Never Fear an Audit Again
with Joe DiChiara
August 11, 2022
Joe DiChiara is an entrepreneur with a CPA license. He has worked with thousands of business owners over a 35-year career. Eager to help people succeed, it troubled him that most new businesses fail, and was determined to find out why. In 2010, after reading “The Science of Getting Rich” by Wallace Wattles and “Law of Success” by Napoleon Hill he got his answer.
Success starts with Mindset and Intention, subjects they don’t teach in CPA school. Joe learned that this was the true culprit in business failure on top of an overly complex tax and compliance system making it nearly impossible to start a business and stay in business. His primary purpose has become teaching entrepreneurs the fundamental principles of success combined with the practical knowledge acquired as a CPA.
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Never Fear an Audit Again with Joe DiChiara
Brett:
I'm excited to introduce you to my guest here for the day out of the great state of New York, Long Island area, and he is a CPA business mentor, best selling author, and he's been helping individuals start and build and manage small businesses for over 35 years. In his capacity as a CPA and business advisor. He's been blessed to work with 1000s of small business owners from all walks of life, good, hard working American people that get caught in a web of government IRS rules and regulations that make starting building and managing a small business successfully nearly impossible. With over 90% of new businesses failing, within 10 years. He has made it his mission to help stem the epidemic of small business failures in the US through high-quality low-cost business education. Please welcome me, Joe DiChiara. Joe, how are you doing?
Joe:
I'm doing great, how are you?
Brett:
'm better than I deserve and excited to have you here and glean some wisdom from you. For our listeners getting to know you for the first time. Would you please give us a little bit more about your story and your current focus?
Joe:
Sure. I'm an entrepreneur that happens to have a CPA license. I was tricked into going for my CPA license by my dad when I was 17. I had no idea that CPAs were accountants and we do bookkeeping and payroll and all kinds of exciting stuff like that. I resented my father for about 25 years until I realized that I could be any kind of accountant I want. I don't have to be the regular public accountant, banging out tax returns and, and financial reports, and I changed my business model about two and a half years ago, basically to serve people that are, the people that you described in there, the people that get caught up in what I call the machine. Now I have a pretty unique type of background working with the IRS in all types of audits, criminal investigations, payment agreements, and I got a pretty good education on the structure and the purpose and the mission of the IRS, and with that, let's say ammunition. I've come up with strategies to help people not fall, but at least have a shot at starting a business on the right track.
Brett:
It makes perfect sense, and it's a, it's a great opportunity to talk about, by the way, never fearing an audit ever again, and that's an IRS audit that is and we're excited to dive into some of those best-kept secrets. But I want to take one other step back, Joe, for our listeners, and for myself, I believe we've all been given a certain gift in this life. Some people call them superpowers, some people call them strengths, which is to go back to your younger days, maybe it's the university days or the pre CPA days, and I want you to think about what's maybe that one or two gifts that you believe you were given? How does that help how you help and bless people today?
Joe:
That's a good question. I was given a lot of gifts, a lot of talents, and I just got done telling my team, as I said, I'm really, really good at a couple of things, and the average is less than average in just about everything else. What am I good at? I'm good, I'll tell you what I'm good at. I'm good at explaining complicated matters. In simple terms. That’s one thing. I have an ability to put people at ease, because of the way that I can speak to them, and I could guarantee them that with me, they will never, ever have to fear an IRS audit again. Now, as I told you before you put me on, that doesn't mean they're not going to get audited. I have no control over that. I mean, nobody does, what we do is we pay attention to compliance. We know what the rules are, we know what forms have to be filled out when, and we just keep people on track. Because what happens is, and, I believe is by design, somebody starts a business, they're automatically a sole proprietor.
They're at a major disadvantage, because that’s the worst way to do business, and it's part of what put me on this mission. I came across this statistic on the SBA website that said, what was it the SBA? I forgot where on one of the websites but it said there were 30 million businesses and 25 million non-employer businesses. Now, I always took that to be just small businesses that had no employees. Well, it turns out those assault proprietors, which made no sense at all, as a CPA, I feel like I've had my head in the sand for a long time. In the CPA world, we just made everybody s corps, you don't want to be a sole proprietor, and if you're an LLC, a single member, LLC, the IRS doesn't care, they say you're still a sole proprietor for tax purposes, and I made it my mission, to let those trying to let those 25 million sole proprietors know that there are better options out there for them.
