Market Crash Tax Strategies Explained - Live Q&A with Mark J Kohler

Hey everybody. Glad to be here with you. I know this is a scary, tough topic, but I've got some amazing info and some slides are going to rock your world. We need to talk about this market crash and what your tax strategy options are. Do you have some gains? Do you have some losses? And we need to see if we can blend it with some of your other gains in real estate, crypto or other aspects of your life, a sale of a business. I got a lot of ideas and strategies here that I think you should consider and talk to your tax professional. Now for all my tax professionals out there that follow me, thank you for being here. I'm trying to come with legit, real life, workable, workable strategies. So let's rock it. Now, I want to go straight to the slide. This is my master slide on how we deal with capital losses. Now this slide is about taking what capital losses look like and what you can use them for and what you can't. So look over here on the left. We've got three types of losses that most people are familiar with. A capital loss, a passive loss, and the rental real estate losses. Now, the only way to explain this, in my opinion, is by giving them three fruits. Now, I want to, as we go through this, by the way, side note, I'm going to do Q and A. I want to give some stuff away. And third, watch out for anybody posting out there about some dumb crypto strategy saying they're me. I am not making any comments on the feed, on Facebook or YouTube during this live. So don't reply to any of it. Those are bots and they're scams. So focus on this topic. I'm going to rock your world. Okay, so let's say you've got a capital loss this year. The market crash has dipped. You've got issues, you've got some losses. Now you may have some gains too. I'm going to come to strategies in a moment, but let's at least just look at what does it mean technically. So capital losses are. Apples are only deductible against other capital gains. And then once you do that, your loss carries forward for the rest of your life and you can only use 3,000 of it a year unless you have other capital gains. Now, what can you deduct it against? This is what everybody wants to know. They want to make a smoothie of apples, oranges and bananas. It does not work. So I got to tell you what you can and can't do with those apples. You cannot deduct it against rental Real estate income. So if you have rental properties with income, your stock losses no good. They stay in their own red bucket. Not deductible against passive gains. So let's say you're a passive partner in a real estate syndication or a restaurant. You're a passive partner in a small business, so you're getting a K1, but you're not a manager or partner. That's a passive gain. And you cannot deduct your capital losses against that passive gain. We get that phone call all the time. It's not deductible against your day job except for that extra 3,000. And if you do sell an asset, capital losses are not deductible against depreciation. Recapture. So let's say you bought a piece of equipment or a forklift or, or maybe even you bought an RV and you used it in your business and you've depreciated it and now you go to resell it. Well, you got to recapture that depreciation. You cannot use a capital loss against that. Now if your RV went up in value, then you could use it against that gain. Which brings us to what can you deduct capital losses against? Yes. Against crypto gains. Yes. Against the sale of a rental property or the sale of raw land. And I got some strategies to share here with you. You're going to love them. Yes. Against sale of a business. I got a capital gain. Now let's say you have a short term capital gain. Capital losses lose their character of short term or long term when you start to blend them together. So you might have a short term capital loss that's deductible against a long term capital gain. A long term capital loss is deductible against a short term capital loss. So you can do that now. I hope you guys can still see my slide. There we go. Now I can deduct them against sale of rare coins, gold, silver or currency sales. I can deduct capital losses against collectibles, cars, art, wine. I can deduct them against the sale of appreciated equipment like that RV example I gave. And yes, believe this or not, you can deduct your stock losses against John Dutton's two year old calf. What that means My farmers love this. If your mama cow has a baby calf and you keep that calf for at least 24 months, it becomes a capital gain when you sell that calf. Now we don't need to get into cows in the circle of life. I bought some cows in my Roth IRA or my health savings account last year actually. And I'm a big fan of Yellowstone. So farmers and ranchers out there have capital gains all the time. So they're going to harvest some capital losses here maybe. Okay? Now passive losses, we're not going to dive deep in today. Those are again, you're a passive partner in an operational business. And then rental real estate losses or gains, those are bananas. Whole other, whole other issue. When I say rental, I mean that's from the rent. Now if you sell a rental property, you can cash in it against your losses. All right, let's go back to the whiteboard, guys. Okay, so let's say, and I guess I swipe up, we, we go there. All right, now on the whiteboard, what I want to point out here is some strategies. And I'm open to Q and A here, so be patient with me. I'm trying to come out fast and hard with the strategies. And no joking around today, okay? All right, let's say you have a capital gain. So you have a gain. And you want to get rid of this. In fact, I want to put this here so you have a capital gain. And you're like, what am I going to do to minimize this? Well, you're going to want to harvest losses and we're going to talk about the wash sale rule for a moment. There's some interesting workarounds or I need to look at a minimizing strategy. A minimizing strategy. And I'm going to give you a few. A few there. Now, let's say with this market crash, you've got some capital losses, which is more likely for many of you. You're sitting on stock and you're like, do I sell it? Do I harvest that loss? What do I do? Now a lot of people are like, okay, let's say I sell that stock. What can I use that loss against? And we just showed some of those examples and I want to give three unique strategies here. I want to talk about washing real estate. You're going to love it. Maybe some crypto. I want to talk about crypto for a moment. And a gain that you might have a built in gain. It's kind of called the big. So you might have a built in gain. And Tristan here, I'm having a hard time with my pen. Let's see, I want to make sure I can get my pen working. I'm going to have you come over and help me out. Don't know why I can't use it. All right, now everybody, let's go off the slide for a moment and we'll just Go back to me. And then while we get this slide, this whiteboard figured out. Okay, so let's say you've got this stock with a loss sitting on the