Open Forum: Charitable Remainder Trust, 401k and the IRA, S-Corp vs LLC and MORE!

Welcome, everybody, to a live broadcast of the Main street business podcast Open Forum. That's right. We're going to throw down live. No. Was it ftc, who regulates radio Live and Howard Stern? Yeah.

Fcc. Is it a Federal Communications Commission? Fcc.

There we go. Not the Federal Trade Commission. Federal Communications Commission.

That's right. Yeah.

All right.

Yes.

So this is live and uncut. We are your resident tax lawyers, helping all of you Main street business owners, real estate investors and crypto traders. We want to help you make more money, save money, asset protected, save taxes. And today, the show is all yours. It's open forum. So if you're watching on Facebook or YouTube, you can type your questions down below. If you see a question you like that someone else posed, give it a little love, give it a little heart. That way we know that question is more important than others. And Matt will be also feeling the questions that were submitted@main streetbusinesspodcast.com where you can always go and submit a question. For the open Forum, we do the.

Yeah, and it's actually just mainstreetbusiness.com just go mainstreet calm. Yeah, we got the shorter URL. We didn't have to go all out. Just.com hit submit a question. I'll be reviewing those. And also if you're like, man, I'm watching this right now and I got a question, or, you know, it's two weeks later and you're like, I got a question I wish you guys would cover. Just pop it in on the website. We've got weeks here from the last time we did our open forum of questions. A lot of great stuff, ideas people had and questions, things people are pondering at night. I know they just jump into the podcast and throw their questions. And we're going to be pulling from those two.

Okay, now let me give a quick disclaimer for all of you watching live on Facebook or YouTube. There are a bunch of scammers out there. I have tried to be verified, check marked over and over again, and I believe I am, but do not, I tell all of you right now, do not participate in any conversation with me back and forth on the Facebook or YouTube chat. I am not asking you for bitcoin. I am not sharing any addresses. Anybody that says that I asked for bitcoin, anybody that says, thank you, Mark, I donated or gave money to your bitcoin address. It is a scam. Avoid it. We are trying to delete those as quick as we can. I am not going to ask you for bitcoin. Or any investment or any response. Any comments from a face of Mark Kohler on the chat is bullcrap. It's a scam. I wish we could get rid of them. All right, so we are going to. Oh, did you see that one? Aaron Perry is wondering where her book is. So check that out. That could be a he or a she. Corey, write down that name. Just see if it's in the queue with Litzy over at the office. Okay. Well, my amazing co host Matt Sorensen, I didn't mean to dominate the introduction there, but I've got Matt Sorenson live from Phoenix, the CEO of Directed IRA or Directed Trust Company, Also the author of the best selling book Self Directed IRA Handbook. We are going to give away some books today. So Matt Sorenson, I'm going to turn the time to you to kind of give us our first question. Welcome.

Yeah, thanks love. Open Forum. This is one of our most listened to podcast episodes every week when we do these. And because you know we're talking about what you guys want, not the dumb ideas Mark and I have, what we think's important. Although I think sometimes we those hit. Let me start with a question here. I'm gonna go with Lawrence. Lawrence asked the question what is the difference between an S Corp and and an LLC being taxed as an S Corp? Have watched about 10 videos of this great content but do not have the answer to this question. Okay Lawrence, great question. The difference to the IRS is there is no difference. Okay. So in terms of the irs, whether you set up a corporation and say I want S Corp taxes or an LLC and I want S Corp treatment, the IRS looks at you the exact same. You file the exact same forms to the IRS. It's an 1120s tax return. You're going to be doing payroll to yourself and you're going to get a W2. So as far as the IRS is concerned, it is all the same. Now the reason, the reason people will do an LLC taxed as an S Corp rather than just an S Corp is there's really two reasons why you may want to just do an LLC with an S Corp election rather than just go full more S Corp out the gate. The first reason is you may not want the S Corp tax status too early on. So when you elect to be an S Corp you have to start doing payroll reporting. You gotta start doing a quarterly payroll report. Well if I just did an LLC and I started out as a sole proprietor cause I'm still getting stuff going and maybe the first year I'm only Gonna make five or ten grand. I might not care to have an S corp and have to start doing payroll. I'm not gonna get any of the tax savings of an S corp. I, I'll just be an LLC as a sole prop to start. And then once I've got good income coming through the llc, I can add the S election later. And we generally recommend you do that about let's say 40,000 of net income. That's after expenses. 40,000 of net income. So a lot of our new clients that are kind of starting out, we may do an LLC and say, hey, pay attention. If you start doing well, let's add the S selection. You're going to save taxes there. So that's reason number one, they grow into it. Reason number two, this is a big question because there's a lot of people are like, what do I do? These are an operating business, do I do S corp, LLC taxes? Second reason is some states like Arizona have lower fees and lower filing requirements for LLC versus corporations. So in Arizona, for example, I like to do LLC taxes S corp for clients here because there's no annual report to the state. There's nothing, there's no annual fee, no annual report. If you did an S corporation, Arizona wants these annual fees and reports for corporations. So and that's a nuance. There's maybe like five or six states where there's a little difference there, but sometimes there's some of those details matter. There you go, Lawrence.

Well, Matt, while you were explaining all that, I was playing Pictionary and I diagrammed that for everybody. And I of course those that are watching her on YouTube, live Facebook. For those that are catching this on the podcast later on on itunes or Stitcher, I think that was fairly self explanatory. Hopefully you can catch this on YouTube later and watch the presentation. I will say this, I'm just going to add the trifecta, which is a huge structure training model we've really promoted the last two to three years because it just makes so much sense, is

on the left innovation. We've innovated.

I know. And so on the left side is where you're going to run your operations. And you might start out as a sole prop or LLC and then you're going to graduate to the S Corp when the time is right. And then on the right side is where you're going to use LLC is just to hold rentals. And I just wanted to make this point. You would never ever put rent rentals in an LLC taxed as an S Corp. Let your LLC taxed as an S corp run the restaurant. Let the llc, the other LLC own the building. So you have the realtor, S corp. Realtor has a rental. Dentist has an S corp, dentist has a building. Crypto trader might be mining or day trader status in an S corp, but then their long term trades or their holds might be over in an llc. On the right side, real estate investors, you do your flips in an S corp, you put your rentals in an llc. So that left side, right side concept and everything flowing down into your trust has just been a revelation for many of our clients that are multimillionaires are going, why didn't my accountant or lawyer ever teach this? It makes so much darn sense. So yeah, there you go, Matt. Good job.

