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Proven Podcast
Legally Pay Less Taxes
00:54:10
In this episode, Adam Torkildson dives into his fascinating journey from SEO pioneer and addiction recovery advocate to becoming a financial strategist and media entrepreneur. His story unfolds as he recalls navigating the "wild west" of early SEO,...
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- [00:00]
A
Welcome to the I am Charles Schwartz Show. In this episode, we dive into the world of legal tax strategies with Adam Torkiltson, a financial strategist who has spent decades mastering the art of optimizing finances, minimizing tax burdens, and structuring investments. Adam brings a wealth of experience from his days navigating the wild west of SEO to running a thriving media empire. But what sets Adam apart is his passion for sharing actionable insights that empower entrepreneurs, small business owners and families to make the most of their money while navigating the complexities of the US Tax system. In this conversation, Adam unveils powerful strategies like the Augusta Rule, Family Management companies, and Section125 cafeteria plans, all designed to legally reduce your tax burden while building wealth. We also explore the critical role of systems in scaling a business, how to turn your kids into productive team members, and why understanding your investments is the key to long term success. Adam's insights are direct, eye opening and unapologetically practical. He's here to challenge the way you think about taxes and money, not to sugarcoat or hold your hand. So if you're ready to break free from financial overwhelm and take control of your wealth building journey, grab a notebook and settle in. The show starts now. Welcome to the I am Charles Schwartz.
- [01:20]
B
Show, where we don't just discuss success.
- [01:23]
A
We show you how to create it. On every episode, we uncover the strategies and tactics that turn everyday entrepreneurs into unstoppable powerhouses in their businesses and their lives. Whether your goal is to transform your life or hit that elusive seven, eight or nine figure mark, we've got the blueprint to get you there. The show starts now.
- [01:41]
B
Today we're going to talk about something that requires a disclaimer. So before we get too involved in this, this is for educational purposes. This is just. This isn't legal or financial advice. Always interact with a professional before you do anything. We're just trying to share information. With that said, Adam, welcome to the show.
- [01:59]
C
Thanks, Charles. Great to be here.
- [02:02]
B
Thanks. Let's, let's find out more about where you are and what you've done before we get into some of the stuff we're doing because anyone who's read the title of this will know exactly what we're talking about. Let's get a little bit of your history. How did you turn into what you're doing and how successful you are in business now?
- [02:17]
C
I had the opportunity to go to college basically for free, and so that opened up a lot of opportunities and I chose journalism to get in my degree and I worked at the newsroom in the newspaper and that I got my first taste of publishing on the Internet. And this was about 20 years ago, so 2004, 2005. And I, I loved how easy it was to just publish other people's works because I wasn't the one writing most of it. I was just sort of interning and helping with publishing. But I was learning how to write at the time. And so 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 and I was able to take a little bit of what I'd learned in college and then I learned a ton of stuff on the job@SEO.com it was, we call it the wild west days of SEO. And you couldn't learn SEO any other way than on the job. They didn't teach it in colleges and most people didn't even know what it was. And I was a brand new 21 year old publishing content for huge Fortune 100 brands, Dell and Alpha Graphics and they probably had no clue what I was doing for them. Most of the time they just cared that their computers or their printing processes ranked high in Google. That's literally all they cared about. We could do whatever we wanted and so we did. And I had a lot of fun doing a lot of black hat stuff. And black hat is just an industry term for cheating your way to the top. And I know all those tricks and I used every single one of them. Which led me to understand that Google, the search engine Google, but also the company Google had so much impact economically on every one's business who did Google has that much of an impact. They drive 68% of all traffic. This is a stat I looked up last month. So Google still has a gigantic share of pushing business to whoever wants to be on the Internet. So I, I thought, you know, that's a great place to, to do work is, is in that space where Google's such a big player and if you know kind of how Google works then you can make a lot of money and you could also manipulate it and scam people in the same way. And yeah, unfortunately I did several times scam some people and had to pay for it. I was sued a couple of times and basically learned the hard way that it's really important to treat people the way you want to be treated. And, and I had to go through addiction recovery as well as part of that process. So I've got a background in SEO and Addiction recovery. So that's led me to where I'm at today, which is I have a publishing company. We, we publish across about 250 websites. People come to us with their content and sometimes we'll publish it straight up as it is, and other times we have to rewrite it. But my parents work for me, my kids work for me, and I met my current business partner in addiction recovery. So all these life experiences have really just led me to using what I learned on the job@SEO.com and the, the life experience of addiction to using it for good. And I love publishing good positive stories. I love publishing political stories sometimes if it aligns with things that I believe in. And I love having that choice. That's really the awesome thing is I have so much choice in how I spend my time and what I talk about online.
