Ep. 5 | Introduction to Specialized Tax Services
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John Tripolsky:Hey, everybody, and welcome back to the Mr. Roar show brought to you by the Monthly Recurring Revenue Institute. I'm John Topolsky here from the MRRI team. We got a great topic as always. Today, we're gonna really dive into what's referred to as specialized tax services.
John Tripolsky:So with everybody that's been in the industry, you're looking to get into it, this may actually be something that you're not familiar with. I know we get a lot of questions on our community pages on this at events, emails, etcetera. Just really people looking for more information on this. So kinda scrolling through our Rolodex, if you will, we went directly to the source, directly to the most interesting man in tax. As you may have heard When I tell you who it is, that's a a good little tag that's been associated with his name, which is perfectly, perfectly a fit for that.
John Tripolsky:So we're talking about Julio Gonzalez. So Julio is actually the founder and CEO of Engineer Tax Services Inc. I believe in this episode, we refer to it as ETS. You may hear others refer to it as ETS as well. But, really, the in a nutshell, the focus of ETS really was to bring specialized engineering tax studies to mainstream America.
John Tripolsky:So, basically, what that means is taking, really, services that have been held we can call it held captive, but really shielded from normal businesses and individuals. So really they've been available for a while to Fortune five hundreds and public companies. But really we're looking at this from a perspective of really introducing you potentially to it, but not just introducing you to it. Really giving you a little bit more of the detail on what goes on in their world, some of the services that they provide, and thus services that you can offer your clients as well. So let's dive right into it.
John Tripolsky:You're gonna be blown away with this one. Julio is a wealth of knowledge. This gentleman has been on many, many, many news networks. He is the source of credible information for so many. We look forward to this one.
John Tripolsky:Hopefully, you do as well. Enjoy the show. Hey, everybody. Welcome back to the mister r show. As promised, we have a fantastic guest on with us today as we jump into specialty tax services.
John Tripolsky:So if that confuses you just a little bit, that's good. Don't be afraid. Don't get off. Don't log off. Don't start writing down notes, freaking out, saying I have no idea what this is.
John Tripolsky:Obviously, we have Julio with us today. So Julio Gonzalez, as you just heard the intro for, we could've went on for a long time. He's got quite a resume to add to it. And, obviously, Chris Pacquero is on with us as well too. Julio, how are you today?
John Tripolsky:How how did you how did you get in this position?
Julio Gonzalez:How did you start ETS? Well, good. I you know, everything's good here, hot and humid in Florida. Well, look. You know, I've been doing this since 1980.
Julio Gonzalez:I've been doing some type of tax work since the, early eighties. And, you know, in 02/2001, what I realized when I was doing big working in big accounting firms is that we were able to do tax planning and eliminate or minimize the tax liabilities for our Fortune 500 clients. And I just realized that that resource and those services, especially tax tax planning services, didn't exist outside of the big eight at that time, which was now the big four. And so in 02/2001, it was planes, trains, and automobiles going to the across the country and sharing with them that there's things we can do as engineers, as scientists, as consultants to help their help their clients with tax planning. And, it's just been a passion.
Julio Gonzalez:It's been a passion of love, and, we've been doing it for a long time. But, you know, every day I'm reminded by clients that we've helped save tons of money and keep their doors open and grow their companies and keep employees and hire employees that, you know, what we're doing is, just truly magical.
Chris Picciurro:Absolutely. Well, I am giddy, because this is Chris. I am giddy to have Julio on today. I don't get, too giddy too often. I'm always excited, but, and this is really special because what Engineer Tax Service does is that it helps tax professionals really maximize their value and it is in lock stop with the MRR Institute and what Mr.
Chris Picciurro:R teaches people. So excited again with Julio here, the most interesting man in tax. And Julio, I'm gonna toot your heart a little, but you're one of the hundred most influential people in accounting. I would argue top 10, to be honest with you. Accounting Today said the top hundred.
Chris Picciurro:And I really admire the work that you guys do. We are yeah. And so what we want to talk about today is how you can you give us a little bit of of background on when I know I know we talked before the show about a big event in your life that really picked off tax planning and strategy, but, you know, who engineer tax service tax services services? And can you give us kind of a 30 foot 30,000 foot view of what specialty tax services are? Because a lot of the people that listen to this podcast, they might have a niche.
Chris Picciurro:We we really teach them to have a niche, but a lot of them are general practitioners just getting started or maybe they've been in practice for a long time. So what are, yeah, what are specialty tax services? Well, it's real simple. What it is is it's tax credits,
Julio Gonzalez:tax, specialty depreciation, tax deductions. So specialty taxes, tax credits, tax deductions, and grant services. Really, it's three core services that help lower the taxes for all small business owners through accounting firms, and we're really just trying to bring to the accounting firms these type of consulting and planning programs that allow them to help their clients. Now, you know, not every accounting firm is gonna have a room full of engineers, right, that are doing things to measure buildings and determine how much a building can be depreciated quickly, or they're not gonna have a team of scientists over in this other room that are determining r and d tax credits and other types of employment tax credits. Right?
Julio Gonzalez:So we become that resource for them. You know, like you and I talk, the accounting firms and the accounting people, they can't do everything. Right? And they can't know when like, when I started accounting in the eighties, we didn't change the tax code every day. Right?
Julio Gonzalez:We went twenty, thirty years without changing the tax code, and then all of a sudden, you know, it's ping pong, right, changing tax code with whatever the new president is, and then we have COVID, and then we have all these inflation issues, and so we change the tax code every day, and so who could keep up with it? Now we have all these green tax credits in this country. How can the accounting firms keep up with all these? How can, how can they help their clients? So we just become that outsource for them.
Julio Gonzalez:We have their we have their engineering department right here. We have their scientist department over here. We have all the interpretation of all these green credits in our tax law department. And so, look, our bottom line is to help them help their clients so that their clients are going online and saying, why didn't we do this, right? That's the that's the one conversation they don't wanna have with their clients, but they're having more and more of those conversations.