I love it.

Okay, I'm going to repeat this for anybody that has joined us late. If there is anybody that's talking about you putting Bitcoin anywhere with me, someone that's full of crap trying to say that, thank you, Mark for telling me where to go and send bitcoin. It is a scam. Avoid it. I am not making any comments on the chat in Facebook or YouTube. We are doing our best to, to eliminate this. I am so sorry, everybody. Okay, I'm going to go over to crypto enthusiast who has a question and says who to call to set up a crt. Well, at our office, the person you would talk to is Shea Fallon. Kind of like Jimmy Fallon. You would talk to Shay Fallon in our office. She's my paralegal over the CRT department. She'll do a quick interview with you to make sure that your situation makes you a good candidate for a CRT. And then, believe it or not, out of our 16 attorneys in our office, you will be working with me directly. I am the CRT specialist in the firm. Now, we're charging $8,000 from start to finish, which is a two month process of getting your CRT really up and going with your wallets and everything involved. There's a lot involved. So it's more expensive. But the opportunity to save thousands and thousands of dollars in taxes is significant.

It's a Cadillac. What do you expect? I mean, it's got all, it's got power windows, you know, heated seats. It's kind of like, you know, a brand new Range Rover. They're not cheap.

Yeah, it's crazy. Now, let me just give everybody a couple points about the crt. In fact, after this broadcast today, Corey and I are going to stay in the studio and shoot A couple videos on crts. So please look for those broadcasts later today, if we're lucky. Depends on how clean the shoot is, if Corey can get them up quickly. But here, here's something I want to say in brief. A charitable remainder trust is a way for you to take highly appreciated cryptocurrency or real estate or stocks or even a business. And I'm just going to go quickly through the steps. The heart of the step is setting up a trust. And what we choose for nine out of 10 clients is the crud, not an annuity trust. I'm not promising an 8% annuity. I'm not promising a 35% or a deduction with the IRS and a tax strategy. There's videos out there that kind of put me in a box on the crack. I don't like the crap. I'm going to take down a video that has previously some reference to a crat. What we like is the Charitable Remainder Unit Trust. It allows you to be the trustee and continue investing the assets you donate to the crud. So step one is the setup of the crud. Step two is you're going to donate. Let's use this example of crypto or real estate. Something that may be worth a million dollars, but you're only into it 100 grand or 200 grand. So you have this huge gain. Now when you donate to the crt, that step two, I'm gonna put number two. Step one is set up. When you donate, you're not gonna sell your real estate or crypto. First you're gonna donate it. Step three is when you actually sell it and that entire gain goes tax free into the crt. Now again, I'm not trying to mislead anybody. You're not going to pay tax on the sale. Your pie is still 100%. There was no haircut for state or federal tax. Now that pie can continue to be invested by you and it's going to grow and every year it'll get revalued. And you're going to get a distribution percentage off of that for the rest of your freaking life. And inside of it, you could be selling and trading and not paying any tax or buying real estate long term holds, passive, not fix and flips. And you can build that. So step four would be a tax deduction based on the fact it's going to go to a charity in the future and a Matt, I'm going to wrap this up quickly and then you get this distribution percentage. You are taxed on the distribution percentage. So when I say a charitable trust allows you to pay zero taxes, yes, on the sale of your crypto inside the crt. But as you get this distribution, you're going to pay tax as you receive it over the rest of your lifetime. That's okay. There's no deception. There's no misleading there. People love the CRT for this. There's no freaking clawback. Because you're going to have a third party administrator managing this. This third party administrator is going to make sure that you never take more than you should and that the rate of return is commensurate with the distribution you're going to be making. If at any time it's threatened, the TPA is going to say, whoa, we've got to reevaluate here. Your investments suck. You can't keep taking money out. So there's no clawback from the irs. As long as you're using a tpa. It's very rare that there's a clawback because people are not idiots. They use professionals to help them manage this thing. You're going to be fine. The CRT is so powerful. So you get this tax deduction you get, you get a distribution. I'll put that as number five. And then when you die, it goes to charity. Now, there's lots of options. There can be a 20 year guarantee. There can be life insurance involved. You can always put more money in or more crypto into the trust as over the years proceed and you continue to manage it and invest it. If you're interested in this, this is the only comment today. Watch the videos that I have on YouTube on this. Talk to Shay Fallon. Jimmy Fallon type reference. She's not related to Jimmy, but I'm just throwing that out. Easy way to remember Shay Fallon. Call her at our office and do an interview with her. There's no charge. She'll talk to you, find out if you're a good fit, and then we'll go from there. I'm going to give you the number now. 435-5869366. So talk to Shay Fallon and she will help you out. All right? So there's our CRT conversation for the day. No more CRTs, all right? Yeah, yeah.

You guys eat your vegetables. We're good.

Yeah, we're gonna watch the videos. Matthew, I know you're asking questions. I see other questions on crts. Watch my videos on this. That'll be produced within the 24 hour period, if not by end of day. And make an appointment with Shea.

All right, let's go to Scott in Michigan. Scott's got a question. He says hi Mark. Mark and Matt, love the content on your podcast. I own four duplexes, each one held in a separate llc. I also self manage them as mom and pop owners. Is it beneficial to set up a C corp or another LLC to manage them? Is it worth the expense? Thanks. All right, Scott, glad you're asking because no, it is not worth it. I mean we set up C Corps, we set up corporations and LLCs. So I mean I'm inclined to usually be like, yeah, and we sell those. We can set them up for you. No, you don't need to. Now there's a caveat to this which I'm going to talk about next here, which is Eric's question. But generally no. If you're just holding the rentals, you're making money cash flowing. You have separate ones for liability protection, which I love. So you've got one LLC for one, four plex. Something happens on that, they can only sue and go after that LLC. They can't go after the other LLCs that own the other three duplexes. So Matt, can I.

