001 | An Introduction to Proactive Tax Planning for Entrepreneurs

How much quicker could you be financially free if you didn’t have to give so much money to the IRS?  Imagine paying up to 40% less in taxes and using those savings to create cherished family memories, supercharge your business growth, or invest in real estate.   

In this opening episode, Vital Strategies founder Patrick Lonergan challenges the status quo of accepting a large tax bill and discusses the importance of proactive tax planning.  

Over the past two years, Patrick’s proactive tax planning service has successfully saved our clients a remarkable $8.5 million, with an average annual savings of $280,000. Tune in to kick start your journey toward financial freedom, take control of your taxes and gain the tools to live a great life.  

Key Takeaways include:  

  • Proactive steps to minimize taxes
  • Aligning your tax strategy with your financial goals
  • Four Levels of Tax Planning


Read the Transcript

Submit questions to the podcast


Sponsored by Vital Wealth

Music by Cephas

Produced by BrightBell Creative

Research and copywriting by Victoria O’Brien



Episode 001 | An Introduction to Proactive Tax Planning for Entrepreneurs

Welcome to the Vital Strategies Podcast, where entrepreneurs learn how to pay less tax, build wealth, and live a great life.
As an entrepreneur, finding a proactive tax strategy can seem impossible. Tax laws are constantly changing, and CPAs are tax preparers, not tax planners. You need tools to stay ahead of the game.
That’s why we’ve created the Vital Strategies Podcast, where entrepreneurs learn how to pay less tax, build wealth, and live a great life.
Let’s get started.
We know how frustrating it is to have your CPAs be reactive versus proactive. The only planning they seem to do is making sure the forms get filled out correctly that gets sent into the IRS. There is a better way. You deserve to pay less tax and use those savings to build wealth and live a great life.
We know what it feels like when everyone in your professional sphere doesn’t have a clue on how to help you save money on tax so you aren’t writing six or seven figure checks to the IRS. Think about what it would mean to cut your tax bill by ten, twenty, even forty percent. What would you do with that money?
Think of the memories you could be making with your family on vacation. The growth you could see in your business because you’re able to reinvest. Or the cash flow you could create by buying real estate. How much quicker could you be financially free if you didn’t have to give so much money to the IRS?
The tax code is complex. There isn’t even a clear answer on how many pages the tax code is. It’s somewhere north of 10,000 pages of regulation. Unfortunately, the tax code doesn’t just stop with your bookkeeping and accounting. It takes into consideration legal structures, investments, cash flow, insurance, and real estate.
If you don’t have a strategy to integrate and coordinate all of those areas, you’ll be leaving money on the table. You could probably figure all these things out, but you’re busy. You already have a life to live and a business to run. You don’t need a second job. Here’s an example of what I’m talking about.
We had a client come to us that was making roughly 2 million a year. The accountant could have made a simple election on a form that would have taken less than 15 minutes to fill out that would have saved the client over $40,000. The difference between filing on schedule C and taking a small wage and filing on schedule E cost the client a lot of money.
We got this corrected for the next year, along with several additional strategies that saved the client over $200,000 in income tax. The problem with taking matters into your own hands is that it’s easy to make mistakes. You can make mistakes by missing opportunities because you’re unaware of what’s out there.
You can also make mistakes by leaning on so called tax experts that have one specific tactic that will magically eliminate your tax bill. The problem there is you can end up with the Department of Justice knocking on your door because you’ve unwittingly committed tax fraud. The problem with not doing anything is that it leads to bigger and bigger tax bills year after year as your business grows.
That leads us to the next problem. It’s just not right that the IRS takes more and more of our wealth every year. If you’re in a high tax state like California or New York, you can pay over 50 cents of every dollar you make in tax. Now CPA business models aren’t designed to align with a growing entrepreneur’s needs.
There must be regular and proactive meetings to make sure that the tax strategy aligns with the current business objectives and the goals of the owner. There are practically an unlimited number of planning strategies available to you. Someone needs to understand your situation and all the opportunities available to entrepreneurs to pay less tax to make sure that your goals align with the strategy.
Through the Vital Strategies Podcast, we’re here to challenge the status quo of just accepting a large tax bill. We want to give you the tools and resources to be able to take control of your taxes so you can grow your wealth and live a great life.
The way that we can do that is by aligning your goals with four levels of tax planning. Here are the four levels.
Level 1
