale, which is no, it’s part of my religion, for example that I tie, that’s very important to me, it’s built into my family, we do 10% or 15%, or whatever it is no matter what, period, right? So, um, you know, I always have to say, Listen, you never let the tax tail wag the dog, right? If you’re a little 10 on that scale, and you’re going to give the charity you give the charity period, we get the tax write offs we can get. And of course, there are more beneficial ways to get to charity. So for example, a donor advised fund or a private foundation, even things like a crab or a klat. Right. And those are some pretty advanced type tactics for big donations, right? So people doing 10% of their income, often those numbers are, are big, right, or they get big or pretty fast. But on the other end of that scale, if you’re at a zero, you know, listen, I’ll give money if it’s really going to help me. So I’ll give an example of here in Arizona. And depending on your state, some states actually have donation contribution programs, where you can put $1 in and you can get out more than $1. Okay, so for example, in Arizona, if you own an S corp or a partnership, you can run your charity contribution through your company, you can donate if the company receives marketing, the company can get a marketing deduction for the contribution. And you as an individual can also take $1 for dollar write off. So you’re making money literally making money by giving to charity. So there, yes, charity is amazing. If you want to do it, great. Do it. There are five or six different ways to look at that, depending on what your ending goals are. And if you’re doing it just to get a tax deduction, you can make money on the deal. So I’m still a big fan of charity. It’s amazing.

Unknown Speaker 16:54
Shona people are ready for that difference making tip even though you’ve given us a lot for them. I love it. I love it. All right, the difference making tip for 2022 I think the biggest thing that I want to let people know is there are always strategies, whether you’re a W two employee, whether you’re a business owner, whether you are a real estate, there’s always at least one a minimum of one strategy that you can work on. Okay, so let me give you some of the cell state as fast as I can, right. But some of the basic basic strategies, if you are a business owner, you need to be looking at paying your kids and you need to be looking at the Masters exemption. Okay. And sometimes the Masters exemption is called the Augusta rule. So if you haven’t checked into those two things, take a look at those. Okay, tax got us on our website, we’ve got free PDFs and all sorts of things. So if you have questions, let us know. But reach out to your CPA reach out to your tax strategist, they should have that information. So Nasser’s exemption paying your kids, those are the two big you should be able to do that with no problem between now and the end of the year. Get yourself some money. So just as an example, Master’s deduction on average, so this is on average, if you own your house, okay, that is $3,500 times 14 events, which means you could get $49,000 per year of tax free income out of your business. Okay, so these are not little numbers. These are big, big, hefty numbers. Okay, so if you own a business, now a business also counts as owning real estate. So if you own 12345 rental properties, or you own a commercial business, whether it building whatever it is, okay, these strategies, paying your kids and the Augusta exemption, absolutely work for you there as well. Okay. If your W two, think about the charity, you hit the nail on the head there, okay. Think about those hidden pockets of money. So the 401 K’s, the IRAs, think about how young or old you are, if you’re closer to 60, may or may not be worthwhile for you. If you’re closer to 3040, you’ve got some big earnings that you can turn into Roth money to really blow up your earnings. So

Unknown Speaker 19:11
that is great stuff. It definitely gets caught up on it. Thank you so much for coming back on where can people learn more about you and how can they engage and I know that any money that that if Shawn is not able to save you money in taxes, then she will not charge you for her services. So there’s very little no reason to not reach out and find out. If working with Shauna is a good idea for you. So give us the website Shauna or whatever else. You are a sweetheart absolutely easiest place to find us is tax goddess ta XGODDES s s tax goddess.com. You can book an appointment right there with the team and Georgia course you were 100% Correct. It’s free consults, if we can help you

Unknown Speaker 20:00
We help you if we can’t, we can’t. We just ran George just because you just brought it up. We just ran our average average return on investment with us is 178.86 times what you invest with our team. So happy to help anyone looking for help. If you’re if you don’t want to pay the man this year, give us a call. We’d love it. If you enjoy as much as I did, showing your appreciation and share today’s show with a friend who also appreciates good ideas, go to tax goddess.com book that free consultation and find out if you can benefit from 178% return on your investment. I know that everybody can’t. So thanks again, Shawn. Thank you so much for having me. And until next time, keep fighting the good fight. We’re all in this together.

Transcribed by https://otter.ai

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