In honor of tax season, I have written an article on tax strategists and why every 1099, self-employed physician should have one to accelerate their financial growth. I recently wrote a guest post for the popular website White Coat Investor. You can access that post by clicking on the link below.
In that post, I discussed how taxes had historically been my biggest expense. Most doctors, dentists, and other high earning professionals are in the same boat. Many look at the over 70,000 pages of tax code and throw their hands in the air in surrender – resigning themselves to overpaying on their taxes.
While the tax code is onerous to say the least, what most fail to understand is that the bulk of that 70,000+ pages has nothing to do with paying taxes. You read that right, the majority of the tax code is about how to legally avoid taxes.
Keep in mind, I said avoid not evade. Avoiding taxes is legal all day every day, while evading taxes will land you in jail. We should all pay every cent of our tax burden, but why leave a tip? Far too many health care professionals are paying more in taxes than they have to and in essence are tipping the government. Unfortunately, many of you are VERY good tippers.
In my opinion, the government doesn’t really want that extra money. They want you to avoid taxes. They encourage you to avoid taxes. I can imagine the skeptical look on many of your faces as you read this. However, why else would they write such a monstrous tax code only to have the vast majority of its content focused on ways to avoid paying taxes?
The answer to this question is that they would rather influence your behavior. They would much rather have you do what they deem necessary and beneficial for society and are more than happy to reward you with lower taxes for doing so.
A great example of this would be green energy. No matter what your politics may be, haven’t you seen various tax breaks for things like electric and hybrid cars, solar panels, energy efficient windows, hot water heaters, appliances, and myriad of other green energy devices? The government wants you to save energy by using alternative sources, thus the financial incentive. Multifamily real estate investing, or providing housing for others, is another example of what the government encourages us to do through the tax code.
With such a colossal tax code, how can any busy physician stay abreast of all of the available tax breaks? To make things worse, new tax code is being added all the time. To access these breaks, we don’t have to be an expert on taxes, we just have to hire someone who is.
Most of us have heard of accountants (CPA’s) and even tax attorneys but, many are unaware of tax strategists. A tax strategist looks at your current financial situation and creates a multi-year plan that gives you the most bang for the buck when it comes to saving on taxes. When I did mine, I had to submit my last two years of returns.
My strategist looked at my returns free of charge. Had she not been able to save me money, I would have had free confirmation that my CPA was doing a great job. Unfortunately, my CPA was failing me. I had been overpaying on my taxes annually in excess of the cost of my wedding!
Once I knew how much money I was leaving on the table, I was given a price for developing a plan to reduce my taxes. Going forward was an easy decision as the price of the plan was significantly less than the money I would be saving. For every dollar I had to pay for this strategy, I was going to save five. Additionally, that cost was a one-time fee while the savings was ongoing annually.
There are many reputable tax strategists out there. For me, it was a no-brainer to use Diane Kennedy of U.S. Tax Aid. I’m a strong believer in creating a team of advisors and I wanted to use the best. Diane has literally written the book – multiple books, in fact, on the subject. She is an authority on tax strategies and tax savings. Average CPA’s get average results (if you are lucky). I was no longer willing to overpay the equivalent of another wedding every year for the rest of my life. How can you experience financial growth and wealth generation when you are losing that kind of money?
While Diane is my tax strategist, I am not receiving any financial benefit from writing this blog post or any referrals that might come from it. As physicians we work hard for our money and medicine is becoming less fruitful financially. Increased regulation coupled with decreased reimbursement is squeezing us all. While this post is a departure from my regular multifamily investing posts, I felt obligated to write it for the NestEggRx community. I hope this helps you to stop overpaying your taxes and keep more of your hard-earned income to invest for your financial freedom. If you are interested in consulting with Diane, you can do so at the link below:
To Your Wealth,
Dennis Bethel, M.D.
P.S. Your financial growth and nest egg depends on you minimizing your wealth decelerators and that is what tax strategists are all about.