Julio Gonzalez:Why? Because everyone's going on TikTok and they're going on all these other Instagram and other social platforms to find out about taxes. They see it and they're like, well, I coulda bought that car and wrote it off there if it weighed 75 you know, you get the gist. Right? So, we're just helping to get ahead of this
John Tripolsky:a little bit. So you guys are really empowering, other tax pros. So you guys really are the engine behind the scenes, but also just empowering them as a whole with all
Julio Gonzalez:the knowledge and tools and everything they need. Correct? We have to because I'm just afraid that the accounting world has been inundated with tax changes, tax code changes, tax law changes, constant evolution of tax codes. And what happens? They become so compliance based just trying to keep up with the code that they can't do the tax planning.
Julio Gonzalez:Right? So they're going to their clients and saying, hey. We put everything in the computer and you owe $10,000. You don't wanna have that conversation. You wanna go and do the tax planning and go to the client, look.
Julio Gonzalez:You owe 10,000, but I did this and this and I saw you had this, and now we're getting you a refund. Right? That's the conversation you wanna have with your client. And you should have that conversation with every one of your clients if you're doing tax planning for your clients. But, you know, 99% of them out there are doing just the compliance.
Julio Gonzalez:So we've gotta change that. Right? And we gotta help these accounting firms stay in business, and not get taken over by AI and, other things out there.
Chris Picciurro:Yeah. I think a compliance heavy firm, compliance kills. But, you know, it it it could unfortunately could take a toll on your house. It could definitely gonna take a toll on your, and your capacity if it's so seasonal. And focusing on the tax planning strategy is amazing.
Chris Picciurro:And I think so we've I'm going to talk about our private CPA practice, just a little bit because we've been in the subscription model for about a decade, and I spent the first decade of my career turning and burning. But what happens is, is once you change things around and you really focus on the tax planning and strategy, you're going to add a ton more value to your clients. But when you start doing that, you need the tools to do that. And there's no way I can like in our private CPA practice, we're niched in real estate investors. But there's no way for us to know every tax credit.
Chris Picciurro:And just like a general medical doctor, and no, they could diagnose something they could identify when you need to see a specialist. But they can't be the specialist and you really don't want them being the specialist. So we started working with Interior Tax Service, I'll refer them as ETS and their amazing team quite a while ago, and we've had our fun of successful client cases. Now we have been working in specialty taxes for about a decade. What will happen was is we are working with a variety of vendors, for each each type of case.
Chris Picciurro:And it was just much it's it was a large portfolio of vendors to manage. When I say vendors, I shouldn't even say vendors. They're really your partners. They could be your partners in helping the client. And in many cases, if you put the time into it, they could be a strategic revenue partner and they could actually generate revenue for you and your firm and to be actually compensated for your time and efforts.
Chris Picciurro:The great thing about ETS is they're able now that we work with them, I don't have to manage a bunch of relationships. They have specialists in each of these tax strategies. And trust me, it's going to make you look good as the tax professional and your clients will be very happy. It's a great way for retention. So we've had a lot of success stories with with ours.
Chris Picciurro:And guess what? Sometimes you might have a client that thinks they're eligible for something. And once in a while, you might bring in an ETF. They might say, I'm sorry, you're not eligible for this credit. You're not the bad guy anymore.
Chris Picciurro:Right? It's like when you're saying, Hey, daddy, daddy, can I have a sleepover? My princess? What'd mommy say? You know?
Chris Picciurro:So it says the tax professional working with them is amazing. So, Julio, I want to kind of touch on just about 30,000 foot view. Some of the most common, some of the most common specialty tax services that engineered tax services provides in and also I want to focus on this. This is a collaboration between your tax business, you as a tax professional, and ETS. They're not replacing the tax compliance fees.
Chris Picciurro:Sometimes they will prepare a form or help you guide you through a form that gets put on the tax return. But this is a compliment. You know, we always talk about, collaborations bigger than competition. I mean, in our teaching tax flow world, Julio nailed this, we always talk about one of our three laws is that tax agencies are your involuntary business partner. That's one of our three laws.
Chris Picciurro:And you could either pay your business partner tax, or you could do tax planning, deploy that money for an asset that grows and earns income for yourself. So, we talk Hooligoo first on like 30,000 foot view on like cost segregation study and when when it would be a time, that we might wanna get a specialty tax service provider involved. Yeah. Good. Well, let's start with cost segregation studies because that's something not a
Julio Gonzalez:lot of people are aware of and this is one of the true gifts that the government gives us. First of all, they give us the gift that if I buy real estate, I invest in real estate, I get to expense it. Now if I buy stock and invest in someone else's company, I don't get to write that off. If I go buy a bond with the government, I don't get to expense it. Right?
Julio Gonzalez:So I could take that hundred dollars and I could go buy a stock and see how the market does, but I don't get to write off that hundred dollars, same with the bond. But if I go is to take that $100 and buy real estate, the government says, well, I get to write that off. So I'm already getting a 50% return if I have a 50% tax bracket, right? So that's awesome. Now it's even better because cost segregation is where we do an engineering study.
Julio Gonzalez:So we have all these engineers, and all they do all day long are cost segregation studies. So what do we do with the cost segregation studies? Well, the government says, the federal government says that if we do a engineering study, we can determine how much of the building is nonstructural versus structural. Bricks and mortars and everything else. Right?
Julio Gonzalez:Everything else that's not bricks and mortars, we can expense from the cost segregation study immediately because we have bonus depreciation. Right? So say I go buy a building for $5,000,000, well, I'm probably gonna get 30 to 40% of that value written off immediately as personal property. Personal property in a building being identified as anything that's not bricks and mortar. So now I get to expense that.
Julio Gonzalez:So I get a big write off and what happens? That goes against my taxable income, I preserve my wealth, and then I keep the cash, right? So the cash is what's so great, right? Because now I can spend that cash on everything else but paying that check to the IRS. And I think one thing that people don't realize with real estate is it's the gift that continues to give.