By the way, so Matt, whenever you're talking. Of course today Matt is not able to see the whiteboard in this presentation. I apologize but. So Matt, I've diagrammed four LLC on the right with four different properties in them, 100% owned by the trust. And I just want to point out you can always pay yourself. This is all passive income. There's no self employment tax. So we've got a back, back door or a side door reason to set up an S corp to manage all your rentals, which we'll come to. I can imagine here in a moment.

Yeah, this is Eric's question.

That's Eric's question.

He's like right on it.

Yeah, but there's only one reason you would ever set up an entity. It would be an S corp and hell no, it would never be a C corp. So go ahead with Eric's comment, Matt, and I'll diagram it here.

Yeah, so Scott, the only reason you would do this and the only time it would be worth the expense to have this correct management company is for what Eric's asking here. Eric's basically saying, I'm a landlord and manage my properties. I want to contribute to a 401k but can't with rental income. He says you recommend on your blog not to create an S corp and pay yourself a salary to manage your property. Matt says it's possible or okay in his book. Can you Guys, clarify. Okay, so that's the general rule, which is what we're just talking about on Scott's question is don't do it unless you're trying to do the side door solo K method here where we set up an S corporation so that you can have ordinary income. You're going to pay a service fee from your llc, let's say that owns the fourplex or duplex and you're going to expense that, pick it up as income over in your S corp. This is the property management company. And then you're going to pay yourself out of the S corp. You'll take a salary, you'll get a W2. For now, you can contribute to a 401k, but we are only going to do that. You're only going to go through that hassle of a new entity. You're only going to take rental income and create it into ordinary income. If we're going to try to contribute to a 401k, absolutely you can do it. Lots of clients have done that over the years. Great strategy.

Yep. Now playing off this, we have a question live from YouTube, Hecton McCoy says, How do you pay yourself in an LLC? Well, Hecton, the first question I have to go back at you on, and this is what I would ask any of you is when you say how do I pay myself in an llc? Well, I need to know what's your LLC doing? So let's just assume for a moment. It's like Scott over here on the right, he's got all these rental properties and he's self manage them. Well, Hecton, it's easy. You take what's called a draw. That's how you pay yourself. No W2, no 1099, you just take a draw whenever there's enough cash flow. It's not a deduction in the LLCs and it's not taxable income to you either. What's taxable is what's left over after rent and depreciation and all your write offs. Now, 9 times out of 10 in the right side, Scott over here is not going to have any taxable income because it's a rental property operation with depreciation and all the write offs, all of those draws are going to be a tax free distribution. That's 9 times out of 10 how it works right here in my book. Now if you say, well my LLC is for my realtor business or I'm doing mining with crypto, or I'm doing staking and that is subject to self employment tax or I'm I've got some other business operation over on the left side and it's an llc. Well now we've got to worry about self employment tax. Now anytime you have profit over there, whether you take it or not, you're going to pay self employment tax. So as Matt said earlier in the show, if you're going to net 30 or 40 grand or more, hecton, we want you to turn that LLC into an S corp and your distributions are going to be split. And so if you're watching here on YouTube or Facebook, what we call is, we call that draw or distribution kind of step one in the process. You just take that money but then we're going to allocate part of it to W2, making sure the IRS is happy with the F word. Fica, Fica, you're going to pay your Social Security, Medicare out of that W2. But this draw or distribution, yes, my handwriting sucks. Then the rest just falls out the bottom as a K1 if you're not sure why to be an S Corp, go to YouTube and type corp, Kohler S Corp and you're going to see multiple videos on when to convert to an S corp. Why an S corp makes sense. Please like them, give them a share. They've got thousands and thousands of views because they just make sense. So every dentist, doctor, plumber, electrician, miner, flipper, attorney, cpa, dermatologist, chiropractor, we're all S corps. We're all S Corps. And you could be an LLC taxed as an S corp. Same damn thing. So that, so hecton, when you say how do I get paid out of an llc? I have to say, well, is that as an llc, taxed as an S corp? Is it an operational business? It's going to be a different procedure than if it's just a rental business with LLCs. So good stuff. Matt, the time is yours. All right.

Okay. Johnny asks, my son and I have LLCs that own rental properties. We have over 30 properties. Good for you, Johnny. Love that. His the son. My son's ownership percentage is less than 5%. My son has an S corp that performs property services. Can his S corp do work on our LLC properties with his S corp in order to increase his portion of the income? Yeah, absolutely. This is what we've been talking about here in this property management entity. This is just a little different wrinkle on it. You've got a lot of properties, Johnny, and if your son is doing a lot of the property management, he should be using an s Corp. These LLCs that own these 30 properties should be expensing the payments they send him to do the services. And he's of course picking up that income in his S corporation. So that makes sense. Absolutely, you can do that. S Corp is right entity for him in carrying that out.

