Read The Transcript Below:

Steven (00:50):

Hello everyone, and welcome to the next episode of the Retirement Tax Services podcast, Financial Professionals Edition. I’m your host, Steven Jarvis, CPA, and with me on the show today, I might have a strong contender to take my title of least boring, CPA, Bob Wheeler, who not only is a CPA, actively doing tax prep and tax planning, but also has legitimate resume and standup comedy. So Bob, welcome to the show.

Bob (01:16):

Steven. Great to be here. I won’t take your title, I promise. We can share.

Steven (01:22):

Perfect. It is a made-up and self-assigned title, so I can do whatever I want with it. 

Bob (01:27):

Okay. I hear you. I hear you.

Steven (01:29):

I think that was one of my favorite things about starting my own business was realizing, well, I can call myself anything I want. I can make up any title and who’s going to argue so?

Bob (01:36):

Exactly. Exactly.

Steven (01:38):

So Bob, you and I had the chance to meet at FinCon here recently. I was really impressed with your background, a lot of the things you have going on, and one of the things that we really connected on was kind of some shared experiences around working with financial advisors around tax planning. But before we dive into that, just go ahead and share a little bit of your background in this wonderful world of tax just to establish where you’re coming from and then we’ll dive in.

Bob (02:03):

Sounds good. So I am a CPA. I have had my own tax practice for about the last 20 years. Oh, maybe more, but let’s say 20. And I’m also the CFO, COO of the world-famous Comedy store in Hollywood. And I’ve been doing this for a long time. I work with a lot of entrepreneurs, people that have businesses, people that I can actually help if it’s just somebody with a W2, not a lot I can do other than say, withhold more, withhold less. And over the years what I discovered is that a lot of my tax meetings turned into therapy sessions. So I have a background in somatic therapy and I work with clients trying to figure out what’s going on for them emotionally before I can actually get to what’s going to work for them practically, because sometimes those don’t align.

Steven (02:52):

Yeah, that’s great insight right out of the gate. One of the things I try to reinforce to people all the time is that we need to make great life decisions and then figure out the most tax efficient way to go about that. Almost never is it a good idea to start with, Hey, let’s save taxes and then try to force our life into that box. So talk more about how those therapy sessions go. I mean, how do you identify where the real issues are and then bring this back to the tax side? 

Bob (03:14):

Well, a lot of times clients will come in and they say, I’m your worst client. I know you must hate me. And even if I agree, of course I’m not going to tell them that, but usually I’ll say, what’s going on for you? Well, I know we didn’t save. I know we didn’t do a good job of keeping our records, we didn’t make the estimated payments. Or it might be just like, I feel like this year we’re going to have a refund, have no idea what we did this year, but this is the year I think we deserve it.

Steven (03:39):

Feeling good.

Bob (03:40):

And so getting a sense of where they are in terms of reality and terms of where they are just emotionally to, let’s take a look at this because I have a lot of clients. I work with a lot of creatives and some clients will say to me, you got 10 minutes and then I’m shutting down, so I know I’ve got to get in. And so just looking for where people are because maybe they’re trying to buy a house, maybe I need to show more income. Maybe they’re trying to save on taxes because they had a huge tax bill last year. There are so many different things. I might be trying to help somebody qualify their kids for financial aid. And so I really need to know what their story is before I go about trying to do their taxes because I need to know what is our goal.

Steven (04:24):

I really like that. There’s a couple of things in there that stand out to me. I do work with a lot of people who are W2 employees, and you’re absolutely right, the number of levers we can pull is a lot smaller for W2 employees. And so it really becomes about these small consistent things over time. Usually year over year, we’re not having these big drastic changes that you’re talking about. But I mean, you hit on a couple of things there that I think get overlooked that over our lifetime, I’m sure most everyone’s goal is to minimize the amount of taxes they pay, but there might be years if we’re looking to buy a house. I mean, there could be years where we say, oh, wait, no, as an entrepreneur, as a small business owner, I actually maybe want to go out of my way to show higher taxable income this year. Not as simple as sharing my most recent tax or pay stub and hoping I’m getting approved for a loan. And so being able to dial in from year to year and knowing that those are going to change drastically from year to year at times is really important to know based on the types of clients you’re working with.

