In this episode of Executive Connect, host Melissa Aarskaug chats with One Stop Tax Strategist CEO Melanie Sikma, who explains how a proactive tax strategy can legally reduce tax burdens, protect cash flow, and accelerate long-term wealth. Melanie shares practical insights on structuring deductions correctly, avoiding audit triggers, leveraging timing strategies, and redirecting tax savings into investment growth. The conversation also explores common mistakes high earners make, why planning matters more than filing, and how business owners can create multi-year financial advantages with the right advisory partnership.

This episode is essential listening for entrepreneurs, real estate investors, and executives who want to keep more of what they earn while building sustainable wealth.

Chapters:

(0:42) Why high earners overpay taxes
(3:24) Income levels where savings increase dramatically
(5:00) Making lifestyle expenses deductible legally
(8:37) Audit risk factors and entity structures
(10:46) Documentation that protects deductions
(12:02) Finding missed deductions in everyday spending
(12:55) Timing strategies that reduce tax liability
(14:02) Bookkeeping as the foundation of tax planning
(17:15) Capital gains reduction strategies explained
(19:13) Real estate and tax deferral opportunities
(20:18) Redirecting tax savings into investments
(21:57) Best vehicles for high-income earners
(23:37) Client reactions to major tax savings
(25:49) Smart reinvestment versus risky decisions
(26:51) Preparing now for future tax seasons
(30:00) W-2 versus business income strategies
(30:55) Multi-year tax planning decisions
(32:22) Moves clients wish they made earlier
(33:47) Rapid fire tax strategy insights
(36:34) Final advice and how to connect

Melanie

(0:00) You don’t have to get a rap. (0:00) You don’t have to do anything like that. (0:02) It’s just the utilization for the business that makes it deductible.

(0:06) So just understanding the rules, knowing that you have a CPA that understands those, and when you, I guess a trick, a lot of people will ask, is this deductible to their CPA, if you have a CPA that is not naturally creative, that’s going to put them, they’re not going to tell you how to make a deductible. (0:21) So the trick there is to change the question and say, how do I make this deductible? (0:26) Hey, my family and I are going to Jamaica.

(0:28) How do we make that deductible? (0:30) And that will kind of get their creative juices flowing to say, well, if you had it be a business planning trip, or if you had, you know, you were looking at different things over there, expand your business, those things would make it more deductible.

Melissa

(0:42) Most people treat taxes like bad weather, unpleasant, inevitable, and completely out of their control. (0:48) But today’s guest is here to prove that you don’t have to hand Uncle Sam an unfair share of your money just because everyone else does. (0:58) Melanie, Melanie Skima is the CEO of One Stop Tax Strategist.

(1:04) She helps real estate investors and business owners legally save tens and thousands of dollars a year without shady loopholes or late night stress. (1:14) Her clients aren’t cutting corners. (1:17) They’re using smart court backed strategies to keep more than what they earn.

(1:22) If you’ve ever suspected you’re overpaying to the IRS, you’re probably right. (1:28) And by the end of this episode, you’ll know exactly what to do about it. (1:33) Welcome, Melanie.

(1:35) Hello. (1:36) Hello. (1:37) Now you’re, you work with investors and business owners who are often shocked by how much they can save legally with the right strategies.

(1:47) Let’s start with that. (1:49) Why do so many people pay more in taxes than they actually owe?

Melanie

(1:54) Well, I think it’s just the ignorance is not very much bliss at this point, but that the tax code is actually, it’s so thick that if you had a Glock 45 and you held it in front of your chest and it was shot at you, it would not penetrate the tax code. (2:11) That’s how thick it is. (2:12) Only 10 of those pages tell you how to pay.

(2:15) The rest tells you how not to pay. (2:17) And so if your tax advisor, your CPA is not continually getting into that and understanding it and knowing how to work the game, it’s like a game that you have to just know the rules. (2:29) If you don’t have that, then you’re probably going to be missing out.

(2:32) Cause if you’re running your business, if you’re, you know, spending all your time running like your, your actual main thing, you’re not going to have time to go read that and figure that out. (2:42) So if you don’t have a CPA that’s creative, that’s proactive and it’s not their fault, they just not very, it’s usually not very synced. (2:52) They’re not, it’s usually an oxymoron creative CPA, but we have systems that at one stop that really help our team be creative.

