The 

Story of a Man Who Told the IRS to 
Pay HIM $102,000, Got the Money, and 
Lived to Tell About It 

Written By: ​The Builders at Wealth Factory

Are you ready for a feel-good story about taxes? And one that may save you a lot of
money?

Then you’ll love this week’s feature article: ​The Story of a Man Who Told the IRS to Pay
HIM ​$102,000, Got the Money, and Lived to Tell About It​.

This is the true story of a Wealth Factory member who we helped get back $102,000
from the IRS — ​and save ~$20,000 per year going forward. It’s a must read for
anyone who pays taxes.

Next up, we have an article featuring our Accredited Network CPA, Brett Sellers, on ​the
4 ways to save money on taxes.

And we finish with ​How to Start Living Wealthy Today With Just 1 Simple Change in
Mindset​.

Enjoy!

Build the Life You Love,

The Builders at Wealth Factory

   
WF Lever: Recover Cash Flow 

The Story of a Man Who Told the IRS to 
Pay HIM $102,000, Got the Money, and 
Lived to Tell About It  
Written By: ​Garrett Gunderson

In 2009, a friend of mine named Dr. Mike Gandolfi contacted the IRS for an unusual
reason. It wasn’t to pay his business taxes, it was to give the IRS notice that they
actually owed him $102,000.

You can imagine that it takes a lot of nerve to do such a thing. Dr. Mike’s nerves were
certainly on edge when he did it, but they quickly jumped to red alert when he got the
IRS’s response.

An audit. Unsurprisingly, the IRS responded to his request for $102,000 with an audit.

And now Dr. Mike was worried.

See, recently Dr. Mike had signed up to work with The Accredited Network, our
boutique wealth team of financial specialists. And we were helping him develop a
smarter tax strategy for his business.

Because Dr. Mike wasn’t a tax expert, he put his trust in our tax specialists.

But now he was being audited and wondering, did we go too far? Did we do something
illegal?

Fortunately, I can assure you this story has a happy ending and everything was done
legally and by the book.
But before I share it with you, let’s take a look at why Dr. Mike asked the IRS for
$102,000 back, and examine how you, as a business owner, may be able to do the
same thing.

 
Changed Business Structure to Save On Taxes 

Before we set Dr. Mike up with our tax team in The Accredited Network, he was in a bad
spot.

Dr. Mike said to me, "We were paying a very high-priced accountant because I wanted
the best, but they were giving us very poor advice.”

And he was getting poor advice. Even though he was the perfect candidate to have his
business classified as an S Corp, which comes with major tax benefits, his accountant
wrongly advised against it.

An S Corp allows you to avoid payroll taxes, otherwise known as the self-employment
tax for business owners, on a major portion of your income.

You have to pay yourself a reasonable salary which is subjected to payroll taxes. But
after that, you can receive regular distributions from your company for any amount —
and these are not subjected to the ~15% payroll tax.

For Dr. Mike, switching to an S Corp was a savings of about $20,000 per year.

 
The Magic of Depreciation and Cost Segregation 

When a business asset goes down in value, it’s called depreciation. And depreciation
can be counted as a business expense, which lowers your taxable income.

Here’s a rough example: if a $10,000 business asset depreciates to $8,000, then you
can write down the $2,000 depreciation as a business expense, which lowers your
taxable income by $2,000.
There are all sorts of IRS rules governing depreciation, so it’s best to talk to your
accountant.

For Dr. Mike, his business owned a building that the IRS says can be completely
depreciated over 39 years.

If Dr. Mike’s tax team didn’t know to hire an engineer, that would be the end of it.
Fortunately, he was working with Wealth Factory's Accredited Network.

Because of something called “cost segregation,” you can hire an engineer to help you
identify pieces of the building the IRS allows to depreciate at a faster rate.

For example, carpet, which doesn’t typically last 39 years, can be depreciated much
faster. Usually the IRS says 5 years. That means you can deduct one-fifth of the cost of
the carpet each year for 5 years, significantly reducing your taxable income.

