Most people think tax strategy is tax prep. It is not. Tax prep is a historian gathering your receipts in December and filing a return. Tax strategy is a proactive, year-round plan that legally minimizes what you owe before you ever earn the income.
That difference is worth more than you think. Overpay $10,000 a year for 20 years and invest what you saved at 12 to 13 percent instead. You would have made yourself a millionaire just by not overpaying.
I do not pay more than $10,000 in taxes per year. I pay far less than that because I have a tax team that uses the whole code. There are 83,000 pages in the tax code. TurboTax gives you 15-30% off it. You are not a surgeon. Your tax strategist is trained as long as you are. So why are you doing your own taxes?
Here is how to actually build a tax strategy, and why prep alone will never get you there.
Why Tax Prep Is Not a Strategy
Tax prep happens once a year. You gather your bank statements, credit card statements, and receipts, hand them to a CPA who says thank you, and then files them. That CPA is a historian. They record what has already happened. They do not forecast what you should do next.
“Most CPAs are historians. They record what you did. They don’t forecast what you should do.”
A strategy starts in January, not April. It asks how much money you are going to make this year, which company is going to make it, and what legal deductions apply before the income even lands. After Q1, you revisit. On target or under target changes your next move. If you are crushing it, you need another entity. I see this constantly with clients: a strong first quarter, a stronger second, and by the third, they need a second or third company because one entity cannot hold a quarter million or a million dollars cleanly.
If you are making a million dollars, you likely need two or three companies, contractually bound to each other with a real strategy between them.
The Five Moves That Build a Real Tax Strategy
Write these down in order.
1. Entity structure. Choose the right business structure to maximize deductions. In The Millionaire Maker, I teach that companies get the best tax strategies while individuals get the worst. That is entity structuring: building the houses your money lives in so the IRS cannot follow you into a personal bank account.
2. Deductions, moved with intention. Once you have entities, you forecast forward. Take your personal expenses and, with a tax strategist, move them into legal deductions. Which company takes the car? The phone? The technology? The intellectual property? You should not have to know the answer. That is what a team is for. And do not ask an AI agent to figure this out for you. I would not trust it to know your entity structure the way a real strategist does.
3. Retirement contributions. A 401(k), a SEP IRA, and a defined benefit plan. These let you contribute before taxes, which reduces what you owe this year.
4. Depreciation. This is enormous, and it ties directly back to the assets you own: real estate, equipment, a 6,000-pound gross vehicle weight vehicle, gas and oil, and aviation. Depreciation can even be split across years depending on your income recognition strategy.
5. Income recognition timing. Do you recognize income this year or push it to next year? That decision, made in advance, is a strategy. Made in April, it is too late to matter.
Precision is the whole point. I have known for decades exactly what I will be taxed at year’s end. It is the legal minimum because I would rather put $100,000 into a real estate or aviation project, take depreciation, and pay less.
The Team You Actually Need
This is not about finding a CPA who files a decent return. Ask any candidate what kinds of returns they typically file. If the answer is 1040EZs, they are not your people.
You need a bookkeeper for the year-round prep, and a tax strategist for the plan itself, working together. If you are running a business or rental real estate, a real team will go back and review three years of returns. Most people are shocked by how many deductions they never took, either out of ignorance or fear of an audit. Playing small on your taxes is still overpaying.
“You’re either going to pay yourself and buy assets to reduce your taxes, or you’re just going to overpay taxes and don’t complain about it.”
If you meet with your strategist less than quarterly and do under $1 million, that is a gap. A million or more meet monthly. Ten million plus, some of my clients meet weekly. The bigger the number, the more frequently the strategy has to move.
This applies even if you are a W-2 employee. I have a client making $1.2 million a year at a hospital, sitting at 40-plus percent tax burden, because he has no entity to offset it. What he needs is what I call a cash machine, a business that lets him legally take deductions against that W-2 income. Without it, a big paycheck is just a big tax bill.
Start Today
- Ask your current CPA what returns they typically file. If it is mostly 1040s and simple Schedule Cs, you have a prep person, not a strategist.
- Pull your last three years of returns if you have a business or rental property, and have a real tax strategist review them for missed deductions.
- Decide today whether your entity structure fits your revenue. If you are on pace to clear a quarter million in any one company, that is your signal to talk about a second entity.
- If you are a W-2 earner with no side entity, build one this year. Even a small cash machine gives you a legal place to run deductions against your paycheck.
Tax strategy is not complicated once someone else is doing the math. It is precise, pinpointed, and it starts long before April. Go to AskLoral.com Ask a question, make a request.
