WCI FEW Live Virtual Event 5/20/25 - Alexis Gallati

Foreign welcome back. It's great to be back together again. We're excited to be here. As always. We had a really wonderful time in person at WC Icon this year. It was so much fun getting to meet some of you in person who have been with us since the beginning. And we also got to meet quite a few women who hadn't even heard of Defue. And our numbers really grew from getting, getting to meet all of those women there. So it was, it was a really great event and we hope to get to see even more of you next year in Las Vegas. So thanks for being here. And speaking of Las Vegas and wcicon as way of announcement, if anyone is interested in applying to speak, our application window is open right now. So go to wcievents.com and you can get all the info that you need there. We would love to have more few representation up on the stage. So okay, our next announcement, I'm just going to give a few announcements here at the beginning like always and then we'll jump into it and I won't have too much to say. But next is our next few event is going to be on Monday, September 22nd at 6pm Mountain Time. And Elisa Chang is going to be giving us a talk called wealth and Deconstructing Social Narratives for Financial Empowerment. And she's awesome. She's going to do some hands on coaching with us after the presentation. It's going to be a really, really great evening. So please keep your eye on your emails. We will have more information coming in the, you know, coming months as the event gets a little bit closer. So our last announcement, if you love webinars and feel like you haven't had enough of them this week, we do have another one on Thursday. This week this is going to be our annual resident webinar. So it's this Thursday night, 6pm Mountain Jim is going to be speaking along with Andrew Paulson of Student Loan Advice. That webinar is really designed to help you hit the ground running as an attending. So if that is where you are at, this is a great event to attend. They're going to be talking about how to best tackle your student loans, how to get proper insurance in place, how to get started investing and budgeting, and how to get a written financial plan in place and pretty much just everything that you need to know and they'll stick around after for a Q and a. They've done hours of question answering at the end of that event in the past. So even if you can't come, you should sign up. The videos will be sent out as always to anyone who signs up. It's whitecoatinvestor.com resident. They're also going to be giving away some courses to a few lucky winners. And you are registered even if you don't show up. If you just sign up, you get added into that pool to win. So that's going to be a great night. So that's in just two days from now, 6:00pm Okay, I think that was all that I needed to talk about. So let's get right into it. Tonight. We are doing things a little bit differently today. We are not going to be having any breakout groups after the presentation. Instead, we're all just going to stay together here and enjoy Alexis's knowledge and have a big group Q and A. So please, as you're listening, put any questions that you have into the chat and like always, we'll read them back and have Alexis help answer those at the end. But again, this is going to be your only chance to get your question answered.

So.

So don't hold back, don't be shy. We know that taxes can be a really tricky topic to get your mind around and so we wanted to be sure that we utilize Alexis's brain here and get her help with these questions. So I'm sure that many of you have heard of Alexis. If you have been around WCI for long, you have sure, for sure heard of Alexis Gulotti. But for those of you who have not, she's been a friend of White Coat for years. She has been on the podcast many times. She's spoken at wcic. She has sponsored events at wcicon, including our first ever in person Few Happy hour. She's the founder and lead tax strategist at Cerebral Tax Advisors. She comes from a family of physicians and she's married to a physician. So she really understands our demographic and where our heads are at and what our questions are. And then I just, I've never encountered anyone who knows more about the ins and the outs and the intricacies of taxes than her. So we're very lucky to get to learn from her tonight and we're super excited to have her here. So, Alexis, welcome back to the Few and we're just going to let you take it from here.