Brett:
I will absolutely love that. You're good at explaining complicated things and making them simple, and then you're also good and I could tell putting people at ease with your demeanor, with your voice, with your experience, and I love how you connect to that to never having to fear an IRS audit. Again. If you're working with Joe, by the way, you can find more about Joe DiChiara at BedRock Business Builders, comments, BedrockBusinessBuilders.com, and also like how you said in the beginning CPAs, it doesn't mean they can't be entrepreneurs, it doesn't mean they can't be, thinking outside the box, and not just the typical, let's say the thought of a CPA, of just doing tax returns, you can add so much value, and so many other ways. I relate to that because I started out in commercial real estate, and I started out doing 1031 exchanges and I still do 1031 exchanges with the clients.
Still California real estate broker multifamily specialists. But as I grew in the business, my client's needs changed, and as they changed, I had to pivot and adapt, and this was after the 2008 crash because I saw so much pain and anguish. People had overpaid for properties, had too much debt, not enough liquidity, not enough diversification and they knew they were overpaying but they felt like they're in a shotgun wedding. They had to get married to property and 45 days married and 180, and it was a struggle and I saw some hats lose half and some lose all. That was my journey from moving into this, let's say the capital gains tax world. We may say it's more of a CPA world or tax attorney world, and I've moved into the world that's now my passion. But I'm wondering, What's that one story for you, Joe? In regards to that passion for having people never fear the IRS audit again. Tell me that story that has gripped you so much that now you're like, I'm on a mission.no one has to feel that ever again.
Joe:
Part of my story is that my father tricked me into becoming a CPA, I went to college, I never changed my major, every single one of my friends changed their major, it was amazing. Actually, one of my most successful friends went on to be a zoology major, and after that being a very, very successful rock star person, okay, he's not a rock star. But anyway, with me, I graduated college. Well, before I graduated, I said if I want to be an entrepreneur, I need to actually run a small business successfully. I always had these small businesses, starting with the lemonade stand to ending up with leasing an ice cream truck. This was I'll go quick with this. It was the semester before I graduated. I leased an ice cream truck, I did everything legally, I signed papers, I signed a lease. I kept records of everything, I got maps with my route, and I had a blast at some I would go to the beach and sell ice cream to kids, and it was like I was the hero when I showed up, and I made money. I went to school with a good amount of cash last semester, I got out, I got my CPA, job, my first job. Six months into my job, I got a letter from New York State.
It's got a big red stamp on it says tax warrant, and, there was no internet then, and I thought my career was all over literally for three days, I thought I had to get a tax attorney, anyway, went through all this anxiety, and it turned out and I finally got up the courage to ask one of the CPAs and he said, just call them and find out what the problem is, and they said, you didn't fill out this form telling us that you're not in business anymore. From then on, and I don't know if it was subconsciously I said, I gotta help these people because I don't want anyone to go through what I said was a simple thing. Leading all the way up to two years ago, I fought a lot of battles with the IRS. Two and a half years ago, I said all my god, 25 million people don't have the right information. that's, it goes back to that one letter.
Brett:
You get the letter in the mail. You think your career is over, you're feeling like he may be going to jail or whatever, they're gonna be a bunch of fines or whatever it is. But all that emotion drove you to where you're at now to help people to keep it simple. do the right things in the right order, which makes sense. That's step number one. Making sure you're setting up may be properly the escort step number two, you're actually organizing everything but or maybe give me the Give me your top three steps for people when they first approach it.
Joe:
Top three steps. I'll go through the steps that they're the first three chapters in my business mastery course. The first one is actually three questions, you got to answer these three questions. What problem do you solve? Who did you solve before? How do you solve it? Because in my experience, unless you're solving a problem, it's hard to run a business around that. Not the problem could be that you are the problem for people that have a lot of money and don't know where to go on vacation. That's a problem for some people. But you've got to define whatever the problem is that you’re solving and be as clear and focused as possible. The second step is you don't have a business unless you have these two things: revenue and cash flow. Forget about the cash flow because people don't get that that's why they got to hire somebody like me, but you still need it. They usually hire me after they've suffered from not having cash flow.
But if you don't have something that people are going to pay for, you don't have the business. It doesn't matter if you have the cure for cancer. If somebody is not going to pay you for it, you don't have a business, you have a hobby or a not-for-profit. The third thing is really what I specialize in is to make sure they are organized properly. If you don't have the right business structure, when you start out, it's like building a house on sand. We build our businesses on bedrock. The reason being I’ve seen too many people start out on the wrong track, get knocked down after two years, they go to an account and then they say, what do you mean I owe $20,000? in taxes? Well, that's what happens when you start a business and you don't educate yourself, and you don't know this stuff. Those are my three steps. Excellent.