Okay, now everybody, I'm going to give away some books here as we go through the show. And Corey, leave that screen right there because I want to hit Jen Hunt's question, Nathaniel's question, and Rondon's question. So I'm going to hit Karen K. And then I'm going to throw a question at Matt from Nathaniel. So Karen K says, easy one for you. We'll see. She says, I have several side gigs, all in different industries. Should I file a separate schedule C as in Charlie, for each one or at least for each industry? Karen, you would, but I would not recommend it. So let me just answer Karen's question. In a vacuum, if you have multiple businesses and you're not an LLC or S Corporation, you're going to do a separate schedule C for each industry. That is what the IRS would like to see and is required. Now, it's a pain in the butt, not a good strategy for tax planning and it creates high risk audit concerns. So, Karen, if you're watching right now and it looks like you are on YouTube, what I would do is set up an LLC, probably taxed as an S Corp. Because if you have multiple side gigs, I'm hoping you're making more than 30 or 40 grand. So we're going to run multiple businesses through one entity, one checkbook. It's the way to go. That's what I do. Karen, I have one S Corp in my life with all the things I've got going on but books or videos or law firm or accounting firm or speaking. I have 1s corp. Run all of that income through 1s corp, do 1w2, do your solo 401k, do a HSA, do all these other strategies we talk about, but let your S Corp be your parent company. It's going to reduce your chances of an audit by 15 times or 1500%. The S Corp is what is going to make you look better for a bank, which I'm going to talk to for Rondon here in a moment. That S Corp is going to generate a W2. So you look freaking awesome for building up your rental portfolio. We want you looking at real estate in the long run over here on the right side. So the LLC S Corp really knocks out several birds with one stone. It's the get all, end all. We love it. Karen. And Karen, I'm going to give you a copy of the new 2022 MJ calendar. MJK calendar. And some of you have already bought this. They are going out the door like today. We've got Carlin truckloads going down to the post office. We just got 750 from the printer today. Some of you are like, it's February, Mark. Yes, but this calendar has all the tax data for 2022 in it with special charts and diagrams and state maps that all have state data that we had to kind of wait for for January to come out. But you're going to love this calendar. You can get it at my website, markjkoler.com we sold out every year the last three years. It's a freaking awesome calendar with building your 10 year plan, motivational statements every month and little QR codes and video. So Karen, this is yours. You need anybody? That's a winner. I'll tell you how to collect. Get your info here in a moment. Now Matt, this kind of builds into the next question from Nathaniel.

Okay.

Is it possible to move an old 401k to fund a new IRA and get a tax deduction for 2021 one before the filing deadline? And so Nathaniel, you've got several.

No, it's not possible. No, it's not possible. You don't get a tax deduction for moving a retirement account 401k to IRA. It's not a distribution either though. So if you have an old 401k and you want to move it to an IRA, let's say to self Direct, there's no tax to do that, there's no distribution. But you don't get a tax deduction or benefit either. It's just neutral. Your 401k moved from fidelity and now it's a self directed traditional ira. Directed IRA that's all tax neutral. So now Matt, don't think about that part. Think about it more. Where do I want the account to invest in what I want to do?

Yeah. Now with that said, where could he get a tax write off for 2021 when it comes to retirement planning?

Yeah. You can make your new contributions and even a traditional IRA you could drop six grand in still up until April 15th. For those of you self employed, you could do a SEP IRA up until your company tax return deadline. So that could be March 15th. Or for S Corps partnerships, April 15th first you sold props.

Or September 15th.

Yep. Plus extensions. So if you extend to, you get

that, that's all going to be March 15th. Matt, I wanted to correct you. Any of you taxed as an S corp, it's going to be March 15th or September 15th. For those that are these sold props, it's April 15th or October 15th. But you have that sep, which I love Matt, because you can convert it to a 401k on day two.

Yep, yep. And, and you may. You could do a solo K also possibly as well. It's too late to make employee contributions by now for you escort people, but you could always do an employer contribution. We just helped the client a week or so ago did it did a S Corp or sorry is an S Corp did a solo K for 2021 and is just making the employer contribution right now. And so we have prior episodes on the S the solo K and we have a prior directed IRA podcast. We did two on contribution deadlines actually the directed IRA webinar on that. So you have a lot of other content out there on it. It's a little tricky on deadlines, but if you're still trying for 2021 deductions, you actually have some time still on getting some money in retirement accounts. Even if you haven't even set up the accounts yet, you got a little time to get some 2021 deductions still.

Yeah. And Nathaniel, if you want to roll over an old 401k into a new IRA so you can self direct or roll the old 401k into a solo 401k so you have a bigger bucket, better protection and an ability to self direct. All of that's wonderful. It's just not going to create a write off. So add to it a contribution for last year through an IRA, through a SEP, through a Solo 401K. And if you have questions about that, call the law firm, get with a lawyer in the next six to eight weeks. You got plenty of time. Probably file an extension. That way you've got time to breathe. Now April 15th is a deadline for Cory. Leave it up there on Karen, if you could. Okay, April 15th is a deadline for the IRA contributions. But if you're a business owner like Matt said, you can file extensions and really play some games.

So yeah. All right, I got a question here that came in just a couple minutes ago. So this is from Sarah, Must be watching live here. She says my business partner lives in Texas and I live in Utah. We are land investors and are a few months into the new business. We originally structured our business with two separate LLCs. One for me in Utah, one for her in Texas, we're now seeing it would be better to partner up on everything. And we're wondering if we need about think about structuring our business differently. We'll be splitting all expenses and splitting all profits. Do we need to change anything about our current structure? All right, love your question here, Sarah. Yes, I would change how you're structuring this. You should be doing an LLC together. And I don't know if you're buying this land in Texas and in Utah. You might want to have a Utah LLC for Utah land you're buying and a Texas LLC for Texas land you're buying. But let me give you a couple ideas on how to do this. If you guys are going to own a lot of land and you guys are just going to go out and buy land, I would do1 partnership llc that you and your partner own. This is going to be your holding company. Now, if you're going out and buying different parcels of land all over the place, you might say, yeah, we could actually hold properties directly in this llc. That'd be option one. Because it's land, there's not a lot of liability risk. We're not developing, we're just buying and selling land. That would be one way to do it. That'd be kind of the simple way. Maybe you're buying land at 5,000, 10,000. It's lower dollar amounts. I would probably go that route if that's the case. Now, if you're like, nah, Matt, we're spending hundreds of thousands on each of these pieces of land. We're developing them. What I would do is I would take that Holding Co. LLC, don't buy the land in it. Have that holding company own an LLC 100%. And that LLC, a property entity, is going to own the separate land. So that would be what like a large developer is going to do. They're going to have their holding parent that's going to have a. And you could do this in Texas and Utah, by the way. Series LLC type structure that has the each little separate property holding. So you guys have a number of options. But I would re look at this. I would think of the series LLC structure or the holding company with property LLC structures, depending on what state you're buying properties in, depending on the value of what this land is and how much you're putting in. I don't want to overkill with all these property LLCs. If you're buying land in the middle of nowhere, that's 5,000 bucks.

And I just tried to diagram that. The best I Could Matt and I, we kill it at Pictionary. We're quite.

