Adam Torkildson
Appearances
I am Charles Schwartz Show
Legally Pay Less Taxes
Even though you may not actually use the space for anything, you do need to make sure you take some notes and use it in some specific ways that the IRS has burbage around. Anyway, It really boils down to the fact that you transfer money from your business bank account to your personal bank account. That money is not taxed on your personal income taxes.
I am Charles Schwartz Show
Legally Pay Less Taxes
Additionally, whatever you're spending there is a tax write-off for your LLC. And the max amount I've ever seen anybody write off using this strategy is is around $100,000 a year. And you can do this annually. So it starts to be a significant amount of money the more valuable your home is.
I am Charles Schwartz Show
Legally Pay Less Taxes
Because what you're able to do is take the fair market value of what you could rent your home for, and that becomes your basis for what you can write off each month. So this is, again, the Augusta strategy. This works for anybody who's got an LLC. I believe you need to be taxed as an S corp, but that's some very simple paperwork. And there's a lot of advantages to being taxed as an S corp.
I am Charles Schwartz Show
Legally Pay Less Taxes
Sometimes it's better as a C corp, but if you're like a gig worker or a freelancer, or it's just, you're a solopreneur of some kind, get an LLC and register as an S corp. And that's going to give you a lot of these tax benefits. Did you have anything else?
I am Charles Schwartz Show
Legally Pay Less Taxes
Well, I don't know specifically all those details, but a scenario that I believe will work is if company A owns house A and company B rents that house from company A, as long as you have two separate entities you're working with, then it's basically a one-to-one ratio. And so multiple companies, you will need multiple entities that own those properties.
I am Charles Schwartz Show
Legally Pay Less Taxes
But again, I've never been in that specific situation, but I've got to imagine if the tax code works the way that it does for one entity and one personal residence with that one-to-one ratio, you should be able to extrapolate that to multiple entities and multiple companies.
I am Charles Schwartz Show
Legally Pay Less Taxes
Second one, this also is for people who have at least one LLC taxed as an S-corp. And this is going to apply to you if you have kids that still live with you under the age of 17 or under the age of 18, I should say. So there's a really cool entity type called a family management company. And you can do all kinds of cool things with this entity.
I am Charles Schwartz Show
Legally Pay Less Taxes
And it's literally just an LLC that has its own EIN number and its own bank account. That's all you really use it for. And I think what may have happened a long time ago is a lot of criminals started to use this entity to funnel money outside of the United States. But it's still on the books, this entity. this entity type, the family management company.
I am Charles Schwartz Show
Legally Pay Less Taxes
Talk to your CPA about it if you want to know more. And what I use it for specifically is to pay my kids out of. So the actual flow of money goes like this. I have up to, I think it's like $1,300 a month per kid that I can pay into the family management company. And then the family management company distributes the money into each of those kids' bank accounts.
I am Charles Schwartz Show
Legally Pay Less Taxes
And as with most IRS rules, there's a couple of caveats. Essentially, you have to be able to prove that your kids are doing work for your company. And fortunately for me, I've got teenagers, and I've been having them work for me since they were really young. And I've taught them how to do all these things.
I am Charles Schwartz Show
Legally Pay Less Taxes
I had the opportunity to go to college basically for free. And so that opened up a lot of opportunities. And I chose journalism to get my degree. And I worked at the newsroom in the newspaper. And I got my first taste of publishing on the internet. And this was about 20 years ago. So 2004, 2005. And
I am Charles Schwartz Show
Legally Pay Less Taxes
on the internet that they never would have learned at school, but that are fairly basic things you have to know if you're at a corporate job. Things like how to respond to emails. So one of my kids, that's all they do for me is respond to customer support emails. And there are principles with how you do that, like the tone of voice you use when you send emails.
