TaxMama’s® Tax Optimization Secrets

[This Special Report is only for TaxMama Family Members and Prime Members. It is a transcript of a special session just for members of Alex Mandossian’s courses.]

By Eva Rosenberg, MBA, EA

 WHY is tax optimization so important to help you achieve greater success?

 You are here at Alex Mandossian’s TeleSeminar Secrets course because you want to make more money – in fact, a LOT more money, right?

But what’s the point of making more money if you have to give it all to Uncle Sam? Why bust your butt, if you can’t keep your money and use it to improve your life – and the lives of the people you care about – whether family, friends, or your favorite charity?

 Let me tell you a little story about someone who contacted TaxMama® because he was in tax trouble. (During the course of this lesson, I’ll tell you stories about clients or friends. Naturally, due to confidentiality rules, all the names have been changed.)

 Like you, Joe was an Internet marketer – someone selling his products or services on the Internet. He used information he learned from the marketing greats (including Alex) to generate a profit of over $250,000 that year. When  April came around, he didn’t have the money to pay his taxes on those profits. By April, all the money was gone. Oh no!

What did he have to show for it? A very happy family, of course. No more credit card debt. And an expensive new house – with a hefty mortgage. But no liquid cash to pay taxes. If Joe had to use this credit cards to cover the taxes, he’d be worse off than he started. 

Coming to TaxMama’s® special Tax Boot Camp that year, he slashed his taxes, kept a big chunk of his money – and even built up a nest egg for his future. How did we do that? 

WHAT is tax optimization, by definition?

TaxMama® is all about tax reduction – finding you the loopholes in the U.S. Tax Code that only the rich tend to know about.  The safe ones – not the ones that will get you into major trouble. 

Like we did for Joe, today, your TaxMama® is going to give you the fundamental tax principals to help you keep as much of your own money – and to reduce your taxes as low as legally possible. 

While US tax laws are very different from the tax laws in other countries, some of the things I will teach you today are so logical and fundamental, they will apply to your tax system, too. You’ll know which techniques, when you hear them. 

HOW do you get started with tax optimization on a step-by-step basis? 

It’s not as hard to keep your taxes low, as you might think. There really are only two secrets:

 1)         Document everything! Save all your receipts for all your spending, year-round.

2)         Communicate!  Meet with your tax advisor at least 2-3 times a year to discuss what you’re doing, to tweak your tax plan and to update your estimated tax obligations.

Just as the secret to good real estate is Location, Location, Location; the secret to successfully surviving IRS audits is Document, Document, Document. 

How can you do that? Easy.

 Minimize your bookkeeping confusion by doing all your spending with a paper or electronic trail. 

1)          Use cash as rarely as possible.

2)          Pay all your bills with checks, e-checks, credit cards, or online banking tools and services.

3)          When you absolutely must use cash (like valets and tips), get receipts.

a.      When no receipts are available – keep a Post-It® pad handy.

b.      Write your own notes, with the name of the payee, date, time, amount and business purpose of the payment.

4)          Use an online accounting system. We put Joe on QuickBooks Online . It lets you log in from anywhere on (or off) the planet to update your records and/or pay your bills. Heck, these days, you can even use your phone!

a.      You can use it to send/track invoicing

b.      Your tax advisor can log in anytime to make your entries, review your data, correct errors, or discuss your strategies with you – without you having to hold off making entries while s/he is working on your file.

c.      Since it’s all online and hosted by Intuit, you don’t have to do backups, or update your software all the time. It’s all there.

d.      Another service you can use online is FreshBooks –  they have a terrific community and active support. You can use it for free until your company grows. (They also both have affiliate programs so you can get paid when you refer your clients and members.)

5)          Do tax planning – using the information you’ve generated in your accounting system, your tax advisor can help you understand which expenses are deductible – and which are not.

a.      Like we did for Joe, the pros can help you set aside money in a variety of tax optimized retirement plans – and explain the pros and cons of your choices, so you finally get a clear picture of WHICH choice is right for you.

b.      Your tax advisor can help you turn personal expenses you’re already paying right now, into deductible business expenses – or even credits.

c.      The right tax professional can help you legally hire your family and replace their allowances with wages, fully deductible from your business profits.

                    i.      This is a touchy tax area – so you have to be very careful and very disciplined, if you use this strategy. TaxMama® can explain to you or your tax pro.

                   ii.      This can be a rewarding business area. Imagine how wonderful it would be if your children loved your business as much as you do?

                    iii.      This is also a touchy personal area that could give rise to needless family conflicts, when it should be joyful. TSS member Jacqueline Green can help you prepare you to avoid the conflict – www.greatparentingpractices.com  and perhaps Kellie Frazier can help you inspire your teens http://kelliefrazier.com/

d.      The right planning and tax return preparation or review help you get past all the IRS red flags, and avoid being audited – or you are audited – you will prevail AND keeping your tax bill very low.

