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- [00:00]
A
What if the career setback you're still replaying is actually the best wealth strategy you'll ever stumble into? Because it forces you to build new skills, new discipline, and maybe a new plan that finally makes you unstoppable. Hello, and welcome to another episode of the Duct Tape Marketing podcast. This is Jon Jantz. My guest today is Jack Ojoe. He's the founder and lead advisor of Ojo Wealth Strategies, one of the nation's largest tax focused wealth management firms. He holds multiple professional designations, including a whole bunch of letters and a master's in taxation. But before starting the firm, he was a major League baseball umpire, advancing to AAA and winning the Joe Ryan Award as the highest rated minor league umpiring prospect. But today we're going to talk about both his journey and his new book, Too Smart to be an Umpire. So, Jack, welcome to the show.
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B
Thanks, John. It's a pleasure to be with you today.
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A
All right, so the first question we just need to get out of the way is what do you think of the rule change on balls and strikes this year that's going to go to the majors?
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B
I am actually in favor of it. Yeah. And the reason why I'm in favor of it is because you've had, you have three boxes on the tv, one from the home team, one from the visiting team, and they're normally set by some intern that works there. It's not the actual strike zone, by the way.
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A
Oh, is that okay?
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B
One for Major League Baseball and the human being. So let's get one right. Yeah.
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A
Do, do you feel umpires feel that way too? Because again, I know they're going to, they're going to test it with, here, we're going to do the whole show on this. I know they're going to test it with, you know, only get a couple challenges. But, you know, every batter thinks it's a ball and every pitcher thinks it's a strike.
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B
So I was going over with one major league umpire, his retirement plan. He was in his late 50s, and I told him he was financially independent, was working because he wanted to. I said, how much longer do you want to go? And he goes, oh, a few more years, Jack, till I'm 59. He goes, they bring in the electronic strike zone. He goes, I'll go till I'm 79. Won't be under any pressure. Nothing along those lines. So I think they like it. It creates more jobs. It makes the job less valuable in my view. Why do you need to pay somebody $400,000 a year when you have a phone that can get the p. Right. So like anything else in our society, AI, you'd be taking away another job.
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A
Yeah. All right, so let's talk a little bit about your journey. I mean, you. While it sounds like you love umpiring, it was a bit of a career disappointment. So how did you turn that into where you are today?
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B
Well, yeah. Yeah. During the eight years I was in the minor leagues, I was smart enough, no pun intended, to. To work in the off seasons as an accountant. I had good accounting jobs in New York City, and so I was gaining experience. And when I got my release, I was surprised because I was on the verge of the major leagues and there was, there were, I write about it, too smart to be an umpire, but nevertheless, I decided to focus on getting as much education as I could. I didn't know where it would lead, but I was so hurt from the baseball experience that I'd work 9 to 5 and then at night I spent the next four years getting my CPA, CFP, masters in taxation, securities and Insurance, License, not knowing where it would lead. And so that was the focus, getting education and try to reinvent myself from the ground up.
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A
So, I mean, would, did you look at it then as. That's Plan B. I don't know what, what Plan B looks like, but that's plan B.
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B
Plan B was always a career in public accounting, but as I was in public accounting, I realized how boring that was. You know, your professional baseball umpire had 30,000 people in the stands and I found myself counting hats one day, verifying an inventory, so. So that's how I transferred into wealth management, too.
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A
Is a, is a minor league umpire in particular not paid enough for that to be their full time job?
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B
It's poverty. It's an absolute disgrace. And that goes for the players too, man.
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A
So you're getting on the buses with them, huh?
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B
No, we drive our own cars on our own transportation. It's even worse than people think. Yes.
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A
Yeah. So. So you. So most of them were doing like you were another gig, which was some mechanic work.
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B
Right, right.
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A
Tax prep.
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B
In, in my case it was accounting work. A lot of people in baseball work for ups, it seemed, in the, in the off seasons, but yeah, unless you had the resources from family, which most people did not, you had to find something to do once the season ended.
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A
I, when I was in high school, a friend of mine worked at, worked for the Worlds as a clubhouse attendant. So every now and then I got to fill in and do that. And one of my favorite Things to do was bring the after game meal to the umpires because they'd always slip me five bucks or something, so. So even in poverty, they were taking care of the little.
- [04:52]
B
Absolutely, absolutely. So manager, the manager of the Padres. Now, I don't know why his name escapes me, but he was actually our clubby in Charlotte in Double A and actually rose to become a major league.