"Having the ability to depreciate things like that at a different speed helped significantly,”
said Dr. Mike.

 
Amend Last 3 Years of Tax Returns 

The Accredited Network looked at Dr. Mike’s returns from the past 3 years and realized
he missed out on some major tax savings.

Fortunately the IRS allows you to amend tax returns up to 3 years later and reclaim
savings you may have missed. That’s how Dr. Mike came to ask the IRS for $102,000
back.

Much of that savings came from missed cost segregation opportunities, but other
savings came from tax writeoffs like mileage when using his car for business.

And actually, that’s what triggered the audit. The IRS had questions about how he was
using his car for business.
 
The Result of the Audit 

So what happened? What was the result of the audit?

“We think of audits as probably one of the last things that you ever want to have to
experience,” said Dr. Mike about the experience, “But it wasn't painful at all. There was
a few phone calls and a few documents we had to submit, and that was it. Everything
else was handled and it came back that we didn't have to pay anything more."

The IRS actually decided that Dr. Mike was correct to write-off his mileage. In fact, his
only mistake was not writing off enough. The IRS decided to let him write-off more
mileage than he had even asked for.

There are a few morals to the story here.

One, make sure you get an accountant that specializes in business and can help you
pick the appropriate corporate structure.

Two, get a second opinion on your last 3 years of tax returns. Another set of eyes may
be able to find you savings you wouldn’t have received otherwise, like cost segregation
and business mileage on your car.

Three, audits are only scary if you’re cheating the tax law. If you’re working with an
accountant who knows the tax law and can use it in your favor, then you have nothing to
fear. You can feel confident taking every tax-savings legally allowed.

And finally — if you’re unsure if your accountant is getting you all the tax savings you
deserve, or even if you just want a second opinion, ​tell us more about yourself right
here.

We can help by setting you up with The Accredited Network or helping you build your
Wealth Architecture.
So introduce yourself at the link above and we’ll determine together the best way we
can help.

Or watch this free overview from Garrett Gunderson on building wealth with us:

How a Wealth Team Helps You Build Wealth Without Risk

   
WF Lever: Recover Cash Flow 

Stop Overpaying on Taxes: Here Are 4 
Ways to Save 

Written By: ​Garrett Gunderson

The best part about taxes are the taxes you don’t have to pay.

With that in mind, I recently asked my team to run some numbers for me. I wanted to
know how many of the businesses we’ve evaluated over the last decade or so were
overpaying on their taxes.

The number came back as 93%. More than nine in ten business owners were
overpaying on their taxes — regardless of whether they were paying for a high-priced
accountant or not.

That’s sad, but no surprise. The federal tax code and supporting documents to help tax
lawyers, accountants, and CPAs understand it totals more than 70,000 pages long.

Without a production-minded accountant who specializes in your area of business,

identifying and claiming all of your tax savings is a Herculean task.

I recently talked with my CPA, Brett Sellers, to see if he could break down tax-savings
into something more approachable than the mammoth IRS tax code. And he delivered.

Brett reports that there are four main ways to save on your taxes, and two are far
superior to the others.

 
Tax-Saver #1: Defer it away 
One of the easiest and most common ways to save on taxes, allegedly, is to defer
taxes. I say “allegedly” because the taxes must still be paid— just at a later date.

Here’s what Brett says: “Deferred tax savings are where you get a deduction now and
you pay tax later, hoping that you’re at a lower tax bracket. The classic example is the
401(k).”

And it’s true. Every dollar that you put into a 401(k) or IRA is deducted from your taxable
income.

The hope is that when you withdraw the money in retirement, you’ll be in a lower tax
bracket.

But that thinking doesn’t work for entrepreneurs. If your business is successful in the
long-term, you’ll be in a higher tax bracket, not a lower one.

And here’s another thing to think about: which direction do you think taxes are going —
up or down? In more than 10 years of speaking to large groups and asking this question
from the stage, only one hand has gone up to say that taxes are going down.

The facts are that government debt is at a record high while taxes are at historical lows.
It doesn’t take a fortune teller to see that taxes are likely to go up.