- [07:07]
B
I think the Internet gives us that because to your point, you can still black hat so much. There's so many things that are black hat. Again, I've got a background in it as well. And there are so many times that we game the system, for lack of a better term, in order to get things to work. Even when we were just doing repairs, we were having to do upgrades. There's ways that you can flank the system. But we're going to be talking about today is, is flanking a much bigger system legally. And things that you've discovered with no matter how someone thinks about, again, this is pretty going to be specific for the United States. So some of you guys out there who aren't in the United States, it was good talking to you. You might want to go grab another episode. This is specifically for the United States where there are rules and we talk about this all the time. Life's an equation. There's constants and there's variables. And if people attack the constants, don't attack the constants. Influence the variables, change the outcome. The IRS has very specific rules. And as a business owner, as a vc, as someone who's been an angel investor, you're rewarded to do certain things. There are certain things and they have certain tax write offs and there's certain things that if you do certain other things, it reduces your, your obligation legally. Now again, you need to speak to a professional before you don't take the advice. This is just things that we've learned as individuals, as business owners, as VCs, as angel investors, as we've gone on the journey. There are ways to mitigate some of this legally. Now Adam's going to be sharing a lot of those but again, talk to a cpa. Make sure you're talking to someone professional, not just two guys on a podcast that are hanging out and chitchatting. So as you've gone into some of this, this isn't, you know, this. We're not talking about nuking the government. We're talking about there are legal ways to play the game. We're going to go into some of those. And what I loved about this was before we even started, Adam, was like, we're going to start with this. People who aren't business owners. You may or may not be a business owner, but we're going to start from the very beginning on some of the tactics that he's learned, and hopefully we learn a whole bunch of this. So, Adam, let's talk about how to pay less in taxes.
- [09:06]
C
Yep. This. This is my favorite topic. And my kids have been hearing me preach about this their entire lives. And it. It's something that I care a lot about because I. I like paying it forward. Just, I've been so blessed in my life. And I. I actually volunteer through an organization called score, where I just mentor other small business owners. We talk about stuff that they just may not even know. And that. That's sort of my motivation for doing this. And I. I just wanted to say thank you so much for the opportunity to tap into your audience and. And do this for a second. So one of the. I like learning and teaching in principles a lot of times, as opposed to very specific tactics. Even though we are going to get into a couple of those, I want to start with some principles that I believe in. I believe that there are basically, if you boil it down to the most basic ideas, there are basically three rules of money. One is you have to spend money to make money. And that's always true, I've found in my own life, and this is something I've taught my kids as well. When, when they want to go out and earn some money for the summer, we had to say, look, you have to go spend some money at the store buying these items, and then you can go resell them later to all of our neighbors, and you're going to make a profit. But you had to spend money first. So building that into their understanding was critical. And that's kind of where I want to make sure we're all on the same page. Number one, that principle, secondarily, not only do you have to spend money to make money, but you. It's important to never spend more than you make. And this is a trap that a Lot of people get into, especially young people who get access to credit and they think that status is more important than how much they're spending on things. And that's completely backwards. Wealthy people are very aware of, of the profit margins of all the things that they're participating in. And a lot of people I know hire teams of people to make sure that what they're investing in always comes with a specific amount of profit. Whether it's 10, 15, 20, whatever that may be. That doesn't matter. Everybody has their own set of goals and the way that they believe about how money should be returned. But at the end of the day, it's imperative that you spend less than you're making and then you can become wealthy. I don't care what it is you do for work. Then the third principle, and this, this doesn't matter whether you're religious or not. This is a principle of money and it works. It is. You need to pay charity in some way, shape or form. You need to donate to a charity. For me, I've got a 10% hard line. All the money I make, I pay 10% of it back to my church. And that's how I pay back to charity. And I donate to other things as well. But I, I don't care if you're making $10 a month or $10 million a month. Give yourself a budget for putting money towards a charity or donating to something as a percentage of your income and you will be taken care of for doing that. I've seen it in thousands of people's lives, so with those as our basic principles. By the way, Charles, did you want to chime in on any of those things? I saw you nodding.
