The Pathway to Zero: Smart Tax Strategies for Health-Conscious Entrepreneurs: Optimize Your Wealth. Restore Your Wellness

Free Resource Link: The Pathway to Zero Free Training:

https://www.taxstrategiesnow.com/signup?fpr=mommy-heal60

www.taxstrategistsofamerica.com

In this episode, I introduce you to Carlotta Thompson.

When Carlotta was 14, she remembers becoming enthralled with a booklet on preparing taxes.

She decided then that she wanted to work for the IRS, so at 14 years old, she began studying tax law with the dream of working for the Internal Revenue Service (IRS).

Shortly after attaining her dream of working for the IRS, Carlotta realized that the IRS isn’t actually in place to help small businesses like she’d thought and it felt like she was working for the wrong side. As an auditor, she saw tons of tax returns with sometimes hundreds of thousands of dollars of missed deductions that were detrimental for the client. Carlotta had a bigger dream and mission to directly help business owners pay the least tax legally possible, so what began as a ministry has evolved into Tax Strategists of America!

Today she speaks about:

Carlotta Thompson's Journey and Mission (0:01)

Common Tax Mistakes and Solutions (3:30)

Tax Strategies for Different Income Levels (5:56)

The Role of ChatGPT in Tax Strategies (15:06)

Misconceptions and Common Mistakes (15:27)

Handling Large Tax Bills (20:40)

Join me for this episode of Mommy Heal Thyself to learn more about smart tax strategies..

Transcript
(Note, this was transcribed using a transcription software and may not reflect the exact words used in the podcast)

Dr. Michelle Gamble / Sankofa Healing 0:01

And then last but not least, looking at my Okay, alrighty, ready to rock and roll.

Carlotta Thompson 0:10

I'm ready.

Dr. Michelle Gamble / Sankofa Healing 0:11

Awesome.

Dr. Michelle Gamble / Sankofa Healing 0:22

I welcome everyone to another episode of mommy heal thyself today. I'm here with Thompson.

Dr. Michelle Gamble / Sankofa Healing 0:48

14, she remembers becoming enthralled with a booklet on preparing taxes. Now that kind of dates us, because I remember that also going to the public library to get those little booklets so that you could learn about your taxes and fill out your taxes. But you know, you guys don't do that anymore. Nobody does that. You know, actual paper and pencil booklets anymore. In any case, she decided then that she wanted to work for the IRS. So 14 years old, she began, she began studying tax law with the dream of working for the international revenue service. Shortly after attaining the dream of working for the IRS, Carlotta realized that the IRS isn't exactly in place to help small businesses. She thought and she felt that she was working for the wrong side as an auditor, she saw tons tax returns, sometimes hundreds and 1000s of dollars of missed deductions that were detrimental to the client. Then she had a bigger dream and a mission of directly helping business owners to pay at least the least amount of tax possible legally. So that began a ministry and has evolved into the tax strategist of America. Well, sweetheart, welcome, welcome. I am so happy to have you here with us today.

Carlotta Thompson 2:16

Thank you so much. I'm excited too, and yes, like I started everything here as ministry, and I feel like that's the biggest, you know, thing that I want to make sure that people understand is like, serve with all of your heart and you will get to where you want to go. That's what I know about daily

Dr. Michelle Gamble / Sankofa Healing 2:34

that is so important to us here at it takes village ministry. One of the things that I have been impressing upon people is understanding that so

Dr. Michelle Gamble / Sankofa Healing 2:51

a business of your own, but to really understand the tax code so that you can utilize it to your family's benefits. You know, a lot of times when we talk to people about health and wellness, they say, Oh, Michelle, I can't afford it. And I'm saying no, not only can you afford it, but you can't afford not to be worried about your health. And so I would love for you to tell us more about how these small businesses, how these solopreneurs, how these independent contractors can maneuver through the tax codes, you know, what are the common mistakes that they're making, and what can they do to come out on top?

