The $183,000 Tax Mistake I Made, and How an EA Fixes It

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0:00 Hello and welcome back to the Owner Reading podcast. I'm Christian, your channel host, joined today by David Perez. I am super excited for today's
0:08 episode. David has uh one of the most important job titles in all of your real
0:13 estate network, which is an EA, an enrolled agent. And if you don't know what that means, uh you're going to
0:19 learn a lot of really cool stuff today. So, this is an episode for you, David. Welcome to the podcast.
0:24 Hey, thank you for having me. Absolutely. Well, let's open with the big question. I did not know this when I
0:29 started my real estate career and um I will tell you for a fact it would have saved me about $183,000 if I did know uh
0:37 what an EA was early in my career. So what is an enrolled agent, David? Uh well it's a great question because uh
0:44 a lot of people do ask me that when I when I say EA people think executive assistant. Um that's kind [laughter] of
0:50 funny but um although we do serve a lot of executives and EA stands for enrolled
0:56 agent. Um in the so in accounting there's there's many forms of accountants, right? There's there's tax
1:03 accountants, audit accountants, there are people who serve as business owners, there are CPAs, there's all these terms,
1:10 bookkeeper. Um just think about it this way. A CPA is somebody who studies
1:15 accountancy at a high level, learns all forms of accountancy. So they they basically dabble in all areas and then
1:21 when they graduate, they pick an area of focus. Um, and that's that's a cool career choice. It takes about six years
1:27 to become a CPA. Very very prestigious certification designation. I respect them. An enrolled agent is somebody is
1:34 takes a different approach. Uh, you know, I hold the bachelor's degree as well, but I I didn't go to school to be
1:40 an accountant. I was more business focused and so when I got into accounting it was more so for the tax
1:46 and communication the relationships I really enjoyed and so I pursued my career at the highest level which is an
1:52 enrolled agent which is a designation that you get through the IRS. So as CPAs
1:58 focus on all areas of accountancy and EA only focuses on tax specifically. So we
2:04 only work with the tax so we can represent a client in front of the IRS courts. Uh we master the tax code. We
2:10 have the same continuing education requirements that a CPA would have. And it gives me more focus, an area of
2:16 focus. And I the way I like to see it is or to say this is is where your focus goes, your energy flows. And that's
2:22 where we focus our energy in tax. And and that's I've this isn't exactly
2:28 what it is, but like as a as a business owner, the way that I kind of put it is like they're like 10% they're like 10%
2:34 lawyer. They can represent you specifically in tax reasons. They're 90
2:39 what? 80% accountant, 10% lawyer, uh 10% business owner. They're it is a different focus. An EA would
2:47 typically, and I'm guessing this is probably your structure, would typically work with a team of CPAs to put together
2:52 tax filings to where CPAs and they work together so that you have a as bulletproof as you can tax strategy.
2:59 Definitely. But CPAs don't necessarily uh me signing on a return is is no
3:05 different than a than a CPA doing it. We both represent the client. We both stand behind the return. We both have been,
3:11 you know, tested through the IRS. There's a lot of things that go through that. But what I would say is when you
3:16 say 10% business owner, that's a very good observation. Uh, an EA is an intentional track. You actually do not
3:23 there's no school for this other than um it's self-study. You have to take examinations through the IRS. They're
3:29 very rigorous. This is a very strict process and they they they hold this very high. And so what I find more than
3:36 most is most EAs are ambitious people who have a drive to serve because in
3:42 most cases when you go for a CPA, you really don't know where you're going to go until you get into college or till
3:47 you get to your mast's area because then you're like, "What area do I want to focus in?" Somebody who's an EA said, "I just want to do tax." Like they're
3:53 they're ambitious people. I mean, I would consider myself that person. I love that. And I little backstory on me. I went to uh my first three years of
3:59 college were accounting major. I swapped at the last minute to general business because I realized uh around the time I
