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Tax Strategy: Igniting Your Unique Wealth Formula With Lorraine And Jim Conaway

 

Your CPAs are your defense players; they’re defending the goal. Your tax strategists are the ones putting the points on the board. They make sure that you’re using the right and most efficient strategies. Join Moneeka Sawyer as she talks to Lorraine and Jim Conaway about tax strategies. They believe that success is truly about education, support, and the art of supercharging your unique style of wealth accumulation. Find out the difference between a CPA and a tax strategist. Discover the process and learn how they evaluate your taxes today!

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Tax Strategy: Igniting Your Unique Wealth Formula With Lorraine And Jim Conaway

Real Estate Investing For Women

Using their extensive experience, knowledge and success in the world of tax strategies, real estate investing and other wealth vehicles, Jim and Lorraine used their straightforward, big-hearted style to guide thousands to ignite their unique wealth formula. With decades of success, designing and implementing customized wealth solutions, they appreciate that success is truly about education, support and the art of supercharging your unique style of wealth accumulation.

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Jim and Lorraine, welcome to the show. It’s nice to see you.

It’s great to be here. Thank you.

We’re excited.

Lorraine has been on this show before. I’ve met Jim several times. We’re all in a mastermind together. I was so excited to share the two of them. Lorraine is so brilliant and shared such good stuff about the CARES Act. They’re such an incredible power couple. The 1 plus 1 does not equal 2 and equals 11. That is true. I’m so happy to have both of you with us. Let’s start with a little bit about the story of how you put this company together. You cover a lot of good stuff like all sorts of strategies around real estate. I remember when I first talked to Lorraine, my first thought was, “Where have you been all my life?” You talk about all these different strategies. The one that I am engaging you for is taxes. Let’s talk about how that piece started for you.

You would think that being a tax expert, a CPA, would make you a tax strategist. That is not the case.

It organically came together. We met in the business.

My first thought was, “Where has she been all my life?”

In the business, years ago, we were working at an insurance company. We started our company in 1996. We worked for ten years side by side with the CPA. Along the way, we started investing in real estate. My father is a contractor. He always had real estate. We had the real estate going on the side. We had our business working. We’re learning about taxes and finding that there was an enormous amount of money in the tax return. I was frustrated like, “Why are people talking about this?” Even in our situation, when we got our taxes done, our CPA said, “You could have saved $18,000 if you had this type of structure.” We’re like, “You tell me after the fact.”

 

We have to spread the word, educate people and let them know that there are better ways of doing things. That you could keep much more money in your pocket and then get the education on real estate, not just investing but understanding how to maximize your real estate portfolio feeding in the tax strategy with the real estate and business. We’re business owners and entrepreneurs. Over the last few decades, it all came together like a recipe going, “This tastes good.”

You look at taxes differently. You are business owners. You two are not CPAs. You have a CPA team. You marry the business mind with the CPA mind, which I love. Talk to us a little bit more about what makes you or your team different from other accountants.

I’m going to jump in here and dovetail into something that Lorraine talked about. That was how we came to be about how we are. We learned by working side by side with CPA and learned an enormous amount working with that man and his practice. What we found was that by doing the tax strategy, we were having a greater impact than we were working with people’s assets. We learned to turn our world upside down and work from the tax down. What makes us different? Is there isn’t a class out there? There’s not a designation out there that says, “You’re a tax strategist.” This is where people disconnect. You would think that being a tax expert, a CPA would make them naturally a tax strategist. That is decidedly not the case.

My analogy is a sports analogy. Think of your CPA as your defense player. They’re preventing points by defending the goal. If you think about their language, that’s how they operate. “Can I defend this with the IRS? Does that make sense? Can we justify it?” Those are the words that you hear from them. They’re defense players. They’re not putting points on the board though. That’s our job. If you’re using the soccer analogy, think of your CPA as the goalie. Think of us as the kicker, the point, the guy that gets the ball and puts it into the other net to score points.

We came about how we are by organic growth, most of it from our painful experience. When you’re trying new recipes in the kitchen, that’s always a mess in the kitchen. What our clients get to enjoy is the fact that the recipes are all nicely laminated in cards. We’ve gone through. We know how long to leave things in the oven. The biggest difference is we are the people that are putting the strategies in place before the taxes.

