Jamelle Nelson, CPA, CEO & founder of Nelson & Associates Corp, brings nearly two decades of high-level financial expertise to entrepreneurs, high-income earners, and real estate investors. His background includes roles at KPMG and supporting global organizations like Estee Lauder and AEG. Nelson specializes in providing solutions to complex tax and financial challenges, including back taxes and audit assistance for his 150-200 affluent clients, with a goal to reduce liability and build lasting profitability. He is a recognized Top 100 Accountant by the L.A. Business Journal.
Nelson spoke to Our Weekly to share his insights.
Given the IRS’s increased scrutiny on high income earners, what is the single most critical misstep you see affluent taxpayers make when initially facing significant back taxes, and what immediate action should they take?
The biggest misstep is failing to proactively plan for taxes as their income grows. High earners are usually excellent at making money, but they don’t put the same energy into understanding their tax obligations. As income rises, so do tax liabilities, and when those aren’t anticipated, people are blindsided by large tax bills that quickly grow with penalties and interest.
Instead, they should engage in proactive tax planning—having structured, ongoing conversations with a tax strategist (not just a basic tax preparer) throughout the year so they can anticipate their tax exposure and implement strategies before filing time.
What is the difference between a tax strategist and a person who files taxes?
When I say tax strategist, I’m talking about a professional whose role is to do more than basic compliance work like just filing a tax return.
The average person thinks the same person who files their return is also doing tax planning, but that’s not usually the case. A tax preparer is mainly focused on filing the return and checking the boxes based on what already happened.
A tax strategist, on the other hand, is focused on the advisory side of your profile. We’re looking at what makes up your income sources, your portfolio, your job, your business. Do you own property? Do you have investments or other assets that affect your taxable income? Once we identify all those pieces, we project what your income will look like for the year and what your tax exposure and liability will be. From there, we use the tax code to identify specific strategies to reduce your tax bill.
I like to compare it to doctors: all doctors have degrees and licenses, but they’re not all specialists. It’s the same with CPAs and tax professionals. Most of us understand accounting and tax, but not all CPAs are well-versed in tax planning. Some focus on accounting or bookkeeping and know very little about taxes. Some are good at preparing returns but don’t do planning. When it comes to actual tax strategy, that typically comes from the professional who is specifically a tax strategist, not just a general tax filer.
Beyond simply ignoring IRS notices, what are the most common specific payment plan or resolution errors that high-income individuals make, and how do these prolong financial strain or increase penalties?
One of the biggest issues I see is that high-income individuals don’t actually file the tax return. A lot of successful people are extremely busy. They don’t plan properly around deadlines, they miss filing dates, and they think, ‘I’ll get to it when I have time.’ But when it comes to the IRS, not filing is actually worse than filing and not paying.
If you don’t file a tax return by the deadline, the penalties and fees are much more severe than if you filed the return but couldn’t pay the full balance. So the most common and most damaging mistake I see is failing to file the return at all. That’s what really drives up the penalties, interest, and long-term financial strain.
You advise clients on leveraging legal strategies to reduce penalties. Can you provide one concrete example of such a strategy, and what is the potential financial benefit a high-income earner could see by implementing it?
When it comes to strategies for high-income earners who are facing a large IRS tax bill, some of the options available are legal and fully allowed, but they do require the taxpayer to understand what those options are. In some cases, these strategies can put the taxpayer in a position to eliminate a large portion of their balance, if not all of it, depending on their specific situation.
An example of this could be an offer in compromise, an installment agreement, or currently not collectible status. So when we’re dealing with clients who have huge, out-of-control tax bills, they do have options—and those options become available once they understand the legal parameters that allow them to pursue them.
With nearly two decades of experience, including supporting major global organizations, what fundamental principle separates taxpayers who successfully navigate IRS back taxes from those who overpay or face severe consequences?
Absolutely. I’m going to piggyback on a previous response from my work with large organizations. One thing that stood out, and that they all had in common, is that they had a dedicated segment focused strictly on planning and tax mitigation. Those specific areas were handled by different departments and individuals within those departments.
With a larger organization, that’s easier to do. Smaller organizations or individual taxpayers usually don’t have the luxury of big departments and specialized teams. But what those larger organizations did very well was make sure they had people specifically tasked with identifying ways to reduce taxes, and with forecasting, projecting, and planning.
So even though a smaller company or an individual doesn’t have those same resources, they should still be asking: How can I plan? How can I strategize? The goal is to be proactive rather than reactive when it comes to taxes.
For high-income earners with substantial back taxes, what is the most common misconception about their ability to resolve these issues independently, and why is professional CPA guidance essential in such situations?
That’s a great question. When it comes to resolving tax problems, anybody can attempt to handle their situation themselves. But a common misconception I see is that people think they can just deal with the IRS on their own and get the best possible outcome.
The tax code is very cumbersome and very detailed. If you’re not experienced in dealing with the IRS or familiar with the process, you might start the process on your own, but you may not be successful—or you may not get the result you actually could have qualified for.
One of the main benefits of working with a professional firm is that you’re working with someone who has the experience, who has the know‑how, and who understands how to address the issue efficiently and correctly.
I tell clients all the time: if you had a serious legal case and you were on trial, you probably wouldn’t represent yourself. You’d hire a lawyer because that lawyer has a wealth of experience and knows how to navigate that situation. It’s very similar when you’re dealing with the IRS.
Editor’s note: All responses were edited and/or trimmed down for conciseness but accurately reflect the subject’s responses.