books. If you sell your stock, you can't just rebuy it within 30 days. That's called the wash sale rule. The IRS won't let you take the loss. They suspend it and it just goes into the basis of your other stock that you rebuy. So some people may say, well, I don't think the market's going to rebound really quickly. So I'm going to sell this stock, take that loss, and I'm going to put it in a bucket. So I want to go back to my whiteboard. If you could. And I'm going to take this loss and see again, let's say you have a gain on something. So if I take the loss on the real estate and I put it in this bucket, I'm sorry, take the loss I have on my stocks. And so here's my stock loss. How can I dump this out? Like, what are the things that I could pour this bucket out and use against? If you take this stock loss, remember, you have to wait 30 days to rebuy what you sold. And you may say, you know what, I don't think the stock's going to really climb in the next 30 days. So I'm going to sell it and. And then wait 30 days and rebuy it. And then you go, rebuy it. That's fine. Now you've got this loss on the books and you want to use it up. You're like, where can I use it? Well, here's an interesting thing. Let's say you've got a piece of real estate over here that has a gain in it. And some of you may have some rental property with a gain. And you're like, man, if I could only. I've got the stock loss I'd love to harvest. And I've got this gain built in. So I call it a bit big built in gain. And so this big, I've got it sitting here. There's no wash sale rule when it comes to real estate. So let's say you sell the real estate to your best friend or your brother or your sister, harvest the gain, and then turn around and rebuy the real estate from them on day two. So sell, harvest the gain, offset it against your stock loss that's sitting on the books, and then rebuy the real estate you sold. Now some of you go, well, there's a Lot of costs that are closing like that. Am I going to do a title policy? There wouldn't be a realtor involved because you're going to find a related party. Now a related party transaction for a loss, the IRS does not like that. You've got to disclose Even in a 1031 if you have a related party transaction. But the IRS never expects you to have a problem with a related party gain. If you want to sell to a friend and take a gain, the IRS is like, sign us up. We'd love to have you pay tax on that gain. So a related party sale for a gain is, is not a high risk issue. It's taking a related party sale for a loss they get pissed off about. So let's say we harvest this gain on a piece of real estate and offset it against a sale of our stock, then rebuy the stock after 30 days. Now you get your same stock back. Now if the stock goes up in value, I can't, I'm not predicting up or down in that 30 days. But I'm telling you, if you feel you want to take that risk, I call that washing your real estate. Avoid the wash sale on the stock. Wash the real estate. And when you rebuy it from your friend, you get stepped up basis. You could even start redepreciating it at the higher amount. Now you may have some depreciation recapture. Now remember, depreciation recapture, capital losses cannot be used against depreciation recapture. This may not work for everybody. You want to run the numbers. Now some of you may go into your account and go, hey, I saw this Mark Kohler guy on this, on this live stream and he said I could sell my real estate and take my stock loss and offset them. Now they're going to freak out, they're oh, you can't do that or whatever. Just say, hey, just chill, let's just talk about it. A lot of accountants out there can be very demeaning and territorial that if it wasn't their idea, it's a bad idea. And I want my CPAs out there to know I teach continuing education, I take continuing education. I'm a licensed CPA and attorney in multiple states. I don't want to violate any of those rules or laws and have issues. I don't want to threaten my licensing and have problems with the IRS. I'm just throwing out ideas and I wish more CPAs and tax advisors would talk about ideas and so chill out. You know, let's talk about, maybe there's a way without a Lot of recapture and a way to get a gain on real estate and then go ahead and take that and offset it against there. Now, I wanna go to another idea here. Let's say you've got this loss sitting on the books, meaning you haven't sold the stock yet. But let's say you're contemplating, I've got this, the market's crashed, I've got this loss I'm gonna sell, wait the 30 days to rebuy, and now I'm sitting on this loss and you're saying, well, I don't have any real estate, I don't have that, but I've got some crypto. Now some of you are like, well, crypto's down too. It may be down, but there's a lot of clients I have that bought it when it was super cheap. And they're sitting on some altcoins that have been. They've been sitting on a gain for a while. They're doing charitable remainder trusts and other strategies. And even though crypto's down, the wash sale doesn't apply. So they could sell that crypto, take the gain and offset it with the loss from the stock. So stock losses can wipe out crypto gains and you can turn around and buy crypto the next day. There's no wash sale rule on crypto. So sell the crypto, rebuy, harvest the gain again, and use that against your stock losses. There's another idea. The third thing I wanted to talk about is just any other gain that may be sitting out there in your life, something that's appreciated. Could it be art? Could it be a collectible of some sort? Could it be some equipment or something that's appreciated? Now, if it's depreciated and you sell it, there's no capital gain there to offset this loss. But if you're sitting on a loss, I want you to do kind of a personal inventory. Are there any gains out there in my life, in my life that I could harvest in this process and then offset them with that stock loss? So do kind of a capital gain inventory of all of things you've got sitting out there. Some of you may have a business that you've been thinking of selling. You might have a trademark, you might have an asset that you've thought about selling, but you don't want to pay the tax on it. Well, right now you might be sitting on a huge stock loss that you could now take advantage of to harvest against any of these capital gains that you just kind of ignored because you don't want it. And if it's something you could sell and rebuy with a related party. Again, a related party transaction for a gain is not on the IRS's rate bar. So I, I would consider something like that. Now let's go to the other side. I want to give out these two last points and then we'll do some Q and A. So let's say you're sitting on a possible loss, you've got a possible capital loss, and we went through some ideas there. Now let's say you've got a gain. One of the things Jack said in the studio, and I want to give a shout out to Jack and James and Tristan. They're in my studio helping make these lives happen. I love you guys. I appreciate all your hard work.