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A
So now fast forward a bit. You've built one of the nation's largest tax focus wealth. Firms talk a little bit about, I mean, was there a secret sauce? Was there an approach to client relationships? Did your past kind of really guide you? What was your, what do you attribute to your success?
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B
I guess I think people like the honesty and I think that's from the umpire in me. I don't know if they think I'm the brightest bulb, but they know they can trust me. And after going through the baseball experience, I did believe in protecting against worst case scenarios. When the terrorist attack took place in 2001, if you remember back then, it wasn't what the thinking was, will there be another attack? It's a question of when. And I prepared my clients for worst case scenarios. When 2008 hit, they were prepared, although I didn't know what a reverse credit default swap was at the time. And the business really prospered, like went to a whole nother level after 2008, growing by 400%. But I think just emphasizing client service, a Four Seasons type of service with clients was probably the biggest.
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A
So I'm sure that you are very aware of this. Certainly a lot of business owners that we work with, tax planning means giving their stuff at the end of the year to their accountant as opposed to anything that would be proactive. Do you, I mean, what's the biggest misconception you hear from clients, especially businesses, when it comes to taxes and wealth planning?
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B
Sure. When I meet with a client for the first time, I always ask them what their biggest expenses and they say their mortgage. And I go, no, it isn't. And they argue with me until I explain to them it's their income tax. Everybody knows their refund or what they owe, but they don't know they have much greater control over that expense than they think. I think people also think that wealthy people don't pay taxes when they do. And arranging your affairs to reduce your taxes in a way that's consistent with your goals and objectives is critical for clients. And again, Max, maximizing retirement accounts, having a side hustle I think helps employees, but arranging your affairs to pay the Least possible tax in a way consistent with your goals is important.
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A
So do you want to get into the nitty gritty on that a little bit? I mean, are there, are there specific things? Again, a lot of our listeners are entrepreneurs, small business owners. Are there, are there things that you just consistently see they're not doing or that they clearly, you know, could or need to stop doing or they could do better?
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B
Well, one huge idea, if you're dealing with a sole proprietor with no employees or few employees that makes a lot of money, they ought to consider a defined benefit pension plan. We've had clients that have million dollar incomes that we are able to get 5 or $600,000 write offs by having defined benefit plans. So figuring out the best pension plan for yourself is critical for a business owner. The second thing would be entity structure. Should you be an S Corp, llc, what have you, should you have your children on the payroll? And things along those lines, what type of accounting method you should have cash or accrual to get into the nuts and bolts of those things. But again, realizing you want to make as much money as possible.
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A
So I mean, are there. Again, I know the people are in different situations, but when some, somebody came to you with a blank slate and said what should my entity be? What is kind of your standard advice?
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B
Yeah, default. I think if your income is over 100, $150,000 a year, you should be an S corporation because you can play around with what reasonable compensation is and be able to avoid Social Security taxes. If you're making under $20,000 a year, just being a sole proprietor is fine, but you can avoid a lot of taxes just with a single 401k plan. Things along those lines. So, so it depends over when you get over $200,000, then we could have some fun with other types of pension plans. And if you're, if you're in a service business, you should probably never be an accrual based taxpayer because payables are going to be greater than what your receivables are. So, so again, it's very, it's not one size fits all.
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A
So are there what people might call creative or lesser known deductions or credits that, that you see people are really not even aware of or certainly are underutilized.
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B
I'm just harping on these pension plans again, I hate to say it, they're missed by everybody. They're missed. And the timing of income at the end of the year, being able to postpone receipts, things along those lines. There isn't a magic Thing, a lot of loopholes have been closed. What used to be pretty cool in the 70s and 80s, they're gone now. So again, those are the things you have to look at. Start with pension plans and then we can talk after that.
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A
So I work with a lot of entrepreneurs that end up having really great year, really bad year, really banner year. It seems to be kind of up and down. And so a lot of them come to the end of the year and it was like, oh, crap, we've had a banner year this year, which is great. But I'm an S corp and, you know, now I'm going to get a giant tax bill. What are some things that people can do when they have more revenue than expected?
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B
Well, you're looking to buy equipment and take a big Section 179 deduction. So if you have a big income, example, you could buy a vehicle, if it's over £6,000, you can write off a very large vehicle. I would look at things that you want to buy for your business and that you can write off in one year would probably be the biggest thing. On the other hand, if you have a really lousy year where you actually lost money for the year on a personal basis, and we've done this for many clients who's looking to do Roth conversions, you're taking your ira, you're paying taxes on it, it never gets taxed again, and you're kind of creating income where there isn't any that exists and utilizing that negative opportunity for something positive for the old age version of yourself.
