Tax Advisory in Action

Show Notes

H. Randy Hughes III, Chairman & CEO of Counting Pennies LLC, joins the podcast to talk all things tax advisory, including specific use cases, helpful tips, how to implement it, and more. Tune in to hear first-hand how tax advisory has saved Randy's clients thousands.

What is AccounTrends: The tax and accounting thought leadership podcast?

A bi-weekly podcast bringing you insights and advice from the accounting & tax industry's top experts and thought leaders. Learn more at IntuitAccountants.com/AccountTrends

Jasen Stine: Welcome to Account
Trends everybody. I'm Jason

Stein with Intuit Accountants.
My co-host, david Bergstein, and

I are excited to be with you
every couple of weeks to share

the latest news, interesting
perspectives and hottest trends

in the tax accounting world.
We'll have special guests on the

show to help break these trends
down and give you food for

thought as you find new ways to
deliver for your clients. And,

most importantly, we plan on
having some fun while doing that

. Welcome, okay, welcome back to
Account Trends everybody. Jason

Stein here, your host as always
, and with me, mr Bergstein. How

are you today, sir?

David Bergstein: I'm doing
fantastic today. Good to see you

again. We've been seeing a lot
of each other lately.

Jasen Stine: Yes, You're getting
tired of me yet. Absolutely,

absolutely.

David Bergstein: Absolutely
tired of me. Okay, so last

conversation, and I'm sure this
will air before it happens,

Quickbooth Connect went live
with registration. Did you know

that?

Jasen Stine: Yes, I did know
that. Well, I sat on the

programming team for QBC and
we've been working hard to put

together a really cool program
for everybody. Very exciting

year, a little different. We're
bringing some new blood, new

speakers to the forefront and
it's going to be interesting.

But it's going to be sold out,
so don't wait to buy your ticket

.

David Bergstein: Are you already
bought my ticket yesterday when

it went live. I want to resell
it at a higher price later on,

in case I decide I don't want to
go.

Jasen Stine: This is the first
year that we're able to do that.

We're opening up the
registration. We're encouraging

people hey, don't wait, buy your
ticket, because we know it's

going to sell out. But for the
first time, you can actually

transfer your ticket to someone
else. Not that we're encouraging

people to hawk tickets to QBC,
but I'm sure there will be some

of that.

David Bergstein: In addition,
today, you know what's also

interesting my Intuit stock,
which I bought at various prices

, finally hit the $500 mark.

Jasen Stine: Oh, did it. I know
if you knew that. I did not.

That's cool. That's a big
milestone. I don't think we've

ever hit 500 before. I remember
I think the first 500,.

David Bergstein: It'll go up,
it'll go down, but it's now past

that plateau so you never can
tell where it's going to go. I

guess you'll check it out.

Jasen Stine: We're looking, it
looks like we're hovering at 490

. It's funny 25 years ago when I
started with Intuit, our

company stock was, I think, 90
bucks a share, so that's just a

testament of our growth.

David Bergstein: And if you held
on to it, maybe someday you'll

be able to move to a bigger
chicken coop.

Jasen Stine: Right, with less
roosters, hopefully.

David Bergstein: So what do we
got today? We got someone who

likes to count pennies and turn
those pennies into bigger

dollars and supposedly has
reliable tax expertise.

Jasen Stine: Speaking of growth,
yes, we have Mr Randy Hughes

with us today from CPA Pennies.
Randy has built quite a cool

business, really largely
centered around tax advisory,

and we wanted to bring him on
the show do something a little

bit different. We talk a lot
about thought leadership on the

show, David at kind of a higher
level, and so Randy was kind

enough to give up some of his
time. We're welcome to the show,

Randy, by the way.

Randy Hughes: Pleasure to be
here, gentlemen. Yes, nice to be

here with you.

Jasen Stine: Really glad to have
you because we're really eager

to hear about kind of digging in
on how you go about these tax

advisory services. David Randy
is a member of our tax council,

I think, and one of the big
reasons that we wanted to bring

him on was because of his unique
business and what he's been

able to do and some of the
stories that he's got to tell us

. I'm super excited to have you
here, randy, to share your

experiences with our audience.

Randy Hughes: And absolute
privilege to be here.

Jasen Stine: Oh yeah, no, man,
it's our privilege. So let's

start off with just a little bit
about your journey. Tell us you

know kind of, how did you get
to where you are here today?