Melissa

(2:59) ready to lead smarter and invest wiser on the executive connect podcast, we unpack executive strategies for wealth and influence. (3:10) Hit the subscribe button. (3:12) Now don’t just watch act, you know, at what income level does overpayment usually start becoming systemic rather than accidental?

Melanie

(3:24) Usually, I mean, honestly, across the board, we see it, but where we tend to really help people is when they’re netting 250 or more, that’s when we can really like save them tens of thousands, a lot of money, a lot more than what they’re paying us. (3:39) And so usually if their business is netting around 200 to 250,000 or more.

Melissa

(3:45) Now, how much of this is bad advice versus just no advice whatsoever?

Melanie

(3:52) I think most of it’s no advice. (3:54) I think a lot of it is you have, we always say we have three different types of CPAs. (3:59) You have the, the scaredy cat CPA who’s afraid to write anything off.

(4:04) You have shady, shady Steve over here. (4:06) Who’s wanting to write everything off and just pull things out of his butt. (4:10) And then you have Goldilocks, which we like to do that at one stop is where you do everything you’re not too aggressive, not too scared, but you’re doing everything right in the middle.

(4:20) You’re utilizing the rules to benefit you. (4:23) You’re not getting too aggressive and just making things up. (4:27) It’s going to be everything that’s going to hold up in an audit and you use court cases to back it up.

(4:31) So that’s the key there. (4:32) But I do think a lot of CPAs, they don’t, I think a lot of them too. (4:36) They just don’t have the time to, to do the research.

(4:38) They’re so busy serving their clients and they get busy in the weeds of their business that they don’t pull themselves out and have time to research. (4:47) So I think a lot of it’s just, just, you know, not having the time and not giving advice.

Melissa

(4:53) Now let’s talk a little bit about making your lifestyle deductible without doing anything sketchy. (5:00) Now you say something that instantly grabs attention is making your lifestyle deductible. (5:07) Before people jump to that conclusion, explain what that actually means when it’s actually done the correct way.

Melanie

(5:14) Yeah. (5:14) So, um, don’t go, there’s a lot of people on Instagram and different places where they’re saying everything in my life is around business. (5:21) So therefore everything’s deductible.

(5:23) That will get you in trouble and that will, you will lose an audit if you do that. (5:27) It’s looking at the rules and figuring out how do you make those things deductible? (5:32) So my family and I, for example, we’re all business partners.

(5:35) And so we go to Hawaii every year instead of making it just a vacation, we make it a partner planning retreat. (5:42) And so that makes the flights deductible. (5:44) That makes the hotels deductible, the meals, because we plan it all around, um, just our business.

(5:51) So it’s how you plan those things. (5:54) This shirt, for example, if, if I didn’t have the logo, it has, for those that are just listening, it has my logo on it. (6:01) If I didn’t have my logo on it, it wouldn’t be deductible, but because I have the logo on it now, therefore it’s deductible.

(6:07) So little things like that, your car, you don’t have to slap a logo on it. (6:12) You don’t have to get a wrap. (6:13) You don’t have to do anything like that.

(6:14) It’s just the utilization for the business that makes it deductible. (6:18) So just understanding the rules, knowing that you have a CPA that understands those, and when you, I guess a trick, a lot of people will ask, is this deductible to their CPA? (6:27) If you have a CPA that is not naturally creative, that’s going to put them.

(6:31) They’re not going to tell you how to make it deductible. (6:34) So the trick there is to change the question and say, how do I make this deductible? (6:39) Hey, my family and I are going to Jamaica.

(6:41) How do we make that deductible? (6:42) And that will kind of get their creative juices flowing to say, well, if you had it be a business planning trip, or if you had, you know, you were looking at different things over there, expand your business, those things would make it more deductible.

Melissa

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(7:31) To learn more and get a free white paper, oil and gas demystified, just visit www.summitven.com forward slash executive connect. (7:46) Now, what types of everyday expenses are mostly misclassified or missed completely?

Melanie

(7:53) I’d say just going back to that, everything in my lifestyle is deductible. (7:57) A lot of people, like they, they write off their gym membership. (8:01) They’ll write off just all of their cars.

