End of Year Tax Strategies EVERY Small Business Needs To Know

Foreign. Welcome everybody to the most powerful live broadcast you're going to listen to this week, maybe this entire month. I want to save you money. I want you to make money when you save on taxes. It's a lot easier than going out and trying to make a sale or make profit. It is easy to sometimes save taxes if you have the right strategies. If you've got a side hustle, you've got a small business, you've got a rental property. If you have any other income other than a W2, which 50 million Americans now have a valid side hustle, that's a 1099 coming in from selling on the web, private service, whatever, then you've got some opportunities for some tax savings. I'm going to give you seven seven year end tax tips right now, today, and I'm going to answer your questions. And now. My name is Mark Kohler. I'm a CPA attorney, best selling author. I've been in the tax and legal industry 25 years. No one has more books, more podcasts, more videos on YouTube with the credentials of a CPA attorney than me. I'm the one. I'm the goat. And I'm here for you today and I'm so grateful you're here. So let's get into it. I've got seven tips I just said to take advantage of tax savings before year end. Okay? Number one, if you're a follower of mine, you know this is coming. It's the number one strategy for Main Street American small business owners and that is the S corporation. Now what that means though is there's three different strategies here I want to bring into this one. I've got about 20 strategies that I'm bringing into this. 7. The first topic is S corporations. Some of you, if you have an LLC and you're going to make over 40 to 50 grand this year net, you should be doing a retroactive S election right now to the beginning of the year and then pegging your payroll in the next three weeks. You have to do the W2 piece and the retroactive S election in the next three weeks or you can't do it. And I'm going to give you resources of where you can get a tax advisor in my network, this Main street tax pro network where you can get some help with this right away. You can even call my own law firm. It only costs $250 to do an S election retroactively to the beginning of the year and then you got to knock out your payroll. Well, we can walk you through that. You're going to save thousands if you're making more than 40 to $50,000 a year. Every small business owner making more than that money on Main Street America is an S corp. Now, for those that are already an S corporation, you need to make sure you're taking the right amount in payroll or compensation, but not too much. And a lot of accountants are far too conservative with this. So I want you to be careful with this. Now, you can Google the Kohler payroll matrix. I've got articles on this and video after video on other on my YouTube platform. So please go study up on this, but meet with your accountant before you're in and peg your payroll. Now here's the last piece. I said there was three parts to this on the W2 that you're going to take out of your S corp and you don't have to take a paycheck. You're just going to report it on paper. That W2 needs to reflect how much you paid in health insurance throughout the year. And if you did an HSA contribution, I want it to come through your company. If you're doing a solo 401k, that's all got to come through that W2 that you're going to report in the next three weeks based on whether you're an S corp here or now. You cannot do this in February or March or April. You've got to deal with it now and again. It can save you thousands of dollars. I have other videos explaining how and why. Number two strategy, paying your family members. This could include your kids under age 18, your kids that are 18 or older, or even your spouse. See, here's the deal. You don't want to pay taxes and then give family members money. You might be in the highest bracket. Your kids don't pay taxes on the first $14,000 and change this year. That's their standard deduction. If they go work at McDonald's and they're under age 18 and, well, no, actually 18 or older. If you go work for someone else, you don't pay taxes on the first $14,000, no matter what age. So pay your kids in your business. Let them pay no tax on the money you're already giving them anyway. It's such a wonderful strategy. Now you've got to do it the right way and you've got to process that payment before the end of the year. And I'm not talking about a W2 or even a 1099 for your kids under age 18. If your kids are 18 or older, they're going to get a 1099 in their Christmas stocking. But you've got to make sure you go through the steps before December 31st. You can't say you pay your kids in March if you didn't pay your kids in December. So you've got to understand that this is a chapter in my book. Where do I have a book here? Tax and legal playbook right here, best selling on Amazon. You can read the ebook and get the audiobook right now. Go over to Amazon. Our whole chapter on paying your kids. It's there. You got to get this done. Okay, Number three, holding your family board meeting before the end of the year. If you have an LLC or a corporation, you're required to have minutes. It gives you better asset protection. It's a great tax write off. Someone today was complaining going, well, I don't want to be an S corp because, you know, there's a lot of work. I'm going to have to do minutes every year. Great. It's a tax write off. We wrote off Thanksgiving dinner because we had a board meeting right after. I want you using this time in the holidays when you're together with family to pull out the company card to pay for everybody's travel, to pay for maybe the Airbnb or the hotel for some family member, a rental car and the food to have your family board meeting. Your husband or wife, mom or dad, brother or sister, kids should all be at that board meeting to guess what, Talk about financial literacy, to talk about money, to talk about building wealth, to talk about your business. Now you could even second strategy under this is what's called the Augusta Rule. Rent your house to your business for the meeting. Pull records of what the fair market value under an Airbnb rental for the day or two days is. And you're going to hold your board meeting and pay rent to your company to have that rent to yourself from your company to have that meeting. It's a tax write off in your business and it's tax free to you. You get to write rent to yourself for 14 days a year. Tax free deduction in your business. Now hold your board meeting, people. You