July 15th Tax Strategies with Q&A - Mark J Kohler

No penalty and no interest on any taxes you owed. So you were okay during this time period. No penalty, no interest. But on July 15th now you can get an extension. But if you owe, if you owe, there is going to be some small penalties and small interest. It's not the end of the world. Seriously, between here and October 15th, if you owe, you can pay here. And it's not that bad. I just kind of want to write that it's not that bad. The interest rate and penalties, it's almost like a credit card. But. And I know we got questions down below, we're going to get to those right here in a short moment. But after October 15th, all heck breaks loose. If you don't file or you don't pay by October 15, bigger penalties, bigger interest, and not fun. And the most important thing is, even if you can't pay, make sure you file by October 15th. Okay? Now I know that may have seemed crazy, but some of you are going to freak out over the next 12 days. It's okay to extend if you owe, guess how much you owe and send in a deposit. We're sending out emails to all of our clients on how to just kind of calculate that deposit. You can talk to your accountant, you can call our firm, we'll help you out too, whatever. But you can send in a deposit on July 15, then file an extension and you're still okay. I would do both 1 and 2. Do a deposit, file an extension, then you have until October 15th. But this is D day here. We want to make sure we're going to come around the corner into a payment plan, some sort of request for forgiveness of debt. I mean, forgiveness of I owe the IRS too much. Be careful of all those online commercials, radio commercials. But this is what I don't want you to worry about. Okay? Now the next point is I want to give you some of the best write offs that you can do now for 2019 still. And I'm going to put still possible for 2019. In fact, let's make this a little prettier here. It's kind of ugly. Let's do 2019 still possible. Then we're going to do a list of 2020, get my you know what together, together and do better. So this time you're going to get better savings in 2020 with this list. Okay? Number one, some of you can still fund what's called a SEP. You'll. If you have a small business, you can't do a 401k, it's too late. But you can do a SEP which could be as much as 20% of your net or if you have an S Corp, 25% of your compensation with your W2. Sorry, there's so much going through my head. Number two, some of you that don't have a small business or profit in the small business could do an ira. That's a great deal. Another thing you can be still doing is a Roth ira. Now you don't get a tax deduction for that, but you can do, even if you make too much money, you think you can't do it, you can do it the backdoor Roth. So that's an option. Number four. Any of you that want to fund a Coverdell for your kids, you can still do that before July 15th for last year. You don't get a write off but that 2000 can go into an account and you can self direct it and invest it. So you can do two grand here on an IRA you can do six grand or seven grand if you're 50 or over. And on a SEP you can do 20% of your profit if you're a sole proprietor or 25% of your W2 if you're an S Corp. So you've got these four options right out of the gate. Next, you might be able to do an HSA contribution, a health savings account. If you had a high deductible plan for 2019, you're in the money. You can do, I think it's 3,500 for 2019 if you're single or 7,000 if you're married, filing joint or head of household, meaning you've got some kids in the house. That's a big write off and you can do that before July 15th if you had a qualifying plan last year. Next. Auto. Auto is a huge deduction. If any of you bought an auto for last year. Don't fall into the trap of oh, I'm just going to do mileage. That's. That was the old method under the Tax Cuts and Jobs act two years ago. The auto deduction is better than it's been in 40 years. You can read some articles of mine, just go to Google and type Kohler auto deduction. I've got videos and articles on this and you've got to read it now. John, we're coming to you in Dallas in one second. All right, the next thing I want you to think about are all of your equipment, all of the equipment you may have bought and, or real estate and supplies. I want you to think about cell phones. I want you to think about Utilities and all of the little expenses that may be on multiple credit cards. And these are. And go back and look at any expense you can dig up for 2019. Absolutely critical. And I want you to try to dig up anything that could even be dining related. Look at every debit card, credit card receipt you can find. You should be building your books. And if you need to again file an extension. So you have three months to do better. Make a deposit of what you think you owe. All good. Now before I tell you. Well, I'm just gonna say it real quick. Max is dying to get to John's question here. I love it. Everybody hang tight. I'm gonna hit your questions as fast as I can. Let me give you your 2020. Get my act together. Listen, you can do what's called a health reimbursement arrangement. I'm going to put number eight, but you have to do it in the year you want your write off. I can't go back and do it for 2019. You might be able to do a 401k for 2020 because you have to implement those as late as November, December, and if you're in a group, it could be September, October. So business owners want to get a consult on what to do there. You can go YouTube, Kohler IRA versus 401K. Roth versus 401K. I've got some great little videos that summarize that issue. And you may, you say, well, my account takes care of everything. I went fishing with a guy today. It said, I go, did you get your PPP money? Yeah. How much did you get? I don't know. I let my accountant deal with it. There's some things you want to kind of watch over the shoulder of your accountant or your lawyer and tax strategies as one of them. Your accountant might be a lot more conservative than you are and you might be bringing them ideas. Which brings us to number 10, paying kids. Can you get your kids on payroll in 2020 if you didn't pay your kids for 2019? I can't do it. So we want to make sure your kids are there. Are we going to pay your spouse again if you didn't do it last year? We can't write it off, but we might be able to get your spouse into your 401k. If you're married next, you might have too much self employment tax. And we need to do what's called an S corporation. And for some of you that already have an S corporation, we better look at your salary level. A lot of CPAs make people take way too much in salary. It's called reasonable comp. It's a gray area and there's a lot of opportunity for aggressive yet legitimate tax planning when it comes to salary level. How much do you pay yourself? Because the more you pay yourself, the more you're going to pay in self employment tax. So. So we're at 13, number 14. I want to talk about buying rental property this year because it's too late, you didn't buy it last year or I'm sorry, it's too late to go back and buy something retroactively. Right. So we want to buy it in 2020. So I'm at 14 strategies and gosh darn it, I know I'm going to come up with 15 to 20 by the end of this webinar or this broadcast. Okay, so let's do a little Q and A. Remember, PPP has been extended by six weeks. We've got our 2015 strategy, our 2019 strategies, our 2020 strategies. We're kind of in limbo right now. And we can do an extension or not, we can pay or not. You want to be engaged in this and make sure you're managing your professional now, guys. Other than that, I'm all yours. Let's do some Q and A and knock this out. Okay, what do you got, Max?

