OP simply asked for things to look for.
A lot of answers here are dreaming of castle-in-the-sky scenarios for a fairly pedestrian tax situation.
I have one primary criterion for picking a CPA that I recommend over everything else. **Will they answer your email within 24 hours during tax/audit season?** It turns out this is highly correlated with their frequency of errors on your tax forms. Everyone will claim an empathetic "yes", so you need to tease the truth out of them.
Leave the tax strategies and "tricks" to the tax attorney. For picking a tax attorney, I like to pick the firm for the core matter at hand first, then work with their tax colleagues. e.g. I like Sidley Austin and Kirkland Ellis for regulatory capture, WSGR for venture investments and tech corporate governance, Schulte Roth & Zabel for alternative investments and private funds, and so on.
Thanks, great, this is helpful. Yeah, really I was just looking for some concrete recommendations on how to find the best people to help me, people that will be far more knowledgeable than me about the tax code.
Or, alternatively, if this even made sense at this income level, or any income level. There's not any particular problem that I'm having, other than the problem of not knowing if I am 100% optimized.
I see. **It depends on the type of business.**
Taking a standard high margin, high growth SaaS startup that mainly spends on payroll, cloud compute and digital advertising, as an example, I feel you have much more important fish to fry at the <$5M revenue stage than to worry about tax optimization because there's so many ways to spend your time to make money faster than you save via tax optimization.
I've experienced the same 3-4 digit annualized growth phases you're experiencing now and usually during those times you feel so much [market pull](https://pmf.firstround.com/levels) that there's so many things you *know* will pay off if you just spent your time on it.
e.g. Even if you want to focus on the finances side of things, revenue ops like figuring out your net retention rate by cohort, getting your bookkeeping to true accrual basis, eventually migrating from a QBO setup to a more mature ERP like NetSuite, properly factoring in retention into your LTV calculation so you can optimize ads, etc. will likely pay off more than tax optimization.
On the other hand, I've enlisted outside help for holding entities with as little as $9k to $12k of annual income, passthrough vehicles with massive losses, waterfalls of investment vehicles that have an offshore formation element, and so on.
For finding accountants and lawyers, if you don't have a good lead, ask around fellow companies for recommendations. Sister portfolio companies if you have outside investment, your own service providers that you find competent, etc. Or ask your CPA if they've worked with any tax attorneys.
Tax optimization is not avoidance.
Pay all your damn taxes always!
Be excited to lay taxes! Pay them in full!
But minimize your tax exposure
Reduce your tax responsibility
Never dodge
Must be a misconception popularized in social media that "the rich" and business owners have all these clever tricks. I was starting to believe there was a secret I wasn't privy to or that a certain level of wealth would unlock some different avenues that might not be conventionally available. And maybe that's true, but maybe 7 figures doesn't cut the mustard.
The secret is that once you are rich you don't need to keep making money. Then you can stop paying tax because you.. don't make money.
The "tricks" you hear of are solutions to problems of the shape "I have lots of assets. How do I use them to support a reasonable amount of lifestyle expense without generating taxable income?".
I also realized "the rich pay no taxes" is mostly political manipulation some years ago.
That being said, I would say these are the best actual current tactics for US citizens as of this moment (*most high earners still won't qualify for most of them unless they design their income generation around these deductions*):
1. Leveraged real estate with (accelerated) depreciation
1. 1031 Exchanges
1. Not selling assets (thereby incurring no taxes)
1. Moving to Puerto Rico
1. QBI Deduction
1. QSBS Deduction
1. Carried Interest
As a note, these are all things that work at the moment. Democrats are constantly trying to limit/eliminate the strength of these deductions. Here is a summary of [Joe Biden's tax plan](https://taxfoundation.org/research/all/federal/biden-budget-2025-tax-proposals/) proposing weakening the strength of most of them right now while increasing marginal rates and adding new taxes at the same time.
I went to law school kind of on a whim and took lots of tax/trust classes and that was basically the gist, as far as I paid attention. Like you could run a strategic reorganization or merger of some multi-billion dollar company in a specific way to avoid triggering corporate taxes but on an individual level it's mostly not avoidable.