Carlotta Thompson 3:31

Yeah, so when you're first starting out, you know, the biggest mistakes are just tax errors, like you're not even doing the tax return correctly. And a lot of times this comes from you're hiring the wrong professional. And so, or you're not hiring a professional at all. You're trying to do it on TurboTax,

Carlotta Thompson 3:56

right? I call it. So first of all, you need to hire a professional hands down, like if you're under if you're making under $40,000 like your gross is under $40,000 it all comes down to having a professional now, once you start making above 40,000 like after expenses above 40,000 you need to hire someone to help you save on taxes, because let's be real, under 40,000 you're probably not paying any taxes, right? You're getting, you know, you're low income, you're you, maybe you have a side hustle or whatever. But once you hit that mark of around 40,000 after expenses, you go from being the taxpayer in the lowest tax bracket to all of a sudden becoming almost the highest tax bracket without making a lot of money. And where that comes from is own, your

Carlotta Thompson 5:01

own your own business, right? You have to pay both sides of that. So when you're an employee, you pay half, and your employer pays half, but when you're when you're a business owner, you have to pay it all. And so that is the first time that you start feeling how much taxes take from you. And so that is when you really need to start focusing on hiring someone to help you pay less tax like it is the number one expense of business owners that actually have a business, right? Yes, if you're a side hustle or you're just, you know, starting out, obviously there's things that could be more expensive than taxes, but when you're making money, taxes become your number one expense, and you've got to make sure that you are using things like hiring your kids, renting your home to yourself, like those are low hanging fruit that any most

Carlotta Thompson 6:04

I'm a tax professional with some strategy can do, right? So that's, that's your first things, right? Make sure, first of all, before that, before 40,000 you're gonna make sure that you get a professional and that you're doing everything, you're deducting everything you can. After that, you're going to start focusing on those small strategies that can get you to zero. You can get to zero if you're making up to 100,000 pretty easily, just by doing some a few core strategies, all right. But past that now we now we go into actual business tax strategies, and that's what sets us apart from everybody else, right? Like, once you have a real business, and you are hiring employees, and you're hire and you're doing, you know, maybe some R and D, like research and development or, and you're, you're doing some of those things, that is, when you've got to have somebody that's actually a tax strategist that does more than just a few

Unknown Speaker 7:02

strategies. So

Carlotta Thompson 7:06

the biggest thing you can learn as a small business owner is to hire the right professional for the for the journey that you're in at that moment, because I'm not going to have the same tax professional when I'm making 40,000 as I am when I'm making 4 million, usually, right? And so just making sure that you hire the right person and that you're learning awesome, use chat GPT. Chat GPT. I don't know how you know you feel about that. I know different people have different thoughts on it, but I'm going to tell you, Chad GBT can give you a lot of tax strategy. What I always tell my clients is, quit asking. Is this a tax deduction? How many times have you asked your your person, is this a tax deduction? Most everybody's asked that question, right? Is, can I deduct this right the number?

Carlotta Thompson 8:11

And ask, How can I deduct that? When I say, use that with chat GBT, because chat GBT, if you say, is my classic car collection a deduction? It's going to tell you No How can I make my classic car collection a deduction? It's going to give you 20 ways. So think outside,

Dr. Michelle Gamble / Sankofa Healing 8:34

that is amazing. So let's break it down a little bit. You were saying you have 40,000 and below, and this is net income, not gross, right? And then you have, say, 100,000 you know the gap between 40,000 and 100,000 and then you have more than 100,000 so when you're in that zone of less than 40,000 what type of preparers, or should I say, what type of professionals should we be looking to get in order to do what?

Carlotta Thompson 9:04

Yeah, so normally you're going to do your own bookkeeping.

Carlotta Thompson 9:17

You're going to use to Excel, you know, like at the I think one of the biggest mistakes people can do is doing QuickBooks too early. I think people all want to, like, have a professional system, and they want to use QuickBooks. Well, QuickBooks in the hands of somebody who doesn't understand bookkeeping is terrible, and it is what causes so many mistakes at the IRS. Like when I go in and I have somebody that's done their books and QuickBooks 100% of the time, it's wrong. I've never seen someone do their own bookkeeping, and it'd be correct. But QuickBooks sells us on or in. You know, I'm picking on QuickBooks because they're the number one but like any bookkeeping software, sells us on the idea that we can do our own bookkeeping, and it seems just as easy as like, oh, it's going to tell you where to put everything. Well, the problem is, is QuickBooks is a double entry set of books you put things to something you might think it goes to it's probably going to go to the wrong place, like it could go to the balance sheet when it should go to the income statement, right? Well, that's a huge problem, because the income statements where your income and expenses are, the balance sheet, has no bearing on the tax return to take deductions, right? So I will say, I mean, it does, but not for you right? When you're when you're pulling your stuff, you're going to pull the income and expenses if you're under 40,000 because that's what you're going to know. So up to that point, I'm going to say, use Excel, quit trying to get fancy too soon. And then I'm going to say, hire a professional that does, you know, just does tax returns like we have that at our company, where you can just hire someone do just to do your taxes like you don't have to do tax strategy. You have to do anything like we have a company where you can just do your tax return, and that's really all you need to start. You need your taxes done. Then when you're at 40,000 to 100,000 you need some bookkeeping. Okay, now we've got to start doing our bookkeeping, because we're going to start implementing some of the lowest strategies there are, right? Some of those are going to be maybe a reasonable compensation analysis, maybe hiring your kids, maybe doing the Augusta role. A lot of you may not know what those things are. If you follow me on on social media, I explain all of them, but you're going to do some of those low hanging fruits. When you get there, you're probably at the point where you need to hire a bookkeeper. Now. You don't need to be doing monthly bookkeeping. You probably need to go with quarterly at first, or maybe even twice a year. Okay, you just need to get your books correct. And then you also want to just get, you know, get a tax return. You don't need anything real exciting at that point,

