25 Tax Strategies The RICH Keep From You

And the wealthy know them. If you want to be wealthy, you've got to know the strategies the wealthy do. This is it. This is a very, very important podcast. We do it once a year. So many families are not talking about financial literacy, talking about wealth, teaching their family about the American dream, getting help from their family members, getting advice from their parents or aunts and uncles, and getting their teenagers or kids in college to be included in the conversation. You're going to be able to take the write offs and you don't have to be rich to do this. You're just going to manufacture the write off, but the money and take it right back out. You don't have to wait till you're 59 and a half. None of that crap. Welcome everybody, to the Main Street. This podcast and what is going to be today the best podcast you've listened to all year that saved you the most money. Because saving money is just as important as making money. My name is Mark Kohler. I'm here with the infamous Matt sorenson. We got 25 freaking awesome tax strategies. This show's going to rock.

Yeah, we're not just influencers talking about this. We are tax lawyers in the trenches doing this every day. We've done the 10,000 consults. We know what works and what's legit and what really matters. So we're going to hit the hottest strategies now. We've got more of this. We've got like mark's got his 25 point checklist here and our law firm, we're doing this with clients. I want to say this. When you go through a tax planning strategy, you might consider 25 things. Eight of them might work for you, but you got to go through the 25. Everyone's different. It's not an easy button. You just get a hit. So we're going to hit these in rapid fire mode so they might trigger everyone. Maybe every other one is like, oh, I need to think about that.

Oh, that doesn't apply to me. Oh, that. So super important that frankly, I know some of you listening to this while you're working out or driving. Please set aside the time to put this on double speed and have a piece of paper next to you and go, okay, boom, boom, boom. And then that's your notes. Those are going to be the notes you're going to have when you have your consultation with your tax advisor. And we're going to give you some resources where you can find. We've got over 100 tax advisors to choose from that speak Mark Kohler. Matt Sorensen. They can be very, very affordable. And we have our own tax lawyers here at the law firm that are doing consults and building trifecta. So we'll come to that. I just want you to know we have a resource, because some of you are like, well, how do I do this? I can't. We'll get to it. But just right now, it's about identifying.

Yeah, baby.

Okay, okay.

And then a lot of this stuff you need to do by year end. That's what we're talking about it right now. We were just talking about this earlier. What happens on April 15 is the report card of what you did for tax planning in the year. Okay.

Yeah.

There's some things you can do after January 1st that'll help you in 2023. Money. But a lot of this stuff needs to be done by December 31st. So this is the time. This is the time to say, take action now.

And. And one last caveat. And then we're just going to take every other one. Okay, let's do it. And I'll give you. You can take number one if you want. All right, so I'll say this also. So many of these strategies aren't about spending money before you're in. It's just about maybe getting the right structure in place to deploy the money right after the first or getting the structure in place so that you could take advantage of future strategies. Like. And we're going to cover, like, the health savings account. So there's a lot of deadlines coming up on December 31, and the wealthy know them. If you want to be wealthy, you've got to know the strategies the wealthy do. This is it. This is a very, very important podcast. We do it once a year. This is a huge podcast. A lot of listens as people try to turn the corner into the new year. Okay, number one.

All right, numero uno, one retroactive S selection on your llc. Why are we talking about this? This is foundational. Any small business owner. I don't care if this is your main business or side business. You're selling goods or services, operational business. You need to have an S corporation. If you have an llc, a lot of people go out and they're like, I have an llc. I'm going to save on taxes because I have an LLC. No, you're not. LLCs don't save on taxes. But if you have an S selection on it or you have an S corporation that can save you taxes on an operational business, I'll just give a quick example Here to give you an idea. If you're, if you're making 100 grand a year in net income doing an S corporation or an S election on your LLC versus just being a sole proprietor and a hit and schedule C will save you $9,000 in taxes a year. You're not spending any more money. You're not deploying this to go buy assets or get a write off here or drop in a retirement account there. This is just structural and running your money in the right way to save taxes, it saves you on self employment tax. You've got to learn the S corporation strategy. I have an S corp. Mark has AN S Corp. 99% of our small business owner clients have an S corp ratio. It's the number one strategy for small business. That's why it's on the list here.

We're going to move quick. Don't worry about the C corp. Hell no. And keep in mind this is a retroactive S election you're going to make back to 1-1-2023. Learn the strategy because number two is pegging your payroll. So for those of you that are already an S corp or you implement strategy number one part two because I've got to choose the right amount of salary. Where Matt comes up with this number of nine grand is reflective of the amount of salary you're going to claim and pay your F word the fica. I don't want to pay fica. Fica. So you're going to pay FICA on a chunk and save self employment tax on the rest. So for those of you that are already S corps you would be astonished how many accounts we bump into where come to our training programs and or we review a tax return and these people are taking astronomical payrolls that are completely unnecessary. And I know if some of you are a tax advisor yourself, a CPA enrolled agent, tax lawyer, you know Mark, reasonable comp. You don't know. I have read every reasonable comp case. I interview prior IRS agents in the S Corporation center in Chicago. I have been doing over 10,000s corporations in my life. I know the rules of reasonable comp. I teach reasonable comp. And I'll tell you 80% of CPAs and accountants are far too conservative on payroll that there is a matrix that we use as a baseline. In 25 years I have never had a client audited for taking too low a payroll period. So get over it and learn something new. And yeah, you might have to suck it up and tell your client last year yeah we took too much payroll but I'VE learned some new strategies. Own it, embrace your client and take them to another level. They will appreciate it. That's number two.

And by the way, Joe Biden himself use an S corporation. I don't think he would be an aggressive person on taxes. He knew he was going to run for president. He has an S corp on his tax return. He saved hundreds of thousands of dollars by using the S corporation tax strategy.

It was incredible. So we. Yeah, okay. Number three. All right.