Julio Gonzalez:What I mean by that is when we do the cost segregation setting, I'm looking at that engineering report and I'm saying, these are the things we can write off immediately for you. But I'm also looking at the rooftop, and I'm sending that roof plan over to AT and T, Verizon to see if they're eligible for five g, to see if they can get rent on the roof, which I call as the next generation of rent in our country. Right? And I'm also looking at the footprint of the building to see if they're eligible for solar. There's so many companies that wanna get solar out there, and they'll do the revenue sharing with you so that they can get the solar and use that solar to get, you know, off you know, sell sell the, energy back to the utility company.
Julio Gonzalez:So we look and see if we can do that for them. We also look and say, you know, if it's a multifamily, if it's an office, hotel, parking garage, we have a lot of companies out there that wanna put the charging stations in and take advantage of that revenue because that's a revenue share program, and you don't have to put out any more capital. So we bring those resources. We also look and see, is this property eligible for grants? Because one thing that people don't realize is that 90% of the grants in our country, federal and state, are for real estate.
Julio Gonzalez:Right? The government wants real estate. Right? Because why? It generates taxes for them.
Julio Gonzalez:Right? We get these property taxes every year. And so the government, whether it's federal or state, they put out these grants to restore properties, to, you know, bring properties in, give them the land, give them some fed money, give them some grants so that ultimately we get take this money, which is what we all paid in, right, in federal taxes, now becomes a grant. Now this grant is basically giving that city a return on investment because now that person's gonna put a building there and it's gonna pay property tax and hotel tax and sales tax and employment tax. Right?
Julio Gonzalez:So it's a big thing for them. But also, when I look at the buildings, does it have air rights? A lot of our clients buy the buildings and don't realize that they have 10 feet or 10 stories of air rights that they can sell, and that's very valuable. Or you can conserve it and give it to the government and take a charitable write off. Right?
Julio Gonzalez:Or maybe the building is 50 years old and now it has some historic tax credits associated with it. Right? So if you think about it and we could go on and on. Right? It could be new market tax credits for multifamily.
Julio Gonzalez:It could be, you know, all these other types of end credits. And then, you know, we also look at the building. Does it qualify for energy tax credits? You know, one seventy nine d or 45 l. Did we make this building energy efficient, and do we get to take the tax credits associated with that as well?
Julio Gonzalez:So when we tear that building apart, we have all these credits, grants, right, and all these other tax incentives, and what a wonderful opportunity. And when you buy real estate and you have that accounting firm helping you with those things, what a return on investment. Because all of a sudden I got credits, I've got grants, I've got depreciation from my cost segregation study, I'm gonna get in some five gs income, and this is where you build wealth in our country, right? The government is telling you how to do it because they're saying, if you go buy buildings, real estate, we're gonna give you all these benefits. Again, you don't get those same benefits for stocks and bonds, you're actually giving your cash to someone else who's gonna take those tax benefits because they're probably gonna invest in real estate and everything else, right?
Julio Gonzalez:So don't give up those benefits and get it utilize them yourself. Make sure you have that accounting firm that's gonna help you
John Tripolsky:with that. And, Julio, you you brought up our a slew of fantastic points there, I think. And this is, again, coming from somebody who's not not in the we'll call it the tax world. Every day, like you guys, I I haven't been doing this that long, so your experience, you know, far outweighs anything I have. But you mentioned a lot of things.
John Tripolsky:Right? Like, the the various rental incomes from, like, five g. Well, obviously, there's the automotive side to it. So there's a huge push to obviously get that in place. So you have infrastructure demand where you're mentioning it.
John Tripolsky:So it's almost like, you know, as our audience on this podcast, specifically, tax pros, you talk I mean, the the old the old slogan, I guess, you know, knowledge is power. What you're talking about could literally be a game changer for a lot of these tax pros because now they're not kind of like you mentioned to you know, going back for a second is the government's providing the road map. It's it's up to the tax pros and the individual to basically navigate their way through it. Correct? So when you're mentioning these opportunities, we'll call them Uh-huh.
John Tripolsky:If I if I'm not the tax pro, if I'm in the client side of the table or the client side of the relationship and they're coming to me with these opportunities, that person is like a superhero to me. Right? Right. Where they look at it and they're like, you know, basically, wow. I'm winning.
John Tripolsky:I'm in this property. I've invested in it. It's it's a good opportunity. And then all these kind of ancillary ops start popping up. I mean, you talk about relationship value.
John Tripolsky:I mean, holy cow. Right? So that's that's where you guys play a huge part in that. And even going to the extent of Chris, I know on the teaching tax flow podcast that we have as well as, you know, the mister Archer, you're part of MRI is, you know, building your board of directors. Where ETS, like, you guys provide such a fantastic and I I wouldn't even say niche necessarily, although it is it in some some regard.
John Tripolsky:There's so much power in what y'all do that I mean, again, it's I keep saying it's just a game changer. Right? I think it's the best way to Yeah. I appreciate that.
Chris Picciurro:Yeah. A couple of things on the cost segregation study because in like I said earlier, you know, the the, tax agencies are your involuntary business partner. One of our three laws of teaching tax flow and that tax flow isn't cash flow, meaning there's situations of the cost segregation study I've seen personally, clients recover in tax benefit more than the down payment on the property. You have you're being paid to acquire this property. And, Willie, I'm sure you see that on a daily basis.
Chris Picciurro:All the time. And, you know, one
Julio Gonzalez:of the biggest I guess one of the the biggest emotional benefits of this job is when I do meet people and, you know, I meet people weekly and they're just having that pain. They're getting ready to write that big check every year to the IRS and to their state government And and then, you know, we just talk and they tell me that they have some properties and they've done some other things and the lights go off and I share with them the good news. And the good news is tear up that check and don't mail it. And then because you have these investments of properties and other things that you've done, we can utilize those to eliminate the taxes that you owe today, right, and maybe get some refunds. So it's, you know, it feels like Robinhood a bit, right, when you're going across the country and you're meeting people and you're meeting accounting firms, and you're helping them go through their clients, and find these little opportunities so that they can call their client and say, you know what?