- [13:22]
B
Yeah, so, yeah, so there's a, there's a lot there. And you know, I, I think everyone knows the story of rich dad, poor dad. It's a phenomenal book. And Robert's a great guy. Those were all the things that I wasn't taught by my family by because, and it wasn't my, my parents fault. They just didn't know. And a lot of us go through school. Our school system can't teach you these things because the people who are teaching us, they don't know these things. So there's this always this excuse that happens of, well, I didn't know. That doesn't matter anymore. This whole idea like, well, if I knew what to do, I would do it. You have an access to the Internet, you know everything, you just have to search for it. So going out, research, you don't even have to read the book anymore. You can just watch the video. So Rich dad, Poor dad taught me a lot of the, you know, basic financial literacy. Cash Flow Quadrant was another one that taught me the next steps. I have found the more you give, the more you get. And that was a byproduct of the time that I spent at hospice. You know, a hospice is a place where you go when you're terminally ill, when you have. It's not about quantity of life, it's about quality of life, about the end of your days. And I would see so many people who gave more throughout their life get more back even at the end, versus the people who kept it all in. They just wouldn't get that reward. So if it's through donations or just your day to day actions, I mean, there's so many people out there who don't have the financial means to give out 10% because they're barely cutting the bills. Well, it doesn't take much to school volunteer. Go spend some time. Go spend an hour here or an hour there. It doesn't take any time to go sit down and talk to someone. So there's lots of different ways to do that. But I love that what you did with your kids, which is like, all right, here's a tangible example. You have to spend money to make money and you start early because if you're relying on a school system or anything that they're going to magically pick this up, it's not going to work. So learning the basics are so fundamentally employee important. There's businesses that I scale and when I work with business owners, you can see their financial records and you can see their financial history and where, how literate they are, just on what their balance sheet looks like. I'm like, okay, I need to work on them on this one. So there's some basic financial stuff that you know, Again, rich dad, poor dad, great book. Cash Flow Quadrant. Great book. As you go through these things, it's important to constantly educate yourself, which is what this entire episode's about, educating you that there are other ways to do things in a very effective way.
- [15:31]
C
Awesome. Yeah, I think that's a great point. Whether you're donating your time or just straight cash, give back that. That's the principle. And thank you for that awesome clarification.
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B
Absolutely.
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C
So I wanted to jump in to the first tax strategy and this one can work for anybody who has an llc. Doesn't matter if you have lots of employees or it's just you and this, this is going to be one that the one other caveat is that you must own your residence, whether it's a townhome or single family home, whatever the case may be, you've got to own it, or at least beyond the title. And this is something called the Augusta Strategy. I'm not going to go into the history of why it's called the Augusta Strategy, but that's what it's called. If you want to go Google it for more information or ask your cpa, they'll know what this is. But essentially what you're doing is taking advantage of an IRS tax code that allows your business to rent your home from yourself on a monthly basis and your business pays your personal bank account the equivalent of one month's rent, essentially. Even though the you may not actually use the space for anything, you do need to make sure you take some notes and use it in some specific ways that the IRS has verbiage around anyway. It really boils down to the fact that you transfer money from your business bank account to your personal bank account. That money is not taxed on your personal income taxes. Additionally, whatever you're spending there is a tax write off for your llc. And the, the, the max amount I've ever seen anybody write off using this strategy is around a hundred thousand dollars a year. And you can do this annually. So it, it starts to be a significant amount of money, the more valuable your home is, because what you're able to do is take the fair market value of what you could rent your home for and that becomes your basis for what you can write off each month. So this is again the Augusta strategy. This works for anybody who's got an llc. I believe you need to be taxed as an S Corp, but that's some very simple paperwork. And there's a lot of advantages to being taxed as an S corp. Sometimes it's better as a C corp, but if you're like a gig worker or a freelancer or it's just you're a solopreneur of some kind, get an LLC and register as an S Corp. And that's going to give you a lot of these tax benefits. Did you have anything else? Yeah.
- [18:52]
B
So one of the questions I have is, let's say one of my companies is I make these widgets and my S corp happens to be a service company. Can I, when, when it comes to my tax code, when I'm doing the, the deductions, can I have multiple companies, that multiple companies set up and choose which one I want to take the tax deduction from. Because again, with. With what I do, I have multiple properties and every single one of those properties in a container themselves. I do this for benefits so that if someone falls down on the property, if they sue me, they only hit that corporation. They can't touch the other corporation. So I limit my liability. Let's say the parent company or a different company is taking deductions. How does it work if you do? And I'm just curious because I know you're not a cpa, if you have multiple companies and multiple S Corps or C Corps or LLCs, how does it play into that one?
- [19:46]
C
Well, I don't know specifically all those details, but a scenario that I believe will work is if company A owns house A and company B rents that house from company A. As long as you have two separate entities you're working with, then it's basically a one to one ratio. And so multiple companies, you will need multiple entities that own those properties. Works, but again, no cpa. I've never been in that specific situation. But I've got to imagine if the tax code works the way that it does for one entity and one personal residence, with that one to one ratio, you should be able to extrapolate that to multiple entities and multiple companies.
