Answering Your Last Minute Tax Questions BEFORE May 17th

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Welcome everybody to a live podcast just for you. Regarding your side hustle, your side gig, your full time entrepreneurship tax return. It's time to talk about some of the deadlines that are coming up on Monday, just four days away. And this is a live, open forum. I'm here for you for the next one hour or less, maybe a couple minutes more. I want to be there to help answer your questions regarding any tax filings, legal structuring you might be facing in your small business, medium business or side hustle. Now, my name is Mark Kohler. I'm a CPA attorney, partner in a law firm, accounting firm, and also the CFO of directed ira.com so we're helping small business owners build wealth every day. I've got an amazing team of lawyers and accountants behind me, not at the moment, but behind me back at the firm doing a fantastic job for clients around the country. So don't worry about what state you're in or what the structure your business may be. My job today is to help you with any last minute questions before the deadline. May 17th in four days. Now let me make a couple initial, initial comments while you're gathering your thoughts for any questions. Now, I'm live on YouTube, live on Facebook and Instagram and a couple other portals. And I want to say thank you to Entrepreneur. Entrepreneur magazine is my is the sponsor of today's Live on Entrepreneur Facebook as well. So I want to give a shout out to Ryan Shea and his team. Now, let's just talk timeline here. And this is 2021, the year after Covid. Right? Okay. Right here on March 15, there was an important deadline. You had to either file your tax return or an extension if you were an S Corp or an LLC with more than one member. Now, if you're just the only owner of your LLC, don't worry, March 15 did not apply to you. But if you had an LLC with one, two or more owners, then you had to do a tax return or file an extension by March 15. If you had an S corp, even if you're the only owner, so it's even one owner. If you had an S corp for 2020 tax return back here, you had to file by March 15th. Now let me just say right now, if any of you are in this predicament and you're like, I didn't know. I didn't file a freaking extension. What do I do? I'm going to say this right now, do the best you can to prepare a return and file it even if you have to amend it later because the penalty is $300 per month or part thereof per owner until you file, it's ugly. So If I've got two owners, that's a penalty of 600amonth for March, April and May. So that's $900 in penalties. So you want to file right away, stop the penalties, and the first time it occurs, you can file for a first time abatement, have your accountant send in a letter and say, I didn't know. And the IRS generally will forgive that first year's penalties because you were new to the game. But if you've asked for a penalty of bait and before and you just missed it, it's not going to be pretty. Now, April 15th is normally our next big deadline, and that's when we have to file 1040s or single member LLCs. Well, due to Covid, we got to bump that to May 17, and that's coming up in four days. So there was no major deadline for 1040s on April 15 to file. We get to extend come May 17. Now that's any of you that are a person that needs to file a 1040 or those of you with a side hustle, side gig, or an LLC with only one owner, 100% you this group, I'm going to tell you right now, this could be the most important tip you get today. Listening and watching and thank you for being here. Even if you owe the irs, even if you have crappy records, even if you don't know what the hell you're doing, file an extension. Because the penalties for not filing on time are worse than not paying. Did you hear that? Penalties are worse for not filing an extension than for not paying. We got time to pay. We can work out that with the irs. But if they don't know what's going on, they're more mad. This is like that boyfriend or girlfriend first date. You went out and you promised you'd call or text them the next day and then you ghosted them. They assume the worst, and that's why you got your car keyed. So I'm just saying now, once you extend this coming Monday, you have until October 15th. I'm going to write that in red. You have until October 15th. You got plenty of time to file. So let's make sure you get this. Now, the form, if any of you want to do it on your own, it's not that hard. It's form 4868. 4868, that's your form and you're off to the races. So make sure you get these filed. This filed by Monday. Our accounting firm might be able to file that extension for you. Give us a call. We've got a waiting list for larger level returns, simpler returns. We can still fit some clients in, but I'll give you our contact information. In fact, Corey, my producer back in the studio, please put the URL the website address for our accounting firm and that they can go and talk to Shelby and get an extension filed. 4868. We charge like 50 bucks. And then if you do your tax return with us, we apply that to the tax return. You're good. If you don't do your tax return with us, at least you got your extension done very affordably. So get that done. Okay? Now there's a couple other important deadlines besides just filing your 1040 extension. The cool ones. These are good ones. You can put money in a regular IRA and get a tax deduction by May 17. This is all by May 17. I'll even put this apart in red here. We have until Monday. If you can put money in a regular ira, you get a tax deduction. If you can put money in an hsa, you get a tax deduction. Well, here's what's cool. You don't have to file your tax return by Monday. Just file the freaking extension. But put your money in the IRA or your money in the HSA before Monday. You can open an account, a directed IRA or other places, your broker, dealer, TD Ameritrade, online, acorns. Just get your account open and put the money in by Monday. We could talk a lot about that, but if you have a question, these two, you get a tax deduction and you can still file an extension. Now below these you have a lot of other things you could do. They don't get you a deduction, but the deadline is Monday. You can put money in a Roth ira, which I love. You might be forming a Roth for your mom, your grandma, your, your kids. So any Roth, we want to do that by May 17th. The next one is an educational savings account, a Coverdell. And you can put two grand in these by Monday. For any kid for last year, it counts for 2020 and you can self direct it and invest in whatever you want. Don't get sold on the 529s. I do not like 529s and I get hate mail for that. But I've got an article. Corey back in the studio. Will you link show my. I'd like you to put in the comments below in YouTube and Facebook everywhere. Corey, the link to my article on should I file an extension? And the article on the education savings accounts and those are right there in the on my blog market. Com. Corey. They're the first three blog articles. And you can put six grand in a Roth if you're over age 50. You could put seven grand in the HSA is 3450 if you're single, 7100 if you're married. And the IRA is six grand or seven grand again. So these are all end on May 17th. So we've got our first question here. And this is a good one. This is from. Oh, I thought it was Ashlyn. It's not but here's the question. It's and it just came in this on the my newsletter that went out last night. I said the deadline. Here's what I said. This is important. The deadline to make a 2020 SEP IRA or solo 401k contribution is May 17th. If you had a sole proprietorship. So you have to file an extension by May 17 and that gives you more time to put money in your 401k. That's a solo 401k or a SEP, you either have to do it by May 17th or your extension deadline. Now if you had an S Corp or a multi member llc, you got to deal with those deadlines. Now the question was don't understand your solo 401k comment. We have a solo K with you, but we haven't contributed yet. If we file an extension, will we have until October to contribute? Yes. LLC was set up with you as well. Well, thank you so much. And I didn't get the first name on this this story comment. It was in my story this morning on one of the social media platforms. Okay. All right. And I understand we're getting a little glare here and I'm going to turn it. Maybe that'll help. We've got some sun coming through. It'll pass. It'll pass. I don't know Corey. How about that? You can come in and tell me for maybe that'll help a little. Okay. All right. Now, Corey, do we have any questions coming in through YouTube or Facebook? You start giving me a first name where they're from and the question and I'll hit it.

