411: Last Minute Action Items For Tax Savings Before Year End

If your kids are working in the business and you fail to pay them properly through the business, you've got to go back and do that. If you're going to pay your spouse, it would be through the S corporation and a W2 so you can fund his or her 401k.

But also for those of you self employed with the Solo 401K or those of you that want a Solo 401K, you got to set up that Solo 401K plan by year end to get maximum employee and employer contributions. Those of you that have an S corp, right, you need to get your W2 dialed in which your fourth quarter payroll.

Happy holidays with Mark Kohler and Matt Sorensen. We are on our final push. Right. It's the Christmas New Year's week. Always a unique week. You know, should I be working, should I be playing? Should I. It's just, it's crazy. So welcome everybody. We got some last minute tax tips that are absolutely critical and we're trying to get this podcast up literally today, same day. Today's the. What is today?

28th.

28th. So yeah, you know, yeah, three days. You got plenty of time.

Yeah, yeah. Now companies will be closed two of those three days, but, you know, so

you got a day.

But we wanted to rattle these off. We're getting fielding questions right now amongst our clients, doing a lot of these last minute items ourselves. So we just want to make sure everybody's on the same page about what are the last minute items I gotta be thinking about for my business? Am I self employed for my retirement account? All these little considerations that come in that you really got to get dialed in by year end or close to. There's some things that kind of bleed into January here. We'll hit those. But it's the last minute folks. We're going to give you the punch list.

Yeah. And I'm looking. Are the banks closed on Friday?

Well, I mean, Saturday and Sunday? Well, I mean they might be open somewhat on Saturday. You know, some of this stuff, you know, you could be just transferring money around on, you know, online. But let's say you want to do a Roth conversion by year end, you're not doing that on Saturday, you're not doing that on Friday. Yeah. You know, unless it's in by 10am and you pay a same day processing fee somewhere. So. So this is kind of the final push for these things and you got to get some of them, require someone else to do something and there's a lot of people doing it last minute. So Just that's only cautionary note I guess I had there. But guys, good news. Getting these things done typically saves you taxes, get you in a better financial position. That's what this is all about. Doing those things are going to help you save money. Getting a better financial position.

Yeah, I think there's definitely some last minute items we need to cover with everyone. We're going to be hard and fast today. It shouldn't be a very long podcast. Let's get to it. We know many of you have limited time during this holiday week. You got bowl games, wings in the oven, the air fryers going on, you know, garlic cheese fries. You got things to do. We get that. So let's get to it. All right, I'm going to give you my number one that I got to do.

Okay. I'm just working on. This is my own personal list too. This list we're talking about is my own little personal list.

It is. And we did. I will throw this out. Obviously some of you regular followers know that two weeks ago I did a live with Matt. I think we did our last minute year end tax tips. So for a little more in depth discussion, please get to YouTube. You'll see it in the playlist on mine on the live videos. Mark J. Kohler. I think it's been in the newsletter. So anyway, there's we've got longer videos and longer podcasts on year end tips, but this is your last ditch effort so we thought we'd just hit them real quick with this podcast today. Okay. The one I got to do is paying the kids. Now, my kids right now are all over. They're 18 or over. In fact, my youngest is 19 now. So wow, time flies. Crazy. Now I'm an old timer, so all my kids are over age 18. But this goes for many of you that are also maybe thinking about parents, nieces, nephews. We'll come back to spouses here in a minute. But here's what the goal is. If you're supporting your kids in any way, shape or form, you've been helping them throughout the year, but you've been doing it out of your personal account. It's time to launder some money now. Now I say that with all legitimacy and honesty with the irs. If your kids are working in the business and you failed to pay them properly through the business, you've got to go back and do that. So what you do is you put money in the business, pay the kids in the next 48, 72 hours through online banking and it's done. You have to create the paper trail. And so I joke about the laundry, but really you can't say you pay your kids in the business if you didn't really pay the kids in the business. And these are adult children. This could be your mom or dad and you want to help them fund a Roth IRA of which you're the beneficiary. Anybody you're going to kick out a 1099 to in January in your family, you got to show that you actually paid them. So I'm going to be moving some money around. I got to go through the kids accounts, find how much I paid them and could I pay them a little bit more and then move money around? Yeah.