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A
Yeah. Another hot topic that I run across a lot is, especially for owners, obviously, is salary versus distributions. You know, you have a lot of people giving the advice of I'll pay yourself just enough that the IRS thinks that's okay, and then distribute because you're going to save on some taxes. Is it that cut and dried?
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B
No, not at all. We have a. The tax system is always going to be complicated because we derive our income in different ways. I've represented clients in many audits over the year. You're trying to sell a reasonable person on what is reasonable. In this situation, you have to pay yourself a quote, unquote, reasonable salary. So if you made $100,000 for the year and paid yourself $10,000, most people would say that's BS that, that, that's not correct. But if you paid yourself 40 or 50,000, $50,000 in distributions now, you could kind of make a case that's reasonable. So, so it, again, it depends on the situation. There's people, you know, you don't want to be a pig with this stuff. You're, you're, I, I found the IRS auditors to be very reasonable people. Believe it or not. You can always get one that's an exception. But most of the time they're trying to be reasonable. And, and most times you can settle these things in minutes. Quite frankly, if you're a pig, you're going to get slaughtered. You know, that's the way I see it.
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A
So talk a little. I know this might be a little dry, so make it, try to make it sexy if you can for me. But depreciation, equipment purchases, you know, like you're talking about vehicles. So let's say this probably is going to verge on the pig, but let's say somebody buys a recreational type of vehicle, $100,000, you know, conversion van type of thing, also own a business, you know, where's the line on. Are they, are they using that for business? Are they not using that for business? You know, where does that get a.
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B
Little fuzzy if you're using your car and your business? Again, we have to sell this reasonable person that we're using this for business. And painting a sign on the side of it is not, you know, you're going to fly when loaded. The IRS is playing a game of where does this number come from? How many miles did you drive? And there's apps I use one called Mileage iq. You don't have to think about it. So they're looking for how many miles did you drive? And improve it. And if you have this documentation you're starting to sell the auditor that these things are real. So, so again, if the vehicle's over £6,000, you write the whole thing off in one year. And then I would strongly advise people to use some kind of documentation tool. Mileage IQ is excellent. If you're lazy and don't do that, then having your oil changed at the beginning, end of the year, where you could document odometer readings, that would be a good thing to do. But you're playing a game of documentation I found with the office.
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A
Yeah.
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B
As long as you could document things and again sell a reasonable person on things, you're going to be okay. That's the line, if you will.
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A
Have you seen a lot of organizations have distributed workforce these days? So people working out of their homes in 15 states, what is, what does that do for the business entity? Tax picture and then also what does it do for the individual? So if an individual is employed, they have to keep an office to say, I mean is that a deduction for that individual?
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B
Sure. The way I would do that. If they want to be smart about it, if they can get with their employer, they can change their compensation structure around. So that part of this is salary and part of it is a direct employee business expense. So if you, if your office is in New York City and you work in Idaho, let's say you make $100,000 a year, you could restructure your salary. So $15,000 of it is reimbursement for office expenses non taxable to the person, item deductible for the employer. And and then again I use an app called Domicile3 65 because I spend most of my time in Florida and some of it in New Jersey. So if I was examined by New Jersey, this app tracks me every 15 minutes and I attack summary to my New Jersey return. I report New Jersey income, but only for the days that I worked in New Jersey. So again this documentation game comes into play. But structure I advise the umpires in Major League Baseball to do this to try to restructure their salary. So part of its expense reimbursement.
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A
Would health insurance fall into that category? Let's say somebody gets their spouse is they're they're able to get on their spouse's plan but it's $300. You know, to add could the employer pay that and actually deduct that. And that would be pre tax or not.
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B
The employer could use some sort of Section125 plan or if there's a high deductible plan, something along those lines can be a win win for the employee and the employer. In my business I've had high deductible medical plans and I contributed money to our employees HSA accounts that they could take with them. It was not a use it or lose it feature. And, and that was good for both me and for them.
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A
Yeah. Where do you fall on 401ks? They I again, I know it's people probably trying to sell another tool, but I see a lot of, I see a lot of people kind of bashing 401ks as not a great business tool or not a great employee tool.