Bob (05:15):

And that was something that came over time because people would walk in and say, I don’t want to pay any tax, and I would accommodate them. And then they’d go, great. Now I can’t buy a house. Thank you, Bob. Well, you didn’t mention that at the time. So it over time and experience helped me to really hone in on what are the goals, what do we need to accomplish this specific year? And then I’m also still looking big picture, do I have capital loss carry forward, net operating loss carry forward? Am I expecting large capital gains? And again, you briefly talked on it, checking in with their financial advisors. I’ve had a couple advisors say, why are you mad at me? They made $200,000. You didn’t tell me.

Steven (05:53):

You didn’t tell me.

Bob (05:55):

It wasn’t part of my formula.

Steven (05:57):

Yeah. A couple interesting things in there. I mean, even if we just take something as simple as how much of a refund or payment somebody wants to make at tax time, we can’t just assume that everyone’s the same across the board as a tax preparer or as a financial advisor. If your default approach is, I’m going to make sure everybody gets a $5,000 refund, you might piss some people off. That might not be the desired outcome. And I’m totally with you. That in fact was recently, I know you’re real active on YouTube, you do a lot of videos. I’m relax on LinkedIn. I recently did a post around this idea of, okay, as the advisor, what are you doing that’s actually making your client’s life significantly harder come tax time? Because yeah, generating $200,000 of investment returns might feel like this great thing, and ultimately it is.

(06:40):

I love more income too, but you’re taking away some of the value if you’re creating income and then you’re also creating headaches to go along with it. I’d be curious to see or to hear what you do with advisors to try to prevent this. But I mean a simple communication late in the year Q3, Q4 to say, Hey, Bob, just wanted to let you know we’re working with these clients that we share and we’re expecting some big capital gains. They just sold a property, whatever that might look like. So that going into the end of the year, so that come February or March, you’re not the one delivering the bad news to the clients of, oh, actually you owe a hundred thousand dollars in taxes.

Bob (07:16):

Yeah, absolutely. Well, talking right there about capital gains and losses. I had a client had a three or $400,000 capital loss and her advisors put me in high-yield dividends. And so I need stock that’s appreciating because I’m paying tax on a hundred thousand dollars worth of dividends looking at these losses I can’t absorb. And so just as simple as saying, oh, by the way, here’s what’s going on. And the financial advisor will say, oh my gosh, I didn’t know that. So I’ve had that multiple times where I’ve got a situation, I had a client, the financial advisor’s freaking out, she’s pulling out money left, right, but I know she’s got a half a million dollars worth of operating loss carry forward. She’s not paying any tax. They didn’t know that. And so being able to communicate, here’s where we might want to focus, here’s what to be aware of knowing that there’s a large capital gain so I can at least brace the client to put the money aside if I don’t have a way to bring it down and harvesting the losses can be great. Some people get super excited, they’re like, I lost a hundred thousand dollars. I get to write it off. And I’m like, you lost a hundred thousand dollars. So I don’t always know that harvesting the loss is the right strategy for everybody, but it’s really about communicating with the advisors so that we can all get on the same page and make sure that we’re actually serving the client the best that we can.

Steven (08:36):

There’s so many moving pieces to all of this, which is why that communication is so important. I like that you brought up the qualified dividends along with the capital losses because, and this is one I can see where people get this confused because I’ll have advisors, I’ll have taxpayers that will correctly understand that qualified dividends and long-term capital gains and losses are in the same category as far as the tax rate that gets applied. But that doesn’t mean we get to offset the two. And so especially anytime we have large capital loss carry forwards, it’s one of the conversations I like to have of, okay, what’s our plan for using these capital losses in the future? Because especially if we get into hundreds of thousands of dollars, sure, we can take $3,000 a year against ordinary income, but at $300,000 of capital losses, that’s going to take a long time to use up. Whereas if we can be really intentional about where our investments are allocated, where we’re generating potential appreciation in the future, we can be more strategic and make sure we’re getting the tax benefit. 