(8:04) I’ll write off everything or like, I have to look pretty. (8:07) So I get my nails and hair done. (8:09) So that’s deductible.

(8:10) All that stuff is not like, you can’t just make it deductible just because you think it’s necessary for your business. (8:16) It’s ordinary and necessary for your business and that your business couldn’t run without it. (8:21) So like those things you need to make sure it’s, it just because you think it is, doesn’t mean the IRS is going to think it is.

(8:28) So I’d say anything around those, like those things, if you feel like you’re kind of just making it up, it’s probably not deductible.

Melissa

(8:37) Yeah, so true. (8:38) So structuring smart without initiating or inviting an audit is really key here. (8:44) So a lot of people avoid tax planning because they’re terrified and fearful of triggering an actual IRS audit.

(8:53) So from your experience, what actually increases audit risk and what doesn’t?

Melanie

(8:58) Yeah. (8:58) So one, the type of entity that you have really does change your audit risk. (9:04) So S-corps, for example, are the least likely.

(9:07) They’re like 0.04% chance. (9:10) So you’re about seven to 10 times less likely to get audited if you have an S-corp versus if you have a sole prop or just a single member LLC. (9:19) Being a partnership actually lowers your audit risk.

(9:22) So if you can’t be an S-corp because you’re, let’s say you’re investing in properties and you’re the only investor, adding your spouse to that entity, it’ll increase your filing fees, but it’ll actually decrease your audit risk. (9:34) So if you’re afraid of audits and that gives you peace of mind, it might be worth it. (9:40) Then also, if you look at all the tax returns have a code on the top of it.

(9:46) If you look at that code, make sure one, that it’s in your industry. (9:50) Cause a lot of CPAs will just, they’ll have that be incorrect. (9:54) If that’s incorrect, then you might be flagging yourself for an audit because what the IRS does when they’re pulling an audit is they look at everything, everybody in that code, how does your P&L line up to others in your industry?

(10:08) If there’s anything that stands out, then you might be pulled for an audit. (10:13) And so making sure that if there’s any outliers that you put a note in there, explain why, or is that maybe miss, miss booked where you can book it is another type of expense, things like that you want to look for. (10:26) So when we’re doing tax planning and tax filing, we always use industry averages because that’s what the IRS looks for.

(10:33) And then also if you have an S corp, make sure you’re paying yourself a reasonable salary or at least a salary. (10:39) A lot of people don’t. (10:41) And that alone will flag you for an audit if you don’t have a salary within an S corp.

Melissa

(10:46) Now, what role does documentation play in this?

Melanie

(10:50) Huge. (10:51) So documentation is more important. (10:53) If you get audited, if you don’t have documentation, then if you get audited, a lot of stuff can get thrown out and a lot of people think that bank statements are enough in the event of an audit and it’s not.

(11:06) So you want to make sure, like if you go on a business meal, for example, with a potential client, make sure you’re taking a picture of the receipt and writing down who you met with, what you discussed. (11:18) So there needs to be the name, date, location, who you met with, what you discussed on the receipt. (11:24) A lot of those are already on the receipt.

(11:25) So just writing down the purpose of that and making sure you’re keeping all of those somewhere, whether it’s in your phone, filing it away. (11:33) QuickBooks Online has a thing where you can, it’s called Receipt Capture, and you can actually take a picture of it and tie it to the transaction in your books. (11:41) So it’s more if you get audited, having that documentation, because if you get it audited like five years from now, you’re not going to remember what your lunch with Johnny was, right?

Melissa

(11:53) Yeah, so true. (11:54) Now you said most people already have the expenses they need. (11:58) They’re just not using them correctly.

(12:00) Walk us through how that plays out.

Melanie

(12:02) Yeah. (12:02) So for example, one of our clients, we audited his personal bank statements and we were able to find $60,000 in missed deductions just because he wasn’t looking at what he could write off. (12:16) He didn’t realize it was a business deduction.

(12:18) And so I guess that’s just a tip is maybe have your CPA audit your bank statements, your personal accounts, just to see if there’s anything in there that might be a missed business deduction. (12:29) So just looking at any type of, vacation’s a good example, just because a lot of people don’t realize you can turn those into business trips if you do it strategically. (12:42) And just anything like with kids or anything like that, you want to look at how can I make this a business deduction?