I am Charles Schwartz Show
Legally Pay Less Taxes
And you can teach kids these things. They're not idiots. And so I can literally prove my kids are working for me in my business, doing valuable things, and I pay them a decent wage. But the cool thing about doing it this way, as opposed to making them a W-2 employee, is that I'm not paying them any. I don't have to pay state taxes. I don't have to pay FICA taxes.
I am Charles Schwartz Show
Legally Pay Less Taxes
I don't have to have health insurance on them. And I just take money from my main LLC, transfer it to the family management company, and then the family management company is the entity that pays them out. And we can use that money in their bank accounts for all kinds of stuff. We can use it for family trips. We can use it for braces.
I am Charles Schwartz Show
Legally Pay Less Taxes
We can use it for stuff that you typically wouldn't be able to write off when you're paying for family needs. You can use that money. in that way. And it has become a write-off through that process.
I am Charles Schwartz Show
Legally Pay Less Taxes
Yeah. And once you two down, one of my favorite principles, I love working based off principles. So another principle that I really love to live by is When you're setting up systems or processes, you should be able to set them up once and then have them keep working for you without having to reset them up constantly.
I am Charles Schwartz Show
Legally Pay Less Taxes
So these two systems of tax savings that I've talked about, you don't have to keep redoing things every year or refiling this paperwork or that paperwork. Once your Augusta strategy is in place, you can just count on it working. Once your family management company is in place, you just count on it working. Yeah, it's a set it and forget it idea. Exactly.
I am Charles Schwartz Show
Legally Pay Less Taxes
I think that's one of the more undervalued ideas in business is the ability to just set it and forget it.
I am Charles Schwartz Show
Legally Pay Less Taxes
I loved how easy it was to just publish other people's works because I wasn't the one writing most of it. I was just sort of interning and helping with publishing. But I was learning how to write at the time. And so these two skills of publishing on the internet and writing led me to, when I graduated, my first job straight out of college was at SEO.com.
I am Charles Schwartz Show
Legally Pay Less Taxes
Yeah, and I love how all these principles, they apply in all aspects The aspects of a business, whether it's operations or marketing or fulfillment or whatever, insurance and taxes, they all have that app, that same application of set it and forget it. And I did want to touch. So the third area of tax savings, legally avoiding taxes, et cetera, is has to do with investments.
I am Charles Schwartz Show
Legally Pay Less Taxes
And I'm by no means an expert in investing. I've done about a dozen angel investments over the last 10 years. My very first one that I did, the company is still in existence. The very next one that I did went bankrupt about a year later. And so my own track record is by no means perfect. But I have learned over the course of the last decade my own investment thesis.
I am Charles Schwartz Show
Legally Pay Less Taxes
And if you don't know what that means, it's just my own rules around how I invest. And for me personally, my investment thesis is essentially, is there monthly cash flow involved? Am I going to be getting regular distributions, whether it's quarterly or monthly or even annually? That doesn't matter. But is there a cadence of cash flow I can count on?
I am Charles Schwartz Show
Legally Pay Less Taxes
Number two, is there a tax advantage to this particular investment? And I've done several that you would never think of. One of them was I financed a solar field in Bakersfield, California. And I was able to write off the entire amount of money I put into that. Plus, I got a 30% tax credit On top of that, so 100% of the money I spent building it, complete write-up.
I am Charles Schwartz Show
Legally Pay Less Taxes
I got another 30% because of the solar tax credit in California at the time. And I think it's still about the same. Each state kind of varies, but California has always been more advanced in their green, eco-friendly initiative, et cetera. And there are other states that... Nevada is another one that has had a lot of those traditionally, historically.
I am Charles Schwartz Show
Legally Pay Less Taxes
So if I can put money into something that's going to provide me monthly cash flow that I don't work for anymore, so whether I'm dead or alive, it's going to keep coming in. That's one of my major goals. Additionally, if there's a way for me to use that investment money as a write-off on my tax burden, then I feel like it's a huge win-win.