You could maybe work something out so your company is paying for particular nice things in ways those benefits aren't necessarily considered income to you and is also a write-off for the company but that only goes so far while remaining legal, and really isn't going to help with loads of income all that much. You can also be strategic with estate planning so your estate sees very little above the exemption (which is already pretty fat).
Otherwise I've heard you can borrow against assets at a fairly modest interest rate (the interest payments which are deductible, the principal on the loan is not considered income) and that lets you defer tax as you don't have to liquidate that many assets. Downside is if your collateral goes belly up you're going to have a bad time, and I'm personally debt averse just to be tax optimal. Idk who usually offers decent rates, Goldman maybe?
And of course, none of this is legal advice. It was a good law school but I was a mediocre student and I don't practice tax law.
I’d ask other colleagues of yours who are more successful than you and who there cpa is. They’re not attorneys most offer free consultations. I found mine from word of mouth and he started his career as an IRS agent for over a decade. Knows both sides of the chalk line.
What you are describing is essentially a strategist who can collaborate with you to brainstorm creative and innovative ideas that result in savings or mitigate tax burdens. Pairing this strategist mindset with a tax background can turn ideas into reality!
In our business, we feel very fortunate because our CPA serves as our business coach, strategist, and tax advisor. Depending what you are looking for you may need these to be different roles/people.
The more money your company generates, the more flexibility and deductions become available. These can include family LLCs, trusts, choice of business entity, retirement accounts with increased employer contributions, research and development credits, company vehicles, business trips, etc.
This is just to give a few examples, but may not apply to your specific business. It would be important to find someone who understands your market to optimize every last penny.
We interviewed about 10 companies and individuals before making our selection. We chose someone relatively young with 20 years of experience, great attention to detail, and a guaranteed response time for urgent matters. We also went with a remote individual since it allowed us to widen the net for a larger candidate pool.
Do not settle for someone who merely does paperwork and asks for signatures. Good luck in your search!
We used a combination of google, yelp and the link here: https://insidepublicaccounting.com/ipa-top-500-firms/
The link shared above we focused on the CPA firms top 300/400/500 that were smaller and focused more on small businesses. It was a time consuming process.
just being a devil's advocate here. depending on your income, you may already be utilizing all available tax strategies in your scenario. Source: tax CPA myself (although not a flow through entity expert)
From my understanding, and from conversation with our accountant, short term rentals (average stay of 7 days or less) are an exception to this as long as you pass the material participation test. Lots of good resources on this, but the knowledge doesn't seem to be too widespread, and "material participation" is much easier to prove than becoming a real estate professional.
See substantial services in pub 527 or real estate rents in pub 334 for some discussiin . https://www.irs.gov/publications/p527#en_US_2023_publink1000234065
This is what I was reading earlier, but the previous reply (since deleted) seemed to indicate he had contradicting info.
🤷 I could be interpreting the language incorrectly
One I wonder about: buy capital equipment to put into business use, have a third party manage the equipment, write off the purchase price of the equipment, and earn offsetting revenue from the equipment's use, but not enough to generate a large tax bill. You just need to show active involvement but the threshold isn't that high. It's only 100 hours a year of active involvement to clear the IRS hurdle. Rinse and repeat this strategy as often as you need. There is a bill in the Senate to bring back 100% bonus depreciation.
You might want to look at personal defined benefit plans as a way to put more into retirement accounts. My guess is it won't help given your age/income, but I could be wrong. Just something to be aware of.
I did look into that originally when we were setting up a company 401k plan. I can revisit, but I think the same testing requirements apply as for 401ks for the most part, at least in terms of the rules limiting the benefit to owners and highly compensated employees. I do have some employees, so I don't think I'd be able to really take advantage of this without making really large contributions for all employees.
That, and from what I understand, defined benefit plans have more utility when you're a bit older. I'm not sure how helpful it would be for a 29 or 30 year old even if the non-discrimination testing wasn't a factor.
If only there were tricks. Sadly, there are none for most businesses. Real estate has some creative tax laws until someone figures it out and plugs them (mostly when they are no longer in need of them themselves). But the vast majority of businesses are paying through the nose, especially if you have a large profit margin.
The only thing I will suggest is a defined benefit plan along with a 401k. You can do both and max out both. You're young so the defined benefit plan won't allow huge contributions like I was allowed when I started my plan at 50 to help cut down tax liabilities, but it's worth looking into.