- [20:46]
B
Which again, is why we're saying we're going to give you ideas here. And if you've never heard of this theory, there's this wonderful, it's this brand new thing out there. It's called Google. You'll figure that out. But also, Talking to certain CPAs, talking to your professionals about this is important. So just because, you know, we're going over things that you might have never heard before, we're not going to give you the history. The goal is here at Scout Lab is to give you those specific details so you can go research it. And we'll put this in the lab report. We'll break it down more to save time so Adam doesn't have to give the full history of it because we'll just Google it for you. But again, go talk to your cpa. Vitally important. Okay, so that was the first one. What's the second one?
- [21:21]
C
Second one. This also is for people who have at least one LLC taxed as an S Corp. And this is going to apply to you if you have kids that still live with you under the age of 17 or under the age of 18, I should say. So there's a really cool entity type called a family management company, and you can do all kinds of cool things with this entity. And it's literally just an LLC that has its own ein number and its own bank account. That's all you really use it for. And I think what may have happened a long time ago is a lot of criminals started to use this entity to funnel money outside of the United States. But it's still on the books. This, this entity type the family management company. Talk to your CPA about it if you want to know more. And what I use it for specifically is to pay my kids out of. So the actual flow of money goes like this. I have up to, I think it's like $1300 a month per kid that I can pay into the family management company. And then the family management company distributes the money into each of those kids bank accounts. And as with most IRS rules, there's a couple of caveats. Essentially you have to be able to prove that your kids are doing work for your company. And fortunately for me, I've got teenagers and I've been having them work for me since they were really young. And they know how. I've taught them how to do all these things on the Internet that they never would have learned at school, but that are fairly basic things you have to know if you're at a corporate job. Things like how to respond to emails. So one of my kids, that's all they do for me is respond to customer support emails. And there are principles with how you do that, like the tone of voice you use when you send emails. And you can teach kids these things. They're not idiots. And so I can literally prove my kids are working for me in my business doing valuable things and I pay them a decent wage. But the cool thing about doing it this way as opposed to making them a W2 employee is that I'm not paying them any. I don't have to pay state taxes, I don't have to pay FICA taxes, I don't have to have health insurance on them. And I just take money from my main llc, transfer it to the family management company and then the family management company is the entity that pays them out. And we can use that money in their bank accounts for all kinds of stuff. We can use it for family trips, we can use it for braces, we can use it for stuff that you typically wouldn't be able to write off when you're paying for family needs. You can use that money in that way. And it has become a write off through that process.
- [24:40]
B
And again, these are legal ways to do it. The government is encouraging you, specifically the IRS and the tax code is encouraging you to do this because it wants to make. Make life easier. I know it doesn't seem that, but if you're not implementing the systems and you're not, you don't know the laws. The IRS seems terrifying. It seems like, oh, it's just going to take, you know, 20 to 40% of my income away from me. Hire a better accountant. Hire someone who knows some of these. We've only gone over 2. There's. The code is specifically designed for years now to make sure that you can leverage it in a way that not only helps you reduce your taxes, but also to do investments. So there's a lot of them that I use that are specifically designed to help me when I do investments, be it purchasing properties or businesses or anything else. There are ways to do this. So I know some of these. You know, these are two that you might have never heard of as an individual before. There's so much more. We're going to continue to go into these and we're also going to talk about, you know, how powerful and how to get health insurance to actually work and be in a stronger place for you. We're going to get to that point. But please understand, this isn't stuff that Adam made up or that I stumbled upon. There are teams dedicated to doing this and helping you set this up, which again, use that brand new tool that just came out today called Google, and you'll find people who will walk you through and be able to help you through this. We're just going to try and give you that insight so you can reduce your tax burden in a legal way. I'm not encouraging anybody to do anything illegally, especially when it involves your kids. So these are legal ways to do it if it's set up properly. That's really important as we go through these.
- [26:11]
C
Yeah.
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B
And once you two down.
- [26:13]
C
One of my favorite principles, I love working based off principles. So another principle that I really love to live by is when you're setting up systems or processes, you should be able to set them up once and then have them keep working for you without having to reset them up constantly. So these two systems of tax savings that I've talked about, you don't have to keep redoing things every year or refiling this paperwork or that paperwork. Once your Augusta strategy is in place, you can just count on it working. Once your family management company is in place, you just count on it working.
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B
These are set and forget about idea.
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C
Exactly. I think that's one of the more undervalued ideas in business is the ability to just set it in.
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A
Forget.