I am Charles Schwartz Show
Legally Pay Less Taxes
And I don't know exactly how to calculate the ROI on 130% tax advantage, but it just means that the money I've spent is essentially, I make it back in that first year, and then everything after that is pure profit. That's basically how I think of it. Is that a good way to think about that?
I am Charles Schwartz Show
Legally Pay Less Taxes
And I was able to take a little bit of what I've learned in college. And then I learned a ton of stuff on the job at SEO.com. We call it the Wild West days of SEO. And you couldn't learn SEO any other way than on the job. They didn't teach it in colleges. And most people didn't even know what it was. And I was a brand new 21-year-old.
I am Charles Schwartz Show
Legally Pay Less Taxes
Yeah. And I agree. I, the very first brick and mortar, uh, investment I made was a total disaster. It was a hair salon. It was only a couple of blocks from my house. So I thought it'd be easy to manage, uh, And it cost me about as much as a really expensive MBA would cost. And so I look at that as my MBA in business because I learned a lot about what I'm not good at in those operations.
I am Charles Schwartz Show
Legally Pay Less Taxes
And I learned what to look for in future investments. And that's all that I use those opportunities and those experiences for. And I like that you brought up Bitcoin first, even though you're not in it at all. I just wanted to say, for me, it fits my investment thesis. Because the way that I invest, it's through mining Bitcoin specifically. I'm not going out and purchasing any Bitcoin myself.
I am Charles Schwartz Show
Legally Pay Less Taxes
I did buy mining machines from an outfit in Texas, and the full expense of each of those servers was a tax write-off because it's a hard physical asset. And so I got my tax advantage, and the price of Bitcoin has been high enough on average ever since I started that it's consistently brought me a monthly profit. Sometimes the profit is crazy good. Sometimes it's just the barest, thinnest margin.
I am Charles Schwartz Show
Legally Pay Less Taxes
And that's where a lot of people really have a tough time putting any money into it because of the volatility. And I get that. So if you want to look into Bitcoin as an investment strategy, there's a lot of research that you can do. Google exists for that reason. And I can even point you in the direction of some really smart people to talk to.
I am Charles Schwartz Show
Legally Pay Less Taxes
They will take your phone call and just chat with you because they love promoting Bitcoin. And they're really, really smart people. So I like talking to smart people as opposed to only using Google. And that's why I love meeting people like Charles. He's now someone that I can email and ask something to if I need to. And I like having that network available to me.
I am Charles Schwartz Show
Legally Pay Less Taxes
publishing content for huge Fortune 100 brands, Dell and Alpha Graphics. And they probably had no clue what I was doing for them most of the time. They just cared that their computers or their printing processes ranked high in Google. That's literally all they cared about. We could do whatever we wanted. And so we did. And I had a lot of fun doing a lot of black hat stuff.
I am Charles Schwartz Show
Legally Pay Less Taxes
Yeah. I actually only have one more tax strategy worked. And this is in a very specific use case. And it's around health insurance. And I know a lot of people really... I know a lot of W-2 people who, when they're looking for jobs, they always look at, what benefits can I get by working at this particular job? I have not looked at life that way for a really long time.
I am Charles Schwartz Show
Legally Pay Less Taxes
So I don't understand that mindset myself. But... I invested in a company that this is all they do. They're experts at setting up these group health insurance plans in a very specific way that helps lower a very specific type of tax for the small business owner. And it adds money on to the W-2 employee's paycheck. And it gives them some, what I think are pretty amazing benefits.
I am Charles Schwartz Show
Legally Pay Less Taxes
And this is all stuff that's set up using a specific IRS rule, just like everything else we've talked about. And this one has to do with section 125 of the IRS code. So it's that specific. And it's sometimes called a cafeteria plan. So the company I invested in, they will go in and There's some minimums. The company has to have at least 10 full-time W-2 employees.