Brett:
Let me see if I got those. So what problem do you solve? Who do you solve it for? How do you solve it, and then as a part of that, it's got to be very clear on the problem you're solving. Imagine clearly on the person you're solving it for, and also very clear on how you're solving it, as well as establishing some revenue, establishing some cash flow, and making sure you're building the structure on bedrock. Building it right the first time. Is that a fair summary so far?
Never Fear an Audit Again: "I went through all this anxiety, and it turned out and I finally got up the courage to ask one of the CPAs and he said, just call them and find out what the problem is, and they said, you didn't fill out this form telling us that you're not in business anymore." - Joe DiChiara
Joe:
Absolutely.
Brett:
By the way, clear more about Joe DiChiara. At BedrockBusinessBuilders.com as bedrockbusinessbuilders.com, and that book that you were talking about? What's the name of that book, Joe?
Joe:
Wait, which book?
Brett:
I don't know. Maybe your latest book.
Joe:
The book is in my bio.
Brett:
Your book?
Joe:
Which one? I have a couple of them. This one, I'm sorry.
Brett:
Pull them up. Let's bring a couple out there. I got there, like your amazing itty bitty S corp book. Look at that.13 simple steps to understanding everything about an S corps. Love that, which actually leads into the next part of this segment. The Biden administration is proposing some tax changes, and maybe we'll touch if you stay around, we'll talk about more of Joe's books here at the end. Those changes could be substantial. I don't know. I know they're, they're talking about it, and I don't know what the latest and maybe you do. But would you just give us what potentially could change? And if it does, what do we all need to be adjusting or preparing for?
Joe:
The problem with all this political talk, again, from my experience, it's like I'm a baseball fan if you didn't know that, it's like the start of the baseball season all the experts have these opinions on who's going to make the World Series, and if you get caught up in that, and if you're a gambling man, you could start betting it's, this is what I know I'm a Yankee fan, and they will favor to go to the World Series and guess what they're not they didn't even get close to it. It's the same thing with tax legislation, they talk about this and, and the reason is that they're trying to get votes. By the time the law is passed, it's like nothing that they were even talking about. Does that make sense?
Brett:
It makes perfect sense, and I absolutely love the analogy and sorry for the delay there because I was writing down your analogy about baseball, and it's the same thing with the NFL. Who's gonna win the Super Bowl? Who's gonna win the World Series and baseball who's gonna win the NBA Finals and all the experts and all the pundits get on they start talking like, none of this really matters until it's October and it's in it's, who made the playoffs?
Joe:
Can I add something to that? It actually goes to a mentality I got from reading a book called The 4-Hour Workweek. I love those conversations. Don't get me wrong, I could analyze that. But I'm like, I only have so long on this earth do I want to spend it on Matt or do I want to solve the problems?
Brett:
That's fantastic. Let's have you back on after potentially this proposal is passed and these laws are changed. How about that and that might be in the New Year soon. Who knows? But how is that fair, Joe?
Joe:
But I could tell you I can make a prediction. Taxes are gonna go up. I can't tell you how much they are talking about raising the capital gains tax. I guess that is correct, and I'm like, this is the kind of thing that the government does. They say we want to raise more money, so we're going to raise taxes, and what actually happens is they wind up getting less money. Because now people with money are like, Well, I'm not going to sell the piece of property until they lower the capital gains rate again, and that's what's going to happen. Right now, if you have capital gains, I tell people to sell it. If, before it goes up, I don't know what your talent piece is?
Brett:
It just depends on what you're trying to accomplish. Depending on the gain and depends on, we'd like to see for our clients a minimum of about a million-dollar net proceeds and a million-dollar gain. If they have that, then we use the rule of 72, which states the figure in 7%, on any given amount of compounding over a 10 year period, we can double that amount. We just closed the deal. It's actually a Bitcoin deal, and so this particular Silicon Valley expert, she bought it at a very low price, and she sold it for multi-millions of dollars, and we just closed it over the weekend, and the biggest thing was her basis was very low, and the gain was very high, and the state of California, federal, estimated about 30%.it's just a mathematical equation. Now, the key here was, cryptos going so high, so low, so high, so low, she's able to sell high, and then she's going to fund a new business venture with a business partner. We always try to focus on the outcome, versus just the tax savings, and what it enables you to do, and so we call it the Deferred Sales Trust, which is an installment sale.
Joe:
We have to talk about this.
Brett:
Let's talk about it. What thoughts do you have so far on that? What I just said there?
Joe:
I heard something about it, and then when somebody and one of my groups mentioned it, and I said, I just heard about it's like a creative way to defer games.