Other people have brought it to our attention that said to us, “Do you know why you’re unique and why you’re different and why you have success?” I’m like, “Tell me why.” They say, “It’s because we focus on the implementation.” When you meet with somebody and they said, “You could get an entity, maybe do a cost sag on your real estate, deduct a certain way or your accounting, £6,000 on a vehicle and all of these things.” What happens is there’s a lot of information out there like on the internet. It’s like, “Who do I trust? Where do I go? What is the right fee?”

It’s like, “I get an entity. What’s the state that I live in? If I get an LLC, is it a partnership? Is it a disqualified partnership? Do I file as a SEVIS or C corp?” There are all these other questions that people are left with going, “I got information but who has time to sit with me, hold my hand and say, ‘This is too complicated. It’s too much. My CPA tells me to get an escort but my attorney tells me to get an LLC. Which one is right?’” What we like to do is get both parties on a joint call together and discuss it. Let’s get all on the same page. We’re advocates about teams, getting the right team on your side, working together collaboratively and not having to redo your strategy and focus on implementation. Almost all of our time is focused on implementing the strategies.

What I love is that if you’re working with a tax strategist, you have all of the team members available to you. They all understand similar strategies and are having conversations. I’m not talking to my lawyer bringing information to my CPA. I’m not playing the middleman. With me not knowing what I’m talking about in the first place, which is why I need them. We’ve got a middleman that’s educated, doing it themselves and understands the process.

Don’t treat people based on their checking accounts. Treat people based on who they are and provide as much value as possible.

In the past years, I’ve been using a tax attorney. This speaks to what Jim was talking about. The reason I used a tax attorney is that he’s on my side, not on the IRS’ side. He’s not playing defense. He’s playing business coordinator for me. In part of what he does for me if I were to ever get audited, as he represents me in court and that thing, they handled that whole picture. Jim, what you were saying about how we’re not playing defense rationally doing an implementation. You’re making the goals. How does that work? You are a CPA firm. Their responsibility is to the IRS. Could you speak to that a little bit more?

In my next appointment, I’m going to be sitting down with a CPA who only has several years of experience in advanced planning. I’m going to be sitting with him to review a tax strategy for a client. What I do is cook up all the good ideas that would apply to this client. We sit with our CPAs and edit them. “This would work but less of it. This would work, let’s do more of it. This won’t work at all. This works brilliantly.” We go through and do the checklist. When we do that, we have a tested strategy. We also put it in writing. The client has something to hold on to. I want to do 1, 2, 3, 4, 5, 6, 7, 8 different strategies.

I’ve got the rules and description. I understand it. If I want to read the document, most of our clients browse it. They don’t read it. They have a deliverable that they understand what the tax team is supposed to do. Here’s a critical element. The tax team also gets a copy of it so they understand what the taxpayer needs. If you were our client and we’re looking forward to working with you, you would get a deliverable that tells you all the strategies.

The tax team gets the same deliverable so that when they’re looking over the tax organizers, there are 50 pages of questions that nobody knows how to answer. You do your best and send it down. Our tax people look at this stuff. They see the strategy and don’t see the information they need. They know there’s a disconnect. Reach out to the client and ask them for the information. “How big is your house?” “It’s this big.” “How big is your studio with the lovely rice paper screen in the background?”

 

That all goes in there. You can see immediately that there’s an enormous amount of connection. Imagine for a minute that we’re sitting with you as our fresh client and we suggest, “Your tax strategy calls for a C corporation. Do we have a network partner that knows how to set up C corporations and that’s their focus and they’re good at it?” They’re already exercised and working with us as part of the team. That’s the thing that helps with the implementation. Everyone in the network that’s already been through the process knows. You don’t have to explain it. It’s one and done. Once you go, “I approve of this strategy,” then it’s off to the races. Everybody knows how to do what they got to do.

In the case of an audit, do you support your clients? How does that look?

What it looks like is we take a 40-year CPA and put that 40-year CPA between us and the bad guys. That 40-year CPA will handle most audit questions. Remember, every strategy is A) Legal, B) Approved, C) All the documentation is in the strategy. It’s like, “Here’s the homework. Where’s the mileage log? Where’s this log? Where’s that log?” We collect the data and put it together. We go and handle the audit. You should also know, this is one of my favorite questions is it a red flag?