Okay. Make a sale and get out of startup mode. For many of you that have started maybe a side hustle, you've got a good income in your day job or a spouse that's working on your day job and you're like, man, I want to take some write offs for my business, but I haven't made a sale yet. You get locked into this startup mode where those expenses are going to just mostly carry forward into future years. But the way out of startup mode is to make a fricking sale already. Get some business, go get some friends or family members that are like, and maybe you need to give them a deal, you know, but get aggressive in getting a sale. Because once you have a sale now, you can use those expenses if you've used to start up your business and as a write off. And they could possibly offset other income you might have from a spouse or maybe your day job. And you may be in a high tax bracket.

Love it. And I call it unlocking your write offs because many of you may have started at a lemonade stand this year. You spent money on education, buying lemons, lemonade, sugar cups, and set up your shop, but you haven't sold a cup of lemonade. Those expenses are locked down until next year when you have a sale. So go sell some damn lemonade. All right, number four, hold a board meeting in the holidays to write off travel and dining. Oh, this is so powerful. So powerful. So many families are not talking about financial literacy, talking about wealth, teaching their family about the American dream, getting help from their family members, getting advice from their parents or aunts and uncles, and getting their teenagers or kids in college to be included in the conversation. So at Thanksgiving dinner, which could be a write off, literally, we've done it for years. We'll take the business card over to Costco and get all the fixings at the Thanksgiving dinner. Guess what you're going to have after the dinner and maybe during halftime of the football game, I don't know, you're going to have a board meeting. You're going to talk about your Real estate, investing, your small business. And you're going to put everybody on the board. We got podcasts on this again, blah, blah, blah. LLC can do this. Corporations can do it. It is so important to have a board meeting now. You're writing off your airfare to travel to a dinner on a Thursday to have a board meeting. I can't write off 10 days in the Cayman Islands, but you can definitely write off a couple days. Two, three days, maybe some Airbnbs. Don't stay at Mom's. It's not worth it.

Stay in an Airbnb because now it's a write off.

Now it's a write off. Mom, I need the write off. Sorry.

Yeah.

For that you're not gonna stay with me? No, no, I need the write off.

That board meeting held on a Thursday.

Yes.

All right. Okay. Next. Get a health savings account already. Okay? We all have medical expenses for the most part. This could include your dental too, prescriptions, you know, out of pocket, medical expenses. And they're not a deduction. They're not a write off. A lot of people track these and they send them their account and their account's like. You can't write it off.

You make too much money.

You make too much money. It has to exceed a large amount of your AGI. What is it, 7.5% of your AGI. It's got to exceed that before you can even deduct $1 of medical. So people, not most people are not able to deduct their medical expenses. But if you use a health savings account, you put your money in the health savings account, you get a tax deduction. That money can be invested and grow by the way. You can self direct it to a lot of amazing strategy we teach. But when that money comes out, it comes out totally tax free for qualifying medical expenses. It's a way to deduct and get a deduction for the medical expenses that we are all going to use. So use the health savings account and it carries forward too. Right? This is one of those things where it's not like that flexible spending account or whatever. It's used or lose it. If you don't use it, it stays invested and it can grow and you can take it out later for qualifying medical.

So the year end tip here is you don't need to put money in an hsa. You don't need to open up an hsa. You have to have a high deductible health care plan to do an HSA next year. And right now is open enrollment. You have from November 1st to January 15th, if you don't implement a high deductible plan. And some of you, they're going through enrollment at your day job, walk in and go, hey, I'm pretty healthy. I want the HSA plan. That's all you need to know right now. People choose the HSA qualifying plan. The deadline is upon us. Then next year you're going to be able to take the write offs. And you don't have to be rich to do this. You're just going to manufacture the write off, put the money in, take it right back out. You don't have to wait till you're 59 and a half. None of that crap. So look, for your HSA plan, you've got to do it in the next six weeks. Yeah.

And if you're single, that's 3850 family, which could just be you and a child. It doesn't have to be. Or you and a spouse. It'll be, you know, the other, the family of four type thing. Okay. You can't get it in many ways. It's 7750 you could put in a year and right now, you could drop that in right now and then again January 1st. But we're going to get the deduction

geared up for next year.

For next year. But anyway, so we're looking for 20, 23 deductions. You actually have until April 15th. I don't want to confuse you, but I'm just saying you're going to be able to do another year's worth of contributions in just a couple months.

Yep. Okay. Number six, dissolve or set up any entities you need. Now. Right now we're on the cusp of the new Corporate Transparency Act. If you haven't heard about that, we just did a podcast last week on this or two weeks ago. You're going to be hearing a lot more from us on this. The point is, why keep an entity around that you don't need something you're maybe paying state filing fees or franchise taxes on or now paying to get it in alignment with FinCEN. This the financial Crimes Enforcement Network under the Treasury Department, they are now requiring reports next year. So if you have an entity that you're not using, kill it. Also, some of you are like, oh, I loved your S Corp idea. I don't even have an entity or an S corp or anything like that. Get it set up now. So it's effective January 1st. So what you're doing is cleaning house. This is so important this time of year. So you're ending the year strong with any entity you got to get rid of and you're starting the year strong with any, any company you need. Now again, I'm going to give you resources here at the end of the podcast where you can go for help. If you're like, oh well, I'll just go to LegalZoom and do it slow on Tiger. We got 25 freaking strategies. I don't think going on Google for three days and trying to figure out on your own is the best use of your time. Get you an advisor for just an hour or two to help nail this, dissolve or set up entities.

Alright, next strategy. Flexible spending account. Now I mentioned this briefly when I talked about HSAs. We love the HSA over the flexible spending account. But many of you might have a job that offers a flexible spending account. An employer. You can do 3050 bucks a year into this. But remember, put in there only what you're going to use. Think of this as a strategy to drop money in. You're going to immediately come back out on because it's use it or lose it type strategy. We don't want to lose it. But it's 3,000 a year. You get a tax deduction. Got to do it by your end.

Yeah, and where this is important is if you have, if you're part of an FSA at work, they're putting something in for you. They wouldn't have it if they didn't. So they're going to be putting in a hundred bucks, up to 3,000 bucks depending on your level in the company. So a flexible spending account is a use or lose it. You've got to turn in your receipts before year end. There is a makeup provision for a certain portion of it before April 15, but you don't want to deal with that. So what are you looking for? Receipts for prescription drugs, eyes, dental. The list is 502. Publication 502. The list is extensive. All that Viagra you're buying over the counter, you can write that off.