Thank you so much, Megan, for that very warm welcome. I really appreciate it. So, yeah, let me go and just say thank you so much for having me. I'm really excited to be talking to everybody about this topic and just taxes in general because I know how difficult it can be Especially when you are not used to that sort of topic. For me, with science, it's way over my head, despite my husband's best efforts to explain things to me. So thank you again and let me go and share my screen. But yeah, just again, a little bit about myself. Like Megan had mentioned, I'm married to a private practice physician. I grew up in a physician household, and I've been in the accounting industry for over 20 years. You can just read about my various experience and accolades when it comes to license and education and such. But really my passion is around helping physicians get that education that they did not get in medical school or residency when it comes to taxes. Because, you know, with my husband and I meeting the second week of college, it really, we've been through all the same scenarios that y' all have been in, and I really want to help try to make things as. As easy as possible and just to try to explain things in such a way where you're like, okay, that makes sense. And, you know, where can I be saving taxes, et cetera. So, yeah, really today I want to talk to y' all about proactive tax planning and why it's important. I'm sure all of you know that, you know, you just can't be reactive to your situation after the fact. You know, you got to be proactive. So we're going to discuss a little bit about that. And many of you might just be physician W2, only physicians. And so that basically means your major source of income is just that, W2, and you really don't have much else going on. So I want to talk about strategies that can really affect your situation as well as those that, that have real estate and have businesses. And of course, we're going to go through that live. Q and A. I love that. That's usually my favorite part of the whole presentation is getting your questions and be able to help you out directly. So why proactive tax planning? You know, it pretty simple. It's just because it will save you money, you'll be able to change your withholdings right away, and that will go and really improve your cash flow. Because if you know that, hey, I'm going to be doing XYZ strategy, then you're able to predict what your overall tax liability is going to be, and then you're able to adjust your withholdings through your W2 or by doing quarterly estimates to match with that withholding or, excuse me, what that. What that predicted liability is. And then that way, you know, you're not giving the IRS or the state an extra tip or that interest free loan by giving them too much or maybe incurring underpayment penalties by not paying enough. So it really does help eliminate surprises and as you can kind of see at the bottom, give you that peace of mind. But really, taxes, when you go to talk with a financial advisor just about your overall strategy with your investment, you know, retirement planning, et cetera, a huge component of your overall plan is, well, how much are you going to be paying in taxes every year? I mean that's by far the biggest expense that most physicians are going to have is that tax liability. So it gives you a very clear picture of your situation and it allows you to really plan ahead, not even for just the current year, but for future years as well. And as I mentioned before about avoiding penalties, if you don't pay enough in tax, then you're not as you earn it, then you are going to owe underpayment penalties. And you might have seen that on your tax return towards the bottom. And we really want to avoid that. Why pay extra if you don't need to? So being proactive, which means during the year you're actually looking at your situation actively as opposed to waiting until, oh, you know, now I'm preparing my tax return and I see that I'm owing a lot of tax. Okay, well there's not as many strategies you can do once you've left the year. So really making sure that you are actively working with your tax professional or you're doing your research or coming to webinars like this to make sure that you are planning ahead. And so within summertime, this is the perfect opportunity for y' all to maybe take that book to the beach and about your taxes and your strategies and start planning for your year end planning. So let's talk about being a W2 only physician. Now unfortunately, W2 only physicians have the real short end of the stick. There are just not a ton of strategies available because the tax code is really built for those that own a business or have a different have other investments like real estate. So really the areas that you can be improving upon, making sure you're maxing out is the first one is your employer benefits. So making sure that any sort of retirement plan that there is, make sure that you're doing the full employee deferral. So for example, if you have a 401k or even a 403b, what there's two components of it. There is the employee deferral and the employer contribution. So if you notice how I kind of emphasize employee and employer. So there's two different components and that employee deferral is what you're putting in from your pay stub, where the employee employer contribution is what is being contributed by your employer. So if your employer provides some sort of matching, that's like leaving money on the table if you don't at least put in enough to your employee deferral to get that match. So make sure that you are maxing that out. And just remember too that even though you might have maxed it out last year, usually the employee deferral, you know, this year for 2025 it's 23,500, but last year was 23,000 for 2024. If you some payroll departments will not make that adjustment for that increased employee deferral. So make sure that you're going and you know, annualizing how much you're putting in every paycheck to make sure that you are going to, you know, make it to the very end with that full deferral. And there with you're over 50 years old, there is a $7,500 catch up that you can do with that 23,500. And interestingly enough, for 2025 only, there's a special $11,250 catch up for those that are between ages 60 and 63. So make sure that you are taking advantage of those two to catch ups whether you're, you know, 50 to 59 or 64 or older for that 7,500 and then 11,250 between those ages 60 and 63. Why they chose those numbers and those ages, I'm not sure that's Congress for you. They don't really make sense sometimes, unfortunately. The other major item that I absolutely love is the health savings account. And if you have an eligible plan, which we'll talk about in a second, then you're really taking advantage of a triple tax advantage account. And what that means is that it goes in tax free. So you're getting a deduction for it. It's growing tax free and then it comes out tax free but being used for qualified medical expenses. And what's amazing about this is that there's really a long term investment potential because of the HSAs have an investment component. So like for example, my husband and I use Optum bank and that's just the company that, that their group chose and they, we have to always keep $2,000 as cash, but they allow us to put the remaining amount into, we just put it into like an index fund, basically. And so that's just rowing tax free for us and we just pay all of our medical expenses out of pocket and then we're saving those receipts and that will allow us in 20, 30 years to submit those receipts. Yes. Even though they're 20, 30 years old and get that money out when we actually need it and you know, be able to again grow that account. So then that way we're able to have a bigger pot basically when we're older and we're most likely going to have more medical needs essentially. So it's a really, really great way to do additional savings and wealth generation. But to know that you have an HSA eligible plan, you can see the numbers on the screen that if you have a deductible that's not less than $1,650 for, for an individual or 3,300 for a family, then you can contribute up to the 4300 or 8550 if your family and then you have to your HSA. And then there's also a maximum out of pocket as well of that 8,300 and then 16,600. So go look at your plan and see if as long as your deductible is not less than, let's say for your family the 3300 and your out of pocket is maxed at 16,600, you're in good shape. You