I am Charles Schwartz Show
Legally Pay Less Taxes
And they can't have more than... I think it's 1,000. I could be off on that. But anyway, there's a range that this plan works for. And again, the companies have to be based in the United States. And the W-2 employees have to be based in the United States. And what happens is... It's fairly simple on paper.
I am Charles Schwartz Show
Legally Pay Less Taxes
Instead of taking the insurance premiums out of an employee's paycheck post-tax, get out pre-tax. And the end result is the employee's taxable income gets reduced by doing that because they're taking out money from their paycheck pre-tax, which makes their total income look smaller.
I am Charles Schwartz Show
Legally Pay Less Taxes
to the irs but we're actually able to put more money onto their w-2 paycheck because of that and it reduces fika taxes for the small business owner per employee per year of about 500 per employee per year so the more employees you have the more you're paying in those fika taxes And so this really starts to add up a hundred employees.
I am Charles Schwartz Show
Legally Pay Less Taxes
That's 50 grand in FICA taxes right there that you're just wiping off your books with a switch that you set up one time and your, whatever your insurance plan was at the time, it's not going to get any different. It's not going to get any worse. And it's actually probably going to get a little bit better because there's a lot of insurance providers and this isn't,
I am Charles Schwartz Show
Legally Pay Less Taxes
going to replace an insurance plan. It will either add to, or if you didn't have one in the first place, it becomes your insurance plan. So what questions pop into your head about this?
I am Charles Schwartz Show
Legally Pay Less Taxes
And black hat is just an industry term for cheating your way to the top. And I know all those tricks. And I used every single one of them. Which led me to understand that Google, the search engine Google, but also the company Google, had so much impact economically on everyone's business. Google has that much of an impact. They drive 68% of all traffic. This is a stat I looked up last month.
I am Charles Schwartz Show
Legally Pay Less Taxes
The company I invested in, and I'm not going to say their name because... I don't want to sound promotional about this because, A, they're not the only company that can do this. Section 125 has been in existence for a long time. Lots of companies are aware of it. They just haven't done it yet. So this is just free information. Lots of health companies, insurance companies can do it.
I am Charles Schwartz Show
Legally Pay Less Taxes
And the process for implementing it, it takes You have to do something called a census. It's sort of a technical term in the insurance industry. But every HR person or every insurance broker knows what a census is. It's basically just a snapshot of all your employees, some of their personal identifiable information, and things like their age, weight, sex, etc.
I am Charles Schwartz Show
Legally Pay Less Taxes
You have to know that information if you're signing up for any insurance product of any kind. It's just the basic process. So we take that census, run it through the algorithms, and I've never seen anybody disqualified by doing that process. But that's basically the way they cover their butts. is take the census.
I am Charles Schwartz Show
Legally Pay Less Taxes
Once they've had that figured out, then it's just a matter of allowing the employees to choose whether they want to get on this new plan, which it's not going to change anything about what they currently have. It's going to have full vision, dental, doctor's visits, and there's going to be some preventive measures built into it as well. There's an app that actually scans their biometrics
I am Charles Schwartz Show
Legally Pay Less Taxes
And they check into it every month. So there's things that help them stay healthy, incentives built into it. This is the part that's not common to all the other insurance companies. And this is why I like investing in this particular company, because of that preventive wellness on it. And that's what allows them to do this plan with the same premium payments that they were making before.
I am Charles Schwartz Show
Legally Pay Less Taxes
And this is what is called a self-funded plan. health insurance plan so it's it is funded by the employees just if that wasn't super clear before it is a self-funded plan and other than that it works just like any other plan would that they're on and if if you're on a bad plan let's say
I am Charles Schwartz Show
Legally Pay Less Taxes
your plan has really high deductibles and there's no doctors that are in your network and all these caveats that insurance companies build in to make themselves profits. This is going to be something that you could probably look at and get way better plan benefits by just switching to that in general. Whether you did section 125 or not, it would actually be amazing. In those scenarios.
