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Hit 7 figures but losing 5 figures to taxes? Earn a 6-figure income but feel financial chaos? Welcome to the show helping you Simplify Your Numbers.
Most business owners in the $1M–$10M range feel like "passive payers"—surprised by a massive bill every April and wondering why their hard work isn't reflected in their bank account. Host Fabrice Metan, a veteran CFO and tax strategist, cuts through the noise of complex financial data to provide straightforward, actionable insights for the "7-6-5" entrepreneur.
This podcast is the bridge between traditional bookkeeping and high-level advisory. We move you away from a reactive "compliance mindset" and into a proactive strategy where your business becomes your greatest wealth-building tool.
Stop being a passenger in your own financials. It’s time to simplify your numbers, maximize your profit, and hold onto more of what you earn.
Subscribe to join the 7-6-5 community and start your transformation today.
Ep05
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Tax Tips Reality Check
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[00:00:00]
Fabrice Metan: Hey, so today's gonna be a little different. You know, there's so much information online, or it's called misinformation. So many videos on tax law that makes absolutely no sense. Or [00:01:00] sometimes all the information is not given to you in such a short clip. So I thought about doing a video where I challenged my producer to find some of the best content he could find online about different strategies that people can implement.
Then allow me to give my commentary and see if, you know, this makes sense for you or if you should be you know, staying away for something like that.
Augusta Rule Explained
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Fabrice Metan: So what you got for me today, one of the most overlooked aspect use for their benefit is the Augusta, where you can rent out your personal residence for up to 14 nights.
Tax exempt. Mm-hmm. In fact, it's one of the only places in the Internal Revenue Code where it says, please don't tell us about your income. A lot of people hear that and think, well, why would I rent my house out to people I don't know? Well, of course you wouldn't. But if you'd made a corporate structure and put your family in that structure, well then it's advantageous for that company in which your family resides to meet every quarter for business meetings or a conference.
Where can they have that conference at your house [00:02:00] and then you can charge them $400 a night. Let's say you put six people in there, 14 nights in a year, that's $33,600 that you just made tax free. And some people, again, think, well, my sister's not gonna pay me $400 a night to stay at my house. And of course she's not.
But your company will, especially if it means the business benefit and knowledge to the members. Now that money that the company pays you on their behalf is deductible to the company. You made 33 6 tax exempt and the company gets to deduct it for another benefit of 21%. You just had a very, very good year and you benefited the whole family, which I hope is doing its own family business because that's what the elite to.
They don't isolate. They come together to build their own generational wealth. One of the most overlooked aspects of the Internal Revenue Code.
Augusta Rule Caveats
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Fabrice Metan: First thing I'd like to say is that the Augusta rule is real Section 280 a of the tax code, essentially allowing you to rent your home [00:03:00] to your business and essentially collect rent tax free without necessarily having to 10 99 yourself or anything like that, right? The business can take the business deduction.
The issue here, from what I can see, is that you don't get to determine what is that daily rate, the market does. So the most important part here is that we're supposed to actually run some comps and look at how much would the market actually charge for a space like the one that you're renting.
So that we have a reasonable rate to apply to those, you know, up to 14 days and so. I don't think that you get to, you know, allow yourself to essentially rent your home like you would a concert venue, right. And then charge by head. Typically what would happen is that you have to determine the space in the home that is gonna be used for exclusively for the business.
So the business gets that entire benefit, right? And then you would go in the market and try to figure out [00:04:00] what a similar space would rent for. For business purposes, a conference room you can call a hotel, whatever you might need to do to run some comps, then you would determine what that reasonable rate would be.
In this case might be five to $800 a day times the number of days that you're actually using it for business, and that would be the total that you can actually deduct from your business by paying yourself that total throughout the year. But I don't believe that you can so easily take out $33,000 tax exempt, so I would be very careful with that.
Retiring Spouse Strategy
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Fabrice Metan: Make a lot more net income by retiring your spouse. If you make over 20,000 a year, you have a spouse who's working part-time or maybe full-time making, let's say $60,000 a year, right? When you pay taxes, you're paying at your combined level, and so you're in a higher tax bracket. Now, if your spouse were to stop working and instead spend time in real estate, for example, and become a real estate professional, now what you can do is you can.
All of the real estate [00:05:00] tax benefit, like write-offs, like depreciation, and use it to not just offset income from the real estate, but also W2 income for that remaining spouse who's working. We often see times where the spouse is giving up that 60,000 of W2 income in exchange for a hundred thousand dollars in tax savings.
So it's a way to effectively net more profit in your pocket by not working or retiring your spouse. You're making over 300 K. Okay. You could potentially make a lump. Well, so.
Running the Numbers
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Fabrice Metan: That's actually a, a, a, a pretty decent strategy. The only issue is that you have to think about every side of the coin right now.
So let's take this, this situation, for example, you make 300,000, your spouse brings in $60,000. So together, you guys have a combined income of $360,000 now based on 2025 tax rates after the updates from the big, beautiful bill. You would normally pay about $65,000 in taxes on that total, which means that the net take [00:06:00] home income would be 295,000.
Now let's look at scenario number two. Your wife who earns $60,000 no longer brings in the $60,000 home. Now you only live on $300,000 of gross income. Right? Technically here, you, the wife, focuses on real estate, so you get to take those real estate losses, say a hundred thousand dollars against that income.