Randy Hughes: Absolutely. Yeah,
well, it's again a privilege to

be here with both of you,
gentlemen. And yeah, the story

is this I wanted to work for
myself. I had an accounting

background. I wanted to work for
myself and a friend of mine

suggested that I explore tax
preparation. I thought it was a

good idea, so I went out and did
all of the things that were

needed to establish a tax
preparation business needed to

find some clients, so I put
flyers. I made up flyers on my

own computer and the funny thing
is, you know, you don't have

your. Well, at least I will
speak for myself. I didn't have

confidence when I first started
out. This is going back 21, 22

years now, and so, even though I
had scored well in school on

tax preparation, I decided to
target apartment complexes to

put my flyers because I was
afraid of schedule A at the time

. You know I'm new to the
profession. I wanted to keep it

simple I'm thinking of the 10,
you know the 10 for the easy

form and all of that stuff, just
to get my feet wet. So I

started with flyers and I put
them in apartment complexes so

that I could avoid schedule A,
and it worked for the first year

and a half. And then that
second season did the same thing

. Somebody came in and handed me
a 10, 98 form and said, oh yeah

, you know, I live in the
apartment complex now, but I

sold my house last year, but
before I sold it, here was my 10

, 98, because I still like to,
you know, claim my mortgage

interest. And I was like, oh, my
goodness, what am I going to do

? But you know it, really I'm
going to be honest with you. It

was one of the best things that
happened to me, because it

forced me to take a situation
that I really already knew, but

to work through it in a real
life situation. And by virtue of

working through that real life
situation, you know, prepare the

return. There were no issues.
But the lesson it taught me is

that as long as I understand the
concept of what needs to be

done, I can research and find an
answer later. And that was a

very important lesson, because
now, fast forward 20 years where

our business model is around
tax planning and advisory tax

services. That's exactly what we
have to do. If we had to wait

until we mastered everything and
knew everything before we sat

in front of a client, we
wouldn't sell a thing, but

understanding the power of
understanding a concept

conceptually what you're trying
to accomplish, and then having

the confidence to know that you
have access to resources to find

the answers that you need to
achieve your desired goal, which

, in this case, is lower taxes.
It is, it was a God send lesson

all those years ago and it
serves me well today.

Jasen Stine: Well said, my
friend.

David Bergstein: In doing all of
that, you know you're not just

a tax preparer, you're a CPA, a
certified tax coach, a

continuing education, and also
you're a certified tax

resolution specialist. So I
guess your niche has always been

tax and the tax planning, and
you've seen it grow.

Randy Hughes: Absolutely yeah,
and all of those. And the

fascinating thing is, through
all of those things that you

mentioned, you know those,
they're all entities or

industries, and into and unto
themselves. We like to think

about it and I think about it as
we have this, what we call tax

service umbrella, and under this
tax service umbrella we have

three different areas that are
unique unto themselves. Now, the

one that we're most familiar
with as accountants and

definitely people in the
community, is tax preparation.

Right, everybody knows what tax
preparation is. Why? Because the

IRS requires us to file a
return and the majority of cases

right Every single year. And
because, as taxpayers, we're

afraid of non-compliance,
because of the penalties and the

punishments that could be
associated with that. We file

our tax return, but by and large
, most people, they don't want

to think about taxes. But
there's this entire other

industry of tax planning that's
out there that really needs a

seat at the table by itself. So
it's not like a latch on, you

know, it's not. It's not like
you know, I think, the

illustration I'm thinking of you
. It's not like you're dragging

it along along with tax
preparation. Tax planning is

something all to itself. It has
its own seat at the table. And

then to your point, david
resolution, resolution has its

own seat at the table too. It's
a whole industry into and unto

itself, and so focusing on those
three, you can really help a

person in a more comprehensive
way than just doing the

compliance work of the tax
preparation return every single

year.

Jasen Stine: And one more
question about your business,

and then I want to get into
those use cases we were talking

about. Yeah, randy, you have a
unique approach to your staffing

model. As a successful firm,
you're able to offer some

specifically unique structure to
your team. Can you talk a

little bit about that?

Randy Hughes: Absolutely yeah.
So we have a team. There's eight

of us all together, counting
myself, and the unique thing

about us is all of us work
part-time, and that's

specifically by design. The
reason why we work part-time is

because we want to make sure
that we have the capacity to

come up with the creative ideas
that are required with things

such as tax planning. So
generally, we work between 15,.

Each team member works somewhere
between 15 to 30 hours per week

. I'm on the 15 hour range
myself, and then we have others

that varied and also depending
on the time of year, of course,

because it does pick up a little
bit more during tax season,

naturally. But the reason why we
do that is we want to make sure

that the team members have time
for other things that they feel

are important to them. Some of
them like to travel, some of

them have families, some of them
have community service. All of

us do some form of volunteer
work. We don't require that, but

it's interesting that everybody
has decided to do some type of

volunteer work, and when we have
those things outside of work,

then we're more excited to come
into work, and we're more

excited to come into work. It
creates our creative capacity,

which is really what you need
when it comes to tax planning if

you want to be able to produce
the type of results that you're

talking about in the initial
stages of explaining it to a

taxpayer.

Jasen Stine: And then what I
think is super cool about that

too just what we were talking
about before we started

recording the episode was this
allows you to go back and forth

and live between Jamaica and
Florida, and live your best life

.

Randy Hughes: That's it, yeah,
and we absolutely love it. Lots

of flexibility.

