Tax Secrets Every Entrepreneur Should Know with Karlton Dennis

22:08And if you're working a W-2 job or you're showing up to a business, we're gonna call it non-passive income. And if you have any deductions or losses from something that's on the passive side, it shouldn't be able to offset the active side. Well, this is an issue for all of us that wanna invest in real estate to offset our active forms of income. We would actually probably never be able to offset our active forms of income by just investing in real estate. So the IRS gave us ways around these rules that Ronald Reagan put into place in 1976. And one of the ways around his whole passive activity loss rules is by becoming a real estate professional.

22:45A real estate professional is someone who can show the IRS they're spending 750 hours in the year managing their own investment property, or they can show that they're spending more time in real estate than any other thing. Well, if I'm spending 750 hours in the year managing my own investments and I have to spend more time in real estate than any other job that I have, W-2 job or 1099 job, I'm essentially doing real estate full time. For most people, they can't justify being a real estate professional because they don't have time to be a real estate professional. If you work 40 hours a week for Tesla, you would have to spend 41 hours a week managing your real estate portfolio.

23:20That's 81 hours a week of work just to get some tax deductions. No one can do that. So this is why I introduced the short term rental strategy back in 2020 after doing more research inside of the tax code. When I sat there in COVID and I was thinking, how did Ronald Reagan think about Airbnb and VRBO when he didn't have Airbnb and VRBO back in 1976? And it hit me like a bag of bricks. Sorry, 1986. And it hit me like a bag of bricks. This was a hotel motel business for Ronald Reagan and all of taxpayers back then. Being able to rent out a house was very similar to being in a hotel or motel. A hotel or motel is an active business in the eyes of the IRS if customers are coming in seven days or less on average.

24:07So most people who are running an Airbnb are having people coming in seven days or less. If you can abide by this rule, seven days or less on average, and make sure that you're managing your Airbnb for 100 hours in the year, you have an active business in the eyes of the IRS. So now we can take an active loss from your Airbnb by accelerating depreciation to offset your active W-2 or S-Corp or LLC income. This is where depreciation starts to become so important. People understand the word depreciation, but they don't know how to leverage depreciation. Depreciation is just what you're thinking. When you drive a car off a lot, it goes down in value.

24:49But the same thing exists for investment real estate. It's sitting outside in the rain, the sleet, the snow. So it's technically losing value structure wise, even though it may go up over time because you bought the right property in the right location. The government gives you a write off as your property depreciates. It gives you a write off for the whole building's value. The whole building's value. You get to write it off on your tax returns. The sad part is it's over 27 and a half years. So most people are like, OK, great. I'm writing off my whole building over 27 and a half years. But this is a really long time.

25:21Is there any way I can speed this up? This is where we enter the cost segregation study as a strategy for those short-term real estate investors. If you do a cost segregation study, what someone is doing is getting the cost of all of the non-structural components that make up your property, such as like the appliances, the windows, the flooring. These non-structural components, the IRS says you can write them off in one year or seven years or 15 years, as opposed to 27 and a half years. So by extracting 30 to 40 % of your building's value and accelerating the depreciation, you're creating such a massive loss that flows on your tax return.

26:04That's an active loss that can offset active forms of income. So it's pretty awesome. How many, do you mind, can I ask you a personal question? Of course. Do you have rental properties? Yes. And how many are you, what's your goal? How many do you have? What do you want? I have 17 properties right now and close to about 28 doors between those properties. I think my goal is to probably get to a thousand doors. Wow. Yeah. And do you have a strategy on how you're going to get there? I'm just going multifamily right now. I've just been acquiring multifamily apartment complexes. Wow. Oh, that's okay.

26:33That's an entirely different episode. I'd love to hear more about that. Okay. So there was one thing my husband and I are thinking about getting a new car. And I've heard you talk about writing off 100 % of a 6 ,000 pound car and other years are only writing off 60%. Can you explain that, like how that works and what I should be looking for? Yeah, absolutely. So last year we were able to take 60 % bonus depreciation on vehicles. And the reason why is because we didn't have Donald Trump's big, beautiful bill that got signed into law July 4th, which is pretty awesome. Now we have 100 % bonus depreciation.