Level one strategies are clearly outlined by the tax code and are widely used. Level one are considered good bookkeeping. That don’t take any investment. We look at simple, often missed strategies like IRS Code 280AG, 199A, and 132J4, which are known as the Augusta Rule, Qualified Business Income Deduction, and Deducting Employee Fringe Benefits. Then we look at opportunities within your entities to make sure that there isn’t any way to shift income and minimize the tax.
Level 2
Next, we move on to Level 2 strategies. With Level 2, the IRS gives us guidance, like in Level 1. But it takes investment. The most common level two strategy that people are aware of is funding a 401k plan.
We have a number of wealth building strategies where clients can save up to $500,000 or more in tax deferred plans that are clearly laid out by the IRS.
Level 3
Level 3 strategies take investment and are strategies that the IRS does not like because they can be abused, but they’re permitted if done properly.
We have to make sure that every i is dotted and every t is crossed. We also have to make sure that we’re using third party administrators that understand the pitfalls, and make sure these strategies are executed in a way that minimizes the risk of problems with the IRS and Department of Justice.
Level 4
Level 4 tax strategies are tax fraud. We bring these up because there’s people out there selling these strategies as legitimate, which might include strategies in Level 3 category, but how they are applied is abusive. There has to be a legitimate business purpose for a tax deduction. The strategy that gets you a huge deduction, and you don’t have any strings attached to the funds that got you the deduction, is going to have problems.
I promise, you don’t want the Department of Justice knocking on your door, because some guy had a strategy where you could take money, put it in an offshore Captive insurance company, and put 25% of your business revenue through that entity, and not pay tax on those dollars. Just because someone else executed a plan for you doesn’t mean you’re immune to the fallout of the consequences.
Ignorance of the code is not a defense in court. So, the process for cutting down your tax bill is simple.
You need a clearly defined what is important to you.
Then start aligning strategies with your goals.
Then finally,
Start executing.
We always start with Level 1 strategies to minimize your tax bill.
Then we move on to Level 2 strategies. And sometimes we stop at Level 2 because a client’s allocated significant money to tax planning and wealth building. It doesn’t make sense to pursue Level 3 in that scenario. If we fill up all the opportunities in Level 2, we move on to vetting strategies in Level 3.
Obviously, there will never be a time where we’re recommending a Level 4 strategy. We err on the side of caution and are working with your CPA to make sure we are looking at your strategy from every angle.
We will give you an action item at the end of every episode to help you pay less tax and build wealth.
Feel free to submit your questions at vitalstrategies.com/questions. Here on the Vital Strategies podcast, we will help you pay less tax by giving you the tools and resources to send less money to the IRS. We are on a mission to see how fast we can help our clients and listeners save 1 billion in tax.
We would rather you have those dollars versus the IRS taking them from you. We know you’ll continue to build wealth, contribute to the economy, and live a great life with those dollars. The key to making change is to take action.
Your action item for this week is to go to vitalstrategies.com forward slash episode one and download our free resource that will help you clarify your top three financial goals for this year.
Then in future episodes, you’ll see how you can align the strategies that we discuss with your goals. The problem with not taking action is you’ll keep having to write larger and larger checks to the IRS. You will be confused as to why nobody seems to solve your tax problem, and you’ll have to work that much harder to make financial freedom and peace of mind that it brings a reality.
Take action to cut your tax bill.
Create more security for your family and your business.
And reduce the stress that comes with having your financial life disorganized.
Tune in for our next episode, where we will take a deep dive into level one planning and how you can save hundreds of thousands of dollars from level 1 tax strategies.
I need to remind you that the information provided during this podcast is intended for informational and educational purposes only. It is not a substitute for professional advise. The views expressed are my own and do not represent the opinions of any entity that we do business with. Every individual situation is unique.
Therefore, you should consult with a professional in an appropriate field before making any decisions based on the content of this podcast. This includes seeking professional legal tax and investment advice from someone who is obligated to act as fiduciary to protect your interest.
Never make important financial or legal decisions based on what you hear on this podcast without first consulting with a professional who can consider all the facts and circumstances of your situation. I hope you find the information in this podcast helpful and informative, but again, please consult with a professional before acting on anything you hear in this show.
As always, thank you for joining us, and don’t forget to rate and review our podcast wherever you listen to your episodes. And if you found any of this information helpful, please leave that in the comments. Have a great day.

Consulting Clients Have An Average Tax Savings Of $280,000

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