Jasen Stine: Folks listen up
because Randy is doing it right

here. So, randy, let's talk
about, let's get into this,

let's really help people. Talk
to us about how you serve your

clients and soup to nuts you
know from getting the clients,

selling them on the service and
executing it.

Randy Hughes: Absolutely. That's
an excellent question because

we can talk about tax planning,
but if we're not able to execute

and implement, then we're
really just talking about wishes

and dreams, right? So precisely
so, here's the it starts with

for us. Anyway, we believe our
philosophy is it starts with

when we feel like we're going to
have the taxpayers' attention.

When are we going to have the
taxpayers' attention? We know as

a firm that some of the best
tax plans are built either in

January or sometimes even in the
summer, sometimes even in the

summer. That's an excellent time
to do tax planning right, but

the typical taxpayer doesn't
necessarily want to hear about

taxes in January or the summer.
Why? Because the typical

taxpayer doesn't like taxes.
They have to pay taxes, right.

They don't want to have to
concentrate on it, and the tax

return, as we explained earlier,
is something that they're

required to do. So they do it
because they're required to. We

completely understand that. So
our challenge was trying to

figure out all right, we know
that tax planning is best done

either at the very beginning of
the year or starting even in the

summer. But we also know that
our clients are not or the

taxpayer is not as engaged, not
as excited or motivated to talk

about taxes in the summer. How
do we overcome that problem?

What we found is best for us is
we have to start laying the

groundwork during tax season,
when individuals have made a

conscious decision to focus on
taxes. So what we do in our firm

is we use the results. When
it's time to deliver results,

hey, this is what you owe, this
is what you're getting back we

choose to use that as an
opportunity to educate and

explain to the client what's
actually happened, because

that's when we have their
attention, especially if they

have a balance due. Right, an
individual has a balance due. A

lot of times they want to know
why do I have a balance due? Why

is it more than it was last
year? What did I do wrong? What

did I do differently? What can I
do? That's when you have their

attention, when they realize
they have to stroke a check or

give bank information for the
IRS to pull. So we start to lay

the seeds and the groundwork
there, because we have their

attention at that particular
point. Now, sometimes, we're

able to go straight into the
process. More times, though,

what ends up happening is we lay
the seed there and then we

follow up a few months later,
because once the seed is laid,

they know they have a problem.
We're not necessarily in a rush

to try to sell them right then
and there, because they're

trying to depends around how to
deal with the IRS. That might

not be the best time to come to
them and say, okay, in addition

to this, now we also want you to
pay for this and this.

Psychologically they may not be
able to deal with that, but we

lay the seed. Hey, this feeling
that you're feeling right now

you don't have to feel this next
year. We see some ways, we see

some areas. We can help you with
this. We would love to talk to

you about it in a couple of
weeks. Would you be interested

in a conversation? Once they say
yes to that, then we have to

follow up, and that's generally
what we do. So how does the

process look? We'll usually send
a communication because we

already have their tax return.
We already know, we already have

an idea of what type of
strategies we can use to help

them. So we internally because
we've gotten so good at tax

planning we usually have a
ballpark. We usually know a

range of what we'll be able to
save them if they pull the

trigger on this strategy, that
strategy or that strategy, right

? So then what we do is we set
up a complimentary meeting and

just to kind of lay the
groundwork for this, this is

really a it's a. It's a three
meeting process with additional

meetings to follow. So let's
just start with that. When we

approach tax planning and for
those of you that are interested

in tax planning, you're
thinking how do I do this, how

do I set this up? Out of the
gate, you want to know this is

going to be at least three
meetings that you're going to

have with your tax client when
you're setting up a process for

tax planning. The first one is a
complimentary meeting. It's

where you explain what tax
planning is, and the reason why

that's important is because your
tax payer is right now thinking

tax planning is finding out
their bill on April 5th and then

being told to contribute to an
IRA. They think that's tax plan.

That's not tax planning. That's
a good idea during the tax

preparation process, but that is
not tax plan. So we have a

complimentary meeting to help
them to understand what tax

planning actually is. A lot of
times what we do is many

individuals are focused on that
balance-do number. We draw their

attention to the total tax
number. So we'll ask them how

much do you think you paid in
taxes last year, by the way? And

they always, always undercut
that number and we say, no,

actually what you paid is up
here online. I can't remember

the number right now. I line out
line 30, line 20, line 30. But

it's not the number on the
bottom of page two, it's the

number in the middle of page two
, on the 1040, right, your total

tax number. So our goal with
tax planning is to address this

number, not the number at the
bottom, because the number at

the bottom can be adjusted. With
increased withholdings, with

estimated tax payments, we're
trying to adjust the actual tax

that's being paid throughout the
year. Once they understand that

, then it's like oh yeah, that
makes sense. So, yeah, how do we

get that number down? Glad you
asked. And we talked to them

about the process and we divide
tax planning into six different

categories, six different
categories that we can pull from

to help to reduce that bill as
low as we can. So once we

explain the process, we ask them
does this sound appealing to

you? And inevitably they say yes
and then we say, well, now that

you know how much you paid in
taxes. How much would you like

to save? You tell me how much
would you like to save in taxes.