 That brings up the Communicate aspect of our discussion. The typical small business owner’s biggest sin. Not using the best tax resource you have – your tax advisor.

 Actually, it happens to be a big sin in the corporate world, too – which is why they spend so much on PR firms to fix the problems resulting from their poor communications skills – but that’s another story.

 People come to TaxMama® all the time, complimenting me for some tax tidbit I distributed, complaining that their tax pro never told them.

While I love the compliments, of course, when I ask them if they have ever set up a consultation meeting with their tax pro, they say….what do you think?

Uh, no….

How can your own tax pro ever help you if you never consult him or her? How can you even know if they know anything about your field or industry if you never see them except to do your tax return?

Let’s face it, during that brief, harried tax prep meeting, there’s just enough time to look over the material you’ve brought and to give you a list of missing items so your tax return can be completed for LAST YEAR. Some tax professionals do make a point of setting up longer appointments for their business clients in order to give them a bit of advice and to do some planning. Most tax pros don’t – especially those with large, busy practices.

So give your tax pro a break – call and schedule an planning appointment.

What if that’s a disappointing experience?

Give yourself a gift. If your tax pro doesn’t the have time, or the right expertise, for you, it’s time to look for someone who does – and who understands your industry and the way you do business. Team TaxMama® can help you.

IF you got started today with tax optimization … what would your life look like in the coming months or years?

 Let me tell you what’s in this for you – besides being able to deduct tax or accounting fees, of course.

 What happens if you follow my advice – actually –  SECRET ALERT – this is the IRS’s advice. They have a vested interest in making sure you’re profitable. After all, the more you earn, the money tax money they get from you – one way or another. Right?

 1)         Within the first month of implementing your tax optimization plan, you will sleep easier. You will have peace of mind, knowing that you won’t have Uncle Sam looking over your shoulder.

2)         Since you feel better, your family will like you better. After all, when you’re not stressed, you’re happier and treat your family better. Then, they like you better, too!

3)         Your records will start shaping up and you’ll be able to get answers to your financial questions about your business anytime you need them.

4)         Within a couple of months, you’ll have a better financial picture of your own business.

a.      You’ll know what activities are profitable – or if you’re spinning your wheels. Let’s face it, when you lose money on each project, you can’t make it in volume!

b.      Learn to take care of yourself first – so you can generate enough money to be generous in the future.

c.      You’ll know if you’re spending too much on certain kinds of expenses, and where to cut costs on things you either don’t need, or can get done, as well, more inexpensively. (Remember, never cut costs if quality will go out the window, too.)

d.      You’ll know when it’s time to put together a joint venture, to split the costs with a partner – or to barter services – or use some of the other techniques you’ve learned from Alex about ho to accomplish things without spending your own money.

5)         Within a year, you’ll have money in the bank, money in your retirement account, your taxes all paid up to date, and, believe it or not – a better relationship with your spouse and children. This is THE best bonus of all!

6)         And in the future – several years from now?

a.      When you’re ready to retire, or to cut back on the time you want to devote to your business – you’ll be able to draw money from your retirement account, without a care in the world.

b.      In fact, with a bit of sacrifice and the right planning now, it’s quite possible that the money you draw will be totally tax-free.

c.      Your children will have money set aside for their college education – or perhaps their first home or maybe even early retirement.

d.      You could do what John D. McDonald’s Travis McGee did http://en.wikipedia.org/wiki/Travis_McGee – take your retirement in installments. Every time McGee got a big payment for one of his salvage jobs, he would take another installment on his early retirement. After all, might as well enjoy your retirement while you’re young and healthy, right? 

What are the specific ROADBLOCKS that typically prevent people from getting started? 

I made it all sound pretty easy, didn’t I? Just a breeze to get started…and you’re on your way. For some people, it really will be that easy. For others? Well, we all have our strengths and weaknesses, don’t we? After all, when we come face-to-face with our own personal mind-freeze, nothing is going to get us past that, short of psychiatry or hypnosis – not even a good, swift kick in the derriere.

That’s pretty much how I feel when it comes to having to produce my own brief videos. That’s it, I am stuck. Nothing is going to unstick me. We all have our own issues – no matter how easy it looks to someone else.

What are typical freezing points for people?

1) Some people simply cannot keep their records organized. Heck, they can’t even hold on to receipts or documents – they just seem to disappear in the wind.