Thanks a lot, guys.

You're not an expert at this, but believe it or not, when the market's going up and down and down and crazy and a lot of market ups and downs, there's people making money in Wall Street. They're going to have gains. What do they do with these gains? And I want to give them options. So some of the things that some clients consider is the Oz. That's an opportunity zone. Opportunity zone property. And you can take your some of the money that you've harvested and gains and turn around and buy an OZ property before year end. We'd want to get this, this in place so that I can. And you have six months, actually I should say six months up to six months to do the OZ property. So you could even complete this transaction after you're in. But look at the opportunity zone property rules now. This weekend we just held our real estate tax summit. And if you didn't buy, if you weren't able to attend, we're selling the recordings right now at huge discount. It was great event. It was in Austin and we have a special speaker on OZ property. We had one on 1031 exchanges. We did a project on charitable remainder trusts. Those are the CRTs. So we could do an OZ property. We could do a crt. Now, if you've already sold stock and had a gain, I can't do a charitable trust. But if you're sitting on a gain and you want to harvest it, a charitable trust could be a good fit. And then the last thing I want to say is for some of you that maybe have some gains in stock, so you're dealing with these stock gains and you might have a possible loss over here. Well, this is time to maybe harvest the lost. Wait the 30 days and again, offset it over here. So I kind of said that from the right side angle, but now I'm saying it on this side and then, and that is avoid the wash sale and, and, and sell some stock, you know, that's okay. So I think that's about what I had on the board here to discuss. Let's go back to the video guys. But not all is lost and I want to from my heart let you know I've got a lot of friends, family and clients that have been really emotionally devastated with this market crash. And one of the. And there's a lot of advice out there on what do you do? Do you sell? Do you, hang on, do you hold? I'm not going to go there. I'm not an expert in that area. On the financial advice of what to do with the down stock, on whether or not you keep it or rebuy it, whatever. But here's what I am saying. There are some tax strategies and if you've got gains somewhere in your other portfolio, whether it's real estate, collectibles in your business, some sort of business asset and you've got stock losses that you could harvest and you're willing to wait 30 days to rebuy, I've got ideas. And all of the tax lawyers at my office are well trained on that slide. Of all the different gains that are out there, short term gains, long term capital gains, passive gains, passive losses, real estate gains, real estate sales, real estate rental losses, real estate rental gains. There's all sorts of fruit and we actually have about 12 different fruits. I only introduced three of those, the apples, the oranges and the bananas. So if you're needing a consult, talk to your, your own tax advisor if you trust them or get a second opinion even if you do have a great trust trusting relationship. Down below in the description, I have a link to my tax lawyers at the law firm Kkos Lawyers. We have a tax review consultation where we look at your last two years tax returns, business and personal, looking for strategies. We're not looking for an amendment, you know, technical flaw or mistake. We're looking for what did you miss? Strategy wise, what is there, what's sitting here that we could do moving forward? And we build you our trifecta. And what I love about the trifecta, go to the whiteboard for just a moment guys is when you meet with one of my tax lawyers, they're going to look at your tax returns and build you a color diagram and they're going to look at your operations of any small business they're going to look at your assets. And in their assets we're going to divide it into two sides. We're going to look at your IRAs, your 401ks, your Roths, your HSAs, your Coverdells. We want to look at your real estate, your notes, your investments that you might have passive syndications or not. And then what are you doing with your side hustle or your main business? Are you an llc? Are you a sole proprietor? Should you be an S corp? And then we want to bring it all in together into your revocable living trust. Your home should be owned by your trust. All of your business assets should be owned by your trust. And we call this the trifecta, the bottom being your 1040 and trust. That's your base. And then you've got your operational entity and your holding company and then it grows from there. And so W2 is off to the side, but your stock portfolio is going to be over here and again with built in gains or built in losses. Bil, I want to look at these this big in the bill and go what can we do with it and how can we blend it into your trifecta? So anyway, back to the video. Tristan. So if any of you want a consult and you want to get that we charge 1200 bucks. I want to save you 10 times that with some tax strategies that will rock your world. And you can call the law firm the website. Let's just put it up there real quick. It's in the description below, but I'll write it up here. For those of you watching, it's kqslawyers.com and you can call 435-586-9366. And we're doing consults around the country. Even people living offshore with US Assets and income, just give us a call. Now I don't want this to be an infomercial. I just want you to say that resources there. Okay, well, I'm all yours. And I'm going to unveil something really exciting right now. I've been working for a year and a half on a new ebook and it is my 30 ultimate tax strategy guide on tax strategies that you can use. And so I want to give you the official title here. I love it is the Ultimate Tax Strategy Guide. And it literally in the last hour went live on my website and you can download it for free. 30 different strategies. It is so freaking cool. And I built a little flowchart of how they can work through your life and where you might use them. And it's a simple summary, 30 different strategies. It's about 40 pages long, easy on the eyes, easy to read, and there's links on almost every strategy to other videos or articles where you can dive deep. Review this with your tax advisor. My tax advisors out there, I would eat this up. I'd like, what's this cooler guy teaching? 30 different strategies. I want to hear him. So that is downloadable. There's a link right there below in the description here. This YouTube and Facebook Live, you can click on it and download it for free right now. There'll also be a question of do you want a console? You can check the box and say, I'd like a phone call. I'd like to see if I could get a strategy session with one of Mark's tax lawyers or CPAs. And I want to see what's out there and get a second opinion. You don't have to fire your accountant, just get a second opinion. But there's a link down below and if you go to MarkJ. Kohler.com you can click on it right now and download my ebook. You're the first to hear of it right now in this live. And we're going to be sending out emails to all of our clients in the next 48 hours letting them know where they can download it. But you can get it here first. And I just got chills. This is really exciting moment. 18 months in the workings and I want to say thanks to everybody along the way that's helped me get that book out. It's just so powerful. Okay, well, in the studio I got James and Jack there. Tristan's here at the Phoenix office here running the studio. And those guys are going to pose some of the questions you guys are asking. So I'm going to do my best to answer those. Let's see where it goes. What do you got, guys?