You can't get it over the counter. I had to get a prescription for it.

That's gotcha. Oh, you did?

Oh, you got me. Hey guys, talk about, talk about tax free growth. All right. You know

I love it. Nailed it. That was my joke by the way. But I take some of yours. Okay, so yeah, if your tax deduction lasts more than three hours, call your doctor and your cpa. Okay, now here's the deal. Medical is a huge option to get some write offs before your end. With a flexible spending account What I've done before is I'll go around to the pharmacies that I might frequent at the grocery stores or wherever, cvs, Walgreens, and go in and ask can I get a report of what I paid for this year? And they'll give you the report. Then you just take that into work and go use it or lose it. And they'll write you a check. So that's the flexible spending account strategy. We don't recommend implementing one for a small business owner. Again, this is for those of you that have one at work or your spouse does. Use it or lose it. Stick to the HSA. We're going to come to the HRA here in a minute. Okay, number eight.

All right, paying kids under 18. Amazing tax strategy. If you've got a small business or even a rental property, you should be getting your kids involved in that business or rental property, teaching them, get them involved and pay them for it. You get to take an expense for that. You're in a higher tax bracket. They're in a no tax bracket. All right, that is a write off for you and you're going to pay them under the standard deduction. So they don't even need to file a tax return. Now we've got other podcasts on this on how to do it properly. If it's an S corp, you got a little two step method with a family management company. So you want to make sure you're doing this right. But step one of this, and there's another little twist to this, I love, you know, but I'm going to leave it for you.

Go ahead, you can throw it, I'll leave, but for you.

Okay, I'll throw it down too. But once you pay your kids, don't just give them the money, put it in a Roth ira. We have a kid's Roth IRA directed ira, put it in a frickin Roth IRA for them and teach them not only how to work and make money in your business, but then how to invest it and let them have a Roth IRA starting in their teens or even earlier. Talk about the growth that that can have over 30, 40 years can be pretty phenomenal. Yeah, that's the legacy you want to leave.

That's the legacy. And I'm not kidding. In our family board meeting a couple over the last few years, we have talked about the Roth IRA in our family board meeting and watched a Dave Ramsey video on the power of compounding interest. Dave Ramsey just does a phenomenal job of that video. I've done the same speech I think I'm pretty good too, but kids don't want to hear me, so I turn on Dave Ramsey. So whoever your flavor of the month is, get that education in front of your kids at the board meeting. And be careful. We're not talking about issuing W2s or 1099s to your kids under age 18 as well. You, you've got to know the strategy here. And if you call up your accountant and go, I want to pay my kids under age 18 and the word W2 or 1089 or you can't do this comes out of their mouth, would you fire your fricking accountant? Holy crap. This is such a common, well used, respectable, legitimate strategy. I have never in 25 years had a client audited for putting their kids on payroll in the right method ever, ever. So please, accountants, if you're out there, learn this. Get over it. Get to my certified tax pro network@marcjkuller.com and get certified in these strategies. I'll send you clients all day long that want you. All right, number nine. Oh, man, this is not.

You leave this one for me too. Solo 401k. Yeah, man, I do love myself a solo 401k. All right, any of you self employed solopreneurs, you have no employees. It's just you. Maybe a spouse, business partner, family members. You can do what's called a solo 401k and put $66,000 a year into this.

You up two? Yup.

Two. That's the total cap. But this is 10 times what you can put into an IRA. You can put 6,500 bucks in an IRA right now for 20, 23. In a solo 401, you can put 66,000. Now you need to be making the money to drop that in. You can't just be making 10 grand a year and put 66,000 in there. But if you're making the money, that'd be about 180 grand approximately. To max it out, you could conceivably put 66k year in it. Now, if your spouse is involved in the business, you can also drop 66,000 a year for them. For a lot of our clients that are self employed making a lot of money, they're like, all right, I need some year end write offs. This is one of the big ones I go to and I'm like, is your spouse solve that business? Yep. All right, we can almost do 100 grand in this thing. One year of contributions and if you want to go traditional, it'll be totally tax deductible. You get a write off if you want to go Roth because you have some discipline and you want all that money starting to grow and come out tax free, you can go Roth. But a solo case, an amazing strategy. You can self direct it. So many bells and whistles to it. It's for you solopreneurs out there and

this is what the wealthy are doing and considering. And again, you don't have to put the money in before year end. You can put it in up to nine months later next year and get the write off for this year if you have the Solo 401k set up. If you don't have it set up, you can't play in the game. So fully they're under the

secure 2.0.

2.0. They did provide some options for a 401k. It's not the full benefit.

Yeah. If the employer contributions, basically. But you don't get to max out the employees. No.

So the full 66 is going to be elusive if you don't get it down right now. So get the solo form. We have a special this time of year, call the office. But if you don't have it set up by December 15th, the IRS, you can't get an EIN during Christmas to New Year's. They shut down for service. You're not going to get the Solo 401k, so call right away. We have a docs only and an attorney consult version. Very affordable. And you get to self direct that solo 401k and invest in whatever you want. Notes, real estate, crypto, small business syndications. All right, number 10, kind of more common. A lot of people think about this. How many of you have driven by a farmer's house and the barn and seen all this crap out there on the field just gathering rust is because farmers hate the government. It's like they're part of their DNA. They hate paying taxes. So what they'll do is they'll go buy a new John Deere on December 31 to not pay taxes. Now, what's akin to this is a small business owner that's like, hey, I could use an suv, I could use a truck. Or I'll tell you, the auto deduction strategy has gotten hugely but more beneficial under the Tax Cuts and Jobs Act. The. The biggest increase in the auto deduction in over 30 years was just at the beginning of Trump's presidency and is still in effect. So be thinking about, do you need new new vehicle before your end? We're going to talk about equipment later, but just A vehicle. Don't go out and buy something you don't need. But this could include an electric vehicle, the Tesla's or others that give you a tax credit. This could be a tax deduction with depreciation or bonus, all sorts of options. I've got an article on my site on this. Go check it out. We've got podcasts on it. Be careful.

Yeah, this could be a December to remember.