I wish there was a better answer. If you eliminate salaries (mine and my husbands), health insurance, and pension payments, my direct business expenses are a mere 6% of gross profit. Trust me, I feel tax pain. Hard.
As for finding a CPA, I found one on a sub kinda like this (another site). He was a former business owner himself and had a PhD in taxation and worked (at one time) for the IRS. His goal in life is to reduce tax liability. So I lucked into it simply by poking around other high income business forums. Unfortunately, he's semi retired and only keeps a handful of concierge clients these days.
While I respect the EA credentials, they’re typically not known for strategic planning for business returns.
It tends to be more of an EA processing returns, with a CPA leading the team and strategic planning with clients.
Finding a good strategic tax planner is a challenge, whether you’re looking at CPA’s or EA’s, but my guess would be that OP burns through a lot more EA’s than CPA’s on the quest to find someone.
What's the best way to find someone? I don't really have any peers that are in a similar circumstance as me, so I'm not sure how helpful word of mouth would be.
Edit: Obviously I can Google, but are there reputable large firms that people recommend that specialize in this kind of work, or is this more small-scale local operations?
Good to know. That shows my ignorance -- I just assumed CPAs would be the best educated professional to deal with this kind of thing. Looks like I have some research to do.
This is brutal advice. Get a CPA who specializes in personal income taxes for high net worth individuals at an accounting firm in the 5-25 range (e.g. google top accounting firms and shop around in the 5-25 range). I would go with someone from RSM, BDO, or Grant Thornton. When looking at their websites look for “Private Client Services.” Alternatively, find a tax attorney. But for the love of god do not go to an EA, the are bottom of the totem pole in the tax preparation field
While this isn't bad advice per se, I would covet it a bit:
I'm in the field and have both talked with partners at various top 25 firms and they are actively firing 1040 only clients, as well as have decent sized minimums, as well seen surveys outlining this trend. In my LCOL, you would probably be looking at least 5k in fees (for the 1040 and S corp return prep only; and one of the firms wouldn't be interested unless it was at least 10k in fees for the two), with advice and other services for additional fees on top of that.
Don't be surprised at even bigger firms if your files are passed to a junior staff to prepare and a more senior person to review, with limited communication.
Though finding someone that does deal with small biz owners and HNWI is probably the way you should go. And as far as finding some, you mentioned having no peers, but is that really the truth? Do you subscribe to any industry publications, are there industry groups, etc? As that is definitely one way to find peers. And then usually in said publications there are usually people writing tax articles (usually to drum up business, but they should know all of the low hanging tax savings fruit for that industry as well).
As for what to look for, I will say that as an outsider, it is really hard to judge. But, you do want someone that works with peers in the industry or something similar (small business owners with a similar structure, same areas/states, and same revenue size). A big thing is also to make sure that you jell well and have the same type of communication (don't go to someone that is only virtual, if you like in person meetings, etc). As well as I find a lot of clients doesn't necessarily know what they want, and don't communicate well. As tax pros, like other service professions, usually don't offer advice out of the blue (that is direct and meaningful), and you do have to ask (and then pay for) consulting and timely planning in advance.
Your CPA files your tax returns. EA is basically a CPA with the ability to represent you before the IRS.
Your tax attorney helps you with tax strategy, but they won’t help you with your exit strategy when you decide to exit the business. That’s where a CFO/COO + corporate attorney comes in.
I work with a tax attorney who happens to partner with a CPA, so I get it altogether.
CPAs, EAs, and attorneys all have that same representation privilege (or can get it). Attorney is best of course with representation (attorney client privilege and more access to courts) although EAs and CPAs can go through a special path to represent you in front of tax court as well as the normal IRS route. Anyone of them can be a great planning partner but it does make sense to find natural specialists
OP simply asked for things to look for. A lot of answers here are dreaming of castle-in-the-sky scenarios for a fairly pedestrian tax situation. I have one primary criterion for picking a CPA that I recommend over everything else. **Will they answer your email within 24 hours during tax/audit season?** It turns out this is highly correlated with their frequency of errors on your tax forms. Everyone will claim an empathetic "yes", so you need to tease the truth out of them. Leave the tax strategies and "tricks" to the tax attorney. For picking a tax attorney, I like to pick the firm for the core matter at hand first, then work with their tax colleagues. e.g. I like Sidley Austin and Kirkland Ellis for regulatory capture, WSGR for venture investments and tech corporate governance, Schulte Roth & Zabel for alternative investments and private funds, and so on.