All right, Mark, so we got Carlos, Ivan, Solace. You kind of went over the cryptocurrency a little bit and maybe this has already been answered, but a little recap would be great. Question is, Mark, for cryptocurrency you can sell and buy right back in since the wash sale rules do not apply.

Correct, Correct. There you go. So I can sell my crypto and rebuy it. If there's a gain there or there's a loss there, I can capture it and use it in one of the ways I talked about. So whether, you know, with stock you got to wait 30 days to rebuy it. With crypto you do not. So let's just go real quick to the whiteboard here. And so let's say, in fact, ooh, I got a fun way of doing this. I've never done this before. James, Jack Christian, see if you like this. So I've got crypto and I've got stock. And let's say I've got this variety of stock portfolio and a variety of crypto tokens. And I say I could sell and I could generate a gain or I could generate a loss here. I could generate a gain or I could generate a loss. And that bucket, all of these buckets block blend together. I can make a smoothie with this. At the end of the day, the only issue is I can't. I have to wait 30 days to rebuy my stock. And you may say in 30 days, I don't care what it's trading at, I'll rebuy it in 30 days. But I'm going to harvest this gain or loss. And you want to think, do I have a loss over here that I could use against this gain, or do I have a loss over here I could use against this gain? And it's a great time to just kind of blend it together, make that smoothie and just know you've got to wait 30 days to rebuy that stock. Maybe not. Pretty cool. All right, James, next question.

All right, let's see.

Back to the video.

Trisha, should we go with that one? We should, we should. We should go with that. What do you think? Kind of getting Jack's opinion on this one. So, Mr. CQP, this one might catch you off guard. I didn't get a. I'm sorry, in his words, I didn't get no trifecta. And I worked with your attorney. I'm a little disappointed.