Yeah.

For your tax deduction.

All right.

And there might be an automobile involved in it as well.

Now we got a sexy one here. Everybody hates this one.

This is a sexy one. But this is kind of like, you know, if you want to get shredded, you know that's right. It's about the kitchen, it's about what you're eating. It's not just about how much time you put in the gym, it's about what you're eating. And in the tax planning world, this is bookkeeping.

Yes.

It's about what you're tracking.

How can you make a decision in the next four weeks?

Exactly. If you don't even know what you have, how are you. And by the way, how do you know what's going on in your business? So you can make great decisions. If you're not tracking your income and expense and your books are a mess, you're lost, okay? You don't know where you're going. If you don't even know where you've been, how do you know where the heck you're going to? Now what I see, and this is my own personal experience, in years I've been off on my books and then you're trying to figure out, all right,

was that a write off?

Was this an. Oh, no, I have this personal account over here. I can't remember. I swear I spent this year at Costco and when I was there, I picked up a laptop or this thing I used in my business. Okay. Don't get yourself caught up in that. And was this meal business or was this personal? I can't remember. Track it. The clients that save the most money, that have the most expenses are the ones that freaking track it. They don't miss anything. Yeah. And so by having good bookkeeping and having that set, having a process where you have a third party bookkeeper, family member, doing it yourself, whatever your process is, you've got to have the process and be religious about getting it done.

Yeah. So what's the year end tip here? Before you make some of these other decisions, at least do an estimated profit and loss. Do an estimated balance sheet. What is in my traditional accounts. Because we're going to come to Roth conversions here in a minute. There's other important deadlines, people. We're only on number 11. We got 25 we got to keep burning here. But the point is, in order to make an informed decision, at least do some ballpark books. Now, you might want to hire a third party right now. Get on thumbtack, fiverr, upwork, Facebook, marketplace, Find a bookkeeper and say, I got to drop this off. You got 48 hours. Come up with something. Get your QuickBooks reconciled. Just so you have a good idea. Because some clients are like, oh, I need write offs. We do their books. I'm like, you're fine. Oh, I thought I made more money. Other people, like, did the books. Holy crap, I've got that much income. I got. Oh, I. But they don't find out till February. March. Find out now. Okay, number 12, shift income and expenses again, fairly. A traditional conversation even the most conservative accountants will talk about, but we got to talk about it. And that is if you've got some expenses that you know you're going to make in January, maybe you're buying some new computers, some new laptops, some new cameras, some new tripods, you're going into the next quarter buying some more equipment for your business expansion or whatever, you can put it on a credit card now and take the tax write off now. So going out and buying some of these expenses right before you're earned on credit, because you know you're going to buy them in January anyway. I'm not saying go into debt. I'm not doing any of that. And if you have a business line of credit that you use for operational expenses, you could dump in 10 or 15 grand in write offs or more right before you're in. This is where doctors will be like, oh, I need that new MRI unit, or I need this new X ray this, or I need this new that, or again, a farmer saying, hey, I need this repair done, or I need this new pipe or I need that. So go out and do a survey. If you're going to buy it in the next 10 weeks anyway, go pull the trigger. Same with income. You may say, ooh, don't pay me till January, please. And so people that owe you money that might be on accounts receivable, it can be dangerous. You gotta be careful. But you might want to bounce and say, I'm going to push some income to the next to the next year and have those people write the check and you go pick it up on January 1st. So shift some income, shift some expenses. It could really swing 20 to 50 grand one way or the other.

Yeah. I think most small business owners should be on a cash basis for their accounting of this. And that's where it is really important. When did you receive it? You know, when did you pay it out? That stuff matters because that's what's going into your books and your bookkeeping.

And that's the cool thing with credit cards and cash basis. Taxpayers get the best of both worlds. So it's super cool. All right, all right.

HRA health reimbursement range. We talked about the HSA a little bit earlier. HSA is a lot more common, I would say. But for some of you are like, Matt, how much can I throw on that thing? Seven grand. 7750.

Family.

I got 20 grand in medical.

I had a knee replacement. I put my kid in rehab. I had eye surgery. I had. Lazy is a write off. Yeah.

So huge family ever go to rehab? I mean, I don't know. You know, it could be a lot of things that come up that could actually be an hra. And if you own a business, you can do what's called the health reimbursement arrangement in the business where you're going to get a larger amount that you can write off. And there's a strategy on how this works. We got a whole separate podcast on this. You want to have one of our tax lawyers set it up or someone that knows this to get the HR set up. It's not like an account you go set up at your bank or that you're going to do like get directed. This is an actual plan, documents established. But the genus. The general point of this is if you have high medical and you're like, guys, that 77 hundred bucks a year is not cutting an HSA. I've got really high medical and I'm going to have it year after year. You need to be considering an hra. This will get you a bigger write off. You can, you can go over the 7,700 a year annual contribution. Yeah. For what? You could pull back out

limited for small business owners. This type of hra, there's QRA and all this when you have more than one employee. But for you solopreneurs and a family, these are incredible. I would just say this, this is where you need a consult again before you're in to adopt the plan. You can retroactively adopt the plan for the year, do some reimbursements. The this is a part of an overall medical Strategy. So let me summarize with this. Health savings account, flexible spending account, health reimbursement arrangement, you can have all three. It depends on the makeup of your family, your income and your business. So bring that up in a consultation and where you can. Because if you have low expenses anyway, an HRA is not going to matter to you. You're going to be all hsa. You have high expenses. You might double dip in the HRA and the hsa. Oh, your spouse has a FSA at work. We're going to tap that out. So it's going to be a combination of different strategies based on your situation. Love it. All right, next. All right, paying kids 18 and older.

Oh, you want to pay your kids 18 and older still get them involved?

No, I do not want to pay them, but I end up paying them.

Yeah. Hey, you know what, some of them are actually worth it. You know, that's true. If you're paying your kids to get them involved in your business when they were teenagers, they're actually be worth something by the time they're 18.

Right.

