The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 77 - Advantageous of W-2 Over Entrepreneurship
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This episode highlights the surprising benefits of being a W-2 employee, emphasizing untapped financial advantages and a more stable lifestyle compared to entrepreneurship. We discuss practical strategies for maximizing tax benefits, maintaining work-life balance, and exploring opportunities to bridge entrepreneurial aspirations within traditional employment settings.
• Exploring the misconception that W-2 employment lacks financial advantages
• Discussing how steady pay and job security offer vital emotional comfort
• Revealing hidden tax strategies for W-2 employees to maximize savings
• Encouraging work-life balance through company-supported time off
• Offering ways to cultivate an entrepreneurial mindset within W-2 roles
• Explaining proactive tax withholding adjustments to improve cash flow
Your tax savings is going to give you all your down payment back. The rest is just profit coming in. It's like you're investing in real estate for free. He was a limited partner, so there was zero risk and he really liked you. This was one of our more risk adverse clients. All right, welcome to the show.
Speaker 1:I always love nerding out with experts in the world of money and finance, with experts in the world of money and finance. So there's a lot of hype and gurus all preaching entrepreneurship. They're all telling you hey, you know the reason why they're paying you a salary so they can steal your dreams from you. You know having a W-2 as a racket there's so much of that out there and, yes, you do have lots of tax incentives for entrepreneurs. But our topic today is the benefits and opportunities of being a W-2 employee. Now, obviously, we work with lots of entrepreneurs, but we also have a lot of highly paid W-2 folks because there's a lot of hidden tax advantages for W-2 employees that people are missing A lot of you are assuming just because you get a paycheck and the taxes are already coming out of that pay stub, there's not a whole lot that you can do because you can't get write-offs, and that's absolutely false, especially as your income increases.
Speaker 1:There are more and more opportunities. We're not going to dive into all of those opportunities. You can look at our W2 playlist on that. Certainly a lot of awesome opportunities out there. Some that may just involve charitable tax deductions. Others are going to involve tax advantage investments or even starting a side business that'll reduce your taxes. But there are some tax advantages not as much as for entrepreneurs, but still some really cool stuff here. But here's what I want you to think about as a W-2, why you may actually want to stick at your W-2 because of the benefits that you're receiving.
Speaker 1:First off, steady pay Isn't that nice. Every two weeks you know how much money is going to hit your bank account. Okay, it's not as exciting as being an entrepreneur. There are some weeks and months where a big wad of cash hits your bank account. But as an employee, I don't know if you know how much it sucks to work incredibly hard, seven-day work weeks and find out you're losing money. You're winding up with less money in your bank account than when you started and you're working harder than you ever have in your entire life. That's worse than anything. That's worse than any form of human punishment. Well, I wouldn't say that, but you know, I mean you got to figure. Even you know convicted felons are getting bread and water. I mean, how crappy is that? You work your tail off and make no cash and actually lose money. You never have to experience that as an employee. So that's one of the things here, and there are many times when I look back where maybe I'll have a rough month.
Speaker 1:Maybe we spent money on things we shouldn't have, or we hired some staff that were supposed to be great and just bombed it and ruined things and we had to throw in new staff to replace them. I would greatly trade those moments with the security and comfort of a steady pay and portion of that going to a match in a 401k. You guys don't realize how comforting it is to have that. Also, you guys take on no risk. You don't have to worry about getting sued. You don't have to worry about taking ownership of all the things that our employees are doing. We have to take ownership of every data point entry in the tax software. There are hundreds of thousands of data point entries that are impacting your tax liabilities, that I have to sign off on and oversee and I am legally responsible. Now, luckily, we have an amazing team. We have an amazing quality assurance process, but there still is the risk of human error and also of the clients themselves giving us the wrong information and them trying to hold us accountable. And you don't have to worry about any of that because you are not the owner of the company, you're not taking any risk at all and that's going to give you a better night of sleep and then taking time off.
Speaker 1:You know a lot of people kind of project that there is this lifestyle entrepreneur You're doing work at the beach. You're sitting back in the lounge chair doing work at the beach with your feet up at the beach. No-transcript, real entrepreneurs aren't hanging out at the beach, they're working their tails off. And we wouldn't work at the beach because of the glare of the sun. You can't have your second screen. It's completely impractical. Just because you can make your own hours and work from anywhere you want, you're not going to be working at the beach. You're not going to be sitting on the sand and getting sand in your USB ports. It's not happening. We're all grinding here with our plugged in laptops and our second screens, right by our cats and our dogs when we got to do all our other responsibilities.
Speaker 1:This is not nearly as glamorous as it looks, with all these entrepreneurs and all of these gurus and hustlers picturing how cool it is to travel all over. Traveling kind of sucks. The hotels are never cool enough. You can't sleep. The sheets are meant for the frozen tundra. You wind up, waking up in pools of sweat when you travel for work.
