In this eye-opening episode, Casey and Jarrod team up with tax expert Kevin Rhoton, a seasoned CPA and MBA, to delve into some of the most alarming tax schemes that the IRS has been warning the public about. Kevin breaks down the intricacies of these schemes, offers practical advice on how to spot them, and shares tips on protecting yourself from becoming a victim. Don't get duped—tune in today and arm yourself with the knowledge you need to keep your finances secure.
Announcer:
Hello, everyone. Welcome to the Millionaire Dentist Podcast, brought to you by Four Quadrants Advisory. On this podcast, we break down the world of dentistry finances and business practices to help you become the millionaire dentist you deserve to be. Please be advised, we do speak with an honest tongue and may not be safe for work.
Casey Hiers:
Hello, and welcome. This is Casey Hiers, back at the Millionaire Dentist Podcast, in studio with cohost Jarrod Bridgeman.
Jarrod Bridgeman:
Casey, how are you? You just got back from the Florida Dental Convention. How'd that go for you?
Casey Hiers:
It was hot.
Jarrod Bridgeman:
It was hot down there?
Casey Hiers:
The temperature was high, too.
Jarrod Bridgeman:
Right. Oh, okay.
Casey Hiers:
It was a hot meeting. It was great. Yeah.
Jarrod Bridgeman:
You've always talked about this is not the first time you've been and it always ends up being a really great show.
Casey Hiers:
Well, it's great we get asked to come and present two hours of CE. We get to see a lot of friends, and dental community people, and clients. Yeah, it's a great meeting. It's a hot meeting.
Jarrod Bridgeman:
That's awesome. That's awesome. Today-
Casey Hiers:
There was a Hygienists Gone Wild event in one of the venues in the resort.
Jarrod Bridgeman:
Okay.
Casey Hiers:
Yeah, I stayed away from it.
Jarrod Bridgeman:
You stayed away from that one?
Casey Hiers:
Yeah, yeah.
Jarrod Bridgeman:
Well, today we've got a special guest, the always lovely Kevin Rhoton. He is an MBA and a CPA, and all-around good guy.
Kevin, thank you for coming today.
Kevin Rhoton:
Thank you. How are you doing?
Casey Hiers:
He didn't like the lovely description.
Jarrod Bridgeman:
Yeah.
Casey Hiers:
Grisly, tough.
Jarrod Bridgeman:
Let me rephrase that, yeah.
Kevin Rhoton:
Lovely.
Jarrod Bridgeman:
The manly-
Casey Hiers:
Strong.
Jarrod Bridgeman:
The manly bear.
Casey Hiers:
Yeah.
Jarrod Bridgeman:
Yeah.
Casey Hiers:
Tax season's over. You just kick up, kick your feet up and relax, right? Nothing to really worry about?
Kevin Rhoton:
You would think so, but actually, no because we hear from a lot of clients and non-clients, just practice owners out there, that the scammers come out of the woodwork with all these beautiful tax schemes.
Jarrod Bridgeman:
Well, okay. One of the scams ... The other day, I got a phone call from the IRS and I gave them all my information. That's what I'm supposed to be doing, right? They just give you a call and then it goes that way?
Casey Hiers:
Website, social security number.
Jarrod Bridgeman:
Yeah, yeah.
Casey Hiers:
Jarrod's a glutton for punishment.
Jarrod Bridgeman:
I am.
Casey Hiers:
Are they scams, are they gimmicks?
Kevin Rhoton:
Gimmicks. Sometimes it's they can take legitimate deductions, legitimate, I don't want to call them loopholes, but tax deductions, and oversell them.
Casey Hiers:
Over time, a lot of these gimmicks end up not being as shiny as they were at the beginning.
Kevin Rhoton:
Right.
Casey Hiers:
I glanced at your notes for about seven seconds and I laugh, because some of the things on there, I hear from practice owners quite a bit, where they get very excited about.
Kevin Rhoton:
Yeah.
Casey Hiers:
I won't steal your thunder.
Kevin Rhoton:
Sure.
Casey Hiers:
But what are some of these gimmicks?
Kevin Rhoton:
Yeah. Really, you can go to the IRS website. We, I know in the past, have talked about something called the IRS' Dirty Dozen. Where they actually will, through notices, let taxpayers know of things that are on the IRS's radar to look out for. One of those, one of many, is conservation easements.