don't have to be a billionaire to have a family office. All of you should have a family office. Do it. I got other videos and articles and podcasts on that. Number four, this is a big one too, and that is buying any equipment, supplies or even a vehicle before your end. If you're going to be buying a new truck or car in January, buy it now. The tax deductions for Purchasing a truck or SUV are even better. There's bonus depreciation for even a car that's better than it's ever been. Now, you might do miles each, you might do actual. But if you need a new phone, a new copier, a new printer, a new laptop, a new phone, a new phone case, anything at Best Buy, Apple Store, whatever for your business electronics, put it on a credit card in December. It's a tax write off. I'd rather have a tax write off now than take it 13 months from now when I do my 2025 taxes. So accelerate any payments that you're going to have to make anyway and take the tax write off now. Number five, this is a higher level strategy for some of you that are making more money. Are you doing a solo 401k? Are you going to do a mega backdoor Roth? These are strategies that allow you to take a bigger write off in your business to having a 401k for yourself. Now, you can have a 401k at work and your small business, that's okay, you can do both. But the deadline to set up a 401k before year end is December 31st. So you've got to have that 401k in place. Now yes, there is a new law that allows you to set up a 401k next year, but you only get to take some of the deductions. You don't get to do the employee deferral unless you set it up before year end. Big conversation. Got a whole podcast on that as well. But if you can put away an extra 20 or 30 grand in savings and go buy some crypto or real estate or do it some stocks, bonds, mutual funds, whatever the hell you want, self direct it. But you've got to have that set up before year end. Now another tip that is related to the 401k in this topic of number 5 is if you have a 401k at work or your spouse, you got to get the match before year end matching out, put in what you can for the company to do. 100% match. You just doubled your money. Forget that's better than bitcoin. Bitcoin, Put that money in, the money doubles and then you can come back and do your own 401k and your own small business, you can do both. So study up on that. Number six, the kids Roth ira. Not Kid Rock, but Kid Roth. If you pay your kids before year end, they can fund a Roth ira, buy crypto or stocks, bonds, mutual funds, whatever. Pull the money out for college and let the earnings continue to grow. You can pull that money out for college penalty free, tax free. But you can't set up a Roth for your kids if you didn't pay the kids before December 31st. So it's related to that topic number two of having your kids or your family members on payroll. But I want you to do the Roth ira, but you have to have the kids paid before you're in to do that. Also, Roth chunking. The deadline for you to convert any traditional Money in your 401k or an IRA to Roth is December 31st. So if you can even chunk out it a little, say, well, I'll convert 10,000, because once it's Roth, it'll never pay tax again. It is the best way to go, but doing it all in one year because you have to pay tax on whatever you convert. Don't do it all at once. Chunk at it just a little bit, Just a little bit. Fill out a Roth conversion form before year end. It's super easy to do. And just look into it now. Wow, we're knocking out six. Now, before I get to number seven, I want to remind you I am here for you if you have a question on any of those that I just shared. Any other like, well, Mark, can I do this before year end or should I do this? Bring it. I'm here for you for the next 20 minutes. I hope that I can help you answer some of these hard questions. It can be a little complicated. All right, now, number seven, I think this impacts everybody with a small business or not. If it's medical, medical expenses, if you have a flexible spending account at work or your spouse, that's called the use it or lose it plan. Maybe they're giving you 500 bucks, 1,000 up to 3,250. I think this year, whatever, they're going to tell you how much you can get reimbursed for tax free, but if you don't use it, you lose it. So get your receipts in before December 31st. Number two, you might be doing a health savings account. Now. A health savings account. You're like, mark, I can put my Money in before April 15, but right now is enrollment for your health insurance plan for next year. By January 15th is the deadline. If you don't choose your health care for 2025 with an HSA qualification, you don't get to do an HSA next year. So we want to get that chosen. Now, this is a major deadline. In fact, December 15th was the deadline for your health insurance to start January 1st. But if you're a small business owner, you can choose the right type of health care plan and do the health savings account, which is a huge write off, which we talk about in April because you can put the money in in April, around 4150 if you're single, 8300 if you're married or head of household. But you got to have an HSA and the deadline is January 15, which means get your butt in gear, do it right now, don't procrastinate. Now the last one is called an hra, a health reimbursement arrangement. Now again, in my book, I have a whole chapter on healthcare strategies. The hra, the fsa, the hsa, it's all in there. Go study it up tonight if you have to. I've got podcasts in this, videos on this, but the HRA is called the 105 Plan for Solopreneurs. So if you've got a small business, you had health care expenses this year, you might want to retroactively create that HRA for 2024, do a reimbursement and take a tax write off for all of your medical expenses for 2024. That could be co pays, deductibles, eyes, dental, you still get to write off your health insurance. Remember, back to strategy one with your S corp, you got to write off your health insurance through that. But you can also do an HRA and write off all your other medical. Super powerful. Some of you are so healthy, you're like, mark, I don't have a lot of medical. Then do your hsa, do the health savings account with a high deductible plan. Study up on that. So number seven was health care. And there's a lot of things to do, but you have to do it before December 31st. So get on it. All right, well, I'm going to turn to my studio director here, Danan, and I'm going to start answering questions and helping you guys out if I can in any way. Dana, what do we got?