Okay, John asks if an S corp made money in 2019 and is losing money in 2020, can you defer profits from 2019 to 2020 to. To pay at a lower tax bracket? 2019 is still not filed.

Okay, all right, so John in Dallas says, In 2019 I made money and he had an S corporation and he has not filed yet. Okay, so there's our story there. Now if he has not filed yet, that's okay. He can still get the PPP based on his payroll. So he probably already did that and that's good. But he made profit. Made money. We're going to put profit. Had an S corp not filed yet, but he had a PPP with payroll. We're all good now. He says, In 2020 I'm not making money. And I'm nervous. I'm scared I might owe for last year and I'm not going to owe in 2020. I got a loss. And so John's question is, and this is a really tricky strategic question. That's very good. John says, what can I do? Can I take my loss? I'm going to have a loss in 2020. Can I take that loss and go back and use it for 2019? Because I haven't filed yet, but I have a loss for 2020. The answer is generally yes, but there's some timing problems. 2020 isn't over yet. And your 2019 return is going to be due before 2020 is over. So there's some timing. So here's what I've been recommending to clients. Oh, by the way, under the CARES act, you can go. You can take any losses this year and go back up to three years. John, it's not just as good as 2019. We can take any losses that you have net operate. I mean, it has to be against all your other income. You've got a literal net loss in your personal Life on your 1040 with after all your other income, I've got a loss. You can take it back up to three years and get refunds for taxes you paid in the last three years. That's under the CARES act, people. Well, John wants to do this right now. Well, he can't do it right now. 2020 isn't over, and he hasn't even filed 2019. So here's the technique. Okay? Here we are in July. Here is December 31st. Here is 2019. Now we're. Oh, I'm sorry. Yeah. Now we're in 2020. And John, David, or John. It was John. John has to file, like all of us, by October 15th. Now, his S Corp. Return will be due by September 15th. So John's got to file his business return and his personal return, and then he's going to owe money, let's say. But he's broke. He's had a bad year, and I'm so sorry. This is a conversation we're having a lot with people. So he's got this tax that he owes, and he's like, what do I do? I don't have the money to pay it. The number one thing you do, John, no matter what, any of you listening, is you make sure you file. The penalty for not filing is worse than the penalty for. For not paying. The IRS does not want to be ghosted, John, like your last girlfriend. You have got to make sure that you let the IRS know what the freak's going on. And you're going to say, well, I'm going to. Oh, that's okay. You are allowed to make a phone call to the irs. They're going to send you a nasty gram within about 30 days ago. Hey, John, we want our money. You call the IRS and you ask for an automatic extension to pay. There'll still be some penalties and interest, but. But they're going to back off. They're not going to start collection. They're not going to hit your credit. They're not going to lean your house. No one's going to arrest you. You will survive. That typical kind of phone call that you're going to make is going to buy you about 120 days. Now after that, the IRS is going to want some money. They're going to want an installment agreement or something, an offer in compromise, or they're going to start collection efforts. And then it gets ugly. But you've got this little bit of time here to kind of buy yourself some time. Now what's John going to do? He's going to be Johnny on the spot, no pun intended. And he's going to file his 2020. Sorry, what am I doing? We're in 2020. Okay, 2019. Oh, my gosh. Why don't you tell me? I had this all jacked up. Max, you're killing me. You're here to look out for me. We are in 2020. Here is 2019. We've got to file. We've got to file these taxes for 2019. And we're going to owe. Now we're into 2021. Sorry, everybody. You're probably like this. Kohler's an idiot. I've got some notes here. This is hard. So now in 2021, Johnny's going to be on the spot and he's going to file his personal and business return as fast as he can. I'm going to put personal and business return as fast as he can. Bam. And it's going to have a loss, and then he's going to apply that loss to the tax he already owes. So before this 120 days is up, he's going to file in 2021. Go, hey, I got a loss. Back off. And then file an amendment or that's a specific form for that. It's not really an amendment. And he's going to apply that carry back loss to 2019 to the 2019 return that he filed at the end of 2020 based on his filing in 2021. See, there's some years here. So you can see it's complicated. This timing we've done for a lot of clients. So, John, that's your plan. Take a picture of that. Watch this video again. Show that to your accountant. What you want to do is file right away and you're going to do this nol Carryback. That's what it's called. All right. Should I take this email question? Oh, Michelle, in New York. I'll take a New Yorker since they're still in shelter and miserable. And I am so sorry. I don't know how people are doing it. California just closed all the restaurants again. It's a nightmare. Okay, go ahead.

