2024 Platform MASTERMIND: Jackie & Adam Williams: Proactive Tax Strategies For Real Estate Agents To Keep More Of Your Money

Adam Williams:  Well, instead of paying it to Disney or Marriott or the art museum or any other event space, you pay it to yourself so it's right off to the business and you don't have to count the income. So we could rent our home for client appreciation events, holiday parties, shooting marketing videos and not pay tax on that income. So this isn't a huge chunk of money, but it's a super cool story. 

Tim Chermak: This is The Platform Marketing Show, where we interview the most creative and ambitious real estate agents in the country, dissect their local marketing strategy, and get the behind-the-scenes scoop on how they're generating listing leads and warm referrals. We'll dive into the specifics of what marketing campaigns are working for them, how much they're spending on those campaigns, and figure out how they have perfected what we call the Platform Marketing strategy. This is your host, Tim Chermak. I'm the founder and CEO of Platform. I love marketing and I talk too much, so let's dive in. 

Tim Chermak: I want to introduce our next session. It's the final session before lunch and this one's going to be very hyper practical, tactical. It's not like a 40,000 foot macro view about marketing strategy or trends, you know, from a macro level. This is going to be a very specific tactical-level talk about things you can do in your business to save money on taxes, specifically as a real estate agent.

Tim Chermak: So the reason I wanted to bring Jackie and Adam in is that this is the firm that we have hired to actually manage our tax strategy at Platform. So this isn't just a friend of a friend that I thought, oh, they might give a cool talk about saving money on taxes. These are people that we trust with our own money.

Tim Chermak: We also have an accountant, but as they will talk about, having a bookkeeper, having an accountant is not the same thing as having a tax strategist. It's not the same thing. So once you start making, you know, $200,000, $300,000, $400,000 a year in GCI, you realize, "I'm paying way too much in taxes," and there's only so many surface level things most agents know that they can take as write-offs. 

Tim Chermak: And so we got referred to Jackie and Adam actually by our accountants because I kept peppering her and asking her, "What are some things we can do for Platform to reduce our tax exposure?" because we're obviously a remote company. We don't operate factories. We don't have inventory. We don't have machinery. There's not a lot of depreciation happening. Even our laptops for our team, we don't depreciate our laptops. We expense our laptops. So there's not long term deductions we can take when everything is so low cost and remote.

Tim Chermak: And so they introduced us to Jackie and Adam and we've been working with them for, I don't know, the last six months, something like that. And they've already saved us about $300,000 that we would have had to pay to taxes. And we operate with like-- We aim for a 30% profit margin. This last year, it's probably been closer to 20%, 25%, but historically, we try to maintain a 30% profit margin as a professional services company. So for us to create $300,000 to pay this tax bill, we would have had to bring in $900,000, actually really, a million dollars of revenue just to pay that tax bill. And Jackie and Adam worked through the system, worked their contacts, and eliminated that. So the fee we pay them is like pennies compared to the savings that they've created for us. 

Tim Chermak: So Adam, Jackie, if you want to make your way up to the stage here. This is one of those things that it doesn't matter early in your career if you're selling 10 houses a year. You know, you're not thinking about tax strategy, tax disclosure. Once you start making, like I said, $300,000, $400,000, or $500,000 a year, you realize, "I'm sending the government too much of my money." And part of the reason that we worked with them, you guys, those who know me know that I'm very passionate about depriving the government of every possible dollar that I could send them and Adam is one of the few people I've ever met on social media that hates the government as much as I do. 

Tim Chermak: And you know the old saying, "You don't want to have an atheist in a foxhole with you," I don't want to have someone doing my taxes who likes the government because I want him morally to be as offended with me sending money to the government. Whether it's a Republican or a Democratic administration, he's as offended at high tax bills as I am. And so I want a guy like that, who thinks the IRS should not philosophically exist doing my taxes. So that's the best possible introduction I could give you because I think that you are a hero. So thank you, Adam, and thank you, Jackie. 

Adam Williams: I've actually never met Tim until last night. Jackie does all of the work with them, right? So any success that our business has brought to them, it's 100% Jackie. So I went over to the artist earlier and I said, "Are you doing these for every speaker?" And he said, "Yeah." I said, "So what's the deal today? Do they auction them off or what?" And he goes, "Well, I don't know how much of a capitalist Tim is." And my immediate thought is, "This is going to cost me so much money." 