27:04But what does that mean? What it means is the tax code works in favor of people who are buying vehicles who are business owners that weigh over a certain amount of pounds. The tax code is incentivizing you to buy vehicles that weigh over 6 ,000 pounds. And for most taxpayers, if you find a vehicle that you like and purchase it, you're most likely going to purchase it with OPM, other people's money. So the benefit of you buying a vehicle and using 100 % bonus depreciation is you're arbitraging debt to save money. If I am going to go buy$100 ,000 F-150, I could put a$5 ,000 down payment down. If I'm in the 37 % tax bracket and I write off$100 ,000 on my tax returns, 100 ,000 times 37%, that's$37 ,000.

27:51I put$5 ,000 down to get$37 ,000 worth of savings. I'm arbitraging and I'm saving$32 ,000 right then and there by using the tax code bonus depreciation to buy that vehicle and placing inside of my business. But here's the one thing I want to make sure everyone knows, Jasmine. most business owners aren't using vehicles 100 % for business. I would argue that most are probably using vehicles about 80 % for business. So before you go rush off to buy that car, make sure you calculate based off of how much depreciation you're going to take. What does that look like for your tax savings? That's good.

28:26And I had heard that you had mentioned an app that you could use to track mileage. Do you remember what that is? Yeah, absolutely. So QuickBooks allows for you to track mileage as well. And then there's an app called MileIQ that will also track your miles as well. So you can write off your vehicle claiming mileage. or you can write off your vehicle claiming actual expenses. Actual expenses are the things that you actually spend your money on, gas, tires, cars, car washes, or mileage means that I'm just gonna write off 70 cents per every single mile that I drive in the year. IRS only allows for you to choose one or the other.

28:54You can't write off both. Okay, see, this is the good stuff. This is what it's with. Okay, in that Q &A, the flash fire, the game, in the beginning, we talked about haircuts and manicures, and then there was like the caveat, if it's for your brand, that seems pretty like vague. Yeah, it is. Can you describe, can you describe that? Yeah. So there's IRS court cases that have not sided in the favor of taxpayers who have tried to write off haircuts and Rolexes and watches. I didn't say a rollie. I'm just trying to get my manicures. I'm going to get my manicures as a write-off. I'm glad you didn't think through the Rolex because that one's a real tough argument.

29:27And then there's taxpayers who have been able to do that. And it's based off of facts and circumstances. Okay. Because each person's situation is different. For people like me and you, Jasmine, we're on camera every single day sometimes. So it makes 100 % sense that our appearance needs to be on point in order for us to generate revenue. And it's an ordinary expense for us to be able to have a haircut because we're on camera every single day. Amen. Yes. Yes. We are. Watch me write my hair off. We are entertainers. We are entertainers by trade. And as entertainers by trade, we have to wear a costume.

29:59We have to have camera equipment. We have to show up and have makeup. This is a part of how we perform. I wouldn't imagine why I wouldn't be able to write off my haircut if I'm performing in this capacity every single day or it's a part of how I generate revenue. And just as a side note, just in case I ever get audited, I make sure that when I do iPhone content, I'm including my hands in it. Oh, good. I am. Like, I'm just like, look at how I'm pointing at this. If they're like, how could you use it? I will send you 374 short form content of my nails. Okay, that's super helpful and very good to know.

30:31So now I want to know on that note, because you said we weren't going to write up, we were not going to write off a rollie. Yeah. Now we can talk about situations in which that might be the case, but you did work with a client where she wrote off her yacht. Yes, I did. Okay. So let's talk about that. Yacht's different than a rollie because a yacht is a vehicle. A yacht's a vehicle. Oh, okay. Oh my God. Okay. Let me, let me. Like, is my husband watching this? Like, buy me a vehicle, baby. Buy me a vehicle. Yacht was categorized as a vehicle. And she leased the vehicle to her corporation. She was able to deduct the vehicle as a vessel.

31:00So yes, we were able to write off the yacht and we won that audit. Okay, but tell the story about the audit. Okay, so this woman came into our office. My mom was there for this one. And we sat in the conference room. Cool thing was, is we went into this, like not knowing who this woman was. She was very anonymous on the phone before coming into the office. She didn't really want us to know a whole lot of details about her. And when she came into the office, she was wearing this full Louis Vuitton dress. And then she had her Louis Vuitton purse that master Louis Vuitton dress. So she was just like dolled up.