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B
Yeah. And the easiest way, if you're, if you're trying to scale, and I know this takes us a little off topic, but if you're trying to scale anything, what I do with all of my clients when I do this, I say map out everything on a board and use a black marker or a blue mark or whatever you want. And they map out everything. It's perfect. Now here's a red marker circle where you're involved, where it's mission critical that if you're not involved in that one process, that one step, that you're involved. The minute that pen touches that whiteboard where they have to circle their name, I'll throw another pen at them like, congratulations, you failed. You don't own a job. I mean, you don't own a business. You own a job. You created yourself a pretty prison. So systems are designed to set you free. They're designed to be set it and forget it without you. And this includes your employees as well. If you got in, your whole system is set up. When you're trying to scale this and you know that Suzie has to be there in order for you to scale, then you failed. Because sooner or later, Suzie's either going to win the lottery or a purple dragon's going to eat her or she's going to get sick or whatever it is. She's not going to be there forever. So make sure your systems are designed to be robust enough to survive, no matter who the employee is, no matter who the owner is. This also helps with your EBITDA when you're trying to sell for a multiplier, but that an entirely different episode risk is just about tax benefits. But I agree with you. People don't think about this when they're building their systems.
- [28:25]
C
Yeah, and, and I love how all these principles, they, they apply in all the aspects of a business, whether it's operations or marketing or fulfillment or whatever, insurance and taxes, they all have that app, that same application of set it and forget it. And I did want to touch. So the third area of tax savings, legally avoiding taxes, et cetera, has to do with investments. And I'm by no means an expert in investing. I've done about a dozen angel investments over the last 10 years. My very first one that I did, the company is still in existence. The very next one that I did went bankrupt about a year later. And so my own track record is by no means perfect. But I have learned over the course of the Last decade, my own investment thesis. And if you don't know what that means, it's just my own rules around how I invest. And for me personally, my investment thesis is essentially is their monthly cash flow involved? Am I going to be getting regular distributions? Whether it's quarterly or monthly or even annually, that doesn't matter. But is there a cadence of cash flow I can count on? Number two, is there a tax advantage to this particular investment? And I've done several that you would never think of. One of them was I financed a solar field in Bakersfield, California and I was able to write off the entire amount of money I put into that, plus I got a 30% tax credit on top of that. So 100% of the money I spent building it, complete write up. I got another 30% because of the solar tax credit in California at the time. And I think it's still about the same. Each state kind of varies, but California has always been more advanced in their green eco friendly initiative, et cetera. And there are other states that, that Nevada is another one that has had a lot of those traditionally, historically. So if I can put money into something that's going to provide me monthly cash flow that I don't work for anymore, so whether I'm dead or alive, it's going to keep coming in. That's one of my major goals. And additionally, if there's a way for me to use that investment money as a write off on my tax burden, then I feel like it's a huge win win. And I don't know exactly how to calculate the ROI on 130% tax advantage. But it just means that the money I've spent is essentially I make it back in that first year and then everything after that is pure profit. That's basically how I think of it. Is that a good way to think about it?
- [31:40]
B
No, absolutely. And you know, for me I've got similar rules. You know, is it going to give me a dividend? Are there tax benefits and do I understand it? And that one, the last one took a while for me to figure out because there's all these deals that came in. I was like, these deals are great. And then it would blow up in my face because there's not a single investor I know that has a perfect track record. I don't care who you are, I don't care if you're looking at the people on Shark Tank, I don't care what's going on. No one's got a perfect track record. Things are going to happen. It's business, but making sure you understand it. You know, we talked about this when, when we first chatted that you're heavily into crypto. And I'm not. Even though I have an IT background, I just can't wrap my head around. So I just, I'm like, all right, I'll, I won't go near it. I go into real estate because I understand it, my family understand it's something that's been beaten into me for years and years and years and years. So when you're going investing, and again, this is a little bit more than the tax strategies we're talking about making sure that you have some hard line rules. Because I know people who are day traders, I know people do forex trading. They've got some very hard line rules. They've got their stop losses set up, they got their take profit set up. They've got hard line rules and they will not violate those rules. The minute they violate those rules, it's over. They lose a fortune. So you're never going to get in the top of the market. You're never going to, you're never going to get out, you know, you're never going at the bottom. You're going to get out at the top, you know, whatever the, you go into that environment, having some rules set up in advance is vitally important. And so for yours are, you know, does it have a monthly, annual, quarterly, yearly distribution and is there tax benefits? The only one I would add to that is do I understand it? Because that one was a painful lesson for me. I invested in something. I don't understand it. That was expensive, that was painful. And I tell people all the time, you know, you're not truly an entrepreneur until you lose your first million dollars. And then when I say that in certain groups, they're like, oh, your first million, that's cute. And I'm like. Because they just laugh at me. They're like, yeah, would you lose 10? And I'm like, and they've done it. It just, it is what it is. The more zeros you have behind your, your, your net worth, trust me, the more money you have lost. It just, it is what it is. You make your mistakes. The only way to succeed is to fail. That's how it works.