I've been S corp in New York. I want to convert into an LLC so I can set up a trust as the owner. Can you explain the implications of converting escort to an LLC in respect to capital gain and others?

Okay, ask Michelle if where she lives in New York. Before I can answer the rest of this question. I'm not going to repeat it for everybody. Michelle, I need you to email or make a comment right now. Are you in one of the five boroughs? Staten Island, Bronx, Manhattan, Queens or Brooklyn? If you're in one of the five boroughs, I'm going to give you a different answer. Also, I need to know what your business is. She goes, should I convert to an LLC and what are the taxes going to be and how do I do it? Freaking, what do you want? A personal consult for the next 40 minutes, Michelle. That's going to be the call. And a trust can own an llc? Yes. A revocable living trust can own an LLC and an S corp. You don't have to convert from an S corp to an LLC to have a trust on it. Now, I don't even know what your business is. I don't know where you live. We do now.

Upstate New York.

Okay. All right, I'm gonna answer this for everybody right here. And you're gonna love this. Michelle, I love you. You're gonna need a consult. But I'm glad you asked this question because someone else may have steered you wrong. Here's Michelle's world. She has a manufacturing business. She has an S corp. She is getting the 199A deduction. She's doing a W2, and she is saving on SE tax. Oh, my gosh. Huge savings. This is a big deal. Now, can her trust own her S corp? Yes. A revocable living grantor trust can own an S corp.

Done.

We're going to do a stock transfer agreement. I think we charge 50 bucks when you do an estate plan with us. So when you set up your trust, we'll do your transfer. Done. Then if your lawyer hasn't done that for you, you can pay us. I think it's around 100 bucks to just. We do it half off for clients that we're doing their estate plan for. Okay. Now she says, well, I want an LLC so I can have my trust on it first you don't need it. And Michelle, this is the biggest point. Do not, I implore of you, do not switch to an LLC because you will not get this savings on the self employment tax. If you're really in manufacturing, you have got to stay in S Corp and make your trust the owner. Period. Now if someone else is telling you something different, call my attorneys, pay for a legitimate consultation where we have all the facts, half hour to an hour, that's it. And get a second opinion. This could cost you thousands and thousands of dollars. It's worth a few hundred bucks for a second opinion. Then her LLC over here that owns rentals is going to be owned by her trust and her trust is going to own her home. All good. It's all good. So Michelle, don't make the change. You're good as an S corp. Get your trust in the mix. And if your lawyer is telling you you can't do it, they're wrong. And I'm hoping your trust is revocable living trust because if it's an irrevocable trust, then you can't do it. But I don't want you to have an irrevocable trust. So Michelle, hopefully we're okay. Marco from Duluth, Minnesota.

Marco says, how are employees verified as stated on the EIDL application? If an LLC has two members, for example, would each member be counted as an employee and how would that be varied?