So you paid $70,000 last year
just in tax. Now you didn't

scroll to check, but it came out
throughout the year how much of

that $70,000 would you like to
save next year? And you get a

number. And then, once you have
that number, once they have that

number in mind, we now know,
based on experience, what we

already know or believe we can
do, based on having already

looked at their situation. And
then we have four tax plans that

we already have ready and then
we place which plan we think is

going to be best for them, based
on what we feel we could do and

based on the savings we're
looking to achieve. And then

we'll quote them on that plan.
Now, if they say no, I'm not

interested right now, it's
really them saying not yet.

Because here's the thing, jason
and David, the tax liability is

not going to go away. They're
going to have this problem if

they don't do something right.
So it's just, they're not yet,

so they don't have enough paying
yet, so we just wait it out.

But if they say yes, then they
pay for the engagement. Then we

go to the discovery meeting.
That's a more comprehensive

analysis of what we're going to
do for them, based on their

situation, and then, about two
or three weeks after that, then

we have what's called the
presentation meeting, where now

we've now identified these three
or four ideas that we bring to

them that are going to get them
the savings that we talked about

, and we present those ideas to
them in a comprehensive plan.

Then, at that particular point,
we set them up on a maintenance

plan where we meet with them
every quarter at least every

quarter to make sure that the
things on the plan are actually

being executed, because there's
nothing worse than having

someone pay for a plan. They
absolutely do nothing with it.

Then you prepare their taxes and
they don't see a difference,

because you know the question
that's going to come back right,

why did I pay for this? Why did
you sell me this, if there's no

difference? That's the reason
why we require now the

maintenance plan. We didn't
always require maintenance, but

we require it now to make sure
that the steps are followed. And

then, when we get to the next
tax season now we prepare the

return. Two weeks, we prepare
the return with the tax

strategies that have been
implemented and we prepare the

return assuming they had not
done any of those things so that

they can see the difference.
Because remember the pain point

when we gave them the results
the previous year? That's what

got their attention, so we know
we're going to have their

attention again next year. So we
want to say you know, remember

that pain you felt. Well, this
year is this much lower. But you

know what, had you not done
anything, we would have been

coming to you with this number.
Then they get a chance to look

at the difference and then they
understand why they have the

plan. That's kind of a
long-winded answer, but I hope

it answers the question.

Jasen Stine: No, no, I loved
every bit of that, randy. I

think our listeners probably
will too, because that's the

thing that people are trying to
wrap their head around is like

how do I execute this? What is
the process I should be looking

at? How do I sell the value to
clients? Right, you just

described all those things, and
I love the little tidbit at the

end about how you show them the
difference between the two,

because the purpose and the
putting that's it.

David Bergstein: Let me hit a
question here. When you say you

get to a point you are from four
different options, before you

really get into it, is that four
different categories? That a

plain vanilla of everyone before
you dig into it?

Randy Hughes: From a pricing
standpoint, yes. So we have what

we call levels. We have what we
call the level zero, which we

don't present initially. We have
a level one, a level two and a

level three. Generally speaking,
it depends on the type of setup

that the taxpayer has, which is
going to determine which level

we have. Are they a business
owner? Are they a W-2? Primarily

a W-2 earner? Those types of
questions are going to determine

which level we're going to
pitch them on. Also, what type

of revenue are they bringing in?
Because the more revenue

they're bringing in, the more
opportunities there are for

tangible savings. That's going
to play a part into which level

we present them with. But if we
get into a situation where and

this is something that's
important for those of you that

are thinking about tax planning
when we get into a situation

where it seems like none of
those level one, level two or

level three work, we have this
level zero, which is a little

less than half the cost of level
one. If you want me to get into

pricing, I absolutely will Just
let me know once I finish this

thought and we can talk about
that. But we have this level one

, which is a little bit about
half of what the level one costs

. We keep that in our back
pocket for this reason. Let's

say that we go through the
presentation. The person sees

the value, but in their mind
they can't wrap their mind

around paying for a tax plan at
that particular point. We say,

okay, we understand no problem,
we let a few months go by. We

don't try to bring it back
around immediately. We let a few

months go by because we know
the problem hasn't gone away.