Now for those you got the S Corporation. Don't pay them out of the S Corporation. You got to set up a separate little bank account. You're going to have a sole proprietorship family management company. Other podcast episodes on this. Mark's got articles and videos on it about paying your kids.

But. But that's under ajp. That's under agp. Yeah.

So we're gonna pay em. You're gonna pay the family management company, which can just be a bank account, pay them from the S Corp over the family management company. Then pay the kids from the family management company where it's. Cause you go to the kids bank accounts. So that's the paper trail, so to speak. So in the end you're getting a tax deduction cause it's a business expense to you for paying your kids for helping in the business. You pick up the income over in the family management company but then you expense it out cause you're paying the kids. So the net outcome for you is tax deductions. And your kids don't have taxable income because they're likely under the standard deduction.

Yeah. And Matt's got a teenager, so he's more on that vein right now. He's got one left. One left. And we can spend the rest of the hour easily or longer talking about paying kids. So we're going to just remind you you got three days with online banking, you should be able to pull it off without visiting the bank. Unless you haven't even opened accounts for your kids under age 18. Carve some time out to hit the bank tomorrow. We been using Titan bank. We love an online bank system more and more. And Matt, they could call the office and get the link for Titan bank or just go to Titan Bank. Do we have some links we email out or is it. Can we put it in the description on how to get over to Titan.

Yeah, we could throw the link into the description to get over to Titan Bank. So yeah, we'll throw that link in the description because we have a unique link for our customers.

Yeah, that's a good one. Okay, now number two. Okay, I'm going to bring this up. Paying the spouse because you think you need to do something to pay your spouse before your end. Yeah. But you don't. If you're going to pay your spouse, it would be through the S Corporation and a W2 so you could fund his or her 401k. Now you got to pick that up in the first week or two of January. I'm not saying you, you don't have things to worry about, but you don't have to do it in the next 72 hours because paying your spouse, if you're married, it doesn't have to have as strict as a strict of a paper trail. You can put them on W2, fund the 401k and you're good. If you want to give your spouse a draw, a draw is a draw. Give it out of the LLC rental property S Corp. Just give them a draw but do not put them on payrol on the payroll reports unless you want to fund their 401k. So don't worry about paying spouses this next three days. It's all about parents, kids, nieces, nephews that you want to write off. And you plan on giving them a 1099 next month, which we'll have a podcast next month on that. But I did say the words 401K. Matt, what are some last minute issues with that?

Well, for those of you have like a day job 401k, you got to get those contributions in. Now a lot of your employers want to process that, so make sure you're dialed in there. We like to talk about just match it out, get as much in so you can get the match. If you can afford to do more, you don't have a solo K, maybe throw in some more if you so desire. But also for those of you self employed with the Solo 401K or those of you that want a Solo 401, you got to set up that Solo 401 plan by year end to get maximum employee and employer contributions. You don't have to put the money in yet, but we need the plan set up by December 31st. Now this would take you being totally dialed in, rushing us getting it through right now, which we can do with the law firm at KQS Lawyers if we at least have a couple days. So you got to jump on this and we can still set it up, by the way, in 2023 and you can still do employer contributions for 2022. So that's just a little note for Those in your solo 401k, still get it set up. For those that already have the solo K, you have until the company tax return deadline to contribute. But you gotta get your W2 dialed in in January. So you gotta be on the ball on this, on how much you're going to contribute if you haven't put money in yet. So that goes into your W2.

I like it. Let me add one little thing to what Matt said. There was a key word he said in there and then he brushed over it quickly. So I want to make this clear for everyone. He said you need to get your 401 documents finished in in the next two to three days if you want the maximum contribution, which means your deferral and a match from the company. But there was new legislation this last year that did allow you, and that's what Matt said subtly. We can still set up a 401 for 2022 next month. But you only get to do the employer portion, which is about 25% of your W2 in most cases because that's where most clients are doing them is in their S corporation. So which makes it almost equivalent to a SEP for you out there that are more knowledgeable on this. So you can still do a 401k next month, but you're not going to get that employee deferral piece. So just think about it, a couple options there.