Yes, we got quite a bit of questions already from an Abdiel. If I have a home office, if I have a home office, can I write off my lawn equipment?

And it's Abdiel. Okay, let me. Okay. I'm Going to stand back a little bit because I think I get my head cut off. But you tell me, Corey, if I'm standing right, okay, the question was, if I have a home office, can I write off some of my lawn equipment? Well, the technical answer is yes. But let me explain how when you do the home office, many of you might have just a side gig or an LLC or an S corp. Well, let's do our trifecta. Everybody knows my trifecta, right? So here's your 1040. Okay? And over here you might have a little side gig and you could even have a little LLC going. So some of you might have a little more advanced structure and you have an S corp or an LLC taxed as an S corp. Some of you may say, well, I've got rental property and a day job. So you have an LLC over here with some rental property. These are all three businesses. You've got a side gig, llc. Maybe you have an S corp running a business, or you have an LLC with a rental property. All three of those could take the home office deduction. Now, I've got videos on YouTube. If you just type Kohler Home Office, you're going to see a couple videos on YouTube where I go more in depth. But this question about lawn equipment is a fair one. So let's say this is the home office deduction. So I'll call it HOD Home office deduction. You have two ways you can do it. There's a simple method where you just take a certain up to 300 square feet times $5, 1500 bucks. Done. That's your home office deduction. No more. And that's it. You just take up to 300 square feet that you can say is dedicated to home office times $5. Done. I want all my clients at least doing the simple method. Now if you do the standard method, we're going to look at your overall home and go, okay, how much is dedicated to the home office? So you look at the square feet for the house. Let's say it's 3,000 square feet. And you say you've got 300 square feet dedicated to your little home office. So you take 300 divided by 3,000. 10% of the house is home office. Now, if you're renting or owning, doesn't matter, you're going to take 10% of electricity, water, utilities, power, gas. I said power twice tonight. Like you're seeing power. Home repair related to the home office specifically, or overall home maintenance, which includes lawn maintenance, property taxes, 10% of your rent or 10% of your depreciation or 10% and sorry, you get to depreciate the house. 10%. There's some math involved. Or. And 10% of the mortgage interest if you're buying the house. So this 10% covers everything to make my home office work. And that would be 10% of Internet, stuff like that. Now, it's different, maybe a little bit for each person, depending on square footage, the type of home, the type of business. But I want to say in general, yes, it would include landscaping costs or maintenance for your home if 10% of your home is a home office. Okay, Corey, next question before I rip this off.

All right, we got kcj. How do you depreciate rental property? For months that property was not being rented.

Oh, good question. And that's Stacy, that's Casey with a K. Okay, Casey said. Now let's go back to our trifecta. I just me a picture says a thousand words. So I appreciate many of you. Let me just get it put together because I want all my clients to get this drilled into them. We have a revocable living trust. 10:40 boom. Our rental property is over here in an LLC. Now, what's interesting, when you write off a rental property, some of you may not know this. If I buy $100,000 rental property, I don't get to write off the whole thing the first freaking day. I have to depreciate it over time. Now some of you are saying, well, Mark, I don't want it to depreciate. I want it to appreciate. I get it. They're two different things. The property is going to appreciate in value, but the IRS lets you write it off in pieces called depreciation. Now how that works is you have to take the land. So we have this rental property and this land around it. We take out the land, we have to subtract that. Usually on average, that's a 20% allocation. So if I bought a property for 100 grand. And it'll vary across the country. CPAs, you tax preparers, know this. So I'm going to take 20% of this and call it land. That's 20 grand. So what's left is an $80,000 building. Now, depreciation is then divided by. And in the first year that you have a rental, it's called a mid month convention. We don't give you the whole year of depreciation. If you had the rental six months of the year, then you get half the depreciation equal to one year. See what I'm saying? But you're going to take this 80 grand and divide it by 27 and a half years. That's going to give you the depreciation every year. So here's your number, whatever that number is. 80 grand divided by 27 and a half. Now, Casey asked a great question. He says, well, in the first year I bought this, we bought it, let's say, in August, and I didn't have any tenants, and then I rented it in November. So that's when I first had a renter. A renter, Casey, the general IRS rule is the day you buy it, you can start depreciating it because it's. You're preparing it available for rent. It is a rental property. You may be putting some final touches on it. You may have already put it up for rent. Doesn't matter. In fact, if you bought it in November and you said it was available for rent, but you didn't rent it till the next year in January, as long as you could show you were preparing it to rent it, it was a rental property. That was its purpose. You didn't live there, and you were trying to get it ready. Casey, you get to depreciate it for all those months. Now, the first month, it's the first year that you buy it and rent it, it's a little trickier math. I mean, there's a whole class on this in freaking accounting program. So be patient with me. Your accountant will figure out the math on year, but all you need to know is a next year. Let's say it's only rented out half the year, but you were trying to rent it or you're doing repairs. You still get to depreciate the whole freaking time. So. Good stuff, Casey. I sound like I wanted to say Casey Kayson. You know, this is America's top 40. I grew up a little. Some of you. All right, who's this? Corey, Next question.

