Ep. 149 | 4-Step Strategy Implementation Process
Download MP3Everybody, welcome back to the Teaching Tax Flow podcast, episode 149. We are, yes, one away from 150. We've got some special plan for you. Maybe we'll give you a hint. Maybe we won't.
John Tripolsky:It's kinda like Christmas. Your parents wrap something up, let you see the gift, but you can't open it yet. We're gonna get into it. But this episode specifically, doing something related to other ones, but we're gonna dive a little deeper into a process or a strategy implementation process, to be exact, which is used in teaching Tax Flow, but also in Chris Pacquero, who is my cohost, if you haven't met him yet, in his private practice. So before we get into it in detail, let's take a brief moment and thank our episode sponsor.
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John Tripolsky:Alright, everybody. We are back here again on the podcast. Chris McKierro. Welcome back, sir. How are doing today?
Chris Picciurro, CPA:It's great to be back. How are you doing today?
John Tripolsky:K. You know what? I'm doing good, man. I got a different hat on. I pulled this one out of out of the archives, I think, is and if anybody that's watched this, you probably have never seen my hair done.
John Tripolsky:And I do that for a number of reasons. Heck, there's a strategy behind it. Not a four step strategy what we're about to talk about, but there's a strategy behind it. I don't wanna make Chris jealous.
Chris Picciurro, CPA:Right. You don't want everyone yeah. You don't you don't wanna show your flowing locks with a bald man.
John Tripolsky:Hey. It happens. And that's, you know, a good thing we didn't do podcast or videos way back in the early ones because that's my longer hair. You know, I cut, like, 12 or 13 inches off at one point. It was pretty long.
John Tripolsky:But who cares about hair? That's not why we're here. We're talking about implementations. Right? So and and those of you that have listened to previous episodes, you've heard us always talk about strategy and tax planning.
John Tripolsky:You're probably saying, alright. I know what this is. I don't need anything else about it, but I guarantee you have not heard this on this podcast. So we're gonna jump into those four steps. Chris, I'm gonna let you kinda drive this one a little bit and walk us through these because I know this is something that you guys in the private practice, you know, your private practice with your business partner, you guys have really developed this, but then it's it's morphed over time.
John Tripolsky:It's not like you woke up one day and said, yep. This is it. This is the four steps. We're gonna try this. You guys have really built this on the backs of working with clients and that letting it kinda drive this development.
John Tripolsky:Right?
Chris Picciurro, CPA:That's correct. So we have developed a proprietary personalized tax planning process. I'm gonna share it with the listeners, the viewers today. This is something that we work with our private CPA firm clients, basically holding their hand. We call it white gloving it.
Chris Picciurro, CPA:That being said, the purpose of this podcast episode is not to bring in tons of people into the private CPA practice as clients. The the purpose is to give people an idea of of the the the way we operate in our private CPA practice and also an idea of how they should be doing tax planning from a mental standpoint, from a process standpoint. Because what we find in our tax planning is I want you to think about this as you watch or listen. The process is the same for every case, but the results are always unique, and that's what's important. Anyone can do tax planning and strategy.
Chris Picciurro, CPA:What we're finding out there is that too many people try to reverse engineer the tax planning process. Most tax professionals are very equipped for to do tax planning and strategy with their clients, but they just don't have a process either. So what happens is they they're reluctant to provide those services because clients and taxpayers are constantly coming in with what we call ideas, what we call prescriptions, without going through any type of process to determine if it's suitable. So sometimes you get clients coming to your tax payers coming to you with an implementation, meaning they've they've deployed a tax planning strategy. However, they never went through the process to determine if it makes sense.
Chris Picciurro, CPA:A great example, John, would be, let's say you live far out in the country and you decide to buy an electric vehicle and you're really excited about it, and then you realize there's no charging stations within a 100 miles of your house. Now you've just forced yourself to basically put a charging station in your house. Now most people that buy an EV put a station in the but that that's just an example of an unintended consequence. So you've got to determine, kind of the end result, and what you want to accomplish. What we're trying to accomplish legally and ethically reduce the tax you're paying in your lifetime.
Chris Picciurro, CPA:So let's I'm gonna take you all behind the curtain, and walk you through our four step process. Now the process starts with a current year tax projection. You can't figure out this is life in general. This is a trip. Right?
Chris Picciurro, CPA:If I said, John, I wanna drive to Orlando, Florida, the city beautiful as we all know it, you would say, great. The first thing you have to figure out is where in the heck am I? Right? You have to know where you're at before you can figure out where you're going. First step, figure out where you're at year to date.