Cqp I'm glad you bring that up. I'm willing to take any hard question. I love it. Folks, if you set up an entity at our office and we charge 800 bucks plus filing fee, and if you need registered agent services or mail forwarding for some privacy, we got it all. And we'll set up entities in all 50 states with their consult with a real lawyer and you're going to talk to that lawyer for at least an hour. That does not include getting a trifecta. If we just set up your entity for you, we're going to talk about the entity, make sure it's the right entity for you. If you want a trifecta, we have a package price for an entity with a trifecta. Or you could Say, I just want to pay my lawyer for another hour or so. Would you work on the phone with me on Zoom and help build a trifecta for me? You can do an hourly consultation, whatever it takes, with the attorney, or you can say, you know what? I want to upgrade to the package where I get a trifecta with my entity, and that's $1,200. So for about $400 more, you do the math, just not that much. You're going to get this plan where we build a trifecta and look at where would your business fall in this? Now, if you want us to review your tax returns, that doesn't include. That does not include an entity. So you can do an entity in a trifecta or you can do a tax return review in trifecta, but CQP if you just did an entity trifecta would not come along with that. It's more work. I mean, all we sell is our time and advice, so don't be upset. Cqp I want you to do this. Call Chantelle. Chantelle or Shelby. I'll give you two options there. Chantelle or Shelby, call the office tomorrow morning and go, hey, I was. You know, don't tear them a new one. Be nice. You always get more with honey and sugar. But call the ladies and go, hey, I got this service. I should have got a trifecta. Or I want to upgrade to a trifecta. Or them know your concerns. We'll solve it. Believe it or not, we're a law firm that cares about customer service. So call the office tomorrow. Cqp all right, next question.

I've got the. This one's a. Interesting question here by Joe Moa. I believe that's how you pronounce it. When you sell and buy back the real estate, can it be in the same year? And does money have to change hands?

Oh, good comment. Yes and no. Okay, let's say. Let's go to the whiteboard for a moment. Let's say you're gonna. You own a piece of property. This is you, and I'm over here. So this is Joe, and I'm Joe's best friend, Mark. Okay, Joe and Mark. Pretty standard names. I bet you Joe knows a Mark out there. So Joe calls up Mark, maybe it's me, and he says, hey, Mark, I want to sell you my property. And we want to do it in the same year because I want you to get the property back. And we don't want to have a fair market value change that. That could be an issue. So we want to turn around, sell it and turn around and rebuy it. Prefer there's a market valuation issue. Because I don't want to gain for Mark. I want him to buy it and then sell it back to you before Mark would experience a gain. So let's say I'm going to sell it to Mark and I'm going to sell him the property. Well, what are the ways I could structure it? Well, I could do it for cash. Maybe I do it with a note. Mm hmm. So I do a real estate purchase contract and you, it's legit. You're going to actually transfer child. You're not going to say I sold the property. Joe, you're going to actually sell it. You're going to record title. I didn't say there wouldn't be some fees. I mean if you sell real estate to someone, there's going to be some fees. You're going to record title, you're going to sell it to Mark and then Mark's going to turn around and resell it back to Joe. I don't want to, I don't want to be reckless. You may want to get a title policy. Even if title is only held for a short moment in Mark's name, I may want to make sure that there's a title policy in place. I'm going to record the deed. Now some of you that live in a state where there's stamp taxes like Florida, Washington, Nevada could have issues. Whenever there's a sale of real estate, there might be some assessment issues. You may say, well, I don't want to have the property reassessed for property taxes. I'm not saying this is perfect. But if you're sitting on a big gain and you're like, hey, the property tax assessment's not going to be an issue. There's no stamp taxes here. I'm going to record the deed. I might do a title policy back and forth. You might spend a couple grand. I don't know how run the numbers, but you might spend some money, but you're going to get a stepped up basis and be able to start depreciation again on this property. If it's raw land, it could even be easier. Maybe it is rental property. You may even resell this property. Check this out guys. Let's say you sold it, Joe, to Mark. Mark turn around and sold it back to you. There's some fees involved. You know, I don't know what they are. Could be two grand, it can be 20 grand. Run the numbers. But then you now have a property back at the current fair market value. You could do a cost segregation analysis. You could start redepreciating another level. And you go, you know what? These fees, not a big deal. And I've got these losses over here that I can cash in and pay zero tax on the transaction. And I get a stepped up basis. So I'm not saying there's not costs. I'm not saying it's a paperwork process. You may need a. I would probably recommend you have a lawyer involved to help make sure all the legal documents are done correctly. I don't want this to be a sham. It's not a sham to sell it to Mark. And Mark wake up the next day and go, I want to resell it back to Joe. That's okay, it's a related party. But there's not. You're not harvesting a loss. And that was. Makes the IRS upset. They don't want you to just sell your property, harvest a loss and walk away. That makes them mad. But when you're harvesting the gain, IRS is like, bring it on. We'd love you to pay tax on that. Oh, you got a loss over here. Damn. So that's my answer. I'm not saying there's not costs or foolproof. It's gonna take some work and everybody's situation's different. So. Hope that's okay, Joe. Okay, let's go back to video and give me another question here, guys.

Great answer, Mark. Thank you. We've got a question here from Mehran Khan says. Hi, Mark. First of all, I would say, I just wanted to say you got a lot of lovely comments out there from your fans. So give them all a shout out. They're endless.