All right, now rolling off the W2 because I just want to think about a number of things. It's just me in the last couple of days on the W2. For those of you that have an S corp, right, you need to get your W2 dialed in, which means your fourth quarter payroll is very important. And I'm just going to a few things. We can talk about them here. But we already Talked about your 401k contribution that needs to be on the W2. Your health care expenses, your self employed. Your self employed. Health care expenses. Like whoever's doing your payroll, they need

to know that Health care insurance.

Health insurance. Sorry, not expenses. Yeah, but health insurance. Sorry about that. Yeah, but also you gotta dial in your salary. So how much salary may I take this year based on how much money I made and getting into the Kohler payroll matrix, you know, to really dial that in. So those few considerations here are really Important at year end, getting those three things dialed in, which all goes off your W2.

Yeah. And let me say in the next three days, you don't have to stress about getting the W2 finished, but it should be on the top of your mind because some of these decisions you're making are related to the W2. But I would tell you by January 15th, you got to have that W2 wrapped up and the company, the service provider you're using, you can't do it yourself. It's too much pain. So. But you're thinking about it right now, and you're ready to call the play, but you're up at the line. There's. You don't have to hike the ball on that one, you know, little more clock.

There's more time on the clock. There's overtime.

Yeah. There's. It's bowl season, you know. Yeah.

I got you.

Oregon plays tonight, Holiday bowl. So going to. Going to be watching that one. It's kind of a bonus bowl, you know. Yeah. I'm gearing up for the big bowl this weekend.

Yeah. Which. Which bowl is that? The Rose Bowl.

Oh, yeah. Yeah. University of Utah Utes are going for the second year in row. Just want to point that out. Yeah. Yeah. For. You're like, who are the utes, you know. All right. Okay. So here's another major deadline, and this is in the next 72 hours making a Roth conversion. I'm going to consider this myself, too. I've got to go. What do I want to convert to Roth? So make sure you file the paperwork with your financial services company where your traditional is located. I don't know if you have time to set up a new account at our office and get the collection done in time. Matt, what's timing? You know, the timing with our infrastructure at directed. What are people done? So

it's possible, but as I'm saying, you're going to be paying expedite fees on everything. So because you're just at the, you know, you're at the 11th hour, so to speak. So. But you know, the Roth conversion takes two things. Remember, if you got a traditional account, you don't have a Roth account yet. You're barely first time doing this Roth conversion. You're going to have to go open up a Roth account and you got to do a written election to make the Roth conversion. The Roth conversion has to be done in writing. So it has to be a written election for it, which we have a Roth conversion form anywhere. Anywhere you're at is going to have a similar process to this because they have to. So there's a couple of things that have to happen there. New account gets open in the Roth conversion election. If you already have a Roth account and you've been converting every year a little bits here and there, it's much easier because you just got to the Roth election to convert. Now it's easiest to convert cash of course too. So if you have it in a cash balance, that's easy. If you've got a hard asset like you're a self directed client with, you know, you own real estate or an llc, getting this done at your end is going to be impossible because you need a valuation, you have to go get an appraisal to convert a hard asset like an in kind asset.

Okay, next major year end strategy, and I've got to look at this too, is the HR a health reimbursement arrangement. For those of you that adopted an HRA in a small business now if you've got employees and you're a little larger type business, you're going to be, you would have grown out of this strategy. And for any of you out there with just rental property, you're not going to be able to implement this. But for those of you, and there's millions of you out there that have the side hustle, the side gig, or just a plain old operational business in an S corp or an LLC and you're just kind of waiting to take it to the next level. But you're a solopreneur. It's just you maybe married or single and you've had high medical expenses. If you've been a regular follower of ours, we've dedicated entire podcast this and that's called the hra. It's separate from the flexible spending account and it's like it is completely different from the health savings account. It's a unique little line called 105 Plan HRA. You've got three days to get that reimbursement completed. If you have an HRA plan. If you haven't implemented the HRA by now, it'll be too late. But a lot of people get the HRA done and then they don't do the reimbursement. So I know there's some of you listening that are in that boat where you're like, ah, I did the HRA and I've still got it from last year, but I've just, it's self administered. You don't have to call anybody to do it, you just got to get it done. I don't know if you'd be able to get with one of our lawyers in the next 48 hours to get help with that either. So maybe this is a good reminder for some of you that are like, damn, I never did that this year. Make an appointment now with one of the tax lawyers in January and say, I want to make sure my HRA is set up for 2023. Get it out of the way, don't procrastinate again. But for those that do have the HRA and it will carry over from last year's hra, make sure you do your reimbursement, which means adding up all your medical and writing yourself a check from the company in the proper method, whether you're married or single. And we won't go there. There's whole podcasts and I got a chapter in my book on that. But study up on it tonight.