Okay, Marco says he's getting the PPP application and he's an LLC and they have two partners. And he's saying on the PPP application, how do I verify their two partners are the two employees? Now Marco, I need you to reply right down below. Are you talking about the application to get the money or are you talking about the application for forgiveness? So I need to know that answer before I can move forward. I'm going to read this one. Be ready with the next question. Logan, thank you for the webinar about the SBA loan. It was very helpful. I just have a question for you. I did apply for the Eidl Economic Injury Disaster Loan. That was the SBA loan they're talking about. This is Susan for the transportation. I did apply for the Eidl for a transportation company. We have, we got $15,000. Shall I apply for 200,000 express bridge loan next or what other loan do I need to apply for? Well, everybody out there, this is a great comment as well. Some of you have gotten the ppp. It helped a little. Some of you got the idle. That's an economic injury disaster Loan which you have to pay back. And maybe it helped a little more. Now Susan's saying, should I go get a 200,000 express bridge loan? Susan, I do not know, because here's the concern, and I have this concern for everybody out there. Your business better be freaking making computer chips for Dell or Matt Apple before I'm saying your business better be profitable. Be a really, really, really good business before you go into more debt to save it. People, I'm going to say this, and this is hard. Covid may have been the death knell for a business of yours that was barely holding it together as it was. If you're going to have to go out and borrow 200 grand, let me ask you this, Susan. If you were starting this business all over again, would you spend $200,000 to get it off the ground? Is it worth. Is very, very dangerous for many of our people where their business is not doing well to go get more debt. And we don't even know what the future is going to hold. We can have the plague this fall, right? I mean, Covid could get worse. And you're going to go borrow 200 grand? It better be making a ton of money, Susan, and you better be able to justify it to me. Then we'll talk about where you go to get it. Are you going to get an sba? Are you going to get a credit line? Are you going to go borrow from family? Are going to borrow from someone's 401k? Are you going to borrow from your own 401k? I don't know. There's. I give classes on how many ways to raise money. It's in my book. Eight steps. I have eight steps how to raise capital. And in here I've got building financials and raising capital. In here I have 1, 2, 3, 3, 4, 5, 6, 7, 8 ways to raise capital to start a business. Susan saying, should I go out and get capital to save my business? Well, you better prove to me it's worth saving or let it drown. Sorry, Susan. Get that. It's a good book. It's on Amazon. 99 bucks. Okay, go ahead. Next question. Oh, do we know where Marco's. What Marco's story is?

He just says it's the idol, not the ppp. That's all he's written.

Okay, Marco. Marco said we have an llc, we have two partners, and we're trying to get the Eidl. Now the Eidl is up to 10,000. And let's back up everybody out there. When you need assistance for Money in your business. Under the CARES act, you can get either the ppp, the Paycheck Protection Program, or the Eidl Economic Injury Disaster Loan. You have to pay back this one. This one we're hoping to get 100% of it forgiven. Two major different topics. EIDL has two parts. You can get a loan that's a 30 year term, 3.75% interest, and it's a very simple application. And when you apply for it, you also might get the Eidl grant. So this is the loan. This is the grant. The grant is $1,000 per person, up to 10 grand. Now back to Marco. Marco says, well, I have an LLC and I want the Eidl grant because that's the only reason he would want it, because he has to prove that he has employees. And if he has, by the way, in accounting terms, employees is 2e. So I kind of do that sometimes. He has employees and he's got to prove that he has two employees because he wants two grand and it's free. It's free money. Well, in order to get that, you've got to have an operational business. You don't get it if it's a rental property. Marco, there's so much here, I, I don't even know what your LLC does and, or did he say no and where you live and did you get the PPP and are you 50, 50 partners? And do you both really work in the business? And did you file a 1065? And I mean, there's so much here. Marco, let me just say the way you verify this, to answer your question, you got to file a 1065, 2019 tax return or you ain't getting nothing. Sorry, that was very bad grammar, but that's the truth. So if you just a simple answer and you've got a lot of things you need a consultation. By the way, if any of you need a consult on any of these matters with one of my tax lawyers, I've got five tax lawyers. They're great. Devin, Lee, Jerem, Christy and Kevin, personally trained by me and Matt Sorenson over the last 10 to 15 years. They're wonderful. If you wanted just a half hour, an hour consult anywhere in the country, any state, on S Corps, LLCs, loans, EIDL, PPP. What do you want to do? Call 435-586-9366 and you might have to wait a week. It's okay. 9366. Sorry, that was ugly. You might have to wait a week. We're going to try to prioritize our clients and get them in the door as fast as we can if there's an urgent matter. But give us a call. We'll help you out. If you need tax prep. I don't even know if we're going to be able to take any more new clients because the deadline is 12 days away. And that's then we're filing extensions. I would probably say at this point, use your last year's account and get it done. And then do a tax planning session now with one of my tax lawyers and then get in the accounting firm for next year. Okay, Marco, you're going to have to file your 1065 for 2019. And that's how you verify to get the PPP. That's how you're verified to get the eidl. I hope that helps. Okay, who am I going to S. Chatham, Chase them.

All right, how do you expense paying your kids? And is there a dollar amount limit? I pay my nieces to help me with cash, but not sure.