You still want to get them involved. Right. And, and I've had my kids do social media stuff, go to events for me, my bookkeeping and I want to pay them for it. Right. And I'm going to get a deduction. I'm going to get an expense. I'm going to 1099 them though. The strategy is changing now. I'm going to 1099 them because they're over 18. The rules change here with how this is the tax code.

Okay, different rules for under 18. That was strategy number six, paying the kids under age 18. Whole different ballgame.

They're over 18, I'm going to pay them. I will 1099 them. I'm going to expense that. I'm in a higher tax bracket. The kids might be in college or they're getting started in a career or a business and they're going to have lower income. They're gonna pick that up as income. Yeah, they will pay self employment tax on this, of course, but they're gonna be in a much lower tax bracket

and they're gonna have write offs to go with it too.

And they're gonna have write offs. You know, and I've done this with my kids too. Again, I end up helping them on their tax returns.

So they, you know, at this time of year, you're also thinking of stocking stuffers. And what can I get my kids for Christmas? Put the 1099 in their stocking. They really appreciate it. It's a lot of fun. They'll really enjoy that and play with it all, you know, spring until April 15th. Now on this note too, what are the kids doing? Okay, let's get clear. Many of us parents still help our kids from time to time once they're 18 and older. Oh, my car broke down. Oh, school tuition.

Oh.

Bought this new thing. Whatever. I need some help, Mom. I need some help. Dad. Why are you writing this off? Because they're on your board of directors. They're on your board of advisors. Go back to the strategy number. Whatever we, where we're going, our board of directors meeting in Thanksgiving. Now you have a legitimate purpose and reason for paying them. Sorry, 1099 in them for the crap you gave them anyway, because now they're on your board. See how this all comes together? Very legitimate, very common, doable. We've been doing it for years. Get your kids 18 and older on the board of directors at Thanksgiving. And now you justified the 1099 for any money you've given them. All my kids know if they ask for Money after age 18, they're getting a 1099.

They just know it.

They do. And they're like. Cause I go, you want help? They're going to get a lecture and a 1099. Now I've got some of my kids working in my business legitimate and they're phenomenal. But sometimes they need some help, you know, so.

And of course, this does qualify them for a Roth ira. Maybe they're college kids and so they didn't, you know, they didn't need the income or whatever. So they're, they're. And so they could actually go do the Roth IRA contribution now.

Yeah.

All right. Now you may want to pay your spouse. Maybe that's why I said may.

All right. Yeah.

Little caveat there. A lot of people think, oh, I need to get my spouse added on payroll for Social Security purposes. I want to make sure they have Social Security when they get to 65. No, you don't need to do that. There's a spousal benefit for a non working spouse that Social Security provides. Paying them, it doesn't work. We've done the math. Most advisors or anybody with a brain knows this doesn't work. But a lot of people get caught up in this. But we do want to pay our spouse if we want to add them, let's say to the solo 401 king. Bing, bing, bing, solo 401k earlier. Maybe the HRA. This could be part of the HRA strategy. Possibly. You may need to add them for that to make, to pull that off. And so if you have a spouse, whether. And you may need to get them involved in the business if they're not, or they probably already are. Let's face it, you're talking about your business all the time with your spouse. You just don't know that they're consulting you and helping you. You don't want to admit it official on the paper.

They're on the board. They're on the board. Ye.

So consider that. But make sure you're doing it for the right reasons. Not Social Security, but maybe for the Solo 401K or HRA. What other strategies would you add? Spouse. That's it.

That's it. And it's going to be medical or to fund a 401k. And it's not going to be a 1099. It's going to probably be through a W2. But then the HRA could be a little different. This is again something you'll bring up with your accountant on if you have. I'm just going to say if you have a Solo 401, you're going to talk about paying spouse. If you have high medical, you're going to talk about using the spouse for the HRA strategy. Other than that, they can just share in the profit. You're going to file a joint 1040 anyway. Don't stress about it. Put them on a stipend, put them on a pay. Pay them because your spouse is participating. They may say, well, I want to get paid. Pay them. But it's not going to be a formal payment process. It's just going to be a journal entry off the bottom line.

Let me make one other point because this is important. You can do what's called a spousal ira. If your spouse has no income, you might be like, well, Matt, we only want to throw a little bit of money into a retirement account for my spouse. But they're not working. Well, you can just do what's called a spousal IRA contribution where you're using the income of the working spouse to contribute to the non working spouse who technically doesn't have earned income. But that's, that's just for IRAs. It doesn't work for 401ks. But just know that's another little strategy there. If you're like, I don't need to max out or I don't have a solo K, we can still get some contributions at first best.

Love it. Okay, number 16, paying grandkids or nieces and nephews Now, I don't want you to like manufacture, write offs for an illegitimate or just because you can. This is for grandparents.

Like an illegitimate child

deducts illegitimate child. So those are fine, we pay them all the time, but I just don't want an illegitimate reason for paying the illegitimate child.

Important distinction.

Yep, important distinction. Okay, so, but if you're a grandparent and you want to fund the gift that keeps giving, that is a Roth ira and you'd like your grandkids to open up a Roth ira, they have to have earned income. So there's a two step method for doing this. Do not pay your grandkids directly. You're going to pay the parents who are the supervisors of your grandkids working in your business in some form or fashion. So we can't just say they came over and did dishes. We need them involved in the business. Stuffing envelopes, shredding paper, cleaning the rental property, painting fixing. Maybe they're old enough to be on the board, but this could be nieces and nephews. If you're helping out nieces and nephews financially, just don't give them money. Do it constructively with a 1099 or a W2 in the right method. Because so many business owners pay taxes and support their family, they just, whether they're young kids, old kids, nieces, nephews, grandkids, start looking at everybody's tax bracket and taking a tax deduction rather than paying taxes yourself and giving them money. But then you have that next level strategy of I want to help my nieces and nephews with Roth iras, I want to help my grandkids with Roth iras, my adult children. So now you're building wealth. But some of you might just need to do this out of necessity. So there's two different reasons there. Have a conversation about it. It's just so, so important. Number 17, really?