This is from a longtime holder from YouTube. Is it too late to get a Roth IRA set up for 2020?

They said, can you still set up for 2020?

Yes, sir.

Yes. I don't need to diagram this. Well, you know what? I will. I got a diagram. Boom. Okay, so if you wanted to set up a Roth between now and Monday, there's two steps here, people. Step one is setting it up. The second step is you got to get the money in it before into business May 17, or else you don't count it for 2020. So if I'm trying to do a Roth, I've got to have it set up and I got to have the money there, so the setup is actually easier. Let's go through some options. One, you could, I said it earlier, you could go to Ameritrade on their app or on their website. Just kind of a basic brokerage. Edward Jones, Ameritrade, Scottrade, Merrill lynch, any of them are going to have set up a Roth right now, and you probably fill it out online. Done. It's set up, but you got to get the money there by Monday. So you're going to do an ACH or do a wire. Now, the IRS rule is as long as you have the check mailed to wherever the money's going and it's Postmark Monday, you're okay. So a recommendation I'd make to all of you, if you get the account set up over the weekend, but you can't get the money out of your bank, it's got to be out of your bank. It doesn't have to be there by May 17th. It just has to be check in the mail, postmark or out of your bank via ACH or wire by May 17th. So if it's Monday afternoon, 2 o', clock, and you might miss the wire deadline on the east coast, just freaking write out a check to the post office and do return receipt and get a postmarked. You're done. Okay, next, you could go to our company directed iraq directed ira.com and you could set up it right online. Right now. We can do it right now. And there's a form to do your ACH from your bank. And you could have it all done online with DocuSign tonight. You could also go to Acorns. I love Acorns. I like them more than Ameritrade when it comes to learning how to save. You can go into Acorns and get an account set up quite quickly. The, the problem is they want to verify who you are. And a lot of times you're going to have to upload your driver's license and it could take a couple days. So I might be a little nervous there. But you could go with acorns. So acorns, directedra.com, ameritrade, boy, any. You could go, oh, and the one I wanted to say, you go down to your bank. If you bank at Wells Fargo, you could walk into the bank and go, I want to open a Roth IRA. Make my deposit for 2020, take it out of my bank account. So that's the two steps. And you gotta have it done by Monday for 2020. Then you can turn around and do 2021 as well and start self directing or investing in crypto. The one thing I like to direct@ira.com, i did this over the weekend. I'm not kidding you. Over the weekend I pay the same set of fees as you folks do. But I. Because even though I've worked there, it's a bank regulated situation. I don't get any favors with directed ira.com. i set up a crypto Roth IRA. So I immediately get a wallet at Gemini. I put my money in my crypto Roth via ACH from my bank. 24 hours later I had my money in my Gemini wallet and I bought a bunch of cryptocurrency. Of course, Elon Musk didn't help Deutsche Coin any on Saturday Night Live. I was hoping to get a bump there, but I'm in for the long haul. I bought like 13 different coins and I'm just going to sit on them, just see what happens over the next year. Yeah, we'll see. Don't put all your investments in any one thing. And I'm not recommending cryptocurrency. It's an option. Corey, next question.

Awesome. Yeah, from YouTube again, we got a. Brandon. Hello, sir, would you mind explaining the savers tax credit? My wife and I contributed $78,000 to our tax deferred accounts. The 475B and the 403B. And our AGI will be 64,000. Will be $64,000.

Oh, Brandon. Okay, I'm looking up the rule right now on this because this is a trick. Okay, just one second. And okay, okay. And okay. I appreciate everybody's patience, patience here. You know what I'm going to do? I'll give you the numbers here, okay? Anybody eligible over age 18 that's contributing to a retirement account, you're getting a credit against some of your taxes for how much you saved. So the government's trying to reward us for saving. Normally, as Americans, we're kind of crappy savers. Now this is a new credit, so it's a little tricky, but the credit is worth either 10, 20 or 50% of a person's eligible contribution. But there's caps in place. The maximum allowed credit for a head of household is 2,000 or a married couple is 4,000. And the table is if you are making more than $66,000, joint married return, Brandon, the credit is zero. If you make more, if you bank between 42,000 and 66,000, the credit is 10% of whatever you saved. Now I'm giving you up to this $2,000. So I'm giving you just kind of this basic summary here, but there's some great tables out there and anybody looking for the savers credit, just google it and look for the savers credit table and it's going to tell you based on your income how much the credit would be. Now if you're doing your own taxes on TurboTax or something like that, it's going to help calculate it for you and tell you if you get it or not. If you're working with an accountant or a tax preparer, enrolled agent, they're going to do the same. But here's the point I'd make. Brandon and everybody out there, if you get the, if you get the savers credit, woohoo, great. But still save, it's an added bonus, cherry on top. But everybody get out and save money as much as you can and try to build that Roth account on the side. Brandon, even if you have the day job, 401k, 403b, all those still do a Roth on the side for what you can do for you, your spouse, your kids, you'll be so grateful you did. I'm a huge fan of Dave Ramsey on this point. Save, save, save. We're still going to get some debt once in a while to buy a business or rental property, but I want us out of debt as well. Shout out to Dave Ramsey. You know, I kind of debate that issue. Okay, next topic.