Actually, you know what? Just emotionally, let me say this is hard to prep for a video like this. This is very technical and a lot of people out there with a lot of different situations and not a lot of CPAs because it's scary to go out on camera and give tax advice. I get some hate mail once in a while. You know, people are like, that was a dumb idea. Or that was. You can't do that or whatever. I'm like, well, not in every. You know, everybody's different, but there's ideas and I want to present ideas. We all need tax advisors that give us some freaking ideas. And so don't beat the crap out of me. Or if it's like not the perfect idea for you, just be grateful someone's throwing something at you, you know? Anyway, thanks, everybody. Okay, I'm sorry I got a little emotional there. James. Excited.

Great. We. We appreciate every single one of you out there. So this question from Mehran says. Hi, Mark. Love your work, first of all, and this question goes, if I had an S Corp created in July 2022, am I still liable to pay payroll taxes for the last quarter of 2022, or should I do 2023 only?

Okay, I like it. Let's go to the whiteboard. Okay, now, everybody, I think you're going to love this. By the way, is it. Is my pen a little fat? Should we bring down the size on this thing? Tristan, what do you think? Little smaller? I think I can do it right there. There we go. That's a little tighter. Okay, everybody, many of you watching today may have an S corporation. It is one of my strategies in my 30 point ultimate tax Strategy guide. In fact, I'll tell you is, let's see, number I get excited to talk about number 11. So it doesn't come in until number 11. But on my 30 point tax strategy ultimate guide, look at number 11 for S Corps. Now, let's go to our trifecta. Now, I'm going to butcher his name. Forgive me, my fine sir, for it could be a female or male. Run Metron, Nashron. Okay, so, Nash. I'm going to say Nash. So, Nash, be patient with me. So, Nash, very similar to a lot of people that may be watching here. You've got a small business and you may set up an S corp. Now, some of you may have done an LLC taxed as an S corp. Same thing, you got an S corp. Some of you may set up an LLC and make an election to be an S corp the next day. Don't tell me you have an llc. Tell me, Mark, I got an S corp. Just because you have the LLC acronym doesn't matter. If you make an S election, you now have a freaking S corp. So let's say. Now here, let's not say it's for real. Nash set up an S corp in July of 2022. Now, why is he doing this? See, we have to step back in a minute and go, why is Nash doing this? I'm hoping this is why he did it, or maybe you got some bad advice. But if you've got an LLC or a sole proprietorship, and let's say Nash brings in 100 grand, he spends 25 grand on expenses and he net 75. So he net 75 grand in his little business. Could be a realtor, a contractor, a consultant, selling on ebay. Affiliate fees, electrician, landscaper, dentist, doctor, whatever. You make 75 grand. If you're an LLC or a sole proprietorship, you're paying self employment tax of 15.3% on that whole amount. That's 10 grand. Then you're going to pay state and fed. All right, people, so many of you have caught on to this and go, oh, I've listened to Mark before when I hit around 30, 40 grand a year net, because we're worried about the net, I'm going to switch over to an S corp. So Nash switched over to an S corp. Now why did he do this? Now this is to answer your question, Nash, because I want you to know the why if you're going to net 75, what we want to do in this situation. So you erase that. I'm getting my pen down. Tristan, you're impressed, right? Okay, net 75. What we want to do is split that income in the S corp. We want to take part as a W2 and part as a K1. Now, I have other videos on what that SW2 allocation should be in an S corporation at 75 grand, I probably do a 40 to 50% split. Now, I'm going to be very conservative here. I'll do a 50% split. I might be 40%, but with my head and math, I'm just going to do a 50%. So that means I would take about $37,500 as a W2, 37,500 as K1 pass through. Now some of you accounts out, my, they're going, oh, that's way too aggressive. You got to look at reasonable salary tests and rules. And he put in all the time and he doesn't have any other employees and he's got. You can't call that goodwill. By the way, people, I've been teaching reasonable comp and going to every continuing education conference and reading every case on it and every statute and every rule and all over the country for 20 freaking years. And I have never, ever had a client get audited for taking too little of salary. If I sign your tax return, my team, my team of lawyers and accountants, if we sign your tax return and you get audited for taking too little of salary, we'll pay the penalty. So I put my money where my mouth is on this. And if some of you CPAs are out there scared to death of reasonable comp and being aggressive, get over it. You got to get over this. Reasonable comp is a subjective analysis. And if you're going to make 100 grand and take 10 grand in salary, you're going to have a problem. But if you make it 100 grand net and you want to take 40 grand in salary, the IRS analysis and computer system, it's going to go right by. I've got ex IRS agents that work with me as partners in my accounting firm and as CPAs. I've interviewed ex IRS agents agents and I've been. We've been preparing thousands and thousands of tax returns for 20 years. Chill out, okay? Learn about it and be a little more aggressive here. And I think you'll be handsomely rewarded. So, Nash, you're going to want to take salary of a reasonable amount, and you've got to do it on your net income. So that's why he's doing this, because you only pay FICA here. So instead of paying ten grand on everything, we're only going to pay five grand, essentially, and we're going to save five grand. Five grand in savings on this net pass through. We only pay FICA on the W2, okay? That's why we do the S Corp. Every dentist, doctor, engineer, accountant, lawyer, electrician, plumber, online marketer, realtor, broker. We're all S corps. It's not an aggressive strategy. Joe Biden set up an S corp for his book deal. As soon as he was done being vice president for President Obama, he got a 13, I think it was 13 to $14 million book deal. He set up an S corp, ran it through it, and took salary of 700 grand. You think my allocation is aggressive, Go look at Joe Biden's S corp. It's public record. I've got it here on my laptop. This is so common. It's okay. All right, so we go back to Nash here. He set up his S Corp July of 2022. Now, if I was his attorney and I was setting up his S Corp, because remember, CPAs are not doing legal work and you shouldn't be going to an online service to just set up your own entity. If I want to screw up my house, I head to Home Depot on Saturday. So I'm going to hire someone that knows what they're doing. So if your attorney, Nash, set up Your S Corp July 2022, it's because you expected profit the last six months of the year, and so you're going to have some level of profit. I would hope it would be around 40 grand. Or I may have not recommended an S corp for the last six months of the year. So you need to take a payroll for third quarter and fourth quarter. That's what The IRS is expecting now your third quarter payroll is due by the end of October and we're in October. You need to be dealing with that. So you've got to report your payroll here and then at the end of the year, by end of January. So everybody, if you have an S corp, if you're taking an LLC and do an S election, if you want to save on self employment tax, this is the strategy. And I love Nash's question. I'm tearing it apart. I know some. I'm going to maybe rapid fire. A few quick questions here, James, but let's just wrap this one up with in depth analysis. So if Nash is going to have expected profit of 40 grand throughout the rest of this year, he's going to do a salary split. I may go 50, 50 again. So I'm going to take 20k and a W2.20k and pass through and I just saved 15% on 20 grand. He saved $3,000. That's why Nash would have done this. If you don't do the payroll report, Nash, you're going to get audited. If you want the savings, you've got to do the payroll report. You've got to do the 941s and kick out a payroll at the end of the process. A W2. Now you don't have to take paychecks. You can do an after the fact payroll process on a 941. We do that with all of our clients. If you need help with this, give us a call. Our link to kepas.com is down below. You can sign up with our payroll service and we'll take care of this for you. We do this every day. But Nash, if you want the savings, you've got to do this. If you say, well, I'm going to wait till 2023, well then why did you do an escort for this year? Because you've got to do a tax return now and you're paying 1200 bucks at least for an S corp tax return to have it done right and you didn't have any net income, I would have done an LLC and then converted to an S Corp on 11 23. So if some of you out there are not sure and you're an llc, let's see how the year goes then. You could do an S election before you're. There's so many strategies here, I got to slow down, get a freaking consult. People. If you're in this boat and you want to save, call my law office, spend an hour with one of my Tax lawyers, they will save you freaking thousands. I was about putting my cell phone number down. 435-586-9366. Give the office a call, get a consult with an attorney and they'll guide you. Okay, James, let's do three fast questions. I'll answer them rapid fire. I also want to give away three books. Be ready to give out three tax and legal playbooks right here on my table and give those away. We're going to announce three names at the end of this, but you have to stay tuned for the very end of the show. So James, three quick questions.