would qualify. And so you can, even if your employer doesn't provide an HSA for you, you can go out and get your own hsa. Another great strategy is going and bunching your donations together for charity. And so what that basically means is if you're, let's say you go and give $10,000 to your church every year. Well, you can go and give $10,000 to your church in, you know, both in January. So then they're getting, you know, $20,000 for two years, but it's all being in one year. And so then that way you're then able to get a above that standard deduction for your itemized deductions. Another great way to save on tax is the if you have a lot of appreciated stock that you have not sold or you don't want to sell because you're worried about those capital gains, then you can actually donate that to a donor advised fund that you control. And so you put that stock into the donor advised fund, then the donor advised fund will go and sell that stock when it's ready and then donate to the charities of your choice. But what Happens there is, for one, you get an immediate deduction that goes on your tax returns, charitable deduction that you can go up to 30% of your AGI with or adjusted gross income, excuse me, of, you know, of that value of the stock. And then you're able to also avoid the capital gains tax on the sale of that stock because it's sitting in that donor advised fund. So it's really kind of a double whammy when it comes to tax savings. Now when we have tax loss harvesting, this is where if you have investments that maybe have not done very well and you're like, hey, I want to sell some of these off in order to, to offset some gains that I might have, or you want to take advantage of that maximum $3,000 a year that you can deduct for your schedule D, which is for, you know, your, your losses, your capital losses, then that's a great way to help offset any capital gains that you might have. And really what you want to do is try to sell it and take advantage of those gains and then reinvest the proceeds, take advantage of those losses, excuse me, and then reinvest the proceeds into a similar, just not substantially identical investment to avoid IRS wash sale rules, which basically say, hey, if I go out and I sell my Coca Cola stock for a loss, then I go and I buy that Coca Cola again within 30 days, then that's, that's, you don't get that loss basically because you're just buying and selling it and then rebuying it. So you have to find something substantially identical to, to invest in, to keep that portfolio, you know, balanced the way you'd like to see it. Let's talk next about strategies for positions with real estate. Now I know this is a very popular subject. Real estate is a wonderful way to really diversify your portfolio and it allows you to take advantage of a number of different tax strategies. It's really important though to understand how real estate is taxed by the IRS in order to really take advantage of the different tax deductions that real estate can give you. So what, this is a very complicated topic, but in a nutshell, what we're looking at is what's called the passive loss rules. So when the IRS looks at a piece of property, your rental property, they automatically default to say, hey, this is a passive activity, which means that you're not actively participating in the day to day operations of that, that property in the running of it. And so when that occurs, any losses that are generated, you aren't able to use against your ordinary income during the year. Ordinary income is like W2 or you know, income from your S Corp, for example. So what happens there is the, any losses that occur are suspended and carried forward until you either have passive income to put against it or you sell that investment. So a lot of people will get into real estate thinking, oh my gosh, I'm going to have all these big deductions and I'm going to be able to use it against my W2. But that's really not the case. What ends up happening is, you know, they, they get the losses but they're not able to use that against their W2. And those losses, like I said, get suspended and they have to carry it forward. Now if you have another property, for example, that is throwing off passive income, so you know your, your rental income well, exceeds all the expenses, including depreciation, then you can use those losses against that passive income. But otherwise, you know, you're, you're out of luck and you have to wait again until you have passive income or you sell that investment. Now I know a lot of you have looked at real estate syndications and that's a really great way to start getting into real estate, but not have the time commitments that a long term rental or short term rental would have. The real estate syndications, you are considered a limited partner, which basically means you're not participating in the day to day operations of that business. Business, excuse me, you're, you're just the money. And so any losses that are occurring from that you can't use against your, your W2 income. You have to go and again carry it forward until you have some other passive income event or you sell that investment. When it comes to long term rentals and short term rentals, there are a few strategies that you can do to help make that passive income to become active income where you're actually able to use it against your ordinary income in the current year. Now when you are have a long term rental, you need to be considered a real estate professional in order to take those losses in the current year. And what that means is you have to spend more than 50% of your working hours doing real estate activities. And this is really hard for physicians because unless you maybe have a spouse that could take on that role, you're most likely you're not going to be able to reach that qualification of more than 50% of your time going towards real estate activities. I do have seen it work where there have been taxpayers or physicians that are doing locum work and they're only working maybe two weeks out of each month, or sometimes they'll just, you know, do a whole bunch during the beginning of the year and then they're not working the remainder of the year. And so they're able to prove to the IRS that they are working more on that property than their work as a physician. And you also have to spend a minimum of 750 hours per year doing your real estate activities. So I mean, this can, you know, add up quite a bit. And really I've seen if you are, let's say, doing single family homes in order to reach that 750 hours, you really need about five or six properties in order to make that work. Now if you have other more complex properties like apartment buildings, for example, then you could probably get away with fewer properties to make it work. But the main reason to do this is so then that way you're able to again change the character of those losses and to then be active and you can then take that against your other sources of income. Now, if you like the idea of real estate, but you're like, I can't meet those requirements to be considered a real estate professional in the eyes of the irs, then we want to look at the short term rental loophole. And I always think it's funny they call it a loophole because it's really not a loophole because loophole sounds kind of, you know, like illegal. But it's for some reason, I guess they never figured out a better name for it, but catch your name. But essentially what makes this easier is that the hurdles are much lower. You just have to be the one spending the most time on that property and you have to only spend 100 hours on that property in order to essentially qualify. And a short term rental is defined as a rental property that the average rental period is seven days or less. It can be 30 days if you are providing some other sort of substantial service. So like if you are a bed and breakfast and you, you cook for your new, your tenants, or you provide like a tour, you know, around the, around the lake or the area or something, some other service that, that makes it a little bit more than just renting out that, that home. And so again, if you can qualify for this, you're changing the character of those losses to being active as opposed to passive. And you can be taking advantage of things like cost segregation studies, for example, to help accelerate depreciation for that property. And I've seen physicians where they'll buy short term rental property one a year, every couple years to take advantage of that cost segregation