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Foreign.
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Welcome to another episode of the Duct Tape marketing podcast. This is John Jantz and my guest today is Peter Holtz. He's a former Big Four accountant and multi company CFO turned founder of Peter Holtz CPA a fast growing firm recognized on the 2025 Inc and 5000 at number 3075 and name to the top 25 IPA top 500. With decades of experience in tax accounting and CFO advisory, he helps business owners legally reduce their tax burden through proactive year round planning. So Peter, welcome to the show.
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Thank you very much. You got it exactly right.
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So we are recording this. People may be listening to this at other times of the year but we're recording this right around the March 15 deadline for a lot of businesses to file taxes. So it kind of leads me to teeing up this question is what's the real cost in waiting till now to think about or have this tax conversation?
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It could be like tens or hundreds of thousands of dollars. And if you, you know, the problem is you gotta structure yourself and make sure you take, get all your write offs in place before year end most of the time. Right. So that December 31st timeframe is very important. And what's critical about what we do and what business owners should be doing is they should be like planning their taxes year round. They should be having quarterly meetings with their tax preparers, tax advisors, whatever and, and really tax strategists. What we recommend is a solid tax strategy to make sure that of where they are, where they're going, how much money they're going to make, what they need to set aside and everything else that they need to do.
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So particularly folks that you know, they have an accountant or a CPA that, that really kind of just does their compliance, you know, with tax reporting. Where do you see companies like that leaking the most money? And I guess a follow up question is why isn't their CPA telling them?
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Well that's the, that's one of the biggest problems in the industry, right. And there are 1.2 million people in the United States license prepare taxes with the IRS and only about 1100 or 1100 of us are certified tax planners. So it's an additional education you can get if you're really interested in helping your business clients. It's not that difficult to do but it teaches you some of the more basic and more advanced tax planning techniques to really reduce taxes. And you know, when you think about it, it's basically 99.993% of that 1.2 million are basically compliance guys, they put the numbers in boxes. Sometimes they don't even think about the numbers they put in the boxes. Like I've seen businesses like, with no assets. Like I've seen a gas station tax return filed with no assets. I'm like, how do you not have any assets? Like do you take everything out with your hands and throw the gas? And I mean it's just impossible. So, and that's really a shame. I think it, I think the industry to a certain extent has been more compliance oriented in terms of putting the numbers in the boxes and doing that's it. And they've not thought about really what can I do to save the client's money. And there's a lot, there's a lot of stuff that the tax code lets them do in terms of depreciation, bonus depreciation, you know, the Augusta rule, paying your kids, how to structure things, should you be a C Corp. S Corp LLC are all really important.
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Well, and I want to come back to the, I do want you to address where you commonly see companies leaking, you know, places. But I want to follow up on what you said about the CPAs. Is there also an element of the industry that is sort of risk averse? And even if something's in the tax code, eh, it might get looked at harder than the, I mean, I've heard that from accountants. It's like, oh, we probably don't want to do this because even though it's in the tax code and it's legal, it's going to get your return looked at. I mean, is there sort of an overarching attitude that leans towards that?
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There is, there's a lot of real conservatism when it comes to that. And you know, I don't know what to say about it, but it's wrong. I mean, really, if it's in, you know, Congress writes the tax code and last year we had the big beautiful bill, for example, that allows they do it so that people will do certain things so that the economy gets better. You know, you think about, just think about depreciating, depreciating real estate. The long term real estate appreciates over every year at 4%. Right? Over the long term, 4%. But yet we can write it off. We can depreciate, right? It is the only appreciating asset we can depreciate. And the reason the government does that is because they want places for people to live. Because a civilian population that's living inside is much happier than one that's living outside. And they want people to work. Right. They grow the economy by offering these tax rules to incentivize investment, you know, and incentivize certain things. Low income housing credits, solar tax credits that we had and a lot of were eliminated. Right. The electric vehicle tax credit that we put in place. All of these things, you know, were so important to the changes that the government wants to make in economy and leveraging really the entire economy to try to move in the direction that they want to move. And it's a lot of it's built into the tax code.
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So the tax code is what, upwards, 700, 800 pages. Okay, so, so how does somebody like you keep up on the fact that it may change, I mean change dramatically this year?
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Yeah, I mean what we do is we, it's continuing professional education. We make sure we understand and focus on, on, on the things we need to focus on for our business owners. We just continue to study. Study. Right. And I think what's interesting is I think now we know with a and so forth, it's going to allow us to leverage to study even more. Right. And to get into the nitty gritty and really expand our range of services and help people save even more money. Things like, you know, more exotic things like certain types of trust, property trust or vocal trust, irrevocable trust. All those other things I think are going to become more and more important as we continue to grow and increase complexity.