I hear this all the time. When you get, “That’s a red flag,” don’t do and write that off. That makes your return auditable. Many right eyes I haven’t taken because of that.

Not true. It’s a myth. The thing that is more likely to cause an audit than anything else is the size of the numbers on your tax return. The larger the numbers, the more likely you’re going to be audited. Think about it. Logic. If you are a tax auditor-manager person, would you audit somebody who has had a $50,000 tax return? Would you audit the guy with a $500,000 tax return? It’s $500,000 all the time. What this tells us is that we have, roughly speaking, a 3% chance of an audit. If you went Vegas and you knew you could pull that handle on the one-armed bandit and you had a 97% chance of winning, how often would you be pulling that enamel?” We don’t want to push the IRS but we want to do everything that we’re legally entitled to. That’s what the strategy is all about.

It’s about following the rules. Another thing that I see is that when there are errors like we had somebody who doubled expense something or there’s not a matching item when it’s not matching, the IRS is going, “Why is this not matching? You got 1099 for X amount of dollars but you reported a different number.” Those types of things are errors. One thing I would say though, from my experience is that people who have very clean accounting and books either have a bookkeeper or they’re doing it themselves but they’re using like a QuickBooks process.

You get clean PNLs, no commingling of money in your corporate checking or your real estate, keeping the real estate separate from your checking account, you pay your groceries and your bills. You got to keep your real estate separate. When you have clean accounting then it’s so much easier process than going through an audit. When it’s commingled and muddy like that, it’s a nightmare.

Do you help people to understand what all of those things are? What is it exactly that we need to avoid this idea of commingling and stuff like that? It’s bigger than the account that you pay for your groceries and business account. I’ve got five different businesses. There are intricacies to that too. Do you help guide people on how to make that last money?

Typically, we’ll ask people, “Do you have a bookkeeper? Do you have a separate checking account?” Starting with the basics of having a separate checking account. When people ask us about those questions, we will go through them and go deep. When they don’t ask us, it’s because we’re covering so much material and education. Everybody’s so different. Some people have different specific needs and goals that they want to know answers to. They might be selling a property and are like, “I don’t want to do 1031,” or whatever it is. It’s all over the map.

We will help the people as much as we’re able to help the people. What we would do normally with bookkeeping is we’ll bring in somebody who is a CFO-level bookkeeper, have them audit the books and let us know exactly what they see. I spoke with a client. In 2021, we brought in our bookkeeper who was trying to be nice to the client, politely pointed out that there were some small changes that they needed to make in their bookkeeping. It turned out that was $540,000 worth of loss carryforwards that they had never reported. The bookkeeper found this error. They save taxes on over $500,000. It can be very valuable to have somebody go through and make sure the books are nice and neat, somebody with an accounting background, not just a bookkeeper.

Tell us what kind of person should engage you. Does it matter where a person lives?

It doesn’t matter where a person lives. They can live in any of the 50 states. We’re nationwide.

People who are alive. That’s the first criteria.

Typically, the people who have more complex and multiple returns have greater value. The more opportunity on saving taxes is the greater value. If you could save $500,000 in taxes, that’s great but there’s no minimum. We work with everybody.

Lorraine and I went through a season where we weren’t financially successful. This is way back when we were quite young. We remember what it was like and how it was when we got treated well and we didn’t get treated well. We committed that we weren’t going to treat people based on their checking accounts. We were going to treat people based on who they were and provide as much value as possible.

Let’s talk about costs. What is this going to cost? Are you going to give blissful investors a special deal?

To do an evaluation takes us quite a bit of work. The process is we reach out and we’re going to have the link. You go to the link. It’ll be a pink link.

They made a landing page especially for my community. As we were talking about it in the green room, I was like, “It has to be pink.” That’s what that reference is.

They will have the opportunity to raise their hand and say, “I would like to have my taxes evaluated to see if there’s any money to be saved.” The evaluation does take time and effort. It’s normally $497. How much are we charging the blissful investors?

We’ve discounted it to $97.

Save taxes so you can turn around and invest that money.

That’s the deal you ladies are getting. When you go to the website, which is BlissfulInvestor.com/taxstrategy, that’s where you would get the Last-Minute Tax Deductions, which is the free report.

It’s 2021 and they will be useful for 2022.