study strategy in order to, you know, continue to have a deduction every single year based on their real estate activity. So let's now move on from real estate and talk about business owners. So this is really the area that opens up the tax code for everybody. And when I'm talking about being a business owner, it can really range from, you know, you owning a full blown medical practice to just having sidekick income from surveys, expert witness, being a medical director, consulting med spa overseeing physician. My husband does that. And so he's, you know, you're essentially able to create 1099 income that essentially allows you to be a business owner. And you. And it's also too, sorry, I forgot to mention about locum tenants. And that's a really big area. A lot of physicians are going into doing that traveling doctor sort of work. So. So then that way they're supplementing their income or they're just doing it full outright. And it's really important with those first steps, making sure you are choosing the correct entity. This is a really important step because this legitimizes your business to the IRS. And I'll probably say this many times tonight, 90% of any fight with the IRS is documentation. That is the number one. So it's imperative that you are creating a business plan for yourself. And it doesn't have to be anything crazy. I mean, you can Even work with ChatGPT to help you create a business plan. There are lots of different ways or different templates out there as well. They're just wanting you to document your business intent, your profit intent. So then that way you're able to, to really legitimize your business. And so you need to decide on what sort of entity you want to be. And the different ones are listed there. You can be a sole proprietorship, where that's just reported on your schedule. C. You can be a partnership if you have multiple partners. So if you have more than one owner, your partnership, you can be an S corporation or you can be a C corporation. And all of these, you know, depending upon the state you're in, you'd be creating an llc, a pllc, which is a. So an LLC is a limited liability company. Notice how I didn't say corporation. It's a company. There's a pllc, which is a professional limited liability company, and then you have a PC, which is a professional corporation. And it's really important to understand that just because you are an LLC or PLLC doesn't mean. Mean that you are automatically an S corporation or C Corporation your default is going to be a. If you're just a single owner, a sole proprietorship and the LLC is a state formed entity and not a tax designation. So what that means again is that you need to tell the IRS that I want to be a partnership by having another partner or I want to be an S corporation by filing the form 2553 to say like hey, I want to be taxed as an S corporation. And then same thing with the C Corp. You have to make that election in order to be taxed as a C corporation. Where when you're a PC you're automatically a C corporation unless you tell the IRS hey I want to be an S corporation corporation. So the different types of entities really it tells you how, how you want to be taxed by the irs. And so you know, establishing that entity, applying for an EIN which is an employer identification number that that's basically the Social Security number of your business. You want to have all of your income going to that. And so you, and you really want to make sure that you're going and if you're going to be like doing locums and you're going to be working in multiple states, you need a foreign qualify or foreign register your LLC in all those different states and obviously making sure you're keeping separate business accounts, that's huge. The IRS hates the commingling of personal business funds. So having that separate is super important. And then obviously saving itemized receipts, you know, credit card statements, bank statements don't count. The IRS has to actually see what you've purchased. So then that way and documenting your activities. So then that way again it's legitimizing everything. And when you're looking at deciding what sort of entity to select, you need to make sure that you're choosing an entity that is appropriate for your state. So like in California they don't allow PLLCs. In Tennessee where I'm at and in New York City S corporations aren't recognized. And so you actually have to pay taxes if, if you are a C corporation. So it's really important to do that extra research and understand how these are being taxed. Where the sole proprietorship, sole proprietorship and a partnership 100% of your profit is subject to self employment tax. That's Social Security, Medicare and an S Corporation your earnings are allocated between W2 wages and distributions which are not subject to Social Security and Medicare where your W2 wages are. And then in a C corporation it you're going to be earning a W2, but your C corporation is actually going to be the one that's taxed at the entity level, where the S corporation and the partnership are passed through entities and the tax is taxed at your level, your individual level. Unless you. In some states there, there is sometimes a little bit of a state tax. Like in California, there's a one and a half percent franchise and excise tax. So just be aware that you're choosing that, that proper, proper entity. Moving on, let's go and talk a little bit more about maximizing your deductions. And you know, of course you want to make sure that you're looking at the general business deductions like office supplies or travel or meals, et cetera, making sure you're taking advantage of all those things. You really have to change your mindset of, hey, I'm a business owner now. Is this expense that I'm making or paying, is it, you know, considered ordinary necessary for my business? Like, am I using my laptop for my business to look at images, you know, on the weekends? Yeah, I am. Well, business expense. So you want to be going and making sure you're keeping track of all these expenses. Automobile expenses are important, as well as expenses for your home. And we'll talk a little bit more about my favorite tools and apps to keep track of all these things in a moment. But these major ones of your health insurance, your legal and professional fees, as well as any equipment that you're buying, periodicals, books, etc. Like that continuing education, even if you're a W2 employee and like maybe have some side gig income, if there's any, any dues or CE that are not being covered by your W2, run that through your side gig income. You know, try to get that income down as much as possible. And also too, there's the very popular, like, I feel it's very popular on social media and stuff. You know, the Augusta Rule where you're renting your home to your business. And that could be a whole podcast or a podcast, but a webinar on its own. And so you know it again, it's really trying to move as many personal expenses to being business deductions as possible, obviously, legally, of course. So then that way you're really trying to dwindle down that income on expenses that you're already paying. When it comes to tracking everything, as I mentioned before, you want to keep your business and your personal expenses as separate as possible. And so when it comes to your business using Excel or QuickBooks, Wave, FreshBooks, these are just a few of the different tools that, you know, they connect to your bank account and download all the transactions. And it uses AI to be like, hey, this, I saw you bought something for $500 at Staples. That's office supplies. So. And you can teach it as well. So it makes it very simple to kind of keep track of everything. And I highly recommend going, having personal tracking as well. I personally use Monarch money. There's also Origin and Quicken and this is a great way for keeping track of the business expenses you pay with personal funds. And so then this way your, you know, whether it's like your home office deduction or you know, your automobile expenses, you're going and very easily able to keep track of everything. And it's just nice and organized. You know, I have a special categorization in my Monarch Money that's for my business expenses. Because if you're like me, I like to put some of my expenses, my business expenses on my personal cards to get certain points or miles or if there's a sign up bonus. So you just want to make sure to reimburse yourself for those expenses. And then I really love my. There's a lot of other