Let me tell you about George and his seat of the pants business model. He is brilliant! Utterly brilliant at negotiating business deals so that everyone comes out feeling like a winner. He has made himself, his partners and his investors millionaires many times over.

One year, when George went to visit his partners in Long Beach they told him he owed them about $40,000 of interest for his share of the loan on a project. They just happened to have a check due to him for  $33,000 in interest on money George had lent to them. No problem, right? George simply signed over the $33,000 check to them. He never brought back a copy of that check to his office. George’s accountant never saw it. For some odd reason, they never received a 1099-INT for the $33,000 George was paid – but IRS got the 1099!

That resulted in a full-blown audit – for three years of his very complicated tax returns. Of course, since I handled the audits, George came out just fine – and the auditor and I became good friends. But it was a harrowing 6 months until it was all over. And it would never have happened, if he had just handed over a copy of that $33,000 check.

The lesson here? If you can’t hold on to papers – find someone who can – and who loves to deal with paperwork! Believe me, there really are people like that. They can’t sell to save their lives – but they can organize and file and tidy up with utter joy.

2) You are afraid of success. Heck, you’re afraid of money and everything related to it. Don’t be embarrassed. Some people really did grow up with such a conflicted family attitude towards money and spending, that they face a severe mental block whenever they must deal with financial issues.

Sam has a great, secure government job. He is single, makes well over $50,000 a year – that’s after the $10,000+ 403(b) pension contribution. He has more than enough money deducted from his wages to cover his taxes and give him an extra-generous refund. Sam makes additional money doing acting and screenwriting. But just touching money makes him break out in sweat – streams of sweat, just taking out a $5.00 bill to pay for gum. Money, taxes, finances utterly terrify him. There is no logic to it – he cannot control it.

Sam is a rather unusual and extreme case. Generally, the fear is more subtle. In fact, you don’t even realize it’s happening.

Have you ever noticed this phenomenon in your own life? Let me tell you about Alice.

Alice is the best salesman in the world. She has an engaging smile and draws you in, making you feel great about yourself. Alice can sell the proverbial ice to the proverbial Eskimo – and may have. She built up one company after another. Each time, just as it was reaching record sales levels, Alice would do something to ruin it all. Sometimes it was not paying the payroll taxes. Other times, she would disappear for a month or two and let the company collapse. Or she’d get into a row with her partners – and walk out…it was always someone else’s fault – or it was something beyond her control. 

Do you ever feel that just when success is within your grasp, it slithers out of reach. Something happens to prevent it – almost as if you’re afraid of success? As if you don’t really believe you deserve it?

Well, with the help of a friend, we created a solution for Sam and Alice and you, too. I’ll tell you about it in a minute.

3) You absolutely hate bookkeeping.  A very common complaint. You keep putting it off and procrastinating until you’ve run out of time. So when it comes time to do your tax return, you either freeze up and just make up numbers; or you scramble and jumble them all together into some half-assed record, with expenses all lumped together meaninglessly.

Randy is a comedian. He’s an old-timer, well known in the Catskills and cruise circuit, and co-star of a comedy series, waaay back when.

He’s on the cruise ship circuit, traveling from one cruise ship and cruise line to another, most of the year. Some of his travel expenses to or from the ships are covered by the cruise lines. Some are not. He spends a lot of cash on tips and transportation fees. Instead of tracking the costs when he started this circuit, he just guesstimated about $4,000. I agreed to use that number the first year. In exchange, he agreed to document his expenses for the second year.

What did he find out? His out of pocket cash expenses were over $10,000!

Every single time I convince someone to track their deductible cash expenses, they learn it’s 2-5 times what they thought they were spending.

Does that give you some incentive to do the same?

What are the specific STRATEGIES that are like keys to unlock “mind freezes” to achieve wild success?

Well, if after all this, you still hate keeping records, working with numbers, or doing bookkeeping, here are some things you can do.

1)          For those of you experiencing utter, paralyzing terror, let’s help you first. I went all the way to Canada to develop this solution for you. Discussing the problem with Canada’s foremost hypno-psychotherapist, Dr. Brian Knight, we summarized some of the specific fears people have when it comes to money and taxes. Together we created a self-hypnosis tool you can use for no more than 5 minutes at a time: Money Fears – Lose them Now! 

2) You’re experiencing a normal level of terror and keep sabotaging your successes? Watch to Alex’s video on Fear of Success  .

3)      Now let’s get to work – save all your receipts and invoices period.

a.      Stick them all in the same drawer or box, to sort out at the end of the year.

b.      Stash them in an expandable file that you keep in your car or next to your desk.

c.      Use a TaxMiniMiser with 2 pockets for each month:

                           i.      One for your auto expenses

                           ii.      One for your income and all your other expenses.