All right, our first question is, does the board meeting, the family board meeting, does that only apply to kids or can I pay that standard deduction to my brothers and sisters? Oh, this is about the standard deduction, My bad. Can I pay that to my adult brothers and sisters as well?

Okay, well, I'd answer it this way. You can pay your brothers and sisters anything you want, but are you. I mean, I love my brother and sister, but I'm not going to give them 15 grand. So I can get a write off. I want the 15 grand. It's $14,600 as a standard deduction this year. But think through this. Are you helping support your brother or your sister? Oh, you gave them five grand this year because they were in dire straits. Give them a 1099 for the five grand. See what I'm saying? If you're supporting your kids in any way, shape or form a new car, helping them with phone, cell phone, school clothes, school tuition, whatever. If you're paying taxes and giving any Family member money, 1099, put them on the books. Pay them for helping you in your business and being on the board. That's what I'm saying. If you want to give your brother or sister 14,600, knock yourself out. But you're giving them $14,600 to get a write off. So if you're not doing them, giving them money, don't do this. It's you want it. By the way, you could pay your kids 50 grand if they earned it. They just don't pay tax on the first 14,600. I'm not saying if your kids don't earn 14,600, don't pay them 14. 6. If earn 6 grand, pay them 6 grand. First and foremost, if you're helping a family member with money, I want you to take a tax write off. Number two, pay them a fair pay for whatever the hell they're going to do. And then number three, take the tax write off. We're not going to just go pay a family member to take a write off because that means you really got to give them money. We're not going to do that. Next question.

Dana, if my small business had a $60,000 net income for 2024 but is going to go down to 20,000 in 2025, am I able to opt out of the S election?

Well, here's a great point. You're going to save probably two to $2,500, two to three grand this year by making an S election. You said it's going to go down to 20,000 next year. Why? I don't want that. I want you to make more money next year. Now, if you already know why, and it's a good reason, okay, so next year you're not going to have a reason to take a salary. That's okay. The S Corporation is audited 15 times less than a sole proprietorship. 1500% less chance of an audit. I have people wanting to be an S corp just so they can be more aggressive with the write Offs and no audit. That's huge. So next year you don't take a salary. Okay. There's no self employment, tax savings, but you got a better company. And then in 2026 you make more money again. Also maybe next year you do make more money. So it's not a bad thing to be an S corp. But if you're going to start saving money, whenever you start making more money, you're going to save even more and you get better audit protection. So I would consider pulling the trigger. And then next year you don't take a salary and you still have a better entity. So that's my. I don't know. I like it. I like it. Next question, next question.