ones out there for tracking your miles, but it just makes everything so much easier. If you're like me, if it's super duper difficult for tracking, et cetera, then you're less likely to do it. Another amazing strategy that if you have family members that you support, like children or parents, hiring them as employees in your business is a great, great way to really shift income from your higher tax bracket down to their low or non existent tax bracket. So with children, the court Tested age is 7 years old. I never recommend hiring a child younger than seven unless you know, they, I know that some people are like, oh my kids can do modeling, et cetera. In my opinion that's was a great strategy years and years ago when people didn't have cameras, like really nice cameras, readily available, et cetera. And so unless your child is doing it on a regular basis for you and other people, et cetera, I just say hey, stay safe, wait till 7 years old. And the goal is to pay your kid that enough to max out their Roth IRA every year. And they could be doing things like my kids are. I have four children ages 7 to 13 and they do a lot of administrative roles for my business. I mean they're shredding paper, stamping envelopes. My oldest is starting to learn QuickBooks. So it's a really great way for them to start earning some money for their Retirement and you can pay them more. You can actually pay them in 2015, $15,000 before they, they earn anything. But it's hard to justify $15,000 salary for a 7 year old with the work that they're doing. So you just have to be smart about it. They have to have a legitimate job in the business and you have to treat them like any other employee by having them on payroll. And so but what's great is that there aren't any payroll taxes for kids if they are, if you're in a sole proprietorship or partnership and they're 17 years or younger. So that's a great, great strategy for starting to build their wealth. And if you have parents and you support them. So I have a physician that supports their parents. They pay about $12,000 a year, just thousand dollars a month towards their support. And we hired them to help out in the business again doing mostly administrative work. And that allowed them to write off their support. Just one thing to be careful about with parents is you want to make sure if they have any sort of federal or state benefits like Social Security or Medicare or Medicaid, et cetera, that you don't bump them out of those benefits. So you have to look at their overall income that they're earning and just, you know, just be careful with that. So it takes a little bit more consideration. So let's talk a little bit about retirement. This is my favorite subject. I wish we had the entire hour just to talk about retirement. But as a business owner, you need to take care of your own retirement. If you have a business, if you are W2 and you have just a side gig, you can have another retirement account. You might just not be able to do the employee deferral twice, depending upon what you have. Really there's four, four main types of retirement plans that I usually discuss with business owners. That's the simple IRA, the SEP IRA, 401k and the defined benefit plan. And I'm not going to really touch base much on the Simple IRA and the SEP IRA because they don't allow you to do your tax free backdoor Roth. You start to get into pro rata rules and that can preclude you from doing that tax free backdoor Roth. So I say, hey, don't worry about those two. Let's just talk about that 401k and the defined benefit plan. They both really allow you to put so much away into retirement. The 401k, the max amount for 2025 is 70,000. And for the defined benefit plan, depending upon your age. Usually I Recommend if you're 35 and above, that it ends up being a really great option for you if you want to be putting more than the $70,000 away a year. So then that way you're, you can really start to build wealth with the 401k. That's a defined contribution plan. So basically the IRS defines how much you're allowed to put in every year. So like 23,500 for that employee deferral, that's the max you can put in and then or $70,000 altogether for the 401k. That's all you're allowed to put in, but you can let it grow to however much you want. Where the defined benefit plan, or you might have heard of that, called as a cash balance plan, which is a type of defined benefit plan. The IRS is defining how much you're allowed to put in by the time that you retire. So they're defining that benefit. And an actuary has to do a backwards calculation to determine, based off of your age, how much you make and the balance of your account at the end of the year, as well as, if you have employees, how much you can put in today, assuming a consistent rate of growth to reach that defined benefit, which right now is about $3.6 million. It changes every year with inflation, but just like how the max amount for the 401k usually changes every year. So it's really important to look at your different options and make sure that you're choosing the right type of retirement plan that will meet your contribution goals. And also there's a great cost benefit. Generally with defined benefit plans, if you have over 50 employees, then it's not as beneficial. It tends to not be as beneficial for the owners. And so again, you have to run those numbers. But of course, don't forget your backdoor Roth ira. This is completely separate from these business accounts we just talked about. With the 401 and the defined benefit plan, for example, you can do that completely separate from those other accounts. So think ira, Individual Retirement account. And then we have the mega backdoor Roth. And a lot of you, you know, may be eligible for this through your 401k. So this is not, you know, have anything to do with your individual IRA, but with your 401k. And this allows you, if you're only, let's say you're able. Let's do a little math. So if you earn, let's say $50,000 in 10, in 1099 income, and that's. Or the. Sorry, in profit. And so then you're only allowed to put in 25% into your employer contribution, which is the 12,500. And then you. But you can also do the, the employee deferrals. Well, that, that 23,500. Do the 12,500 plus 23,500. So the max you can put away is $36,000. Well, with the mega backdoor Roth, if you wanted to put away more, you could put away another $14,000, which is the third, the 50,000 that you of your profit minus the 30, the 36. And then that leaves over 14,000 that you can put into your Roth 401K. And so it's a bit more complicated than that and there's definitely special steps that have to be done. But what's great is that if you're trying to be a mega saver, then you can go and not only do pre tax, but post tax contributions. So just some final thoughts. Start planning early start planning today. It really is important to be proactive. As I spoke about in the beginning of this webinar, you really can't start too early. Even if you're like, hey, you know what, I'm a resident right now and I'm going to be going out on my own next year and I'm going to be doing some locum work or maybe you're moonlighting. Then you want to start planning right now. So then that way you can take advantage of one in your lower tax bracket during that period. But, but also to start getting the ball rolling when it comes to setting up your entity property properly, for example, and really think about how you are earning your income and how they are taxed. How we were talking before about your ordinary income versus passive income versus portfolio income, which is with your like interest, dividends, capital gains that might seem passive, they're actually considered portfolio income. So they have different, they're taxed differently. So understanding is super key to proper implementation. And of course, probably most important that people forget to think about if they do earn extra income is paying your quarterly estimated taxes. Taxes are a pay as you go system and so you need to make safe harbor payments to avoid those underpayment penalties. And that's either the lesser of 100% or 110% of the prior tax. You'd be 110% if it's over 150,000 if you earn over $150,000 a year or 90% of the current year tax, whichever is less. So you know, just make sure that again you're really planning ahead and hopefully that some of these strategies have sparked some interest and some ideas for you to start kind of researching on your own. But I love it. I want to hear about all of your questions.