4:05 hit cost accounting. Um I hate this. [laughter] Uh and then I went into real estate uh which involves a ton of
4:11 accounting. So turns out um I use more accounting than I thought I would. Um and it's not it's not all the
4:18 accounting that I learned in school. Um accounting was what I found personally weird about accounting is that you think
4:24 of it as math or as objective. It's a lot more subjective than you think it
4:30 is. There's a lot of different ways to interpret different things, even down to the bookkeeping level. It's as much a
4:35 science and an art as it is mathematics, which uh which is where I uh I swapped
4:42 majors because I'm like, man, I I wanted something that was more empirical. I would I would agree with you. I think that there's um I think it just depends
4:49 on what industry you're in, right? Um and and the size and the scope of of your business. uh the larger the company
4:55 the more um predictable things become as well as the way standardization becomes
5:00 gap plays a bigger role and which is general accounting principles um those things happen and then obviously cash
5:06 versus acrruel the size of the business but when it when it comes down just accounting you're right like the the way
5:12 we interpret things really plays a big factor on the way you get taxed and the way that your business can borrow money
5:18 um those two compat by the ways those are our two components in our firm what we focus on is we want to make you look
5:24 rich to a bank but poor to the IRS. And the balance to those two are really difficult. I've had many years where I
5:31 looked fantastic for the IRS. Um I have [laughter] I personally have what
5:38 5560 $60 million of debt. A lot of it direct with Fanny now. Um
5:43 Wow. I still have to use bank statement loans to close my house. Uh Fanny will give me
5:50 $50 million for multif family. don't qualify for a conventional home loan. It is really hard to strike that balance.
5:56 There is a uh there is certainly an art to it. Uh which is which is where you start introducing EAS into your universe is is
6:03 that is the when your business is the size where you're like hey I I need to manage my
6:09 accounting like a business. That is where I think everyone needs to have an EA. like very specifically I have a huge
6:15 for this that that's totally correct and it's funny that you mentioned that and a lot of maybe I I know your community is very
6:20 real estate related but what you're mentioning is that there's a you're getting income based or are or income
6:26 producing based loans meaning the properties will will will cover their own debt and so that's that's why you
6:31 could borrow money without having good tax returns or maybe tons of income because the the property itself is an
6:38 incomeroucing property so the bank uses that to qualify you and the same thing with DS SCR or any of those other
6:44 non-traditional standard loans, they they just use it based on income. And that's those by the by by no means is
6:50 that a bad thing. Uh not not whatsoever. Uh the way I see things is interest
6:57 rates are really irrelevant. It's it's more of a ratio to income that we should look at in all things in life. Like in
7:04 all things, like when somebody says, "The interest rate's 8%." I'm like, "Well, it's high, but in comparison to
7:11 my income, is that $5,000 note, like is it is it 10% of my income? Is it 5% of
7:17 my income? Or is it 50% of my income?" That would make a difference to me. Yes. Versus the interest rate.
7:23 That's That's one of the I I I love that you said that because I have I have loans at 3% interest. I have loans at 13
7:30 and a half% interest. Yeah. Yeah, the 13 and 12% interest loans are still on some of my highest
7:36 cash on cash returns. Um, my debt service coverage ratio, which I think is a fantastic metric to
7:42 look at. That's your I that accounts for all expenses, uh, is sitting on those deals at like a 1.6 debt service
7:49 coverage ratio. I pay myself 60% when I pay the bank. If you're paying the bank 13 and a half percent and you're paying
7:54 yourself 60% of that, I would argue you're doing pretty darn good on that deal. Yeah. Yeah. Yeah. And if you can
8:00 refinance in the future, you'd be not doing good. You'd be doing great. Yes. I did one of those last week. I brought a uh a deal that was cash
8:06 flowing uh while at 13.5% debt to 6.6% debt. Uh
8:12 wow. Cash flow increase $10,000 a month with uh well, I was going to say one signature, but it's a bank loan. So 50
8:18 signatures later, one sitting. Uh yeah, that's $120,000 a month income increase.
