December 14, 2023 • 39 mins
Join us on a journey to financial success and legacy building as we sit down with the incredibly insightful Alexis Gallati, a tax strategist with a knack for making tax planning an accessible and powerful tool for everyone. Imagine a world where even ordinary individuals can leverage the same tax strategies employed by the wealthiest among us to secure their financial future. That's what we unpack in this enlightening conversation with Alexis, where we break down the significant differences between a tax preparer and a tax strategist.
In our journey to financial stability, Health Savings Accounts (HSAs) and retirement plans often go underutilized. Fortunately, we have Alexis to guide us through the intricacies of these tools and how to maximize their potential! From saving receipts for future use to fully leveraging employer-matched retirement plans, we navigate the terrain of cash balance plans—a complex yet potentially rewarding venture that demands careful management. We even delve into the world of deductions that can be claimed for personal expenses through businesses, a topic sure to pique the interest of small business owners and the self-employed!
Tax strategy doesn’t have to be complex, and it’s not just for the super-rich. Whether your income comes from a W2 or 1099s, we’ve got you covered. We explore retirement planning and tax strategies tailored for individuals with mixed-income sources. Alexis also enlightens us on the wide spectrum of deductions that can be taken for personal expenses through a business—from the home office and mileage to per diem for travel. Wrap up your listening experience with our deep dive into Opportunity Zones and 1031 Exchanges, alternatives that could offer tax-free income and appreciation. It’s a comprehensive financial masterclass you wouldn’t want to miss! Remember, your path to a financially secure future and legacy building may just be a podcast episode away. Tune in, and let's begin this journey together!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
This is the Legacy Wealth Code podcast helping you
build long term wealth andelastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur,
Michael Notbohm, and real estateinvestor and attorney, Andrew
Hoek.
Michael Notbohm (00:23):
Hey guys, welcome back to another episode
of the Legacy Wealth Codepodcast.
My name is Michael Notbohm,here with my partner in crime,
Andrew Hoek.
Andrew Hoek (00:31):
Hey guys, how's it going?
Michael Notbohm (00:32):
So we are delighted to have today.
Andrew and I talk about taxes alot, right, but now we have
somebody who actually is in thisspace as a professional, Alexis
Gallati not just you know, wetry to tell you what to do.
She is the person that can doit for you.
So Alexis is the founder of thetax strategist at Cerebral Tax
(00:56):
Advisors and the Cerebral WealthAcademy.
Also an author of advanced taxplanning for medical
professionals Over 20 years ofhigh level strategic planning,
which I know, Andrew and I talkabout every single podcast.
So we're delighted to have you,Alexis.
Thanks so much for joining us.
Alexis Gallati (01:13):
Yeah, thank you so much for having me here.
Michael Notbohm (01:15):
I'm really excited, so let's jump in.
Obviously, you know I think youprobably have seen a few of our
episodes, but Andrew and I arealways talking about build
wealth with taxes.
Build wealth with taxes becausea lot of people just they have
almost a negative connotationaround taxes.
Everyone almost like, oh, Idon't want to mess with the IRS.
(01:36):
And what we've come to realizeis there's such a huge
difference between a taxpreparer and a tax strategist.
So talk about what that meansto you and kind of how you have
created your business around thestrategy side.
Alexis Gallati (01:49):
Yeah, definitely , you know, when I was working
for regional, regional and localCPA firms before going out on
my own in 2014,.
That's really what majority oftax advisors, or safe tax
preparers?
Speaker 1 (02:04):
are.
Alexis Gallati (02:04):
They're just, they're preparers, they look in
arrears, they're reactive tosituations and which.
That's that's important.
I mean you still need to knowhow to actually properly report
things to the IRS and thatcompliance.
But you know, especially withmy husband being a physician and
you know, at the time beforestarting cerebral, you know he
(02:25):
was in his residency and acouple of years out and I
noticed the writing on the wall.
I mean he, you know he wasgoing to, we were going to be
shifting to another tax bracket,and so I wanted to know why the
Warren Buffets and the BillGates of the world, you know,
were getting those that 15% taxbracket.
And so that's when I reallystarted to look at tax planning
(02:46):
and being proactive in nature.
And so that's really what mypractice cerebral tax advisors
is all about is being proactiveand educating our clients on
what is available to them, evenif you know those strategies
that they're not ready to take.
It's more about the education.
You know, and all thestrategies we use are court
tested, arrears approved.
(03:07):
We don't put anything on a taxreturn we don't feel comfortable
defending in an audit.
So most clients when they cometo me, they're used to meeting
with advisors once a year.
You know, it's always it seemslike after year end and once
they've prepared their turn,they might get a few pieces of
advice here and there, but thatdoesn't help with tax savings.
(03:29):
Like you know, you have to do alot of the strategies during
the year in order for them toapply for that year.
So being proactive and workingthroughout the year is really,
like I said, the cornerstone ofcerebral, and that's why you're
having regularly scheduledmeetings with your tax
professional.
It is imperative to make surethat we're up to date on your
(03:50):
situation and we can applystrategies immediately.
Michael Notbohm (03:54):
Yeah, that's great.
I mean it's funny because a CPAthat we've worked with for for
a number of years always says heviews that the income tax.
You know once it once this timefor your taxes to be done as
his report card for the year.
And so many preparers exactlylike you said totally, you know,
(04:15):
let me just check the boxes andtell you how much you owe and
it kind of you know, it's like Iunderstand both sides of it,
right.
The tax preparer has a thousandreturns on their desk.
They don't have time to gothrough and say, hey, alexis, I
figured out all these ways afterspending hours of research, all
these ways I can save you money.
It's just going to take me awhole bunch more time to do it.
(04:37):
That just doesn't happen withthe regular tax preparer and I
think that you know there's sucha huge need for what you're
doing on the tax strategy side.
It's awesome.
Alexis Gallati (04:49):
Yeah, exactly Like you said.
I don't blame them because Imean they're that's what they're
doing, their tax return mills.
In a way they're just pumpingout the tax returns and most and
you got to remember too most ofAmerica is not in a position
where they're they'renecessarily going to be doing a
ton of tax planning.
You know, physicians andhealthcare professionals, I mean
(05:10):
they're just kind of in adifferent realm, in a different
bracket where you know theyreally need to start looking at
their situation morestrategically so they can keep
more of what they earn.
Michael Notbohm (05:23):
Yeah, agreed.
Andrew Hoek (05:24):
Alexis, touch a little bit if you can.
One of the things that we talkabout a lot is that and you
brought up Warren Buffett, forexample you know a lot of the
time you read these sort ofsmoking gun articles and, I
think, the initial thoughtprocess as well.
You know, these people are onlydoing this because they may
have a team of tax attorneys andtax planners and professionals
(05:46):
around them and that's reservedonly into the uber-uber wealthy.
But you know, one of the thingsMike and I try to coach and
preach on a lot is that, yes,while there is a segment of the
population that spends way moretime and money looking at that
because they have to, theseexceptions and exemptions are
applicable to everybody and it'sacross the board.
And I mean, what do you think,like you know, the run of the
(06:10):
mill, upper middle class shouldbe really spending time wise
with their tax planner.
Do you recommend quarterlymeetings?
Do you recommend less than that?
More than that?
What does that kind of looklike for you?
Alexis Gallati (06:23):
Well, it really depends on the person's
situation.
I mean, are you just strictlyW2?
That's not going to require asmuch time as someone who owns
multiple businesses or is inreal estate.
So at a bare minimum, theyshould be meeting with their
advisor at least once a year,and I say more likely towards
(06:43):
the end of the year.
You know, doing a year endprojection would be very helpful
to one help eliminate surprises.
What are you going to owe onyour tax return?
Is there anything we can dobefore your end?
So it's at least that littlebit of productivity once a year.
Now if you go all the way to theother side of the spectrum and
you have multiple businesses oreven just one business, then
(07:05):
it's really important to meet atminimum twice a year, and
that's what I do with my clients.
I meet with them at least twicea year when they have a
business.
So then that way we're doing amid-year projection, seeing how
things are going.
Do we need to tweak anything?
And then we meet with themagain at year end to basically
do the same and make sure.
Hey, are we still on track towhat we had before?
(07:27):
Like with the warm buffets ofthe world?
Like I'm sure that he's probablynot meeting with his people
quarterly, but he has people tomeet with his people.
That's when you know you madeit.
Yeah, exactly, and I'm surehe's probably looking at like
things and overall, like bigpicture sort of plan.
But for people you know more inour situation when you have
(07:51):
multiple businesses.