31:32And she was kind of frustrated. She had her tax documents with her and she said, hey, I have already met with 14 other CPAs. Let's see what you guys can do. And slid her manila folder across our conference room table and it fell into my lap. So I opened it up. There's two returns, one for me and one for my mom. So I gave one to my mom and I looked at her tax returns and it was already marked up by other tax accountants. She'd given us returns that she had brought to other people. Here's what I noticed. Right when I opened up the returns, I noticed that she was making a couple of million dollars.

32:01But then I saw on the very next page that she had a notice from the IRS that said, judgment,$1.1 million. And I was like, whoa, she needs to pay the IRS $1.1 million in three weeks. So we immediately opened up and said, hey, why is the IRS assessing you? And how can we help you? She said, listen, I purchased a vehicle. I went to other CPAs. They told me it wasn't a vehicle that should be placed on my tax returns. And now I have nobody to support me with this. I believe this vehicle is a business expense for me and I need support on it. And we said, what's the vehicle? And she said, it's a yacht.

32:34And I said, I took a big gulp and I looked over to my mom. She was super stone cold. And so, okay, all right. We've been here before, apparently. So my mom went on to say, okay, well, express to us how are you using the yacht for business? And she said, well, I use the yacht as a real estate agent. I speak on the TV show Million Dollar Listens and I do broker previews on my yacht. This is where I bring all these real estate brokers and we go over different deals on my boat. I also have different actors and athletes who I take out on my boat here in Orange County. I take out celebrities like Shaq and Kobe Bryant onto my boat.

33:07And these are the people who I sell houses to. I have made transactions this year just because I brought them onto my boat. As I'm hearing this, I'm like, who is this woman? I'm like, whoa, Kobe. Like mentally, that's where the dude inside of me went. My mom was like tax code. I was like, whoa, basketball. Awesome. And my mom went on to ask this question, which was, do you have documentation? She immediately started off with her iPhone photos. And we're like, okay, yeah, that's great. You have photos of people that are on and off your yacht. What documentation do you have of you making transactions directly after people coming on and off your boat or like people that we knew actually made it onto your boat at a specific time?

33:48And she's like, oh, my captain. My captain has a log booklet and he documents in chronological order, the date, the time, the activity of everything we're doing on the boat and who we were with. We said, perfect. Can we get that? And she's like, absolutely. We asked her to send the photos, that log booklet and her transactions that she closed that year. We went into a field audit. Field audit is where we invite the IRS to our office. IRS was on the fourth floor. We were on the third floor. So it wasn't a big deal. They come down. We handle the IRS audit inside of our office and we open up with, our customer has purchased this vehicle, which we believe should be a business vessel underneath her tax returns, underneath code section 162A that states a business owner can take a business deduction if the business deduction is ordinary to the business owner, necessary to the business owner, and reasonable to the business owner in the pursuit of income.

34:35This was an ordinary expense for our business owner. She's a seven-figure earner, a reasonable expense for our business owner. She's a seven-figure earner. And we also were able to show you that she has documentation and substantiation of every single person that's come on and off her boat. You'll notice here, one of them's the Lakers star down in Southern California. That's Kobe Bryant. This is Shaquille O 'Neal. Here are the transactions that she's been able to do. Here's her log booklet, logging every single person that's come on and off of her boat. This is deductible under code section 162A as a business vehicle.

35:02And the guy was like, she knows Kobe and Shaq. The IRS is normal. They're normal. They watch sports. I knew it. And that changed everything for me. I was like, okay, one, documentation is absolutely everything to getting out of an audit. Like it's everything. things. She was so well documented because she had a team of people that were surrounding her. She had a captain. She had an assistant. Someone was logging her receipts for her. So she had a team of people that was surrounded by her. But most importantly, we knew the tax code when we went in there. We weren't shooting like we were trying to get over on the IRS.

35:39We showed that she was making legitimate money by having this business vessel. So it worked out. That's so good. That's so good. So people are hearing this and maybe they're not in the phase of life where they are having a yacht and they need to write it off. Yeah. One of the things is we talk about on this show, quick action, like what's something that they can do to start getting their business in shape so that they could work with you if they're not at that state right there. So if someone's making, and I'm going to increase, increase the monetary amount, if somebody's making 10K a month, what's one thing they should stop doing immediately?