Casey Hiers:
Oh, I've heard of these for years.
Kevin Rhoton:
Now granted, it is-
Casey Hiers:
There's a place for it.
Kevin Rhoton:
There is a place for it. It's not just an outright fraud. But where these promoters and scammers do is they'll charge fees and not do the proper work.
Jarrod Bridgeman:
This will probably be dumb, but what is this?
Kevin Rhoton:
Sure.
Jarrod Bridgeman:
What is conservation easement?
Kevin Rhoton:
Conservation easement is where you can claim charitable contribution deductions for an investment. You go with a whole group of people, purchase a piece of land for a certain amount of money, and then put a conservation easement on it. Say, there's minerals, some sort of mining, whatever.
Jarrod Bridgeman:
Okay, okay.
Kevin Rhoton:
Then you put a conservation easement on there saying, "We're not going to strip it and make money off of whatever valuable materials are there." You can deduct that value on your taxes.
Again, with the proper work done, the proper appraisals, all that, making sure Is are dotted, Ts are crossed.
Casey Hiers:
Proper documentation, yeah.
Kevin Rhoton:
Proper documentation. It can be done.
Casey Hiers:
Where do you see it being abused?
Kevin Rhoton:
Yeah. There's real no blanket answer to that. It's one of those things that, if it's too good to be true ... I'll probably be saying that quite a bit today. But if it's too good to be true, then it probably is. If they're offering, "Here, for $1000, pay us," 10,000, whatever amount of money, "and you can get hundreds of thousands of dollars in tax credits." It might be a little big too-
Jarrod Bridgeman:
A little fishy?
Kevin Rhoton:
A little fishy.
Jarrod Bridgeman:
This kind of gimmick, is this more towards they're trying to get you to buy into a piece of land? It's not something you already own.
Kevin Rhoton:
Right.
Jarrod Bridgeman:
Got it, okay.
Kevin Rhoton:
Yeah, there's only certain areas. It has to be ... We've seen some that have had, whether it's oil or different types of precious metals.
Jarrod Bridgeman:
What if there's buried pirate treasure?
Kevin Rhoton:
I would dig up the treasure. That's just one thing.
Another item that we see here in the past few years, digital assets. Looking at transactions, buying and selling of cryptocurrency, virtual currency, NFTs, things like that. Any transactions involving digital assets need to be reported. They are considered an investment.
Jarrod Bridgeman:
Yeah.
Kevin Rhoton:
Just like any type of stock, you need to record that. A lot of promoters out there often say that the transactions are untraceable, undiscoverable by the IRS. But actually, the IRS is able to track those. If you pop up on the radar with too much, not going to-
Jarrod Bridgeman:
So somebody coming in here trying to say I have a potential option for us to almost scam the government itself?
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
By getting around it?
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
Okay.
Kevin Rhoton:
Here, purchase NFTs.
Jarrod Bridgeman:
"Purchase this picture of an ape I have."
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
Right, this Boredom Ape. Yeah.
Casey Hiers:
Now unless you try to cash out on that, what are they supposed to do reporting wise?
Kevin Rhoton:
It's just like with any other stocks. If you sell it for a gain, you need to report the gain on that.
Casey Hiers:
But a lot of times, these never turn into a gain.
Kevin Rhoton:
That's true.
Jarrod Bridgeman:
Right.
Casey Hiers:
Some of these things, I think to get back to square one is a lot of practice owners under-save for retirement, so then they go chasing. A lot of people know that, unfortunately, dentists and specialists are targets, they might have some cash on hand, maybe they've under-saved. So they have these great ideas and they're susceptible to them. Let's say they want $100,000 of some random coin that's going to go 100X by next year, unfortunately a lot of practice owners get real excited about this, but nothing comes to fruition. Is that a fair way to set that up?
Kevin Rhoton:
That's definitely one way that that happens. Yeah, they lose.
Casey Hiers:
With a conservation easement, again they're going to potentially pay a lot of money to buy land to which they do nothing with.
Kevin Rhoton:
Yeah.
Casey Hiers:
And bank on the tax deductions over time.
Kevin Rhoton:
It's never as easy as-
Casey Hiers:
For credits.
Kevin Rhoton:
"Here, just pay me this and here you go. Here's your tax deduction."
Casey Hiers:
I talk to people very excited about it on the front end, and then on the back end, it didn't really come to anything except some of their money tied up somewhere.