Yes, you should be working withyour advisor on a quarterly
basis, even potentially amonthly basis.
It depends on how big and howinvolved your business is, and
so it really depends, too, onthe business as well, especially
for healthcare providers.
You know, when you have youknow your medical practice, for
(08:11):
example you're going to probablywant to, like I said, at that
minimum do twice a year, andthen, you know, go from there.
Michael Notbohm (08:20):
So I had a client, you know so I'm still an
active real estate agent aswell and I had a client about a
year and a half ago.
He was an anesthesiologist.
They did a 1031 exchange out ofa mobile home park in
California, wanted to buysomething in Florida.
So sitting chatting with them,they had never heard of cost
(08:41):
segregation and bonusdepreciation.
So I walked them through howthat works and you know, his
wife was basically the propertymanager already Like that's what
she did.
She was working with collectingall the rents, making sure
everything is leased all thethings that you would normally
do as a real estate professional.
(09:01):
And I remember they boughtsomething in Fort Myers area and
that year he paid because theyfiled jointly, they paid zero
taxes.
And when we talk about buildingwealth and what that looks like
in terms of you know, fiveyears, if they did that for five
years, what does that look likefor your portfolio and what
(09:22):
your legacy means to you?
How often do you have peoplethat are in a similar scenario
to that and how do you advisethem?
Alexis Gallati (09:30):
Yeah, so I definitely.
I have clients that are intoreal estate and you know the
full spectrum of real estatesyndications, all the way up to
direct ownership.
You know short term, long term,etc.
And I love real estate for thatfact that you know it can
really provide a great avenuefor tax savings and it just
(09:51):
depends on the, the physician'sposition and if they're married,
if you know whether they're notmarried and you know what, what
they're able to do, even ifthey're single, and you know
they could potentially do like ashort term rental and qualify
for that short term rentalloophole.
That's amazing, you know, and Ihave some clients that are like
(10:15):
hey, lexus, I just don't havethe time for direct ownership.
So then you know we look atreal estate syndications, which
don't have, you know, the samefirst year sort of effects, tax
effects as, like a short termrental does, are doing real
estate professional status.
But there's still opportunityin the long run and, depending
upon their other assets theyhave, that can really help
(10:38):
achieve that lot of savings.
Andrew Hoek (10:41):
That's great.
So, you know, one of the thingsthat we're always trying to
look for, too, is like what aresome of the things that that?
I mean we spend a lot of timein the real estate side of
things, but what are some of thethings that maybe that we're
missing, that you would say arelike?
These are just kind of likeeverybody should be taking
advantage of these taxstrategies.
Do you have a couple favoritesthat you like, that you think
are really good ones?
Alexis Gallati (11:02):
Yes, yes, probably my absolute favorite is
the health savings account, theHSA.
I mean, anybody can do it aslong as you have a high
deductible health insurance plan, and so I advise my clients
even if they don't at the moment, maybe they have a loaded up to
take a look and see how muchmore the high deductible is or,
like the, I should say the taxsavings in it, the cost savings,
(11:26):
because obviously depends onyour situation and your health
and you know what you need foryour family, you and your family
.
But HSAs are wonderful becausethey're triple tax advantage the
money goes in tax free, itgrows tax free and then it comes
out tax free if you use it forqualified medical expenses.
So, and a lot of peopleincluding myself, for our HSA,
(11:51):
we will actually put the moneyin every year and not touch it
and we will pay for our medicalexpenses out of pocket and we'll
save those receipts and there'swe'll submit those receipts in
30 years.
There's no rule saying you haveto submit the receipt as soon
as you get it.
You can hold on to that receiptfor as long as you can.
(12:13):
You know with current laws andwhen we actually will allow
those funds to grow, because alot of HSA accounts allow you or
say, providers allow you toinvest that money into ETF or
other stock etc.
So you can allow that to growand then in, let's say, 30 years
(12:36):
, when you actually want to tapthat money, that account has
grown and you can, you know,submit the receipts at that time
and if you have more money inthere, then you have receipts.
It acts just like a regular,pre tax IRA individual
retirement account.
You just take the money out andyou, and if it's not for
qualified medical expenses, thenyou just pay at your tax rate
(12:58):
at the time.
Michael Notbohm (12:59):
So and so that I guess I was always thinking
that when you put into those atthe end of the year, whatever
you put in you had to use or youlost it.
And I think about some that'sflexible spending account.
Alexis Gallati (13:12):
Yeah, so that's different FSA, fsa you got one
letter.
That one letter is a big deal.
Michael Notbohm (13:20):
Exactly, yeah, and so is there a cap on how
much that people can put in?
Alexis Gallati (13:26):
Yeah, it changes every year.
In 2023 for a family plan at7,750.
And next year, for 2024, goesup to a 300.
And you have all the way untilthe filing of your tax return to
actually make April 15 to haveto fund that HSA.
So there's still time for 2023to do that if you have a
(13:50):
qualified plan, okay.
Michael Notbohm (13:52):
Yeah, that's great, all right.
So what else I mean?
Because this one was good, soyeah.
Alexis Gallati (13:57):
My absolute other favorite is retirement.
You know, depending upon yoursituation, if you're even if
you're just w2 making sureyou're maxing out your
retirement, it it seems so basic, but you'd be surprised the
number of People that come myway that are not maximizing that
benefit, especially if theiremployer offers some sort of
(14:19):
match.
So I mean, if there is any sortof match, you got to make sure
that you're taking advantage ofthat and putting in that Minimum
amount, otherwise you reallyshould be maxing it out.
And if you own a business, thenyou might want to take a look
at cash balance plans as adefined benefit plan as opposed
to defined Contribution plan,which is what a 401k is, or even
(14:43):
a step by array.
I love cash balance plans.
Michael Notbohm (14:45):
I'm sorry, yeah .
So I was gonna say just forpeople that don't know the
difference.
Alexis Gallati (14:50):
Yeah.
Michael Notbohm (14:50):
I explain what that would look like.
Alexis Gallati (14:52):
Yeah, so with a 401k, those are defined
contribution plans.
So what that means is that theIRS defines how much you are
allowed to put into your plan.
So for, like 2023, the maximumyou can do for your employee
deferral is 22,500.
Next year will go up to 23,000for a Define benefit plan.
(15:14):
The IRS is Defining the benefitthat you will are allowed to
put in.
That maximum amount you'll haveto put in by the time that you
retire, and so when you set upthe plan, you define that age.
So let's say it's age 62 and ifyou're aged 30, then you have
32 years to Make to get up tothat defined amount.
(15:35):
And so right now it's about 3.4, 3.5 million dollars.
It changes every year withinflation, and so You're able to
put in a much higher dollaramount With a cash balance plan
than you would with the 401kplan by itself.
Even with a profit sharing,you're maxed out there at 66
(15:56):
thousand dollars for 2023 and2024 at 69,000.
I have clients that you knowstart this sort of plan, let's
say, around age 35.
I mean, they're easily able toput in About six figures into
their retirement, so it reallyallows you to put so much more
away.
Now they're very.
There's some quirky thingsabout them which I'm happy to go
(16:19):
into if you want.
But yeah, so I mean you have tofund it for a minimum of three
years and keep it open for aminimum of five.
Now, that's a A generalguideline.
If you know, god forbid, there'slike another COVID, or you know
you decide like, hey, I'm notgonna do 1099 work anymore and
be an independent contractanymore, I have my own business,
(16:41):
then you can close it down forlegitimate business reasons, but
in general you need to keep itopen for those few years.
And then also too, there's a.
It's a pre-tax account, Ishould mention.
Both of them are so this moneyis going in, you're getting an
deduction for it.
But you you need to keep thethe growth of the account at a
(17:02):
fairly consistent rate in orderto take advantage of the tax
Benefits year after year, beingable to put in that six-figure
amount every single year,because Otherwise, if it grows
too quickly, then you're gonnareach that defined benefit
amount a lot sooner that 3.5million, let's say yeah, for age
62, and so then you won't beable to put in as much the next
(17:24):
year.
So, like I said, there's a fewnuances.
It's definitely a much moreadvanced type retirement plan
and I highly recommend workingwith you, know Professional, to
make sure that it's being sayingcompliant and properly
administered.
Michael Notbohm (17:40):
So okay.
So because I know you work alot with the healthcare, you
know you said your husband's aphysician and I think your
parents were physicians as well,right, which is kind of how you
got indoctrinated into thatwhole realm and you're like I
don't want to be on call at 2 am, I just want to help you guys
save money.
So I totally get.