Other thing I was going to say is pay expenses. If you owe money for business expenses that you have incurred or that you're going to be incurring in the next little bit, get them done and paid. Now get the expense and write off in 2022. So don't be sitting on those bills. Get them paid. That'll increase most of you on a cash basis. That'll, you know, get those expenses on your 2022 tax return.

That's a great thought. I mean, any of you that have your cell phone bill is just sitting in the Verizon email or your Verizon account or T.

T Mobile.

T Mobile. Sorry.

I was struggling for a second too.

I was like, I had TD Ameritrade on my head for some reason because we were just talking about Roth IRAs, those things. So yeah, T Mobile. And so if any of you have a cell phone account or some sort of business utility bill or a services order printing bill. That reminds me too, on the calendars, I've got the printer waiting for it to get paid too. Maybe I'll write a check or send them money today or tomorrow. So any of you that just know you're going to pay a bill in the next two weeks, pay it now right off today is always better than a deduction 12 to 18 months from now. You know, let's get the write off. Good call.

Yeah.

Okay, here's another good strategy. Let's say you have a business partner that you just love. You know, they're really good to you. Over the years, you could, you know, make a business expense through, you know, some sort of technology item that would be good for the company and then just send it to your business partner. Matt, I've texted you my address that I'm at right now. Just go down that path.

Thank you. It's a great idea. Great idea. Okay.

Just wanted to throw that out. I could be a.

So the gift is I get a write off. Is that what gift is?

You get a write off? Feel free.

Christmas spirit is still running strong on you.

Yeah. Run it through your F corp. It's definitely a business expense to enhance your business relationship and I would accept it willingly just to help you have that write off. I just want you. I'm a giver. Call me a giver. All right.

Now, I did have a couple thoughts, other things I wanted to say, though.

Okay, go ahead.

I was going to hit another one. This is actually not another one. It's an important point. There's a lot of things you don't need to do right now. Your IRA contribution, your Roth IRA contribution for 2022, your HSA contribution, you have until April 15th. Don't stress and freak out on those ones. You've got until April 15th to still do 2022. IRA contributions, HSA as well. So hang tight on those. Don't stress out. Enjoy the new year. Get ready for those inspired 15th.

Love it. Now, here's a couple of other items on the prepay idea. You. You can put a charitable donation on a credit card and get a write off now and prepay any tithes or charity that you plan on giving in January or February. Prepay it now. Now, those of you that are itemizing, that's a great thing to do, you know, get that charitable deduction captured now for your itemizing schedule A. So don't be afraid of that. And I also want to throw out the equipment. We've got 100% bonus depreciation. It goes down to 80% bonus depreciation next year. So what that means is if you bought, I don't know, let's say you bought a new Canon camera and a TV and a drone and you bought, you know, spent four or five grand on some equipment that, you know, you need for your social media plan and your marketing plan for next year, and you know you're going to buy it in January, February or March, you can put it on a credit card. I know talk all the time about not using credit. You're paying off credit cards by the end of the month. You're doing it for points. We are helping clients get out of credit card debt. We use credit cards in our business to capture points and pay off the card in its entirety every month. Takes a lot of discipline and a mature business. I didn't used to do that. But what I'm getting at is if you do buy any equipment before year end, you can bonus depreciate it all in one shot, even if it's three or five year property. And that's. But don't go out and buy crap you don't need. Just be careful. My farmers out there, they're like, I'm headed down to the John Deere. I'm gonna get that. Get that new combine, put it on credit, park it on the back 40. By the way, did you see 1923's new episodes out?