I am Charles Schwartz Show
Legally Pay Less Taxes
But I know a lot of companies are really trying their best to give good benefits because that's a big incentive these days. It's a huge incentive. The better your health insurance plan, the easier it is to attract good talent. Absolutely.
I am Charles Schwartz Show
Legally Pay Less Taxes
Yeah. And this, this has to do with my background in addiction recovery. Because I learned that if I didn't set up my day properly, right when I get up, I have to really get my mind right. Because the way that you think is the reality that you experience. No matter if you're thinking positively or negatively, it's just a fact. And so I use an app called Insight Timer. I use the free version.
I am Charles Schwartz Show
Legally Pay Less Taxes
And it just allows me to look at different meditations I want to do or positive affirmations. And they've just got a library of things. And it keeps track of how many days I've meditated or done affirmations in a row. But anyway, my mind has to be right before I can do anything else productive in my day. So that's the one I use every single day.
I am Charles Schwartz Show
Legally Pay Less Taxes
This is one of the investments that I made. My very first investment, actually, back in 2016. It was in a company called NanoHydrate. It's a pre-workout supplement that... uses nanotechnology to deliver really basic nutrients, electrolytes, BCAs, some caffeine. It skips your digestion and just completely hydrates you within seconds. And I use it every single day.
I am Charles Schwartz Show
Legally Pay Less Taxes
So Google still has a gigantic share of pushing business to whoever wants to be on the internet. So... I thought, you know, that's a great place to do work is in that space where Google is such a big player. And if you know kind of how Google works, then you can make a lot of money. And you could also manipulate it and scam people in the same way.
I am Charles Schwartz Show
Legally Pay Less Taxes
Whether I was an investor or not, I would be using it every single day. And I have been since then.
I am Charles Schwartz Show
Legally Pay Less Taxes
The Richest Man in Babylon. Yeah, really good book.
I am Charles Schwartz Show
Legally Pay Less Taxes
I participate in my religion faithfully. And I've found that if I'm doing that and focusing on that, it's automatically making me want to be a better person myself, which has ramifications for all my other relationships. If I'm working hard on myself, it's going to spill over to everybody else in my life.
I am Charles Schwartz Show
Legally Pay Less Taxes
I'm the only Adam Torkelson on the internet, honestly. And so I've spent a great deal of time managing my online reputation. And LinkedIn and my website are the top two things that are going to pop up if you search my name. My company is called Torque Media. It's just a play on my last name, which is Torkelson. and media because I just own a bunch of media properties. So torque media.com.
I am Charles Schwartz Show
Legally Pay Less Taxes
And I put my cell phone right on the homepage of that website. Cause I just, I love talking brave man. And you'd be surprised at how, how few people will actually try and reach out and, and try and get ahold of you.
I am Charles Schwartz Show
Legally Pay Less Taxes
And yeah, unfortunately, I did several times scam some people. And had to pay for it. I was sued a couple of times and basically learned the hard way that it's really important to treat people the way you want to be treated. And I had to go through addiction recovery as well as part of that process. So I've got a background in SEO and addiction recovery.
I am Charles Schwartz Show
Legally Pay Less Taxes
So that's led me to where I'm at today, which is I have a publishing company. We publish across about 250 websites. People come to us with their content, and sometimes we'll publish it straight up as it is, and other times we have to rewrite it. But my parents work for me, my kids work for me, and I met my current business partner in addiction recovery.
I am Charles Schwartz Show
Legally Pay Less Taxes
So all these life experiences have really just led me to Using what I learned on the job at SEO.com and the life experience of addiction to using it for good. And I love publishing good, positive stories. I love publishing political stories sometimes if it aligns with things that I believe in. And I love having that choice.
I am Charles Schwartz Show
Legally Pay Less Taxes
That's really the awesome thing is I have so much choice in how I spend my time and what I talk about online.
