Roger Ledbetter | RE & SMB CPA
@rledbetterCPA
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Taxes, Firm Management, Dad-life | Highlights tab for greatest hits | Today in Tax Court Podcast | Tax and Accounting emails in 🔗👇
Katy, TX
Joined December 2015
Aggregations are some of the most powerful tax strategies. If you've ever seen a partnership return, you've likely skimmed over two of the biggest: §465 and §469 👇
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The House just released a list of options they may use to pay for the next big tax bill to extend current tax cuts. Some expected, some zingers:.
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Fraud is a four letter word in public accounting. The first part of my career as a CPA I audited financial statements for private co’s. We didn’t look for fraud, but it always made sense when we found it. Lessons learned on how you can protect your small business - a 🧵.
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Double entry accounting is undefeated. If you want inflate one number, an offsetting adjustment must also exist. From Enron to F T X, this is how forensic accountants reverse engineer frauds. A few examples:. Want to make revenue higher? Okay, but your accounts receivable will.
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Eliminate Non-citizens from Federal Health Benefits. Save $35 billion. Illegal aliens are eligible for some federal health care programs (tax credits and medicaid). This would eliminate that eligibility.
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Eliminate Non-profit Status for Hospitals. Would increase revenue $260 billion. Wow. Hospitals that are 501(c)(3)s would be taxed as for-profit entities.
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Every business has a fraud story, some just don't know it yet. Here are a few of my favorite actual client stories from my time as an auditor:.
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Repeal Green Energy Credits. Save $796 billion. Would eliminate clean vehicle, clean energy, efficient building, and other energy credits that were introduced in the Inflation Reduction Act (IRA). Cutting additional IRA Green-related credits could add $405 billion in savings.
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Repeal SALT Deduction ENTIRELY. Increase revenue by $1 trillion. This would remove even the $10,000 allowed deduction for state and local tax.
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10% Tariff. Would increase revenue by $1.9 trillion. Applied to all imports.
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Eliminate Home Mortgage Interest Deduction. Increase revenue by $1 trillion. Currently allowed to deduct interest on primary residence - this would eliminate that.
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Tax College Endowments 14%. Would increase revenue $10 billion. Only applies to larger endowments, but is currently set at 1.4%.
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As a tax partner, 80% of initial meetings are about the same things - entity selection, structuring for efficiency, and how much in taxes to pay. There are curveballs and unique items, but here’s the standard meeting flow. A 🧵 on tax 101:.
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Shout out to the one CPA I knew who would anonymously report his cleanest clients to the IRS to increase fees for audit support.
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End the Employee Retention Credit. $75 billion in savings. Yes, this is still happening.
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As a CPA for residential and commercial real estate sponsors (GPs, syndicators, etc), it is my goal to optimize, from a tax perspective, my clients time and money. Here is what I tell new sponsors wanting to know what they don’t tell you in paid groups - a 🧵.
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Border Adjustment Tax. Increase revenue by $1.2 trillion. Would create a new consumption tax on imported goods. Basically disallow deductions for costs of imports and eliminate tax on exports.
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SSN Requirement for Child Tax Credit. $28 billion in savings. 2017 tax reform required this, but it's set to lapse.
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Disallow Charitable Deduction for Health Org.s. Would increase revenue $83 billion. Same vibes as above. Donations to 501(c)(3) hospitals would not be deductible as charitable.
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The options for revenue to offset the planned TCJA extension (reconciliation) bill take up over 50 pages - so there are way more than this. But this provides some insight into where their heads are at. Should make for great theater.
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Deny Social Security to those with Felony Warrants. Increase revenue by $3 billion. Currently only those "fleeing to avoid arrest" are having this income withheld.
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Older dads: which one comes first?. 1) Wife and kids learn to turn off the lights when they leave a room. 2) We give up and leave all the lights on all the effing time. Because the other option is keep bottling up the rage with every light switch I turn off. I need hope.
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Income Verification for Free / Reduced School Meals. $9 billion in savings. Would require income verification for free breakfast and lunch for qualifying students.
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The holy grail of real estate tax edge is the negative capital account. It’s peak use of leverage to reduce your current taxable income. But to unlock this, there is a labyrinth of tax code to wade through. And the biggest guiding principle? Partners capital accounts ≠
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Tax Scholarship and Fellowship Income. Would increase revenue $54 billion. Currently these are excluded as long as they're used on tuition and related expenses. This option would make them taxable.