Adam Williams: So, hi. Good to see all of you. My name is Adam Williams. This is Jackie. We'll do intros a couple slides in, but I'm an attorney. I'm actually an entrepreneur. I just happen to be an attorney. We own a couple of different businesses, but at one point in the history of our law firm, we actually did about 250 real estate closings every year, so I feel for you guys a little bit. 

Adam Williams: So in preparing for this presentation, I found some very real, not-made-up statistics that to get a single commission check, you have to endure 4,000 text messages, 3,000 emails, nine empty coffee cups in the back of your car. You do 14 open houses that 12 people show up for, 19 showings, lenders who change the requirements at least four times during the deal, appraisers and home inspectors who have never been in a house in their entire lives, and then, of course, 17 competing offers. But you get to that closing table and you get your commission check and then Uncle Sam takes a third of it. Oh, man. 

Adam Williams: Before we got up on stage, Jackie leans over and she goes, "There's a lot of kids in this audience." This would usually be the R-rated portion of the presentation. Alright, so we can't help you with your clients or your lenders or the lawyers or the appraisers or the home inspectors or any of those folks, but in the next 45 minutes, we can help you keep more of your hard earned money. Cool? I almost did that call and response thing that Tim did this morning. “No, it's gotta be better than that. Come on, who's excited?” There's so many things from his talk this morning that I'm stealing. 

Adam Williams: All right, so my name is Adam Williams. I'm an attorney. I own a law firm called Rust Belt Business Law. We are based in Erie, Pennsylvania. We are a law firm that serves entrepreneurs and small businesses. If you're familiar with Erie, Pennsylvania, it is the least entrepreneurial city in America. It's horrible product market fit. It's not anything I would encourage anyone else to do, but despite that, we're pretty successful. We've made the law firm 500 List of Fastest Growing Law Firms three of the last four years. I forgot to apply one year. We were just on the Inc. 5000 list of fastest growing privately-held companies in the country. We've been certified as a great place to work, which there's only three or four businesses in town that have done that. And a lot of that success came as a result of us just giving a shit about our clients.

Adam Williams: There's the first one, us just caring about our clients and wanting to serve them in better ways, particularly through the pandemic. So that's what got us to here is we did work with PPP loans and ERC credits and EIDL loans and all of these financial instruments that really became popular through the pandemic. And as we dug in, what we realized was a lot of entrepreneurs have the same problem that we had or the same experience that we had. We sit down with our accountants in the first quarter of the year, they throw some numbers on a form, they ship them into the IRS, and they say, "Here's how much you owe. Congratulations." There's a better way, so that's why we're here. So go ahead. 

Jackie Williams: So you want me to tell them about me? 

Adam Williams: Tell them about you. 

Jackie Williams: Okay. 

Adam Williams: I've talked for the first ten minutes. 

Jackie Williams: My name is Jackie. I am a CPA and I did the whole corporate build-my-career-as-a-CPA for, I don't want to date myself, but 15 years. And what really makes us passionate about helping small business owners is that I left my job in the big corporate world and then COVID hit right after that. And so I was working for the law firm and helping real estate closings close. We were able to keep those closing, but we were realizing that small business owners really needed our help and built the PPP program that we helped with and the ERC program and naturally thought, oh, we're actually making a much bigger difference if we can help these business owners save more on their taxes. So that's where our mission comes into play with Pennywise to help our clients save more than a hundred million dollars on their taxes. We got what? 

Adam Williams: We've already done $75 million. 

Jackie Williams: Yeah. Well. 

Adam Williams: Hasn't taken long. 

Jackie Williams: With the law firm, we did that in ERC.

Adam Williams: But the hundred million dollars, that's the annual budget of the city of Erie, Pennsylvania. So we're trying to take that from the government and put it in the hands of small business owners. So that's why we're here. So today, oh man, this has animations. I didn't even know it did this. Nope. We're going to teach you how much your tax bill actually is because I bet a whole bunch of you don't actually know. In fact, if one of you can guess within 10%, Tim will give you a cash prize. 