Alexis Gallati (17:59):
I do not have the science gene at all.
I have the dollar gene in myhead.
Michael Notbohm (18:05):
But so you know , for a w2 income earner, if
they, if their Business or youknow company they work for,
offers a Retirement plan, theywould not be able to do this.
Cash retirement plan, cashoption retirement plan.
Alexis Gallati (18:20):
No, it's such.
I was saying the very universalanswer to most things tax.
Andrew Hoek (18:25):
It depends, unfortunately, so like an
attorney there.
Alexis Gallati (18:33):
If you are w2, but let's say you have fifty,
sixty thousand dollars of 1099income you know income is
independent contractor.
Maybe you're doing consultingor you are doing some locum work
on the side Then you can dothat retirement contribution on
top of what's happening in youremployer's plan.
(18:53):
The only thing you can'tduplicate is the employee
deferral you know, for examplein a 401k.
So if you have a 401k in bothspots then you can't duplicate
the employee deferral but youcan do the employee or
contribution Between both okay,yeah, that's grabbing Like so
(19:14):
much value there to me that,like I think, most people don't
know about yeah.
And that's the majority of ourclients are those that have at
least fifty, sixty thousanddollars of 1099 income, and if
we have that, we're able to workso much magic in terms of
retirement planning, deductions,making sure, using proper
(19:36):
entity, etc.
And all of it together canreally help save a ton of money.
Andrew Hoek (19:41):
Does it have to be 1099 or that?
Can it be k1 as well?
Alexis Gallati (19:46):
So when you start to get into k1 you start
to get in into things calledcontrolled group and affiliated,
affiliated service group issues.
Okay, so if you let's say thatyou're a partner in practice and
you get a k1, but let's saythere's eight other physicians,
then most likely you cannotcreate your own retirement
(20:10):
account because of Even if it'scompletely the independent
income of the group big.
Since you are a 8th owner inthat partnership, you have to go
and include any employees inthat group in that plan got you
(20:31):
so in the plan that you've setup.
So it doesn't work well in thatsituation.
So you got to be very carefulabout those cork.
It's under a RISA rules, soit's er is a don't ask me what
the acronym is I, but if youlook up, er is a RISA rules that
basically those are rules thatprotect the employees, like the
(20:53):
little guys, from the owners,you know, not including them in
any sort of retirement.
Michael Notbohm (20:59):
And it.
You know, it's kind of funnybecause so one of the things we
teach a lot is is that the taxcode is thousands of pages and
Yet only very small amount of itActually tells you how the IRS
can apply taxes.
The rest of it is really howthe IRS Incentivizes you to do
different things, and so itsounds to me like you know, some
(21:20):
of the stuff you've alreadyshared really is incentive based
that most people I don't thinkreally even know about.
Now, how often do you work withsmall businesses?
I guess there's some taxadvantages that they should know
about that they may not betaking advantage of.
Alexis Gallati (21:35):
Yeah, majority of our clients have small
businesses and you know because,like you said, you know, to be
honest, the code is really builtfor those that own businesses
or have investments.
If you're strictly W2, I hateto be the bearer of bad news,
but there's really a limitedamount of things you can do, and
so you start, until you startgetting into more investment
(21:57):
type strategies like oil and gasor solar credits, things like
that, short term rentals Shortterm rentals, exactly, real
estate as well and, yep, exactly.
Michael Notbohm (22:08):
Sorry, shameless plug.
Alexis Gallati (22:10):
No, no, exactly no, that's, that's, that's right
.
And so when we start workingwith our clients, especially if
they own businesses, we arewe're looking at entity.
You know entity selection issuch an important thing Because
even if you're only own, youknow, have $50, $60,000 of 1099
(22:31):
income, you can, if you go andchoose the correct entity, does
open up a ton of doors in termsof different strategies, such as
, like, if you only have $50,000of 1099 income and you're a
sole proprietorship, you can'trun a loss due to a retirement
contribution.
So if you want to do any sortof retirement contribution on
(22:54):
that $50,000 of revenue,assuming that you dwindle it
down with other expenses to zerothen you really have to do an S
corporation in order to takethat loss and, you know, do a
retirement contribution based onthe wages which you make, that
you just make that as high aspossible, basically to max out
(23:15):
your retirement.
But otherwise I'd love to alwayslook at what my client spending
habits are and see how manypersonal expenses we can make to
be legal business deductionsthrough their business, like
home office and mileage.
I love per diem as well becausethat allows you to take
(23:37):
additional deductions that youdon't have to pay for and I'd
say per diem for lodging andmeals and incidentals when you
travel over 50 miles away.
So that's great strategy forlocum workers that travel a lot.
Those are some of my favorite,and so we always just look to
make sure that you're maximizingout as much as possible.
Andrew Hoek (23:58):
I like that.
I'm going to put you on thespot here.
I know we didn't chat aboutthis at all prior to the show,
but I'm getting ready to do a1031, and I have a call with an
intermediary tomorrow to startto ask some questions.
But I just figured I'll firehim at you too if we have access
.
So I'm interested in and Idon't know how much 1031 work
(24:24):
you do, but I suspect you've gotsome working knowledge of it,
of course.
But I'm interested in doing kindof a non-traditional exit on.
So I'm selling a property thatI own with three partners and
basically we're all going ourdifferent directions and so
we're not going to do alike-kind replacement as far as
(24:46):
a typical, just sell thatproperty and buy another
property.
So I'm aware that there aresome options out there that are
like you can kind of go in onalmost like a fractional
ownership and you can buy abigger asset that you own some
percentage of, and that can bedone in lieu of a 1031.
(25:06):
Somebody was telling me thatyou can also do a scenario
that's kind of similar to that,but as long as you're not
touching that money, it can besome other company that you own,
almost like the idea of kind oflike a self-directed IRA.
Do you have any knowledge ofthat?
Is that something that you canactually do?
Have you ever dealt with thator come across that?
Alexis Gallati (25:28):
I have not come across that before, but have you
ever considered an opportunityzone or an opportunity fund?
Andrew Hoek (25:36):
Yes, and I've kicked that around too.
That's actually one of thethings I wanted to explore a
little bit with them with themtomorrow too, but tell me, I
guess, a little bit more aboutyour take on that.
Alexis Gallati (25:46):
Yeah, so what I love about opportunity funds is
that you're able to so.
With a normal 1031 exchange,let's say you have proceeds of a
million dollars but your gainis only 300,000.
Well, in a normal 1031, youwould have to move that full
million dollars into the nextproject, but with an opportunity
(26:10):
zone you get to just move that9, or, sorry, the 300,000.
Instead you only have to investthe gain, and so then that
helps to go and defer the gainuntil 2026.
And so I mean, these have beenaround for a good while, yeah
we're like two years too late,right.
(26:32):
I know you can at least get todefer for a couple years and
some of the programs that I'vebeen introduced to have been
really great that they'll go andyou get to defer that gain.
But then you get a guaranteed6% income every single year on
that money and then that moneyis tax-free.
(26:53):
And then when you have to go topay those taxes so for 2026,
you pay in 2027, they willprovide a distribution to help
cover the capital gains tax andthen between that time and 10
(27:14):
years so usually your money doeshave to be tied up for 10 years
then they'll give you a.
The appreciation that you haveon that investment is tax-free
as well.
So it's a pretty sweet deal,especially if you don't need
access to that money right away.
(27:34):
Then you get to defer that gain.
They'll help pay for it, youknow, essentially out of your
distributions, and then the andthen 6% tax free income
guaranteed every year plus theappreciations for tax free.
I mean yeah.
I wish I had some capital gains,to put it, and that doesn't
(27:56):
have to be just from a 1031exchange.
You can be any capital gains.
It can be even from you knowinvestments in the stock market
and or even like, if we havewith sometimes we'll have
clients that will sell equity inyou know to private equity firm
, you know, to the part of theirpractice, and we'll use that
strategy.
So that might be something tothink about and discuss with
(28:19):
with them tomorrow.
Andrew Hoek (28:20):
Yeah, I like that.
Michael Notbohm (28:21):
Yeah, the opportunities on thing.
I always laugh because so youknow, like we talked before the
show, we're down here in Tampaand I think the misconception
people often have is opportunityzones must mean that it's a
really bad neighborhood andthat's not the case.
You know there's a lot ofexamples, but one of them is
downtown Tampa.
(28:41):
Jeff Vinick, who bought theTampa Bay Lightning a number of
years ago, started a projectcalled Water Street and it's
about a what two?
$3 billion project, andrew, youthink by the time it's done.