Yes, I got a somebody for our ebony Ellie from YouTube again. Where do I get the tax, the tax forms from? I've been buying items from my business and in 2020 but didn't make any sales as a sole proprietor. What forms do I use so I can start writing things off?

Okay, this is great. For many of you that may be a brand new business owner, there was 4.4 million new businesses started last year because of COVID People are like I got to get my side gig going. Get just starting to drive for grubhub or Uber or any of these delivery services. You're gonna, that's a small business. You're in business now. Ellie says I'm gonna go with Ellie. I hope that's okay. Sorry, we got some big issues here. So let's look at a timeline. So this is 2020 and this is 2021. Now let's do option one. Let's say any of you were a side gig small business owner last year. I'm going to assume you made some money. Now Ellie, we'll come back to yours. Where you said I didn't make any money. But remember everybody, I'm just talking about gross sales. Let's say you brought in 10 grand, but you had 15 grand in expenses. So you had a loss of $5,000. Well, that's okay. That loss is going to go on your 1040. So. But what I'm really concerned about is did you bring in any sales at all? So let's assume in option one you had sales of something. You got a 1099. This is option one. When you go to do your 1040, Ellie, or any of you out there, here's your 1040 tax return. You're going to fill out a schedule C. A schedule C is in Charlie, that's where your 10 grand goes in. You're going to detail your 15,000 in expenses. You're going to have a loss in this example and that loss comes over here and helps get you a refund on your day job income. So this is called a side gig, side hustle. Schedule C. I want you to take it home. Office, auto dining, electronics, computers, Internet, cell phone, all sorts of goodies. And you're going to do it, Ellie, on form, schedule C. Now for those of you that are new to this and you may be on a tight budget, Tax Slayer and TurboTax, the two biggies out there, they're going to make this really easy. You can do a lot of this on your own with a self prep tax software. If you need a little extra help, that's where you might go to a Liberty Tax or an H and R block and walk into somewhere where a person can help you, but they're more of a strip mall. Do it quick. Try to help you. Now, they may not have all the strategies Mark Kohler talks about, so you're going to have to be on your game. But doing it yourself or getting help with a national type firm like that might be a great place to start. For those of you that are seasoned business owners with some bigger income, you got to upgrade to get the best write offs you can. And that's where my, hopefully my podcast and the newsletter lives like this are helping you. Okay, now second option. Ellie said I didn't make any money. Now I don't know if Ellie meant I didn't make any sales or I didn't make any profit. See, that's a difference. I'm going to assume for a minute that Ellie meant I didn't make any sales at all. I just had expenses in 2020. Well, everybody, Ellie is in startup mode. When you are in Start up Mode. Mode. You don't get a write off until your business is going. Now, many of you have heard me say it a thousand times. It's a lemonade stand. I'm out there on the street. I got my sugar, my ice, my sign, my cups, my lemonade, and I'm out there making lemonade. You're not in business yet until you sell the first cup of lemonade. So all those expenses you had in the first year of getting your lemonade stand going, keep track of them. I want them. But you don't get to write them off on schedule C until you start making money. So let's say Ellie in 2021 is like, Mark, I'm freaking making money now. Things are cranking. So in February she has her first sale. Okay, that's good. I'm going to go back and grab these startup costs. There's a way to approach these. I've got a video on YouTube called Startup Costs. Go watch it. And we're going to write off all these startup costs and, and then all the expenses moving forward. We're out of startup mode, so I'm going to get to write those off. So there's these two situations. Did you make sales? You're going to go schedule C. If you didn't make any sales, you're going to save those expenses and write them off in 2021. All right, next question.

All right, this is from a Jimmy, also from YouTube. I'm not sure quite what he means, but can I use margin to pay off my tax bill?

Okay, Jimmy says, mark, I owe taxes and I'm going to use a margin account. Now what that means is he's borrowing money. That's a margin account that you might have with a broker and they give you some money to trade with if they let you actually pull the money out. Jimmy, to go pay your taxes. Fine. Look at the terms of the loan, people. You can pay your taxes with margin account, a home equity loan, a personal loan from someone, a credit card. You actually, I have clients that actually pay their taxes with a credit card. Get the points and take a free trip every year. That's possible. So you can use any debt or any loan to pay your taxes. Now here's what I'd recommend for all of you. If you owe the irs, file an extension, start figuring out your tax return. Get it really fine tuned. You look for every freaking write off you can find. Get that work of art for 2020 done. And figure out exactly how much you owe. Then sit back and go, can I Get this paid by October 15th because the penalties in interest between now and October 15th are not terrible. They just get worse after October 15th and the IRS gets testy. They want their money after October 15th and they start coming hard. So take the summer and Jimmy, make some money. Get that debt paid off without going into debt. Try to pay off your taxes without the margin account. And then everybody, if you have to, I would prefer you borrow money to pay your taxes by October 15th rather than trying to get on a payment plan or cut a deal with the irs. It can be time consuming, expensive, and very stressful. So be careful there. All right, Corey, next.

This is for long term holder again from YouTube. Are you going to be doing new customer appointments soon?

Am I going to be taking any customer appointments? Me, Mark Kohler?

Yes.