“Deferred tax savings are probably the least effective way of saving taxes,” says Brett.

 
Tax-Saver #2: Spend It Away 

This won’t come as news to business owners, but the more you spend on your
business, the more tax deductions you earn. In fact, if you spend enough money you
can reduce your taxes to zero.

You can spend money to reduce your taxes by hiring a new employee, buying new
equipment, running an advertising campaign and more.
But you don’t want to let the tax-tail wag the dog. Spending $1 to save 30 cents in tax is
never a smart move. So if the expense doesn’t make your business more profitable,
then it’s not a smart way to save tax.

 
Tax-Saver #3: Connect Personal Spending to Your Business 

Because business expenses are deductible, entrepreneurs have an advantage over

other taxpayers. They can find tax deductions where others cannot — in their personal
expenses.

Brett says, “Look at your personal spending — where you’re spending money already
— and see if you can connect that to your business. So we’re not spending new dollars,
we’re re-characterizing existing spending in a more tax-advantaged way.”

The most classic example is the home office. You’re already spending money on your
home. But if you can build a case and document that a portion of your home is used for
business, then a personal expense becomes a business expense.

“I have my clients look at their last 2 months of credit card bills and bank statements
and really challenge themselves as to whether there’s a business connection to any of
those charges,” says Brett.

Travel expenses, education expenses, magazine subscriptions and more — these are
all expenses that could possibly be connected to your business. If they are connected,
then you just found a way to lower your taxes without spending any more money.

 
Tax-Saver #4: Lower Your Tax Rate 

The fourth way to save on taxes is to lower the rate at which you are taxed.

One way to do this is to change the tax you’re paying from ordinary income tax to a
capital gains tax.
Ordinary income is taxed as high as 39.6%. The capital gains tax can be as low as 0%,
but is typically 15% for most individuals. So you’ll save big if a CPA can help you
transfer some of your income to capital gains.

“I was just talking to a business owner this morning,” said Brett, “We were structuring
the sale of her business so that there were more capital gains coming off the sale of the
business than ordinary income. That lowers her tax rate — same income, but it’s taxed
at a different tax rate.”

There are many other ways to lower your tax rate as well.

For example, some business owners have elderly parents who live with them. If you’re
supporting your parents, you can hire them to work for you. Because they’re likely in a
lower tax bracket, the income comes into the family at a lower tax rate.

You can do the same with kids. Your kids can work for you and earn up to $6,000 per
year without owing any income tax — and that money can go straight to their college
savings account.

Some investment vehicles are taxed more favorably than others, too. For example, the
growth inside of a life insurance policy is never taxed. Real estate is another popular
investment with favorable tax advantages.

 
In Short... 

Here are the 4 ways to save on taxes in a nutshell.

Deferring taxes is the most tempting way to “save” on taxes. But for entrepreneurs, the
real tax savings occurs when you dig a little deeper.

Any expense that makes your business more profitable in a responsible way is a good
decision — both for your business and for reducing your taxes — because that expense
is a deduction. But don’t let the tax-tail wag the dog. If it doesn’t make your business
more profitable in the long-run, skip it.
Dig through your personal expenses to see if any can be connected to your business. If
so, it could be a valid business deduction.

And finally, significant tax savings often come from finding ways to lower your tax rate. It
may take an experienced CPA to help you do that, but my experience says it’s more
than worth it.

   
WF Lever: Make It Count 

How to Start Living Wealthy Today With Just 1 Simple 
Change in Mindset 

Written By: ​Garrett Gunderson

Most people think of retirement like this:

You work in your twenties. You work in your thirties. You work in your forties and fifties.
And then finally at age 65, you can retire and enjoy life.

But what about all those years along the way?

Are you going to live a life you dread today, so that you can live the life you love one
day?

I hope not, because the truth is, you don’t know if that day will ever come. Two of my
business partners died suddenly in their mid-thirties. Later didn’t come for them. Waiting
until 55 or 65 to enjoy life is too risky and too expensive.