Melissa

(12:49) Now, how does timing affect deductibility and cashflow?

Melanie

(12:55) It’s huge. (12:56) So we just finished our busiest season of the year, which is tax planning season. (13:00) If you don’t meet with your CPA before the end of the year, you’re missing out and probably it’s costing you a lot of money, January is the time to kind of prep for tax season, but it’s not the time to meet with your CPA to lower your tax bill.

(13:14) There’s some things we can do, but it’s really hard for us. (13:17) At that point, we’re just historians. (13:19) And so, you want to meet with your CPA November to actually just October to December, pretty much after extension season, we enter into tax planning season.

(13:30) And that’s where like for our clients, we run their numbers. (13:32) So we plug their numbers into our tax software as if we’re filling out their returns. (13:36) So we get to see how much they’re going to owe in taxes.

(13:39) And then we get to play around with different scenarios. (13:41) If you did this, this is how much you owe. (13:43) If you did this, this is how much you owe.

(13:45) So it’s a really powerful tool if you meet with your CPA before the end of the year.

Melissa

(13:50) So is there a simple shift that people can start today that often creates immediate savings in their taxes?

Melanie

(14:02) I would say just honestly, the bookkeeping is the biggest piece just because it allows you to actually look at your expenses properly. (14:09) And if we always say bookkeeping is the start of all tax planning, you don’t know your numbers. (14:13) We can’t, we can’t tweak them.

(14:15) So it’s, it’s really having a proper set of books, being proactive, meeting with your CPA. (14:22) If you have questions, make sure your CPA is on call so you can call and ask questions because it’s really, it’s having that partner that understands how to minimize your tax bill, where if you don’t have that, you’re kind of on your own and you’re not going to know what you can write off.

Melissa

(14:39) Now, are you recommending like, what is the go-to tool? (14:42) Do you recommend like QuickBooks? (14:44) Is there a specific tool you suggest?

(14:47) I think it kind of, yeah, go ahead. (14:49) Kind of what you were saying at the beginning, a lot of people are just using their bank statements and then they’re going back and saying, okay, I had this bill in January and you know, my cell phone bill all the way through the year times 12 and you know, they’ll, they’ll look really at those bank statements to give them, you know, what the write off is. (15:07) But you recommend they use like a small to medium sized business.

(15:11) They use like a QuickBooks software, a bookkeeper.

Melanie

(15:15) Yeah. (15:15) Some sort of a software that will automate the process. (15:18) And then I’d say at some point, if your hourly rate is not a bookkeeping rate, if it’s higher than a bookkeeping rate, then that’s when you need to delegate that task.

(15:28) Or if you’re not going to do it at all, then you need to delegate it because it’s so important. (15:33) It’s important to have a separate set, a separate bank account, a separate credit cards for all your business transactions so that if, if you even think it’s a business expense, you can put it on that and then it’ll flag you to ask your CPA if it’s a business expense or how do you can write it off? (15:50) Cause you can always book it as a personal expense or an owner draw.

(15:54) And so I would say making sure that simple shift would be to just have separate bank accounts and credit cards don’t intermingle. (16:00) And then if it’s a, maybe just put it on the business so that it brings up a conversation. (16:05) We use QuickBooks online, but there’s other people that like Stessa, there’s other, you know, other software.

(16:11) So it’s just an automatic, like automated software that makes it pulls from your bank statements, makes it easy for you to keep those updated.

Melissa

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(17:07) So I want to talk a little bit about capital gains and capital gains can destroy otherwise great investments. (17:15) So what, what legal strategies, what legal proven legal strategies do clients use to delay or reduce capital gain exposure?

Melanie

(17:24) So this is where having the conversation way before you even are thinking about selling your business is important. (17:32) There’s multiple strategies. (17:35) One, our favorites, the deferred escrow trust, but there’s also charitable LLC, charitable lead trust, so there’s different strategies depending on your unique situation.

(17:46) But for example, like we had one client selling their business for 6 million. (17:50) We did the deferred escrow trust and we got that down to just 138,000. (17:55) So it’s important to have that conversation and it’s really, it can be costly if you don’t have it.