And you know Bill Gates is oneof the investors.
You know and you know you canimagine how much it's going to
be worth at the end of this.
(29:02):
And conveniently, it waspetitioned to be added as an
opportunity zone.
And I just laugh because itkind of always goes into that
mindset that a lot of the taxcode is really it was written
because there was very richpeople petitioning for certain
things.
But what we try to teacheveryone is that, even though,
(29:23):
yes, that might be the case,those are the same things that
you can take advantage of if youknow about them.
And just most people just don'thave access to the strategy
side of taxes.
They're just checking boxes ordoing TurboTax, and they never
know about any of the stuffthat's actually available.
So we, you know, we certainlyappreciate you jumping on.
(29:45):
So let me ask you what are youin all the state like?
What states are you takingclients from?
Alexis Gallati (29:52):
Yeah, we are all over.
We have clients in 40 plusstates, we're 100% virtual and
so, yeah, we.
We have a ton of clients inCalifornia, texas.
Like I said, we're in 40 plusstates and so I don't think we
have any in Kansas.
So if anybody in Kansas wantsto help check off that box for
(30:13):
us, I'd appreciate that.
Michael Notbohm (30:16):
And what's your who's your ideal avatar, like
who you know?
I know you you deal a lot withwith the healthcare industry,
but it sounds like you're prettyknowledgeable about small
business.
You know W2 workers.
Who are you looking for?
Alexis Gallati (30:30):
Yeah.
So our ideal client are thosethat earn over $400,000 a year
from all their sources and alsohave 1099 income or income as an
independent contractor of atleast 50 to $60,000.
With that we're able to providea guarantee in our tax plan
(30:51):
design services which weguarantee to 2x their investment
in our services.
So if they pay us $10,000 todesign a plan, I'm going to
guarantee a minimum $20,000 peryear in tax savings or they get
the plan for free.
So you know we're a very small,boutique type firm.
We only have about you knowit's time of this recording
(31:13):
about 120 clients that are onour tax maintenance packages,
and that's by design.
We have criteria to work withus and we want to make sure that
we're working with those thatwe know we can save a lot more
than what what you're paying us.
Michael Notbohm (31:30):
Yeah, that's awesome, that makes it funny how
, how synchronized the missionof what the legacy wealth code
is.
When we created it.
It was, like you know, andrewand I both we met, actually in a
networking group and both of ushad similar goals for what we
anticipated our net worth tolook like in the future and what
our legacy was to our familyand our friends.
(31:52):
And for us both, it's teachingother people how to build wealth
, because I'm convinced you know, especially granted a partial
to real estate, but there's alot of different investment
vehicles, but I'm convinced thatanyone could really be a
multimillionaire if you have theright disciplines, you have the
right network in your corner,because there's so many
(32:12):
opportunities that people justdon't take advantage of, and I
just love the fact that yourmission seems definitely in
alignment with what we're doing.
Alexis Gallati (32:21):
Yeah, I 100% agree, and it's with cerebral
like.
Like I said, we're very big oneducation and we don't take so
many products, we don't get anycommissions or kickbacks, and so
those that work with us knowwe're, you know, giving unbiased
advice, and it truly is aroundeducation.
(32:42):
I mean, if there's strategiesthat our clients don't feel
comfortable with, that's fine.
The most important thing isthat we're bringing new ideas to
the table and that you knowabout them.
So maybe in a couple yearsyou're ready for that short term
mental, you know.
Michael Notbohm (32:55):
So why do you think so many people not and
when I say people, I would evensay tax professionals are so
nervous about dealing with theIRS?
I mean they're it's almost likethey steer their clients away
from anything that might be, youknow, in the gray area.
But it's not.
It's like it's not really inthe gray area if you know about
(33:16):
it and know how it works.
Alexis Gallati (33:17):
Yes, I agree.
I think it's just because theyprobably don't have as much
experience with the IRS or feelas comfortable in their their
own education or skills.
You know, I did a three yearfellowship in IRS representation
and so I'm just verycomfortable with it.
Also to I, there are some areaswhere I'm a little more
(33:38):
conservative than others,because I know the IRS like
meals, for example, I tell myclients don't go crazy on trying
to write off all your meals,because that's one area that IRS
loves to nab people on and it'ssuch an easy area for people to
see like, hey, why'd you spend10,000 last year?
Announced 50,000?
Well it's, it's just a veryeasy spot.
So knowing where the IRS likesto audit more is important.
Michael Notbohm (34:06):
I guess the IRS workers were not buying eggs
during this period, Because Imean that would make sense.
That's where it's $10,000 to$50,000.
That's almost automatically.
Alexis Gallati (34:15):
That's true, there's always some per
inflation.
But yeah, otherwise, I'vealways loved tax and the fact
that it's really more centeredaround law.
I mean, it's really not thatmath related.
All you need to know is basicarithmetic, and I actually even
took the LSATs and was ready togo to law school, but my husband
(34:36):
and I decided that medicalschool bills were enough for us
at the time.
But yeah, it's just one ofthose things that, like I said
before, a lot of preparersnowadays are just more into
being tax return mills.
But you can definitely see,especially with the advancements
(34:58):
in AI, that if you're notgiving proactive advice, then
most likely those people willstart to fade out.
Michael Notbohm (35:07):
Yeah, I would definitely agree with that.
Andrew Hoek (35:09):
Your fellowship that you just said you did on
representing, I guess,individuals with regards to the
IRS what's the name of that?
Just so that I mean, I thinkthat's something people should
be asking their CPA like, hey,do you have this?
Is that something you do?
Because I mean, what a way toset yourself apart.
Alexis Gallati (35:28):
Yeah, it's an NTPI fellowship, so NTPI is
National Tax ProfessionalsInstitute.
Hopefully I got that right.
But yes, they're really greatwith, like I said, doing that
that three-year fellowship inand just really making sure that
their advisors know how toproperly handle everything,
(35:51):
whether it's like offeringcompromise or trying to get
penalty abatements, things likethat.
So, in full disclosure, I don'tdo a ton of offers and
compromise or things like that,but when it comes to maybe some
back taxes or penalty payment, Ido those on a more regular
basis.
Andrew Hoek (36:09):
Sure Makes sense.
Michael Notbohm (36:10):
The first quarter is just how to stay on
hold for hours and hours withoutlosing your mind, because
you're like, how come no one'spicking up?
Alexis Gallati (36:19):
Well, that's where you tap into your tax
professionals, because they havea practitioner priority line,
so we usually get in a littlebit faster.
Michael Notbohm (36:29):
So sometimes we're on hold a lot.
So I tell you what I mean.
We certainly appreciate it, andI know that when we first did
this there's like five or sixtopics, so I'd like to
proactively invite you back atsome time in the future to cover
some of these others, becauseyou've definitely given us so
much good stuff today.
How can we help you?
You need somebody in Kansas.
(36:50):
What else can we do for you?
Alexis Gallati (36:53):
Well, yeah, I would love to be back on.
I like I said, I love talkingtax and providing help that can
hopefully save people money,Because the more we can take out
of the IRS's pocket, thehappier I am.
But yeah, I actually have awebsite that's dedicated to
legacy.
So if you go towwwcerebraltaxadvisorscom
(37:16):
forward slash legacy, that willgo and show you kind of what we
offer.
That has on there a free bonustracker and year-end tax
planning list.
Go and check that out and makesure you have kind of thought
about everything before goingand doing your tax return for
the year, as well as a link tomy book which is Advanced Tax
(37:41):
Planning for MedicalProfessionals.
That was really a brain dump,basically, of a whole bunch of
different strategies from realestate to the retirement, to
entities, et cetera, and it wasa real labor of love and so many
people have gotten so muchvalue out of it and which I'm
very grateful for.
And then also on there I haveCerebral Wealth Academy, which I
(38:05):
just created within the pastfew months to really go and
educate those that have 1099income that $50,000, $60,000 of
1099 income.
But our more do-it-yourselfers,Cerebral tax advisors we're
really a white glove,hand-holding type of service,
(38:25):
and so we really promote amazingcommunication et cetera.
But we have some people thatcome that are perfect for us,
but they're like, hey, we reallywant to do it ourselves, and so
the Cerebral Wealth Academycourse will really help them do
it on their own.
And there is a $300 off couponin there.
(38:46):
It's exclusively for Legacy'spodcast, and then there's also a
link there.
If you want more of thathand-holding white glove service
, you can book a free discoverysession with me and see if we're
a good fit.
That's awesome.
Michael Notbohm (39:02):
That's great.