Chris Picciurro, CPA:When you are watching this or listening to this, look at the date and say, okay. If the date is August 31, September 30, October 31, if the year ended at the end of the month I'm listening to this podcast or watching it, where would my tax return stand? What is my situation if I do nothing? That's your starting spot. If you don't do that, you can't go through the process.
Chris Picciurro, CPA:How can you get to your destination without knowing where the heck you are in the beginning? So figure out where you're at. That that's your prerequisite.
John Tripolsky:And you made a great reference earlier. It was a medical one. Right? It's similar to, you know, bypassing the doctor's office and going and knocking on the window at the pharmacy. Tell them you want medication for a pain you have, except they force you most, hopefully, force you to go to the doctor before you pick up a script.
John Tripolsky:Right? But this is what you're saying, right, people trying to reverse engineer it or kind of skip ahead because they think maybe there's some fluff in the middle of it. The result, you know, basically implodes on itself.
Chris Picciurro, CPA:And just because there's four steps in this process doesn't mean it necessarily has to take a long time. That's the other thing. So the yep. The first thing is figure out where you're at and figure out what your MTR is, marginal tax rate that's different than your tax bracket, that's more important than your tax bracket. It's your number one KPI key performance indicator for your tax planning.
Chris Picciurro, CPA:Marginal tax rate. Remember, one of the three laws of teaching tax flow that tax agencies are your involuntary business partner. Tax laws are written to encourage and discourage certain economic, social behavior, financial behavior, etcetera, etcetera. So your marginal tax rate means this. For every dollar that you're putting on your tax return and reporting as taxable income, how much is going to your business partner?
Chris Picciurro, CPA:That could be the IRS. That could be a state. That could be a city. Once you figure that out, then you will diagnose yourself. We use color coded diagnosis in teaching tax law.
Chris Picciurro, CPA:You could use whatever you want. We use red, green, purple, gold. So a 25% or higher marginal tax rate means you are in a red diagnosis. Okay? Green means lower marginal tax rate.
Chris Picciurro, CPA:Gold is tax free income and growth. Purple is tax deferral. Again, that's just a teaching tax law system. I want this to resonate with everyone that watches and listens. So diagnose your situation by determining your marginal tax rate.
Chris Picciurro, CPA:From your marginal tax rate, then you need to prescribe different tax planning implementations. So for instance, John, if you are in a very low marginal tax rate, we would call it green, but don't worry about that necessarily. Let's say you are a teacher. You just got done with college. You have your first job.
Chris Picciurro, CPA:You're in a 12% marginal tax rate. It's good to put money into retirement. Great. Put it into your Roth. Don't put it into your traditional IRA or or four zero three b.
Chris Picciurro, CPA:Why? Because you don't need tax deferral. You don't need the red diagnosis versus tax deferral taking a digging in the deduction today. You want tax free income and growth. Again, another example would be, let's say you have a property.
Chris Picciurro, CPA:You're gonna sell a very large capital gain, and you are in a very high marginal tax rate, and you're in a situation where you don't necessarily need that cash in your pocket, you're a red diagnosis, then the prescription of a $10.31 exchange might make sense. So the prescription has to match the diagnosis.
John Tripolsky:Mhmm. Right? People are skipping ahead. Right? Then they're they're just kinda doing it off of, we'll call it a gut feeling, which in this case, it's frankly, it's pretty lazy.
John Tripolsky:It is. You you have everything in front of you. Look at the darn thing.
Chris Picciurro, CPA:It's just uninformed. You know? I don't think people are trying to be lazy necessarily. I think they're just uninformed. And then within prescriptions, understand there are different prescriptions.
Chris Picciurro, CPA:Some tax planning implementations are behavioral. Some are tax advantaged investments. Some are tax mitigation strategies. We have tons of content elsewhere in teaching tax law and on our YouTube channel that dive into each specific strategy. But always diagnose, then prescribe.
Chris Picciurro, CPA:The third step, we call it an IQ test, identify strategy, quantify a result, but think about it as a suitability test. Does this make sense? So for instance, let's take an example of let's say you were thinking about investing in some type of fifteen year investment. However, you're 95 years old, and you can't that might not be a suitable time horizon for 95 year old person to invest their assets in. Maybe they'll lift a 110.
Chris Picciurro, CPA:Hopefully, they do. The point is suitability. I'll I'll give you one more example on the suitability. So a lot of times people come to us and say, wanna maximize the amount I can put in retirement. Great.