Okay, awesome. Thank you so much, Alexis. That was, that was awesome. We've got a few questions that have rolled in. We'll start with those and then as you guys are listening to the questions, if you have more, keep sending them in. We only have a couple, so feel free to ask any questions, even if they're specific to your own situation. That's okay too. I think we'll all learn from each other, regardless of what the question is. So let's jump over here. Okay. Our first question says to pay your kids from the business. My accountant recommended creating an LLC for my daughter, who I pay her as an independent contractor to avoid payroll taxes. Your thoughts? Did that, did that sound right? There might have been a typo in there.

Yeah, I think he or she that, that wrote that might have been. Probably your current advisor was talking about what I talked about earlier, where if you're a sole proprietorship or you're a partnership, then you don't have to pay payroll taxes, Social Security and Medicare on your child's wages as long as they're 17 years old or under.

So she's 14. We just got a little follow up there.

Perfect. Perfect. Yeah. And I'm an S corp. Got it. Yep. So, yeah, if you're an S corporation, then you would have to pay those payroll taxes on her earnings. So what I usually say is, okay, look and determine how much it's going to cost you to create that llc and then you're going to have to run a separate payroll as well. So it's going to be a completely different business, a completely different payroll from your S corp. So you want to take a look at the costs involved and make sure that that's a lot less than the payroll taxes you would be paying on your child's earnings. I mean, I found that most, if you're paying, let's say your child $7,000 so that they can put that into their IRA, then you know, that's maybe like $200 a year in payroll tax that you're paying. And most payroll companies are charging something like, you know, 40, $50 a month for, for you to run payroll. So most of the time, depending upon how much your chart that, excuse me, you're paying your child, most likely it's going to be cheaper for you to just run it through your S corporation and Pay the payroll taxes and then it's always putting a little bit towards, you know, their Social Security, Medicare, if, like if you believe that Social Security is going to be around by the time that they, they need it.