You also get the added benefit of 80% off of an actual consultation with them. Is there anything else you wanted to add before we go into the three rapid-fire questions?

I’m looking forward to people saving taxes so they can turn around and invest the money.

Find more real estate.

That’s the big thing. That money is saved for our businesses. Grow your real estate fempire. That’s what I’m calling it. Become a real estate mogul. It’s good to understand that this is a business strategy. Thank you for mentioning that. Here are our three rapid-fire questions. What’s a super tip on getting started in real estate investing?

The first thing is you have to understand that getting started in real estate means moving. I don’t care what you do. There’s no shortcut. It’s getting moving. If you’re in action, you can do something like wholesaling or sandwich places. You can save money and buy income properties. You can use your tax savings to help you save for your real estate. Get in motion. That’s the bottom line.

What is one strategy for being successful in real estate investing?

Saying yes to your wife.

That’s good advice. We need the guys to read this.

It’s managing the manager. Before you manage the manager, do some serious due diligence and find the right manager because you can have the most amazing property in the great area and grants and have terrible management. If the management is not responsive to the tenant, the tenant is going to move out. You’re going to have a vacancy and then the property is going to go downhill. Management is crucial and critical. Managing the manager is important and making sure you have the right manager.

Make sure that they’re going to be responsive to you, the investor.

You guys don’t do turnkey properties but you help people to find them to be working with teams that find you properties that have leverage. In real estate, we love to talk about leverage. Part of that leverage is our relationships. If you’re going with a turnkey operator or something like that, they have many properties so they can put pressure on the managers if things start to go sideways.

We do have vendors with properties with turnkey. We have already done the due diligence and have our properties with these vendors.

 

What was the cash-on-cash return for that one investor?

It was about a 20% cash-on-cash return. We also have amazing non-recourse lenders, which we can explain at another time.

We have to talk much more. We’ve got lending, turnkey, notes, self-directed IRAs and so many amazing things. This is why I was like, “Lorraine, where have you been all my life?” They’ve got all the different pieces and you’ve got access to them in one place.

The network has developed over the decades. Somebody said to me, “Do you know how valuable your address book is?” We don’t have address books but what I’m talking about is your network, your Rolodex. I was like, “I didn’t pay attention because I’ve been doing my job and working in expanding and getting all the pieces and all the people to bring it all together to create great success.”

I like both of you to answer this. What is one practice that you do daily that contributes to your success?

For me, it’s saying, “Yes, dear,” multiple times a day and staying very close to our real estate vendors and various network partners.

We don’t want to butt heads. Although we both meet with people, we have different roles in our business and working together. One thing for me is I focus on the critical things that I have to get done for the day before I even open an email. I have to get control of each day. Stay focused and accomplish what I said I was going to accomplish.

Thank you for that. We do have EXTRA. We’re going to be talking about the Augusta rule, which is a tax write-off that nobody seems to know about. It’s so interesting because when I did my tax evaluation, Lorraine was like, “You’ve heard about the Augusta rule. Why are you not using it?” I was like, “Can I use it? I’m just a little guy. What is this?” It could have saved me $20,000 in taxes. We ran the numbers. I’m super excited about it. It’s simple and available to many different people that wouldn’t expect it. That’s one of those little strategies that is often missed. It shouldn’t be. We’re going to talk in detail about that in EXTRA. Did you want to add anything to that?

No. I’m looking forward to speaking about that in your EXTRA.

Ladies, if you are subscribed to EXTRA, stay tuned. You’ll get to know about the Augusta rule. If you would like to subscribe to EXTRA but you have not yet, go to RealEstateInvestingForWomenEXTRA.com. The first seven days are free. Get in there. Seriously, this is the time to do it. If you don’t love it after seven days and you’ve gone through the content, you get to make that choice. For those of you that are leaving Jim, Lorraine and me, thank you so much for joining us for this portion of the show. I hope you enjoyed it and got great value. I look forward to seeing you next time. Until then. Remember, goals without action are just dreams. Get out there, take action and create the life your heart deeply desires. I’ll see you soon. Bye.

 

Important Links

• Jim Conaway and Lorraine Conaway
• Lorraine Conaway – Previous Episode
• BlissfulInvestor.com/taxstrategy
• RealEstateInvestingForWomenEXTRA.com

 

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