Brett:
Yes, it's IRC. logs, it's IRC forfeited, which is a seller carry back. If I come to Joe, Hey, Joe, want to buy an apartment complex in Long Island, and let's say it's 10 million, you've owned it for 27 and a half years and you're fully depreciated and you have no debt, and you're like, I like to maybe either 1031 or, but maybe not, I might want to do something that's a little more creative, a little more passive, maybe a little more flexible with timing. Well, in a traditional installment sale, you could just carry the paper so I could come and I could give you a $3 million down payment. You could carry back the note for seven, you'll pay tax on the three but the seven isn't a deferral state until I pay you back. Well, that's a traditional installment sale so we take that exact structure to talk about building it on bedrock. We build our tax structure on the bedrock of IRC 43 goes back to the 1920s and from there though, we just introduced this business trust and this is the cool part two I think alike. We asked the buyer Let's call the buyer jack from Manhattan and Jack's gonna buy it for 10 million he can go get the financing it 3% say hey come with cash we don't care jack how you bring the money, but cooperate with this trust, and with Joe who's selling it and right before the closing of escrow dro we have the funds.
We have an installment sale with the trust and the trust ends up ultimately selling the asset to the buyer, and the trust establishes his new basis because it bought it from you for 10 million it sold for 10 million, but you carried it back 100% financing. You're in a deferral state Jack's got his property he's gone, and that's where the magic happens here because it works not only for investment, real estate for public stock, private stock businesses, s corpse, LLC c corpse, you name it, we've done dentist, veterinarians optometrist car dealerships 1000s of closes billions under management's been tested by the IRS all that stuff, but it works for cryptocurrency too, then at the end of this thing, they can go and put it into their next deal or diversify and never go into another you can go into stocks, bonds, mutual funds, hard money, lending ground-up development. It's pretty flexible, and that's what we do. Any thoughts on that? Joe?
Joe:
I got to wrap my head around the logistics and stuff. But yeah, there's a lot of opportunities there, let's say, creative opportunities.
Brett:
I agree. It's the largest oil trace in the history of the planet. It's going on right with the baby boomers, and it's about I don't 17 to 20 trillion, at least that's going to pass the millennials, some, some my parents or maybe passing to your kids, and this amount of wealth is 50% of that it's tied to high end commercial real estate, private equity, which is businesses and then end to high-end primary homes and a lot of these folks that are our joint clients, Joe, they don't know how to sell to get out without getting hammered by the tax, and you're right Biden is proposing to raise the federal capital gains tax rate it's at 20 I'm hearing 25 we're hearing 26 and hearing 28 I'm How am I hearing he's gonna go to 40 again that's like the book but we do think it's going to go up some and and so they need a solution and some of them will not sell unless they have this solution and so that's where we try to focus like a laser on that but then look at cryptocurrency we think it's even better for that because at least you can get out when it's high because it's such a volatile market so we're finally if anyone wants to learn more about that they can go to capital gains tax solutions calm that's capital gains tax solution calm we got a free ebook, you can download that and you can schedule a one on one opportunity to talk with me if you'd like but any thoughts or questions on that Joe? Does that make sense?
Joe:
It makes sense my focus like I said our is on the 25 million sole proprietors and how they can start a business and not get that fear like I did when I got that letter because, when they start I don't care if you get a DBA you do an LLC, a corporate you get bombarded with now and a lot of it is junk, some of it is important. But the sole proprietors I'd say the majority of them don't have an accountant, and that's why there's still a sole proprietor.
Brett:
So important I have my LLC to an S corp. for all the reasons. But for tax planning and for and maybe you can we can dive into that on another show. We're kind of running out of time, but you want to really assess what I've heard about if you're making about, I don't know 50, 75 to $100,000.
Joe:
There is no number and I just spoke to one of my assistants about this, she thought I was the LLC bashes. She's like you're telling everybody they shouldn't be no, LLC is great for a lot of things. But when somebody has a small, active operating entity, and when I say that it's not real estate, it's not a passive activity. It's like a candy store or an ice cream truck, a construction company. You do not want to run that as a sole proprietorship for tax purposes. The only option is a corporation and then the only question is, is it's going to be a C Corp or an S Corp and the time to do it is yesterday you don't wait there is no magic number and there's a lot of reasons for that we can't even get into it but that's what I explained to people.
Brett:
Little nuance there so I have a couple of LLC’s and then a couple I'm filing is S Corp. Its LLC makes the S corporate election right. Is that the same pattern that you use as well?
Joe:
A lot of people come to me now and already they're like, I'm an LLC already. Well, that's great you got legal protection but you still assault proprietors and the IRS is coming after sole proprietors. That's the truth sole proprietors get overtaxed over audited they combine their business in the personal tax returns it's that's why I was shocked when I when working with CPA firms we never had sole proprietors the thought as clients It was like it wasn't even and that goes back 40 years when I first started in accounting everybody had an S corp.