Yeah, yeah. We're an unstoppable force.

You want to watch out for that. Okay, I'm going to answer Jen Hunt's question and I'm being bipartisan. I'm giving away some books to the male side of the crowd and the female side of the crowd. But I'm going to go with Jen Hunt here and give her a copy of the tax and legal playbook. Her question is, my tax guy said you can only go back 75 days to elect an S corp on an LLC. So you can't wait halfway through the year and see how well you're doing. Jen, fire your accountant. That is such a rookie understanding. It's ridiculous. It's my brand new CPAs we train in our firm know that that's incorrect. On their second day working for us, there is a revenue ruling you would attach to the 2553 election. We're still electing people s corps back to 1121. Now that means there's some payroll to be done and things like that. But there is not a 75 day rule if your accountant knows how to attach the right form to the election. So Jen, if your accountant has screwed you over for 2021 and said you couldn't do it, oh my gosh, you've got to move quickly to get some payroll issued before as soon as possible for 2021 and get that s election done to 1111 21. If you're talking about making a hundred grand or more for last year, this could be a 5 to $10,000 swing. And I stand behind all of those recommendations in my book. I train other CPAs around the country. We make sure you take a reasonable salary and there's still savings on the table. So Jen, watch out. Okay, Anybody out there? Again, watch out for anyone suggesting or encouraging you to transfer any bitcoin anywhere. Anybody that says I told you to transfer bitcoin. It's bull crap. It's a scam. Okay, Matt, your question.

Okay, Kurt from Utah asks when an llc, when LLC A taxes an S corp. So let's just say S corp. When an s Corp owns 100% of LLC B, that is an operating service business, which entity pays the salary to the owner and how does the S Corp strategy work?

For example, diagram that. So we have L.L.C. s corp parent owned 100% by Kurt or his trust, which is where we'd want to be. And then it also owns a subsidiary

that's operational operating Service business. Yep.

Okay, keep going.

All right. He says, for example, a contractor who has an S corp that owns his contracting business, should an LLC be in his example here at the contracting business? Pay the salary. It's confusing. Okay. You're basically asking the question of what Mark and I do like. Okay, we each have our own S corporation that is really LLC as you're talking about here. All right? That's where you pay the salary. Now it owns an operating business, let's say the law firm. That is the LLC operating business that's receiving all the income, paying all the bills, paying every other employee, but. But not us. It drops the profit down to llc. A in your example here, Kurt, the S corp. And then you're taking a salary out of that. So you're not taking a salary out of the operating business, llc. B up here in your example, the contracting business. So don't get confused. Your employees are going to get paid out of there. They're going to get their W2 and salary out of there, but yours is going to drop your profit down into your S corp and you're going to be taking the W2 out of there. And you're probably the only one. In my S corp, I'm the only one that gets a W2, you know.

Okay, let's jump over to Rondon and I'm going to give him a book as well. This is over to. Can you pull up Rondon's question? Corey? I'm going to give him what your CPA isn't telling you. It's the gateway drug to loving taxes. So if you want to be a nerd like Matt and I, this book will hook you. So Rondon says he's got several questions, so I'm just going to take the. I wanted to the first one, so I'm going to go with that. Rondon, I'm going to take your first question. Please set up a consult with one of our attorneys or tax lawyers. You've got multiple questions that are very important. It says, I'm a health care provider and I'm curious about getting a conventional loan as a new 1099 S corp owner. So if we go back here to our S corp diagram that we've kind of been playing with. Healthcare provider. So we're gonna assume that he's either a doctor, a dentist, chiropractor, something in the healthcare industry, and now he's running his own. He or she is running their own S corp out there making money in multiple ways. Good to go. It's kind of a Two part question. He says getting a conventional loan as a new 1099s corp owner. Well, the reason why the S Corp is going to make you look good for conventional loan is because you're going to issue yourself a W2 that puts you into the Fannie Mae box of actually having a W2 and not playing around with the schedule C. So that's going to make you look more conventional. Number two, please make sure that you're talking to a mortgage lender that understands an S corporation because it's really a two part application. You're going to have a K1 that shows your profit from the S Corp and the W2 that you're an employee from the S Corp. A good mortgage lender is going to look at both, both pieces. And if you walk into the credit union and Talk to the 22 year old at the desk and say, I need a W2, you know, loan, they're not going to understand the S Corp. Their brain's going to explode, probably spin around a little exorcist type, you know, experience, and then you're not going to get what you want. So no offense to you credit union folks out there, but you're built for the box. You know, people are coming in with a W2, you put them in a box, easy schmeasy. But you business owners out there with a 1099 S corp strategy, you need to graduate to a more advanced mortgage officer. Then he says, can you deduct miles and the gas you put in your business vehicle? No, you have to choose one or the other. So either you're going to do mileage or you're going to do fuel. Now I've got a new article I need to update from last year on the mileage strategy versus the actual strategy. If you go to markjcolder.com and just go to my blog and put in the search word auto, you're going to see a wonderful article on that and run with it. And you have to choose one or the other, but it will be deducted in your S Corp. Man, you're. You're calling.

All right. Bo from Arizona says thank you for sharing your information. I'll be setting up an LLC for a rental I have in Lake Havasu.

Okay.

I also want to offer Lake Havasu.

I just watched Piranha in 3D the other night. It was like, woo racy. That was at Lake Havasu. Little party action there. I had to edit that thing. So. Okay, yeah, so Lake Havasu, party town.