Unknown Speaker 12:15

but you do. You

Carlotta Thompson 12:29

where you're going to start paying a bunch of taxes, but those strategies can be just the core ones, right? Just just the just the smaller ones where you can get those implemented, and it you're going to get to zero pretty easily. If you're under $100,000 you really only have to implement a few strategies to get to zero. It's not hard, wow. So yeah, and then, so then when you get over 100,000 that's when you start looking at, maybe I want to get a piece of real estate. Maybe I want to get I need to do some higher end strategies, because I need to get down. Maybe I want to invest in another business. Maybe, you know, you start thinking through that. You start thinking more of an investor, because now you have enough money, usually, as women in in the space of like going to college, right? Your your business was really income replacement

Carlotta Thompson 13:31

enough. You're making over 60,000 70,000 which is what most of us were making as accountants, unless you're like in a big city, or you're a lawyer or a doctor like you're not. Most people that are employees are not making over in the south over about 75 now, if you're in California, you're making 125, 150, 200 but like in Arkansas or in Texas, or in, you know, Oklahoma, like in the south, the medium range of people with a degree is about $60,000 a year. It's not that much, right? So you've came to the place where you've replaced your income, usually, and now you're thinking like, okay, now I have a few dollars to go out and do something else with. Now some of you may be listening to this, and you're probably like, I've got replacing my income would be 300,000 or $400,000 that's totally okay. You're not who I'm talking to right now. You're going to have to do yours a little bit different, right? You're gonna have to do strategy at the same time, because you have this whole other income that's putting you in a higher tax bracket than us with just a business, right? And so I do things a little different when people have wages, but they also have a business because the numbers are a little different, because you shoot from like being, if you have a job that you're making a couple $100,000 a year, it's really Easy to get into that 50% bracket super fast, and a lot of people are like, 50% will you think about it when you're paying 15% of Social Security, Medicare, plus on top of the regular federal rate and bracket plus on top of if you have state, state taxes, I mean, it's, it's over 50% very quickly. So yeah, that's what I would suggest.

Dr. Michelle Gamble / Sankofa Healing 15:27

That adds up so quick, as you were saying,

Dr. Michelle Gamble / Sankofa Healing 15:38

that is one of the common mistakes or misperceptions that people have in each of those three categories.

Carlotta Thompson 15:47

So I would say in that zero to 40,000 the biggest problem with businesses in that in that range are they want to go too fast. They see everybody else doing it. They're always on social media. They're buying all kinds of crap they don't need they're spending money like crazy, and usually they never can get out of, get get into actually having a business. Because when I say like you have a real business, it means like you're profiting money, right? A lot of times under the 40,000 mark, people are trying to get rich quick. And in business, it ain't quick, you know, like it's not quick. It took me, if you want to do it quick, I will say, quit trying to start a business and buy a business like we teach

Carlotta Thompson 16:40

all the time. We've closed over 100 businesses in the past four, three and a half years for our clients, because they were wanting income replacement or they were wanting to grow, right? Because it's easier to go buy a business that's already been in business. It's already has 10 years of of history that the SBA will finance for you. You know, it's, it's easier to do that than to start from ground zero.

Dr. Michelle Gamble / Sankofa Healing 17:10

But a lot would that be something particularly for, say, retirees.

Carlotta Thompson 17:16

I would, you mean, like, would retire? Retired people go buy a business,

Dr. Michelle Gamble / Sankofa Healing 17:21

yeah, because, you know, at that stage, they may have the income, but they don't necessarily want to go through the the tussle of having to do everything from scratch. It's like getting a teenage child as opposed to getting a baby.