Bob (09:34):

Absolutely. The other thing that I would really want to mention right now, especially because we’re close to the end of the year, Roth IRA conversions, I have a lot of seniors and a lot of people where this year they’re going to have a negative $30,000 of taxable income. I want to convert. I’ve got SEP IRAs, I’ve got retirement accounts that I can convert. Let me convert those tax-free if I know. And so I tell clients, now look, we’re going to put money into a SEP IRA. We’re going to do these plans, but if your money dips, we want to take advantage of those dips and convert tax-free or pretty close to tax-free. And I have converted hundreds of thousands of dollars with much joy because we planned ahead and nothing makes me sadder than to see lost opportunity in March and April.

Steven (10:20):

Yeah, I think it comes as a surprise to people at times when tax professionals like ourselves will say that because you tell me if you disagree with this, but to me one of the biggest missed opportunities is a tax return where we paid $0 in taxes because if we had zero taxable income if we had $0 in taxes, it probably means we missed doing things proactively because again, I don’t want to minimize taxes this year. I want to minimize taxes over my lifetime. And so paying $0 in taxes probably means I missed out on potentially filling up the 0% capital gains bracket, maybe the 10 or 12% ordinary income brackets. And again, especially since you work so much with entrepreneurs, we have more potentially volatile income streams for our W2 taxpayers. They might not be able to fathom what would a year look like where it had negative taxable income or zero taxable income. But for business owners, this is perfectly possible. So taking advantage of those years, converting to 0%, what gets better than that?

Bob (11:18):

And one of the things, another way I bring people some joy, at least for the beneficiaries when I’m talking to adult children and I’m saying, Hey, your mom, your dad, they had negative income. We didn’t convert these, but how does this impact you when you inherit their retirement accounts? You want to inherit Roth IRAs, not traditional IRAs, not traditional 401Ks if you don’t want to pay tax on it down the future because when we inherit IRAs and retirement plans are mostly taxable unless we inherit Roths. And so that’s a big incentive for adult children to say, mom, dad, let’s look at this because not only does it help you, it helps your kids, it helps your beneficiaries, and I think that’s important too.

Steven (12:02):

Yeah, it really shouldn’t even just be about minimizing your taxes over your lifetime. It’s the lifetime of your wealth and you jumped right to it of this is making sure we understand what the legacy plans for a client is. Because I’ve definitely had taxpayers who when we talk about the idea of Roth conversions and say, you know what? I’ll just pay the taxes when they come due. I’m not that worried about it. It’s like, okay, this isn’t a conversation just about you. This is about potentially your surviving spouse. This is about your kids. This is about your intentions for that wealth that’s left over unless you plan on having your last check bounce, which if you can plan that perfectly, all the best, good luck with that. But most people have some kind of legacy intentions and we have to understand what those are including, Hey, if those are going to get left to charity, let’s skip the Roth conversions probably altogether or maybe we’re doing a much smaller amount.

Bob (12:48):

Yeah, absolutely. And then again, you just mentioned charity. A lot of my clients don’t know that they don’t have to take the RMD, right, the required minimum distribution. They can just directly give it to charity, not have the income for sure. They may not get the charity deduction on a schedule A, and so there are other ways we can minimize our tax.

Steven (13:07):

Bob, we’re talking to an audience of thousands of financial advisors here. What are the top things that you would love to see advisors do that? I mean, selfishly it’s going to make your and my life better, but really it’s their client we’re trying to help. What are those top things that they can do as they’re doing planning with their clients to make sure taxes are getting handled appropriately and that we’re not just creating problems come tax filing time?

Bob (13:30):

Actually, I think the first thing is, and a lot of financial advisors don’t do this, connect me with your CPA connect me with so that we know that we can talk to each other and I make sure that I let the financial advisors know I want to be in communication with you. Let’s be effective together. I think that’s the most important. Secondly, I think it’s actually really establishing what do they want to accomplish? What are those life goals? What is the legacy they want so that we can start putting those things into place. Maybe it’s long-term care, maybe it’s life insurance that offers both. Maybe it is setting up a charitable foundation and really taking care of that stuff and making sure that the clients understand, get it done, sign the paperwork, put it in place. Because I’ve seen so many people who pass didn’t take care of the paperwork and now everything that they thought was going to happen didn’t happen because they didn’t want to deal with the fact that they might not be here one day.