Roth conversion is up for you. I get it. I love it. I'm going to take it. Roth conversion for 100. All right, Alex. Okay, the Roth conversion. Many of you might have traditional IRA or 401k money. You remember the deal you got to tax us when you put the money in. That was great. I got a tax deduction, it's going to grow. And I don't pay taxes, but when that money comes out, I pay taxes on the way out in my traditional account. A lot of you are like, man, I want to get to the Roth structure where the money comes out tax free. I get to grow it and invest it and make it as big as Possible, and it's going to come out tax free. Well, you can do that. You can move from traditional over to Roth. Let's say you've got a $100,000 account. You can move that $100,000 from traditional dollars to Roth dollars under what's called the Roth conversion. Now, the deal the IRS has given you is they're going to say, all right, we're going to let that 100,000 grow. And you know what? It can even be a million bucks by the time you retire. And it's going to come out tax free as a million dollars. But you've got to pay the tax on the 100,000 because we gave you a tax deduction and put all the money in, and now your account's grown, it's 100 grand. You've got to pay the tax on 100,000 to convert over to the Roth. So if you do the Roth conversion, your custodian is going to send you a 1099 R. It's going to go on your tax return at your regular income rates. You're going to pay state taxes on it, too. But the beauty of this is it's growing now and coming out tax free. No tax on the way out, state or Fed.

Yeah, it's huge. So we call this a chunking strategy, because you can pinpoint how much you want to convert this year. And guess what? Just like paying the kids, just like buying the vehicle, just like the health care strategy, you got to file the paperwork by December 31st or the window's gone. Can't do it for this year. If you can't wake up in January and think you've made it happen. So you might do the books for the purpose of finding out how much can I convert before I move into a higher tax bracket. And so that's why four strategies ago, we were saying, know what's going on. Know what your plan is with your Roth and your income and your expenses and where your bracket is. And all of this is like. Like baking a cake. And it's super exciting when you have a good advisor. And for some of you, I don't care about the strategy. Like Matt said at the beginning, 25 strategies. This one may not be an important one to you. For others, this could be the most important strategy you implement all year. So put it on the list.

Love it. All right. Well, it is the season, you know, of giving. You know, it should be in a charitable spirit. And remember for me, like, you know, make charitable contributions to your church or other, you know, charities or other nonprofits that you are, you know, you think are providing great value to the world.

Yeah.

Remember, this is tax deductible. Now, there's a number of ways to do this for many of you that are building and growing in wealth. And when we talked about, well, what do the wealthy do? Do the wealthy just send cash out of their bank account to the charities?

No, they do not.

What do the wealthy do? Why would they not do that?

They get a bag and walk around the house and find all the crappy clothing they want to get rid of and then drop it off and think benefit in society. Oh, not that one.

No. The charitable wealthy people like the good.

The good wealthy people have big stock portfolios. Yeah.

Or maybe some appreciated real estate or maybe a large IRA. And they're in their 70s.

You mean charities would take appreciated real estate or appreciated stock off your hands and willingly?

Yes. Charities, universities, churches have a department within their organizations that work with these people, the wealthy, to say, hey, we'll take anything. We'll take anything. And you know what? If you got a stock, if you got a bunch of stock, let's say you bought for 100k, that's worth 300k, and you're like, I want to donate that 300,000 to my church or to the university I love, I can donate that whole 300 grand. If I sold it, pay capital gains tax, and then I gave it to them, It'd be like 250,000, you know, or less. But you can gift the whole 300, you get a $300,000 tax deduction. The charity doesn't pay gain on it. So gifting appreciated assets is a very, very common thing that the wealthy do to make their charitable contributions. It's more bang for bug for the charity. It's no tax for you, and you still got the charitable deduction on the full value. Everyone wins. IRS loses on this one.

And also, again, if you need to put a little charitable donation on a credit card or write a check, you can do that and still get the write off. And the other trick is, some of you might be over age 70. There's some changes in these. The RMD rules on when you have to start taking RMDs. We won't go into that. We've got other podcasts on it. But if you're over age 70, or your mom and dad are, you want to be thinking three letters, rmd. Maybe the NFL too, on the weekends. But RMD required minimum distribution. And so you, if you're over age 70, need to start thinking about, oh, I got to take money out of that ira. So you didn't convert to Roth. Now you got to start taking money out and paying tax. That's called an rmd. They're just not going to let you leave it there forever. This is why we were doing the Roth conversion three strategies ago. But for those of you that have an Iraq, you actually have to take money out before the year end. It's called an rmd. Well, instead of taking the money, if you're going to be doing charity, give them the rmd. Now you don't pay tax on the required minimum distribution coming out of your retirement account. So you can donate your RMDs. Super cool. Wow. All right, now this is a hard last minute deduction, man.

This is like five strategies in one.

Yeah, well, and, and it's, it's part of a. Okay, we're going to talk number 19 real estate.

Buying a rental.

Well, in some of you that have already bought the rental might be thinking about a cost seg analysis and doing the math and saying, hey, I bought this rental. My spouse now qualifies as a real estate professional. Maybe I hit my hundred hours on a short term rental. Maybe I bought a self rental. I bought a building for my own business. I missed out on this one year. I could, I bought a part of a building for our law firm and we could have maybe done a cost seg analysis on it and taken more depreciation in that year because we bought a self rental. So if you're buying warehouses, maybe you put an ADU in at your house. In California, very, very common now in more and more states, the ADUs, you may not even know you're a real estate investor. Yeah, you're got gateway drug data. You, I need cash flow. So now it opens up depreciation and some of you might be closing on a rental before year end. You don't have to have it rented before you're in to take the write offs. With a short term rental you do, but long term rentals you don't. Man, there's just so many variables. So I had to throw it down as number 19.

Yeah, and we have so much on this, so much content on this. For many of you that are like, I don't know the real estate strategy, why do the wealthy buy real estate? Well, one, it's a great investment for appreciation and growth. Look at the value of real estate that's gone over time. Think of your own experience in real estate and homes. You're like, man, I've lived, I got people back and I've lived in two or three homes and I sold them all. If I just kept those houses and didn't sell them when I bought the next one, oh my gosh, I'd be so wealthy, you know. Well, that's your rentals. We're talking about building long term wealth, but it's a great tax strategy. This is why we talk about it at year end because we like clients to be acquiring a property a year, acquiring a property a year, building a long term real estate portfolio. Now this is what's awesome about rental real estate. You can be cash flowing the property. It can be appreciating in value you're building and growing wealth, but you don't pay any tax on it because you're taking depreciation as a write off. And even if you're really cash flowing, you can accelerate the depreciation with a cost seg like Mark talked about. And I'm just talking about a basic rental. I'm not talking about a short term rental or the self rental where it gets even better. I'm talking about a basic rental. You cash flow. You're building wealth through appreciation and you're not paying taxes to do it.