Oh, well, I'd like to. Now, keep in mind, we've got a law firm and accounting firm. And today I was training 15 CPAs on our accounting firm side. We have 10 lawyers on the legal side. These people are amazing. In almost every meeting where I'm training something, I learned something from them. These are very, very well trained, skilled, licensed CPAs and licensed attorneys working in our firms. Please don't think you have to have an appointment with me. Yeah, I can be a little more storytelling and maybe I explain things a little better sometimes and I get dramatic and excited and motivating and I try to make an incredible appointment, positive experience for my clients that have an appointment but don't feel like you have to wait for me. The sad part is, and I mean this honestly, I'm looking over here at my table, I've got an inbox this thick of people that asked me to do some of this work a month ago. And so I'm really doing you a disservice if I meet with you personally because my turnaround time sucks. I'm just so busy right now trying to run the firms and teach and train, but I'm still doing appointments with certain clients that I've started. The trains left the heart. You know, boats left the harbor and I'm helping them. Trains left the station and I will get back to taking some personal appointments more regularly. But right now my assistants, like Mark, you cannot. You're going to disappoint them and kill yourself. So thank you. Be patient. Meet with my team. They're really, really good and I'll be available in months and years to come. Thanks for asking.

Awesome. We got a Spencer from Facebook. I'm filing an extension due to reclassifying IRAs. I will owe an additional 1515 to 25,000. Way different from the last year. I am already 15, 15,000 from my W2. How much do I pay to IRA? How much do I pay to the IRS before I know exactly how much to pay?

Okay, this is a great comment. One of the other articles that in my blog, everybody, is how much to send in with your extension? Let's do a timeline here for everybody. This would be fast. So where. Here's our 2021, and we're right here. And it's extension time May 17th. Now, the IRS wants to know how much do you owe for 2020? And they want you to give us that. Give them the money by May 17th. If you don't, you have until October 15th to file your actual tax return. And the penalties and interest in this period of time are not terrible. They're not great, but they're oftentimes better than a credit card, that's for sure. So you've got this period where you, I said this earlier. Where you really want to get your taxes paid in full once you know what they really are. Okay, now the question is, well, Mark, I kind of know what I owe and I know I'm going to owe $15,000 to $20,000, but I don't know how much to send with my extension. Now, in my article that I wrote, I tell you how much you have to send bare minimum to avoid any penalties and interest because the IRS says if you send us at least a certain amount that you owed last year, and there's some equations there, and I talk about it in the article, the IRS says no penalty you can pay us between now and October 15th, and it won't be the end of the world as long as you hit some of these minimum benchmarks in a deposit. But the safe bet. Now I'm going to tell you the safe bet. Guess what you think you owe and add 10%. Send it in and then hurry and get your tax return filed in June or July. If you overpaid, you get a refund and no penalties and no interest. If you've got 15 or 20 grand and you decide not to send it in just because you want to make sure you're really accurate, you're going to pay some penalties in interest maybe, and I don't want you to, and you'll be mad that you're saying, well, Mark, why don't you tell me to at least Send into the 15? Do it. Send in what you can. And that extension again is form 4868. And you'll send in a voucher with the extension on how much you think you owe. And just do your best to guess it and throw in a little extra if you can, then hurry and file because you're giving them an interest free loan until you get your refund. So hurry and get it off. And I'm going to give a word of caution here too. For some of you, your state taxes are still some, something you got to think about. You got to think. Does my state need an extension? Extension? Do they accept the federal one? What are the penalties in interest if I owe the state? Now this happened to me two years ago. I didn't make as much deposits with the state as I thought. I, and I thought, it's just the state. They're not going to kill me. The irs. I'm more worried about the irs. I had moved to a new state and I just didn't look up the rule. I was in a hurry. I said screw it, but it is what it is. I'll just pay. The freaking penalties were terrible. I was like, holy crap. And so I was really shocked at how bad the state penalties were. And that was the state of Idaho. Worse than many other states. So you got to just double check what the rules are in your state as well. Okay, next question.

Corey, I need to make a change to my 2020 tax return. Is there any time limit for doing that?

Yes. For those of you that may have already filed your 2020 tax return and let's say you're going to do an IRA contribution in the next four days or an HSA and you forgot to do it, you can go back and amend your 2020 tax return and get a refund because you, you paid too much or whatever. So if any of you need to amend your 2020 tax return, that's okay. You can do that. You have up to three years to amend from the date it was due with extensions. So you've got three years to amend it. So if you file an extension, you have, that means your 2020 return was, is due by October 15, 2021. So you have until 2022, 2023, 2020 24, up until 2024, October 15, to amend your 2020 tax return. Anyway, if you're going to amend, get it done right away. Get that refund. So. But you have three years.

Awesome. This is from Sherry. If you want owe money, is there still penalty if the extension is not sent in?

Oh, fair question. Okay, Sherry, great question. I'm going to repeat it for everybody because that's a really good one. I know many of you can hear Corey asking the question here, so I'm not too worried. But this is. I want to make sure that everybody hears this clearly. If you don't owe any taxes, there's no penalty if you're late filing because the penalty is based on how much you owe. Now, if some of you are due a refund, the IRS does not pay you interest. So you want to make sure you hurry and file your tax return and get that refund. But if you don't owe, there's actually no penalty for not filing your extension. Now, I will say this, people, you don't want to play that game though. The IRS is like that boyfriend or girlfriend that you ghosted. They're not going to be happy. You might get your house egged or your car keyed or who knows what, right? Some hate mail on your social media. So the irs, when they're in the dark, they didn't know that you didn't owe, right? They don't know. So you may say, well, I don't owe, so I'm not going to file and I'm not going to worry about it for a while. And then it comes in the next year and then it's the next year and then your records become a mess. And then sometimes you end up owing to because your records are so bad, it's not what it used to be two years ago. Putting it together. So I recommend to everybody, do your best to get filed right away, especially sometime in the summer if you need to. Even if you don't owe, get it done and get it over with. The IRS won't be bugging you. You won't get any nasty mail from them because they don't know. They want to know what's going on. So next question, correct.