8:25 Like that's freaking amazing. But but that's amazing. You nailed it. It's it's people,
8:30 especially in today's market, and this is for all business. This isn't just for real estate. They focus on the rate. They're like, rates are expensive, so
8:36 deals don't work. It's like, well, your deal doesn't care what the rate is. Your deal cares how much money it makes in
8:42 proportion to your expenses, which is exactly correct to service the debt. Uh, and that that leads into other things
8:47 like I think about it from like an SBA perspective. You know, interest rates on SBA is higher than it was, let's say,
8:52 four years ago. But when people are like, well, it's really hard to to borrow money for my business. So I'm like, well, it just means your
8:59 business isn't making very much money to cover the debt, right? Because if you had an unlimited customer base that was
9:06 begging for your product, whatever that may be, then the debt doesn't matter. The the the rate would not matter
9:13 because you'd outbeat that debt by sales, right? But most people have a sales problem or a rental income
9:20 problem. They don't have a rate problem. They they they see that that as a reason for them to not move or take action. And
9:27 it's like, no, just if it makes sense, it makes sense. A deal is a deal. It does not. And I just actually had this conversation with my team last week cuz
9:33 we're all looking at a deal together. And they're just saying like, well, you know, how do we know if it makes sense? Let me just get a m napkin, right? Let
9:39 me show you guys like this is how much it costs to buy this thing. This is how much we're going to put into it. This is what it's going to take to rehab it.
9:45 This is what it's going to take to service it. And here's how much we're going to make. Does it cover it? No. Then the deal doesn't work. Like that's
9:52 it. Simple. Done. Well, this is this is Okay. So, uh, one of the questions I was going to ask with
9:57 I feel like you're kind of already answering it. The I was like, well, why the EA track and you mentioned you're businessminded. I'm like, well, this
10:04 actually makes sense cuz the way that you're breaking apart all of business um is just a it's a straight up EA mindset.
10:11 It is a let's get in where are we making money? What where do things need to be categorized? And then you just said it
10:17 for most of business if you have a decent product doesn't even actually have to be a good product though I
10:23 advocate for having good products. [laughter] you almost always the the constraint is either on the sales or
10:30 marketing. Either you need more leads or you need to close more of the leads you have. And it's usually a combination of both. But if you have that part down,
10:37 which is I think one of the hardest things to get right in business and also the most critical. If you have the
10:42 income, you have to have topline to have bottom line, which is sales and marketing. If you can scale and you can
10:49 convert, you can make more money. And then the constraint is okay. So what is our actual cost of growth and is it if
10:55 we are making money on it you just need to be able to show a bank which is where you come in. You need to be able to show
11:00 the bank yes my business makes money. It is capable of making money and if I have more money in my business it will
11:06 continue to return more money than I put into it. That's essentially what you need to show. If you put money out or you put
11:12 money in more money comes out than goes in. If you build that engine in your business regardless of industry you will
11:19 find more money. That's right. 100%. I agree with you. How often how often do you consult with
11:24 clients where you're looking at your books and you're finding you're finding like, hey, the way that you're set up,
11:29 you actually don't have a business problem. You do have a sales and marketing problem or you have a problem with the way you're portraying the books. What how often do you look into
11:36 the books and say, hey, there is a correct way to paint this p picture where your business can take off in a
11:43 different direction. That that's probably not something I do as much as I used to. Um we're the
11:48 reason so is that we focus on a specific client these days. Typically their their tax liability has to be greater than
11:55 500,000 and and so that means they have internal controller. They probably have some sort
12:01 of finance department within their inside of their business and uh we're coming in more for tax strategy. So the
12:07 biggest which is the biggest lever, right? Um I mean we can give guidance and we can give some some oversight but
12:13 I I don't do as much anymore just typically because uh you know the type of customer we serve it's really that
12:18 much. Well and and that's so so uh a story that I have and this is this is how I found EAS which is why I'm so excited
12:24 for our episode today. The um my first year no one had explained to me the
12:29 difference between uh inside and outside basis. And so I bought a I started with
12:36 no money. So, I bought a ton of real estate and I'm calling a ton. I started
12:41 with no money. I used no money to buy about 120 rentals in my first year. Um, and so I built this portfolio. We run a
12:49 bunch of cost segs. I have all these tax benefits. Um, I also had a pretty good year in active income. My assumption
12:56 was, well, if I have all these tax benefits, I'm probably not going to be paying taxes. uh if you have no basis
13:01 yet in your property, it's not that you lose the benefits, but you can't necessarily use them. So, I had all