(18:02) And so it’s basically just looking at your unique situation and seeing what makes sense. (18:07) So that’s, that’s, those are the things, but there’s multiple, multiple strategies. (18:11) It’s just a matter of your unique situation.

Melissa

(18:13) If you’re a giver, if you’re not a giver, you know, what mistakes do people make when they’re trying to outsmart capital gains?

Melanie

(18:27) I’d say not having the right CPA or having the right partner behind their back, because we’ve talked to people where they told us they sold their business and so then that’s when they start, that’s actually thinking too late too, because we’ve had people come to us and they’re like, I sold my business. (18:43) I want to make sure I’m prepared for my taxes this year. (18:47) So I wanted to have a conversation where like, oh, it’s too late.

(18:50) You should have had it before you sold your business. (18:54) So that it’s looking, talking to the right people, but also having the conversation before you do the actual thing. (19:00) It’s called, we call that the, oh, you did conversation.

(19:03) Oh, you did.

Melissa

(19:06) Now, how does real estate unlock deferral options?

Melanie

(19:13) Well, the, we have the bonus depreciation. (19:17) So if you are a real estate investor in the eyes of the IRS, then you can do a bonus depreciation and that really can offset your taxes. (19:25) That would be the big one for real estate.

(19:27) We have other, we have other deferral strategies for any business owner. (19:31) If you have a lot of payroll and marketing, we utilize our kick the can plan. (19:35) And that’s where, and this could be for flippers.

(19:38) This could be for wholesalers or just a plain business owner that has a lot of marketing or a, you know, a big payroll expense, but we put all of that, those expenses into a November year in company. (19:51) We mark up those services by industry averages. (19:54) Typically it’s around 40%.

(19:55) And then we’ll teach you how to shift the funds, like basically have the invoices, the payments, all of that, to legally defer your taxes. (20:04) So if you have a million dollar payroll expense, we could get you a $2.8 million deduction with pretty little cash. (20:10) So it’s like a, a loan from the IRS we’ll say, so that you can use that to, to grow your business.

Melissa

(20:18) That’s fantastic. (20:19) Now, one of the most powerful ideas you talk about is redirecting money that would have gone to the IRS into wealth building vehicles. (20:28) How does that actually work and share a little bit about how one could do that?

Melanie

(20:33) Yeah, for sure. (20:34) So I, the vehicle would really depend on you and your unique situation. (20:39) If I took my business for say, we can, you know, we could have very good return on our investments within our business, if I could save a hundred thousand dollars, even 70, or maybe even just $20,000, and I can put that into my business and get a very high return on that, that’ll grow exponentially rather than just throwing it to the IRS.

(21:04) And so just looking at the impact of just small returns, like 4%, 5%, it’s pretty cool to see what that does for your retirement and your long-term plans. (21:16) But if you know what you’re doing, let’s say you have a real estate investment and you’re very good at getting, let’s say a 12 to 20% return on your investment. (21:23) If you could put $50,000 a year extra into that, it’s going to really change your life.

(21:29) So we just always encourage clients, don’t use your tax savings to buy prettier tennis shoes or go on fancy trips or, you know, do all that. (21:38) Maybe you do a piece of that, but if you use that to fund your investments or your business, it really does like rapidly change your life and your dreams and all of that.

Melissa

(21:51) Now, what kind of vehicles make the most sense for high income earners?

Melanie

(21:57) For like, to put their money in for tax savings, real estate’s good. (22:02) If you can qualify as a real estate professional, a lot of people don’t understand that you actually have to qualify as a real estate professional in the eyes of IRS before you can do like, and get the impact of a cost seg study. (22:15) So if you do 750 hours or more in real estate related activities and do real estate more than anything else, any other job that you have, you can write off and accelerate the depreciation on that to offset your other income.

(22:32) So that’s very powerful. (22:34) If you can’t take advantage of that, there’s short term rental loophole. (22:37) So if you invest in a short term rental and you self manage it in the first (22:41) year and you do a hundred hours or more of, you know, prepping that property, (22:45) getting it ready for rent, which that will be easy then, and you do anything (22:49) more than anybody else on that property, you can still take advantage of the (22:53) cost seg study and still take advantage of the bonus depreciation where if you (22:58) can’t do the 750 hours, that’s a really good option. (23:01) And honestly, just if you’re really good at getting a return and growing a business, it might be better off just putting back in your business.