Then we will revisit them with
another option and say we had

this meeting with you a couple
of months ago and usually it's

me doing those follow-ups. My
team usually does the other

follow-ups, the initial meetings
and things of that nature. If

they don't pull the trigger,
then usually I as the owner will

jump in and say, hey, I noticed
you had a meeting with my team

but you didn't pull the trigger.
I just wanted to check in with

you as you find another
resolution for your tax

situation and if not, is there
anything that I personally can

do to help? When that happens
and they're getting a call from

me as the owner, they usually
they will tell you why they

haven't pulled the trigger If
the reason is financial. I just

couldn't wrap my mind around
paying for a level one, for us

costs about $5,000, $5,600, just
for perspective. I couldn't

wrap my mind around paying that
kind of money. You know what. I

completely understand If I take
another look at your situation

to see if there's something else
that we can do for you, and if

there is, then I come in with
that level zero which is at

around $2,000, and say what if
we could make this plan work for

you and get you some tangible
savings? Usually it works pretty

nicely because now they have a
starting point. Here's the

beauty of it If they are a
business owner, because, well,

let me back up and say this
first if you're going to sell a

tax plan for that kind of money,
you have to make sure that

you're saving the person at
least that much, either in the

first year or in the years to
come. Otherwise it doesn't make

sense. It really comes back as
like a boomerang to bite you as

the business owner, because the
person wants to know why did you

sell this to me? I paid this
money. He said I was going to

save taxes. It doesn't make
sense to them, right? So we're

always looking to make sure that
they get more savings than what

they're paying us. So let's
take the $2,000 scenario. Let's

say that they're that's level
zero, that we charge If they're

a business owner, and let's say
that they're in the 24 or 25%

tax break just by purchasing the
plan. We've already helped them

save $500 against their taxes
just by virtue of the fact that

they purchased the plan. You see
what I mean. So we build that

into the, we build that into our
calculations and and and we're

going forward. And then, of
course, there's always things.

There's always things that can
be found to make up that

difference. It's just a matter
of guiding them in the right

direction.

David Bergstein: But whatever
they're paying you, they're

getting a bigger savings in tax
in all cases. So if I'm paying

you $2,500, you're probably
telling me I'm going to save at

least $5,000 in taxes or
something along those lines. So

I see, whatever I'm paying for,
I'm getting more back.

Randy Hughes: Yeah, exactly, and
yes, that is the. That's the

reasoning behind it, because
otherwise it doesn't make sense

to the taxpayer. However, when
we offer the plan, we're very,

we're very deliberate about how
we word that, because we can't

tie the cost of our plan, can't
guarantee Exactly, because it

gets sticky, you get into
trouble and in some cases that's

not even legal right. So we
have to be very strategic in how

we word that, and usually the
way we approach it is you're

paying for a certain number of
strategies and we are paying for

a certain number of strategies,
and then we on our end,

internally, we make sure that
those strategies add up to what

makes sense for the taxpayer.
Sometimes that means we have to

kick in a few additional
strategies, which we don't mind

doing because we have to make
sure it's a win for the taxpayer

. If it's not a win for the
taxpayer, we've wasted their

time, we've heard our reputation
and it's not a good scenario

either way. So if I tell you
we're going to sell you two

strategies, but it takes me four
or five to make sure you get

your money back, you're going to
get the four or five. Basically

is how we approach it
internally, the way we do it

anyway. That's perfect.

Jasen Stine: So this is a
perfect transition into some of

the use cases. Give us some
examples of how you've executed

this approach.

Randy Hughes: All right, I'll
give you one of the most

comprehensive ones. That
happened just earlier this year

and it was literally a home run.
And I'm going to tell you, not

all of them are home runs like
this one, but this one was. This

one was a home run. This is an
individual who has been

following our firm for quite a
number of years. They had their

own account, interestingly, but
they were following some things

that we had been doing on social
media and things of that nature

, and something happened where a
person they were using was no

longer available to do their
return. Well, because they had

been following us for a number
of years, they said let's give

it a shot. We like listening to
when they give informational

learning on this topic or that
topic, so let's give it a shot.

So we do the review. And what we
learned when we did the review

because we always do a review
before we give a quote for a tax

return what we learned when
they were doing a review is that

they had a business that they
had started four years ago and

when we inquired and met with
them after giving them a quote,

we learned that they were
interested in selling it. So

they said we're interested in
selling this. We're thinking

about selling it on this
particular date. Is there

anything that you can tell us?
Well, we realized that they

qualified for Section 1202 as
long as the sale was just pushed

back by a couple of months.
Section 1202 is a provision that

says that if you have small
business stock in a C-corporate,

qualified C-corporation and you
sell it five years later than

the capital gains is excluded
from federal tax. They did not

know that, and so what we did is
we said, hey, we see some

opportunities here. We really
this is how we approach tax

planning we see some
opportunities here and we feel

like they're pretty substantial.
We didn't tell them the exact

number in that scenario, but we
told them enough and they pulled

the trigger. So they decided to
do a level two. In that case,

they paid $9,000 for their plan.
But here's the thing when we

actually ran the number, so we
started to do the work, once

they paid for the engagement,
when we actually started to do

the work job, we realized that
by giving them the direction to

push the sale back a couple of
months, which they said that

they could do this move was
going to save them over $160,000

because of this provision. We
went back and checked up all the

but they had to hold it for at
least five years. But, unknown

to themselves, they were about
to sell it at about the four and

a half year mark, just because
they were ready for retirement.