36:11Stop doing your bookkeeping right around 10K a month is where you're probably hiring a bookkeeper. You probably had your Excel document and you're categorizing your own expenses to try to cut cost to grow your business. But now you're about a six-figure earner and you probably have somewhere around a 40 to 60 % profit margin. So you probably need to have a bookkeeper on your team now. That's good. Now, when somebody's making$100K a month, what should they stop doing? You should stop relying on your CPA to come up with strategies to reduce your tax bill because now you're almost pretty much a seven-figure earner at$100K a month.

36:39You are doing tax preparation and you're probably paying in estimated tax payments. You're probably maxing out your 401k. You're probably R &S Corporation. You're probably already taking payroll and you're scratching your head, wondering why you're still owing every single year. And it's because you don't have somebody on your team that's solely focused on strategy. You've only hired a CPA that's filing returns. And for somebody who's making a million a month. If you're making a million a month, what you need to look at is how can you do income shifting strategies? How can I take income off of my tax returns and putting it into tax deferred vehicles?

37:07One of the things that I love looking at also is how can I invest my money that's going to create active losses on the return? For most of our clients, they invest into movie films, which can give them a 4X deduction. It makes them an active investor in the movie film. We have clients that also will invest into oil and gas. If you invest into oil and gas as an active participant in a working interest, you can claim active losses. Some of our clients are receiving a 90 % deduction relative to their investment. Meaning if you put in$100 ,000, you're looking at a$90 ,000 tax loss in year one. That's a cashflow producing asset that you're acquiring right there.

37:39And then outside of that, I love the idea of having a foundation at this amount. If you're making a million a month, chances are you've thought about it. If you haven't already, you're philanthropic. Why not write a check to your own private family foundation? The IRS gives you a 30 % deduction based on your AGI and only 5 % of the charitable assets that you put inside your foundation has to be donated out to another 501c3 other than your own. I felt like I was watching like a beautiful mind over here and he's just sitting there and he's just like spitting it off. Here it is, here it is, here it is, yes.

38:06One thing that I love hearing you talk about is having your children involved in your business. Love that. Can you explain a little bit more about that? There's two different ways in which we can have your children involved in your business. We can set up a FMC, which is a family management company, or we can set up a rental management company. Let's just say that you're running a real estate operation. Great. What if you decided to set up an LLC management company where you're managing your own investment properties? Now you can get paid for managing your own real estate. But rather than moving money from the left hand to the right hand, you instead choose to work with your children.

38:35Children are the perfect employees to have working inside of a real estate management company. Take them with you in the car when you're going to go check out the property. Is there an age? Is there an age? Like my daughter is five. Oh, five years old is the perfect age. I would say right around five years old is where we start placing children on payroll. It's a perfect age to start placing children on payroll because normally they'll end up being either child models or they'll help mom out with picking up staples off the ground, trash, basic things. And we're gonna pay them a wage relative to their age.

39:02We're not gonna max out the standard deduction with them. But it's awesome knowing that we have options to be able to pay our children without our children needing to file a tax return and without us needing to pay payroll taxes. The mistake that business owners make when they're S-Corps is they'll place their children on payroll through an S-Corp. This is why I say the family management company might be better. You can set up an LLC that is a family management company to the S-Corporation. Now your children can be on payroll inside of an LLC that gets paid to manage the S-Corporation. Let's just say my S-Corporation is doing podcasting, but my family helps me run the show part-time.

39:42They can get paid outside of my S corporation through a separate LLC. So that way I don't have to pay payroll taxes for placing my children on payroll who are underneath the age of 18. That saves you 7.65%, which is social security and Medicare taxes, essentially. That's incredible. Yes. That's incredible. And so when my daughter is getting paid as a five-year-old, am I making, if I heard it correctly, I want to make sure that she's making less than$15 ,670. Yeah,$15 ,750. You definitely want to make sure she's making under that because I don't know many five-year-olds that can justify making that much money, but that's the maximum you can pay them without them needing to file a tax return.