That’s why, at Wealth Factory, we are redefining retirement to ensure that you live the
life you love today, and actually end up more prosperous tomorrow too.

 
How to Live Wealthy Today, Guilt Free 

I once told my father that I knew I’d be successful, because no one was willing to work
as hard as I was. He was proud of my ambition, but he also warned me, “You can never
get back the memories you never have.”
I’ll never forget that advice. And it’s the main reason I came up with the idea of a “Living
Wealthy” account. We first mentioned this in last week’s issue as the second rung of
your Automatic Wealth Ladder.

A “Living Wealthy” account is about guilt-free spending.​ It’s a place to pile up cash
with the intention to spend it, guilt-free, so you can create memories today that you’ll
never get back if you don’t.

New experiences, new memories, new gadgets — whatever it is that helps you live the
life you love today.

 
Here’s An Example... 

There’s a man I know who is worth several million dollars. He’s in his fifties, and in my
mind, he has his priorities straight because he makes a point of sharing a special
experience with each one of his adult kids, at least once a year. That’s a wise way to
spend your Living Wealthy account.

For me, I make a point to travel with my wife and kids at least once a year. In the last 5
years, we’ve been to Rome, Paris, Dublin, Amsterdam, Monaco, Venice and more,
creating memories that can never be taken from me.

Many entrepreneurs avoid this because it seems so expensive. Not necessarily

because of the money they pay for the trip, but because of the money they’re not
making while away.

But more than just robbing yourself of memories, you’re sabotaging your productivity. A
spirited vacation will leave you feeling rejuvenated, ready to work faster and harder than
ever before.

It’s just like how you can often get more done with a good night’s rest and starting again
in the morning, rather than working on fumes late into the night.
Another thing that I’ve found is that you look at your business differently when you have
a trip coming up. Your energy and excitement for the trip can be used to be as
productive as possible before you go.

 
Surprising Side Effects of Taking More Time Off 

Taking more vacations will also improve your business’ productivity now and into the
future.

The last time I went to Paris, I decided to get rid of all technology for 72 hours and be
completely unavailable.

At first my assistant freaked out because she was used to getting my frequent advice.
But after it was done, she proved to herself that she was perfectly capable of handling
most tasks and decisions on her own. So when I came back, she needed my time less.

This is the surprise benefit of stepping away from your business for a while. Your
employees have to learn how to run the ship without you.

And while that may give many business owners nightmares about what might go wrong,
I’ve actually found these types of mistakes to be an opportunity as well.

If something goes wrong while I’m away and a customer is unhappy, it gives me an
opportunity to swoop in and overdeliver for them. And as funny as it sounds, this is
actually one of the best ways to create a customer for life.

 
Retirement Redefined 

At Wealth Factory, we teach retiring IN your business today, rather than retiring ​FROM
your business in 30 years. And we’ll go into more depth about how to do that in future
articles.
But making the change in your mindset goes along way. Stop believing that you have to
sacrifice today in order to live wealthy tomorrow. Because by living wealthy today, and
strategically retiring IN your business, you can live even wealthier tomorrow.

   
In Closing... 

Written By: ​The Builders at Wealth Factory

That’s it for this week — and we covered a lot.

Not only did we show you how to get money back from the IRS — $102,000 in one
Wealth Factory member’s case — but we also covered the 4 ways to save on taxes.

(And if you skipped the article, we only recommend 2 ways wholeheartedly.)

Finally we ended with an important philosophical message that is central to our values
at Wealth Factory.

And that’s to live wealthy today.

Others will tell you to sacrifice and delay so you can lock money into the stock market
for 30 years. And if the market cooperates, you may be able to enjoy what you worked
so hard to create.

The Wealth Factory way is to live wealthy now AND in the future by focusing on your
greatest wealth creator — your business.

And if you do it right, you can actually retire ​in ​your business, rather than ​from ​your
business, in 3-7 years.

If that sounds appealing…

...we’ll tell you all about it next week, so be on the lookout for your next Monday morning
issue of ​BUILD:​.
Build the Life You Love,
The Builders at Wealth Factory