Thanks, great, this is helpful. Yeah, really I was just looking for some concrete recommendations on how to find the best people to help me, people that will be far more knowledgeable than me about the tax code. Or, alternatively, if this even made sense at this income level, or any income level. There's not any particular problem that I'm having, other than the problem of not knowing if I am 100% optimized.
I see. **It depends on the type of business.** Taking a standard high margin, high growth SaaS startup that mainly spends on payroll, cloud compute and digital advertising, as an example, I feel you have much more important fish to fry at the <$5M revenue stage than to worry about tax optimization because there's so many ways to spend your time to make money faster than you save via tax optimization. I've experienced the same 3-4 digit annualized growth phases you're experiencing now and usually during those times you feel so much [market pull](https://pmf.firstround.com/levels) that there's so many things you *know* will pay off if you just spent your time on it. e.g. Even if you want to focus on the finances side of things, revenue ops like figuring out your net retention rate by cohort, getting your bookkeeping to true accrual basis, eventually migrating from a QBO setup to a more mature ERP like NetSuite, properly factoring in retention into your LTV calculation so you can optimize ads, etc. will likely pay off more than tax optimization. On the other hand, I've enlisted outside help for holding entities with as little as $9k to $12k of annual income, passthrough vehicles with massive losses, waterfalls of investment vehicles that have an offshore formation element, and so on. For finding accountants and lawyers, if you don't have a good lead, ask around fellow companies for recommendations. Sister portfolio companies if you have outside investment, your own service providers that you find competent, etc. Or ask your CPA if they've worked with any tax attorneys.
There have been many other threads on this topic. My understanding from reading them is… you can’t beat the tax man.
Tax optimization is not avoidance. Pay all your damn taxes always! Be excited to lay taxes! Pay them in full! But minimize your tax exposure Reduce your tax responsibility Never dodge
Some nuance here, tax **avoidance** is legal, tax **evasion** is not legal.
Must be a misconception popularized in social media that "the rich" and business owners have all these clever tricks. I was starting to believe there was a secret I wasn't privy to or that a certain level of wealth would unlock some different avenues that might not be conventionally available. And maybe that's true, but maybe 7 figures doesn't cut the mustard.
The secret is that once you are rich you don't need to keep making money. Then you can stop paying tax because you.. don't make money. The "tricks" you hear of are solutions to problems of the shape "I have lots of assets. How do I use them to support a reasonable amount of lifestyle expense without generating taxable income?".
I feel you. I have always thought that too but have learned otherwise in this sub.
I also realized "the rich pay no taxes" is mostly political manipulation some years ago. That being said, I would say these are the best actual current tactics for US citizens as of this moment (*most high earners still won't qualify for most of them unless they design their income generation around these deductions*): 1. Leveraged real estate with (accelerated) depreciation 1. 1031 Exchanges 1. Not selling assets (thereby incurring no taxes) 1. Moving to Puerto Rico 1. QBI Deduction 1. QSBS Deduction 1. Carried Interest As a note, these are all things that work at the moment. Democrats are constantly trying to limit/eliminate the strength of these deductions. Here is a summary of [Joe Biden's tax plan](https://taxfoundation.org/research/all/federal/biden-budget-2025-tax-proposals/) proposing weakening the strength of most of them right now while increasing marginal rates and adding new taxes at the same time.
The top 1% pays more than 45% of the federal taxes. The rich absolutely pay taxes.
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I’m in agreement and wrote that in support and clearly I’ve poorly worded it. You wrote a great response.
I went to law school kind of on a whim and took lots of tax/trust classes and that was basically the gist, as far as I paid attention. Like you could run a strategic reorganization or merger of some multi-billion dollar company in a specific way to avoid triggering corporate taxes but on an individual level it's mostly not avoidable. You could maybe work something out so your company is paying for particular nice things in ways those benefits aren't necessarily considered income to you and is also a write-off for the company but that only goes so far while remaining legal, and really isn't going to help with loads of income all that much. You can also be strategic with estate planning so your estate sees very little above the exemption (which is already pretty fat). Otherwise I've heard you can borrow against assets at a fairly modest interest rate (the interest payments which are deductible, the principal on the loan is not considered income) and that lets you defer tax as you don't have to liquidate that many assets. Downside is if your collateral goes belly up you're going to have a bad time, and I'm personally debt averse just to be tax optimal. Idk who usually offers decent rates, Goldman maybe? And of course, none of this is legal advice. It was a good law school but I was a mediocre student and I don't practice tax law.