All right, S. Chase them. Says, how do I pay my kids in my business? And then all of a sudden he throws in his niece, too. All right, which one is it? Chatham, you're killing me. All right, first again, this is why consultations are so good. And I'm going to try to answer all I can here. And that's why I want you to write down that phone number and give us a call if you need or get with your person. Are we talking about kids that are under age 18? Are we talking about kids that are 18 and over? Or are we talking about nieces, nephews, grandchildren, yada, yada, yada? This is your kids. So. So, by the way, Chatham, the one thing I would do, this book right here, the tax and legal playbook, get it over on Amazon right now. It's on digital audio and print. There's a whole chapter called paying family members. And on paying family members, I go through all this. Also, I've got videos on YouTube on all three of these. But if they're under age 18. Oh, my gosh, this is so much. I'm just gonna do it. I'll do it fast. These are diagrams in my book as well and other videos. Okay. This is a master plan. You have your trust. You have an llc with rentals. You have an llc or a sole prop. You have an S corp. Maybe this is a little family management company. Sole prop. I'm going to answer this quickly. I'm sorry, Chatham. If you're going to pay kids under age 18, and they're your kids. If you have an LLC sole prop, you're just going to pay them right here. Pay kids under age 18. Pay kids under age 18. If you have an S corp, you do not pay your kids directly out of the S corp. You pay the family management company and management 1099. Then you pay your kids under age 18. No W2, no 1099, no tax return for your kids. Easy, schmeezy. The best. And you're gonna pay them based on their age? I usually don't want to pay them more than the standard deduction, which is now $13,000. Pretty good. But I'm gonna pay a six or seven year old, maybe a thousand a year. But I might pay a teenager 10 or 12 grand a year. I don't know. Depends on your situation. Where do you live, what do your kids do? Lots of topics right now. If your kids are 18 or older, going to 1099 them. We're going to 1099 them. We'm going to 1099 them. We are going to 1099 any of your children that are 18 and over. That's the way it works. Now if they look and act like regular employees in your business, you're required to pay them a W2 just like all your other employees. So that's a possibility. Nieces, nephews. And are you going to do 1099s even if they're under age 18? Now there's one last strategy for grandchildren and nieces where you're good friends with their parents. You might 1099 the parent who's helping with your business. They have a sole proprietorship and then they pay their kids. Now no self employment tax. You get a write off. No income tax for anyone. Amazing. Now if that whets the whistle of some of you and you're like, I've never even heard an accountant talk like this. My accountant doesn't talk to me about paying my kids. Got the wrong accountant. Get us a consult. Give us a chance. Get, get a consult, get a second opinion. We'll help you out, Beth.

Okay. Beth says first off, sorry that it's not a tax question.

It's okay, Beth. No, she says it's a legal question, I guess.

Yeah. So she says we are a C corp, so we don't need 24 weeks to use our PPP funds. So if we can use up all of our PPP money in 12 weeks, do we need to annualize to annualize any salary over 100,000 using 12 weeks or can we use the amounts for 24 weeks.

Okay. Beth says we are C Corp. We have employees. I'm going to assume she has third party employees and she has herself as an employee. Okay. That's an important distinction. So in her C Corp herself is an employee and she has others as an employee. Okay, she went, got the ppp. Now she says we got our money. Let's say she got 150 grand, big money. And she goes the eight weeks we couldn't do it, but we paid it all to qualifying expenses. In 12 weeks we are ready to apply. We are ready. We want to apply and get this thing done. We are ready to go. We don't need the 24 weeks. That's nice of the government, but we don't need it. We already spent all of our money in 12 weeks. We didn't even need the eight weeks. Okay. That's where she's at. Then she throws a curveball where a consultation is going to help. Sorry. She says the $100,000 annual limit for paying employees, is that prorated over the eight weeks, the 12 weeks or the 24 weeks? She didn't even say eight because she doesn't want to ask that. Because that's the answer. That is the answer for your pay. So Ruth's pay is prorated over eight weeks. I think I have it written down here what that amount is. I've got so many notes flying around here, but it's in my article. Go to entrepreneur.com I don't know if you want to go over to entrepreneur.com or type PPP EZ Loan Kohler in Google. It'll become right up, Hit it, click it, get the link. We'll drop it down in the chat below. Thanks Logan. So that's ppp, easy app Kohler, and it'll come right up on Google. So Ruth, if any of you got the PPP, your pay is limited based on an 8 week time period. Your employees are actually over the 24 weeks or however many weeks you kept them. And the limit is around $40,000. I'm going to say 44. I'm just going to put 40k plus your limit is somewhere between 15 and 20. It depends on some issues and I think it's 20,833. But get to my article. Logan's putting it down in the link below. And so Ruth, the consultation would be which employees are you talking about? You or your third party employees because they're two different amounts, two different time periods. You were over eight weeks. Your employees are limited, but over the weeks that you kept it. Hope that helps. All right, Mike, what do we got?

Mike says, mark, under the CARES act, can the 2020 losses be created through a Section 179?

Ooh, good question. He says on these losses in 2020, that I can carry back. Can I generate those losses with a 179 deduction? I'm not even going to get into explaining what that is. And Mike, I want to give you kudos for a really insightful, tricky, difficult question. My answer is no. But, Mike, hang tight. I'm going to blow your socks off here because I probably wouldn't do a 179 anyway. Why is that? Mike, think about it for a minute. I'm not going to do a 179 because you're right. I may not be able to take me into a loss position and then get my NOL and go back. What am I going to use instead of the 179? I'm going to use the bonus. See, the 100% bonus deduction can drive you into a loss and into an NOL that could be carried back. That's my understanding. Now, again, these laws are changing so quickly in Congress and everything that's going on. And if I had my partners here at the table, we'd all powwow and just figure out by consensus with my attorneys and accountants where we're at on this. My understanding is you're gonna go with the bonus instead of the 179 because you can do one, the other, or both. Study that up. Now, if you're asking that question, you're probably a cpa, so look into it. I love Bradford Tax Institute. I love ria. I subscribe to all the big websites and newsletters of the professionals out there. This is a small business daily Tax Strategies that I love. This is@smallbiztax.net this is a newsletter I get every month. I like this, so I'm constantly learning out there. But go with the bonus depreciation and I think you're golden. That's the answer. Okay, next question. H. Gray in California. Thanks for telling me where you're from, people. I kind of want to know. It's exciting for all of us. All right, H. Gray.