Adam Williams: We're going to explain the different types of accountants. We're going to go through some common tactics that you should be using. And then despite the fact, was it Isaac just got up here and said lead magnets are dead and lean generation is dead? We have a lead magnet, but it's super helpful. It's going to be some extra tips that you should be looking at. So are you doing this next slide? This is you, right? 

Jackie Williams: Yeah, so I'm the CPA and this is your 1040. Do you guys realize that the number that is the most important on that form is the number on line 24? So many of us think, okay, what is the number I pay in April? But really, what I want to encourage you to do when you get home is to pull out your tax return and look at what your total tax number is because odds are you paid in throughout the year, you maybe have a spouse on a W-2, you might be on a W-2, and that number is probably gonna make you even more angry than the number that you paid in April.

Adam Williams: So this is the top of page two. So I met with a client last week, husband and wife team. I said, "Well, what's line 24 on the 1040 look like?" and the wife knew and the husband didn't. So she goes, she said, "I know what it is." So I said, "Well, why don't you share your screen?" So she pulls it up on the screen and the husband fell out of his chair because, pretty successful business, their tax bill was $1,012,000 and he had no clue. So there you go. If you get nothing else out of today, you can get some anger towards how much you're actually paying. 

Jackie Williams: Alright, and so to follow up what Tim said earlier, there are several types of accountants. And what we're going to talk to you about today is something that tax strategists, a tax strategist would tell you and that is at the bottom of the list. At the top of the list are the types of accountants you're maybe more familiar with, right? They're your bookkeepers, your payroll providers. Maybe you have a CPA that does financial statements for you and maybe prepares your tax return. They all have different purposes and I want to do you a service today by telling you to ask your accountants what they are doing for you. 

Jackie Williams: It is good for you to eventually have all of these. You might not need all of them now, but some of them focus on the past, some of them focus on the future. And so to find strategy, you should be looking for people who are forward focused, right? You should be trying to get yourself into a managerial accountant, a CFO that's going to help you with your numbers, and then you can plan for your taxes. So what we're going to talk about today then are some ways that you can plan for your taxes. Maybe you can fit some of them in before the end of the year. 

Adam Williams: So, as a good example--

Jackie Williams: 2025. 

Adam Williams: I don't remember. Was it Justin? The second speaker, is that your name? Justin? Yeah, so Justin was talking about how he's projecting 120 or 140 transactions this year, right, so he can project that. Well, I bet based on that, we can calculate his average commission and figure out how much money he's going to make through the end of the year. Well, just like calculating potential closings and the revenue and the commissions from that, we can do projections on your tax bill and actually do some things about it. So let's get into it. 

Adam Williams: This is like foundation basic stuff. How many of you have some sort of entity, an LLC, a corporation, an S Corporation? How many of you already have something set up? Fantastic. We're off to a great start. I like to talk about this one first. One, because if you aren't doing this, this is like boom, immediate impact. You think that we're the last thing before lunch, but for many of you, the last thing before lunch is going to be picking up your phone, calling your current accountant, and going, "What the hell?" 

Adam Williams: So entity structure, whatever type of entity you are, most common one for the type of stuff that you guys do, you're going to set up an LLC and you're going to make an S Corporation election, but there's other options out there. So we have clients who may be set up as partnerships, or if they make a whole bunch of money, they may be set up as C corporations. And we think that you should evaluate this at least once a year. This is gonna be particularly interesting as we see some new tax proposals come out of the new administration and control of the House and Senate, so we'll be keeping a close eye on entity selection, but this is not a set it and forget it. 

Adam Williams: It's also something you should not do yourself because we found, we're based in Pennsylvania, there are some really nuanced restrictions, whether you are an agent or a broker or something else. So there's a lot of hoops that you potentially have to jump through and you could get this wrong, but here's why it matters.

Adam Williams: If you're an agent that makes $250,000, so you collect your commissions, you pay some expenses out of that, and you got $250,000 to live off of, you're going to pay $45,000 in taxes roughly. If you set up the LLC and you do a proper S Corporation election, and the way that this works is an S Corporation makes it like a separate entity under the law and you can pay yourself a paycheck just like any other employee would get. In this instance, if you put yourself on payroll at $80,000 a year, that one move, the S Corp election and putting yourself on payroll, you'd have $80,000 of payroll, you'd still have $170,000 of profit. It's the same $250,000 of income, but your total tax would be about $34,000. So that one move right there could save you about $12,000 every year forever and ever and ever. No one has yet run out of the room to call their accountant, but they're probably typing the emails. Alright. 