No, I just. I barely saw what that was. I didn't even know they've got the 1883. 1923. Is this John Dutton's dad? I don't know who's who. This is his grandpa who's 1923.

I'm not going to spoil. You got to watch it. Okay, but I will say just to get your accurate Tim McGraw in it at all. No, well, no, see, 1886 is with Tim McGraw and Faith Hill. Yeah. 1923 is the middle that generation between John Dutton and Yellowstone. Yeah. And. And the 1923 has Harrison Ford. And dude, he looked so good. I watched just five minutes of the Kids Were watching. I'm like, I gotta finish freaking Yellowstone. And one more episode of 1886. Anyway, and he's picked up Kevin Costner's little draw. You know, he's like, so. He's like, so Harrison Ford rolls into town on his horse. Like, I don't know, let's go get a drink. You know, it's pretty sweet. It's a slow star. Lots of character development if you like a good Western. Okay,

okay. All right, back to your end. Tips here.

Is that what we're talking about?

Yeah, yeah. This is also, you know, show recommendations, you know. All right, one other one I had RMDs for those of you 72 or older. I know you listen to the podcast. We got some of you here, you got to take your RMDs from your retirement account by December 31st. So don't forget, your 2022 RMDs are

due December 31st and they're changing. This rule's changing under the new law, but not for this year.

Yes, for 2022 it's the same. So we'll be going over this on the Directed IRA podcast. Secure Act 2.0. Lots of content. We're going to be putting out on that. I've got an article, a YouTube video already, but you'll see more on that, on all these changes. RMD rules are changing, but 2022 unchanged. Got to get the R and D done still.

Okay, I want to give a tip, but I want to talk about the NFL first. No, I'm just joking. Okay. I'm looking over my list. Yeah, I think we're. I don't have anything else for your end. Last minute tips, people getting your books in order, making some good decisions on purchases, your Roth conversion, setting up a solo 401k, paying the family members, capitalizing on your HRA. I will say this, for those that have the flexible spending account, use it or lose it. You should check with your company policy and procedure. You can turn in some receipts. There's a grace period now that goes into January, February, and I think into March, but you don't want to risk it. So if you do have medical receipts and you have that day job flexible spending account, make sure you turn in those receipts, too. So. Okay, well, I think it's time to just, you know, sit back and assess your menu for the next two to three days and get your bulb schedule. Even if you don't like football, it's always nice having it on, you know, just.

Yeah, just that creates, you know, that holiday spirit that, you know, this special time of year. And, you know, drink the rest of the eggnog. You know, it's gonna go bad here anyways, so, you know, finish off that eggnog.

I. You know what? I just saw that in the fridge just literally this morning. I'm gonna. As soon as this podcast is over, I'm hitting. I'm hitting the eggnog. I'm gonna hit it. Okay. Gonna go hit it hard.

Good for you.

Call 911 in about three hours when they're coming over to give me cardiac, you know, some sort of.

You learned some eggnog today. Well, make sure you guys are signed up for the newsletter. There's lots of tax tips there. Also, you'll find some of the resources, you know, on Mark's YouTube channel, on mine. On our sites, we have lots of in depth detail on how you do these tax strategies. Like, I've never heard of some of this stuff and I got three days to pull it off. You know, it's a Hail Mary pass for me. Yeah, but now you're going to know what people are doing next year, what the cool kids are doing. They're saving taxes. So you got to take these steps. You got to actually do these things. Go through the steps, get them done, and you'll pay less tax. Good deal.

Love it. Okay, Matt. Well, that's.

That's a wrap.

That's a wrap. You're such an excellent co host. Thanks, everybody. Enjoy your holidays. Travel safe. Don't drink and drive. Send some merry cheer around to someone. Send some nice texts.

Enjoy, spay and neuter your pets.

Are we doing all the public service announcements?

I think so.

Yeah. Get your Covid booster, you know, whatever you know.

I don't know what they think you know.

Yeah. Well, thanks, everybody. We'll see you next week.