Okay, perfect. Okay, next we have. Can you please explain more about why having an S corp in Tennessee is bad?

Yes. So S corporations in Tennessee are basically, Tennessee doesn't recognize S corporations. So when, if I, you remember before I was saying that with an S corporation your earnings are allocated between W2 and then your profit in the business. So that profit is what comes through on your K1. So the profit distributions that you take on that K1 are subject to, to the franchise and excise tax which is right now 6.5%. And so that essentially negates the tax savings that you have at the federal level. Now there are some exemptions that you can get to be. Essentially it's an OEM exemption in Tennessee that allows you to essentially take on the liability of the corporation of the S corp. And so then you don't have to, you don't, you're not subject to that self employment tax but you have to make sure that you qualify for it.

Okay, perfect. Okay, next one. This is a great question. What mistake do you see doctors make the most often.

Really poor record keeping? You know it sounds very basic but you would be surprised how many audits have taxpayers have gone through without proper documentation. And the IRS can deny all those deductions if you don't have that proper documentation. So that's why before I was saying 90% of every fight it comes down to just documenting your business intent. Even if you're going out to lunch with a colleague. What I do is I write down who, who I was with and what was discussed on the back of the receipt and I just take a picture of it and I, you know, I put it into my, my, my Google Drive folder of all my receipts. Same thing too with like doing your meeting minutes, you know, just documenting what happened in the business that month, you know, et cetera. So that's definitely the number one mistake that I've seen physicians make is just because they're so busy. And I get it, but it's important.

Kind of a follow up question to that is what is the best way to store receipts for an HSA if you are doing a good job with record keeping?

Yeah, I mean this is my, my favorite way whether it's for the HSA or it's for, you know, your, your business receipts is using something like Google Drive or Dropbox and creating a folder tree. So you know be like 2025 receipts is the parent folder and then you have subfolders for each of the categories. And so like if you like I have one just for like medical receipts and it's by year and and then I go and just take a picture of it and save it to to digitally and then it's like throw it away.