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So, so let me loop back to what are maybe less three or four the most common things that, that you see all the time. You've mentioned assets a couple times, so depreciation is probably one of them. But what are some of the things that, that you just see time and time again?
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I see people that don't reimburse themselves for home office. I see people that don't take the Augusta rule, which is ability to rent out Your personal residence 14 days a year to your business and create tax free income. I see people not paying their kids. I've heard other saying, oh, that's a red flag. Well, nonsense. Okay. The tax law was established that any child above age 7 can work in your business. You can pay them not a fair amount for the work that you're doing. And you're going to have to do payroll or create time records and give them a job to actually do it. But it to them, to a child, you know, if you pay them $15,000 a year and they're monitoring your social media and maybe they're helping you with whatever, to them it's at their standard deduction. So it's essentially tax free income, you
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know, and you were going to give it to them anyway.
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Yeah, exactly.
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Because they needed the money so they were going to get it one way or another. Right.
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I see people spending money on their kids, their sports, their music lessons, their schooling, whatever it is. And I, and these people are using after tax money instead of pre tax money. The more you can shift from after tax to pre tax, the more money you save. And you know, if you use all the rules properly, if you're a business owner, let's say you're making $150,000 a year in a business, which, you know, it's okay. Right. But you've worked your business, you've made yourself a decent profit, probably you can turn close to a hundred thousand dollars of that 150,000 into tax free money. You know, you properly manage and control your business, you're gonna have your home office be. I mean, I see, every time I see a contractor, right, you know, their primary storage facility for a contractor is a garage, right? Yeah, every single contractor's garage is full of stuff. Right. And it's funny, when I talk to clients who are contractors and the husband and wife is there, it's like I always mention that and always like, oh yeah, for sure. Or I'll have guys that deliberately, maybe they have a bigger piece of property and build a barn on their backyard, in the backyard to store their equipment, their trucks, their extra materials, whatever. And they never write it off because nobody asked. This is really where it gets in my profession. Really. Where's the problem is people don't ask questions. Like every time I talk, I start talking to somebody, I'm asking, you know, or what's your business? Like what are you actually doing? How do you do it? What is, where do you work? Are you working out of your home? You know, are you paying your kids or whatever? How many this, how many? And it's like you, you would be. I literally have people who are still, they have their parents living with them, supporting them and the parents are helping in the business and they're giving their parents money and supporting them, but they're not taking it off. But even though the parents are doing stuff to help them. So it is, you know, trying to think of. Everything is about ask. It's about, it's not about the answers. It's about asking the right questions.
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Right, right, right. I actually have my office in my home. So you just gave me a hint. I should hold a retreat once a year for 15 days and, and, and lease the, or rent the, the home to my business, huh?
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Absolutely. Well, you know what, quite honestly, I have an attorney in the northeast that's a client of mine that does major events and the equip and like he's got a very large place, a very large house and he does major catering events out of his house for clients that are business building. And if he would go to a Hilton or Four Seasons or you know, a large hotel, you know, the Augusta rule still applies. It's what you would pay for an equivalent space outside. So sometimes we're taking very large, you know, imagine 12 events at $20,000 an event for sure. A tax free income because it's like. And a lot of man, you know, there's a lot of people that, that can benefit by that.
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So when you first sit down with a business owner, are there some pretty telltale signs that they've probably got a tax problem versus a cash flow problem?
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Yes, absolutely. What we do is we, when we sit down with a business owner, we get your last two years tax returns, business and personal. We study them, we understand exactly what we see on the tax returns. Then we kind of go back and we ask them questions about what we see for the business and everything else like that. And there are some telltale sign like I, you know, I made that point about the gas station with no assets, right. Or it's like, hey, you know, you're. And it's always the balance sheet, but you can really find a lot of mistakes. Like they may, you know, we know they may use this type of business where they may use credit cards, but yet there's no credit card liability, you know, for what they've already spent money on. Lots and lots of stuff that we can see in the numbers that just look weird compared to other businesses, other people in the same industry.
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Right.
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So those telltale signs are really, it's all in the number. And I'll have people come to me and start talking to me and they say, well, and I'm like, I gotta look at your number. Right. And once you start, oh, you know, I've been doing this for near 40 years, right. So once you start looking at a business and you kind of know what to expect in terms of margins and everything else like that in terms of bottom line. And when it's not there, you try
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to figure out, so you also offer CFO services or on a virtual basis, is there a point at which a, a small business needs that level of thinking? Or is it like day one to
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A certain extent you need some financial acumen, certainly from day one. Okay.