Unknown Speaker 17:37

I would say I had

Carlotta Thompson 17:46

I would have bought a business, because it's not like, Yes, I do have some retired people, but that's not really. Who are buying businesses. It they you don't have to have a lot of money to buy a business, really. People think you do, but SBA makes it where you don't, right? And then you can get a searcher fund at the bank, like we use live oak, they have searcher funds that will come in and actually help finance all of that business. So a lot of people think it costs a lot of money to get into a business. It does not. It's actually very, very cheap, and usually costs less than what you're spending on, like coaching. You know, when I remember when I left the IRS and I came out here, and I got into some coaching programs that were $25,000 you know, like I went and bought a business with less than that. Also, because I'm in, I'm an accountant, right? And so I can go

Carlotta Thompson 18:50

0% down, you know, like there's, there's just so many things. So why would I have bought a business instead of growing the way I did? Well, the first year I was in business, I didn't make any money. I mean, I made money, but I had to pay it all out, right? And so even though I made $100,000 of revenue, or 150,000 of revenue, I actually had to have a side gig to pay my one employee to help me business, right? And I didn't make any money. My husband was a RN, and he helped make it where we could afford to pay our bills. The second year I was in business, I think I made $40,000 after my expenses. The third year I was in business, you know, I think I got to several $100,000 now, now we're at, now we're in the millions, several million, $4 million of profit, you know, in one business, and we have seven businesses.

Unknown Speaker 19:43

So

Carlotta Thompson 19:44

what I've done different is by a business, instead of trying to do

Dr. Michelle Gamble / Sankofa Healing 19:58

in the category of 40 to 100 what is the most common misperception or mistake that you find?

Carlotta Thompson 20:04

Yeah, so in that in that range, I think the people that have gotten there have usually done it by scraping by. So it's like that whole different mindset. The people that are in zero to 40, they never usually make it to 40 to 100 because they're blowing all their money that they make 4200 they've gotten there because they've not gave anybody any money, and so they're trying to DIY everything. It's so weird that the people that are broke essentially, or, you know, have a w2 income that's supporting their business, or maybe they got a windfall, they're trying to hire coaches, and they're trying to spend all their money, and they're trying to do all this stuff, then you've got this place of like, all the people that actually make it to 100 they have done it, usually by keeping a really tight fist and not spending any of that. And if they have, they've definitely not spent it on tax professionals or bookkeeping professionals or anything like that. Their stuff is usually a wreck. And so what usually, why? Why those people come is they get their first large tax bill, because that's where you know, you first get your hit zero to 41 but the 40 to 100 you're like, oh my gosh, I just got a $15,000 tax bill. And usually the thing is in business, it happens overnight, so you go from that zero to 40 range, and then you get to 100 and usually it happens within a couple of months, and you don't even realize it, because you just got your tax bill at the zero to 40. You're like, Oh, I didn't pay any taxes. Life is great. I'm going to keep going and doing this. They spend every dollar they make when they're making that that money because they didn't pay any taxes, you know, on the 40, and they're thinking, Oh, I'm not going to have to pay any taxes on the 100. And so they they get a tax bill after they've made the money, they've spent the money, and now they've got a $20,000 tax bill out of the blue, and they're like, but, but I didn't have a tax bill when I was making 41 while I'm making 100 Why not all of a sudden get a $20,000 tax bill? Well, when you're making 40 you're getting all these, these incentives from the government for low income people when you're making 100 all of a sudden, those all went away, hit with Social Security, Medicare, like all the others, all at once. And so it is a stark difference, right? Like, usually, people are coming to me when they get their first large tax bill, and they're like, oh my gosh, what do I do now?

Dr. Michelle Gamble / Sankofa Healing 22:44

So are you able to help people in that situation, you know, like, can you go back in time and redo their taxes? Or is it just like, Oh, you gotta bite the bullet. But now we strategize to move forward.