Steven (14:29):

Yeah, that’s a great reminder. I know this is something I have to catch myself on at times because I deal like you, I deal with the tax side, and so that means that very often I’m leaving some of the movement of money, a lot of the paperwork up to the financial advisors because they’re licensed and the experts in that area. But those details matter. I was recently giving a presentation to advisors talking about inherited IRAs and the ability to disclaim assets, and one of the things we talked through is that, hey, there’s a very important order of operations here as far as where the check goes and how it gets rolled over and which accounts it goes to and the legal paperwork that needs to be in place before someone ever passes away. And if you miss those steps, all of this great conversation that you and I are having about possibilities goes out the window. We have to do these in order and we have to make sure we’re ready when these things come along.

Bob (15:17):

There’s other couple things that I, with financial advisors specifically, one, be willing to admit you don’t know everything. Some people will come to me and say, Bob, I want to do this trust and then it’s going to do this. And I’ll say, I don’t know anything about this. Let me do some research. Let me find out or let me talk to some experts so I can actually give you some real information instead of pretending and go, yeah, do it without understanding the impact. That’s one thing. The other piece is understanding your client, because I do talk sometimes with financial advisors and I actually talk about money and emotions, and I had a lot of advisors come up after the first time and they said, oh my gosh, I never really understood why people don’t just hand me over their half a million dollars to invest. They’re so resistant yet because they haven’t established trust.

(16:04):

They worked a lifetime to get this money. And if you could actually not have compassion, but empathy of understanding, oh, this is a legacy that you received or this is your hard earned dollars from sweat and tears and really being gentle with their money instead of just do what I say, I know better than you, and just jumping in. I think that’s so important. I had a client who came to me who was very wealthy, and I was talking to her and she said, I’m on board. And I was like, well, wait a minute. We haven’t even talked. She said, you’re talking to me, not at me and over me. And I have had so much experience of being talked over and not to, and I already know I want to be in a relationship with you because you’re actually hearing what I’m having to say.

Steven (16:51):

Especially on a topic like taxes. It’s so easy to get carried away with jargon and acronyms and wanting to appear as though you’re the expert, a person’s coming to you because they assume that you’re the expert. And so this isn’t about proving to them how many acronyms you have behind your name or what fancy university you went to. It’s about showing them that you can effectively communicate and to your point, empathize with them so that they want to have a relationship. This is a very relationship-driven industry. You can’t just assume that by being the smartest person in the room, you’re going to win all the business.

Bob (17:24):

Yeah, absolutely. And I think it’s important for financial advisors to really establish trust, letting people know, I’m here to be of service. I’m really here to help you not buy this annuity and buy my products, or let’s just do day trade so I can get a commission every time, because ultimately that’ll come back to bite them because other people will pay attention to that. And when advisors give me clients, I’ll say to them, listen, I’m grateful and I’m going to be very mindful of this client, and if I see something that seems out of whack, I’m going to check in with you, but understand, I am now an advocate for the client and so we’re going to work together, but I’m also, I got eyes on everything, and so let’s work together and just stay in integrity and make sure that we’re doing the best.

Steven (18:10):

Bob, as you describe your approach, it definitely really resonates with me and how I approach this as well. But as I talk to other advisors, and honestly as I talk to other CPAs, what you and I do is more the exception in the industry as opposed to the norm. I mean, a lot of our industry is very focused around let’s grind out as many tax returns as we can. So you talked about that you’ve been doing this for 20 years. I mean, at what point did you make that shift or has that always been the case for you? And then as you think about your transition to that, the other question I get from advisors all the time is, how do I identify which CPAs are going to take this approach as opposed to the ones that are just looking to grind out returns?

Bob (18:46):

So to both of those questions, one, I think I’ve always approached it this way, it’s just I’ve gotten more experience and more information to really hone in on it a lot quicker, and I am surprised at how many tax preparers don’t want to do tax planning. That’s just a waste of time. To me, the most important time of the year, these next two months are critical. And so I’m always surprised how many people, let’s just get the tax returns done and let’s just see what the surprise is at the end. I’m not a surprise guy, so I want to know what’s happening ahead of time. And I think the way to identify is for me, I actually meet with clients, potential clients before we meet and I’ll say, look, I want to meet you. You may not like me. I may not like you, and if it’s not a fit for either one of us, it’s not going to serve you because if you’re triggered by me, but you’re going to go with me anyway, you’re not going to call me. And if you’re somebody that I’m not a fit with, I’m not going to get excited to get on the phone with you. And so I want to make sure that we’re sort of on the same page so that we’re in this together because if I have to care more about your taxes than you do, we’re going to have a problem. But I’m happy to be here fully to make sure that we take care of them, but I need a partnership.