Julio Gonzalez:You made a lot of money, and I'm also getting you a refund this year because of some of the things you did.
Chris Picciurro:Yeah. And if you own an accounting firm, first of all, you should not have any trouble getting clients right now. But second of all, it's much easier to educate yourself to build your own board, your own board of directors, be it peers, and maybe a practice management coach or specialty tax services, learn how to go comb through your client list and find those opportunities and do not feel bad about that. If if you were, you know, I'm finding eight to 10 x value typically when we find an opportunity for a client. Why would I feel bad about that?
Chris Picciurro:I feel great about it. That to be able to find that opportunity for a client. And it's, you know, it always depends, it depends on the situation. But
Julio Gonzalez:if
Chris Picciurro:you're adding a lot more value than the cost, you've put money in their pocket.
Julio Gonzalez:You mentioned a couple And that's what they're counting on. They're counting on you to do that. Right?
Chris Picciurro:Well, and that's the thing is with tax compliance, tax compliance, and I know I just said compliance skills, compliance is also a commodity. Tax planning is it's part of commoditize tax planning right now, because they're like, we've developed as our own private proprietary system, and I don't there's not many out there like that. But compliance, once we talk about AI and that sort of stuff, and I think the theme is really we're focused on tax planning strategy and how to I think most accountants want to bring that to their practice, but they just don't know how to right now. And that's and that's a lot of, I mean, should we we don't there's about a thousand seems like a thousand participants at the conference we went to a few weeks ago. Right.
Chris Picciurro:And we just we just ask people. One, a couple of things I wanna touch on cost seg. One more question about cost seg because, and then I'm going to ask another something else. But Julio, you brought up a great point. And maybe you could touch on this a little bit.
Chris Picciurro:There's a lot of times with the cost segregation study, there's a misconception that you can only do a cost segregation study on a property that you placed in the service that tax year. Right? And that's not true. So let me so if you're a tax professional and you're looking at a tax return and you have a client that has a big taxable event and let's say it's March and this taxable event occurred the year before and they're gonna owe a bunch of money. Yet they have other rental properties or other properties that are eligible for cost segregation study on their on their on their balance sheet or on their depreciation schedule.
Chris Picciurro:Yeah. You could actually go back and do a cost segregation study in a in a subsequent years. Can you kinda explain the April a and just kinda how that might work? What what account should you
Julio Gonzalez:look at for? This is just what you're saying is more indication that the government wants us to invest in real estate and give us all these benefits. And one of the benefits you just mentioned is great. I would say 50% of the cost segregation studies we do for accounting firms and their clients are when their clients buy a building. Right?
Julio Gonzalez:So we're gonna do the engineering study and we're gonna set up the depreciation upfront. But the other 50% are clients from the accounting firms that they've owned their billings for ten years, five years, and never take advantage of cost segregation studies. And what the government allows us to do, the IRS allows us to do, is calculate all that enter or all that depreciation that they took over that five year, ten year period and what they coulda taken through the cost segregation setting. And then that difference, they allow you to adjust the depreciation in the year that you're filing that tax return as a catch up in depreciation missed. So you don't have to go amend tax returns, and you can catch up all that depreciation when you do the study.
Julio Gonzalez:And the IRS allows all these things automatically. So there's no you know, back in the eighties and nineties when we did it, we had to go ask for permission from the IRS and get their permission and then do it over a four year period. But those all things have changed because, again, government likes real estate.
Chris Picciurro:Exactly. And final cost seg question. I thought I already promised that, but I I love cost segregation. So John laughs up there. Like, he's learned a lot about cost seg studies just by hanging out with me for a lot.
Chris Picciurro:To me, it's the lowest hanging fruit for some. I mean, it's the best bang for the dollar. At what point is is it does it make sense? Let's assume it's a long term buy and hold, but at what point as far as an asset level or an acquisition price, does it make sense to consider a cost segregation study in your Yeah. It's such a good question because
Julio Gonzalez:ten years ago, you know, our cost segregation studies were, you know, primarily billings. Today, the biggest percentage are Airbnb's. People buying properties for $75,000, 50 thousand dollars, and we're doing cost segregation so they can get an extra 20,000 in depreciation. So, you know, the market tells us what we need to work on. You know, fortunately, with cost segregations on these smaller properties, the IRS doesn't, request an engineering site visit.
Julio Gonzalez:So they they understand that, you know, that would kind of, from a fee standpoint, kill the opportunity to do those studies. So on properties like that, a million and under, residential homes, they don't require us to even do a site visit. So we can do a lot of that information online. We don't have that site visit fees, and, you know, these things, a lot of the information, you can find it right online and do the studies for them. And so it's inexpensive, but, like, I think your question is, you know, where does it start?
Julio Gonzalez:For us, we're doing 30,000 Airbnbs, 40 thousand Airbnbs. We're doing a doctor office that did $50,000 in improvements and wants to get those written off. So, you know, it it doesn't mean that we don't do stadiums and we don't do high rises and we don't do these big Amazon distribution centers and big shopping malls and things of that nature, but, you know, really, the goal for me has always been to make sure this access, these studies are accessible to everyone. Right? Because whether you're owning a $30,000 apartment for Airbnb or you're the one you know, you're a rate with a high rise, everyone should have access to this this tax codes and these tax benefits, and it's our goal to make sure that everyone does.
Chris Picciurro:Yeah. Then if you're a practitioner, we talk you know, you probably heard about the it's called the short term rental loophole. Maybe some people wanna call it the short term rental tax strategy if they don't like the loophole term. But if you have a client that's purchased a short term rental property, especially since September of twenty seventeen, which we saw a lot of that during the pandemic, a lot of people started using Airbnb purchasing. I'm here in based in Tennessee, so the Smoky Mountains exploded.
Chris Picciurro:Not literally, guys forbid, but, you know, the market exploded. And if they, in general, if they self manage that property, you could we've found, yep, with clients that have relatively lower acquisition costs, but make that the short term rental, loophole because of the short term rental loophole, meaning they're managing it themselves in general. There's a lot of rules for that, but makes sense. So if you're a tax professional out there listening, you have a client that fired a short term rental property. And if if you're preparing their tax return, first of all, we hope you did the tax planning.