Chris Picciurro, CPA:If you're self employed, let's say you make, you know, a half a million dollars a year, first of good for you, we might be able to design a retirement plan where you're putting away a 150 or $200,000, way more than the four zero one k using, a defined benefit plan. Woah. I don't no. That's you know, that hey. That's I wanna put money away.
Chris Picciurro, CPA:I thought the max was, you know, $60. So the point is you you've gotta talk about the liquidity. So the better question for someone like that is, well, how much per year are you comfortable with earmarking towards retirement? Then you build that whatever plan around what what their liquidity is.
John Tripolsky:So really finding the perfect partnership in your tax professional too. Right? Because, obviously, somebody that's not, and not talking bad about anybody specific, but, you know, somebody that just files returns and calls it a day. Right? Like, that that's if if you're the type of person that this is something that you're after, then you're probably not a best fit for that type of tax pro.
John Tripolsky:Right. Right. Because there's a lot of knowledge of what's going on and changes.
Chris Picciurro, CPA:You know, when we're talking about tax planning and strategy, we're talking about everything moving forward. Tax compliance is everything looking backwards. So sometimes you can implement a tax strategy or tax planning implementation, after the end of the year, but vast majority is forward looking. So diagnose, prescribe, what we call IQ test, but think about suitability. Does it make sense for you?
Chris Picciurro, CPA:Are you required to be an accredited investor? Ultimately, when you're looking at that menu in the restaurant, if you have an if you don't like onions or you have the palate of a 10 year old like me, don't order something that you know is gonna have stuff in it you don't like.
John Tripolsky:And he's not kidding, folks. He he likes some very plain stuff.
Chris Picciurro, CPA:I'm a plain guy. The final step four, implement. And, John, you know you hear this multiple times a week from me. Ideas are cheap. You can find them on TikTok, Instagram, etcetera.
Chris Picciurro, CPA:Implementation is valuable. Make sure that you implement the strategy properly, the tax planning implementation, and use the right partners. So for instance, if you want to do that $10.31 exchange, I literally had people over my 22 career say, I'm doing a ten thirty one exchange with a property I sold. Great. Who's your qualified intermediary?
Chris Picciurro, CPA:Client. No. They're not a client. Actually, our clients are very important. Taxpayer.
Chris Picciurro, CPA:I haven't found one yet, but I closed, I just put the money in my bank account. I'm gonna give it to the QI. Qualified in. It doesn't work that way. Right?
Chris Picciurro, CPA:You haven't implemented it properly.
John Tripolsky:Game over.
Chris Picciurro, CPA:Implementation is key. Make some things you could self implement, like a health savings account going to the bank and creating that. But a lot of times, you need to build your team to implement. And so if you're listening or watching into this and you feel like you've got a good idea of what you wanna do and you need that help with implementation, check out the teaching tax flow hub. John will put a link in the show notes, and we're happy to connect you.
Chris Picciurro, CPA:So that's the four step process. Let's keep it simple. Let's keep it quick. Diagnose, prescribe. IQ test slash suitability, implement, repeat.
Chris Picciurro, CPA:Every year is different.
John Tripolsky:Bingo. Bingo. So, yeah, this one, we kept a little bit more condensed and what I mean, what a great topic to do this. What? Right?
John Tripolsky:Because we started off saying that it it doesn't have to necessarily be lengthy and very complex. I mean, for the client part. You have the right partners, right people on your side. You can power through it pretty quick. Chris, yes.
John Tripolsky:So now we mentioned a little bit earlier on that. People aren't necessarily lazy. They're uninformed. But now that you, who's ever watching or listening to this, now you're informed. So now if you don't do this, now you're being lazy.
John Tripolsky:We'll we'll put it that way. But on that note too, we will drop that hub link in the bottom. Go check that out. Defeatingtexas.com. We'll send you directly to the private Facebook group that you can ask any question under the sun within that box of tax.
John Tripolsky:We're happy to answer it. Somebody from our team, extended team, as well as others in the industry and the community members. Everybody kinda chimes in and helps each other out with that. The great thing is very easy to moderate because everybody behaves themselves. So we have no problems.
John Tripolsky:That's why we kind of open it up. And as always, again, creeping up on that one fifty. We got something pretty cool that we're gonna go through on that one next. But really, that's it. It's as simple as that, you guys.
John Tripolsky:Check it out. Questions, you know where to reach us, and we will see everybody back here again next week on the Teaching Tax Flow podcast. Let's try this one again. Different week, same day of the week, different time of day, completely different topic. We'll see everybody soon.
John Tripolsky:Have a great weekend.
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