Yeah, and all of these linkswill be in the description of
the podcast when it publisheshere in a few days.
Andrew, you got any final taxquestions for the Wizard of Tax
here?
This has been great.
Andrew Hoek (39:15):
I don't, but, alexis, I really appreciate it.
It was a lot of greatinformation that you shared
today, so thank you for yourtime and your wisdom.
Alexis Gallati (39:23):
Yeah, thank you so much.
I really appreciate the two ofyou having me on.
Michael Notbohm (39:26):
Absolutely Until next, guys.
This has been the Legacy WealthCode podcast onward.
Speaker 1 (39:32):
Thank you for joining us for another episode of the
Legacy Wealth Code podcast.
If you enjoyed this episode,click Subscribe now and never
miss an episode Until next timeonward.
This is the Legacy Wealth Code podcast helping you
build long term wealth andelastic legacy through real
estate investing, tax strategiesand motivational stories from
some of the most successful andinfluential people out there.
Here are your hosts real estateinvestor and entrepreneur,
Michael Notbohm, and real estateinvestor and attorney, Andrew
Hoek.
Michael Notbohm (00:23):
Hey guys, welcome back to another episode
of the Legacy Wealth Codepodcast.
My name is Michael Notbohm,here with my partner in crime,
Andrew Hoek.
Andrew Hoek (00:31):
Hey guys, how's it going?
Michael Notbohm (00:32):
So we are delighted to have today.
Andrew and I talk about taxes alot, right, but now we have
somebody who actually is in thisspace as a professional, Alexis
Gallati not just you know, wetry to tell you what to do.
She is the person that can doit for you.
So Alexis is the founder of thetax strategist at Cerebral Tax
(00:56):
Advisors and the Cerebral WealthAcademy.
Also an author of advanced taxplanning for medical
professionals Over 20 years ofhigh level strategic planning,
which I know, Andrew and I talkabout every single podcast.
So we're delighted to have you,Alexis.
Thanks so much for joining us.
Alexis Gallati (01:13):
Yeah, thank you so much for having me here.
Michael Notbohm (01:15):
I'm really excited, so let's jump in.
Obviously, you know I think youprobably have seen a few of our
episodes, but Andrew and I arealways talking about build
wealth with taxes.
Build wealth with taxes becausea lot of people just they have
almost a negative connotationaround taxes.
Everyone almost like, oh, Idon't want to mess with the IRS.
(01:36):
And what we've come to realizeis there's such a huge
difference between a taxpreparer and a tax strategist.
So talk about what that meansto you and kind of how you have
created your business around thestrategy side.
Alexis Gallati (01:49):
Yeah, definitely , you know, when I was working
for regional, regional and localCPA firms before going out on
my own in 2014,.
That's really what majority oftax advisors, or safe tax
preparers?
Speaker 1 (02:04):
are.
Alexis Gallati (02:04):
They're just, they're preparers, they look in
arrears, they're reactive tosituations and which.
That's that's important.
I mean you still need to knowhow to actually properly report
things to the IRS and thatcompliance.
But you know, especially withmy husband being a physician and
you know, at the time beforestarting cerebral, you know he
(02:25):
was in his residency and acouple of years out and I
noticed the writing on the wall.
I mean he, you know he wasgoing to, we were going to be
shifting to another tax bracket,and so I wanted to know why the
Warren Buffets and the BillGates of the world, you know,
were getting those that 15% taxbracket.
And so that's when I reallystarted to look at tax planning
(02:46):
and being proactive in nature.
And so that's really what mypractice cerebral tax advisors
is all about is being proactiveand educating our clients on
what is available to them, evenif you know those strategies
that they're not ready to take.
It's more about the education.
You know, and all thestrategies we use are court
tested, arrears approved.
(03:07):
We don't put anything on a taxreturn we don't feel comfortable
defending in an audit.
So most clients when they cometo me, they're used to meeting
with advisors once a year.
You know, it's always it seemslike after year end and once
they've prepared their turn,they might get a few pieces of
advice here and there, but thatdoesn't help with tax savings.
(03:29):
Like you know, you have to do alot of the strategies during
the year in order for them toapply for that year.
So being proactive and workingthroughout the year is really,
like I said, the cornerstone ofcerebral, and that's why you're
having regularly scheduledmeetings with your tax
professional.
It is imperative to make surethat we're up to date on your
(03:50):
situation and we can applystrategies immediately.
Michael Notbohm (03:54):
Yeah, that's great.
I mean it's funny because a CPAthat we've worked with for for
a number of years always says heviews that the income tax.
You know once it once this timefor your taxes to be done as
his report card for the year.
And so many preparers exactlylike you said totally, you know,
(04:15):
let me just check the boxes andtell you how much you owe and
it kind of you know, it's like Iunderstand both sides of it,
right.
The tax preparer has a thousandreturns on their desk.
They don't have time to gothrough and say, hey, alexis, I
figured out all these ways afterspending hours of research, all
these ways I can save you money.
It's just going to take me awhole bunch more time to do it.
(04:37):
That just doesn't happen withthe regular tax preparer and I
think that you know there's sucha huge need for what you're
doing on the tax strategy side.
It's awesome.
Alexis Gallati (04:49):
Yeah, exactly Like you said.
I don't blame them because Imean they're that's what they're
doing, their tax return mills.
In a way they're just pumpingout the tax returns and most and
you got to remember too most ofAmerica is not in a position
where they're they'renecessarily going to be doing a
ton of tax planning.
You know, physicians andhealthcare professionals, I mean
(05:10):
they're just kind of in adifferent realm, in a different
bracket where you know theyreally need to start looking at
their situation morestrategically so they can keep
more of what they earn.
Michael Notbohm (05:23):
Yeah, agreed.
Andrew Hoek (05:24):
Alexis, touch a little bit if you can.
One of the things that we talkabout a lot is that and you
brought up Warren Buffett, forexample you know a lot of the
time you read these sort ofsmoking gun articles and, I
think, the initial thoughtprocess as well.
You know, these people are onlydoing this because they may
have a team of tax attorneys andtax planners and professionals
(05:46):
around them and that's reservedonly into the uber-uber wealthy.
But you know, one of the thingsMike and I try to coach and
preach on a lot is that, yes,while there is a segment of the
population that spends way moretime and money looking at that
because they have to, theseexceptions and exemptions are
applicable to everybody and it'sacross the board.
And I mean, what do you think,like you know, the run of the
(06:10):
mill, upper middle class shouldbe really spending time wise
with their tax planner.
Do you recommend quarterlymeetings?
Do you recommend less than that?
More than that?
What does that kind of looklike for you?
Alexis Gallati (06:23):
Well, it really depends on the person's
situation.
I mean, are you just strictlyW2?
That's not going to require asmuch time as someone who owns
multiple businesses or is inreal estate.
So at a bare minimum, theyshould be meeting with their
advisor at least once a year,and I say more likely towards
(06:43):
the end of the year.
You know, doing a year endprojection would be very helpful
to one help eliminate surprises.
What are you going to owe onyour tax return?
Is there anything we can dobefore your end?
So it's at least that littlebit of productivity once a year.
Now if you go all the way to theother side of the spectrum and
you have multiple businesses oreven just one business, then
(07:05):
it's really important to meet atminimum twice a year, and
that's what I do with my clients.
I meet with them at least twicea year when they have a
business.
So then that way we're doing amid-year projection, seeing how
things are going.
Do we need to tweak anything?
And then we meet with themagain at year end to basically
do the same and make sure.
Hey, are we still on track towhat we had before?
(07:27):
Like with the warm buffets ofthe world?
Like I'm sure that he's probablynot meeting with his people
quarterly, but he has people tomeet with his people.
That's when you know you madeit.
Yeah, exactly, and I'm surehe's probably looking at like
things and overall, like bigpicture sort of plan.
But for people you know more inour situation when you have
(07:51):
multiple businesses.
Yes, you should be working withyour advisor on a quarterly
basis, even potentially amonthly basis.
It depends on how big and howinvolved your business is, and
so it really depends, too, onthe business as well, especially
for healthcare providers.
You know, when you have youknow your medical practice, for
(08:11):
example you're going to probablywant to, like I said, at that
minimum do twice a year, andthen, you know, go from there.
Michael Notbohm (08:20):
So I had a client, you know so I'm still an
active real estate agent aswell and I had a client about a
year and a half ago.
He was an anesthesiologist.
They did a 1031 exchange out ofa mobile home park in
California, wanted to buysomething in Florida.
So sitting chatting with them,they had never heard of cost
(08:41):
segregation and bonusdepreciation.