Chris Picciurro:But if you're preparing their tax return, and you realize, wow, they don't have a property management statement. Oh, they're managing this property on their own. They're going on Airbnb and VRPO. Please connect with us, because you might have a client sitting on thousands, maybe tens of thousands of dollars. And for like Julio said for for Main Street USA taxpayers, a $30.40000 tax benefit moves the needle a ton.
Chris Picciurro:Now obviously, if you're you built SoFi Stadium, you know, that's not going to be a big needle mover. But but again, that's but I kind of share this with Julio. Like, I just love helping people out. I wish I could have a million clients. I and and and hand hold all of them, but we can't.
Chris Picciurro:But but we can teach the accountants how to help a million people. So yeah, no, that is cool. You mentioned grants, and sanitizing the real estate. I think that as a tax professional, even myself, I'm trying to dive into the grants as well. And I know ETS does a lot with that.
Chris Picciurro:When we think about grants, our mind typically goes to non profits. And you tell us some of the most common things we need to be looking for as a CPA, as a tax professional for our clients, when we hear that trigger word or we find something out about them that we might say, man, they might be eligible for a grant. Let me let me look into that for them. Yeah. And I think a lot
Julio Gonzalez:of people do think of it as nonprofits. But let's talk about who are the biggest grant recipients in our country, right? Number one would be Tesla, right? So they took a massive amount of grants from the state of California, from the federal government because both collectively felt that we wanted that kind of business in our country, and we're willing to give them grants to save it because, you know, without those grants, Tesla doesn't make it, and they don't survive. They were barely making it out of California.
Julio Gonzalez:California decided to give them some grants to keep it going, live another day. Federal government stepped in and then did some credits, right, so people would go out and buy their cars. And because of all that work, now we have that company and that employment here in The United States, but it doesn't survive without that. But who so Microsoft, right, Facebook, all these companies, these are the people that have taken the biggest grants in our country. But those grants are accessible to everyone.
Julio Gonzalez:Every small business owner should look at grants. Right? The biggest grants that we see today for small business owners are in real estate, they're in tech, right, and medical, development drugs, you know, medical devices, and all kinds of different technologies, manufacturing, right, so and all kinds of different real estate, especially affordable real estate where we need to have grants to have these subsidized housing communities throughout the country. So the grants are three buckets in my mind. Right?
Julio Gonzalez:But Atlantic firms may have all these clients. Right? Nonprofits, no brainer. Right? If you have a nonprofit as a client, you're a CPA firm, you gotta look at grants.
Julio Gonzalez:I I guarantee you most accounting firms don't even look at that path. And this is pre equity. They don't have to give back. Right? This is pre equity.
Julio Gonzalez:So the small business clients, they gotta examine what their small business clients are doing and if they're doing anything in tech, manufacturing, real estate, we've gotta look immediately at what grants are available for them at the federal and state level. And then third, if you have clients that are municipalities, these cities are the ones that get the biggest grants in our country, right, from the federal government and from the state government. Like here in West Palm Beach, Florida, right, they needed grants for the fire department. They need to make a bigger fire department. They need a bigger police department, a bigger police station.
Julio Gonzalez:We need infrastructure for the bridges that are failing, for our railroads, and we need housing right here. And so Mhmm. And the cities, like most companies, don't have the capacity, the staff to write these grants or have the relationships up in DC with the different departments and getting those grants. But these are easy things to get, and it's so funny that, you know, again, these are things that can separate accounting firms from all their competition to say that, hey. I'm gonna help you with grants.
Julio Gonzalez:We're gonna also look at your tax return and see if you have any credits available, which I'm sure we'll talk about. Do you have any real estate? Did we do any depreciation study? Did we get the energy tax credits? All these things are separators, and grants, low hanging
Chris Picciurro:fruit. Well, great segue because I in our private CPA practice, I have as we know, we're a niche in real estate, but I had a client that, built a new building, that was that that he bought and held, and he was leased to a arts college here in Nashville. And we looked at this looked at this building, I talked to the ETS team, and it was determined that he was eligible for the 45 l deduction. So which changed dramatically with the inflation reduction there. So could you just touch 30,000 foot view?
Chris Picciurro:I know I keep saying 30. The plane has to move out levels at some point. John's probably like, oh, gosh. Everything's 30,000 foot. But the 45 out because I think a lot of tax professionals, you know, when when a client comes in and and, the cool thing is we did a you could do you could pair cost segregation in a in a extra deduction, on a lot of these things.
Chris Picciurro:But Yeah. We had a client successfully pick up 45, as a as a, thirty one fifteen deduction and then on a down to the next year's return as well. But can you tell us a
Julio Gonzalez:little bit about the 45 l deduction? Yeah. So the 45 l is a credit and like you said in the Or the clock. Sorry. Yeah.
Julio Gonzalez:And the Yeah. My bad.
Chris Picciurro:I was thinking of the 179 d. Sorry about that. Yeah. Let's talk 45 l first.
Julio Gonzalez:So in the Inflation Reduction Act, they increase the benefit so it can be up to $5,000 a unit as a credit. So this is dollar for dollar benefit. And what is it for? It's for rewarding, you know, property investors, developers that make their buildings energy efficient. And this, of course, 45 l, what's the difference between this and one seventy nine d?
Julio Gonzalez:They're both tax benefits for energy efficient buildings. 45 l is for multifamily, basically. One seventy nine d is for anything that's not multifamily. And, again, it's rewarding people for building properties energy efficiently so that they're taking, you know, they're basically helping the cities not have to continue to put a lot of, you know, issues and stress on the energy, of their communities. And so, really, it's rewarding good energy efficient building or renovations to a building.
Chris Picciurro:Yeah. So that was my fault. Yeah. Before I got my ISO one seventy nine d and 45 l. My notes are right next to each other here.