They hadn't had any other
direction. We were like whoa,

hold on, stretch this out a
couple of months, we take

advantage of this provision, and
then you walk away and we ran

the numbers into being about
$160,000 savings. The $9,000 was

nothing to them when they
understood that they had that

type of savings as a result of
that provision. And what ends up

happening with a win like that
is now they tell their friends.

And now their friends come over
and not all of them qualify for

the same things, but you find
what works for each individual

situation at that particular
point. So that was a huge one

from this particular year.

Jasen Stine: And am I doing the
math right on this ROI here,

Randy? That's a 1,777% return on
investment.

Randy Hughes: That's it, and
that's just the first year.

That's just one thing, because
one of the things yeah, now are

they going to have that type of
savings every year, but with a

tax plan. A tax plan is not just
one big idea. Tax plan is a

combination of ideas and those
other ideas that they got along

with the tax plan. They can
duplicate that in year two, year

three, year four, year five,
and with us, unless there's a

significant change, you're not
buying another tax plan, you're

on maintenance, but those other
things are taking care of the

maintenance by far and it's a
win-win for us and for the

client.

Jasen Stine: Sounds like you
didn't charge near enough.

Randy Hughes: Yeah well, we
didn't know the numbers. We knew

we had something, but we hadn't
found the numbers. At that

particular point we definitely
could have charged more. So

that's something again for those
of you that are considering tax

planning. That's why the review
process is such an important,

deciding what you want to
include in your review process.

If you decide that you want to
incorporate a more comprehensive

review, then you know those
numbers and then you can

probably gauge based on that, so
that you're absolutely right.

That could be adjusted depending
on what your review process is

like.

Jasen Stine: What a cool example
.

David Bergstein: I was going to
say I like everything I'm

hearing, but it's just a thought
. I'm probably off the wall and

Jason will shut me up. But what
a different approach as you go

forward with these clients talk
about hey, we do tax advisory

services and part of our tax
advisory we're paying us an

annual fee, tax returns, part of
the deliverable. We will come

up with tax planning ideas
through our advisory services

based on your unique needs. So
instead of selling them a plan,

you're actually putting them on
subscription pricing. I'm

looking at it a little
differently, of course. We're

going to give you advisory
services based on your needs and

each year we'll come up with
other things based on what goes

on. So I'm just looking at
changing it around a little.

That make any sense.

Randy Hughes: That makes
excellent sense, david, and to

your point we agree with you.
And so that's why, when we sell

a tax plan, so they pay for the
tax plan, but then after that we

also sell them a maintenance
plan. And that maintenance plan

is a quarterly arrangement where
they pay anywhere from $5 to

$600 per quarter and the purpose
of the maintenance plan is to

make sure that the original tax
plan is executed, but then also

that maintenance plan takes care
of their tax preparation for

the following year. It also
allows us to incorporate some of

the smaller things, like I'll
contribute to your IRA, oh, home

office induction, I mean those
little things. All of that's

included in a maintenance plan
year over year. So once we sell

the plan, there's still another
opportunity for between $1,500

to $2,000 per year because we're
constantly working with the

client. And so for the clients
now that you brought it up,

because inevitably what's going
to happen, especially the

accountants out there that are
thinking about adding this and

they're going to say how do I
sell somebody? How do I go to

somebody and say I want to sell
you at $9,000 plan and then, oh,

I want to come back and I want
to hit you up for another $500

every three months. How do you
do that?

Jasen Stine: Right.

Randy Hughes: That's a good
question. That's an excellent

question. Here's something that
we would like to encourage you

to use. That's worked very, very
well for us. We use the analogy

of a vehicle. When you go out
and purchase a vehicle, you're

paying an initial cost for that
vehicle, but you know you have

to maintain that vehicle as the
years go by. You're going to

have to replace the tires,
you're going to have to get oil

changes, you're going to have to
replace the fluids. You're

going to have to do something.
Now, if you're buying a really

luxurious car, they may sell you
something and say, hey, we're

going to include all of that,
but you're paying some type of

subscription for it. But if
you're buying a car that doesn't

come with that, you're having
to go to the mechanic and you're

having to come out of your
pocket. Every single time you do

the oil change, every time you
do the tire rotation, the

alignment, all of those things,
you have to put gas in it. The

dealership doesn't pay for your
gas. They sell you the car. You

still got to put gas in it.
Right? The maintenance plan is

something very similar. You're
buying the plan and now we're

going to help you maintain that
investment through the

maintenance program.

Jasen Stine: And I love that
it's required.

Randy Hughes: Yeah, and you know
what we learn the hard way?

Well, let me not say the hard
way, we learn through experience

at that's best. Because when we
first started them, gentlemen,

people would get them. We would
have what we call our

presentation meeting. It made
complete sense. And then we get

the tax time and they hadn't
done anything. And then we

looked. You know, imagine how it
makes us look. Now usually

people will acknowledge yeah,
you told me to do it and I

didn't do it. But still, as the
ones putting the plan together,

we feel bad too, because we
don't want this to look like

we're just trying to take your
money. We want you to have

results, because if you have
results you're going to go and

tell your friends and then your
friends are going to come in too

, right. So we realize that the
maintenance for Quint it helps

us to help them execute the plan
so they get the savings they

need.