Yeah, that's great. Yeah, Jim preaches a lot. Do not save your paper receipts that they will fade and they'll disappear and don't do it that way. So definitely find the digital way that works best for you for sure. Okay, for the defined benefit plans, what things do you look at to see if the company administrating the plan is good? Fees, any company recommendations, anything like that? She said, I currently use America's best for 1k.

Got it. I'm not familiar with America's Best, but what I look for is great communication. The fees obviously are important. What you want to look at is if you're just by yourself you can do some of the less expensive like you know, like less hand holding services. If you have employees then it's important to have a really great third party administrator to administer those plans just because it can get super complicated and you know like when employees are eligible when they're not and you know, keeping track of everything and also for liability purposes is really important. But yeah, the main things are like I always look for great communication that they have a solid plan that they that at the beginning of the year when they ask for all the information and then they they have a quick turnaround time to getting you your funding illustration to actually then make the decision if you're going to extend your return or not for that contribution.

Awesome. Okay, this one is recently, I've recently heard you can convert a 529 plan. Is this true and is there a cap?

Yeah. So I'll be honest, I don't know the exact specifications for that. But there has been legislation that allows you to take a bit of that 529 and you know, convert a portion of it or even use it for your your kids like private school, etc. And so I apologize, I don't know those, those stats off the top of my head.

That's fair. I feel like we were just talking about this on podcast the other day and I'm trying to remember where we were at. That's all right. I'll see if I can do some homework back behind the scenes here. Okay, next question says is the Maximum HSA contribution for us in 2025 is 4300 + 8550 or just 8550. My husband has qualified self only coverage and I have qualified family coverage for myself and my daughter.

Yeah. So it's, it's just. So if you have a family plan, then from my understanding is that you can do the family plan for you and your daughter and then your husband will have his own for the single. That's my understanding. Again, I'm not an HSA expert, so I apologize.

That's fair. Okay. I think we have gotten through. Okay, we have one. The last question I have here, you know, how do you know if you need help from attack strategists like yourself? Like, what are the red flags that it's time to get some backup?

Yeah, basically, if you feel overwhelmed, if you don't feel like you have the time or the energy or the desire to go and you know, look all these things up, you know, look up all the different strategies or, you know, you have very specific questions, your situation's getting very complicated. You know, if you just have a W2 and you're just like, hey, I'm good with this. Like, and you know, you don't want to get into more like investment type strategies to lower your liability, then, you know, like a turbo tax or doing those things on your own is fine. It really just depends on, you know, how comfortable you feel with the material. But I always think of, like to think of tax strategies like medication. You know, you might be on medication A, and if you do medication B, it might make you even more sick. It's the same thing with strategies. If you, you know, you know, use strategy A and then use strategy B, strategy B might negate the savings of strategy A. So it's definitely A, you know, can be a complicated area if, especially if you're getting into more complicated transactions.

Okay, awesome. Somebody wants to know if you provide hourly service for specific questions or is it more comprehensive than that?

Yeah, so we provide more. More comprehensive type services. I do have Cerebral Wealth Academy, which I do answer questions through there as well as have monthly Q and A, live Q and A's that you can ask different type of questions and such. But yeah, for, for cerebral tax advisors, it's more of a, we have more of a white glove, all inclusive type of service.

Perfect. Okay. And for any of you, we had a few people want that Alexis's contact information slide back up. We will send her slide presentation to everyone. So you'll have access to everything that she put on her screen today. We'll get that out here shortly to everyone so you will be able to get in touch with her if you want help from her in a more personal way. That was awesome. Those were all of our questions. Thank you to all of you for asking them. Thank you Alexis for taking time out of your evening to be here with us. We really, really appreciate it. And then just as we wrap up here, reminder, our next webinar is going to be September 22nd at 6pm Mountain watch your inbox. We'll send out more information as that gets closer. And if you want to enter the drawing for this for this time around, hop on over to Facebook and let us know something that you learned tonight. And as always, if you are not a Facebook person, you're welcome to email your answer to us fewwhitecoatinvestor.com and we will get you entered into the giveaway that way. And thank you all for being here. I know how busy everyone is. I know especially this time of year is crazy and we are grateful that you choose to to be a part of this community and come here and learn together and to just spend your very valuable time here with us. So thanks to all of you. Alexis, thank you again and we will see you all in September. Have a wonderful summer and enjoy your the rest of your evening.

The hosts of the White Coat Investor are not licensed accountants, attorneys or financial advisors. This podcast is for your entertainment and information only. It should not be considered professional or personalized financial advice. You should consult the appropriate professional for specific advice relating to your situation.