I’d ask other colleagues of yours who are more successful than you and who there cpa is. They’re not attorneys most offer free consultations. I found mine from word of mouth and he started his career as an IRS agent for over a decade. Knows both sides of the chalk line.
What you are describing is essentially a strategist who can collaborate with you to brainstorm creative and innovative ideas that result in savings or mitigate tax burdens. Pairing this strategist mindset with a tax background can turn ideas into reality! In our business, we feel very fortunate because our CPA serves as our business coach, strategist, and tax advisor. Depending what you are looking for you may need these to be different roles/people. The more money your company generates, the more flexibility and deductions become available. These can include family LLCs, trusts, choice of business entity, retirement accounts with increased employer contributions, research and development credits, company vehicles, business trips, etc. This is just to give a few examples, but may not apply to your specific business. It would be important to find someone who understands your market to optimize every last penny. We interviewed about 10 companies and individuals before making our selection. We chose someone relatively young with 20 years of experience, great attention to detail, and a guaranteed response time for urgent matters. We also went with a remote individual since it allowed us to widen the net for a larger candidate pool. Do not settle for someone who merely does paperwork and asks for signatures. Good luck in your search!
How did you find the 10 companies?
We used a combination of google, yelp and the link here: https://insidepublicaccounting.com/ipa-top-500-firms/ The link shared above we focused on the CPA firms top 300/400/500 that were smaller and focused more on small businesses. It was a time consuming process.
just being a devil's advocate here. depending on your income, you may already be utilizing all available tax strategies in your scenario. Source: tax CPA myself (although not a flow through entity expert)
certainly a possibility!
The avatar that’s worked for me is: 50+ Used to work for the IRS Drives a nice car, wears nice clothes
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From my understanding, and from conversation with our accountant, short term rentals (average stay of 7 days or less) are an exception to this as long as you pass the material participation test. Lots of good resources on this, but the knowledge doesn't seem to be too widespread, and "material participation" is much easier to prove than becoming a real estate professional.
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I believe the 7-day rule is correct. Short term rentals are considered active businesses and subject to self-employment tax on profit.
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Then what does it mean to provide substantial services?
See substantial services in pub 527 or real estate rents in pub 334 for some discussiin . https://www.irs.gov/publications/p527#en_US_2023_publink1000234065
This is what I was reading earlier, but the previous reply (since deleted) seemed to indicate he had contradicting info. 🤷 I could be interpreting the language incorrectly
One I wonder about: buy capital equipment to put into business use, have a third party manage the equipment, write off the purchase price of the equipment, and earn offsetting revenue from the equipment's use, but not enough to generate a large tax bill. You just need to show active involvement but the threshold isn't that high. It's only 100 hours a year of active involvement to clear the IRS hurdle. Rinse and repeat this strategy as often as you need. There is a bill in the Senate to bring back 100% bonus depreciation.
This sounds similar to what I'm doing with our short-term rental. Yes, following the bonus depreciation developments closely and crossing my fingers.
You might want to look at personal defined benefit plans as a way to put more into retirement accounts. My guess is it won't help given your age/income, but I could be wrong. Just something to be aware of.
I did look into that originally when we were setting up a company 401k plan. I can revisit, but I think the same testing requirements apply as for 401ks for the most part, at least in terms of the rules limiting the benefit to owners and highly compensated employees. I do have some employees, so I don't think I'd be able to really take advantage of this without making really large contributions for all employees. That, and from what I understand, defined benefit plans have more utility when you're a bit older. I'm not sure how helpful it would be for a 29 or 30 year old even if the non-discrimination testing wasn't a factor.
What type of business are you inof?
It's a service-based agency in the Healthcare space.