40:20Okay. Okay. Is there, I mean, advice? This is not, this is not advice. This is just like, what would that number be? Not legal advice. It just depends on what the role is. So let's just say that you have your daughter doing modeling for you and she appears on the website and you bill this modeling shoot per hour at$100 per hour. and she does this three to five times a month, that might be up to$1 ,500 a month over a 12-month period. You can start to kind of max out how much you want to pay her in that sense. I got it. Okay, that's really cool. Thank you. That's amazing. And then from an advice, not legal advice perspective, that money that she gets paid, what would be the best way for us to invest that?

40:59Okay, great. So what I would highly recommend all parents do is to take advantage of the custodial Roth IRA because once you've paid your children, let's just say you max out the 15 ,000, you can take 6 ,000 of the dollars that no one paid taxes on and put it into a custodial Roth IRA. At the age of five, if your children do not touch it, and you only do this once, by the way, at the age of five, if your children does not touch that Roth IRA account, by the time they're 65, they should have about$1.4 million if all of that money is invested into the S &P 500 with an 8 % rate of return. Made your children a millionaire tax-free by making one move in one year.

41:38That's incredible. Pretty awesome. That's incredible. That's incredible. And you know, I just have to like take a second. This was totally not a part of the notes, but when I hear you talk about that way, I can't help but think I'm the daughter of an immigrant. And so with the first of my family to go to college, first of my family to start a business. And I think to myself that the things that we've done and then the people that I get to meet gets to change like massive legacy. Like I've never ever saw it or ever considered it. So thank you. Like that's cool. That's cool. Like her mama gets to make her a millionaire.

42:05That's amazing. Okay. Okay, so please. And it's not just about the transfer of money. It's about the transfer of information because what did mama learn along the way that got you that million dollars that's in the Roth IRA? Because mama's going to spend time making sure that real wealth is the transfer of information and how I teach you how to build a legacy for your family. Do you have children? I do, I have a daughter. Oh, how old is she? She is 13 months. Oh my gosh, she's a baby. Fresh, super fresh. Isn't it the best? Isn't it, like, are you just obsessed? We just got back from Europe with her and it was the best idea to take her to Europe for her first birthday.

42:38We're like, we're traveling for her first birthday and it was so awesome. That's amazing. What are you gonna do to set your children up for wealth proficiency? Yeah, so what I'm doing right now is I set up a life insurance policy with a cash value component to it. So I'm currently paying into life insurance for my daughter. She has a 529 plan. Part of the reason why is because I believe in college and I do want her to go to college and have access to funds for college. But what I love about the 529 plan now that just got updated this past year is whatever funds that aren't utilized in the 529 plan can be rolled over into that Roth IRA account that I set up for her.

43:14My daughter will be on payroll starting next year. I'm gonna take the year off and strategically map out how she's gonna be on payroll. You're such a slacker. She's only gonna be two. Come on, bro. Step it up, bro. I'll have her on payroll right around two. And that's where it'll start. That's where the journey will start for her. And my biggest thing is I just wanna buy one property a year that I can have for her. So far, I'm up to two so far for her. So we'll just keep that going. Hopefully by the time she's 18 years old, I'll have north of 18 properties for her. So some of the lessons that your mom taught you, what are you passing on and what do you think you would reserve?

43:47I would say the lessons that I'm passing on almost have entirely to do with how I act. My mom taught me a lot about respect, honesty, being a good person, not cutting corners, working in ethics. And those are the principles I want to pass on. I absolutely know that my daughter is going to absorb all this tax information being next to a tax wizard like me. And, you know, I want her to gravitate towards her own passions, but I'm going to pass on the information that I know about strategy because it's not about tax strategy. It's about being savvy in all phases of life. and whether it's having a strategy with your fitness, having a strategy with your finances, having a strategy on how you're gonna get out of debt if something happens, I want to be able to teach her how to strategize and how to recognize patterns.

44:40And I think that's what's helped me find success at an early age and part of the reason why I'm finding success right now. How do you teach strategy? Time, time with people, recognizing patterns, pattern recognition, understanding that it's more about critical thinking than having a fast solution. Yeah. Okay. Not part of my notes. I consider myself a strategist. It's the world that I live in well. I actually never really considered that I could teach strategy. Like I'm just like, well, it is, it is of me. I can't help it. Like it's just what I do. And so you linked pattern recognition and strategy.