4)          Hire out the tasks you just can’t bear do to. Otherwise, they either won’t get done properly – or they simply won’t get done. 

5)          If you simply can’t write down the details of your spending or business deals, can you talk about them? Just dictate the information into your phone or recorder – and have someone else transcribe it for you. Here are some tools you can use:

       i.      EVA for hire – your Electronic Virtual Assistant  – just call in and record your expenses and mileage for the day http://www.evaforhire.com/

        ii.      Contact Susi at The Admin Source on Alex’s Vendor list – use her budget service, since you can wait a week or two to get the report. http://www.theadminsource.com/

         iii.      Log into your AudioAcrobat account or your AudioGenerator account and dictate your message to your own live assistant or bookkeeper. 

          iv.      Or use one of the Virtual Assistants on Alex’s Vendor list – I love the name Workaholics for Hire, don’t you? http://www.workaholics4hire.com/

6)          Hire a good tax professional to work with you and to advise you. Better yet, build a team of advisors and meet with them at least twice a year. They should include:

a.      Your tax professional

b.      Your banker

c.      Your insurance broker (not an agent – a broker – someone who works with several types of insurance for you and your business.)

d.      Marketing advisor

e.      Web developer/designer – the person maintaining your image

f.        Your mentor

g.      Your office manager

h.      Anyone else that can help you advance your business’s success.

The question you’ve all been asking – what tax optimization steps did TaxMama use for Joe?

Oh yes, what did we do for Joe that slashed his taxes so dramatically? We put his tax return on extension and let him use 2008 dollars to pay his 2007 taxes.

It bought him time to make more money (using two “tax sales”) and use that money to fund a SEP-IRA[1] for himself and his wife before October 15th. We were able to put about $46,000 into the SEPs for the previous year, and $10,000 into IRAs, saving him over $24,000 in taxes.

Since his two children had been in day care, costing $625 per month ($7,500 per year), we were able to have his business establish an child care facility. This gave him a combined IRS (Form 8882 – 25%)  and California (Form 3501 – 30%) tax credit of over $4,000. We did some other minor things that resulted in net tax savings of over $30,000!

Then, we did some planning to cover larger tax reductions for the next couple of years, so he wouldn’t be behind again.

What’s the first PHYSICAL ACTION STEP you want to take to get started with tax optimization?

We’ve had  such a brief time together today. (I’d love to go home with all of you to help you ….but my husband really wouldn’t appreciate that.) I really wish I could work with each of you individually to solve your problems and reduce your tax anxieties. Sigh, unfortunately, that’s not possible.

So, here are some things you can do to help yourself eliminate your tax and financial anxieties.

1)      Find yourself a good tax pro! Here is a link to an article about just how to do that!

2)      Select a recordkeeping system

3)      Decide who will operate it – you or someone else.

4)      And join www.TaxMama.com

And if you need me – here are ways I actually can help you

5)      If you are timid, become a free member. You will get a daily TaxQuip that answers a member’s question – who knows, it could even turn out to be yours!

6)      If you are ready to start taking control of your own finances and to cut your taxes, join as a Family member. You will get a copy of the 100% Home-Based Business Tax Solution, lots of other useful e-books, and special live tax roundtable meetings where you can ask your questions, or listen to the discussion.

7)      If you’d rather let someone else take it all out of your hands? Be brave, join as a TaxMama Prime Member. Why brave? You will face an evaluation and have to be approved. If you are approved, we will take everything out of your hands.

a.      We will help you decide if you need to be incorporated – or to select the optimal business entity for you.

b.      We will set up your business books (or review your chart of accounts) – for one business.

c.      We will help you find a reliable bookkeeper, and give him/her guidance to keep your records up-to-date, properly organized, ready for 1099s and third-party reporting – and easy to organize in case of an audit.

d.      We will help you identify and build your team of advisors.

e.      We will spend time with you lay out a tax plan and to help you find the right advisors or vendors to implement it.

f.      We will help you find the right tax professional to do your personal and one business tax return – and will review both returns before you file them.

g.      We will help you put your minor children work for you, and help your bookkeeper and tax pro set them up properly so their taxes are optimized too.

h.        You will have special meetings and consultations just within Team TaxMama Prime community – in addition to being invited to monthly Round Tables for TaxMama’s Family .

i.        You will be able to network with some of the most positive and success-oriented people online.

j.      You will have reprint rights to certain key tax articles for your own membership.

k.        And more.


[1] Retirement contribution calculator – http://www.sepiracalculator.com/

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