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Yeah.
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Certain elements of the tax code from a business owner are really tricky. Probably the trickiest one is sales tax. Right. And every state has auditors that go out there that treat every city. Yeah. Everybody tries to find additional money for their people. And the sales tax can be really tough as a regular tax aren't hard enough, but, you know. Yeah, but really as a business gets bigger and really they're thinking about growing, really, they're thinking about, you know, what they're going to do next. Should I buy this next vehicle, Should I buy my competitor? Should I get a building? Should I Do you know, what's going to be the long term impact to me, not only from a tax perspective, but also financial perspective is really important. Can I afford to do this? What does my business look like? How is my marketing paying off for me? You know what I mean? And just all the different questions that you want to ask as a business owner, having another person who knows numbers, right? Because here's the thing. Most business owners understand what they do, right? They know how to fix a car, they know how to pump gas, they know how to do a restaurant, they know how to do catering, they know how to do construction. Whatever it is that they know how to do it, man. But when it comes to the numbers and the compliance and the, you know, how are my numbers going to fall in the next couple years, studying that is really important and having just another set of eyes to say, hey, man, you know what? I think I want to buy my building. And I'm like, okay, what's the, what's your current rent for your building? Right? Okay, whatever it was, 10, $4,000 a month, you buy the building, how much is your loan payment going to be? $3,000. Well, that's an easy one, right? Because you're buying a building, you're getting depreciation, you get the White House or whatever. You know, looking at those, break even, even understanding break even. And what you have to do and what your margins are can really, I mean, can be, you know, a night and day for a business owner.
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Talk to me a little bit about the mindset that you see. I know I've worked with thousands. I've done this 30 years too. I've worked with thousands of businesses and profit seems to be a really misunderstood and often maligned word. The relationship that businesses have with profit really seems screwed up. How do you help fix that?
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And I think I give a very good point, and I think it relates To I think that mindset relates to the fact that when most people get, if they start their own business, most people get started in business and they come with the attitude of I just need to make, I just need to pay my bills. I just need to pay my bills. So they're kind of going along or working their butts off trying to get to this level, then they start paying their bills and they level off. Right?
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Yeah.
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Then they don't say wait a minute, I should make this. Built this business. Sorry I said building. But make this business pay for my retirement, put money away for my health care, put money away from the college education. And what I'll see is that people go along and suddenly they got a kid that's got to go to college, they find another 30 grand a year, they step it up. So why not step it up and push it all along the way and factor in your retirement, factor in your medical, factor in your kids care, factor in everything as part of your utilities for your business. And you never see, you rarely see people factoring in save a savings plan into their business operations. And that is really.
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Well, we talked about it before we jumped on recorded here. You know, we're both fans of Mike McAllowitz's work profit first. And I think as simple as that idea was is it really did ch. You know, the idea of actually instead of paying all the bills and going, I hope there's some left over. It was really more of just what you said. It's like, no, this is a bill, profit's a bill, you pay it first. And there does tend to be a real kind of we'll work to the level of what's left. Right?
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Exactly, exactly. And it's not, there's nothing bad about that. It's just people's, they know what they don't. You know what I mean? And that's one of the things I like about Profit first and what Mike has done is that he's, he's educated people on, you got to pay yourself first, man. That's what you're in business to do, right. A lot of people love the freedom in being in their own business. They love not being their own boss, but it can it. If they don't take care of themselves, it can be, you know, a heavy load. I remember once I met a pool contractor that was in his 60s and he spent his life a good 20, 30 years building pools for rich people in one of the wealthiest communities in the United States. And he ended up broke because he never watched his number. And he never took care of it. And it was like, it was sad. You know what I mean? I would see pictures of the works of art that he built. And, you know, I never want to see any of my clients go down that road.
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So if you were advising people, whether they call you or anybody they're working with currently, what are a handful of questions that they, regardless of the relationship they have with their tax advisor, they should be saying, hey, wait a minute, ask me about these four things to get better, sort of strategic picture rather than just like, add up the numbers and fill out the forms.