If I make $900,000 in my W2 job plus 250 at 1099, does it really make sense to go to an S corp since I've already maxed out my FICA with my W2?

Oh, you didn't max out FICA. You maxed out Social Security. You're still paying Medicare and Obamacare. Do we have Whiteboard today? Okay, let's go to Whiteboard. So this person says, all right, here's my trifecta. I have a W2 day job and I'm going to make 900 grand. All right, God bless you. That's pretty damn cool. Now you've got 250 grand in a 1099. Now, if you're working your butt off to earn 900 grand, I don't know how many expenses you're going to have here, but let's just say it's 200,000 net. So 200 grand net and you have 50 grand in expenses. Okay, does everybody see that? They have a big W2 day job, 900 grand. God bless you. We are so excited for you. Then you're making 250 grand with your small side hustle. That's a main career for a lot of people. But God bless you again. Now you got this $250,000. We're going to write off home office, we're going to write off your board meeting, we're going to write off cell phone, we're going to write off auto travel, dining, all these goodies and you net 200 grand. See how that works? Okay, now their point is, well, I'm paying all my FICA up here, so there's not going to be that much FICA here. I don't need to be an S Corp. Now, it's a deep question beyond explaining a little bit. But here's the reality. You're going to love this. This is an okay, you pay 15.3% on zero to $168,000. Okay. Then you pay 2.9% on 168. Now I don't know if you're married or single, but I'm going to just go with single for just a moment. So it's 168 to 200 grand. Then you pay 3.8% on everything over $200,000. If you're married, it's everything over 250. Okay? Now look at, you're already at 900, so you've maxed out your Social Security and you're going to pay 3.8% on everything else. Okay? So let's do the math. If I do an S corp over here and because you have a full time job, I'd probably do payroll on you of maybe 20 grand, just enough to keep the IRS off your back. So you're going to pay your 3.8% on that and you're going to pay your 168 on this and then everything over this at 3.8. See how it's working out? So what we're going to save on is right here you're going to pay, you're going to save 180 grand times 3.8% if you did an S corp. And these are very common. So let's just do the math on that. It's kind of fun. Okay, so we go over here. Get to my calendar. Okay, so 180,000 times 038. We just saved 6,000. Saved $6,840. That's a Caribbean cruise for four. Mid level cabin. I mean I'm not talking about a suite, but 6840. And you wonder if an S corp would make sense. I don't know. You made 900 grand. But 6800. 400 is not chump change. Based on the facts you just gave me, you're saving six grand or more. Remember, it's Social Security that maxes out at 168. Medicare and Obamacare, boom forever. Okay, there's your answer. Give us a call if you need help. Let's get. Oh, by the way, let me just digress and say this. If you need a tax advisor, one of my Main street tax pros trying to get into one in the next two weeks could be hard. But I've got hundreds of them on my network so you can start emailing them and going, can you help me? Can you help me? You could call my law firm and we could do your S selection and line you up with the payroll service. But we're going to want to get you into a new tax advisor to do your taxes because obviously you have a bad accountant if you're not doing any of these things. So here's where you go. I want to just give this to you. It'll be down in the link below ww.markjkohler.com and then go to services and you're going to see my tax pro network and you can search for all over the country. You don't have to have an accountant in your backyard. It can be anywhere in the country. But this is where you can go to get a tax advisor. Now if anybody watching here, you're a tax professional and you're doing accounting or bookkeeping or whatever you're doing. Our network is amazing. And prices go up January 1st for this next year. I have a certification program. I put you in the network. We have weekly meetings, a tribe, a community, 75 plus different strategies to provide advisory services. We have business building classes every month all included in the program. Go check it out@marcjkohler.com Do a discovery call with someone on my enrollment team. You will freaking love it. And it's a write off this year and you can get certified immediately and start watching videos tonight on how to do a comprehensive consult and convert your your compliance clients over to advisory. All right, next question. Dana.

All right, really quick. I just want to point out to all of our friends on Facebook who are watching that we are not giving away bitcoin. There is a scammer in the chat. So just a heads up there where our team is take.

Our team is taking care of us freaking scammers. I hate it. No, we're not giving away freaking bitcoin. Don't answer any of that crap. All right, next, next.