13:07 these unusable tax benefits. They came up in other years. We increased our basis, but that's the it's the little
13:14 stuff like that where my budget neighborhood CPA had no idea how to
13:20 counsel me to put together my taxes. I ended up uh with excess tax benefits
13:25 that I couldn't use in that tax year and owing 183,000 to the IRS when I was
13:30 factoring for about 15,000 in your first year of business as an entrepreneur. Uh that sucks [laughter] when you just
13:38 you just managed to put aside about I put aside about $200,000 and I'm like I just set aside more than I made in my
13:47 active career in previous years. and then getting a uh letter from the IRS
13:52 saying, "Hello, you owe us all of that." [laughter] That was a uh that was a huge bummer. So, it is one
13:58 of the most important things that you can do when you start making significant money, you have a successful business, putting that money back into your
14:05 business, especially in the growth phase of a business, is so critical. What I
14:11 could do with an another $180,000 of marketing would have been huge. Um I agree with you on that. So, so, so you
14:17 have clients, um, take, take someone who was in my situation. I, I hope this is relevant to, to some of you listening to
14:24 this. In my situation, you have someone coming in, um, they don't understand how
14:30 the game was played. They're working with a a their business has grown beyond their neighborhood CPA. They come to
14:37 you. What are the most common things that you are finding that you guys are correcting on the front end or opportunities that you see where like
14:43 hey this is usually the lowhanging fruit? Well, first and foremost the the number
14:49 one thing that we encounter is that there is no strategy whatsoever. Meaning there's there's this there that's and
14:55 and when I say that I I say that with with to be jokingly but at the same time it's there there's this this mantra
15:02 amongst most accountants today that that paying taxes is a is a badge of honor.
15:08 Paying taxes is something that is uh patriotic if you will. I call them blind patriots. They believe that that just
15:15 paying a tax is part part of the process of making money, which in some regards there is a time in your career or in
15:22 your journey of of growing income that you're going to pay taxes because there's nothing that you can do because
15:28 your income's not high enough and it's not low enough. So meaning you you're you're you're in a position which that
15:35 usually happens when somebody's making between let's say two and $400,000.
15:40 Yeah. Usually there's just like there's no way to avoid it. either you're going to expense to zero, which means you report
15:45 no income, or you're going to report income and pay taxes. One or the other is going to happen. And so most people
15:51 just try to not report income. But once you start passing around $500,000,
15:57 you get opened up to the world of advanced strategies. And that's where we come in and we say things like, well,
16:03 what have you done in the past? Right? Nothing. What investments have you made? because almost 100% of strategies that
16:09 really impact the bottom line of a tax liability are going to be from investments. Now, it could be in real estate as an example, um energy, which
16:16 is a big sector right now. It could be in assets that have depreciation that
16:21 are tied to them. This there's there's we probably have a dozen strategies that are be just like, wow. Um and and once
16:29 you realize that, they're like, whoa, so if I just made investments, I could start saving taxes. I'm like,
16:34 yeah. So, what do you do for your investments? Well, I just put him with my, you know, my um financial adviser. He just takes it and he puts it into the
16:41 market. And I'm like, well, why don't we not Well, I said, you can always still do that because the truth is I'm not even trying to help them. I'm not even
16:48 trying to get some of the money that they're giving their financial advisor to go to investments. I actually just want them to reallocate the tax that
16:54 they would have paid to an investment and then that would offset the tax liability. And they just
17:00 don't know that. So, it's like mindblowing and it it really has no structural change in most cases. I'm not
17:05 coming in and saying, you know, hey, we need to open up three more LLC's or we need to start, you know, funding that
17:10 like none of that stuff. All that stuff that that people talk about, which is definitely important for asset
17:16 protection really has no bearing on tax. Uh really, really nothing. I mean, it it's negligible to the point where if
17:22 you save if you're paying $500,000 in taxes and I give you something that's going to give you a $3,000 savings,
17:29 you're like, "Bro, like please, you know, $3,000 isn't I mean, you might I'm not saying it's nothing, but you're
17:35 still paying $497,000. Like, you don't give a about the three. Um, you
17:41 want me to work on the 497." And so, we work primarily on those. And that's where people don't know there there's
17:46 this whole world of advanced strategies that gets appears when you make enough income like this whole world. And when
17:52 somebody says to me like, "Well, why do wealthy people not pay taxes?" Well, they just have income sufficient enough
17:58 to make smarter investments. That's it. It It's not That's it. And you mentioned blind patriotism. And
18:04 here here's here's always been my opinion on it. So I I intentionally ma remain very apolitical because uh
18:11 honestly I don't I don't typically care very much. But when it comes to taxes, I I I do have really hard stances on this.