I am Charles Schwartz Show
Legally Pay Less Taxes
Yep. This is my favorite topic. And my kids have been hearing me preach about this their entire lives. And It's something that I care a lot about because I like paying it forward. I've been so blessed in my life. I actually volunteer for an organization called Score, where I just mentor other small business owners. We talk about stuff that they just may not even know.
I am Charles Schwartz Show
Legally Pay Less Taxes
That's sort of my motivation for doing this. I just wanted to say thank you so much for the opportunity to tap into your audience and do this for a second. So I like learning and teaching in principles a lot of times as opposed to very specific tactics, even though we are going to get into a couple of those. I want to start with some principles that I believe in. I believe that there are
I am Charles Schwartz Show
Legally Pay Less Taxes
Basically, if you boil it down to the most basic ideas, there are basically three rules of money. One is you have to spend money to make money. And that's always true, I've found, in my own life. And this is something I've taught my kids as well. When they want to go out and earn some money for the summer, We had to say, look, you have to go spend some money at the store buying these items.
I am Charles Schwartz Show
Legally Pay Less Taxes
And then you can go resell them later to all of our neighbors. And you're going to make a profit, but you have to spend money first. So building that into their understanding is critical. And that's kind of where I want to make sure we're all on the same page. Number one, that principle. Secondarily, not only do you have to spend money to make money, but...
I am Charles Schwartz Show
Legally Pay Less Taxes
And it's important to never spend more than you make. And this is a trap that a lot of people get into, especially young people who get access to credit. And they think that status is more important than how much they're spending on things. And that's completely backwards. Wealthy people are very aware of... the profit margins of all the things that they're participating in.
I am Charles Schwartz Show
Legally Pay Less Taxes
And a lot of people I know hire teams of people to make sure that what they're investing in always comes with a specific amount of profit, whether it's 10, 15, 20%, whatever that may be. That doesn't matter. Everybody has their own set of goals and the way that they believe about how money should be returned. But at the end of the day,
I am Charles Schwartz Show
Legally Pay Less Taxes
It's imperative that you spend less than you're making, and then you can become wealthy. I don't care what it is you do for work. Then the third principle, and this doesn't matter whether you're religious or not. This is a principle of money, and it works. It is you need to pay charity in some way, shape, or form. You need to donate to a charity. For me, I've got a 10%.
I am Charles Schwartz Show
Legally Pay Less Taxes
hard line, all the money I make, I pay 10% of it back to my church. And that's how I pay back to charity. And I donate to other things as well. But I don't care if you're making $10 a month or $10 million a month. Give yourself a budget for putting money towards a charity or donating to something as a percentage of your income. And you will be taken care of for doing that.
I am Charles Schwartz Show
Legally Pay Less Taxes
I've seen it in thousands of people's lives. So with those as our basic principles, by the way, Charles, did you want to chime in on any of those things? I saw you nodding.
I am Charles Schwartz Show
Legally Pay Less Taxes
Awesome. Yeah, I think that's a great point. Whether you're donating your time or just straight cash, give back. That's the principle. And thank you for that awesome clarification. Absolutely. So I wanted to jump in to the first tax strategy. And this one can work for anybody who has an LLC. It doesn't matter if you have lots of employees or it's just you.
I am Charles Schwartz Show
Legally Pay Less Taxes
And this is going to be one that the one other caveat is that you must own your residence, whether it's a townhome or single family home, whatever the case may be. You've got to own it or at least be on the title. And this is something called the Augusta strategy. I'm not going to go into the history of why it's called the Augusta strategy, but that's what it's called.
I am Charles Schwartz Show
Legally Pay Less Taxes
If you want to go Google it for more information or ask your CPA, they'll know what this is. But essentially what you're doing is taking advantage of an IRS tax code that allows your business to rent your home from yourself. on a monthly basis and your business pays your personal bank account the equivalent of one month's rent, essentially.