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C
Yeah. And I agree. The very first brick and mortar investment I made was a total disaster. It was a hair salon. It was only a couple of blocks from my house. So I thought it'd be easy to manage. And it cost me about as much as a really expensive MBA would. Cost. And so I look at that as my MBA in business because I learned a lot about what I'm not good at in those operations and I learned what to look for in future investments. And that, that's, that's all that I use those opportunities and those experiences for. And, and I like that you brought up Bitcoin first even though you're not in it at all.
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B
Yeah.
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C
I just wanted to say there for me, it fits my investment thesis because I've with the way that I invested. It's through mining Bitcoin specifically. I'm not going out and purchasing any bitcoin myself. I did buy mining machines from an outfit in Texas and the full expense of each of those servers was a tax write off because it's a hard physical asset. And so I got my tax advantage. And the price of Bitcoin has been high enough on average ever since I started that it's consistently brought me a monthly profit. Sometimes the profit is crazy good, sometimes it's just the barest thinnest margin. And that's where a lot of people really have a tough time putting any money into it because of the volatility. And I get that. So if you want to look into bitcoin as an investment strategy, there's a lot of research that you can do. Google exists for that reason. And I can even point you in direction of some really smart people to talk to. They will take your phone call and just chat with you because they love promoting bitcoin and they're really, really smart people. So I, I like talking to smart people as opposed to only using Google. And, and that's why I love meeting people like Charles, he, he's now someone that I can email and ask something to if I need to. And I, I like having that network available to me.
- [36:18]
B
Yeah, it's, it's when I, so I, I've been known to purchase businesses, systematize them and scale them. One of the things that I'll do is exactly that, where I'll go in and I'll go find people in the area or in the same network or in the same industry and say hey, I'm thinking about buying this company in Xtown. So I'm not a competitor to you. I haven't pulled the trigger yet. What don't I know? And I will take those owners of those businesses, I will fly to their cities and I'll sit with them. I'll sit with their GMs, I'll sit with their staff. And I'm like, hey, I'm just curious, what don't I know? What are the things that you do on a daily basis? And I'll talk to five to 10 of those. Even if I know the industry, even if I think I know what's going on, I'll still go talk to the other the experts in the field because the owner doesn't always know what the sales manager knows, doesn't always know what the front desk person knows. And talking to those people and getting those insights give me fill in those blanks. Because I'm never making money is the easy part. I'm not going to make more time. And the time that I lose when something fails is what I'm trying to avoid. I know I'm going to lose money. It's a rule when it comes to investing. If I'm not okay losing the money, whatever the money is for whatever I'm investing in, be it a business or property or whatever else it is, if I'm not willing to lose that money, I'm not going to do it because then you're emotionally charged and it eats you alive. It's just a dangerous thing. Anyway, we got to get back to taxes. Okay. Taxes.
- [37:38]
C
Yeah. I actually only have one more tax strategy and this is in a very specific use case. And it's, it's around health insurance. And I know, I know a lot of people, really, I know a lot of W2 people who, when they're looking for jobs, they always look at what benefits can I get by working at this particular job. I have not looked at life that way for a really long time. So I, I don't understand that mindset myself. But I, I invested in a company that this is all they do. They're experts at setting up these group health insurance plans in a very specific way that helps lower a very specific type of tax for the small business owner. And it adds money onto the W2 employee's paycheck. And it gives them some what I think are pretty amazing benefits. And this is all stuff that's set up using a specific IRS rule, just like everything else we've talked about. And this one has to do with Z section 125 of the IRS code. So it's that specific. And it's sometimes called a cafeteria plan. So the company I invested in, they will go in and there, there's some minimums. The company has to have at least 10 full time W2 employees and they can't have more than, I think it's a thousand. I could be off on that. But anyway, There's a range that this plan works for. And again, the companies have to be based in the United states and the W2 employees have to be based in the United States. And what happens is it's fairly simple on paper. Instead of taking the insurance premiums out of an employee's paycheck, post tax, you know, pre tax. And the end result is the employee's taxable income gets reduced by doing that, because you're taking out money from their paycheck pre tax, which makes their total income look smaller to the irs. But we're actually able to put more money onto their W2 paycheck because of that. And it reduces FICA taxes for the small business owner per employee per year of about $500 per employee per year. So the more employees you have, the more you're paying in those FICA taxes. And so this really starts to add up. 100 employees, that's 50 grand in FICA taxes right there that you're just wiping off your books with a switch that you set up one time. And whatever your insurance plan was at the time, it's not going to get any different. It's not going to get any worse. And it's actually probably going to get a little bit better because there's a lot of insurance providers. And this isn't going to replace an insurance plan. It will either add to, or if you didn't have one in the first place, it becomes your insurance plan. So what questions pop into your head about this?