Steven (19:58):

That all makes a lot of sense. One of the questions I encourage advisors and taxpayers to ask when they’re screening for a new tax preparer is what can I expect outside of tax filing season? Honestly, a lot of tax preparers will tell you, well, as long as we get a tax return filed on time, we’ll be ready for the next year or something to that effect. And then you know that this is a transaction, this is something that they’re going to grind out for me every year. And maybe they’ll do a good job of the preparation, maybe, hopefully. But you’re not going to get things from ’em outside of that specific time. It’s not going to be what you’re describing of, Hey, let’s build this relationship.

Bob (20:30):

Yeah, absolutely. And I do tell people, we’re here 12 months out of the year. We don’t shut down after April 15th. We need you to communicate with us. If you’re thinking about buying a car, you’re getting ready to buy a house. We want to be involved in those conversations, and what we do is we factor that into our fee. And I’ll tell people, look, if you call me 10 times a day, I’m going to bill you. But please, anytime there’s a life change, money goes up, money goes down, you had a baby, there’s a divorce, any of these things, please communicate with us because we can’t help you if we don’t know.

Steven (21:04):

Yeah, that at list you just gave there. I mean, that’s something that advisors really may be reinforcing with their clients as well, that you want to be involved in every money decision and every tax decision and giving people context for these are the times you should be picking up the phone and calling me. One of the things I tell clients is, I would rather you gave me too much information to let me decide if it’s too much, as opposed to assuming that I don’t need it. I would much rather know too much.

Bob (21:24):

Absolutely. And I can tell you it has happened multiple times, and this is why I think it’s so important. Meeting with clients, especially on Zoom, she walked by with two kids. I’m like, whoa, whoa. Two kids. They’re like, oh, is that important?

Steven (21:36):

Is that important, yeah.

Bob (21:38):

They’re five and six years old. We just lost a whole bunch of tax breaks. And so you may not think it’s important or you may not know, but I agree. Overshare information with me and let me discern what we don’t need.

Steven (21:52):

Yeah, I think we do our clients a disservice quite often by assuming that a lot of things around taxes are just common knowledge or their intuitive, but nothing in the tax code makes any logical sense and not at all at best. Your clients are thinking about taxes once a year. They’ve maybe looked at their own tax return once a year for the last several. A lot of ’em don’t even really look at their own tax return, so you can’t take for granted that they’re going to know that kids are an important to topic when it comes to taxes or that moving’s an important topic or that getting divorced or married or whatever these things are. So don’t assume that your clients are going to tell you. Keep asking.

Bob (22:26):

Absolutely. Absolutely. And for us, we’re checking in with people midyear July because we want to have a six-month point. We’re checking in early October with September, and so our clients, we’re interacting with them throughout the year, so they know, unfortunately, our clients are thinking about tax more than once a year because we are not going to let them forget. We want it to be part of their decision-making every day.

Steven (22:52):

The nerdy side of me has had to hold off asking any questions about this so that we could get through some really valuable tax content. But you kicked off with, hey, you’ve also been the CFO for years of the world-famous comedy store there in California. So talk to me about what that’s like. You were involved in this world-renowned comedy club, but you’re still doing taxes every year. Share some more about just the evolution of your personal life there. 

Bob (23:18):

Well, it’s interesting. I was doing standup comedy and I actually, I had a show at the Comedy store every Thursday night. I had a show called The Good Humor Bar, and I’ve been doing it for three or four years. I had a lot of friends that were comics, and Mitzi called me up and she’s linking, I help us out, things are bad. And I was like, no, Mitzi, I’m just doing these little taxes on the side. I’m a comic. And no, and they were in a pinch. They were in a tight situation. And so I had to make a choice if I was going to help or not, and I knew that I could. And so I did. And at the time, the store was struggling. It had had its heyday. Mitzi had had some health issues. The staff wasn’t really fully engaged and they were struggling.