Can I revoke S corp status for 2020 and make it only be applicable for 2021?

This is from Dundeep11W11 says, Can I revoke my S corp status? Now, I'm assuming he's an LLC or she is an LLC for 2020 and they made an S election and then Covid hit and they didn't make as much money as they thought. And so they said, I don't want to file an S corp return, I just want to revoke it. Can you revoke an S election? Yes. The ramifications of that may not be worth it. First of all, you can only revoke an S election if you made the S election on the same day you formed the llc. So the formation of the LLC and your S election are the same day, then you can revoke the S without a problem. If your LLC survived for a while, maybe a year or two, then you made an S election. Revoking it is a lot more challenging. You might have a C Corp period in there, which is not good. Also, once you revoke it, it's a lot harder to get it back. The IRS doesn't want to play this game. They're like, if I don't know your situation, and a lot of times when we meet with our clients, we might say, well, if you're going to revoke it, let's just kill it and start a new company. That might be cheaper than trying to go through all this revoke crap. So that's an idea. Also, I want to know, do you have a gain? Do you have a loss? Is the name important to you? Do you have employees? Do you have other ID numbers? Do you have sales tax? What state are you in? Is it costly to redo it? So there's a lot of issues W11. I would recommend you get a consult with an attorney, a tax attorney. You trust our office. I would love that. Give down below. Corey, please put down the phone number to call our office and get an appointment. Any of you that want to just schedule a half hour. There may be 150 bucks just to meet with a tax attorney for a half hour. On your world, it could save you 1,000, $10,000. Spend a little money for a professional that can help guide you through it, even if it's not us. I don't. I don't care. So, okay, Cory, next question. Awesome.

Got one from a Justin Clow. ESAs are good with much lower fees, but the limit is too low versus the 529 plan. Am I incorrect?

Okay, say that. Say it one more time. Wants to debate the covered L and the 529, but I want to understand this point.

Again, he's saying ESAs are good with much lower fees, but the limit is too low versus the 529 plan. Is he correct?

Okay, let's debate this. Boom. Let's do it. Jason, he's comparing the Coverdell esa, which is like a supercharged IRA for education. So it's been called that before. An education IRA. All right. And what's out there is the 529 plan. Now, all the broker dealers, and when you go out on the web to try to find out which one's better, you are fighting against Wall Street. Wall street is all about the 529 because they make more on the fees. These big mutual fund companies and the Wall street brokerages love 529s because you can put more freaking money in them. So yes, now, but was it Jason? I apologize, Corey. Justin, Justin says but the ESA is too low. Now I didn't want to agree out of the. Because that two word is a subjective word. He's saying they're too low. Are they low? Yes, they're lower than the 529. Are they too low? I don't know. I don't think so. Let me give you my counter argument. Yes, with a 529 you might be able to put 50 grand and front loaded up to 250 grand per kid in a given year. But your rates of return are terrible and the fees. Try to get out on the web and actually find out what the annualized yield per year with. After all the expenses are in any 529 plan. It's almost impossible. It's ridiculous. And you might be lucky after all my research and calculations to be at a 3 or 4% rate of return. Yeah, but Mark, you could have put away so much more. Who cares for 3 or 4% return? Or you can go buy a rental property and kill it and that that pay for my kids college. So yes, you can put a lot of money away, but the yield is just absolutely terrible or the percentage of return is just miserable. Now with a Coverdale you can only put $2,000 in, but you can invest it any way you want. And it's $2,000 per year per kid. And so if you're starting with your kids at age 4 or 5 or 6 now I know some of you are like, well Mark, I didn't know this 10 years ago, but if you've got 10 to 15 years where you can start doing this, you're putting away $2,000 a year and you're investing it. Now Corey, back in the studio, we love to look this up. If I would have put $2,000 four years ago in Lululemon stock or Tesla stock, you want to compare the rate of return on that two grand compared to 529. If I would have put $2,000 in cryptocurrency a year ago in some of these coins like dogecoin and others, which I know are high risk, you'd have over 300 to 500 grand. You want to talk about Bitcoin? $2,000 in Bitcoin ten years ago, when your kid was five years old, would it be worth today Right. Can't do that in a 529. So now if grandpa and grandma want to give you 50 grand for your kid, freaking take it, throw it in a 529. But me, I'm putting my money over here. And what I did, which I think is a lot of fun, I just did this this year with some of my older kids. We formed an llc. And I'm not going to tell you the full name of it. I want a little bit of privacy here. But this LLC has eight partners, and it's got our Roth IRAs of me, my wife, my four kids, and two spouses, because two of my kids are married. So that's four, five, six, seven, eight. We have eight partners. Now, one of these could be an ESA education savings account, not a 529. One of these could be a 401K. One of these could be a traditional IRA. One of them could be an HSA. So all of these accounts pooled together created a little LLC for me and my family to manage. We're flipping F150 trucks. We're buying some cryptocurrency. We're thinking of all sorts of little business ideas. I don't have a hundred grand in here. It's just a little bit of money to invest as a family. Do I want to. What do I want to get? I want 20 returns, easy. And I think we're going to do it. Can't do that in a 529. So. Justin, that's my counter argument. I. For what it's worth. All right, do both if someone's giving you money. Okay, Corey, next question.

All right, this is from a Nicholas. I didn't file. I didn't file 1040 for my W2 in 2019. I started an unofficial sole prop in 2020, but didn't make any money in 2020 from that business. How bad is my situation? Can I still file extensions for 2020?

And what's her first name?

Nicholas.