So I walked them through howthat works and you know, his
wife was basically the propertymanager already Like that's what
she did.
She was working with collectingall the rents, making sure
everything is leased all thethings that you would normally
do as a real estate professional.
(09:01):
And I remember they boughtsomething in Fort Myers area and
that year he paid because theyfiled jointly, they paid zero
taxes.
And when we talk about buildingwealth and what that looks like
in terms of you know, fiveyears, if they did that for five
years, what does that look likefor your portfolio and what
(09:22):
your legacy means to you?
How often do you have peoplethat are in a similar scenario
to that and how do you advisethem?
Alexis Gallati (09:30):
Yeah, so I definitely.
I have clients that are intoreal estate and you know the
full spectrum of real estatesyndications, all the way up to
direct ownership.
You know short term, long term,etc.
And I love real estate for thatfact that you know it can
really provide a great avenuefor tax savings and it just
(09:51):
depends on the, the physician'sposition and if they're married,
if you know whether they're notmarried and you know what, what
they're able to do, even ifthey're single, and you know
they could potentially do like ashort term rental and qualify
for that short term rentalloophole.
That's amazing, you know, and Ihave some clients that are like
(10:15):
hey, lexus, I just don't havethe time for direct ownership.
So then you know we look atreal estate syndications, which
don't have, you know, the samefirst year sort of effects, tax
effects as, like a short termrental does, are doing real
estate professional status.
But there's still opportunityin the long run and, depending
upon their other assets theyhave, that can really help
(10:38):
achieve that lot of savings.
Andrew Hoek (10:41):
That's great.
So, you know, one of the thingsthat we're always trying to
look for, too, is like what aresome of the things that that?
I mean we spend a lot of timein the real estate side of
things, but what are some of thethings that maybe that we're
missing, that you would say arelike?
These are just kind of likeeverybody should be taking
advantage of these taxstrategies.
Do you have a couple favoritesthat you like, that you think
are really good ones?
Alexis Gallati (11:02):
Yes, yes, probably my absolute favorite is
the health savings account, theHSA.
I mean, anybody can do it aslong as you have a high
deductible health insurance plan, and so I advise my clients
even if they don't at the moment, maybe they have a loaded up to
take a look and see how muchmore the high deductible is or,
like the, I should say the taxsavings in it, the cost savings,
(11:26):
because obviously depends onyour situation and your health
and you know what you need foryour family, you and your family
.
But HSAs are wonderful becausethey're triple tax advantage the
money goes in tax free, itgrows tax free and then it comes
out tax free if you use it forqualified medical expenses.
So, and a lot of peopleincluding myself, for our HSA,
(11:51):
we will actually put the moneyin every year and not touch it
and we will pay for our medicalexpenses out of pocket and we'll
save those receipts and there'swe'll submit those receipts in
30 years.
There's no rule saying you haveto submit the receipt as soon
as you get it.
You can hold on to that receiptfor as long as you can.
(12:13):
You know with current laws andwhen we actually will allow
those funds to grow, because alot of HSA accounts allow you or
say, providers allow you toinvest that money into ETF or
other stock etc.
So you can allow that to growand then in, let's say, 30 years
(12:36):
, when you actually want to tapthat money, that account has
grown and you can, you know,submit the receipts at that time
and if you have more money inthere, then you have receipts.
It acts just like a regular,pre tax IRA individual
retirement account.
You just take the money out andyou, and if it's not for
qualified medical expenses, thenyou just pay at your tax rate
(12:58):
at the time.
Michael Notbohm (12:59):
So and so that I guess I was always thinking
that when you put into those atthe end of the year, whatever
you put in you had to use or youlost it.
And I think about some that'sflexible spending account.
Alexis Gallati (13:12):
Yeah, so that's different FSA, fsa you got one
letter.
That one letter is a big deal.
Michael Notbohm (13:20):
Exactly, yeah, and so is there a cap on how
much that people can put in?
Alexis Gallati (13:26):
Yeah, it changes every year.
In 2023 for a family plan at7,750.
And next year, for 2024, goesup to a 300.
And you have all the way untilthe filing of your tax return to
actually make April 15 to haveto fund that HSA.
So there's still time for 2023to do that if you have a
(13:50):
qualified plan, okay.
Michael Notbohm (13:52):
Yeah, that's great, all right.
So what else I mean?
Because this one was good, soyeah.
Alexis Gallati (13:57):
My absolute other favorite is retirement.
You know, depending upon yoursituation, if you're even if
you're just w2 making sureyou're maxing out your
retirement, it it seems so basic, but you'd be surprised the
number of People that come myway that are not maximizing that
benefit, especially if theiremployer offers some sort of
(14:19):
match.
So I mean, if there is any sortof match, you got to make sure
that you're taking advantage ofthat and putting in that Minimum
amount, otherwise you reallyshould be maxing it out.
And if you own a business, thenyou might want to take a look
at cash balance plans as adefined benefit plan as opposed
to defined Contribution plan,which is what a 401k is, or even
(14:43):
a step by array.
I love cash balance plans.
Michael Notbohm (14:45):
I'm sorry, yeah .
So I was gonna say just forpeople that don't know the
difference.
Alexis Gallati (14:50):
Yeah.
Michael Notbohm (14:50):
I explain what that would look like.
Alexis Gallati (14:52):
Yeah, so with a 401k, those are defined
contribution plans.
So what that means is that theIRS defines how much you are
allowed to put into your plan.
So for, like 2023, the maximumyou can do for your employee
deferral is 22,500.
Next year will go up to 23,000for a Define benefit plan.
(15:14):
The IRS is Defining the benefitthat you will are allowed to
put in.
That maximum amount you'll haveto put in by the time that you
retire, and so when you set upthe plan, you define that age.
So let's say it's age 62 and ifyou're aged 30, then you have
32 years to Make to get up tothat defined amount.
(15:35):
And so right now it's about 3.4, 3.5 million dollars.
It changes every year withinflation, and so You're able to
put in a much higher dollaramount With a cash balance plan
than you would with the 401kplan by itself.
Even with a profit sharing,you're maxed out there at 66
(15:56):
thousand dollars for 2023 and2024 at 69,000.
I have clients that you knowstart this sort of plan, let's
say, around age 35.
I mean, they're easily able toput in About six figures into
their retirement, so it reallyallows you to put so much more
away.
Now they're very.
There's some quirky thingsabout them which I'm happy to go
(16:19):
into if you want.
But yeah, so I mean you have tofund it for a minimum of three
years and keep it open for aminimum of five.
Now, that's a A generalguideline.
If you know, god forbid, there'slike another COVID, or you know
you decide like, hey, I'm notgonna do 1099 work anymore and
be an independent contractanymore, I have my own business,
(16:41):
then you can close it down forlegitimate business reasons, but
in general you need to keep itopen for those few years.
And then also too, there's a.
It's a pre-tax account, Ishould mention.
Both of them are so this moneyis going in, you're getting an
deduction for it.
But you you need to keep thethe growth of the account at a
(17:02):
fairly consistent rate in orderto take advantage of the tax
Benefits year after year, beingable to put in that six-figure
amount every single year,because Otherwise, if it grows
too quickly, then you're gonnareach that defined benefit
amount a lot sooner that 3.5million, let's say yeah, for age
62, and so then you won't beable to put in as much the next
(17:24):
year.
So, like I said, there's a fewnuances.
It's definitely a much moreadvanced type retirement plan
and I highly recommend workingwith you, know Professional, to
make sure that it's being sayingcompliant and properly
administered.
Michael Notbohm (17:40):
So okay.
So because I know you work alot with the healthcare, you
know you said your husband's aphysician and I think your
parents were physicians as well,right, which is kind of how you
got indoctrinated into thatwhole realm and you're like I
don't want to be on call at 2 am, I just want to help you guys
save money.
So I totally get.
Alexis Gallati (17:59):
I do not have the science gene at all.
I have the dollar gene in myhead.
Michael Notbohm (18:05):
But so you know , for a w2 income earner, if
they, if their Business or youknow company they work for,
offers a Retirement plan, theywould not be able to do this.
Cash retirement plan, cashoption retirement plan.
Alexis Gallati (18:20):
No, it's such.
I was saying the very universalanswer to most things tax.
Andrew Hoek (18:25):
It depends, unfortunately, so like an
attorney there.
Alexis Gallati (18:33):
If you are w2, but let's say you have fifty,
sixty thousand dollars of 1099income you know income is
independent contractor.
Maybe you're doing consultingor you are doing some locum work
on the side Then you can dothat retirement contribution on
top of what's happening in youremployer's plan.
