Karlton Dennis is a licensed enrolled agent, which is apparently higher and mightier than a CPA. The self-proclaimed Tax Alchemist says there are five steps to keeping more of your money every year.
First and foremost, you need to make the decision to work with two specialists: a tax accountant and a tax professional. It’s the latter that most entrepreneurs neglect. So they end up with someone who’s just really good at filing their taxes but not so much saving them money.
“A tax professional is someone who interprets the law,” Karlton explains, “and coaches you on what to do with the law. That way, you can use the law to your advantage.”
“Whereas, a tax accountant knows the rules for filing your return. With your tax accountant, there may not be a whole lot of conversations around how to reduce your tax bill. They just wanna get all your information so they can complete the tax return. That’s compliance.”
“Okay, great. But that’s only half of it.”
“Now, with your tax professional,” he continues, “there’ll be nothing but conversations around how you’re spending your money; how your family operation is set up; whether or not you love where you live; whether or not you would like to move; whether or not you’re thinking about investing more money into the market or into real estate; and whether or not that even makes sense.”
“See, your tax professional is somebody who is kinda like your best friend. You can bounce ideas off ’em. Like bumper lanes at a bowling alley, pushing you in the right direction.”
Heard that. So what’s step number two?
It’s to convert all personal expenses that you currently have, into business expenses.
Your cell phone, your car, your rent – it can all be written off, as long as you do it the right way, Karlton claims.
The blueprint’s buried in code section 162(A). Which, again, is why you gotta get with a tax pro to give you the game, right?
But as long as your everyday expenses are ordinary, necessary and reasonable, and helping you to pursue future income, apparently you can claim ’em as business expenses.
Step three’s a little more obvious. It’s to implement all these strategies by December 31st.
When you wait till Q1 of the following year, like 99% of people do, it’s too late. You can’t move money around or backdate transactions, can you?
If this were a game of Red Light, Green Light, Jan 1st is the gym teacher yelling, “Red light!” and then stepping outside to have a yearlong smoke break.
Step four then, according to Karlton, is to utilize both tax deduction and tax deferral tactics.
“Most entrepreneurs are only using tax deduction strategies,” he says. “They’re spending money to reduce the amount of money they’re going to be taxed on. Which is completely fine.”
“But what about tax deferrals? Where you put off paying taxes on the money you have coming in?”
“Maybe it’s setting up your own retirement accounts. This gives you control of your money that would’ve otherwise gone to Uncle Sam, and then you can grow your money and pay the taxes later when you have a vehicle to offset it.”
Fifth and final is implementing a tax eliminator strategy.
For many, it’s real estate. Buy long-term rentals, use that depreciation as a shield to block the IRS’s bullets (*pew, pew, pew).
To learn more, check out Karlton’s Tax Alchemy Program, or book a consult with him through Kar-la Dennis & Associates, Inc., where Karl-ton serves as the Business Director.
My only question is how did Karlton’s parents name him so perfectly, knowing he was gonna grow up to be Carlton Banks’s doppelganger?