(23:08) So that’s really does depend on the person. (23:11) But some people like to do whole life. (23:13) I know some people like to do that.

(23:15) Don’t do IULs. (23:17) I’ve heard those explode. (23:19) And so the properly structured whole life’s always very good also.

(23:24) But you know, that would talk to a financial advisor for that.

Melissa

(23:28) Now, how do clients typically feel the first time you work with them and they do this tax saving strategy correctly?

Melanie

(23:37) Oh man, it’s sometimes almost too good to be true. (23:40) Like, especially if I tell them they can save, actually I had a guy last in this, in November, I like, we could save you $150,000 a year and defer the rest of your income if we want. (23:52) And he, he was netting over a million.

(23:55) So he, it really was like, he didn’t believe it. (23:59) And it was like, I don’t even, it was just too good to be true almost. (24:03) But so some people it’s too good to be true.

(24:05) Like, they’re like, how is this possible? (24:07) How has my CPA missed this? (24:09) Um, other people, it’s just like, they just get excited and it’s fun.

(24:13) So that, that’s the really fun part of our job.

Melissa

(24:17) And I love that question because I’m thinking, you know, it’s a self-serving question. (24:21) I think about, I’ve had both the CPAs that you’re talking about, the very, you know, specific, strict, didn’t do a lot of write-offs. (24:30) And then I went from that type of CPA to kind of similar what you guys are doing.

(24:35) And, you know, and I had your first CPA for, I think, 10 years of my life. (24:41) And so I look, when I went to the, you know, one that knew what they were doing, I’m like, Oh, think about how much money I could have today that’s growing. (24:50) Right.

(24:50) Cause the sooner you can sort through this and figure it out, the longer you have to grow your money.

Melanie

(24:56) Some people get really pissed. (24:57) Like they’re like my CPA missed this much. (25:00) Like they’re costing me this much.

(25:02) Cause really what you’re paying the IRS plus what you’re paying your CPA is your total bill. (25:06) Like that’s if your CPA is cheap, but you’re paying a big tax bill, they’re an expensive CPA. (25:12) So some people do get mad.

Melissa

(25:15) And I was guilty of that myself. (25:17) And, um, and so I love that you mentioned that. (25:19) Cause I think it’s, you know, there’s a difference between, you know, a cheap CPA or using, you know, doing your taxes yourself versus actually leveraging someone that works in this business, understands it, you know, pays attention to it and knows what they’re doing.

(25:35) I think it’s, it’s so key. (25:38) Um, and I’m curious to get your perspective on what separates strategic reinvestment from the risky moves.

Melanie

(25:49) I would say, what do you, what do you have a history, like a track record of success? (25:54) That’s what I would look at. (25:56) So a lot of people, you know, if we did a deferral strategy and they’d, they have to pay that back down the road.

(26:04) It’s like, don’t go putting that in crypto or something that you know, that you don’t know for a fact that you’re going to get a return on that. (26:10) And obviously with every investment, there’s a risk, but if you have a track record of growing money in real estate, then don’t go throwing it at something new.

Melissa

(26:20) Yep, absolutely. (26:24) So when January hits, um, a lot, like you mentioned, a lot of the opportunity is gone where people should be looking October, November, December to really build that strategic plan. (26:36) So for those who have missed out on opportunities of finding a CPA that can really help them grow their wealth, what should listeners do now in preparation for winning this tax season?

Melanie

(26:51) Yeah, for sure. (26:52) And I mean, there are some tweaks we can make like, and if you didn’t meet with your CPA, so feel free to talk to us and maybe we can come up with some stuff for you, but make sure that like the bookkeeping is key. (27:03) We always say that making sure you’re meeting with your CPA before the end of the year, and maybe even mid year is a good option, depending on your, your, your situation.

(27:12) If you have, I mean, just some quick tips. (27:15) If you have kids, you can put them on the payroll. (27:17) If you own a house and you have a business and there’s a location outside of your house, you can do the Augusta rule, write your house to your business for those days, um, and get 14 days tax free.