18:17 Um I don't think any party would disagree that the government sucks at spending money. Um yeah, depending on
18:24 what business you're in, you getting to allocate the same dollars for the good of other people, you can do a lot more
18:31 than giving it to the government, which is typically what you end up doing. And that's what mostly the tax code tries to
18:36 incentivize. So you could take as example, I'm in housing. Look at the cost of the government to house people
18:42 and how the quality of government housing. Then look at how many people an entrepreneur can house if you do a great
18:48 job creating great housing for great people. You can typically do a lot more good with the money in most of these tax
18:55 strategies. You're giving significant economic benefit greater than what those
19:00 same dollars would do if you paid them in taxes like ethically. Then also saving your money is also
19:06 awesome. But but what you what you just said is very very important. Everybody pick up because even the government incentivizes
19:14 entrepreneurialism through building of apartment complexes to serve a specific
19:20 income demographic. Um, every every state is allocated
19:25 credits, tax credits every single year that then get deployed to developers to
19:31 build lowincome housing. So the government incentivizes entrepreneurship
19:36 and business ownership by tax credits so that people will build more houses. And so you know like if you really just want
19:43 to win in in the game of taxes just do what the government wants to incentivize. And real estate is a big
19:49 one. I mean it is it's it's it's just to be clear and I know this audience is a group of real estate investors. And so I
19:56 I you're already in the right track but just know not every real estate deal is going to give you tax benefits. I don't want anybody to pick that up. And I want
20:02 you to know that real estate always has to make financial sense before it makes tax sense. Just just know that.
20:09 I hate those strategies. Like, well, I bought a deal. It was kind of bad, but I saved so much in taxes. I'm like, you did not.
20:14 Conversely, uh, you could have bought a deal that was good and then also had the same benefits. Uh, buy for cash flow. Do
20:22 not buy cash flow negative deals hoping for taxes. Your your taxes are a beautiful, beautiful side effect of
20:28 doing good deals. And never buy a deal. This is a rule we live by. Never buy a deal on anticipated
20:33 rent growth. Base it on the today's market and because things change. Like if I if I'm
20:39 going to buy something because I think that I will make more money in the future off the rents and that's going to service my debt, that's not a good deal.
20:46 Yeah. The uh appreciation over the long term is what makes you rich in real
20:51 estate. Holding a lot of real estate for a long period of time that that will absolutely do that. And long period you get paid to wait. That is the that
20:57 is the strategy. So, you buy in areas or deals where you anticipate high appreciation, but you buy based on cash
21:05 flow for long-term growth. You don't buy based on potential growth hoping for
21:10 future income. The difference is uh extremely it's the difference between
21:15 bleeding on every deal you buy or getting paid to wait on every deal. And that is uh that is where you see people
21:21 go under or the people who are in their 70s who are like, "Yeah, I have hundreds of units and I paid most of them off." And
21:27 a lot of the clients who are like, "Hey, I need an EA." are the people who bought cash flowing businesses and cash flowing
21:32 real estate and they're making a profit and they need to figure out what to do with it. That is the problem that you want to have. That that's exactly right. And and just
21:39 you said the key words. It's over time. Um to be clear, appreciation has to
21:44 happen significantly. Like appreciation is the only thing you can really bet on if it's not cash flowing at a high
21:50 level. And I mean it's got to be cash flowing significantly more than what you have to pay. And that's hard to find these days. And um so I just I mean the
21:58 real estate just kind of market is unless you're in the game every single day, there is a high likelihood that
22:04 you're not getting deals. I I would agree with that. And I'll caveat that with you need to be in the
22:10 game like 15 minutes a day. It's not like you need to be plugged in all the time. Go go go. But it is absolutely
22:17 daily. You should be you you need to be negotiating and conversing in real estate daily. It will cost you in my
22:23 opinion less than watching an episode of Netflix every day, but you do have to be actively playing to find deals.