I'm a sole prop in California. Filed schedule. See myself in a rush and plan to hire CPA to amend because I made a mistake. My SE tax is going to go up a lot. Can I create an s Corp in 2020 and Refile 2019?

H. Gray in California. Okay, let's do his Little diagram or hers. H. Gray has a sole prop in California and in 2019, did he use an accountant or. He said he did it himself. Okay, so he did his own taxes, which is a 1040 Schedule C. Now what's scaring me here is I hope H. Gray, you didn't go get the PPP on the wrong amount. That's a whole other topic. So get a consult with us or someone because that's a scary thing. So, and you may want to, you may didn't want to say that, but some people filed a schedule C for 2019 and made it look really good to get the PPP and now they're going to amend and it's going to be different and lower scary. Now he says he did his own 2019, 1040 and the income was, it sounds like it was too low or too high because he says he's going to go get an accountant to do it and his SE tax is going to be higher. Right? So this was lower than it was supposed to be. So that's good in his situation for the PPP because now he got too low of a ppp. You know what you might want to do, H. Gray? You might want to do a new PPP application because now that you file your 2019 a corrected 2019amended and your income goes up, so now you're going to pay more self employment tax, you might want to reapply for the ppp. You got six more weeks to do it. That's a new law in the last 48 hours. So H. Gray, I'd look at that if you already did the PPP or you didn't now. So income is up, he's going to have to amend his tax return and he's going to owe a lot in self employment tax. And H. Gray says, well, can I do an S Corp now and backdate it to 2019? Because Mark, I've seen your videos and I should have been an S Corp. The answer is no. Sorry, you cannot backdate into an S Corp. In fact, half the year is already screwed. So you want to be an S Corp as soon as possible you're going to transfer that sole prop operations into it. And, and look at this, you're going to be. Let's do a little table here. And I hate to give H. Gray bad news, but look at this. This is 2019 sole prop. Now in 2020 they're going to be a sole prop for the first six months of the year. You can't even back date to the beginning of 2020. Now you're going to be an S corp for the rest of the year and this is where your savings is going to kick in. So you're still jacked up for 2020. H. Gray, I hate to say, and I'm sorry. Now some people go, well, in California, I got to pay an $800 minimum tax. Well, I'm going to save five times that doing an S corp. That's why we do S corps. Now, it depends on your income and what your business is and all that good stuff. But H. Gray, you're probably on track. Now, if H. Gray, you tell me you were an LLC this whole time as a sole prop, I'm going to punch you in the face because now you just changed my whole answer. So if you're an LLC taxed as a sole prop, now I can do some backdating for 2020. Now I can turn it into an S corp for the whole year. I just still don't like it for last year. There might be a gray area, no pun intended. H. Gray, get a consult from one of the another accountant. If you are an LLC all last year as a sole prop, you've got some of their options. But if you were just a plain old sole prop last year, you need to be an S corp immediately and try to salvage the rest of the year. Okay, Connie in Texas.

Connie says, I have an S corp. We did not set up payroll last year. We already submitted our tax return for this year. Is the any. Is there any tax savings that we can do at this point if we want to amend our tax return for 2019?

Okay, now everybody listen as I'm going to prepare to. I'll pose Connie's question here in a second, but let me ask all of you, what is the number one reason why you would set up an S corporation? It's not asset protection. I know some of you are like, why not asset protection? Nope. You could be an llc. You could be a C corp. Why are you going to be an S corp? Connie in Texas? Why are you an S as in small corporation? It's so that she can take a W2, take a K1, get the 199A and save on self employment tax. That is why we do an S corp. Now, Connie's question, she says, I already filed 2019 and we never did a W2. We screwed up. We didn't take a W2. So she's sorry I'm giving so many sometimes some bad news today. So Connie goes, well, I want to go back and amend 2019 and create the savings because I know I need it. Can I do that? No, you can't. So I think 2019 is water under the bridge. Now if you say, well, I bought an auto or there's a bunch of cost of goods sold or some expense that your accountant missed, okay, that's worth amending. But if you're going to try to amend to save on the self employment tax, it ain't going to happen. And what you need to be doing right now, Connie, is for 2020, getting your crap together and getting your W2 going. Now, even if it's like five grand a quarter, get it going immediately because that's what's going to generate the savings. Now, I don't know your business, I don't know your income level. Maybe you shouldn't do a W2 at all. I don't know, get a second opinion. I'm going to throw down our phone number again because I want to make sure all of you know we can be here as a resource. And we do these types of phone calls with clients every day around the country. Five attorneys out, sometimes a week and a half because we're busy helping people like you get the right structure, right tax strategy, blah, blah, blah, blah, blah. All right. Okay. We're still doing okay on time. Maybe three or four questions. All right, what do we got? Laura in Missouri.