(27:28) If you have parents that you support or kids in school, like kids over 18, we can probably shift some money to them and get, uh, it’s usually is around 12 to 15,000 minimum savings per person on that. (27:41) Um, so there’s just little things like that, that you want to make sure we actually, uh, are testing out right now in AI, a tool called Sally, we call her Sally, and she can have a chat with you and show you how much you’re leaving on the table. (27:57) So I’ll have to share that with you and you can put that, put that out to your audience.

(28:01) Um, and so then they can just at least see like, am I missing out on any low lying fruit?

Melissa

(28:07) And I love hearing that too, as a, you know, a techie, um, I’ve visited with many CPA firms that are anti AI, anti technology for various reasons. (28:19) And I, I think it’s exciting to hear that you guys are leaning into that and leveraging some of the AI and tech that’s out there, um, pivoting back to kind of some of these decisions, um, that we kind of talked about what decisions must be made before the year.

Melanie 

(28:37) And that matters most to people that we haven’t touched on anything that you have to make a payment or make a transfer. (28:46) Those are going to be the things that need to be done before year end. (28:49) So like, let’s say you want to hire kids to be models for your business, having them have bank accounts before the year end and making those transfers before year end is important because you can’t go back and change those things.

(29:04) Um, so those are really the things like a lot of the checks need to be written before the year end. (29:09) So whatever that is for you, then that would be making sure that the checks are written.

Melissa

(29:15) I love that. (29:17) Um, I’m thinking, what, what are you consider, what is considered high income earners? (29:24) Is what would be like for a W-2 employee, what would be considered a high W-2?

Melanie

(29:31) Yeah, I don’t know what the actual threshold is, but in my mind, it’s like anything, $250,000, $300,000.

Melissa

(29:37) Yeah, that’s what I was thinking.

Melanie

(29:39) And I’ll, I’ll say that we’re not great at helping people with W-2s. (29:43) We’re better at business owners or if most of their income comes from a business, that’s when we can get more creative. (29:51) Some W-2s we can maybe, you know, figure something out like small, but it’s not going to make a huge impact like our business owners.

Melissa

(30:00) I love that. (30:01) Now, what if people are both W-2 high income earners and business owners?

Melanie

(30:08) Then we can offset a lot of the business income and maybe, maybe some of the, or the W-2 income, but that’s where if you compare real estate with the business deductions, it’s, that can be powerful because then with real estate, you can go into a loss without causing flags. (30:25) Like if you do a loss in a business too long, the IRS is going to go, okay, this is a hobby after five years or so of creating a big loss, you’re going to be classified as a hobby rather than a business. (30:38) And so real estate gets you a little more flexibility on that.

Melissa

(30:44) Now, how do you help clients think multi-year tax horizons versus just kind of in single year over year strategies?

Melanie

(30:55) So I always like to know what their, what their long-term goals are with their business, because for example, if we can do our kick the can plan, that’s a huge deferral strategy, but if they want to sell their business in the next couple of years, it might not be worth it. (31:11) The tax savings might not be worth it. (31:13) If it’s going to affect either the valuation of their company or something that’s going to, any, actually any tax strategy that affects the valuation of a company might not be a good idea if somebody wants to sell their business.

(31:25) So we always look at that. (31:27) We look at if they, you know, if they need to qualify for loans, if they know they want to buy a house or start investing in properties and they’re going to need to get a bank loan in a couple of years, but we jacked their income down to like not showing much at all, then it can affect their borrowing ability. (31:45) We’ve had clients that didn’t tell us, we didn’t, we, you know, this was way (31:48) before, actually it’s more my dad at his old firm, but he said he had clients that (31:53) didn’t tell him that they needed to borrow and so they put their income way (31:58) too low and so now we put that on our checklist to ask the client so that we (32:02) know for sure we’re not hurting their borrowing abilities, even if they don’t (32:05) have that conversation with us.

Melissa

(32:09) Now what’s one move people wish they had made earlier? (32:13) I guess just generalizing of all the clients you’ve worked with, is there one, you know, move people had wished they made earlier?

Melanie

(32:22) I’ve talked to a couple come to mind. (32:24) Um, I’ve had one, one guy in this, I’ve had this conversation a lot, but one guy stands out or he’s like, so you mean to tell me if I talk to you guys 10 years ago, I would have 500, like thousand dollars more in income that I could have invested. (32:40) And I’m like, yeah.