Nicholas. Oh, Nicholas, your situation is not bad. It's great. I love your situation. Okay, now let's. Let's put it up on the board here. What did Nicholas do in 2019? He had a W2. All right, cool. In 2020, he said he had his W2, plus he started a small sole proprietorship. I love it. I love it. I want all my clients to start a small business. So we're over here with this little SP. Sole proprietorship. Now, he says he didn't make any money. I don't know what that means. Does that mean you didn't make any sales or you didn't make any profit. Now, I'm gonna hope you made some sales, but with all your write offs, you had a loss, so there's no profit. It was a loss. Am I okay with that? Hell, yeah. And there's file an extension. Give your chance to do your tax return. You're going to file a 1040 tax return, and you're going to do a little Schedule C over here for your small sole proprietorship. It's going to generate a loss. Let's put the loss in red. So you got this loss in red, and the loss is going to come over here and reduce your W2. You're going to get a refund. This is great. Now, that's assuming you had sales, you kept some decent records, you had a day job. I, you know, I don't know all your facts, but, Nick, this is wonderful. Now, what I would tell you to do is don't give up. Turn the corner, go into 20, 21 and say, you know what? I'm going to keep learning about small business. I'm going to listen to Mark Kohler's podcast and check him out when he's live. I'm going to be a small business owner. That's great. Have a side business. It's too risky not to have a side business, right? Some people are like, oh, it's too risky to start. Hell, you see what happened with COVID right? People lost their jobs. Just think if they had a small business to fall back on now, next time around, Nick's going to have a small business on the side, and he's going to learn how to make it profitable. He's going to be able to pivot, change the game plan, change the marketing plan. It's okay, Nick. I think you're doing great. File an extension. 4868 by Monday. Get your crap together on your books and get in and file your taxes in the next month. I'm all good. Sounds good to me. I love it. All right, Cor.

All right, from Marianne. How is mortgage interest written off if you purchased a home after 2017?

Oh, my gosh. Marianne. Okay, Marianne, I'm going to. Oh, am I going to my last piece of paper? Ooh, I don't know if I want to do that. Okay, Marianne says, I want to write off mortgage interest. Now, the way she said it sounds like it's her home. She said, I bought it after 2017. I bought my own home. How much of the mortgage interest can I write off if you have a rental property, the mortgage interest is 100% write off plus depreciation, plus property taxes, repairs, maintenance, HOA, all sorts of goodies, tools at Home Depot, blah blah blah. Cell phone. So Marianne, again, I want to say it to everybody, but when you buy a rental property, mortgage interest, no limits, 100% write off against your rental income. But if you're buying a personal residence, the mortgage interest write off has been limited. Now I'm embarrassed. I haven't talked about this in over two years. I mean we were knee deep in it when the Tax Cuts and Jobs act was passed. I've got blog articles on this but Marianne, I haven't looked at them in almost a year and a half. So I'm going to. Maybe it's showing my fallibility here on a webinar. Actually endears myself to some of you going, oh, Mark really doesn't know everything. I cannot remember everything. But here's the deal. If you bought a home and you have mortgage interest, it used to be a much better write off. And property taxes are limited to $10,000 across the board. And if you have a bigger mortgage, some of the interest is limited. I can't remember off the top of my head, the limit. Someone's probably writing it in the chat. I got an article on this in my blog, but the standard deduction has been increased to over $12,000 which is just huge. And for. And so a lot of people gave up on itemizing and writing off their mortgage interest because the standard deduction was so good. So Marianne, what you want to do is compare itemizing to standard. If you're married or single, look at your total mortgage interest, property taxes, charitable contributions and say and maybe medical, which I hate writing medical off on a schedule A. But look at your schedule A, compare it to the standard deduction and you can easily look at mortgage interest limitations on owning a home. There's going to be 500 articles out there on Google. I think I have a good one. I just can't remember. I haven't looked at it in almost two years. Sorry Corey, next question.

Yes, this is from Calvin. I'm 46 and a self employed truck driver. What is the best plan for my retirement? On.

Okay, and you said retirement by what age?

60 years old.