Brett:
Got it. From the very beginning, your thoughts would be to start escorting from day one and file make sure you keep a separate tax return for the escort separate tax texture for your personal do not commingle the hose and keep it straight and narrow. Is that a fair summary?
Joe:
Pretty much the decision to be an S Corp or a C Corp really hinges on your current job.
Brett:
That being said, we are running out of time. Would you be ready for the lightning round?
Joe:
Sure.
Brett:
All right, knowing what you know now Joe if you go back to your 25-year-old self what's the one Golden Nugget Make sure to tell yourself to do?
Joe:
I would have spent more time on the relationships that I had built. Perfect is today that that's all it's about? You can go broke, but if you have relationships, you can always make your money back
Brett:
Everyday question number two, your favorite book that you've gifted or recommended the most in the past 12 months.
Joe:
The Science Of Getting Rich by Wallace Wattles. Wait, did you say One that I read in the last 12 months.
Brett:
It can be whatever you want. I mean, that's good. The Science of Getting Rich sounds great. That's a science of getting rich, and then could you also promise that we would also talk about your other books. Could you name a couple of other books that you've personally written as well?
Joe:
The first book I wrote was Myths To Money.
Brett:
Myths To Money. I like that name.
Joe:
It's really about people thinking that they fail because of the economy. They don't have enough money. But people fail for the wrong reason, not for the reasons they think.
Brett:
I'll bring you back to the back of the show to talk more about that. That sounds really neat. Do you have two books? Do you have three books?
Joe:
I have an itty bitty book about bookkeeping. Perfect. I got a couple of books that I co-authored with other people. Can you go on Amazon, they should all be up there.
Brett:
Excellent. Yes, that sounds great. Question number three. What are you most curious about right now?
Joe:
That's a good question. I'm curious about a lot of things. But right now, what's occupying My time is how I'm going to take my business to 100 million a year.
Brett:
That's a great thing to be curious about. Love it. Last question. After all your success, Joe, writing multiple books, helping lots of small business owners, being a CPA, who's an entrepreneur, all of those things, how do you stay centered in your values? And how do you stay encouraged to charge forward to reach new heights?
Joe:
I have God in my life. It's as simple as that. That keeps me grounded. I have 13 principles that I go by. I take care of my body, my mind, and my soul. It's pretty, it actually becomes pretty simple. If you take care of yourself, you could help other people. If you don't take care of yourself, you can't help anybody, and that's how we stay centered. I just stay centered by making sure that I'm in the right place. If that makes sense.
Brett:
It makes perfect sense, and it's a beautiful way to end the show. Joe, I want to thank you for being on the show. I want to thank you for sharing your wisdom with us. I want to encourage you to keep using the gifts of taking what's complicated, making it simple. Putting people at ease when it comes to their financial future with their business and never having to fear an IRS audit ever again, especially if you're working with Joe Dichiara, and Joe for our listeners who want to get in touch with you would you remind them one last time what's the best place for them to find you.
Joe:
They could find me at my mastermind which we have every Saturday you can just go to MastermindWithJoe.com, it's a free mastermind. We love doing it, we have a lot of fun. But most importantly it's like a little community where we support each other and we learn. One of the principles that I follow is to try to learn something every day, and the mastermind is a great place to learn from other people.
Brett:
Amazing thanks, Joe for being on the show, and we're for sure gonna have you back if you do. It's the pleasure of being back on the show to talk more about books talk about the Biden tax things, plans if they go through so that everyone can prepare and adjust in a wise way. I want to thank all of our listeners for listening or watching the Capital Gains Tax Solutions Podcast also streaming on eXpert CRE Secrets. Where we believe most high net worth individuals and those who help them they struggle with clarifying their capital gains tax deferral options not having a clear plan is the enemy and using a proven tax deferral strategy differ cryptocurrency primary homes, businesses, and highly appreciated asset using the Deferred Sales Trust we believe is that one of the best ways to grow your wealth also getting with someone like Joe DiChiara to help you clarify your business bedrock building of an S Corp of filing making sure you're doing things in order. Get with Joe. I want to thank everyone for listening, watching. Please subscribe, rate, and review, you can always go to CapitalGainsTaxSolutions.com as well. If you are looking at the Deferred Sales Trust to defer your capital gains tax. We also do have a mastermind as well every Friday at 10 am Pacific Standard Time 1 pm eastern time where we talk about all things cryptocurrency commercial real estate investing and the Deferred Sales Trust to bring them all together. Thanks so much, everyone for listening or watching.
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