(32:42) So people that waited too long to talk to us, the other people are the people that talk to us and they think it’s too good to be true. (32:49) And then they come back because they didn’t want to, whether pay our prices or make the shift because it was a pain in the butt to move over. (32:57) Then they call us the next year and they had a huge tax bill that was sprung on them and then they wish they would have moved over.

(33:03) I’ve had that conversation multiple times too. (33:07) So just, I guess, not necessarily, I mean, I think we’re great, but making sure that you’re getting a second opinion. (33:14) A lot of people don’t get second opinions on their taxes.

(33:17) They do it in every other area of their life. (33:19) Their health, if they’re getting a bid on something in their house or anything like that, they get second opinions. (33:26) But for some reason in taxes, people don’t.

(33:28) So just getting a second opinion.

Melissa

(33:30) That’s great advice. (33:32) This has been so educational with all these rapid fire questions I’m hitting you. (33:37) I want to hit you with a couple more quick fire round questions and see what else, what other magic we can gain.

(33:47) So biggest tax myth you wish would die.

Melanie

(33:51) Everything in my life is deductible.

Melissa

(33:55) Worst advice high income earners still follow.

Melanie

(33:59) If you just start a side hustle, you’ll be able to offset all your income. (34:03) It’s just not, you gotta have, it’s gotta be reasonable. (34:07) So if you just start either by one rental or get a side hustle, they think they can offset a lot of their income as a W2.

(34:15) That’s great.

Melissa

(34:16) Most misunderstand word in tax strategy.

Melanie

(34:24) Oh, I think a lot of people misunderstand real estate. (34:28) I don’t know if that would be a word, but real estate.

Melissa

(34:31) Yeah. (34:32) What’s a red flag that someone needs a new tax advisor?

Melanie

(34:37) If your CPA is not asking you questions to save you money and they’re only asking you questions to fill out the forms.

Melissa

(34:44) Oh, that’s spot on. (34:45) One deduction people are afraid to take, but shouldn’t be.

Melanie

(34:51) I’d say a lot of like just the little things that I shared earlier with the kids payroll. (34:55) Um, as long as you do that properly, it can be good. (34:58) Uh, just little things in your life, meals, um, writing off, you know, doing the Augusta rule, little things like that.

Melissa

(35:06) Okay. (35:06) Here’s a tough one. (35:08) Filing or planning, which matters more?

(35:12) Planning.

Melanie

(35:15) One year too late is usually how much money lost depends on the person, but our average savings is $70,000 for people netting 250 or more. (35:27) So 70,000, that’s great.

Melissa

(35:29) Best mindset shift for tax strategy.

Melanie

(35:34) Proactive being proactive instead of reactive.

Melissa

(35:38) I love that. (35:39) So true. (35:39) Okay.

(35:40) Last question. (35:40) One sentence, every high earner should remember about taxes.

Melanie

(35:47) It’s a collaborative, uh, partnership with your CPA. (35:52) You can’t expect them to do everything you have to give them, give them the stuff to be able to do their magic.

Melissa

(35:58) I love that. (35:59) Give them the stuff. (36:00) Semi-organized.

(36:01) I was guilty of giving it to them. (36:02) Very, very disorganized.

Melanie

(36:05) Yeah. (36:05) Yeah. (36:05) And if you don’t do like bookkeeping or whatever, it’s, I think ownership is a lot of it, just having ownership around it, going what’s, what’s, what’s in your court, what’s in ours so that we can do our job well.

Melissa

(36:17) This is great. (36:19) So much great nuggets of wisdom today. (36:22) Melanie, thank you so much for being here.

(36:24) Any final thoughts that you want to leave with our listeners and please share your information, the best way to contact you with our listeners.

Melanie

(36:34) Yeah. (36:34) So if you go to, um, osts.tax, you’ll be able to connect with us there. (36:39) We offer a free tax assessment.

(36:41) And then, as I said, that AI tool, um, that will be on our website as well. (36:45) So feel free to go there, check it out, see if we could save you any money. (36:49) Um, I am fairly active on Instagram.

(36:51) So if you want to follow me and Melanie Sikma, um, you’ll see some tax tips on there as well.

Melissa

(36:58) Thank you so much for being here today. (37:00) That’s the executive connect podcast.