Next question. My EA didn't want me to write off my Thanksgiving dinner for my board meeting. She told me that is a huge red flag. She even told me from conservative to aggressive. She rates herself at 7 out of 10.

Okay, whoever just said that, please send this live to her. Your accountant. I don't know if it's male or female. Listen, everybody, that accountant said it was aggressive to write off Thanksgiving dinner, which is the meal where we're going to have our annual board meeting. That's aggressive. That's conservative. Hear me out. You, if you have an LLC or corporation, have to at least have one annual board meeting. I don't care if you eat at Olive Garden, Applebee's or you're having a honey baked ham at home. Are you kidding me? And I'm going to have a legitimate board meeting, take notes, talk about my business. And that's aggressive. Unbelievable. Now I am a cpa, a board member on the AICPA for the state of Arizona. I am licensed in four states, I've taken the bar exam, the CPA exam, have a master's degree, written four books on this, and I consider myself a seven on aggressive. And writing off a dinner with my family to talk about my business is aggressive. Please, this, accountant that, you think that's aggressive, you got to have a reality check. Please come check out our tax pro network where I have boring conservative accountants with me trying to do careful, cautiously, aggressive strategies and writing off dining. Because that's the line it's going to go on dining to have a board meeting with my family. Can you guys. I have a feeling some of you are just laughing. Haha. Yes, Margot, go whatever. Give me some love in the chat. Am I crazy? No, no. Please write off your Christmas dinner, for crying out loud. And have a constructive conversation about your business and the future. Helping your kids build their business, your mom and dad getting out of debt, saving, having a Roth ira. That's what a board meeting is about. In no way, shape or form is that even close to aggressive. Trying out loud. Man, I'm going to lose it. All right, go ahead, Danan. Next question.

How do you value Augusta Rule for something like a six hour client event at your own home?

Love it. Love it. Okay, now let me repeat this. The Augusta Rule can get abused and it does. And I generally hate it for clients that are trying to just cook up a freaking write off. This is a joke. So the CPA that's watching this that your client asks you to come watch this. Thank you for watching. The Augusta Rule originated in Augusta, Georgia during the Masters where for 14 days the IRS said under the Paper Reduction act, if you want to rent your home, we won't even make you claim that income. Cool. Now where it gets abused is, well, as a business owner, I'm going to rent my home to myself for legitimate meetings where I have clients over for six hours or employees or whatever and I have a legitimate meeting once a month, once a, a week, once, whatever. But I for 14 days it's a tax write off in my business and not income to me any more than that. I got to claim the income and it's got to be fair market value. Okay? Now where clients abuse it is they don't Have a freaking meeting and they don't take attendance and they don't have a sales meeting with clients and whatever, they're committing tax fraud. I don't like my clients to do that, obviously. And we would not sign the tax returns. But if your client is holding a legitimate meeting for six hours with vendors or clients. Holy crap. And you go find out on Airbnb what your house would normally rent for, for that meeting, write it off. But you better darn well have some good records of what the hell you did. Next question.

So let's say that there's a video producer watching this right now and he has a follow up question to that. If there was, if you were using your house to shoot a commercial, short film, something like that right off business that is included.

Hell yeah. I mean, think about this. If you rent your home out to someone else so they can come to watch the Masters or the super bowl or the NBA Finals or Final Four, if you rent your house out to anybody else for up to 14 days throughout the year, you do not have to claim the income. And whoever paid you might get a write off. I don't know they paid you. But if you're going to use your home to shoot a commercial legitimately or film some YouTube or whatever legitimately for up to 14 days out of the year, you don't have to claim the income, but can take a write off. If it's a legitimate purpose for the use of the house, it's. There you go. All right, next question.

How much is it to set up and file as an S Corp? Is it usually an extra 1 to $2,000 apart from tax return fees?