Okay, thanks for Noting that there. Yeah, okay. Llc. LLC with the rental in Lake Havasu. Now he says, I also want to offer other amenities such as a UTV side by side with the rental can or should I purchase and own that vehicle inside the same LLC as the house? Okay, Bo, I love this question because it gets at a couple of issues and misunderstandings people have about LLCs. So of course you're going to use the LLC for the rental, right? We've already talked about that enough. Everybody listening to this podcast should know LLCs are great for rentals. Now why do we use the llc? We're using the LLC to protect you and your other assets from something that happens on the property. Before I even get to the UTV and side by side, I just want to make sure on the same page, the LLC is not protecting the equity in the property. If something happens on that property, someone slips and falls and they there are a tenant in there and they sue the llc. They can't sue you because you don't own it. They have to sue the llc. They can get at the equity in the property. They can get the property. Okay, but they can't come after your other assets, your other LLCs that own your other assets, they can't get a judgment against you personally, come after your home, your other businesses. Okay? So we're limiting that liability just to that business itself. Okay, so then you say, well, what if I want to do a side by side? All right, I know what everybody's thinking now and what you're thinking, Bo, sounds like there could be some accidents and some liability. And renting a side by side as an amenity. Can I put it in the same llc? Yes, you could put it in the same llc. And if something happens, someone crashes that side by side, someone gets hurt, they're gonna sue you, right? And now they're gonna again sue the llc. Well, what's at risk? The equity in the llc. How much equity do you have in this property on Lake Havasu? If you got a ton of equity, that's just a risk you're gonna take. But it still can't come down to you personally and all your other assets. Now, I want to make one other point on this. Some people will say, well, what if I set up a separate LLC for the side by side? So it's like I have an LLC that owns the property and then a separate LLC that owns the side by side. So now something happens on the side by side, they have to sue that llc, right? Yeah, but are you gonna have A separate bank account for that. Are they going to pay you for the rent? Separate for that? Are you gonna have a separate rental agreement for the utv and side by side if you don't, that isn't gonna work. You're gonna have to go to that extent. So when someone rents it the house, they're gonna have to separately rent the use of the 8 of the UTV, which I might do. I don't know the situation, the equity here and how much rental you have. But you could separate those two liabilities. But you just have a separate bank account for the utv, separate agreement for lease, separate and treat those two rentals as separate things. Then you could get separate liability treatment.

I love it. Great points, Matt. I tried to diagram that with my. I don't. I think that looks like a piece of crap gremlin car. Not a side by side, but whatever. Okay, now I'm going to jump off yours and go to Simon. That said, would you have properties in different states within this one llc? So let's keep the same diagram up and you got this Lake Havasu property in an LLC in Arizona. Then you go, oh, I'm going to go across the border and buy a little duplex over in Utah. Well, you have two options. If you don't have a lot of equity in these properties and you're trying to be efficient, even with me having a law firm, I don't want more LLCs than I need. So I might put that Utah rental in that same llc. Now I need to register the LLC in Utah because now I'm doing business in Utah, but I'm able to keep the same bank account, the same llc. I just register it in Utah. Cheaper, easier, one bank account, one holding company. Now let's say I go across the border over to St. George and I buy a golf course property out there on Stony Brook and it's like $1 million property. I'm going to Airbnb it. It's a big deal. I'm probably going to set up a separate LLC for that one because it's just got so much value and probably even more risk with an Airbnb than the long term rental over in Lake Havasu. So you want to look at the value involved, the equity involved, the risk involved, and it's just, it depends on the situation. Simon. So our goal is to make sure we're not overselling you. Llc. Watch out for companies are like you pay one fee and you can set up as many LLC as you want. That's not A good thing. I don't care if we're encouraging you to set up a lot of llc, something's wrong. We want you coming back to us year after year knowing that we are reasonable, careful and and very analytic about how many LLCs you need, what states. Let's be strategic about it. And that's why we have a lot of clients that go to LegalZoom, set up their entities and then they come back and go. Now what do I do? Well you set up too many damn entities. So let's clean it up. So just because you can do it online doesn't mean that you should do it online. So. All right Matt, yours.

I got. Yeah, this is a for a minute.

Cory too. Go ahead.

Yeah, it's a question for you too but this is question from Maria. She says I'm a new listener. Thanks for the wealth of information you provide our business in S Corp. And this is you're a new listener here. We're going to get to a good point, Maria. Our business has been on cash basis reporting ever since we started. Reason being not wanting to pay tax up front before we even collect. Makes sense. Collections in general is slow and painful. Although we're doing pretty well with sales this year, I think we can finally afford to switch to accrual and we'll be extra pushy with collecting payments. Any tips you can share about changing reporting structure? Yes, I got one tip. Don't change.

Don't change. In fact you might not even be able to change. Most taxpayers can't claim accrual unless you're inventory based or seasonal. Stay away. Stay away.

Yeah, yeah. And most small businesses, 99% of them are going to be cash moving to accrual. Maybe you're a big corporation or something or you have an odd business model where that's, that's something to do. Maybe. But for all you listening you should be on the cash basis report and

watch out for these yahoos out there. Like you need to be a C corp with a different year end than your personal year end and then you can push the income over here and then you don't pay tax till the next year and by the time you're done with all that frickin headache and the mess and the extra tax return and the C corp tax and all the BS that goes with it. It's not worth it. I've written a whole section of my book on that. Now if the same people that are selling that strategy doing your tax return and you compare it to a regular method that's still very strategic. And look at the cost benefit analysis. I don't think you're going to get there. Okay, Kevin Andrade says what's the revenue rule for an S corp? Kevin, I wanted to address this because I don't know what you're talking about and I think that's important to say here and no offense, you may be talking about what's the W2 payroll rule for an S Corp. And that is all of you out there that have an S corp like me and Matt, we have to take a reasonable.

Maybe he's referring to the late filing, the rev. The revenue ruling you mentioned on the late filing of the S election, which

is the rev rule for S corp.

Yeah, that's by the way, I just pulled that up. That's Rev Proc. 2013-30. So our paralegals know that and use that. Quite common. A lot of tax lawyers and savvy CPAs are doing it too.

2013-30, right?

Yeah, it's called late election relief.

Yeah. So that's the revenue. Now, Kevin, I know what you're asking.

Yeah, I think that's what you're asking.