- [41:17]
B
Oh, I see. I think the couple things is helping people understand how just catastrophic insurance is here in the United States. One of my favorite stories about this is a guy went in. It's a very famous story. He walked into a bank and he held up the bank. He goes, I'm robbing you for a dollar. And she's like, what? He's like, I'm robbing you for a dollar. She gave him the dollar. He went, he sat down outside and he sat on the floor and he waited for the cops to get there because he couldn't afford the chemotherapy he needed. So he rather go to jail just to get so insurance in this country is. It's catastrophic. A friend of mine is pre diabetic and he can't get a continuous glucose monitor until he's fully diabetic, which is like, I'm going to give you a seatbelt after you get in a car crash. It's just the insurance in the United States is horrible. How much we pay for insulin compared to the rest of the world. Is obnoxious. It's not like twice as much or three times as much as anywhere. 14 to 18 times as much. So the insurance system here in the US is broken. The tax system could use some help. That's as far as I'm going to go with that unrecorded line. It could use some help. Being able to put yourself in a situation saying hey, I'm a small business owner, I know I'm scaling, I'm trying to make more money, I'm trying to scale this to the next level. Sometimes we forget there's ways to save money based on the basic routines that we're doing now. Be it your legal or your financial or your insurance. With this one that comes in and you can reduce 500. It just, it seems like a really simple process. If someone comes into this and they're a business owner, what are the steps that they need to do? Is it a form that they fill out? They need to sit down and talk? So on how much of their books do they need to open up? What is the policy? And then also you mentioned that the insurance policy stays the same. Can they just move it over? Is it the same company or does that, does it have to be a specific insurance company as well?
- [43:10]
C
The company I invested in and I'm not going to say their name because I don't want to sound promotional about this because a, they're not the only company that can do this. Section 125 has been in existence for a long time. Lots of companies are aware of it, they just haven't done it yet. So that, that's, this is just free information. Lots of health companies, insurance companies can do it and the process for implementing it it you have to do something called a census. It's a sort of a technical term in the insurance industry. But every HR person or every insurance broker knows what a census is. It's basically just a snapshot of all your employees, some of their personal identifiable information and you know, things like their age, weight, sex, etc. And you have to know that information if you're signing up for any insurance product, any kind. It's just the basic comments process. So we take that census, run it through the algorithms and I've never seen anybody disqualified by doing that process. But that's basically the way they cover their buns is take the census. Once they've had that figured out, then it's just a matter of allowing the employees to choose whether they want to get on this new plan, which it's not going to Change anything about what they currently have. It's going to have full vision, dental, doctor's visits and there's going to be some preventive measures built into it as well. There's an app that actually scans their biometrics and they check into it every month. So there's things that help them stay healthy. Incentives built into it. This is the part that's not common to all the other insurance companies. This is why I like investing in this particular company because of that preventive wellness component. And that's what allows them to do this plan with the same premium payments that they were making before. And this is what is called a self funded health insurance plan. So it's, it is funded by the employees. Just if that wasn't super clear before, it is a self funded plan. And other than that, it works just like any other plan would that they're on. And if you're on a bad plan, let's say your plan has really high deductibles and there's no doctors that are in your network. And you know, all these caveats that insurance companies build in to make themselves profits. This is going to be something that you could probably look at and get way better plan benefits by just switching to that in general, whether you did section 125 or not. It would, it'd actually be amazing in those scenarios. But I know a lot of companies are really trying their best to give good benefits because that, that's a big incentive these days. Is a huge incentive. Your health insurance plan. The easier it is to attract good talent.
- [46:49]
B
Absolutely, absolutely. So we've talked about health insurance and we've talked about taxes, which is just oh so sexy. Let's try. And as we wrap it up, I kind of want to rapid fire some questions that I didn't tell you about in advance that I always love to do to give more insights, to give more kind of tips and tricks to the atoms of the world. But 10 years ago, right. To give those little things. So what is, as we go through this, what is an app that you use on your phone or your device that you're like, okay, this one thing, it changed my life. What was this one app that you use? Is there something that you use on a daily basis that really kind of changes your life?
- [47:29]
C
Yeah. And this, this has to do with my background in addiction recovery. Because I learned that if I didn't set up my day properly right when I get up, I have to really get my mind right. Because the way that you think is the reality that you experience, no matter if you're thinking positively or negatively. It's just a fact. And so I use an app called Insight Timer. I use the free version, and it just allows me to look at different meditations I want to do or positive affirmations. And they've just got a library of things, and it keeps track of how many days I've meditated or done affirmations in a row. But anyway, my mind has to be right before I can do anything else productive in my day. So that. That's the one I use every single day.