22:30 I I agree. You got to be in the game to play, right? And so I think 15 minutes is a very I've never heard that approach
22:35 and I actually like it. I think that's a it's a fair statement. Many people want to be uh you know passive in investing
22:42 in real estate. And that's true. You can be, but then you're going to need somebody who's active to actually do the work and find the deals. So that's why
22:49 it's why investing is either you're going to get in the game or you're going to invest with somebody. You don't want to do well I think I can do it half the
22:56 time or a quarter of the time. No, it's just like get in or out because if you're being presented a deal, let me
23:02 put the quotes up there right now. If somebody calls you with a deal and you're not in the game every day, you're
23:07 that is not a deal. Like they're looking for a sucker cuz uh they've they've
23:13 already given that deal to somebody, right? Like if coincidentally you haven't talked to anybody about real
23:18 estate for the last, you know, 3 months and all of a sudden this guy calls you out of nowhere and it's like, "Hey, hey
23:24 man, I got this one deal, bro. I haven't told anybody about it. You really want to try and check it out?" It's like, bro, no, no, nobody's just calling you
23:31 randomly. You got to be in the game. I absolutely agree. I absolutely agree. And like I I have found that there's So
23:38 I' I've had friends who are like, "Hey, I I make like a thousand calls a week
23:44 and I'm I'm on the phone. own them with brokers all the time. The reason that I settled on multif family personally is I
23:49 can move forward massively financially every year doing two or three maybe four deals like most a deal a quarter and if
23:57 you have to succeed once every 3 months talking about like it's mostly talking to brokers about listed deals or
24:03 pre-market deals and talking to some of the local owners but that 15 minutes a day that's two seven minute phone calls
24:11 on deals and markets you're interested in over the course of a year. Sure, that's a lot of calls. That's the most
24:17 I've ever spent. Unless your goal is, hey, I want to have a 10,000 unit portfolio and I want to be some real
24:22 estate titan. For 99.9% of people who are like, hey, I want to I want to build an income of 10 20 $25,000 a month in
24:30 real estate, it is really a 105 minute a day process, but it's being continuously
24:36 involved. It won't cost you a lot. one of the lowest demand, like time demand part-time jobs you can have. But if you
24:43 don't treat it like a business and you don't dedicate time to it daily, you are not going to find deals. If you're
24:49 someone who's like, "Hey, I check in every week," the the people who are checking in every day are going to destroy you. Like, you just won't find
24:55 the deals that I find with the little bit of time I allocate daily to it. That's that is the model that I found
25:00 that works. It's sustainable. It's easy. And that's why I advocate for buying a little bit bigger deals is succeed
25:07 three, four times a year, you're 100 units ahead while someone else bought a duplex. Like it's a phenomenal uh
25:13 phenomenal strategy. When um going back in time a little bit, I'm just curious uh how did you how did you get started?
25:21 Like anywhere in the accounting field is a very specific mindset and personality.
25:26 And I'm curious what was what was the starting point where you were like, "Hey, this is something I want to do." How did you end up on hey I became an
25:34 enrolled agent? It's just a very specific path to find yourself in uh how did you find yourself here?
25:39 So 2008 um I am a real estate agent at the time trying to sell properties that
25:45 were coming up for foreclosure and I couldn't find a just couldn't find a way to to continue to grow especially since
25:50 I had only been an agent for less than a year. Yeah. And um my uh my buddy reached out to me
25:56 and says hey man what are you doing these days? I told him what I was doing. He says, "I'm going to open a tax office and I'm looking for for a partner. Would
26:02 you would you mind joining me?" And I said, "I don't like anything about that idea." In fact, uh, he says to me, you
26:07 know, "What don't you like?" I said, "Well, for one, I don't like taxes, right? I don't want to pay him, and that's all I know."