Carlotta Thompson 22:56

Usually it's going to be strategy moving forward. Now, if there wasn't,

Speaker 1 23:02

I Yes, you

Carlotta Thompson 23:14

can go back, but just I'm going to tell you the number one thing that is the problem is, people don't think about taxes until after the year ends, and once that year ends, you really can't do a lot of strategy, you know, like, what we're do, what we the strategy we're working on right now. On, you know, June 2025, is 2025 strategy, right? We start 2025 strategy on January 1 of 2025 and people always come to me and they're like, Can you do anything with this old tax bill? Or can you do anything with last year? Sometimes I can, if you haven't filed yet, but once you file, you've told the IRS that was your intention, your you intended for that. So when you go and amend those things. Now you're having to prove to the IRS that you put it on there wrong and it just wasn't your intention. See, everything with the government comes down to record keeping and what your intention was. And you come, yeah, I can usually help, because I can change the intention, right? I can, because you haven't, you don't even know your intention. Like I talked to a guy a couple of days ago, and he had filed for last year, and the strategy he had filed for last year, making a couple $100,000 a year, and he's a talent. The strategy was like, terrible. And I was like, Look, we could amend this, but see, the thing is, you've already filed it. When you filed it, you told the IRS your intention. So now if I go and like, change all of this, they're going to say, well, intention was that. So did this really? Did this really happen. And so amended returns, yes, if you actually miss something, yes, if there's a strategy you missed, yes, if you know it's something that you can actually do, but I'm sorry,

Carlotta Thompson 25:20

pay your kids backwards and you didn't pay them, no, like, I can't go pay your kids when you didn't pay your kids, right? But maybe you missed, maybe, maybe you needed to make an election that you didn't make, and maybe that election would save you, you know, 20 or $30,000 yes, a lot of times we can do those backwards. So I would say that's really the biggest thing is what was, a lot of times people will be like, Oh, we can amend your returns. Okay, but you need to understand an amended return has a much higher rate of getting audited, and so we would want to make sure it's very accurate if we're going to amend it,

Dr. Michelle Gamble / Sankofa Healing 26:01

because you're automatically putting out that red flag that makes you stand out absolutely,

Carlotta Thompson 26:07

yeah, especially on a personal return, like on a business return, it's not as big as a red flag, because the way that come the IRS tracks things is when you earn it just kind of overrides the return. But most people in the zero to 100,000 range are filing their taxes on their personal return, and that's where it's those. Those personal returns are always a lot more criticized than business returns are, just because there's a lot more error usually on a on a personal return than a business return, so have a lot higher risk of getting audited. Well,

Dr. Michelle Gamble / Sankofa Healing 26:47

I think the biggest message that I'm taking away from all of this is like what my mama always told me, which is success is when preparedness meets opportunity. And what I mean by that is that we should always be looking forward, not waiting until, you know, we get confirmation that we're at that stage, but thinking, You know what, I'm in the zero to 40. But I need to think with the mindset of 40 to 100 so that when that happens, I have that infrastructure in place. And the same thing when you're in that 40 to 100 to not just sit there and be comfortable, but start thinking, okay, am I getting the infrastructure in place for the next move? So I'm I would love for us to wrap us up today by telling us what are some of the services and supports that you can offer in each of those different categories.

Carlotta Thompson 27:46

Yeah. So we actually have a business where we can do everything. We can do your tax return, we can do your bookkeeping, we can do your tax strategy, we can do all of those services that is done through our stable.com it's S, T, A, B, I, L, L, I know it's kind of a weird Yeah, that is where we do if you're here in your your zero to 40, that is where I would start a stable if you're here in your

Carlotta Thompson 28:36

a tax strategy and like we go over, you know, if I'm making 100 How can I get to zero if I'm making a million, how can I get to zero? If I'm making a billion, how can I get to zero? And so that's what I'm going to say. Like, if you're making money, if you're if you're, know, you're going to have a tax bill, I would come to one of those trainings. But if you're here and you just need your taxes done, or maybe you need some bookkeeping done, we do all of that. Our company called stable, if you're here and you want to come to a training, we do those on online, and they're at, that's at tax strategist of america.com you can go to those links. She'll have the links in the show notes. But those are the two places like we really have created something for everyone, and so that's what I'm gonna leave you with.

Dr. Michelle Gamble / Sankofa Healing 29:25

Well, I appreciate that, because

Dr. Michelle Gamble / Sankofa Healing 29:37

think, quote, unquote, the higher echelon. And the reality is that we all started out, you know, at the bottom of the run. And you know, for us to have that vision and that scope, I believe, is helpful, and to know that you provide that assistance at each of those levels, and you're not looking to overwhelm people with things that they don't need in that moment, but rather to say, You know what? Right now, you just need this, and then later on, when you need bigger shoes. We got them in the next aisle, but right now, let's stay with here, with the little baby shoes,

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