Now this is a paper loss, right? So you still have your 300,000, and then you pay the taxes on the remaining balance. In this case, you still need to bring in $295,000 in take home income. The issue here is that on $200,000 of actual taxable income that you have to pay taxes on, you would be. Roughly paying about $27,000 in taxes.
So in other words, your real take home would be 300 minus the 27,000. ~You are off about two 20, $2,000 there. ~I hope that makes sense. That's a lot of numbers, but here's what I'm saying by that. It's not just about the depreciation and the rental, you know, real [00:07:00] estate tax loss that you can use against.
Your your ordinary income, it has to also be about the cash flow. How much money does your real estate portfolio actually brings you so that you can get back to that $295,000 in take home income? Right? And so one thing is how much money, ~how, ~how big of a portfolio do you have to have to, to be able to make up that $22,000 difference you might need about a $500,000 portfolio.
To earn about $22,000 in net, you know, free net cash flow from your portfolio. And then out of that $500,000 portfolio, we can then run a cost segregation take depreciation. And you may be able to have a hundred thousand dollars in losses to claim. ~And so I don't want you to listen to this and automatically think.~
~It's all about the real estate losses. ~It's also about how positive your cashflow will be from that real estate so that you can get back to the same number. Take home income.
Unfiled Taxes Crisis
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Fabrice Metan: Years and 15 ish years of that marriage. My husband was an [00:08:00] alcoholic. He is now three years sober, but in the midst of the chaos, we have not filed our taxes since 2020. And I'm not What? Chaos. He was drunk for 20 years until the chaos happened. Well, he just, it really was a downward spiral.
It just got worse and worse. He even had a couple of DUIs, so it just kind of reached a peak. So 20 to 23 was him going to the bottom and 23 to now is coming back out. Yes, exactly. My, but this is just like a looming black cloud over us because I know we have to pay the piper. Yeah.
File Now Not Later
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Fabrice Metan: First thing to know is this, and it's very, very serious.
Failure to file. Income tax returns is a federal criminal offense. Failure to pay taxes is not, people do not go to jail in America for not paying taxes. They do go to jail around 2,500 to 3000 of them each year for not filing. So we've gotta get that off of you. The number of times that the IRS prosecutes someone who comes out of the cold off [00:09:00] the grid on their own is almost zero.
So you're going to initiate this filing immediately. Okay. I don't want them accidentally finding you in the next 30 days and really screwing up all of the positive progress he's made in the last three years. What happens is you need to reconstruct the last three years, maybe four, and do the best you can to reconstruct those years and file those and then all of those taxes will be due.
Okay? The best you can do, you're gonna have to pull it together. 'cause you need to file something. Okay? 'cause they're probably not going to look at it. They're probably just gonna be happy that somebody just showed up and start giving money. Okay? But that's if you go to them. So do not put this off into the air.
Danger, danger. Danger. I have been worried.
Why Filing Matters
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Fabrice Metan: Dave said something extremely important here is that failure to file is a criminal offense. While failure to pay is not, essentially, it is much better for you to file your tax return and have a tax liability that you then figure out [00:10:00] how to pay than it is to completely ignore the IRS and the state and assume that they won't find you.
~They will. The reason why is because. ~You are not necessarily hiding your income because most of that income has probably already been reported to the IRS. If you're earning income through W2 10 99, any, you know, 10 99 R, any of the tax forms that you're receiving from a third party. That information has already been reported to the IRS and the state as well, and so technically they already have the information.
They're just waiting for you to tell your own story, and so if you don't come in with that information. They would have to make an assumption for themselves, and the worst part about letting the tax agencies determine what your income is, is that they do not take into account all of the deductions and the write-offs that you're actually entitled to.
What will happen is that if, for example, you're a business owner or a 10 99 contractor, they will assess the total income that they received on that form with none of your business [00:11:00] expenses to write off against it, and then based on that number. Calculate what your tax liability is supposed to be. That is, I actually have a real example of a client that essentially was never filing.
You know, she came to me explaining to me that she hates the IRS hates taxes, does not want to pay, and essentially has been ~running, ~running away from having to deal with this since 2018. Well, the problem is that now in 2026 she received a notice from the state actually showing. The 10 99 income that she had received back in 2019 and saying that based on that income, you do owe X amount of dollars in taxes.
But they only took into account the 10 99 income, not all the expenses that she could have written ~against those, ~against that income. ~Right. ~And so when she came to me, I explained to her why this was such a dangerous thing to do, and we went back to. ~To now ~reconstruct that entire year, 2019, business income, business expenses, all of that to determine the true income.
But that information [00:12:00] now had to be reported to both the state and the IRS. What does that mean? We now have to catch up 20, 20, 21, 22, 23, 24, and 25. We cannot at that point just stay there and just wait for another notice, because by that time, it won't just be the state. It would also be the IRS, which becomes even more dangerous for you.
~I think that's it. So do you want to give a little wrap up? So these are just some really good examples of the types of advice. That's good. Sometimes it's bad, sometimes it's just incomplete. Mm-hmm. Right? Some, something like that. ~
Wrap Up and Advice
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Fabrice Metan: Alright, so that's all I got for you today. I think these are some really good example of the type of information that you find out there. You know, it could be a 30, 60, 90 second reel where you hear something that sounds really good and that you try to act on it. And what I would say is that you always want.
To take all the information that you get with a grain of salt and consult with a tax professional to make sure that that information is accurate before making any decisions.
[00:13:00]