(24:00):

And I came on board and we probably struggled for about 10, 12 years and I kept going, I cannot be involved with the failure of the Comedy store. And they didn’t really have the money to pay me. And so it behooved me to really make sure my tax practice was really successful. So I actually sort of owe the Comedy Store thanks because I had to work really hard to make sure I had a thriving practice so that I could give my time in the early years just because I had such a love for the place and a love for Mitzi. And it’s been an incredible experience. It’s a love-hate relationship. Sometimes I’m like, what have I done? I didn’t come here to be an accountant, but I love the store. I’ve gotten to meet incredible people, and it’s a part of history. The Comedy Store just is a magical place that has created so many careers for so many people, and I just feel so privileged and honored that I’ve gotten to be a part of it for so long.

Steven (24:49):

That’s so cool. As years ago, someone come up several times, people would recommend that try and stand up comedy was a good way to improve your public speaking skills. So I’ve taken a couple of classes, which I know has mixed feelings in the comedy community, and I’ve gone up on some open mics, and I just always assumed that the fact that I’m a CPA and had never even touched a stage put me in rarefied air and then I meet you at FinCon, it’s like, no, no, no. You actually have a show. You were doing the whole thing. So I love meeting other people who are breaking the mold of what a CPA has to be. If we take the relationship side seriously, if we take being an individual and being a person, whether we’re talking about CPAs or advisors, people want to work with people. And so while that expertise is important, it’s not really why clients are going to stay with you. It’s not why clients are going to resonate with you. It’s not like clients are going to come to you and bring you these life things and share their life goals in a way that’s going to allow you to do the best tax planning, the best financial planning possible.

Bob (25:45):

Absolutely agree. And I’ve always looked at everything relational. I do not have a thousand tax returns. I have a thousand relationships, and if it becomes transactional, it’s not really good for either one of us. And that’s agreed. If it’s a financial advisor, if it’s your attorney, if it’s your accountant, have those relationships. And that’s how actually I built my practice from doing standup and meeting people. I was in sketch comedy, I was acting and I got to meet a lot of other people. And I don’t regret my choice of getting my bread and butter from my tax practice. It has afforded me to be able to do all the other things that I want to do and create my own safety net because I didn’t have one. It’s all about relationships for me.

Steven (26:26):

Absolutely. Bob, share with the audience ways that they can follow the content that you put out because you put out a lot of content as well.

Bob (26:31):

Absolutely. So they can follow me at Money you should ask. Our website is themoneynerve.com, and you can follow me at Bob Wheelerr with two Rs at the end because somebody stole my name. But Bob Wheeler with two Rs at the end. We do a lot of stuff around mindfulness, money, practical stuff, and not-so-practical stuff. And we have a little fun along the way.

Steven (26:57):

I enjoy the fun. I appreciate that you include that in there. Well, Bob, I really appreciate you joining the show. For everyone listening, Bob talked in the middle about things that advisors should be doing to make sure that we’re collaborating effectively between advisors and CPAs to make sure we’re building those relationships, getting clear on goals, going beyond just, Hey, my goal is to save taxes. We need to understand what the life goals are. And then Bob, I’m sure you would echo this, but I constantly tell advisors they have to be getting copies of tax returns every single year so that they’re dealing with real data and we’re not just guessing at what might have happened. You’re welcome to push back on that if you’d like. It seems like sound advice to me.

Bob (27:33):

Absolutely. And I’m amazed how many times financial advisors have said to me when we’re talking about a client, they said, they never told me that. I didn’t know that. Because a lot of times we tell the advisors what we think they want to hear, but you can’t tell the tax guy what you want. We tell you what it is. We’re dealing with facts. And so I’ve been surprised at how many times financial advisors didn’t have the whole picture because the client was sort of embarrassed or was ashamed.

Steven (28:00):

That’s a great point. Yeah. So all the more reason beginning tax returns every single year. Well, again, Bob, thanks for being here, everyone listening. Thanks. And until next time, good luck out there. And remember to tip your server, not the IRS!