(18:53):
The only thing you can'tduplicate is the employee
deferral you know, for examplein a 401k.
So if you have a 401k in bothspots then you can't duplicate
the employee deferral but youcan do the employee or
contribution Between both okay,yeah, that's grabbing Like so
(19:14):
much value there to me that,like I think, most people don't
know about yeah.
And that's the majority of ourclients are those that have at
least fifty, sixty thousanddollars of 1099 income, and if
we have that, we're able to workso much magic in terms of
retirement planning, deductions,making sure, using proper
(19:36):
entity, etc.
And all of it together canreally help save a ton of money.
Andrew Hoek (19:41):
Does it have to be 1099 or that?
Can it be k1 as well?
Alexis Gallati (19:46):
So when you start to get into k1 you start
to get in into things calledcontrolled group and affiliated,
affiliated service group issues.
Okay, so if you let's say thatyou're a partner in practice and
you get a k1, but let's saythere's eight other physicians,
then most likely you cannotcreate your own retirement
(20:10):
account because of Even if it'scompletely the independent
income of the group big.
Since you are a 8th owner inthat partnership, you have to go
and include any employees inthat group in that plan got you
(20:31):
so in the plan that you've setup.
So it doesn't work well in thatsituation.
So you got to be very carefulabout those cork.
It's under a RISA rules, soit's er is a don't ask me what
the acronym is I, but if youlook up, er is a RISA rules that
basically those are rules thatprotect the employees, like the
(20:53):
little guys, from the owners,you know, not including them in
any sort of retirement.
Michael Notbohm (20:59):
And it.
You know, it's kind of funnybecause so one of the things we
teach a lot is is that the taxcode is thousands of pages and
Yet only very small amount of itActually tells you how the IRS
can apply taxes.
The rest of it is really howthe IRS Incentivizes you to do
different things, and so itsounds to me like you know, some
(21:20):
of the stuff you've alreadyshared really is incentive based
that most people I don't thinkreally even know about.
Now, how often do you work withsmall businesses?
I guess there's some taxadvantages that they should know
about that they may not betaking advantage of.
Alexis Gallati (21:35):
Yeah, majority of our clients have small
businesses and you know because,like you said, you know, to be
honest, the code is really builtfor those that own businesses
or have investments.
If you're strictly W2, I hateto be the bearer of bad news,
but there's really a limitedamount of things you can do, and
so you start, until you startgetting into more investment
(21:57):
type strategies like oil and gasor solar credits, things like
that, short term rentals Shortterm rentals, exactly, real
estate as well and, yep, exactly.
Michael Notbohm (22:08):
Sorry, shameless plug.
Alexis Gallati (22:10):
No, no, exactly no, that's, that's, that's right
.
And so when we start workingwith our clients, especially if
they own businesses, we arewe're looking at entity.
You know entity selection issuch an important thing Because
even if you're only own, youknow, have $50, $60,000 of 1099
(22:31):
income, you can, if you go andchoose the correct entity, does
open up a ton of doors in termsof different strategies, such as
, like, if you only have $50,000of 1099 income and you're a
sole proprietorship, you can'trun a loss due to a retirement
contribution.
So if you want to do any sortof retirement contribution on
(22:54):
that $50,000 of revenue,assuming that you dwindle it
down with other expenses to zerothen you really have to do an S
corporation in order to takethat loss and, you know, do a
retirement contribution based onthe wages which you make, that
you just make that as high aspossible, basically to max out
(23:15):
your retirement.
But otherwise I'd love to alwayslook at what my client spending
habits are and see how manypersonal expenses we can make to
be legal business deductionsthrough their business, like
home office and mileage.
I love per diem as well becausethat allows you to take
(23:37):
additional deductions that youdon't have to pay for and I'd
say per diem for lodging andmeals and incidentals when you
travel over 50 miles away.
So that's great strategy forlocum workers that travel a lot.
Those are some of my favorite,and so we always just look to
make sure that you're maximizingout as much as possible.
Andrew Hoek (23:58):
I like that.
I'm going to put you on thespot here.
I know we didn't chat aboutthis at all prior to the show,
but I'm getting ready to do a1031, and I have a call with an
intermediary tomorrow to startto ask some questions.
But I just figured I'll firehim at you too if we have access
.
So I'm interested in and Idon't know how much 1031 work
(24:24):
you do, but I suspect you've gotsome working knowledge of it,
of course.
But I'm interested in doing kindof a non-traditional exit on.
So I'm selling a property thatI own with three partners and
basically we're all going ourdifferent directions and so
we're not going to do alike-kind replacement as far as
(24:46):
a typical, just sell thatproperty and buy another
property.
So I'm aware that there aresome options out there that are
like you can kind of go in onalmost like a fractional
ownership and you can buy abigger asset that you own some
percentage of, and that can bedone in lieu of a 1031.
(25:06):
Somebody was telling me thatyou can also do a scenario
that's kind of similar to that,but as long as you're not
touching that money, it can besome other company that you own,
almost like the idea of kind oflike a self-directed IRA.
Do you have any knowledge ofthat?
Is that something that you canactually do?
Have you ever dealt with thator come across that?
Alexis Gallati (25:28):
I have not come across that before, but have you
ever considered an opportunityzone or an opportunity fund?
Andrew Hoek (25:36):
Yes, and I've kicked that around too.
That's actually one of thethings I wanted to explore a
little bit with them with themtomorrow too, but tell me, I
guess, a little bit more aboutyour take on that.
Alexis Gallati (25:46):
Yeah, so what I love about opportunity funds is
that you're able to so.
With a normal 1031 exchange,let's say you have proceeds of a
million dollars but your gainis only 300,000.
Well, in a normal 1031, youwould have to move that full
million dollars into the nextproject, but with an opportunity
(26:10):
zone you get to just move that9, or, sorry, the 300,000.
Instead you only have to investthe gain, and so then that
helps to go and defer the gainuntil 2026.
And so I mean, these have beenaround for a good while, yeah
we're like two years too late,right.
(26:32):
I know you can at least get todefer for a couple years and
some of the programs that I'vebeen introduced to have been
really great that they'll go andyou get to defer that gain.
But then you get a guaranteed6% income every single year on
that money and then that moneyis tax-free.
(26:53):
And then when you have to go topay those taxes so for 2026,
you pay in 2027, they willprovide a distribution to help
cover the capital gains tax andthen between that time and 10
(27:14):
years so usually your money doeshave to be tied up for 10 years
then they'll give you a.
The appreciation that you haveon that investment is tax-free
as well.
So it's a pretty sweet deal,especially if you don't need
access to that money right away.
(27:34):
Then you get to defer that gain.
They'll help pay for it, youknow, essentially out of your
distributions, and then the andthen 6% tax free income
guaranteed every year plus theappreciations for tax free.
I mean yeah.
I wish I had some capital gains,to put it, and that doesn't
(27:56):
have to be just from a 1031exchange.
You can be any capital gains.
It can be even from you knowinvestments in the stock market
and or even like, if we havewith sometimes we'll have
clients that will sell equity inyou know to private equity firm
, you know, to the part of theirpractice, and we'll use that
strategy.
So that might be something tothink about and discuss with
(28:19):
with them tomorrow.
Andrew Hoek (28:20):
Yeah, I like that.
Michael Notbohm (28:21):
Yeah, the opportunities on thing.
I always laugh because so youknow, like we talked before the
show, we're down here in Tampaand I think the misconception
people often have is opportunityzones must mean that it's a
really bad neighborhood andthat's not the case.
You know there's a lot ofexamples, but one of them is
downtown Tampa.
(28:41):
Jeff Vinick, who bought theTampa Bay Lightning a number of
years ago, started a projectcalled Water Street and it's
about a what two?
$3 billion project, andrew, youthink by the time it's done.
And you know Bill Gates is oneof the investors.
You know and you know you canimagine how much it's going to
be worth at the end of this.
(29:02):
And conveniently, it waspetitioned to be added as an
opportunity zone.
And I just laugh because itkind of always goes into that
mindset that a lot of the taxcode is really it was written
because there was very richpeople petitioning for certain
things.
But what we try to teacheveryone is that, even though,
(29:23):
yes, that might be the case,those are the same things that
you can take advantage of if youknow about them.
And just most people just don'thave access to the strategy
side of taxes.
They're just checking boxes ordoing TurboTax, and they never
know about any of the stuffthat's actually available.
So we, you know, we certainlyappreciate you jumping on.
(29:45):
So let me ask you what are youin all the state like?