Jackie Williams: So next, you might already be doing this, but making sure that you're taking a home office deduction is important. And one thing we often find once you do make that S Corp election is a lot of CPAs will tell you, "Oh, you can't take the home office deduction now. You're an S Corp." Well, that's not true. 

Jackie Williams: So, it's calculated a couple different ways. You can do it by taking a percentage of the different expenses that you have for your home office or you can do a simple just $5 per square foot with a max there, but importantly, if you do have an S Corp, you will want to try to get it reimbursed through an accountable plan. And we can give you the slides. It's pretty detailed, but basically, make sure that you're tracking exactly those expenses and calculating it and then having your business then pay you, reimbursing you for the use of the office space. 

Adam Williams: So this is a really great example of where most CPAs are doing you a disservice. If you have an S Corporation or you've done that S Corp election and you ask your CPA, "Can I take the home office deduction?" they're going to say no, which they're technically correct, but they're creatively, completely lacking. Because it's not through a deduction, it's through a reimbursement. So this is one of our great frustrations is there is a way and they just don't care enough about you to actually find it that way. 

Jackie Williams: In their defense, this is where proactivity comes into play versus reactivity. So if you're taking them your tax return at the end, you know, taking all your stuff to get your tax return done, you can't be reimbursed in 2025 for what was 2024. So you're going to want to make sure that you've made this reimbursement so it is an expense on your tax return and this is where we are being proactive. 

Jackie Williams: Very importantly too with the home office is you guys are realtors, you drive a lot, and if you have and establish a home office, any mileage that is coming from your house to wherever you're going for work becomes business mileage, and Adam will talk about how important that is in the next slide.

Adam Williams: Briefly. So just to give you an idea on what stuff you can deduct or get reimbursed for, this was the first slide that I probably skipped over too quickly, but it's everything in your house as a fraction. So how much of it is your home office versus the rest of your house? But we got numerators and denominators in that fraction and we can take out things like the garage and hallways and utility spaces, so we can actually gain that fraction a little bit and you can deduct a little bit of everything, including potentially domestic services. So Tim was talking earlier about buying back your time. If you’ve got a housekeeper, potentially part of that expense, Uncle Sam can help pay for. 

Adam Williams: All right. I don't want to spend a ton of time on vehicles because we actually have two bonus tips and there's one of them that I decided is going to be more important than this, but the bottom line on vehicles, you guys put more miles on your cars than any other profession out there. I pulled the stereotypical real estate agent with the face on the side of the Hummer, right? Personal injury lawyers do the same thing, whatever. That's me. I have this sweet, it's a 69 Chevy camper special for those of you who really know old trucks, air ride, sick car. Anyway, I'm a car guy. 

Adam Williams: So, couple different options if you're gonna get a vehicle, and I would encourage you, if you're thinking about getting a new car, and most of you are going to purchase instead of lease because the mileage, you're far exceeding whatever a lease is going to give you, there are benefits to purchasing a vehicle by the end of this year that on January 1st, the benefits become significantly less, which I'll explain. But if you've got your S Corporation set up or your separate entity set up, you can actually purchase or lease that vehicle in your business's name, so it keeps things separate and you get some liability protection, which the lawyers always like. 

Adam Williams: You should be tracking your mileage. Every single one of you should have some sort of app because that's the easiest way to do it. And literally, every time you move, it'll ask you whether you were driving and whether it was business or personal. You should all be tracking that because a lot of what we're teaching you today is just deductions, right? What are expenses that you can take on your taxes to lower your income? Well, the number one reason that the IRS disallows deductions is because of inadequate documentation, so let's fix that today. 

Adam Williams: We should get some sort of royalty from some of these app mileage tracker things. We'll figure that out. If you have a leased vehicle and if you use that vehicle exclusively for business, you can write off your entire lease payment. Pretty cool. If you purchase a vehicle, this is my favorite game to play, all right? I'm going to skip the rest of this because if you're going to buy a car for the business, just ask somebody. It's not super complex, but here's why the timing is really important.

For more of this episode, listen on Apple or Spotify Podcasts.