Episode Summary: "Legally Pay Less Taxes" | I Am Charles Schwartz Show

Release Date: January 8, 2025
Host: Charles Schwartz
Guest: Adam Torkeltson, Financial Strategist

Introduction

In this enlightening episode of the I Am Charles Schwartz Show, host Charles Schwartz sits down with Adam Torkeltson, a seasoned financial strategist with extensive experience in SEO, media publishing, and addiction recovery. Together, they delve deep into the intricacies of legal tax strategies designed to help entrepreneurs, small business owners, and families minimize their tax burdens while maximizing wealth.

Adam Torkeltson’s Journey and Expertise

Adam begins by sharing his unique career trajectory, emphasizing his transition from journalism and SEO expertise to running a successful media empire. His hands-on experience in the "wild west days of SEO" provided him with invaluable insights into Google's economic impact, which he leverages to benefit his current ventures.

Adam (02:17): "These two skills of publishing on the Internet and writing led me to, when I graduated. My first job straight out of College was @SEO.com... They drive 68% of all traffic."

Adam candidly discusses his past mistakes, including unethical practices in SEO and subsequent legal challenges, which led him to addiction recovery. These experiences have molded his commitment to using his knowledge ethically to empower others.

Foundational Principles of Money Management

Before diving into specific tax strategies, Adam outlines three core principles of money management that underpin his approach:

1. Spend Money to Make Money: Investment is essential for growth.

   Adam (09:05): "You have to spend money first. Building that into their understanding was critical."

2. Never Spend More Than You Make: Maintaining a budget ensures financial stability and growth.

   Adam (09:05): "It's imperative that you spend less than you're making and then you can become wealthy."

3. Pay Charity: Allocating a portion of income to charity fosters generosity and long-term well-being.

   Adam (09:05): "You need to donate to a charity... give yourself a budget for putting money towards a charity or donating to something as a percentage of your income."

Charles echoes these sentiments, highlighting the importance of financial literacy, referencing influential works like Rich Dad, Poor Dad, and emphasizing continual self-education.

Charles (13:21): "Rich dad, poor dad taught me a lot of the basic financial literacy... it's important to constantly educate yourself."

Key Tax Strategies to Legally Reduce Tax Burden

Adam introduces several actionable tax strategies, each meticulously designed to optimize financial outcomes within the U.S. tax framework.

1. The Augusta Strategy

This strategy leverages the IRS tax code to allow business owners to rent their personal residences to their LLCs, effectively transferring money in a tax-efficient manner.

Adam (15:45): "You transfer money from your business bank account to your personal bank account. That money is not taxed on your personal income taxes."

How It Works:

• Eligibility: Must own your residence and have an LLC, preferably taxed as an S Corp.
• Mechanism: The business pays the individual an amount equivalent to one month's rent.
• Benefits:
  • Personal income from rent is not taxed.
  • Business expenses are deductible, potentially allowing up to $100,000 annually in write-offs based on fair market rent.

Charles underscores the importance of professional consultation when implementing this strategy.

Charles (18:52): "Talk to your CPA. Make sure you're talking to someone professional... these are legal ways to do it if it's set up properly."

2. Family Management Companies

Ideal for business owners with children under 18, this strategy involves creating an LLC that manages payments to family members, thereby reducing family tax obligations.

Adam (21:21): "The actual flow of money goes like this... I pay my kids a decent wage without the typical taxes and insurance burdens."

How It Works:

• Entity Setup: Create an LLC with its own EIN and bank account.
• Payment Flow: Main LLC transfers money to the family management company, which then pays the children for work performed.
• Benefits:
  • Avoids paying state and FICA taxes.
  • Provides flexibility for family-related expenses.

Charles emphasizes that these setups must be properly documented to comply with IRS regulations.

Adam (26:10): "You should be able to set them up once and then have them keep working for you without having to reset them up constantly."

3. Section 125 Cafeteria Plans for Health Insurance

This strategy allows businesses to offer pre-tax health insurance benefits, reducing taxable income for employees and lowering FICA taxes for employers.

Adam (37:37): "Instead of taking the insurance premiums out of an employee's paycheck post-tax, pre-tax."

How It Works:

• Eligibility: Companies must have between 10 and 1,000 full-time employees.
• Mechanism: Employees can choose to have insurance premiums deducted pre-tax, lowering their taxable income.
• Benefits:
  • Reduces FICA taxes by approximately $500 per employee annually.
  • Enhances employee benefits without increasing insurance premiums.

Charles notes the added advantages of improved employee retention and attraction through better benefits packages.

Charles (43:09): "They have some things that help them stay healthy. Incentives built into it."

Investment Strategies Aligned with Tax Benefits

Beyond tax-saving strategies, Adam shares his investment philosophy, focusing on opportunities that offer both cash flow and tax advantages.

Adam (26:11): "Is there a tax advantage to this particular investment? If yes, it's a win-win."

Highlighted Investments:

• Solar Field Financing: Allowing full tax write-offs plus a 30% tax credit, effectively recouping the initial investment within the first year.

  Adam (31:40): "The money I've spent is essentially I make it back in that first year and then everything after that is pure profit."

• Bitcoin Mining: Utilizing physical assets for tax deductions while capitalizing on cryptocurrency profits.

  Charles (34:33): "It's through mining Bitcoin specifically... I got my tax advantage."

Charles echoes the importance of understanding investments thoroughly to mitigate risks.

Charles (33:44): "Do I understand it? Because that one was a painful lesson for me."

Systematizing Business Operations for Scalability

A significant portion of the discussion focuses on creating robust systems that operate independently of the business owner, ensuring scalability and sustainability.

Adam (26:11): "You should be able to set them up once and then have them keep working for you without having to reset them up constantly."

Charles elaborates on the necessity of "set it and forget it" systems to avoid dependency on specific individuals, which is crucial for business growth and eventual sale.

Charles (27:12): "If it takes us a little off topic, but if you're trying to scale, what I do with all of my clients... map out everything."

Rapid Fire Insights

In the concluding segment, Adam shares personal tools and habits that enhance his productivity and well-being.

• Life-Changing App:

  Adam (47:28): "I use an app called Insight Timer... it keeps track of how many days I've meditated."

• Daily Health Hack:

  Adam (48:44): "Nanohydrate... it completely hydrates you within seconds. I've been using it every single day."

• Must-Read Book:

  Adam (49:26): "The Richest Man in Babylon."

• Family Unity Secret:

  Adam (50:17): "I participate in my religion faithfully... it automatically makes me want to be a better person."

Connecting with Adam Torkeltson

For listeners interested in implementing these strategies, Adam provides his contact information:

Adam (50:45): "You can find me on LinkedIn or visit my website at Torquemedia.com. My personal cell phone is listed there."

Charles encourages listeners to reach out and emphasizes the importance of consulting knowledgeable CPAs to tailor these strategies effectively.

Charles (53:14): "If you're having conversations with your CPA... hire someone who loves this stuff more than they love air."

Conclusion

This episode serves as a comprehensive guide for those looking to legally reduce their tax liabilities while building sustainable wealth. Adam Torkeltson’s pragmatic approach, combined with actionable strategies like the Augusta Strategy, Family Management Companies, and Section 125 Cafeteria Plans, offers listeners valuable tools to navigate the complex U.S. tax system.

Charles wraps up by directing listeners to a free action guide summarizing the discussed strategies, encouraging them to take proactive steps toward their financial empowerment.

Charles (53:14): "Your tax revolution starts today."

Download the Comprehensive Action Guide:
Visit podcast.com/CharlesSchwartz to access your free guide and start implementing Adam’s tax-saving strategies today.