And even creating more write offs. Is that last? Yeah. You're not paying tax and you may even create tax write offs you can use somewhere else.

Yes.

Now here's the tip. You do not have to do the cost seg before December 31st, but what you want to do is figure out my strategy before your rent because that cost is going to generate a tax deduction. Now that you know what that tax deduction is, you're going to go, oh, now I can use it to offset my Roth conversion or I might use it to offset this other income.

Yeah.

Oh, that's going to affect my payroll level. Oh, that means I could put more in my 401k in February. Oh. See, they, they can really have a lot of interplay. So you're like, what's the year end gig? It's knowing how you're going to use that real estate before year end to offset other income or create other write offs for strategy. It's just so, so powerful. Love it. All right, number 20. Not sexy. I can throw down on this.

He, Mark turned the slide over and he was like, oh, this is a buzz kill.

All right. Okay.

Paying the irs. Okay. And confirming your quarterly deposits and sending the money in.

Yeah.

All right. This is one of the things you do need to do. Okay. This is, I think one of the things for new business owners and people who are entrepreneurs is they learn this the hard way. Yeah, they get behind and they miss out on payments. They're like, I'll catch up at the end of the year. I'll worry about it when I do my taxes. And then all of a sudden, they get their tax bill and they're like, oh, my gosh, this is a ridiculous amount of money. And I have not been sending in money to the irs.

And it's not only about being ready for what your tax bill could be in April. It's avoiding the penalties. See, there's penalties for not making proper deposits. There's 100% rule, 110% rule. And you're again before year end. This is why you're doing this. Your last deposit of the year has to be in by January 15th. So again, you want to do that P and L, that profit and loss statement of where's my income going to be? Where are my losses? Oh, I just remember strategy 19. I'm doing a cost seg. I don't have to deposit as much either. See this? This all plays into deposits and W2s and 401ks. So knowing what your deposits are and what you've done so far can reduce penalties, reduce interest, and prepare for April 15th more wisely. Boy, but it's crazy. We just saw a case, boy, last month, an old client of ours that ended up in prison for not putting in the deposits properly for payroll.

Ooh, that's the one you do not mess with. Never mess with payroll deposits. All right, like that for. Especially for your employees. I mean, even for yourself. For any of you have S Corps and, you know, have your own business, that's important. But if you steal your employee money, like the IRS is expecting that to be there. And when they do their taxes and they file it, the IRS is like, we never got this money that's on your W2 that said it was withheld from your account. Like, I got a pay stub that said it was. I'm just telling you, those are the IRS agents that wear the badges and have handcuffs.

Yeah, I remember when I was a brand new business owner in college, a janitorial business, and I had to take that deposit to the IRS and send it off for all the payroll withholdings, and my bank account was zero. That's very tempting to not send that off to the irs thinking, oh, well, I'll catch up next month. Playing with fire people.

Vicious cycle.

Vicious cycle. All right, number 21. All right.

Why don't you hit this one?

Okay. Oh, I love this one.

You've been in this one?

Yeah. This one used to be a big deal. About five or 10 years ago, through Covid and through some other changes in the market, crypto had its run. This kind of got forgotten. And Matt and I have really began to get back to the core. We've got Michael Maselli from one of our greatest referral sources on this, teaching at our360 event next week. And that's called the intangible drilling cost deduction. IDC. This is strategy 21, which means the government will give you huge tax write offs to invest in drilling rigs, oil and gas in the US So we want to produce as much domestic oil and natural gas as we can. The government, even though Biden shot down the pipeline to Alaska, there's still a ton of drilling going on in Oklahoma, Texas, the Dakotas. And if you invest in one of these funds, you can get huge tax write offs. Big conversation. I've got material on this. We've got. I think we need to do a whole podcast on this. I don't know if we have yet, but we got plenty of material on it. It'll be a class in the workshop next week. Study up on it. We love REI Energy. That's where Michael's at. And he just does a great job explaining it. Their company has great track record and there's other companies out there too. So that's the intangible drilling cost deduction. All right, three more. Got to go quick. All right, all right.

529. 529 plans, we usually don't love them. We like to do the Coverdell first. 2000 bucks a year can put in a Coverdell no deduction, but you can grow it and you can self direct it and it comes out tax free for qualifying education.

We love the Roth.

This is the Roth. We love Roth as a strategy also for college savings, because the money you put in a Roth, you can pull out tax free. Your contributions come out, no tax, no penalty. If your kids later want to use it to go to college. All right, now on top of that, of course, 529, that is designed for college. You can't self direct it. It goes into a state fund. But a lot of states offer a state tax deduction when you put the money in. So that was. Could be Arizona for one, where we're at, that's offering that. There's a lot of states that have that. Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio, Pennsylvania actually have a state Income tax deduction. When you contribute to the 529, it grows and it comes out tax free for qualifying education costs.

Now those, those states, Matt, just rattle off are nine states that will give you the deduction no matter what 529 plan you put money in. The other states that have a 529 will give you a deduction, but you have to invest in their 529 in their state. Again, not a big fan, but if you're really trying to throw down, you're going to be doing the Roth, the coverdell and the529 and concert because you're a huge education family, you want your kids going to college and there's, there's nothing wrong with them. We just think they're, they're not as efficient as other methods. But if you want your kids going to Harvard and you need to throw down, the 529 has got to be a part of the plan. So very, very important. All right, 1089s this is.

Yeah, these are going to start hitting January 31st. It's going to be right around the corner. So make sure you've. This is why you get the W9s. When you're dealing with a vendor, someone that you know, a new relationship or a contractor you're regular working with, do you need a W9? So you'd be tracking this and get the 1099s out quickly in January.