45:15Can you connect the two for me? Well, see what I look at is I look at successful people and I try to study and mimic some of the things that they're doing. Okay. And then I try to come up with strategies on how I can utilize this in my day-to-day life. And so for me, I have a strategy around how I approach my mornings. I have a strategy around how I approach taxes. I have a strategy around how I approach wealth building, but it's not something that I just came up with one day. It's from doing due diligence and recognizing what has worked. I think I have an unfair advantage because I get to see into the tax returns of everybody.

45:48So I get to see the real, the real noble. And you see all these people who share these ideas and tell you to do all these things. And then you look behind the curtains and you look at their finances and things can be an entire disarray. And so I have been able to recognize patterns of people who walk the walk and are capable of talking the talk and people who simply just talk. Oh, that's real. And you know what? It isn't until you just laid it out like that that I'm like, that's what I do. Like 100, 100. Okay, can we talk about your strategy about content? Because now we talked about like your, I like the word tax wizard.

46:31I'm only gonna see Carlton and just like, there goes the tax wizard, you know, going down PCH. Okay, but let's talk about, you're a business owner. You're an entrepreneur. And you're an entrepreneur who knows taxes. Okay, great. What is your strategy when it comes to content? because you're probably just as much of a content wizard as you are a tax wizard. Can we talk about that? Yeah, I mean, my strategy on how I grew my content was very simple. What are people searching for? And get out in front of it. YouTube is a search engine. It is owned by Google. There are an absence of tax accountants and tax professionals that realize that if you put out content, your video will come up first.

47:13They just don't understand this. So in 2020, when I went on the internet and I researched, how do you pay yourself as an LLC? There's only three videos on it. How do you place your children on payroll? There's no videos on it, okay? When you switch from an LLC to an S-Corp, there's two videos on it that has over 100 ,000 views. Where is the YouTube person teaching taxes? There's YouTube for everything. If I wanna cook an omelet, I can, there's 1100 omelet videos. Where is the 1100 LLC to escort videos? So I went on googletrends.com. I found out that googletrends.com tells you exactly what people are Google searching.

47:50So if I type in how to pay myself as an LLC, I can see over the last month, how many people have researched how to pay myself as an LLC. So this is exactly what I did. I went on the internet and I looked up what are people searching the most in tax? And I created videos on that first. The algorithm of YouTube loved it and picked it up. Within three months of me being on YouTube, I already had 100 ,000 subscribers on YouTube in three months because I was doing what YouTube wanted me to do. I was solving a problem. And then I just went on YouTube and I said, okay, where else is all the real estate and tax?

48:23Because now I'm not viewing real estate. YouTube is just a search engine. I'm viewing it as real estate, as digital real estate. And I need to take up all of the digital real estate. So if someone looks up how to place their children on payroll, I need a video for it. Someone looks up how to convert a traditional IRA to a Roth IRA. I need to have a video for it. If someone looks up how do you save money on$100 ,000 worth of income? I need to have a video for it. So I went and created videos on everything tax related. So now anytime anybody searches anything in the tax space, Carlton Dennis has a video for it.

48:55I took up all the real estate. This is how I built my business so quickly is because I bought up all the real estate. And then I turned around and monetized it and said, hey, by the way, come here to Tax Alchemy. I gave away all the strategies. I gave away all the information. and the traditional CPA, they found value in gatekeeping information. Oh, pay me this fee and we'll be able to figure this out for you. Pay me this fee and we'll figure out how to reduce your tax bill. What? Give them the information and let them choose on who they want to work with. Who has, who can explain it the best?

49:24Who do you gel well with? And so I leaned in hard on that. And so Tax Alchemy, talk about the business structure of it. Like now we're talking about the entrepreneur side of what it is you do. You had to scale you. So you became the magnet. Yeah. And then you had to disseminate. What is like, what is your team size look like? What is the structure? What do you, how are you spending most of your time? Yeah. So early on, I was spending a lot of my time doing all the fulfillment inside of Tax Alchemy. I was the YouTube guy. I was the marketer. I was a salesperson. I was the fulfillment. And it was - How long did you do that?

49:52It was a lot. I did it for about a year and a half, two years. Okay, wow. Yeah, it was all right. But Tax Alchemy started off with a program. We created a real estate program because I loved real estate and teaching people how to invest in real estate to offset W-2 and 1099 income. Robert Kiyosaki was a big influence on me and so was Grant Cardone. So I really gravitated towards real estate investing in the tax code. I wanted more people to know how they can invest in real estate to offset their taxes. So I started off with a program. Hundreds of people bought that program. Then they said, Carlton, how do we work with you?