Okay, I'm going to use my last sheet of paper. This is risky, but we're going to do it in my trifecta and this is a great question for everybody. In fact I this may be the climax of the show. Can we call it that? Corey, Maybe, I don't know. I can take one more question after this. Let's look at here at our diagram. This is our revocable living trust. In this today we or tomorrow we start our annual special on revocable living trust. Everybody's got to have a foundation. Get your trust done. You can go to our website. KKOS lawyers. We knock off 300 bucks so it's 1200 for estate plan, one of the best in the country, any state. Go check it out. That's your revocable living trust. We do it once a year. It's our 11th year in my master diagram. You guys are going to love this. I have clients that have a W2 as well as the small business and they may have an S corp or an LLC or a sole proprietor, but they've got this little small business thing going on and maybe themselves or spouse has a W2. The question being Mark, how? What's the best way to save for retirement? My answer is it's a multi pronged approach and I'm going to get a little. Dave Ramsey is here because I think it's important before you start saving money, you need to look at getting out of any consumer debt. I want you out of consumer debt because if you're paying interest on debt, that's money that could be working for you and you earning interest, you want to get rid of this right away. So we're going to get rid of consumer debt and we want to have an emergency fund for when things come up. This emergency fund is going to be there because crap happens and I don't want to go to credit cards when something bad happens. So we're going to have two to three months of living costs. If you, if your monthly net is 3,000amonth for rent and mortgage and blah blah blah or whatever. I want you to have $9,000 in the bank that's ready to go. A lot of people go, yeah, I got access to cash. Not in a credit card, not borrowing from someone, not in your home equity, cold hard cash. I want two to three months set aside, then we're going to start doing certain things. If you have a day job now in this example or question person here did not have a day job. But if there was on the thing in the mat on our story here, I'd want to do a match at my day job. I want to play up to the match and have the company double my money. And that is a great rate of return. Double my money, 100% return. But I may leave it there. I Want to play in the match and get out then in my own little S Corp, for those that are a truck driver and you have your own little S corp, which you should. Many, many, many of my truck drivers making over 50 grand a year, they get their 1099 to their S Corp. We're going to create a solo 401k and we can start building a Roth inside the Solo 401K. If you have old IRA money, we may roll it over into it. So we're going to take our old IRAs, our old Roths, and roll them into the Solo 401K. Meanwhile, we're going to create another Roth on the side. So I'm building my 401k, I'm building my Roth and I'm getting a match at work. Now if you're married, this is, you know, you can double down on this and so you might have a couple Roth iras. Also. One of your biggest costs coming down the pipe is health care. So we want to start building a health savings account as well. So all these little buckets are tax deferred, tax free strategies. Now what do we do next? I know some of you are like, Mark, I can't do this. I don't have enough money. Listen, listen, don't go anywhere. Next, I want to be trying to buy one rental property a year. Now some of you are like, Mark, I don't even own my own home and you're telling me to buy a rental property? Hey, hey, hey. You can partner with friends and say, hey, I got the idea. I know a good rental. I'll do the work. You got the cash, you got the credit. Let's form an LLC and go out and buy a little rental. You don't have to own the rental 100%. The rental doesn't have to be in San Diego, California or Hawaii, Kai Wahoo. Or in New York City. You could buy a little rental in Mississippi, a little rental in Oklahoma and Idaho, the breadbasket states in America where all the Fortune 500 companies are building their factories. There's so many good small tier 2, tier 3 cities with great rental properties. Start shopping. You're a truck driver, for crying out loud. You're seeing the country. Especially if you're a long haul truck driver. You might be a short haul, but if you're a long haul truck driver, holy crap. You should be looking for rental properties everywhere you go. And I'm going to set up LLCs where the rental properties are located, not this Nevada crap. Or a C corp in Nevada or Delaware. But I'm going to set up LLCs where my rentals are located. And what happens is you're out of debt, you're building your retirement accounts and you're starting to look for a rental property every year. In five, 10 or 15 years, you're going to have more than enough to retire. It's not a get rich quick scheme. It's just pointing our ship in the right direction, setting the sails, getting out the oars and paddling. It's hard work. I'm not teaching a get rich quick scheme. I'm teaching and get rich in the long term scheme. And it works and you can do it. So I would be looking big picture. Now, this little diagram is for paying kids or spouse. This is a little family management company. I want you to own your own home. Possibly sometimes you don't even own your own home and you're buying rental property. I've done that anyways. Okay, Corey, last question maybe.

Yes. This is from April. I live in Texas and I have a sole prop. May I write off my lease apartment rent.

Okay, so April in Texas has a little sole proprietorship that's right over here. And she says little side gig. Can she write off her rent? Well, the technical kinda. That's the answer kind of. You can't write off the whole rent because you live there too, but you get to write off something. Yes, in April, it's the home office deduction. So we would start out by looking at what's the total square footage of your apartment or house that you're renting and how much is dedicated to an exclusive area for your home office. This is where you've got to do some homework and watch the movie of the Accountant with Ben Affleck. Oh, awesome movie. And in the first 10 minutes of the show, he explains the home office. In his little accounting practice. Strip mall office, he explains the strategy. But April, yes, you get to write off some of your rent and you're going to include some of your utility bill, some of the Internet bill, depending on the size of your business. Married, single, other phones, I might write off 100% of your cell phone. We're going to write off hotel, travel, dining, auto. Oh my gosh, there's so much. April, I've got my book, the Tax and legal Playbook has so many ideas and strategies in it. I have a workshop you can watch online immediately@markjakeholder.com My 8 Steps Workbook. I've got tons of content out there. So much of it is either free or affordable. Keep studying. April, I want to make a final comment. Corey, are we good? Yeah, we're all good. Okay, so thank you in the studio to Cory for his hard work today making this happen remotely. Everybody, please don't go anywhere. Let me just say one last thing. Entrepreneurship, a lifestyle. It's a lifestyle of flexibility, not freedom. Sometimes having a small business straps you down. It can be some hard work, but you have flexibility to work when you want and to sometimes make as much money as you want to make. There's no glass ceiling. And having a small business is something you can fall back on. You can teach your family about entrepreneurship and hard work. You yourself can make money. Maybe it's something you love doing because you hate your day job, but it takes time. It takes practice. It takes street smarts. I've been running my own law firm for 20 years with, I shouldn't say my own. I've got partners and a great team around me. But I started 20 years ago opening up my little shop all by myself with one paralegal. And we got going. And a little shout out to Deb, my first paralegal, and she's still with us today. And I had four or five businesses during college, and it took me 10 years to get through college and go through law school and a master's program and own businesses. But you know what? I don't regret it. And it was hard work, but I've learned so much. And I didn't learn it all in one year, in one month, or what, you know, one workshop. Please keep sign up for my YouTube channel and hit the bell icon and subscribe. And every time I go live, you get a ping. I'm doing newsletters every week. Sign up for the newsletter at my site, markjkohler.com I do an annual workshop that's very, very affordable. And the podcast every week I say this and there's others. I listen to podcasts of others that are great entrepreneurs. Please continue learning. Don't give up. Entrepreneurship is a wonderful part of the American dream. I know it's hard, but I'll be right there alongside you, working with you. So see you next Thursday for another live session at four o' Clock Mountain.