Chris Picciurro:So the 45 l is a credit, which is was we know as tax professionals much better than a deduction. And that's for multifamily buildings that are energy efficient. The beautiful thing as a tax professional is you don't have to figure out if they meet the requirements. Just bring in a specialty tax firm to help you out. They will you you can help out a little on the discovery session, section of, of that.
Chris Picciurro:And if they qualify, amazing. If they don't qualify, okay, you learn something. But you're not you're not the bad guy. So now you mentioned the one seventy nine
Julio Gonzalez:on that point, and this is a really good point. Listen. We have all these great tax benefits for real estate. We talked about cost segregation, 45 l, one seventy nine d. One seventy nine d and 45 l, you have to be a licensed engineer to certify in these calculations.
Julio Gonzalez:So what we're saying and when you do cost segregation, you have to be an engineer that's determining what parts of a building are tangible and nonstructural versus structural. And I think what the IRS is saying with all these things is that, yes, we wanna give you all these tax benefits. We're not gonna make it easy. Right? We just don't wanna we we still want more money to come to the government.
Julio Gonzalez:Right? We still wanna collect more at the IRS. So, yeah, we have all these tax benefits, but we're not gonna make it easy. And we're not gonna make it easy because 99% of the accounting firms are not gonna have an engineering department that can do energy calculations and engineering reports on buildings. Right?
Julio Gonzalez:So, you know, it sounds great. And, again, for the accounting firms, it's like, yeah. I've heard about this, but I don't I don't have an engineering department. But this is the thing. Our code is complex for a reason.
Julio Gonzalez:We wanna say that we're doing all these great things as a government, but we wanna make it very difficult. Right? We wanna make sure that most people don't have access to it so that, you know, we can say we did our part, we passed the codes, but at the end of the day, we still want more money to come into the IRS, right? So it's one of those mixed bags. And so for the accounting firms, having that resource, that engineering department, because what accounting firm can put engineers on staff that can do energy calculations and determine structure on a billing?
Julio Gonzalez:There's no possible way because they're not going to have enough clients. And like you said, we're paid on success. Right? So the clients are paying us because they know they're getting a tremendous benefit, and we share that revenue with the CPA firm. We all win.
Julio Gonzalez:It takes the community to kinda rise us all up, and, that's kind of our part with the accounting firms.
John Tripolsky:And they and who Julio, it's one thing too. So you had mentioned, I mean, kind of going back a little bit even to this point. Right? So we talked about cost segs. We've talked about grants.
John Tripolsky:Before we jump into to some too different, you know, you really you really got across the point of that there is, for the most part, these opportunities are very accessible to people. It's just the fact of having all your ducks in a row and really being a little bit more laser focused and approaching them. So some of these, like, we're just talking about the the other opportunities here, those not so much. It's a little bit more in the weeds,
Julio Gonzalez:a little bit more detailed. But overall, things are are pretty accessible. Would that be a a pretty good assumption to make or a a good little nugget there? Yeah. No doubt about it.
Julio Gonzalez:I mean, they're accessible. They're available. You know, there's more information about it more than ever, but you don't wanna be the accountant that has real estate clients and doesn't know about 179D, 45L, cost segregation. You gotta know these things and you can't know everything, right? And you can't have an engineering department, but, you know, there's firms like us all throughout the country and certainly you gotta be sure that you're having these kind of partnerships creating your board, right, like you said, of these people to help
Chris Picciurro:your clients. Absolutely. Yes. So got talking about that, and and that's why, you're moving on to a different type of tax credits. Another tax credit that I found, I love the tax credits that you're just intention, you're getting on money that you already spent, you spent.
Chris Picciurro:Obviously, once you start learning about these credits, you can do better planning to make sure that the activities and what you're doing is legal ethically eligible for the credit. But I've had clients eligible for the R and D research and development tax credit every year. And these are clients that you wouldn't even think about research and development. That some of them, because they're not necessarily making a product, let's say they're improving a process or they're creating a some type of software. Can you touch another I think another opportunity for tax professionals to add value to their client is once you start talking to them and getting you need to know their operations.
Chris Picciurro:Can you talk to about talk to us a little bit about r and d credits and Yeah. In Yeah.
Julio Gonzalez:Of course. The so r and d stands for research and development tax credits, and, basically, it's a refund of labor for a company. And, basically, that can be on the federal and state side, so you can have r and d at the federal and state level. And this is a refund for labor that any small business has where that labor is paid for innovation and research and development and making their products better or their processes better. And so I think you said it just right.
Julio Gonzalez:And, again, we're the independent engineers, scientists that come in and verify the labor that was spent labor and supply spent by a company to create innovation within their company. And the reason we have r and d, like, the reasons we have cost segregation and one seventy nine d and 45 l, is because we don't wanna lose that innovation outside of our country. Right? Because if a company says, well, we can do these innovations, but it's gonna be cheaper for us to outsource to China or India, then that's what they do, right, because it's gonna be lower cost, and we lose those jobs. So the r and d tax credit recognizes that these companies have an a choice and that choice is do I do this labor outside the country and use them for the innovation which is much cheaper or do I do it here in the country and take advantage of the research and development tax credits and get a refund on my labor and keep those jobs here in the country?
Julio Gonzalez:So, you know, that's why we do that here. We understand that labor, you know, across the globe is gonna be much less in other countries, especially if they don't have all these, you know, regulations and standards. And so this R and D credit is to kinda help, you know, create an equitable table for the small business owners here.
Chris Picciurro:And one of the things to consider when you're, please correct me if I'm wrong, but when you're thinking about this credit for your clients is that is where's that labor sourced, right? Because it needs to be US based labor to be eligible for the credit. I know there's a we won't get too technical. We might we might have someone else back on in the future. We could do a whole episode on the four part test for r and d credits and that sort of stuff, but, but the the the labor has to be US based.
Chris Picciurro:Is that is
Julio Gonzalez:that correct? Yeah. US based labor. Right? So we wanna make sure we're keeping jobs here in The United States.