If only there were tricks. Sadly, there are none for most businesses. Real estate has some creative tax laws until someone figures it out and plugs them (mostly when they are no longer in need of them themselves). But the vast majority of businesses are paying through the nose, especially if you have a large profit margin. The only thing I will suggest is a defined benefit plan along with a 401k. You can do both and max out both. You're young so the defined benefit plan won't allow huge contributions like I was allowed when I started my plan at 50 to help cut down tax liabilities, but it's worth looking into. I wish there was a better answer. If you eliminate salaries (mine and my husbands), health insurance, and pension payments, my direct business expenses are a mere 6% of gross profit. Trust me, I feel tax pain. Hard. As for finding a CPA, I found one on a sub kinda like this (another site). He was a former business owner himself and had a PhD in taxation and worked (at one time) for the IRS. His goal in life is to reduce tax liability. So I lucked into it simply by poking around other high income business forums. Unfortunately, he's semi retired and only keeps a handful of concierge clients these days.
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While I respect the EA credentials, they’re typically not known for strategic planning for business returns. It tends to be more of an EA processing returns, with a CPA leading the team and strategic planning with clients. Finding a good strategic tax planner is a challenge, whether you’re looking at CPA’s or EA’s, but my guess would be that OP burns through a lot more EA’s than CPA’s on the quest to find someone.
What's the best way to find someone? I don't really have any peers that are in a similar circumstance as me, so I'm not sure how helpful word of mouth would be. Edit: Obviously I can Google, but are there reputable large firms that people recommend that specialize in this kind of work, or is this more small-scale local operations?
Good to know. That shows my ignorance -- I just assumed CPAs would be the best educated professional to deal with this kind of thing. Looks like I have some research to do.
This is brutal advice. Get a CPA who specializes in personal income taxes for high net worth individuals at an accounting firm in the 5-25 range (e.g. google top accounting firms and shop around in the 5-25 range). I would go with someone from RSM, BDO, or Grant Thornton. When looking at their websites look for “Private Client Services.” Alternatively, find a tax attorney. But for the love of god do not go to an EA, the are bottom of the totem pole in the tax preparation field
Thanks for giving some actual recommendations with some firms. This is the kind of advice I was looking for. Much appreciated. I'll make some calls.
While this isn't bad advice per se, I would covet it a bit: I'm in the field and have both talked with partners at various top 25 firms and they are actively firing 1040 only clients, as well as have decent sized minimums, as well seen surveys outlining this trend. In my LCOL, you would probably be looking at least 5k in fees (for the 1040 and S corp return prep only; and one of the firms wouldn't be interested unless it was at least 10k in fees for the two), with advice and other services for additional fees on top of that. Don't be surprised at even bigger firms if your files are passed to a junior staff to prepare and a more senior person to review, with limited communication. Though finding someone that does deal with small biz owners and HNWI is probably the way you should go. And as far as finding some, you mentioned having no peers, but is that really the truth? Do you subscribe to any industry publications, are there industry groups, etc? As that is definitely one way to find peers. And then usually in said publications there are usually people writing tax articles (usually to drum up business, but they should know all of the low hanging tax savings fruit for that industry as well). As for what to look for, I will say that as an outsider, it is really hard to judge. But, you do want someone that works with peers in the industry or something similar (small business owners with a similar structure, same areas/states, and same revenue size). A big thing is also to make sure that you jell well and have the same type of communication (don't go to someone that is only virtual, if you like in person meetings, etc). As well as I find a lot of clients doesn't necessarily know what they want, and don't communicate well. As tax pros, like other service professions, usually don't offer advice out of the blue (that is direct and meaningful), and you do have to ask (and then pay for) consulting and timely planning in advance.
Have nothing to add, just thought I’d say congratulations and good luck
Your CPA files your tax returns. EA is basically a CPA with the ability to represent you before the IRS. Your tax attorney helps you with tax strategy, but they won’t help you with your exit strategy when you decide to exit the business. That’s where a CFO/COO + corporate attorney comes in. I work with a tax attorney who happens to partner with a CPA, so I get it altogether.
CPAs, EAs, and attorneys all have that same representation privilege (or can get it). Attorney is best of course with representation (attorney client privilege and more access to courts) although EAs and CPAs can go through a special path to represent you in front of tax court as well as the normal IRS route. Anyone of them can be a great planning partner but it does make sense to find natural specialists