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B
Anybody that bashes 401ks you should run away from like the place was on fire. And for people it's one good thing that Jimmy Carter did as president was put in the 401k plans. Sorry to say that everybody should make, almost everybody should make maximum use of 401k plans. Where they're missed by people is A lot of times I've seen us two spouses working where one person makes big money and another one has some sort of part time job and they this mental accounting on money. They should both be maxing out 401k plans. Because I found that a lot of people in America when they go to retire, end up with a paid off mortgage, which I'm a huge fan of, by the way. I'm a big believer in paying off your mortgage when reasonable to do so. I haven't had a mortgage on my house in 25 years. But they come in with these 401k plans that are seven figures and then they live off of them, they downsize their home and they have more money to play with. But that's the. For most Americans that make under $400,000 a year, $500,000, you're crazy not to max out your 401k plans. And you know, my three adult children, I preach that to them and I'm glad they listened to me on it. I go, max it out, max it out. And because you're reducing, in my opinion, your largest expense, which is your income tax, you're cutting that down and building up this lump sum of capital you need to retire. And this business that you have large taxes in retirement is also a bunch of malarkey. You know, the tax rate under $90,000 is 12%. You have $3 million in your IRA. Take out 4% a year, 120 grand, you got 90,012% and a $30,000 standard deduction. But how is that wrong? So that's how I feel very strong.
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A
Well, so talk to talk one more time about putting children or spouses on the payroll because I think that's a, that's something that a lot of people overlook as well.
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B
First of all, children can only be on the payroll if you're a sole proprietor or a single member llc. If you want to avoid payroll taxes on. And they have to do work and it should be documented. But if you pay your child that works in the business $10,000, let's say you avoid all the Social Security taxes. They get taxed at that rate, which is hardly anything. And then you put that in your 529 plan with a regular business owner that goes, I make too much money for any child. They that's your own, that's your own loophole to get, you know, you probably save three to $4,000 just having your kid on the payroll for $10,000. That's it.
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A
And you're giving them money that you would have probably given them anyway.
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B
My kids were on the payroll. My kids were on payroll for a long time. I remember my son, who is now my youngest, is now 30 years of age. When he was four years old, my wife got a letter from Social Security saying here, Mr. Financial Advisor, Social Security wants to know what my son Matthew did for work. And I said, my son worked on the shredding machine in the office. He stuffed envelopes and he told everybody at his preschool what his father did for a living, which significantly resulted in new business and sent that in and never heard from them again. That's great. So, you know, but he did work in the business. You know, it's a question of what is it worth. You know, the tax law for a millionaire is the same for a poor person. And you make that argument, my son modeled for the firm brochure. How is his modeling different than somebody else? Unless you're the laws for them and not for me. So they're the arguments you could make there. But again, you have to. Can't put them on the payroll for a hundred thousand dollars.
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A
Well, I will say, you know, for a lot of entrepreneurs, you know, a spouse, particularly a spouse that is doesn't have another career, you know, outside the home, I mean they're, I guarantee you they're working.
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B
My spouse, my, my wife Eileen has been on the payroll for 30 years, always maxing out the 401k plan. And she could tell anybody what she did because she did work in the office and worked very hard. But it's two pension plans, one for me, one for her, and now they're telephone.
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A
Well, and, and she contributed Social Security, I suspect. Right?
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B
Yeah.
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A
So she's going to get a Social Security check that she wasn't going to get otherwise.
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B
Yeah, 100% absolutely correct. Yeah.
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A
Awesome. Well, for those of you that like it when we talk about AI and marketing and creative things, I'm sorry we had to get down into the weeds on another really important, as you said, the biggest expense for a lot of businesses or certainly a lot of business owners. Zach. But before we let you go, is there someplace you'd invite people to find out more about your work? To find out about Too Too Smart to be an Umpire.
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B
Yeah. There's a website, toosmarttobean umpire.com. they can go on Amazon and read all the reviews that are on Amazon right now. I'm thrilled. I'm a first time author. So when Too Smart to Become Be an Umpire came out, I wasn't sure I was going to go over and it's, it's borderline bestseller list right now. So there's a website too smart to be an umpire.com and also OJo Wealth Strategies, which I'm the founder of. People can check out that website. Jason Gordon and Anthony Sandomierski are running the firm now, but they. Jason. Jason's 35 and he's worked in my office since he was 16 years old. So they're well credentialed and great guys. So that's where they can find out.
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A
Awesome. Well, again, I appreciate you taking a moment to stop by and hopefully we'll run into you one of these days out there on the road.