Laura Justice Week. I hired an intern. She will primarily work on assigned projects from her college dorm. Should she be W2 or 1099, paying intern hourly?

Wow. Laura asked a very tricky question. I don't know her business structure. Did she say her business structure? Okay, so she's got a business. We don't know what it is. It could be an llc, it could be a sole prop, it could be an S corp, but we do know it's in Missouri. She's going to have profit. That's what we hope. We all want profit in our business. And she goes, I'm going to hire an intern. Okay. Now the first thing I do, don't be offended by me saying this because I've got some interns, prior interns in the room. Sometimes you can get those interns for free the first two or three months to test them out. They test you out. They need the qualification for their graduation. And then you can make them an offer for part time or full time. One of the people here in the room did that. And it's all good. So the first thing I would say is maybe reevaluate. Maybe you could get an intern with zero cost for a couple Months. Now if you're like, no, I want this intern, I'm going to pay him. Alright, so let's go there. The big question is, do I give them a W2 or I give them a 1099? It depends. Most oftentimes I'm going to say 70% of the time you're going to be a W2. They're going to act like an employee, look like an employee, do what you tell them, blah, blah, blah, blah, blah. Now you threw out a couple of nice little features. They're not going to work at my office. They're going to work from their dorm room. All right? They're going to use their own computer. I'm not going to provide them an office space. Okay, that helps. Now we're leaning more towards 1099. Here's what I would recommend. The first thing is I've got some great videos and articles on this. Go search subcontractor Mark Kohler on Google Search. Then go do it on YouTube and I've got some great articles. Get over to markjkohler.com and when you're over there, go to blogs and then type in employee versus or just go to employee or sub and you're going to see the articles come up. I go through the analysis, the criteria. It's a weighing game. And you're going to want to talk to your accountant about it too. Because if you go through the whole year thinking 1099 is okay and you read my article and you think 1099 is okay, then you go to file your tax return. Your accountant goes, hell no, you can't do that. Then you're going to bump heads and they're going to freak out and scare you and you're going to go, mark Kohler's crazy. No, that's my opinion. This is a gray area. And I may tell you should be a W2. And your accountant says you could do a 1099. I don't know, hit your wagon to the horse. You want running down the road there. This is a great thing. You want to study up on it, look into it. But I would say most of the time an intern is going to fall on a W2. Mr. CQP in Manhattan. I like it. Mr. CQP. I'm trying to figure out what CQP stands for. Word, Corporate Qualified Pension Capital Qual I. Whatever. I'm just screwing around. Okay, what do we got?

He says, hey Mark, I a day job and make about $40,000 but also do a side hustle making about 20,000 would you recommend LLC or or so prop? Because S Corp is not recognized in New York.

Oh, very good, Mr. CQP. The reason why I asked about the five boroughs earlier when we were talking to a woman that's up in Buffalo, New York or upstate New York is because in the five boroughs, as Mr. Cqp said, the s Corp is not recognized. And so S corps aren't usually that great in Manhattan or the five boroughs unless you're at the right sweet spot with your income and family situation. Sometimes the s Corp works, Mr. CQP. If you were to turn that side hustle into your main hustle and quit the day job, I'd be looking at your income level. And an S corp could work for a while because you still save on self employment tax, but you pick up corporate tax in the boroughs at the state level or the city level. So because New York State recognizes the S Corp, the five boroughs don't. So the first point I want to make is don't think S Corps are all bad. If you had the right income level, it could work and save you money. But he says he's a W2 for 40. Then he's got a side hustle. A side hustle, nine times out of 10 is a sole proprietorship and he says he makes $20,000. Now this is a concern again, consultation. Is that gross before expenses or is that net 20 grand after expenses? I don't know. 20 grand gross, 20 grand net. Okay, so Mr. CQP, but his question is really a good one. He said, should I just get over to an LLC because the S corp doesn't work for me. As far as I've researched, that's his question. Okay, I'm going to throw it back at Mr. CQP and all of you. Does an LLC save taxes? Think about it. Does an LLC limited liability company save taxes? The answer is no. Resoundly clearly. Defend it. Bet you a million dollars right now no, LLCs do not save taxes. Why do we set up LLCs? For asset protection and because I can convert it to an S corp. I freaked out some of you, didn't you? You're like, well, I have an llc, I'm saving taxes. No, no, no. If you're saying that you have an LLC taxed as an S corp, that's not a fricking LLC in the eyes of the irs. So everybody, if you have an LLC taxed as an S corp and you it's an S Corp. So. But Mr. Cqp says, I don't want an S Corp. Should I convert my side hustle to an LLC? And my consultation with Mr. Cqp would be all about what is the risk? What are your assets? What's your business about? What are your plans? Because I don't need an LLC to write off as auto, his cell phone, his travel, his dining, his home office, his computers, his laptop. Do I need an LLC to do that? No, I do not. So, Mr. CQP, it's going to be all about asset protection. If you're doing a bungee jumping school, probably you need an S Corp. If you're selling jeans from China on ebay in your underwear at night, you probably don't need an llc. All right, two more questions and we're done. Susan in the Virgin Islands. Oh, my gosh. I. I love and hate you all at once because I love the Virgin Islands. All right, Susan, thank you for watching so far in the Caribbean or Caribbean Tomato Tobato.