Kevin Rhoton:
Yeah.
Casey Hiers:
Yeah.
Kevin Rhoton:
Yeah. Those, and then digital assets. It's sometimes marketed as there's no tax implications to this, and unfortunately there are.
Casey Hiers:
Well, there's a red flag right there, if you ever hear that.
Kevin Rhoton:
Yeah. IRS, there's tax implications to pretty much everything.
Casey Hiers:
Yeah.
Kevin Rhoton:
They get their hands in everything.
Casey Hiers:
Not yet with breathing air, but it's probably coming down the pipe.
Kevin Rhoton:
Yeah.
Casey Hiers:
"If you want to breathe air, we're going to tax you."
Kevin Rhoton:
Yeah.
Another one that I thought was interesting is there's getting to be art donation deductions that are fraudulent. Sort of along the lines of NFTs, where promoters of these scams will encourage you to buy various types of art at a "discounted price." Then donate, again "donate" that. They say the fair market value of that ... Say you pay $5000 for a piece of art. Well, the "fair market value" of that is $25000. They say you can-
Jarrod Bridgeman:
Deduct the 25,000.
Kevin Rhoton:
Deduct the fair market value of it. IRS actually has many, a huge team of professionally trained appraisers. You have to report what it is and they will investigate, and see okay, is that really worth that? And they'll come after you if it's not.
Casey Hiers:
Well, it really goes to trying to get, I don't want to say get rich quick, but it taps into that human psychology of a shortcut.
Jarrod Bridgeman:
A shortcut and winning one over something else.
Casey Hiers:
When it comes down to it, it's produced industry, don't make mistakes, save your money, grow your money, retire wealthy. That's a beautiful plan. But unfortunately, if people have neglected that aspect, then they look to these other areas. Or they hear, "Oh, my friend I went to dental school with does this, and this, and this," and it sounds really good.
It's funny you said art. People love talking about these things. Saving $180,000 a year for retirement it's not as fun to talk about, I guess. But getting into art, or you name it, some of these things, conservation easements, the pride I've heard people talk about them with is uncanny. Rarely do these things provide them what they need in retirement. It's a shortcut, unfortunately.
Kevin Rhoton:
Yeah. Yeah, that's exactly right.
Casey Hiers:
Sidebar. I had a friend once and he goes, "You know what, I'm going to get into art." I go, "That's random. What kind of art?" He goes, "Really expensive art." I go, "You're on my borderline friend list now, I don't know if I can hang out with you anymore. But what does that mean?"
Jarrod Bridgeman:
Yeah.
Casey Hiers:
What kind of art do you like?
Jarrod Bridgeman:
Norman Rockwell.
Kevin Rhoton:
Finger painting-
Jarrod Bridgeman:
Finger painting.
Kevin Rhoton:
From my kids. That's about it.
Casey Hiers:
That's a good answer.
Jarrod Bridgeman:
Can you donate those and get a nice tax deduction?
Kevin Rhoton:
Actually, I have. That's where I got the 20-
Jarrod Bridgeman:
That's where you got the 25,000?
Kevin Rhoton:
That was my example. The guy that bought it and took a 25,000, that was me. No, just kidding.
Jarrod Bridgeman:
Okay.
Casey Hiers:
If you're in the political arena, you can sell art for a lot of money, I've heard.
Jarrod Bridgeman:
It's like the Thunder Dome.
Kevin Rhoton:
Yeah.
Casey Hiers:
What else you got for us, Kevin? What are some of these other gimmicks?
Kevin Rhoton:
Yeah. Here's another one that we've actually come in contact with ourselves, with practice owners. There's these third party helper scams, where they'll get in contact with practice owners. "Here, we will help you file this form with the Federal government, with the state." A lot of times, with the Secretary of State, there's various census forms.
Casey Hiers:
A lot of times, with these initiatives, these third parties encourage you to get excited about said gimmick, and then they will do the legwork for you. All the responsibility or liability is on you, the practice owner. This third party, most likely, just brings it to your attention, fills it out, gets paid their fee. They walk away, no strings attached.
Kevin Rhoton:
Yeah.
Casey Hiers:
And the practice owner's on the hook for it.
Kevin Rhoton:
Yeah. That's exactly right. These third party scammers, again, they'll charge a fee for something that is very simple, very fee.