Okay, so to convert, so let's say you have an LLC to convert to the S Corp, we charge 250 bucks. Done. So that's done the conversion, that's one step. Then you've got to do that payroll report. Now, once you're an S corp, you're going to do payroll every quarter. You've got to file the 941. Now the first year you do it, we're only doing payroll in the fourth quarter. So your payroll service is going to charge around 3, 400 bucks max throughout the year. Next year it's going to be, we charge you back in the day, 250 a quarter, 200 a quarter. So you might be out 600 bucks. ADP is very affordable paychecks. We have clients in our network that do it for clients all over the country, members in our network. So you got the conversion, then you've Got to do your payroll reports, plan on about 600 a year, maybe 800. And then you've got to do your S corporation tax return. I think you're going to pay at least 1,000, maybe 1,500. Now, I don't know what your books look like. Bookkeeping is separate. And remember, you should be doing bookkeeping anyway. If you have an llc. Bookkeeping is not a fee for an S Corp. Bookkeeping is being a good business owner anyway, so you've got an S corp tax return and payroll. Now, by the way, if you convert to S Corp, you just got rid of a tax return for your llc, which would be a schedule C. So you're not paying for a Schedule C anymore. So you just saved, I would think, at least $500 on that tax return. So net net, and S Corp is going to cost you about 1,500 to 2 grand on average in total, because bookkeeping separate. And you would have had an LLC tax return separate, too. Now you just have an S corp tax return and payroll. So I'd say 1,500 to 2 grand. So now we're not going to convert a client over to an S corp unless they have 40 or 50,000 in net income. Come up with reasonable comp. Let's say we go 50, 50 allocation. By the way, I teach CE on this and read every case in the book on CE for I'm sorry, on reasonable comp and teach classes on it. So you accountants watching out there, don't freak out if I recommend a reasonable comp level that maybe you're not comfortable with. But after interviewing IRS agents on my podcast for 20 years and never having a case ever of a client being audited for reasonable comp, maybe I've got something to share with you on this. Anyway, let's say you're saving four grand in FICA and it cost you $2,000 to be an S corp. All right, now, I know this is hard math. Let me figure this out. Spend two grand, save 4,000. I know, I know this seems really hard. It might be a little risky. Spend two, save four. Sorry, I'm being a little rude today. A little feisty. Okay, next question.

All right, our next question. I have an S Corp and I'm not paid salary to myself this year yet. No good. I know. But would you recommend it's okay to at least do one large salary now versus none at all?

Yes. Yes. Pick up payroll in fourth quarter. Do it. Call any of my Main street tax pros that do payroll and knock out Your payroll. Call up adp. You've got to do payroll and send in your deposit by January 15th. And you want to make sure you write off your health insurance and your HSA contribution and your solo 401k. You got a lot to do here. You've got to issue that W2 or you're going to get freaking audited. See, I love the S Corp, but I don't want to abuse it. So let's be on top of it. Get help right away. Yes. You got to do it. Next question.

All right, here we have, I think, be our last question of the day. And it goes back to the family board meeting. We're talking about who can be involved. And the question is, can it be just my wife and I as a board meeting?

Yeah. That's great. So husband and wife have their board meeting. I go meet with my partner once a quarter. In our law firm at least, Matt Sorenson, we have hosted podcasts together. We're doing a quarterly meeting. You can have more than one a year. If it's you and your spouse and you're having, you might write off a nice dinner two or three times a month to do business planning. I'm okay with that. Now, if you're going to travel to go see mom and dad, maybe put them on the board. If you're going to have the kids home from college, put them on the board. If you're going to hang out with another couple, put them on the board. If you're paying for the fees, brother, sister, if you're paying for it with someone, put them on the board. And make it a business experience. There's nothing wrong with that. So, yeah, all the time. Now, I'm not going to write off Little Caesars every night or whatever. I shouldn't eat Little Caesars every night. I don't. But I'm not writing off food every night to meet with my wife and talk about business. But once every couple weeks, we might go out somewhere nice. Yeah, we're going to write that off. Damn straight. That's not aggressive. All right, well, no more questions. All right? Okay. I know there's more in there. We're just going to cut it off. I've been going here for 40 minutes, everybody. It's easier to save money than make money. You are the captain of your ship. Don't expect your accountant to show up and solve all of this in April. You got to get engaged in it now. Find a tax pro in my network. If you're an accountant, come check out my network. If you. If you are a business owner and trying to build wealth, you've got to make tax planning and legal planning a priority. You're going to lose everything in a bad lawsuit or an audit and you're going to leave tax write offs on the table. Rich people love to talk tax strategies. If you want to be rich, start learning some tax strategies. My name is Mark Kohler and I love the American Dream. Have a great holiday season and I'll see you in the New year with another live after the New Year.