This is a year end strategy in a big way. I literally had my staff. Please put this on your list, please. Because accountants hate to get the phone call in mid January. I've got to kick out 501099 and you have like 3W9 and it's too late. And contractors and whoever you pay doesn't want to give you a W9 anyway. So you start doing it now. Start. Dude, this is your QuickBooks report again. How many people did I Pay? More than $600 and I need to issue them a 1099. So you get the W9s in and then you'll be ready for January when that time comes. So very, very important.

Ooh, a little tax loss harvesting here.

Yeah. Number 24.

Yeah, yeah. I mean many of you may invested in crypto that went down. It's back up though.

Yeah, it's crazy.

Depending on whether you sold or not, you might have gotten, you know, some shell shock and sold. So. And looking at your stock portfolio, you know, we always are talking about alternative assets, of course, investing in real estate and small business, but we think that's fine to have A well balanced portfolio of investable money in the stock market, even in crypto. But these are places where you may have losses from trades that you want to be tracking and they can be used to offset other gains or income you had. And if you don't have, and there's at least 3,000 you can use against ordinary income. But everything else is going to carry forward to prior years. But you've got to be tracking that, reporting that on your tax return so that you know when you have a gain later, because you're going to remember when you have a gain, everybody forgets the losses. Make sure you're tracking this and that your account is getting that brokerage statement, whether it's a crypto account or a stock trading account.

And some of you, again, this is a big deal. Some of you does not matter. So. And we're going to give you your charging orders here in just a moment with number 25 final on the list. Then we'll give you some recommendations of where to go, where to get help and what you do Next. But number 25 is the charitable Remainder trust. Now, we can still pull off CRTs before year end. This is a type of trust where you might put in a highly appreciated asset. It could be a business, it could be real estate, could be stock. And you plan on selling it in January, February, March. And you already don't want to pay the tax, but you'd like the charitable deduction this year. So when you take that appreciated asset and transfer it to the trust, you get the write off now. And then when you sell it in the spring, next year, you don't pay any tax. So many of you might be contemplating a sale of an asset and you know you're going to sell it in the next three months. You know you're going to be hitting a big tax bill. And you've heard of the crt, do a consult. One of our tax lawyers in our office does these consults constantly. Max Merritt. He's our little expert on this. He's wonderful. Book an hour and say I've got this highly appreciated asset. I might want to create the CRT before year end, harvest the write off, shelter the gain and do it all before you're in. It really is a pretty powerful strategy.

All right, everyone, we made it through 25. We ran through them fast. A lot of these, like we said, we have a separate podcast episode, search for it in the mainstream business podcast on just this topic alone, on one of those 25. Now, I said this at the beginning, tax planning Is not an easy button. But you know what? If you're engaged in it and you are proactive, you're learning the strategies for yourself. What works in your situation, you deploy what you work. This will save you tens, hundreds of thousands of dollars. The largest expense you will have as a successful small business owner, investor, entrepreneur is taxes. Is taxes. It probably is not even going to be payroll. It's going to be the taxes from your success and your wealth you're building and being proactive and knowing the strategies to minimize that so you're only paying what you have to. Is significant.

It is. And what do you do next? Don't get anxiety about this. Don't get frustrated. Don't hate the player, just hate the game. We're, we're here to give you the rules for the game. And being aggressive, cautiously aggressive, being strategic is not a moral or ethical problem. The tax code is there not to be taken advantage of. It's to be used. A lot of these write offs Congress passed to create an incentive. I had something the other day that was like, well, I'm morally against saving taxes. Like finding a loophole. That's just wrong. I should pay as much as I should. I'm like, who are you, you nut job? No investing in charity. We get a write off doing intangible drilling cost. Government wants you to do that. You get a write off. Buy real estate, stimulate the economy. You get a write off and do a Roth IRA save.

So you're not.

Yeah, you know, save Social Security. We should get a shot. Save Social Security. Invest in a Roth. That'd be a good shirt. Okay, so anyway, here's my final take. Get over to markjcohler.com this is option one markjkohler.com, we have a tax pro network there. You can find an advisor all over the country that they don't have to be down the street. They don't have to be as people are like, do you have one in my state? Does not matter. Find someone that understands tax law and understands you. Do a discovery call and engage them someone for a planning session. Before you're in number two, call any of our tax lawyers at the office. We have a year end tax strategy session for 1500 bucks. We want to save you 10 times that in strategy with, with any tax strategy. We can build a trifecta for you. Those are your two avenues. If you bring up any of these with your current accountant and they shoot it down, you have the wrong advisor.

Yes, that's it. That was amazing. I'm like, man, we hit all 25 of those guys. We have so many more resources on this. Markjkohler.com Matt Sorenson.com Our law firm, we talked about KQS lawyers directed IRA Mark's Tax Pro Network. We have all the resources here to help you pull off and execute this. Don't feel overwhelmed. Just build the right team of people and professionals that help you execute it and get it done.

It's a good way. Schedule it. Don't think it's going to just happen. I know you've got Thanksgiving and this and that and the holidays. Schedule the call.

That's it.

Just have the call. And you'll be amazed at how much you accomplish. You absolutely will be amazed. Give yourself a gift of Christmas planning. Doing a consult with the tax lawyer. Get yourself a trifecta for Christmas. Got to shoot a podcast.

I got the next podcast we need to do.

Give yourself the gift of a trifecta for Christmas. Give it your mom and dad. Get them an estate plan. Do you only have a trifecta estate plan? They get a diagram, they get a review, they get action items and they get their will and trust on all on the same freaking engagement. That's so affordable.

That's a great gift for mom and dad because that one is going to benefit you later. That's going to be your gift because they actually have an estate that they freaking planned and not a disaster for you to figure out what the heck's

going on and you're going to put mom and dad on your board. You just got a write off paying for their trifecta and estate plan.

All right, Mark and I are like fighting for the last word.

Go ahead.

This podcast. Thank you guys for listening. If you're still listening right now, you liked it. Go give us a five star review. Subscribe, Share it. We appreciate you and enjoy your holidays.