Jasen Stine: Well, and not only
are they going to go to all the

friends, but then that's going
to help you attract those ideal

clients that are the right fit
for your services versus

post-emfliers in an apartment
complex. It's scary.

David Bergstein: With or without
? Do you have a minimum

requirement on income earned
before you accept a client?

Randy Hughes: Throwing that out.
Well, that's a good question.

One thing we will do is not
really an income earned, but tax

paid through the years. You
could tie that to the income

that they've earned, right?
Because if we get a tax return

and we review it and we see that
the person only paid $10,000 in

total tax for the year probably
not going to try to sell them a

plan because it's going to be
tough, especially if they're

just a W2. If they don't have a
business and they're only W2,

it's going to be tough to
eliminate that $10,000, right.

But if we see opportunities
where we can, they're paying a

large total tax and we see
opportunities to get that down,

then, yes, you know. So we're
looking at it more. We're

looking less at total revenue,
we're looking more at total tax

paid. Now there are
opportunities for individuals

that are only W2 earners.
There's quite a few ideas out

there, and so you know, for
those of you that are tapping

into that market, that is
something that we encourage you

to look into and I believe, into
. It helps with those types of

things as well, which is
fantastic.

Jasen Stine: Yeah, so on that
note, randy, I was thinking

about, you know, like that
example of the $160,000 savings

and it's, you know, 1,700%
return on investment. That's a

grand example, right, which is
an awesome example of how

something so simple could be so
wildly successful. Do you have

more examples of things that our
listeners might run into on

kind of more of an everyday type
of a situation?

Randy Hughes: Yeah, that's an
excellent example. So some

things that we would suggest
that. Well, it depends on what

you consider every day. Are we
talking about individuals that

own real estate as every day, or
are we talking about more

simple than that?

Jasen Stine: I don't know
Whatever we think is the most

relevant to the listeners. I
think maybe go beyond a niche,

Something that's just a little
more common that you see.

David Bergstein: Well, real
estate is probably a kind of one

People own real estate. What
are their opportunities?

Jasen Stine: And a lot of real
estate pros will like they

engage professionals with their
taxes.

Randy Hughes: So then, here's a
couple of things that we really

would encourage as it relates to
real estate. There's two things

that we look for when we're
looking at real estate. Number

one especially if they're a
client that's coming in, we're

taking a look at depreciation.
You would be surprised at how

many returns we see where the
depreciation is incorrect. So,

and a lot of times it's because
people have tried to do the tax

return themselves. Sometimes
it's individuals. They've gone

from tax preparer to tax
preparer and some things didn't

get carried over. So for those
reasons, we always take a look

at depreciation. If we come to a
situation where the

depreciation is wrong and it's
actually in the favor of the tax

payer meaning once we make this
correction, they're going to

get a really, really big. You
know they're going to get a nice

reduction in tax Then that's
something that is really, really

nice. So that would be a 3115
form. It's a correction of

accounting form, but you can do
catch-up depreciation on there.

That's a really, really big one
for those individuals that have

real estate. Another one that we
like to do with our

high-profile clients, but it
also works for individuals who

aren't making, you know, quite
so much money is. If you're

dealing with taxpayers that have
cyclical income. In other words

, they have some years where
it's high and then other years

where it's low. Maybe they're
contractors, Maybe they do

contract work, and they have
some years where it's high and

then it goes down and it kind of
rides like that. We like to do

analysis, where we have some tax
strategies that we apply in the

high-earned years and then
other tax strategies that we

apply when the income is lower.
So when the income is high,

we're talking to them about cash
balance plans, possibly donor

advice funds, and we're also
helping them to put some money

away in an account that they can
use for other things in the

low-earning years. And we're not
just talking about bills, we're

talking about money that they
can use to their advantage in

those years. In a situation
where a person has real estate,

especially if they have a number
of real estate properties that

they're dealing with, a nice
strategy that we like to

incorporate, if individuals have
the funds to do it is, in the

low years, sell one of your
properties that has appreciated.

If the capital gain is roughly
around 100 to 200,000, then we

can do some tax planning to get
the income for that individual

under the 89,000 or whatever it
is right now, so that they pay

zero capital gains tax on that
particular year. It's not gonna

work in a year where they have
high income, but in a year where

they have low income and we're
just dealing with the capital

gains. Then we will give them
advice on when to actually pull

the trigger on the sale of that
appreciated property and if the

appreciation plus the income is
still too high for that

threshold, then we're coming
back at them with the things

that I mentioned earlier the
donor advice fund, which allows

you to put a large amount of
money away for charity but then

distribute the funds later. Or
the cash balance plan, which the

best way to describe that is
like an IRA on steroids

Basically allows you to put
contributions away a much more

aggressively than a traditional
IRA. Let's put it that way.