26:13 And um, he he convinced me with a few words, just like, hey, you know, this is a recession proof business. You should
26:18 just check it out, try it out for a season with me. And I had no background in taxation, but I mean, I'm I'm savvy
26:24 enough to figure this out. So, we open a little tax office. We're filing tax returns. And after the first season, I
26:29 was like, man, this is this is good. I really enjoyed it. I I I wasn't so much of a numbers cruncher kind of guy. That
26:35 wasn't my like my my attractiveness to the industry. It was more so I loved learning how people made money. I loved
26:43 learning how people spent money. I liked how investments work. I liked how the tax return flowed. And I I saw that the
26:49 tax return was the most important document when it came to finance, when it came to business. And it just
26:54 interested me. So I I pursued that over the next uh about 12 years, a little over a decade. I built one of the
27:00 largest tax preparation businesses in the country. Um we had prepared over 50,000 tax returns by 2020.
27:07 Wow. And um it was um it was a fun ride. I would say that. And u over the last five years
27:13 though um was a different chapter of my life. Co exposed a lot of a lot of challenges. My business was primarily in
27:20 person. People dropped off paperwork, those kind of things. and I just didn't see that the growth that I wanted. And I
27:26 I also just saw that the the writing on the wall, things are changing. And so, um, I started to see that there was a
27:32 need for people to get more deep advice from from their from their tax professional. I saw that there was a
27:38 need for for me to go deeper with clients and a lot of them were paying taxes, including myself. And that that
27:44 was my pivot. And so, in 21, I said, you know, this is the world I need to go to. I need to work with a specific client.
27:50 And back to the ambitiousness, right? The reason that I I'm really good at what I do and the reason that I was good
27:56 at that time is because the the vast majority of the problems I was solving, I had I had my own self. Like, yeah,
28:01 I had a sevenf figureure business. I I I owned real estate. I had all the the
28:07 challenges that my clients are new clients were coming to me about. And I said, you know, I like working with
28:12 these people. I I enjoy talking about the same challenges either that I'm going through or overcame. And so over
28:18 the last five years, we built a very successful tax strategy company. Um, I actually work with CPAs and accountants
28:24 all over the country to help them offer strategies. Uh, last year alone, we saved over $900 million in taxes for our
28:31 clients. That's amazing. We, you know, I I found a groove in 22 or 21 through 23 on all real estate
28:38 because real estate was booming and I was booming in real estate. I we we acquired about $10 million worth of real
28:43 estate in that time frame and um me and my wife. And so, like, there's just so much of this story that ties back to
28:49 real estate when I first started, learning about how important a tax return is, learning about how bank
28:54 financing works, and I I just totally enjoy today what I do. I just work with specific clients on specific challenges
29:01 that I've overcome in most cases myself because, you know, you don't want to work with people who've never been
29:06 through the problem. It's like handing the keys to your Lambo to a guy who
29:11 drives a Toyota Corolla, which is what most people do. And uh you know I I know how to drive the Lambo because yeah well
29:18 kind of that's the kind of vehicle that I would drive, right? Or that I own. And it would be because not because I'm I'm
29:24 wealthy. It's just because I've been there and it's very important to work with people who have been there. And so my
29:29 journey started in 2008. Still today. Um we lead one of the largest communities in the industry today. I've kind of I
29:35 write in all publications CPA advisor.com um accounting today. I'm a
29:40 I'm a big contributor and a big advocate that accountants today, tax professionals specifically, need to go
29:46 deeper with their clients. They need to save their clients on taxes and they need to help their clients position them
29:52 for wealth in the future. Ah, love that. I'm going to ask the question that we ask in every episode,
29:57 which we call we call the stupid tax, which I I realize that name is actually really relevant in today's episode since
30:02 we're talking about tax. Uh but the uh the essential is the dumbest you'll ever be is the beginning of your career
30:08 because then you're going to learn a bunch of stuff and you'll become wiser. Um as everyone goes into their business and this podcast is called the owner
30:14 meeting because we meet with owners, we learn from them. One of the best things that we can do as entrepreneurs is help
30:19 people avoid the most expensive mistakes we made along the way. If we can make a mistake for you and you can learn from it here on the podcast, that's the goal
30:26 of this question. Uh so what was the highest stupid tax that you paid in building the business? This could be a personal relationship. It could
30:32 literally just be monetary. Uh but what is the most expensive lesson that you
30:38 have learned on your journey? Well, my the biggest lesson, most expensive lesson I learned was 2015. Um
30:44 I'm finishing up the tax season. It's April 15th and I sit down to file the last return of the evening. And it so
30:50 happens to be my own. And as I entered the information from all my K1s, 1099s,
30:55 all those documents, I started to realize that my um tax bill kept on
31:01 going up and up and up and I had never really paid taxes because the first seven or eight years of business, all I did was grow. I was adding more
31:07 businesses, locations, you know, employees. I had a lot of expenses. Um but this year was a little different.