Yeah, yeah, yeah, yeah. And thanks Matt for pulling that out. So I'll leave that on. But I will say everybody that has an S corp, you've got to take a W2. That's reasonable. I have a payroll matrix. If you just Google Kohler payroll matrix, you're going to see all sorts of ways to come up with the right payroll that keeps you out of harm's way with the IRS and saves you a buttload of tax. David Duncan wants to talk about solar credits for commercial buildings. Big conversation. I'm going to leave that aside. Research is so unique for commercial buildings and what your solar credits can be and how much you have to spend and what the benefits are. I'm sorry David, I will just kind of sidestep that one. Matt, I want to give Nathaniel McKnight your self directed IRA handbook for his 401k and IRA question for those that have won. I've got one more book to give away here, Nathaniel McKnight. And I've been writing down these names too, Corey. But any of you that have won a book, I've got your names here. So don't try to get away with the cheating here. I need you to email Corey. You're going to message him here now if you want or just email. Is email better? Corey? Okay, just email Corey.com and he will make sure that you get your book. He'll get Your address and take care of you. We've got your names down here and your handle, so be honest, folks. Yeah, Matt, go ahead, take another question.

All right, this is Rosalie from California, lives in central California. Says my daughter and son in law have an S Corp landscaping business. Find all your topics interesting and have learned so much. On one recent insurance discussion, you said that they could run their health insurance premiums through the S Corp. As long as the premiums are paid by the S Corp and they report it on their W2s. However, their CPA told them they can't do this unless they offer the same health coverage to their employees. I thought I heard you said they don't have to. They have eight employees. Okay, Rosalie, this is your account, I think, mixing up two different rules. One is, can the business owner deduct their health insurance and put it on their W2? Yeah. Yes. You got something, Mark?

No, no, keep going. I was telling.

Okay, sorry, go ahead.

Sorry.

All right, the other question is do you have to offer health insurance to your employees? Which doesn't get into whether the business owner can deduct their health insurance. So, yes, you do have to offer insurance to your employees if you have 50 or more. Now that's the Affordable Care act rule or Obamacare, if you recall. If you don't have. If you have less than 50 employees, you don't have to offer health insurance to all your employees. So I don't know if that's the confusion on where this is coming from or if there's some weird California nuance to this I'm not aware of. Every once in a while there's a weird California nuance to things, but I've never heard of that. So I think your CPA is probably wrong. Or I should say your kid's cpa. Mark, any thoughts?

Nope, we're good. I'm going to keep moving along here. Aaron asks, where are any. Where are the sessions from your crypto tax summit recorded so that we can purchase them individually? Aaron, I'm sorry, we are not selling the recordings from the Crypto Tax summit for those that attended. You saw, it was a big undertaking. We are actually releasing the recordings to those that attended today or tomorrow. They're all up and ready to go. But we're just fine tuning when we're going to hold a webinar for the follow up, making sure the PowerPoints are tight. It was a lot of work, Aaron. And any of you out there doing crypto trading on May 19th and 20th in Florida, we will be holding this next Crypto Tax Summit. I know that seems kind of far away, um, but it's just really 90 days away. I think three months away. And we are going to continue to release articles and hold podcasts and release videos on topics, but the market is changing so quickly, Aaron. If we release recordings and start to sell them. We're really already planning the agenda for the next Crypto Tax Summit. And there's legislation in Congress all over this too. Yeah. So we're doing.

Yeah, we're doing three a year right now. So just what we're trying to say is just catch the next live one that'll be coming up. If you missed the last one.

Yep.

It's only three months away.

Thank you, Michael. We're going to be covering minting NFTs and gas fees probably on an upcoming podcast. So stay tuned for that. Sarah says, can I go back in previous years to claim the income? What I think she means is the deduction for paying my children in the business. Was told we couldn't claim it in the past. Have multiple messages with your office. I don't know what to do. Okay, everybody, if you paid your kids last year out of your business and the money went out of your business to your kids, you're going to write off for last year. Make sure it's included in your tax return for last year.

But if go to your kids account, though, this is the one thing your kid had to have a bank account in their name. Your business paid the kid. If you're like, well, I paid me and then I was paying for stuff for my kid, not going to happen. Yeah.

If the proper procedure was followed, you can go back to last year before you file your tax return and make sure you take that write off. But Sarah and everybody out there, I am so sorry. If you're like, I just learned about how I could pay my kids. Can I go back to 2020 or 2019? The answer is no. And in my book, Tax and legal playbook, I've got videos out there in my membership site. I've got all sorts of training on that. It just. Sarah, stay tuned. I'm going to be providing more resources in my membership site launch in the next month and a half. Please continue to follow our newsletter. I'm going to help you get the information you need for this sort of thing so that you can do it right in 2022. I will say this as well. She said, and this may be some of you that are followers that you're like, mark, I've called your office. We can't get a return call or you guys are too busy. It's right. We're pretty busy. Don't give up entirely. Leave a message. If you're looking for tax prep or accounting services, bookkeeping, we've got a waiting list there. And if you're calling just now, I regrettably have to say you're probably going to have to use someone else for your 2021. We're trying to ramp up. We're bringing on more and more employees, but on the law firm side, we can service you. Yes, we get more phone calls than we can handle each day, but we're reaching out the determined folks. You'll get help. Our attorneys are only out maybe a month on appointments and they can help build a plan for this year. We have a tax consultation plan where we build your tax your trifecta and give you tax tips for the year since year and action items. So please sign up for that. Stay in, stay determined, email our office. Keep calling. You'll get through and get an appointment. The phones are, we're just, we're trying to be the best out there. And so the phones are ringing off the hook a little bit. And please be patient. We're going to do our best.

Yeah. But we've brought on a lot of new attorneys. We even had to start last month that are experienced and we got two more starting in a couple more months.

So.

So we're bringing on more people. Lots of. And these are not newbies. These are people experienced. Okay,

go ahead, Matt.

You got a question.

I do this. I'm talking to Corey, not you. If I point to you, that's you. If I do this, it's Corey. All right.

Okay. This is a question from Lee Richter from Midland, Texas. Lee, you know we love to get to Lee's questions. Now, Lee does have a 401k question I'm going to answer here, but I just want to remind everybody the Directed IRA podcast has an open forum, too. Get over to direct ira.com podcast. Submit your self directed IRA or retirement plan questions there. We can always cover those on that show. But let me just hit Lee's question here. He talks about managing a rental property in an LLC owned by your 401k or IRA. He says, Do I have to hire a management company? Can you clarify your position on that? And he says, I've heard conflicting responses about whether you can manage your own property. He says, by the way, maybe the reason Matt has only one book as to all of Mark's books is he figures when you Write a classic. Enough is done. Thanks, Lee. That's pretty much the reason I read your question. So I want to get that in.