Those are some of the ideas that
we have. We can go with some

simpler ones if you'd like, but
those are ones that we usually

see quite often, especially with
individuals with real estate.

David Bergstein: You ever use a
throw to sad an opportunity zone

credit with anybody. I just
learned something cool about

that. It's where people can
invest in a distressed area and

end up with a lot of tax savings
. So distressed area you wanna

hear a distressed area, jason?
San Jose, california, because

the areas around it have much
more income. So your investment

is safe and San Jose is where
you used to have your quick

connect.

Jasen Stine: Think about that.
No correlation to us moving to

the Vegas spot, though, by the
way.

David Bergstein: Right, but just
thinking about that, sure

that's another great. If
someone's got a lot of money

sitting around and say, hey, you
asked them to invest in certain

ideas, I'm guessing Absolutely,
and an opportunity zone is a

nice way to accomplish that.

Randy Hughes: That's an
outstanding suggestion actually

for individuals who are
interested in real estate.

Jasen Stine: This is really cool
, I think, randy, we really. I

think you did a really good job
of unpacking both the how you

approach the work. Thank you for
your transparency on your

pricing as well, because that's
something that people tell us

all the time and I don't know
what number to attach to this,

like what is reasonable, I don't
know, and some people have kind

of packages that are more
consistent across the board and

others it's case by case. I've
talked to other practitioners

that do similar work that each
client ends up with different

amounts based on the different
situation. So I think that just

goes to show. And then what I
also love about your pricing

model is you're doing like a
combination flat fee and

subscription, and so what's
awesome about that and this is

something I've been learning
more and more lately because I

push the conversation a lot with
pros that I talk to you gotta

move to subscription. You gotta
move to subscription, especially

if you're on hourly, get off
hourly. But the fact of the

matter is lots of people, lots
of firms, approach their pricing

differently, and that's okay,
because you gotta do what makes

most sense for how your firm
operates, the culture that your

firm runs on and how you wanna
interact and engage with your

clients, and so you've done
exactly that. So brilliant. And

then just digging into the
strategies themselves and

talking about that Perfect
examples for our listeners that

are struggling to figure out how
do I wrap my head around all

this stuff. So awesome,
absolutely great. Well, that's

about all the time we have for
today. Randy, you are developing

some or maybe already have
developed some resources for tax

and accounting pros as well.
Right, you wanna talk a little

bit about that.

Randy Hughes: Oh well, love to.
Yes, we have a course called the

Well-Rounded Accountant. It's a
program, that is, we have a six

month version and a 12 month
version of the course, but the

course is designed to teach CPAs
, eas and tax preparers what we

call the five basic areas of
accounting, which we feel are

tax planning, tax preparation,
tax resolution, bookkeeping and

then CFO advisory service. We
teach and cover all five of

those in the program. Then, once
you go through what we call the

basic coursework, which is
about two weeks on each of these

, plus some things on value
pricing, so that you know how to

price your services, then you
pick your major or your niche,

so to speak. We focus in on that
particular niche, whichever one

of these fives that you pick,
and then that completes the

first six months of the course
and then the next six months is

what we call real life
application. So, kind of going

back to what we started the
conversation with, we can talk

about ideas all day, but if we
don't know how to execute them,

then what have we really
accomplished? So when the course

, once the accountant has picked
, gotten a well-rounded view of

all of these areas and now
they've picked their niche, now

for the next six months. They
work along with myself and our

staff accountants on that
particular niche and we allow

them to help us with some of our
clients. And we help them with

their clients in real life
situations so that they can see

how what they've learned in
class actually how it actually

works in real life. So the
things that we just talked about

in our call here today. We're
working one-on-one with those

individuals in real life
scenarios so that they can get a

feel and get their sea legs
underneath them, so to speak,

and that's basically the program
. So it's called the

well-rounded accountant.

Jasen Stine: I love that you're
doing that, randy. The need for

that is so strong. So, folks,
where should people go if they

wanna learn more about that
program, randy?

Randy Hughes: That's excellent.
Go to our website, cpeniscom.

That's wwwthelettercpenis,
spelled out P-E-N-N-I-E-S dot

com and there'll be a hashtag on
there for the well-rounded

accountant and that will take
you to all the information about

the course and when the next
one runs, which is in the not

too distant future.

Jasen Stine: Outstanding. Well,
folks, go be sure to go check

that out. We need more people
like you, randy, in the world,

and thanks for sharing your
insights with us. Well, thank

you so much. That's all we have
time for today. Folks, randy,

thanks for being on the show,
really appreciate it and look

forward to next time. And, for
those listening, thanks for

tuning in. Thanks for listening.
If you enjoyed this episode,

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wanna learn more about any of
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, visit IntuitAccountantscom.
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Trends is produced and edited by
Luke Johnston. Copyright Intuit

2023.