31:12 And as I saw the end result, it was $142,000 tax bill.
31:18 And I had never paid taxes that much and I didn't know what I was doing. I mean, I knew how to file my return, but I guess I didn't know what I was doing in
31:24 the moment. So, I called a buddy of mine who's a a mentor, very successful CPA, and I said to him, "Hey, I need help,
31:30 man. This is I I need like I'm going to file an extension. I need to go to your office tomorrow. I need help." So, I went to his office and sat down with
31:37 him. Now, he is a millionaire. I mean, this guy is not just your neighborhood CPA, very, very successful retired CFO
31:43 from Cityroup, CPA, credentials like no other. And I say, "Hey, man. Here, help me review this." So he reviews it, says
31:50 the same thing to me. Hey man, it's 142,000, bro. Congratulations. You made money. You should be so lucky. Pay the
31:57 bill. And um you know, I I said, "Man, I I don't First off, I don't have the money to pay the bill. Number two, I I I
32:03 don't want to pay this bill." And he says to me, "David, this is just the way it is. When you make money, you pay taxes." I said, "There's got to be
32:10 something you can do. You know, Bill Gates doesn't pay taxes. Jeff Bezos doesn't pay taxes. Donald Trump doesn't
32:15 pay taxes. is Warren Buffett does like how how am I paying this much but these guys don't pay taxes and he says to me
32:22 David that's a bunch of like that's not true you pay your taxes or he
32:27 said this and this always resonates with me he says if you don't pay your taxes you shouldn't have the right to vote and
32:32 I took that so personal I walked out of that office with my tail between my legs
32:37 and I said to myself this will never happen to me again there's two things I learned that day number one I was a tax
32:44 preparer who had been preparing preparing taxes for the last seven years. At that time, we probably had about 20,000 tax returns filed in our
32:51 organization. And I didn't know anything about taxes. Number one. Number two, in order for you
32:58 to solve a problem, you have to have enough pain and you have to have the problem yourself. And so that was the
33:03 spark of learning the tax code. Like that was it. I said, "That's never going to happen to me." And over the next five
33:09 years, by 2020, I paid zero tax. Today, I still pay zero tax. I have a multi-7figure
33:16 net income. Mhm. Net. And I don't pay any taxes. Yes. That is that is amazing. I You're
33:23 ahead of me. I paid about 17,000 on a uh on a seven figure income. So, you are you're you're netting better than me. I
33:29 had I had low taxes but not no taxes. I I actually get a refund um because I
33:34 have a escorp and I pay federal withholding. So, I get a refund every year. Oh, that's amazing. That is amazing. Uh
33:41 but what what a huge lesson and and if you guys are looking for an EA, you're looking for tax advice, absolutely uh
33:47 this is what David does. So if you're in that category and you have this high taxable income, uh David, how how does
33:53 someone I mean you're actually relatively easy to find online, but how does one how does one find you and how
33:59 does one get connected if if this episode resonates with them and you're actively solving problems uh right now
34:05 that they have? All right, two two ways. is uh go to our website taxplanexperts
34:10 with an s.com. You can go to taxplanexperts.com and just form right on the main page, inquire, we'll
34:16 schedule a call, see how we can help. Number two, you can message me on Instagram or Facebook. I am David A.
34:22 Perez. Just that's the handle. I am David A. Perez. Reach me anywhere there and uh message me, send me a DM, and uh
34:29 we'll connect to see how we can get on a call and see if we can help you. Perfect. Well, David, this has been fantastic you have having you on. Uh
34:35 links will be below in the show notes or the description if you're watching this on YouTube. Uh but guys, uh thank you so
34:41 much for listening. This has been the Owner Meeting podcast with David Perez and me, your channel host, Christian
34:47 Osgood. I appreciate having you guys here and we'll see you all on the next episode.