All right, I use my 2018 Schedule C for my PPP, have my PPP loan be adjusted. And she also said she just completed her taxes for 2019.

Okay, Susan says she has her 2018 tax return and her 2019 tax return. She went to go get the PPP and lo and behold, she used her 2018 return to get it. Is that good, Max? No, Max says no. Good job, Max. That's not good because the bank let you do that. And my understanding is they shouldn't have. But I'm just going to leave it at that. But here's what's interesting. She goes, well, can I adjust my PPP? Because I have a feeling her 2019 income is more so now she wants to reapply for the ppp. Technically, you should be allowed to get it. You should have gotten more. And she said schedule C. Right. Here's my concern. First, you've got to find a bank that's going to go for it. Number two, if you're Schedule C and you've got more income here, I would want to do the math and find out what the difference is, how much that new PPP would be. If it's a couple thousand dollars, I don't know if it's worth the headache and the risk and the fight because it's not going to be easy. Now, some people may say, go apply again, get the new PPP and don't use the money that you got here. Only use the new money, the difference and saving the difference that you don't need because you already got it. Don't spend that. Give it right back to the Bank. When you apply for your forgiveness, some people may say call the sba, some people may say call the bank. I'll tell you, we have not found success adjusting your PPP application because you, I'm being blunt, used the wrong number to begin with. So now you're going back and asking for more money based on your 2019. So I, I don't know, Susan. I'd like to find a solution for that. And if you find something cool, please tell me about it. But I'd go to your bank first. No, no, no. I would calculate what would the difference really be first and if it's worth the headache and if you're like, no, Mark, this is some serious money, five grand, ten grand, twenty grand more, then I'd go talk to your bank and see if they can help you out. And if that bank tells you no, go to a different bank. You don't have to go to the same bank that you got your original PPP with. Final question, Jay.

Jay says, hey Mark. Hopefully I'm not too late. I recently established an LLC with an S election as the parent company. I have four LLCs, subsidiaries that will flow the profits to the parent. He wants to know is this a good idea?

Okay. Jay says he recently set up an LLC taxed as an S corp. All right, sounds good. He's trying to save on self employment tax, so obviously he's not doing rental property. That would be over here. He is doing operations. Cool. Then he says, is this the right structure? Well, do you want me to explain? You know, the Manhattan Project and you know our position is United States on nuclear energy. This is a big question, Jay, you're killing me. I like it. I have an S corp with multiple subsidiaries. I usually have partners in these subsidiaries. It works really well when these are all ordinary income operational businesses. That's what I want. So Jay, very common. I like it. It's a diagram in my book. I use this strategy all the time. I just don't know what your other businesses are, how much money you're making. Because if you're like, well this one isn't even making money yet and this one's not either. And this is my sister in law and this. Okay, maybe it's overkill. Sometimes you're like oh, I'm making a million here, a million here, a million here. Oh my gosh, I love it. Or do we do in a 401k, what are we doing? You know, I don't know. So Jay, get a second opinion, call me office, talk to my team. We could be of service. My link to articles are down below. I think Logan was popping a bunch of those in there. Our phone numbers down below. I want to say thanks to my team here, Logan and Max, that helped out with questions and the live. I want to tell all of you thank you for sticking it out during this broadcast. And it's hard being a business owner sometimes, but there's so many amazing rewards and you know what I'm talking about. If you're an entrepreneur, controlling your own destiny is truly an exciting venture. And I think it's wonderful when you have a day job and a side business. These two guys in this room, I want them to have a side business. I want to have them rental property. I want all my clients to have a great day job and a side business if that works best for them. If you're going to go full time and not have a side business, remember, having a rental property is having a business. So you may be a business owner and not even know it sometimes. So keep living the dream. Don't give up. I'll be here in a couple weeks for my next live broadcast. I think I'm out next week. It's my wife's birthday next Thursday, so I'm going to take it off to be with her and to do my best as a husband because as you know, in our relationships oftentimes times we feel like failure. So I'm going to try to do my best. I won't be here next week. So thanks everybody for listening, watching and I'll see you around. Thanks.