50:23Not just your mother's firm. We want to work with you. We've spoken to them. They say, we can't work with you. How do we work with you? That's when I decided to create my private client group. So was this a course? Yeah, it started out as a course. Tax Alchemy started out as a real estate course. and then how much was it it was two thousand dollars yeah yeah yeah we have over 3 000 people inside the program okay so the course led to people wanting to work with you yeah and so then but i had no way for them to cash flow me outside of the course i was like you're gonna get on the phone my sales team at my mom's office and work with my mom's company yeah well you can't work with carlton dennis i'm just doing tax education and tax strategy even though i have a tax license I'm still not the one who's doing the tax strategy right now.

51:06Okay. It wasn't until I built my own department, my private client group department that I said, okay, I'm going to be the one that actually does the tax plan now. I will get on the call and actually explain it to you now. Okay. And this was brand new. And I charged a lot of money for it because I knew now all of the strategies that I could leverage for somebody. And I knew how to use the software and I knew how to explain it and implement it because I was doing it myself on my own tax return. You were like expert level wizard. I was feeling pretty good about myself. I was feeling pretty good.

51:36So I started selling people tax planning through my business, Tax Alchemy, because my mother's company primarily worked with thousands of clients. And I was just going to work with a handful of clients. I was like, I'm just going to work with a boutique, small amount of clients and make it only high net worth individuals. They have to be making over half a million dollars a year because I want to make sure they're leveraging the real estate strategies. They need to have liquidity to do real estate. And that's what birthed. I started getting investors to work with me and they started buying real estate and I started doing the cost segregation study strategy.

52:08And the business grew from, you know, 10 clients to close to about a thousand clients now. And what about the team? How have you grown that? The team, we went from me having an assistant and one tax pro to now I have 25 tax professionals and a staff of about 46 individuals. And so where do you spend most of your workday? How do you spend it? I spend most of my workday doing content. So I will wake up. My assistant probably will send me my schedule for the day. She's already responded to the text messages I don't want to respond to and responded to the emails that I don't want to respond to. I'll typically map out the content that I feel like doing for the day and then jump right into it with my team.

52:46My team will show up to my house or I'll show up to my studio. We're typically filming for six to eight hours and normally doing YouTube videos, short form content, podcasts. How many days a week? Just twice, two days a week. I do that two days a week. And then the other three days? Meeting Wednesdays. Thursdays is my family day. And then Fridays I'll do meetings again. Half day. And so do you have an operator? Yeah, I have COO. And they leave you in your zone of genius. And that's content. Content. And you're still the magnet attracting deal flow. Deal flow, yeah. Wow. Yeah. And so how many direct reports do you have?

53:21People who report to me? Mm-hmm. I have an operations manager. I have a president. I have a my film and production manager let's say three and then my HR manager so yes three four people wow yeah and so in terms of content I did have a question and I we can edit it out if you're not comfortable talking about it yeah the the school of hard knocks they came up to you in in a street and they said you didn't pay any taxes yeah they found me in Beverly Hills so so I've always thought is this planted yeah they come up to people so you were okay okay okay They're now scripted. Okay. Yeah, because I know James.

53:57So now I do content with him. So I've been on his podcast show. He's unscripted most of the time. He'll just go up to you. Okay, so explain the story. So I pulled up, I was shopping. I was going to the Goyard store, which is in Beverly Hills. It's the only Goyard store in California. So I was going there. And I pulled up in my drop-top Ferrari. I don't have that Ferrari anymore. I've sold it for a nicer car, but I love that Ferrari. Gosh, it's so lowbrow. Drop-top Ferrari. Come on, Carlson. Step it up a little. I love that car, but I had to part ways with it. So I pulled up in this white Ferrari, drop top, red interior, you know, looking like a straight chocolate drop.

54:34I was ready to go. And then he comes up to me and he stubs a microphone in my face. So I immediately was like, who the hell is this? Am I going to have to fight somebody right here in Beverly Hills? LA is a little crazy. And he's like, excuse me, sir. Excuse me, sir. Can I interview you? And I was like, yeah. huh? And like, I know LA has a lot of those young guys that like to interview people. And like, I'm a internet personality. So I'm like, okay, I'll do an interview. He's like, can I ask you, like, what do you do to be able to afford a Ferrari like this? And I'm like, oh, easy. I was like, I run a tax consulting company.