Thank you. Thank you.

All right, Lee, so let me cover that. You can be the manager of your own IRA llc. You can. And if you have a rental property that the LLC owns, you can manage that property. But you need to stick to administrative and investment oversight tasks. And this is in my book in on the IRA LLC chapter, the Self Directed IRA Handbook. So if you are writing the lease, collecting the rent, paying a contractor to go fix it, even showing it to a tenant, or posting an ad that the LLC is paying for, that's all fine. You're doing administrative or an investment oversight task for the asset that you're IRA LLC owns. But you're not fixing up the property. You're not working on it. All right? You're not putting in physical labor or worker services into the property. So stick to the paperwork, decision making, talking to the tenant, which is, you know, your customer here, really, at the end of the day, that's paying the irlc. I'm okay with that. But this is where there's just some confusion. Just don't get into the physical work on the property.

Hey, I want to give a shout out to Sean J, cpa. I appreciate, Sean, your comments answering a variety of questions here. I haven't seen one of your answers out of line, Sean, but I need to point out Sean is not affiliated with our firm. And always make sure any advice out there you're double checking on. But Sean, thank you for your help today and shout outs on there. I want to say Roberta throws out, I have an LLC that I don't use for anything right now. Can I use that LLC for a rental?

Sure.

In fact, if you have an LLC laying around, you could use it for operations. Sometimes when you have that LLC just kind of sitting in the middle on a bubble and you're going like, I'll pull it off the shelf and use it for this or that. Once you dedicate it to an operation, leave it there. And also make sure you're always in good standing with the state. You just, you know, a lot of people think I have an LLC laying around. Come to find out it's been dissolved by the state. Carlos, I'm going to give you a book, Carlos. I recognize his face. A regular follower. I love him. Great client of ours, Carlos Gauman, says, when you pay your children in your schedule C, what is the right category to expense it? Now I'm going to give Carlos a Business Owner's Guide to Financial Freedom. I'll write that down here. Now, people, when you pay your kids in a schedule C if they're under age 18. See, again, sometimes these questions require more information. But if you pay your kids under age 18, we put that in other expenses. Outside labor. No W2. No 1099. Now, some of you CPAs may be freaking out. The reason why a W2 is not required is because there's no FICA withholding required when you pay your own kids. So you say, well, there's a penalty for not giving my kid a W2. Yeah. What's the penalty? A percentage of the FICA. Did you withhold FICA? No. So what's the penalty? Zero. Don't worry about it. Now, if you want to fund an IRA for one of your kids, you at Directed IRA, we don't require a copy of the W2. We just. On. On your honor, you said I paid my kid earned income. Great. They can open up an IRA at our Directed Directed Trust company. Get to Directed IRA.com. but some brokerages or financial advisors may require a W2 to show that your kid actually had earned income. They don't believe you, but there's no tax reason to go through a W2. Other income, outside labor. If you're paying your kids over age 18, 18 or over, you're going to do a 1099 or a W2, and that's going to go under a subcontracting line for what they did. Or if they're a W2, it's going to go under employees, and you're going to have the regular withholding. So, Carlos, There you go. Matt, one more question.

It's yours. Okay. All right. Sorry. Rosalie gets the final question. I think I already read one of yours, Rosalie, but I like this one, too. So she says, I'm a realtor on my tax preparation. I used to zero out on my schedule A, and now I am using the standard deduction instead. Okay, so she was itemizing before, but now she's using the standard deduction. Can I deduct the cost of tax preparation, your books and Mark's calendar, or a Hawaii conference on my schedule C, If I call in and talk to or speak to one of your attorneys or CPAs, can I write that off? And where. All right, well, the nice thing is, Rosalie, you started out with, I'm a realtor. Okay. All right. You're a business owner, and it looks like you're going as a sole proprietor on schedule C. Maybe you don't have Enough income yet where the S Corp makes sense. But yes, absolutely, you could be deducting the cost of the calendar that Mark has. It's got a lot of things for your business purpose. Doing your strategic plan business. The tax date, you need to know the business owner's workshop which is in, I think Mark has a Hawaii location again this year. Absolutely. You can expense a trip to there because that's for business purposes. Now the one that was a little tricky is the cost of tax preparation. So in your tax bill, you know, a lot of times a CPA will say, all right, I charge this much for the individual and this much for the business. And if you're a schedule C, you know it's a little extra more because you're a schedule C. Well, that part is going to be you can deduct but the part of your tax preparation on the individual side is generally non deductible. So. But if it's advice about your business or the tax preparation fees, as to the business part of your taxes, that is going to be deductible as a professional expense, I love it.

Folks want to say thank you for participating. Those that were here live, we're also here every week recording our podcast. And when we go live, I'm sorry, when we do open forum, we try to go live, please make sure you're on. You find the YouTube broadcast, you can search Mark Kohler there. We've got two YouTube channels. We're going to be making sure that's more available in two different locations every every week. But thank you. Don't give up on the American dream. If you want any of our books, you want to sign up for any of our upcoming Summits, we have 10 different workshops this year. Whether they're self directed IRA workshops or crypto taxation workshops or business owner workshops, they're around the country. Some are virtual, many are in person. These are great tax write off trips and tax write off opportunities and hopefully packed with education that are going to help you throughout the year. We're kind of, kind of glad Covid we're hoping is praying that it's on its downturn. Many locations are now allowing the live events. So we want to get out there and meet you face to face. So please get over to the websites and all the links are down below. Thanks so much.

Yeah, thanks everyone. Thanks for all the amazing questions. I love the questions. I just want to say that thanks for all the always tuning in, putting the questions in. Remember mainstreetbusiness.com submit a question if something random pops in your head, and I'm like, I wonder what Mark and Mac think on this. Just throw it in there. We'll catch you on the next Open Forum. See you then.