Oct 11, 2024
PFG Is Too Conservative
Written By: Nate Williams
In 2010 I started PFG with one primary goal – to create a financial services firm tailored exactly to what private practice doctors would need. The persistent question that has been on my mind over the past 14 years is: “If I were a client, how exactly would I design PFG?”
When you set out with the objective to serve and not to be served, it’s not surprising that the overwhelming feedback we get from our clients is positive. When we hear that positive feedback, it makes us feel good about our work.
However, over the past 14 years there has been one piece of negative feedback that we have heard more than once. When it comes to taxes “PFG is too conservative.”
Many doctors have not hired us as we disclose to them that we plan to follow the tax laws1.
One client for years jokingly accused me of being “an undercover IRS agent” every time I told him how much he owed in taxes.
Another client fired me for not suggesting to him that he take the now infamous and heavily abused “conservation easement deduction.” While yet another client thanks me profusely for advising them to STOP taking this same deduction that they had taken for years prior to hiring us. Two years after they stopped, the IRS audited the fund who sold this scheme. They have since been involved in a 4-year tax legal battle with the IRS. When it is all over, this poor doctor will pay back well over $100,000 in penalties, not to mention paying back the tax deductions they once took2.
Sadly, we were recently made aware of a dentist who was indicted of “six counts of tax evasion for his use of an illegal tax shelter.” We are devastated over this news; we wish the very best for this doctor and his family, and do not want any PFG client to ever be in this situation.
Predictably, I know exactly how this “tax evasion” happened: an otherwise well-intentioned doctor who hates paying taxes is vulnerable to tax-saving scams; he gets bad advice from some crooks who sold him a web of bogus strategies and half-truths about the law. Like candy from a baby, they took his money and sold him these sophisticated schemes.
What tax scams are around the corner that we will eventually start hearing about doctors getting nailed?
Let me give you two:
- The R&D Tax Credit
- The Employee Retention Credit
How can you avoid falling victim to tax schemes and keep yourself out of jail?
- Use common sense and be a good, honest person.
- Find and follow the advice of a reputable CPA and tune out the garbage “tax advice” you hear on Tik Tok or IG!
- Never listen to or take advice from people who peddle tax credits.
- Never listen to legal firms (like “Legally Mine”) who sell complicated tax saving and asset protecting legal structures.
Is PFG too conservative? If you call following the law too conservative, then yes, perhaps we are.
Notes:
- Whenever we get on the phone with a client who starts by asking how we’ll minimize his taxes, we know immediately that this is probably someone we don’t want to work with. Quick tip: if you want to pay zero in taxes, either move to Mauritius or quit your job and start panhandling. If you want to turn your hard work into wealth, get used to paying a lot in taxes.
- The government allows for a tax deduction as a charitable contribution for donating land back to the government for conservation purposes. This renders the land undevelopable. The scam started when people started buying land, immediately having the land “appraised” at many multiples of what they paid, then donated back to the government at the higher appraised price. Here was the pitch from the scammers:
- You buy land for $1,000,000
- You “appraise” the land for $5,000,000 and donate it to the government
- You get a tax deduction for $5M, worth $1,850,000 in cash (assuming 37% fed tax rate)
- Therefore, your $1M gets turned into $1.85M instantly!
- What’s the problem? If you bought land for $1M, then that is the FMV, not $5M.