- [48:28]
B
All right, so that's mine. Now let's talk about health. What is the one thing, the one purchase, the one supplement, the one thing that you use on a daily basis that you're like, God, I'm always going to have this one health hack, this one health thing that you do that has radically changed your life.
- [48:45]
C
This is one of the investments that I made, my very first investment, actually, back in 2016. It was in a company called Nanohydrate. It's a pre workout supplement that uses nanotechnology to deliver really basic nutrients, electrolytes, PCAs, some caffeine. It skips your digestion and just completely hydrates you within seconds. And I use it every single day. Whether I was an investor or not, I would be using it every single day. And I have been since then. So that's an easy question.
- [49:26]
B
Again, I'm trying to do these so that you. I didn't give you any pre prereq on this one. You didn't know these were coming. Again, the simple one. We have to ask all entrepreneurs, what is the one book that you've read that you wish you would have read earlier or one that you're having your kids read already?
- [49:44]
C
The Richest man in Babylon.
- [49:46]
B
Yeah, really good book. Okay, and then since you've been married and you've got little ones, what is the one that has helped you guys the most in unifying the family and helped out the most with the family? What is the secret that you guys do? Like, I have this one trick that this is what we do no matter what. Like, we had one person come on the podcast and they were like, we have date nights no matter what. Once a week, there's a date night. I don't care if we don't even want to talk to each other. If we just go out in the car and go to sleep, we have mandatory time where we have our time. What is one of the ones that you do to keep your relationship as solid as it is?
- [50:18]
C
I participate in my religion faithfully. And I found that if I'm doing that and focusing on that, it's. It's automatically making me want to be a better person myself, which has ramifications for all my other relationships. If I'm working hard on myself, it's going to spill over to everybody else in my life.
- [50:46]
B
All right, well, Adam, how do people track you down? How do they find you? What's the best way to get a hold of you?
- [50:52]
C
I'm. I'm the only Adam Torkelson on the Internet, honestly. And so I've spent. I'm. I've spent a great deal of time managing my online reputation. And LinkedIn and my website are the top two things are going to pop up if you search my name. My company is called Torque Media. It's just a play on my last name, which is Torkelson and Media, because I just own a bunch of media properties. So. Torquemedia.com and I put my cell phone right on the homepage of that website because I just.
- [51:26]
B
I love talking brave, man.
- [51:28]
C
And it. You'd be surprised at how. How few people will actually try and reach out and. And try and get a hold of me.
- [51:38]
B
Want you to remember that you said that, because when we published this episode, I want you to remember no one calls him Good luck. We're going to publish this. You might want to take that down. We're our top 10. You're good luck. So. All right, so if you want to get a hold of Adam, if you want to call him up on his personal cell phone, feel free to go track him down on his website. Thank you for sharing the insights and the knowledge that most people haven't. And again, this, guys, this is just the tip of the iceberg when it comes to either your health insurance or your taxes. There are ways to do this. If you're having conversations with your CPA and you bring these things up and he kind of looks like he or she looks like a deer in the headlights, you've got the wrong cpa. Just, it's the nicest way possible. You want to hire someone. You know, I have rules when it comes to lawyers, and I have rules when it comes to CPAs. With lawyers, you want to hire the person that scares the crap out, and you're so glad he's on your side versus someone else's side when it comes to CPAs. You want to hire this person who just loves this stuff more than they love air, someone who just knows all the ins and outs. My accountant used to be an auditor for the irs. So that's how we play the game. We make sure that we, we, we give the best chance forward. So if you have some of these things and you've googled it and you, and you reach out to them and say, hey, I heard this on this, I heard this on the scale lab, I think it's interesting. What do you know about it? If their response is I've never heard of that before, you get to start looking for a new CPA as quickly as you possibly can because there's so many other things and this is just a brief one that we wanted to go over really, really quickly. Anyway, Adam, thank you so much for coming on the show. I really appreciate you sharing your insights and good luck for everyone talking to you on your cell phone.
- [53:11]
C
I look forward to it. It's a good challenge.
- [53:15]
A
Thank you for tuning in to this episode. A massive thank you to Adam for breaking down the myths and complexities of the US Tax system. His journey from mastering SEO to helping business owners legally minimize their tax burdens is nothing short of inspiring to all the entrepreneurs, small business owners and go getters out there. Your drive to maximize your potential fuels everything we do on this show. Ready to put Adam's tax hacks into action? We've got you covered. We've distilled this episode into a comprehensive action guide. It's packed with strategies like the Augusta Rule, Family Management companies and tax saving health insurance tips. Download your free guide@podcast.im Charles Schwartz.com and remember, as Adam shared, it's not just about working harder. It's about working smarter and leveraging the systems already in place. Now go out there and take charge of your financial future. Your tax revolution starts today.