Casey Hiers:
The ERC, the employee retention credit, that was a thing back there where there was some great outfits out there that would do a great job with this. There were others that were just going to do anything and everything on the form to get the maximum immediate money back. They get their cut, they're gone. 18 months later, knock, knock, knock. "This is out of whack."
Kevin Rhoton:
Absolutely.
Casey Hiers:
It's outside of the algorithm, and then the practice owner has to deal with cleaning it up.
Kevin Rhoton:
Yeah. We're seeing the ramifications of that right now. IRS is really coming down hard on the ERC filings that are egregious. Those firms that were out there, they're nowhere to be found.
Casey Hiers:
No, they're gone. Then the people that file these say, "Hey, look at my beautiful new sports car," on all their social media. Then dots get connected and they're on the hook.
Kevin Rhoton:
We advise all of our clients, if they get any type of solicitation of, "Here, let us help with," even with Secretary of State's business survey, "We'll fill this out for you for $500." It's pretty much just refreshing your information with the Secretary or State. That's something we offer, that we do for our clients, that's included in our services.
Casey Hiers:
Included, yeah.
Kevin Rhoton:
They just delete that, send that to us, whatever. But don't pay for things that are actually free.
Jarrod Bridgeman:
Or you could pay me $1000 to do it.
Kevin Rhoton:
Yeah. Jarrod, I think he-
Jarrod Bridgeman:
I don't even know what I'm doing, but I'll do it.
Kevin Rhoton:
Neither do these third-
Casey Hiers:
Well, that's what these third parties, they're just .... I've heard a lot of nightmare stories about these things.
Kevin Rhoton:
Yeah.
Casey Hiers:
You know what the common reply is after the dust settles, "I should have known better."
Kevin Rhoton:
Yeah.
Casey Hiers:
I think on a lot of this, what's your instincts say? I should have known better.
Kevin Rhoton:
Instincts.
Jarrod Bridgeman:
Right.
Casey Hiers:
This didn't feel right.
Kevin Rhoton:
It goes back to that too good to be true. Sometimes, oh man, the amount ... They either prey on your fear, or they solicit that huge tax deduction, huge windfall of money. But when you take a second, take a breath, yeah that's really too good to be true.
Casey Hiers:
Well, these third parties, if they don't have skin in the game, if they're not an ongoing partner with you, what happens once this is filed? When they tell you, "Oh, you just sit back and wait for your check to come," well then what part do you have in that? What accountability or responsibility? "Well, none." That's a problem.
Kevin Rhoton:
Last one I want to hit on today is sometimes ... This is, again, from the Dirty Dozen from the IRS. It's called real tragedies, but fake charities. A lot of times, when disasters ... I know, coming up on hurricane season. During the summer, a lot of tornadoes. A lot of times, fake charities will pop up soliciting donations. The only way that those donations are tax-deductible is if they are an actual recognized 501C3 organization with the IRS. The IRS actually has a website on their website, on the IRS.gov, has a tool where you can look up organizations. It's a tax-exempt organization search.
Casey Hiers:
When George Costanza, from the great show Seinfeld, came up with the Human Fund on one of the episodes, to instead of giving out Christmas gifts, he said, "A donation has been made in your name to the Human Fund," and there was no Human Fund.
Kevin Rhoton:
Yeah.
Casey Hiers:
I just wanted to tie Seinfeld into a tax topic, but that would be an example.
Kevin Rhoton:
Yeah. Fred Claus, have you seen that one?
Jarrod Bridgeman:
Oh, yeah.
Casey Hiers:
With Vince Vaughn.
Jarrod Bridgeman:
With Vince Vaughn?
Kevin Rhoton:
Yeah. People Helping People Charity.
Casey Hiers:
No, to your point. When people see tragedy, the best and worst comes out in human nature, but a lot of times people want to help.
Kevin Rhoton:
Yeah.
Casey Hiers:
They'll see an opportunity, write a big check, feel good about it.
Kevin Rhoton:
Yeah.
Casey Hiers:
And it doesn't go anywhere.
Kevin Rhoton:
There's a lot of ways that a practice owner can use the donations, local sponsorships that, one, is good for the community, and two, does get your name out there. There's a good way, there's a right way to do that, which obviously we can help with.
Casey Hiers:
Yeah.
Kevin Rhoton:
Just be careful of those solicitations.
Casey Hiers:
Yeah.
Jarrod Bridgeman:
This is just a small, what, four or five we've covered, out of the 12.