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Yeah. I think you want your tax person or your business advisor or accountant basically to ask you questions like what? Tell me about your business plan. What do you think you want to do? Are you going to grow? Are you going to stabilize? You're going to. You're going to sell? What are you thinking about doing in the next three to five years? I think you want them to ask them about your family and your personal life and who you support and everything else like that so they can maximize their. Your deductions. Do they want to get into your business and talk to you a little bit about how they're planning to grow their business? Okay. And I think they want to. You want them to ask you questions about. This is an interesting way. What have you paid for outside the business that you may be using in your business? I will run into plenty of times where it's like, you know, I bought this pickup truck and I never really put it in the business, even though I use it for the business. It's finding those misplaced assets. You know what I mean? And it's really what you want is somebody that's going to ask a lot of questions and really get an understanding, not only your business life and your personal life and where you spend your money.
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So this is a tricky question. The only tricky question I'm going to ask you.
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Okay.
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How far do you think people should push it? So there's some things it was like, that's kind of gray or, I mean, it's in the code, but you really would have to document every second you did that. Or so, I mean, how far do you just kind of say, let's take advantage of what they're giving us without killing ourselves?
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You know, I think, you know, you. The line is tax law. Right. I think you want to go up to that line.
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Yeah.
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Okay. In all cases. Right. I'll give you a good example. I have an airline pilot that once wanted to claim to be a real estate Professional, yet he was getting a very substantial W2 from the airline business. Well, upon further research, airline pilots can only fly 20 hours a week. And when this guy was on layover or waiting to fly, he was doing his real estate portfolio. He had multiple properties, he was managing contractors, he was collecting rents, he was doing his. So we got him declared a real estate professional even though under full time W2. And it worked. And now he can take all the depreciation from his real estate against his W2.
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Sure.
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And it was pushing the limit because the IRS came back and they said to us, this guy's got a six figure W2. What are you guys crazy? And it's like, ah, federal law, Federal law says he can only fly 20 hours a week. It's a part time job. And we were able to prove that he was working 25 hours a week on his real estate portfolio.
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Yeah, well that's a great one too because you had the backing of that. You know, it wasn't him just saying, oh, I only work 20 hours a week. It was literally like, I can't.
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Yeah, exactly. And, and you know the other great news, he was an airline pilot. And you know, airline pilots are fastidious about keeping your ex. He had all the contemporaneous records that we could possibly need. And the IRS was like, well, we got nothing. Right. So sometimes it's work challenge when you think. And once you get through that challenge in one year, he's been able to do this now for five, six, seven years, which has been amazing. So I think you want to take it to the tax law. I don't think you want to break the tax law. I think everybody needs to understand where the Internal Revenue Service is right now too. Okay. Wherein they're in a mess. It is a, it is a, I would say unqualified disaster. The Internal Revenue Service, their staff is going to cut 25% they're on. And this is, these are not my opinions, these are facts. When they. And you can chat gbt this stuff or whatever from their announcements. When the government is shut down, their half, their operation is shut down. They've actually told people when you file you need to have your refund direct deposited. Otherwise you'll wait another six to eight weeks to get a paper check. Because they're not processing paper and they're letting their automated systems run, but they're not processing the paper that would feed into the automated system. So you know, 52% of the letters that are being sent by the IRS are incorrect. It's probably Much higher now because of the current situations. And I mean, there's nothing the people in the IRS can really do about it because, you know, we've had conversations we've never had with the Internal Revenue Service before where it's like, hey, we need to talk to a revenue officer to help this client take care of a balance past due and to work out a payment plan. And the IRS will tell us, well, there's nobody available. So it is. That's one of the things you want to factor in terms of what you decide what to do and understanding that the Internal Revenue Service is not the efficient organization. I won't. I'm not even going to say it that way. It's not as good as it used to be and it never was the efficient organization. I mean, Covid, during COVID so much stuff disappeared. So many things disappeared. Paper that was filed and was. It was just a nightmare. I mean, literally millions upon millions of documents that weren't dropped.
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I'm fearful we're going to go down a rabbit hole here that we won't be able to recover from.
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We definitely could if you want to.
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So, Peter, where would you invite people I appreciate you stopping by. Where would you invite people to learn more about the work that you do
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and connect with you@go.peterholz CPA that's P E T E R H O L t z c p a.com backslash duct tape.
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Awesome. Backslash duct tape because he's going to have all kinds of freebies for you there.
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Yeah, we got some goodies in there. We have self assessment PDF we have in there. We also offer a free tax strategy meeting with our team and it's not really anything to do with the irs, but we can definitely take a look at that tax strategies you currently have in play and look at the last couple years tax returns and see what we can do to help you out, man.
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Awesome. Well, again, I appreciate you stopping by and hopefully we'll, maybe we'll run into you one of these days out there on the road. Pete.
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Sounds good. Thanks, John.