Yes, sounds great. I just want to say this quick note real quick for anyone out there who wants our ebook, please link should be in the description and I guess I'll go with this one. When does it make sense to contribute to a solo 401k versus a SEP IRA? If I do a SEP, I will do a backdoor Roth IRA strategy.

Okay, take me to the whiteboard. I'm going to answer this quickly and you need a consult because this is a big question. The time it makes sense to do a solo 401k is when you have business income. And typically we're going to do that at the point you're going to be an S corp anyway. So we, we have a special coming in November where we set up solo 401ks with an S corp or. Or to enhance your S corp, you're going to set up a solo 401k. It will be effective for the year 2022. The only time, in my opinion, you do a SEP is in two situations. One, you screwed up and didn't do your 401k before December 31st. If you don't have this solo 401k set up by the end of the year, you can't have one for 2022. So it means you've got to do a SEP for 2022 and then get your crap together and do it for the 401k for 2023. Now by the way, I have classes or videos out there, both that teach. I screwed up and had to do a sep. I am not a fan of a sep. A SEP is an old world strategy that I only use it if I have to and so I literally have videos. I screwed up and had to do a SEP. So you screwed up and didn't get your 401k done by the end of the year you're going to do a sep. Now the second reason why I do like a SEP is once you have an employee for at least 12 months, you cannot do a solo 401k. So if you have employees for 12 months, full time employee for at least 12 months, you're out of the game for a solo 401k. But with a SEP, you can have full time employees up to 2 years before the SEP is no good. So I'll tell clients, even though it's going to suck with FICA and you may not be able to get as much because I want to find a balance between FICA savings and the 401k, that's why I teach that. So do the SAP. If you have full time employees and they haven't been with you for two years, you can kind of milk the SEP for two years and then drop everything to the Roth. Now if you're going to do a mega backdoor Roth, you're going to be using the Solo 401K. You're not going to go down the step. You're going to pay way too much in fica. So get a console. I don't know what your full time employee situation is, how much money you're making. If you want to do the backdoor mega Roth, all my attorneys can consult with you on that. Okay, next question.