Speaker 1:We're not rock stars here, trust me. We grind and we work incredibly hard to do what we do, and you guys get to take time off with your family and completely unplug. You have backup. You can assign your work elsewhere. I know it's not a perfect system, but you guys can likely take a good two weeks off without even taking your business laptop home. As entrepreneurs, most of us never get to do that and what we find here especially if you value time with your family and those relationships outside of work or even being part of other communities, other religious organizations or even part of a Dartley that stuff is much more possible for you when you are an employee than when you are a business owner, maintaining so many responsibilities here, responsibilities here, and you can do work and not.
Speaker 1:I mean there's a certain level of emotional and mental attachment. We have to work as entrepreneurs For you guys. You can have this kind of at the end of the day, things don't matter type of mindset because you're not responsible for the impact of this. Several years down the road, if things go belly up in whatever project or thing, you guys can just leave and you can peace out. We can't do that. We're always going to be there. We're always going to be attached to the results and the work product and it's easier to have work friends because us as authorities, it's much harder to relate to the general public. It's a lot trickier to connect with people when you are their authority in a professional environment and you guys can pal around and joke and go out for drinks after work and all that stuff. We can't really do that as much.
Speaker 1:So you know, I do find and I look back at my time as an employee it was much easier to relate with the general public. When you become an entrepreneur, you're entering this different reality that very few people can understand. It's much harder to relate to people. You also find yourself spending less time doing things that make you relatable. You're spending less time watching TV shows and sports. You know sporting events, because that stuff just doesn't matter when the stakes are so high in this game of entrepreneurship. So not only that.
Speaker 1:So here's what I want you guys to think about here on. You know, maybe you're still thinking to yourself, yeah, but what you guys do is so cool, there's no limit on how much you can make. You know, you're really. You know you guys can make so much money and my boss makes so much money, so, whatever it is. So here's what I want you to think about as an employee here, trying to see some of the benefits as an entrepreneur.
Speaker 1:Well, first, you want to be part of a good organization and, especially in the time of labor shortage, be part of a good organization that resonates with you. And if you really want to have control over your destiny, find one where you can be entrepreneurial. Is there a way to get additional compensation for bringing in business? So, for instance, at our firm, we really want to build that strong entrepreneurial environment where, if you can find a way to bring business or you can be more productive, instead of having fixed costs of labor, we try to fix our profit margins. So you reach a certain threshold, you're going to be able to make more money and we're trying to remove the ceiling on how much our staff can make, even having people being able to reach six figures of income in year one with the setup, if you are competent and capable of producing results. Also, you really want to be selective in who you choose as a role model and a coach here and really again, when you look for these organizations, really find the people that have that desired culture and outcome that really gets you excited about coming to work every day and you can still create write-offs. You can still create a side business.
Speaker 1:There's so many ways to do this and we talk about lots of this when we consult with W2 employees on how they can still win the tax game. Maybe for some of our higher income earners it may involve renting out solar panels from a distance and seeing the benefits of the investment and energy tax credits and the bonus depreciation of those panels. Or maybe you can invest in real estate on the side. Maybe your spouse can do that on the side. Short-term rentals have fantastic tax advantages.
Speaker 1:There are so many other things we can do. Or maybe you just get really good into being a passive investor. You're putting money into oil and gas and evaluating deals. We have one employee client who flies down, puts the hard hat on and visits the oil rigs he's investing in. So there's still really cool stuff you can do, and those can create write-off opportunities where now you're doing all those foundational opportunities where you can create write-offs when you're flying to Houston to inspect the oil wells or you're creating write-offs for your real estate and you're hiring your kids to create write-offs and shift the income into your kid kids tax bracket. So there's still really cool things you can do on the side. On top of that.
Speaker 1:And another thing that we're exploring that is really awesome and you're not going to hear about this from really any other firm or very few firms is we are helping clients adjust the withholdings from their W-2s, because what we often find is when you're a W-2, that money's coming out, you don't have any control over when the money goes to the government. But if you know that you're going to be able to minimize or completely eliminate your taxes, we can be proactive and we can fill out the forms with your HR department and we are assisting our clients in doing this so they're not paying taxes that are going to be refunded to them. So instead of waiting until spring of the following year to get your money back in the form of a tax refund. Instead of waiting all that time, you just have less money coming out of your W-2. You know you're not going to owe that money in taxes, and now you can take advantage of the time value of money and reinvest it to other things that are going to grow and compound and maybe even further reduce your taxes. How awesome is that. So, if you're really proactive, you can now take advantage of controlling how much money is going to the government before all is said and done and you do that tax return.
Speaker 1:So think about all these things and really focus on what you're good at. If you guys are making a lot of money you're W2, and all of a sudden you're getting seduced by the hustlers and all the online gurus out there and all those fancy, sexy people out there showing you how cool it is to fly on private jets. It might be that you're being misled. You have a good thing going for you. You're making good money, you have time with your family, you're getting 401k matches and reserve stock units. Maybe you're in a really good setup. You could still be entrepreneurial. You could still win the tax game and you can still do a lot of amazing things to build wealth with us as well, with some tax planning and by being resourceful. So if any of this sounds interesting to you and you want to learn more, go to prosperalcpacom slash, apply and we're hiring fantastic talent. We really need good people, so send them to prosperalcpacom recruiting. Hope you enjoyed and have a wonderful day.