55:06And he's like, okay. And how do you help people? I was like, I help people legally pay 0 % income taxes. And, and then he asked me how much money I had made. And he's like, okay, do you pay any taxes? And I was like, no, I don't pay any taxes. I think it's more patriotic to not pay taxes. And so that went viral. I guess a lot of people kind of, you know, had affinity to that. And yeah, definitely went viral. It definitely blew up our brand to a year or two ago. That's incredible. And then they came back. So that was, I actually thought it was scripted. Really? Oh yeah. 100. Cause I was like, you just, it just looked too perfect.

55:39It was like, excuse me, sir, can you interview and you're sitting in your car and you didn't seem like you were caught off guard. You're like, Hey, like, you know, I guess like a chocolate drop indeed. And so I was like, oh yeah, it's got to be this. And then they came back to your house and did an interview. Yeah. A long form podcast interview. Yeah. The year later they did a long form interview. Okay. Did you get any heat for people saying, oh, he didn't pay any taxes? No, I honestly, that was my best year of business. So you don't get any people saying like, oh, it's when people say it's, it's you, when you said it's patriotic not to pay taxes.

56:11Yeah. Aren't there people who argue the opposite? it? I mean, there are, but I don't believe those people have the right education. Be honest with you. Okay. Explain it. If you look at how the tax system was built, I mean, we didn't live off of taxes in the United States. In 1913 was when we introduced a formal tax system. Before then, we lived off of excise taxes. We used to tax tobacco and alcohol. That was it. And we thrived. We were doing completely fine. And we had World War I. And then the government said, okay, we're just going to take taxes out of your paychecks temporarily. Well, guess what?

56:41That temporary document got signed into law and then it became permanent. Now you have a permanent way of taking taxes out of our paychecks. And then the IRS got created a year later and it just kept going. It just became this permanent thing. So it's patriotic in that we go back to the roots of our founding fathers. Our founding fathers did never wanted us to be taxed. You had a Boston tea party where people were literally throwing mounds of tea into the ocean over 1 % tax. we're at 37 % now. We're at 37 % now. So, you know, yeah, I think it's more patriotic to not pay taxes. I think it's more patriotic to use the tax code to not pay taxes.

57:23And I think those who set the tax system up, set the tax system up to tax the most earned income earners and to reward those who invest the most amount of money. Yeah. I love that answer. Yeah. And I love that you are here and sharing this wisdom and knowledge. I have spent endless hours consuming your content, a lot of which I understood and a lot of which I didn't. And the more I listened to it, the more accustomed I got to the language. It made me feel a lot more powerful. I knew what I wanted to do and I set goals that I had never set before. And so I felt challenged by your work to take a lot more ownership in what I'm doing to catalog, to diversify how we're setting ourselves up for the future, and then to bring in our daughter and show her how we can change wealth and set her up for future legacies.

58:07And that's why I wanted you on the show. I just wanted you to come in and inspire other people to make those similar decisions. Now, there are a group of people who are more than qualified to become a future client of Tax Alchemy. Absolutely. Where can people go to get more information? Yeah, absolutely. Guys, listen, free education is on our YouTube channel at Carlton Dennis. Check out our YouTube channel first and familiarize yourself with some of our strategies. But if you're ready to, you know, hop on a call and talk to a tax strategy team to formulate strategies that are proactive instead of reactive, go to taxalchemy.com.

58:37be sure to schedule a complimentary consultation. We'd be more than happy to help you. That's amazing. And let's shout out your YouTube and Instagram where you're creating content. Yeah, absolutely. Carlton Dennis on all platforms. You can also visit us at Tax Alchemy Advisors as well. Be happy to help. You guys, I was looking forward to this interview. I knew that I could throw a game at the beginning of it. I knew that he would be game and you just came in again and just blew my mind. You added different elements to stories and education that are like really had a profound difference. So thank you so much.

59:03Absolutely, I appreciate it. For those of you guys who are watching and listening, Thank you for watching and listening to The Jasmine Starr Show.