What states are you takingclients from?
Alexis Gallati (29:52):
Yeah, we are all over.
We have clients in 40 plusstates, we're 100% virtual and
so, yeah, we.
We have a ton of clients inCalifornia, texas.
Like I said, we're in 40 plusstates and so I don't think we
have any in Kansas.
So if anybody in Kansas wantsto help check off that box for
(30:13):
us, I'd appreciate that.
Michael Notbohm (30:16):
And what's your who's your ideal avatar, like
who you know?
I know you you deal a lot withwith the healthcare industry,
but it sounds like you're prettyknowledgeable about small
business.
You know W2 workers.
Who are you looking for?
Alexis Gallati (30:30):
Yeah.
So our ideal client are thosethat earn over $400,000 a year
from all their sources and alsohave 1099 income or income as an
independent contractor of atleast 50 to $60,000.
With that we're able to providea guarantee in our tax plan
(30:51):
design services which weguarantee to 2x their investment
in our services.
So if they pay us $10,000 todesign a plan, I'm going to
guarantee a minimum $20,000 peryear in tax savings or they get
the plan for free.
So you know we're a very small,boutique type firm.
We only have about you knowit's time of this recording
(31:13):
about 120 clients that are onour tax maintenance packages,
and that's by design.
We have criteria to work withus and we want to make sure that
we're working with those thatwe know we can save a lot more
than what what you're paying us.
Michael Notbohm (31:30):
Yeah, that's awesome, that makes it funny how
, how synchronized the missionof what the legacy wealth code
is.
When we created it.
It was, like you know, andrewand I both we met, actually in a
networking group and both of ushad similar goals for what we
anticipated our net worth tolook like in the future and what
our legacy was to our familyand our friends.
(31:52):
And for us both, it's teachingother people how to build wealth
, because I'm convinced you know, especially granted a partial
to real estate, but there's alot of different investment
vehicles, but I'm convinced thatanyone could really be a
multimillionaire if you have theright disciplines, you have the
right network in your corner,because there's so many
(32:12):
opportunities that people justdon't take advantage of, and I
just love the fact that yourmission seems definitely in
alignment with what we're doing.
Alexis Gallati (32:21):
Yeah, I 100% agree, and it's with cerebral
like.
Like I said, we're very big oneducation and we don't take so
many products, we don't get anycommissions or kickbacks, and so
those that work with us knowwe're, you know, giving unbiased
advice, and it truly is aroundeducation.
(32:42):
I mean, if there's strategiesthat our clients don't feel
comfortable with, that's fine.
The most important thing isthat we're bringing new ideas to
the table and that you knowabout them.
So maybe in a couple yearsyou're ready for that short term
mental, you know.
Michael Notbohm (32:55):
So why do you think so many people not and
when I say people, I would evensay tax professionals are so
nervous about dealing with theIRS?
I mean they're it's almost likethey steer their clients away
from anything that might be, youknow, in the gray area.
But it's not.
It's like it's not really inthe gray area if you know about
(33:16):
it and know how it works.
Alexis Gallati (33:17):
Yes, I agree.
I think it's just because theyprobably don't have as much
experience with the IRS or feelas comfortable in their their
own education or skills.
You know, I did a three yearfellowship in IRS representation
and so I'm just verycomfortable with it.
Also to I, there are some areaswhere I'm a little more
(33:38):
conservative than others,because I know the IRS like
meals, for example, I tell myclients don't go crazy on trying
to write off all your meals,because that's one area that IRS
loves to nab people on and it'ssuch an easy area for people to
see like, hey, why'd you spend10,000 last year?
Announced 50,000?
Well it's, it's just a veryeasy spot.
So knowing where the IRS likesto audit more is important.
Michael Notbohm (34:06):
I guess the IRS workers were not buying eggs
during this period, Because Imean that would make sense.
That's where it's $10,000 to$50,000.
That's almost automatically.
Alexis Gallati (34:15):
That's true, there's always some per
inflation.
But yeah, otherwise, I'vealways loved tax and the fact
that it's really more centeredaround law.
I mean, it's really not thatmath related.
All you need to know is basicarithmetic, and I actually even
took the LSATs and was ready togo to law school, but my husband
(34:36):
and I decided that medicalschool bills were enough for us
at the time.
But yeah, it's just one ofthose things that, like I said
before, a lot of preparersnowadays are just more into
being tax return mills.
But you can definitely see,especially with the advancements
(34:58):
in AI, that if you're notgiving proactive advice, then
most likely those people willstart to fade out.
Michael Notbohm (35:07):
Yeah, I would definitely agree with that.
Andrew Hoek (35:09):
Your fellowship that you just said you did on
representing, I guess,individuals with regards to the
IRS what's the name of that?
Just so that I mean, I thinkthat's something people should
be asking their CPA like, hey,do you have this?
Is that something you do?
Because I mean, what a way toset yourself apart.
Alexis Gallati (35:28):
Yeah, it's an NTPI fellowship, so NTPI is
National Tax ProfessionalsInstitute.
Hopefully I got that right.
But yes, they're really greatwith, like I said, doing that
that three-year fellowship inand just really making sure that
their advisors know how toproperly handle everything,
(35:51):
whether it's like offeringcompromise or trying to get
penalty abatements, things likethat.
So, in full disclosure, I don'tdo a ton of offers and
compromise or things like that,but when it comes to maybe some
back taxes or penalty payment, Ido those on a more regular
basis.
Andrew Hoek (36:09):
Sure Makes sense.
Michael Notbohm (36:10):
The first quarter is just how to stay on
hold for hours and hours withoutlosing your mind, because
you're like, how come no one'spicking up?
Alexis Gallati (36:19):
Well, that's where you tap into your tax
professionals, because they havea practitioner priority line,
so we usually get in a littlebit faster.
Michael Notbohm (36:29):
So sometimes we're on hold a lot.
So I tell you what I mean.
We certainly appreciate it, andI know that when we first did
this there's like five or sixtopics, so I'd like to
proactively invite you back atsome time in the future to cover
some of these others, becauseyou've definitely given us so
much good stuff today.
How can we help you?
You need somebody in Kansas.
(36:50):
What else can we do for you?
Alexis Gallati (36:53):
Well, yeah, I would love to be back on.
I like I said, I love talkingtax and providing help that can
hopefully save people money,Because the more we can take out
of the IRS's pocket, thehappier I am.
But yeah, I actually have awebsite that's dedicated to
legacy.
So if you go towwwcerebraltaxadvisorscom
(37:16):
forward slash legacy, that willgo and show you kind of what we
offer.
That has on there a free bonustracker and year-end tax
planning list.
Go and check that out and makesure you have kind of thought
about everything before goingand doing your tax return for
the year, as well as a link tomy book which is Advanced Tax
(37:41):
Planning for MedicalProfessionals.
That was really a brain dump,basically, of a whole bunch of
different strategies from realestate to the retirement, to
entities, et cetera, and it wasa real labor of love and so many
people have gotten so muchvalue out of it and which I'm
very grateful for.
And then also on there I haveCerebral Wealth Academy, which I
(38:05):
just created within the pastfew months to really go and
educate those that have 1099income that $50,000, $60,000 of
1099 income.
But our more do-it-yourselfers,Cerebral tax advisors we're
really a white glove,hand-holding type of service,
(38:25):
and so we really promote amazingcommunication et cetera.
But we have some people thatcome that are perfect for us,
but they're like, hey, we reallywant to do it ourselves, and so
the Cerebral Wealth Academycourse will really help them do
it on their own.
And there is a $300 off couponin there.
(38:46):
It's exclusively for Legacy'spodcast, and then there's also a
link there.
If you want more of thathand-holding white glove service
, you can book a free discoverysession with me and see if we're
a good fit.
That's awesome.
Michael Notbohm (39:02):
That's great.
Yeah, and all of these linkswill be in the description of
the podcast when it publisheshere in a few days.
Andrew, you got any final taxquestions for the Wizard of Tax
here?
This has been great.
Andrew Hoek (39:15):
I don't, but, alexis, I really appreciate it.
It was a lot of greatinformation that you shared
today, so thank you for yourtime and your wisdom.
Alexis Gallati (39:23):
Yeah, thank you so much.
I really appreciate the two ofyou having me on.
Michael Notbohm (39:26):
Absolutely Until next, guys.
This has been the Legacy WealthCode podcast onward.
Speaker 1 (39:32):
Thank you for joining us for another episode of the
Legacy Wealth Code podcast.
If you enjoyed this episode,click Subscribe now and never
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