All right, next question. It's a simple question. You can answer it really quick. Fire away. Do you do estate planning and how much is the package price of the estate planning?

You bet. We have an incredible estate planning set of attorneys that can help. We do estate plans around the country. We're going to work on Zoom with you and FedEx. Email. I was going to say fax, but who faxes anymore? So email Zoom and all those goodies. We, we help clients all over the country do estate plans. We charge 1500 bucks. $1500 for an estate plan? Single or married in any state. Start to finish with the paralegals. Talking to a real lawyer. Working on your trust with all the bells and whistles, the wills, the powers of attorney. Pull the plug if I'm a vegetable. The final instructions, financial and healthcare powers of attorneys of both. The whole nine yards. We also have an estate plan packaged with the trifecta. It's a little bit more. I'm not sure on the quote. I'm not going to give the dollar amount. It's on a. It's our popular service list@kqs lawyers.com There's a form you can fill out right there to get it going on the website and you'll get a consult with an attorney within a week and you're off to the races.

Last question was more of an explanation. If you can. We got Dade County 813, how you doing? They said James, kindly ask Mark to discuss tax trader status. Let me get into that.

Okay, tax trader status. Let me just say one thing. It's a big conversation. We ought to do a live on it. James and Jax. We ought to do a tax trader tax trader status. Pros and cons. That's. That's the issue because the person asking this question, a lot of times they're sold that tax trader status is a good thing. 99 out of 100 times we're trying to make sure our clients do not hit tax trader status. They're sold this because there's some business benefits at times like solo 401k and you. But you got to run it through an S corp. You got all these things and you want to get over to tax trader status to get those benefits. But there's a heavy cost with again self employment tax in fica. And so all I want to say just for now, if you be patient with me everybody, I'll do a video on tax trader status. Let's look at the pros and cons. The good, the bad, the ugly. The important thing is if anybody is telling you to get tax trader status, figure out why. Are they trying to sell you something and are they going to be signing your tax return? Have they looked at the cons of being a tax trader status? You can easily Google pros and cons of tax trader status. And generally we're not fans. There's a lot of other things you can do with your money that's a little more wise. Okay Jack, give me three winners of our books today.

Jack here we got.

I got a. And while they're pulling that up, I'm going to just tell everybody thank you for being here. I'm trying to do a live every week. Want to say thank you for your patience in getting this ebook out. I'm so excited about it. If you enjoy the ebook, please get your give the link to your friends and say this ebook's awesome. Have them download it. I'd really appreciate the opportunity to keep you on my newsletter list. That's my exchange. There is I asked let me be Please get on my newsletter list and I do a newsletter every week with some incredible videos and articles and announcements and deadlines and in exchange I'll send you this ebook. So please sign up for the newsletter. I know it'll bless your life. Okay Jack, who are our winners?

I'm Gonna go ahead and read those off first. Dade county, anytime. Thank you guys for chiming in and asking questions. Sorry we can't get to everybody, but we're. We do try. My first winner was the first comment, and that was dad and Eli. Gameplay. We're going to give you the tax and legal playbook. So if you wouldn't mind, please emailing. And this is only if you're a winner. We will verify. Dianearkjkuller.com can you put this up on the board, Tristan?

Okay, so any winners and we will verify. Please get to email Diane with 2n'sarkjkohler.com and there's not a underline there, but it's dianearkjkohler.com so we got our first winner and then our second.

Our second winner is Subhash M. Subhash.

Subhash M M. Awesome. Congratulations, Tax and Legal playbook. And any of you that want the Tax and legal playbook can get it at my website, MarkJ Kohler.com or on Amazon. It's on Kindle and Audible.

So next, two more to give away. We're doing two. We're doing four, tops.

I'm sorry, the third winner is who?

Copy that? Landy maybe. Landy maybe.

Maybe Landy maybe. Okay, well, everybody, congratulations to those three winners and I want to say thank you to all of you to being here and can you take me back? Back? Thanks. And I will see you next week. And I've got a lot of video content coming out in the next three months. I got this ultimate tax guide. Please get over to my Instagram and Facebook. I've got some posts going out daily now that are very, very helpful. I'm taking ownership and control of my own social media posts and making sure that they really do speak to my voice and my brand and who I am and really excited about the new presence I'm making on social media. So thanks, everybody. You have a great week and don't give up on your American dream. Keep working hard.