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@RobertMSterling This is why legislation tariffs is a bad idea imo. Legislation makes them less of negotiation leverage. But these put in place by the president can’t be just as quickly removed and therefore more effective.
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Eliminate Deduction on Student Loan Interest. Would increase revenue $30 billion.
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Ban Telehealth Facility Fees. Increase revenue by $2.3 billion. This would eliminate facility fees charged to "telehealth" visits.
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Tax Employer Provided Transportation and Gym Use. Would increase revenue $70 billion. Currently employer-provided gym use is not taxable and transportation up to $315 per month is excludable.
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Partners in an LLC / Partnership: you need to know about Unreimbursed Partner Expenses (UPE). A recent President (you know who) took a tax deduction of $27,400,000(!!) over 6 years using UPE. What is this loophole, what are the rules, and how can you use it?. 👇👇👇.
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Onshore Oil and Gas Leasing. Would increase revenue $500 million. Expanding the current leases for onshore sites.
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Don't steal from rich people. Years ago, one of my wealthiest clients discovered fraud from an employee. He sued her, took her cars, clothes, and kid's X-Box. One of her cars he kept as a company car as a warning to other employees.
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CPAs literally only want one thing and it's disgusting
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In my first year as an audit partner, we audited a large commodity trader with a $100 million facility with an international bank. The loan agreement was 219 pages long and buried in it was a profit sharing arrangement with the bank, as well as a calculation for fines for busted.
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Getting IRS notices can be a terrifying experience. When those notices have penalties and interest, and include words like "lien," many people assume the worst and panic. Let's break down the different levels of penalties the IRS can assess:.
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“Militarized IRS” was not on my 2022 bingo card. And neither was 87,000 new IRS agents. While some IRS audits are random, there are definitely things I’ve seen over the years that made me say, “that’s going to get you audited.”. A 🧵 on lowering your IRS audit profile:.
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S-Corps being used properly are as rare to find as a correctly placed “whom” in grammar. They do have a role to play in real estate portfolios and small-med. business but some consequences of using them are irreversible. A 🧵 on when to use and when not to use an S-Corp:.
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“If we get audited and I don’t owe any taxes with penalties and interest, you didn’t do your job. If I go to jail, you went too far.”. — the single wealthiest individual I’ve met with when describing his ideal tax advisor.
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If you have an AOL . com email domain, this is your reminder that your required minimum distributions are due before end of year.
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"I still paper-file a hand-written tax return (pen & paper) because it lowers my audit risk.". - a 20+ year IRS Agent turned Tax Counsel for a national CPA firm. I think about this a lot.
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This is a wild stat from the WSJ article on audit quality at large CPA firms. Big 4 averages a 26% audit deficiency (material error). Meaning 1 in every 4 audits could be meaningfully misleading. But GT and BDO were far worse - at 54% and 86%, respectively. Auditing will only
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You’re an LP in a real estate deal and you were just told your equity is gone and the bank is taking the property. As bad as it is, the K1 you get next year could make it worse. Being an LP protects you from creditors, but not from phantom income. More:.
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One of the best parts of my job is being able to read all variations of Operating Agreements. I keep a running list of useful sections I like for when I work with clients to review theirs. A few of my favorite ones I don't see in every OA:.
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Last year a close friend took his own life. He left behind a wife and young children - several of whom old enough to understand. In the last weeks he would talk about just packing up and moving away. To start over and reset. Looking back now I can see he wasn’t talking about.
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In 2022, the IRS completed 708,309 audits. Of those, 625,973 were audits of individual tax returns. 52%(!) of those were for taxpayers reporting less than $25,000 of income. Why? Return on hassle cuts both ways.
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CPAs are going extinct. College accounting programs have historically low enrollment. Older CPAs have timed a historic bull market right into a PE wave of acquisitions.
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“The U.S. Tax Code for individuals doesn’t favor those who pay no tax. It’s lazy work by tax advisors when their only aim is to get tax due to $0.”. I have this convo with new clients several times a year and once they see it, it clicks. A 🧵 on how to win in the U.S. Tax Code:.
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Today in Tax Court (really yesterday) - another W2 taxpayer gets shot down trying to prove real estate pro status. Taxpayer worked at a 40 hour-a-week job and on the side worked to oversee construction of a building In their city of residence. Once placed in service, the
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@sweatystartup Two things happen after you turn 30:. - every injury is permanent .- you can never trust a fart again.