Julio Gonzalez:So if you have labor and I well, listen. I run into a lot of clients that outsource their labor across different countries. You know, they don't get that tax benefit. But, again, they probably didn't know either. So when they find out that, a, either they have labor that qualifies, that's a reward.
Julio Gonzalez:Right? Because now with our r and d, not like Costa where we can go back ten years, but r and d, we're able to go back four years and Mhmm. Get refunds for previous years and then go to make sure you take advantage of it going forward. So still some good news if you didn't take advantage of the r and d tax credit. Yeah.
Julio Gonzalez:At least the IRS says that we can go back three and four years and fix that, amend those tax returns. Those those you do have to go amend and get your Mhmm. And then keep it going forward.
Chris Picciurro:But we've amended successfully. I'm telling you, if you're as a tax pro, you you will be a rock star to your client if you find an opportunity for them. And then the the first thing they're gonna do let's say you start working with them from the twenty thirteen year, you're in DC, I think you're eligible for this credit, and you bring in a specialty tax firm and they get it. That for not actually, they're going to say is, man, I wish I knew that four years ago or three years ago. You say, guess what?
Chris Picciurro:The IRS gives you a few get out of jail free cards and that's one of them. Yeah. Yeah. So and it's been amazing for our clients to obtain that credit, but also it's been a good revenue source for for our firm, as well just as, working with, ETFs. So it's been mutually beneficial.
Chris Picciurro:And again, the boots on the ground and the accountants out there working with clients on tax trends on a daily basis really look at that. And that's a credit that could either be, it could be on a corporate return it could be on a S corp partnership return which passes through your k one or it could be on your purse a ten forty so. Yeah. Another credit so this oh go ahead I'm sorry Giulio.
Julio Gonzalez:No. I was just gonna say, when I talk to small business owners, I tell them that you're you can treat your account as an expense, and you're gonna get compliance, and you're gonna get basically someone that's gonna take your information and create a tax return. Or you can think of your account as an investment and get an accountant that's gonna know your industry, know the tax credits, know the tax, deductions associated with your industry, know the grants associated with it. And you're not you know, you could pay this and then reduce your taxes this much, or you can invest in an accounting firm that knows all these opportunities and pay, you know, this much, right, a much smaller amount, right, and now it's a better return on investment.
Chris Picciurro:Absolutely. The, the next one I get a little fired up about because we did talk about this on a teaching tax flow podcast. The reason I get fired up is that there's a lot of bad actors out there when it comes to the ERTC. And, speaking of, you know, we these credits should be somewhat difficult to get because we they should be awarded to the companies, the entrepreneurs, the business owners that deserve the credits. And unfortunately, there's a lot of people there's a lot of bad actors out there that that advertise and then, you know, may potentially filed ERTC claims for people that shouldn't have gotten them.
Chris Picciurro:That's exactly why, you know, I'm as a tax pro, you shouldn't we have our private practice. We did not touch any RTC claim. We worked with a specialty tax firm on all of them, just because there's so much knowledge that you had need to have. But I also think this is one that was a little easier to get, the RTC credit, but Gulley, correct me if I'm wrong, but I believe there's, you know, there's some eligibility left for this.
Julio Gonzalez:Yeah. So the eligibility for the employment retention tax credits is through 2025. So, again, still some great opportunity to take advantage of those tax benefits. And you're right. There's always gonna be bad actors, and bad actors happen because the accounting firms don't know necessarily or are not caught up with these different tax credits.
Julio Gonzalez:So you see a lot of people jump in, go after small businesses, and, you know, all these pop up employment retention tax firms were, you know, success based. Right? So they're gonna go find you the biggest returns, right, and they're gonna get their fee. And, ultimately, what we're seeing with Department of Justice is that they're busy like they were with the PPP. Right?
Julio Gonzalez:Going after the bad actors, finding the bad actors. And, unfortunately, the small business owners, they didn't know. Right? They just trusted the guy that sent the email or sent them the text or gave
Chris Picciurro:them the call.
Julio Gonzalez:Right? So you're right. I mean, lesson learned here. Make sure that even with these things that you're working through your account and that your accountant approves the the specialty tax service that they're using because they're just as eligible because they signed those tax returns. And, you're always gonna have those bad actors on these things.
Julio Gonzalez:We see it all the time. So just make sure you have a good account that's doing their research and making sure they're not putting you
Chris Picciurro:at risk. And what were the themes we've talked about is that is, you know, real estate's a very tax favorite industry. It's also, advantageous to to deploy your resources into US based labor. So the last credit I want to touch on in the end then is specifically is the Work Opportunity Tax Cover credit or WOTC. And our private practice, we don't have tons of heavy labor clients because most of them are in the real estate.
Chris Picciurro:But can you talk to us about the WOTC a little bit and is it tax professionals listening to that? If you're not a tax professional, listen you're the best. Yeah. Please don't join us because you should if you if you enjoy this, you should be a tax professional. But if you're a tax professional listening to this, yeah, where where should we where could they look to
Julio Gonzalez:see if their clients are eligible for this? Yeah. And the work opportunity tax credits are great. Again, it's a refund of labor that is associated with hiring people that are disadvantaged. That is the strict definition of work opportunity tax credit, and so that's hiring veterans.
Julio Gonzalez:Right? That's hiring people that have come out of prison or people that have, disabilities or low income. And, basically, it's to encourage these firms to hire these disadvantaged people in our society and then get a tax credit for doing that. And I can tell you that a lot of firms employ these people all throughout the country. You see it especially, like, in, you know, restaurants or small businesses across the country, hotels, things of that nature, where they have a lot of people working that have these disabilities or disadvantages or become eligible because they were veterans and served our country.
Julio Gonzalez:And ultimately, you know, the small businesses just don't know. And, and also, you know, the account should be telling their small business owner not only about the employees they do have, but maybe when you're hiring. Maybe you wanna consider hiring a veteran for that job because of the tax benefits you're gonna get for doing so. Mhmm.
John Tripolsky:And who you know, I know we I know we touched on so much stuff here, and I know we're we're kinda wrapping up a little bit on time. I don't know, Chris, if you had any any other questions or any other items we'd wanna drop on the table.