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
That are the top 12.
Kevin Rhoton:
For this year, yeah.
Jarrod Bridgeman:
For this year.
Casey Hiers:
The Dirty Dozen from Dirty Rotten Scoundrels, who try to prey on people. We just named two movies right there. Yeah.
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
Kevin, anything else you want to finish up with on this topic?
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
Besides obviously, visiting the site.
Kevin Rhoton:
Sure. Just to put a bow on it is I looked up the IRS budget is $16 billion annually. They have almost 85,000 employees. They're looking, day in and day out, for taxpayers using some of these fraudulent schemes. It's important that you have someone like us to help keep you off the IRS radar.
Jarrod Bridgeman:
Yeah. You don't want to be like those old ladies that get caught on the phone scams.
Kevin Rhoton:
Yeah. I've talked to my parents. I don't want to get off subject, but be careful because they are out there and they sound legit.
Casey Hiers:
I had a grandma who just fell for those all the time.
Kevin Rhoton:
Yeah.
Casey Hiers:
"Well, they sound nice. Here's my social, here's all my passwords. They sound really nice."
Jarrod Bridgeman:
There goes my inheritance, great.
Casey Hiers:
Tongue-in-cheek, but sometimes people want to hear what they want to hear sometimes, too.
Kevin Rhoton:
Yeah. The IRS only contacts taxpayers through US Postal Service. No phone calls, no texts.
Jarrod Bridgeman:
No texts. Yeah.
Kevin Rhoton:
Yeah. There's actually even some through the mail that sometimes, you'll see that looks like a legit form, but you really have to see who it's from, where it's from.
Jarrod Bridgeman:
Well, it's nice now, with the ability, most people have access to the internet in some form, to be able to research.
Kevin Rhoton:
Absolutely, yeah.
Jarrod Bridgeman:
Type it in and be like, "Is this entity a scam?"
Kevin Rhoton:
Yeah, just Google it.
Jarrod Bridgeman:
You'll find all kinds of stuff, yeah.
Kevin Rhoton:
Yeah, for sure. But yeah, we get forwarded letters and emails from clients very often, "Hey, is this legit?" No, it's a scam.
Casey Hiers:
Yeah, those are out there. We just wanted to make sure people are aware. When you hear it, it sounds like, "Oh, of course I'm not going to give into a scam." Well, those that fall for them don't think that it's a scam from the start.
Jarrod Bridgeman:
Yeah, got grifted.
Kevin Rhoton:
Last piece of advice is to stay away from these unscrupulous tax schemes and stay off the IRS radar.
For our clients, we do take advantage of legitimate tax saving strategies. More importantly, we focus on the big picture.
Casey Hiers:
It's incredible how many times we can lower tax liability by 30, 40, 50, 60 thousand dollars, simply by mastering tax, and structures, and all the things that we do. And yet, some of the stuff people chase.
Kevin Rhoton:
Yeah.
Jarrod Bridgeman:
Yeah.
Casey Hiers:
If your current situation was structured better, there are a lot of ways to lower tax liability in a way that puts you in no risk or radar.
Kevin Rhoton:
That's right.
Casey Hiers:
It's just stay away from gimmicks.
Kevin Rhoton:
Stay away from gimmicks.
Jarrod Bridgeman:
If you want to learn more about how Four Quadrants Advisory can help you and your practice, visit fourquadrantsadvisory.com. We're going to be out, offering CE courses in a couple different areas coming up soon. We're going to be in the Indianapolis area. We're doing a bourbon and real financial advice for dentists and specialists event, as well as a brunch. One's in Westfield, Indiana, one's going to be in Downtown Indianapolis. We're going to be in Cincinnati, we're going to be in Cleveland. We're going to be in the DC area as well. Casey's going to be out and about, doing his own thing, and really educating people out there. Make sure to go to our site and click on Events if you want to sign up. Thanks, fellas.
Casey Hiers:
Thanks, Kevin.
Kevin Rhoton:
Thank you.
Announcer:
That's all the time we have today. Thank you to our guests for their insight and for sharing some really great information. Thank you to you, the listener, for tuning in. The Millionaire Dentist Podcast is brought to you by Four Quadrants Advisory. To see if they might be a good fit for you and your practice, go on over to fourquadrantsadvisory.com and see why, year after year, they retain over 95% of their clients. Thank you again for joining us, and we'll see you next time.