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If you like these takes - check out more tax and accounting takes here .
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Today in Tax Court - can you deduct a Range Rover and Baby Grand piano for your engineering business? . The taxpayer owned an engineering firm that was a single-member S-Corp. It was headquartered in Nebraska, but began to expand to other areas - specifically, New York. To
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Beneficial Ownership Information reporting - the new tax filing that can turn your $300 LLC into a $10,000 fine or jail. Which of your businesses or side hustles does it apply to and how do you stay legal?. A plain-English 🧵 with links and pictures.
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S-Corps are useful in a specific fact pattern. Recognizing when to use them takes a lot of years learning what not to do. Story time on how to eff up your taxes with an S-Corp 👇👇.
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We could cut IRS staff by 20% just by allowing them to use email instead of fax.
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Every business has a fraud story - some just don't know it yet. In my time auditing small businesses, here are some of the best ideas to prevent and discover it:.
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Tax loopholes are sexy. But tax landmines can cost way more than loopholes save for real estate and business owners. Let’s nerd out on some of the most popular types of loopholes with their counterpart landmines:.
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Don’t know what the tax terms in your LLC operating agreement mean?. These two people WILL:. 1) An IRS agent. 2) Your investors tax attorney. A primer on 5 tax sections that can wreck a multimillion dollar business as well as a solopreneur:.
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It's not everyday a major hotel chain ends up in Tax Court with a QUARTER of a BILLION dollars of missing income. But today is our lucky day for a banger of a case: . Hyatt Hotels v. Commissioner. At issue is how Hyatt has treated (since 1987!) their rewards program. The case
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You've heard of girl math, but I present to you CPA math:. KPMG saved Mark Cuban $12 million just like that 🫰
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When CPAs get together and compare notes I usually bring up one of my favorite clients, Jax. In the words of the Notorious BIG - sit back I got a story to tell. A 🧵 about the perfect storm of real estate tax strategy:.
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As a GP / syndicator, you are responsible for the tax return and K1s. I’ve had my share of calls with angry LPs about K1 “mistakes” and they’re not fun. A 🧵 on what you need to look at before approving the tax return and sending K1s:.
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The 5 phases of wealth:. Phase 1 - W2.Phase 2 - W2 with 1099-C (investments).Phase 3 - 1 K1.Phase 4 - W2, 5 1099-Cs, 45 K1s.Phase 5 - 1 K1.
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Your fraud story may end before it's noticed, but unfortunately for many SMBs it won't. The easiest way to discover fraud is to cross-train and have mandatory vacation policies. The best way to prevent fraud is segregation of duties and approvals. Godspeed.
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Today in Tax Court - a second generation family business get's a win against the IRS with their creative real estate option strategy. A successful road construction company was formed by two cousins in the 1940s and later passed down to their children (Parkway Gravel). Parkway
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The President has vowed to abolish the income tax. Here's why that can't happen:.
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Now is the golden age of taxes. You will tell your kids you paid tax at 30% federal rates and they won't believe you. To test this, I calculated what $500,000 would be adjusted for inflation every year since 1929 and then used the tax brackets in effect for each year to check
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Great tax planning meetings always end with two questions -. “Anything else I should know? Any changes coming?”. After I’ve used up all my best ideas, they always ask for more. Here is what I answer. A 🧵 re: big tax changes in the next 5 years.
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15/ The lessons -. - Reconcile the sh*t out of intercompany accounts and get an explanation from both sides on variances. - When your 57 year old CFO starts bragging about his stripper girlfriend, hire a fraud expert.
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Solid tax court case today - Schmerling v Comm. • Taxpayer is a used car salesman. • Compensation is mainly W2. • A bonus program is paid via 1099. • Taxpayer used Sch. C to deduct mileage and other expenses against 1099 income. • IRS hit the brakes, arguing W2 and 1099 are.
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The lessons -. - Reconcile the sh*t out of intercompany accounts and get an explanation from both sides on variances. - When your 57 year old CFO starts bragging about his stripper girlfriend, hire a fraud expert.
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Buying a big truck just to save money on taxes is the same vibe as my wife telling me how much money she saved us by buying Christmas decorations on sale. If you don’t need it, getting it at a discount doesn’t make it a better decision.
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Say it with me:. Distributions can happen without income on a K1. and. Income on a K1 can happen without distributions.
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When I was 30, I started writing a book that took me 3 years to finish. The book sucked. Like embarrassingly so. But I published it anyway. The only people that bought it were my mom (10 copies) and like one dude on Amazon who later asked for a refund.