Chris Picciurro:No. I and the WOTC, I think that that's yeah. Yeah. That's something that that, is lower hanging fruit and that could is is that something someone can amend a return for, or do you have to claim that credit as you go? And then I'll No.
Chris Picciurro:You can
Julio Gonzalez:definitely amend and fix it. Mhmm. Yeah. So, you know, it's just again, take a look at your clients, take a look at the either tax returns and see if there's some eligibility just on these low hanging fruit things that we discussed today. Right?
Julio Gonzalez:There's obviously 50 to a hundred more tax incentives we didn't talk about, and maybe that's for another time. But, certainly, these are low hanging fruit that they should go find right away as we're doing tax planning in in August for the end of the year.
John Tripolsky:Mhmm. Absolutely. And going from Chris, I'll, Chris, I'll poke funny here for a minute. You know, knowing you for twenty years I could do that. So now we'll go from the 30,000 foot view.
John Tripolsky:We're gonna put down the landing gear a little bit, and we're gonna go towards the go towards the strip. You know I love you, so I could poke fun at you. So, Julio, really, my my final question for you is, I know we touched on some of these some of these opportunities. Like, where where in your mind do you see things in the semi near future? I mean, obviously, some of these opportunities, they have, quote, unquote, expiration dates on them.
John Tripolsky:Obviously, there's new stuff that's always rolling out. There's changes in the industry, changing you know, changes coming down from the IRS. I mean, do you see our country going in a direction that is maybe obviously, real estate will will always be a focus most likely. Obviously, tech has has taken a lot of that, interest, we should say, in the past. Where do you see things going in in the future?
John Tripolsky:I mean, what types of clients might some of our our listeners maybe be on the lookout or maybe they start to approach them and and maybe we start to to perk their ears a little bit as, oh, wow. You know, this might be an opportunity for me as a tax pro to maybe target these types of clients because there's future opportunities in the pipeline or or from your point of view, where do you see it?
Julio Gonzalez:Yeah. I think that, you know, obviously, with the last two changes, significant tax code changes in the last year. It's all right now with the government under green energy. So if you have clients that are in the green energy, clean energy space, you gotta identify them, or maybe you have prospects in your community because those tax credits are massive, they're growing, and they're not going away. Right?
Julio Gonzalez:And I can tell you that we've, in fact, we just saw a big tax credit for people that make electrical boats. And the accounting firm called us and said, you know, I have a client that does about a billion dollars in making electrical boats with their grants. Are there credits? You bet. Because we want those kind of jobs.
Julio Gonzalez:We want that kind of activity in our country. And so that's the one I would focus on as an accounting firm. Maybe you have a niche, maybe you have clients in your community, maybe their prospects, but certainly that's the biggest one we're seeing. And that's not to say that, you know, real estate's not always gonna be big. It's gonna be big.
Julio Gonzalez:But if we're talking about new, it's definitely clean and green energy.
John Tripolsky:Mhmm. Absolutely. Well well, as we wrap up here, we we obviously appreciate your time and your insight. I mean, it's it's always, you know, you try to be the dumbest guy in the room. I I successfully think I've accomplished that today.
John Tripolsky:Like, this is this is great. I I I enjoyed it as always. And if anybody has any questions for Julio, I mean, please feel free to reach out to him. We'll drop a couple links in the show notes for this one as well or, you know, obviously, always feel free to reach out to our team here at the Monthly Recurring Revenue Institute. But also check out teaching tax flow too.
John Tripolsky:I think it's you know, there's a there's a lot of overlap in these that as far as for tax pros go, there's there's a lot of content on the teaching tax flow side that's more of an on demand, the questions that your clientele is probably asking. And like we had talked about multiple times in this show, Julio, I think you you agree with that as well. It's really just empowering yourselves with that knowledge that you can bring to your clients. But really at the at the end game, you're you're empowering yourself to empower your clients, and you're just making it a a better situation for everybody. And your your practice is growing.
John Tripolsky:So, Julio, we we greatly appreciate your time. We look forward to working with you again. I know we had a had a couple of things in the hopper that we were chatting about, some content stuff. So I look forward to that. And, yeah, we'll have to have you back on the show.
John Tripolsky:We really appreciate it.
Julio Gonzalez:Listen. I'm I'm grateful for today. I'm grateful for what you all do for the community and what you do for the community and also for, ultimately, all the individuals and small business owners where they're, you know, retaining cash and paying less taxes. You know, those are things that I think we can all be proud of. So thanks for having me.
Julio Gonzalez:Absolutely. Thank you. And and until next time,
John Tripolsky:we will see everybody very soon here on the Mr. R Show. Hey, everybody. Thank you for hanging in on this episode with us once again. I know your notebook is full of those notes.
John Tripolsky:I know you're pushing that pause button, going back and listen to some of the stuff that we covered. Undoubtedly, we will absolutely be working with Julio some more on getting some content together for MRRI, getting that out to you as well. They are a fantastic organization that's been built over many years, building out a fantastic team, serving so many clients with so many services. It is absolutely incredible. Personally, in in my world, not being in the tax space as much as these gentlemen by a long shot, I'm absolutely blown away on what they can offer, how they do it, and the benefits that really, really results in some very, very happy clients and some very challenging situations, which they make easy.
John Tripolsky:So thank you so much, Julio, for taking the time to join us on the show. Chris, as always, thank you for co hosting with me on here. Any of those questions, we will drop some of the contacts in the show notes where you can reach out to us. You can reach out to the ETS team in Julio with any of those, but as always, do not hesitate to ask those questions. That's the main purpose behind the show is really just providing the information and the resources.
John Tripolsky:So you can grow your practice and elevating it to an entirely new level. So partnering with companies like ETS and really just knowing somebody like Julio is almost a shoe in for being able to do that with your practice or in your practice, I should say. So again, thank you, Julio. Thank you, Chris. Thank you everybody for joining us on the Mr.
John Tripolsky:R show. And as always, we will see you very soon.
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