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The first step to become a bad ass real estate tax CPA is to recognize the different types of Operating Agreement (OA) allocation language. Why? Having the right language protects the promote of the sponsor (👍). Without specific OA terms, upon IRS audit there is a high
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Long front yard tree swings. My HOA charges me a $300 fine every few months that I gladly pay.
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This is a basic version of a partnership income and loss allocation workflow I've spent a few hours creating:
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Tax entity selection is hard. A lot of factors to consider. Layer in real estate and you’ve got a recipe for DIY disaster. Here’s what entities to use and where. 👇.
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10/ The lessons here -. - Run A/R agings and look for partial payments and/or aging customers who are usually good. - Rotate duties every so often between accounting staff. Which means have more than one. - Mandatory vacations.
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5/ She was prosecuted but nothing really recovered net net. The lessons - . - Run a vendor report monthly, quarterly, and annually and review it. - Lock up check stock and signature stamp if you have one (don’t have one).
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Last month, my non-compete finally expired with Baker Tilly, a national top 10 CPA firm. I walked away from a healthy guaranteed draw, juicy retirement, and long-term relationships with partners, managers, and clients. But I'm excited to now be able to share more about what.
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CPAs and real estate pros speak a different language. Knowing key terms and how they impact taxes is critical to giving good advice. Here is the list I share with my team on what they need to know:. 1) Operating Agreement - aka: OA, LP Agreement, LPA, LLC Agreement. The.
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The lessons here -. - Run A/R agings and look for partial payments and/or aging customers who are usually good. - Rotate duties every so often between accounting staff. Which means have more than one. - Mandatory vacations.
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The IRS took an L today in Tax Court - this time on conservation easements. Murfam Enterprises LLC valued ~1k acres at $5.8MM and took a charitable deduction for contributing the land as a conservation easement. IRS disputed the valuation and reduced it to approx $400k. To.
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She was prosecuted but nothing really recovered net net. The lessons - . - Run a vendor report monthly, quarterly, and annually and review it. - Lock up check stock and signature stamp if you have one (don’t have one).
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One of the coolest CPAs I've met was a former IRS agent for like 30 years. He moved to work at the CPA firm I was at and I got to pick his brain countless times. I naturally had to ask him for his craziest story - it involved Guam, a strip club, and a tax raid. Before he had.
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I work closely with cost seg professionals and the biggest reason people don’t use them is depreciation recapture. But when a property is sold at a gain, not every asset appreciated equally - which is a big assumption in the recapture argument. Let’s jam….
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Everyone knows real estate comes with huge tax advantages. But the tax edge goes far beyond bonus depreciation and tax losses. A lot of startups can generate losses quickly too!. So what does make real estate unique from a tax perspective? 👇. 7 of the biggest real estate.
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22/ Hope the lessons I’ve learned along the way help. Like and RT to share the love. Godspeed friends.
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In 2008, a 30% owner of 5 Hour Energy sold their interest for $438MM… on a 20 year balloon note (interest only). The IRS audited them, they went to tax court, and we get to learn the lessons:. 1. Tax on a foreign partner.2. Installment sale interest (453A). The Rawat case 👇.
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9/ The owner, kind as he was, went after everything. Including the kids X-box and games that had been bought on the credit cards. He probably recovered half of the lost funds and proceeds to spend that amount on internal control redesign. Savage.
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The wealthiest people I know think in terms of balance sheets. Those that struggle financially think in terms of income statements. 👇👇.
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If FTX knew accounting as well as Enron, they could have been bigger and likely would still be around today. The reason Enron needed to use accounting and FTX didn't?. Access to cash👇.
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You'll never read your Operating Agreement as closely as US Tax Court will. They only care about a handful of sections, but they can make or break your case:. 1) Income allocation language.2) Deficit restoration obligation.3) Debt allocation and minimum gain.4) Disributions.
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Own a business AND the building you work in?. The §469 election let’s you use building depreciation to offset operating income. Looking at you, doctors, dentists, engineers, consultants, etc 👀. This is the gateway drug to real estate investment. 👇.
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@RobertMSterling Use the photos on a website for $20 consulting. Pay your kids $12k each for modeling. Basically free money. Also maybe fraud.
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@RobertMSterling Nearly choked drinking water. Feel like Reddit is to Twitter what Twitter is to LinkedIn. Just savage.
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