Secure Act Passed This Week! | What Does This Mean For Business Owners?

Welcome, everybody, to a live broadcast, the last one of the year. Helping you with your tax business, legal strategies. My name is Mark Kohler, cpa, attorney, author, podcaster, and just, you know, trying to be an all around good guy. I'm here with Matt Sorenson, the amazing Matt Sorenson, who has done all of you a favor. He has read this new bill passed and signed by Joe Biden on December 27th. Matt, how many pages is it? And you've read this thing?

765 pages. So now there's good news in those 765 pages. So don't freak out, you know, like, oh, more laws. Great. No, there's some good stuff in here, guys.

Okay, so I need to ask, basically, did the Grinch steal Christmas or did Santa Claus come to town? Which one are we dealing with here?

It's a little of both, but it's more Santa Claus came to town. Okay.

All right.

My Grinch definitely snuck in a little bit here and there.

All right.

There's no presence here.

I don't want to be Cindy Lou who and just be falling asleep and that candy cane just coming out of my hands right there at night. It's not good. I don't want that. So.

Okay, yeah, we're, you know, I got some good news here. That's the cool thing. Retirement accounts were a big piece of this bill. This is the budget bill that just got passed. It's going into effect now. Some of the stuff phases in over years. We'll hit some of that. But it's cool. There's big themes on this for retirement accounts. That's what we want to hit today.

All right, well, everybody, this time is yours. We really are grateful for Entrepreneur, all of our followers on Facebook and YouTube to come live to you once a week. We try to do this to help answer tough questions you might be having in your small business. So we'll give you a quick update. We're going to hit maybe 5 to 10 at most, little factoids about this new bill that will be affecting you the rest of your life, believe it or not. I know that sounds crazy, but these laws do affect you and your money especially so. And then we're going to just go to Live open forum and you type in your questions on the platform you might be listening on. We will do our best to answer those questions as quickly as possible. We'll go to a rapid fired mode. If we get a lot of questions, we'll turn up to speed. We want to help you with any year end tax planning, legal Structuring. You're setting up new entities before. Before New Year. You want to set up an account, get a call with one of our lawyers. Just get some help. We're here for you. I will say, please ignore any comments on the chatter that are about, I made so much money in Bitcoin, oh my gosh, Mark saved me, or oh, I made so much money. Click here. Ignore that crap. That are bots, they're scammers, they're scum of the earth. Please ignore that and just focus on your comments. We will be answering those. We are not commenting. So the and anybody that's trying to get you to go off site, do not click on it. All right, Matt Sorenson. Yeah. Tell us your number one present. Chris Kringle came over the hill. He came over the hill.

There was a stack of presents kind of put together next to the tree. And if there was a theme for these, the Red Hot Chili Peppers would look at it and say, looks like some rothification happened here. Okay. A little Californication. Rothification.

All right. Okay.

Let me tell you more. Now, many of you know we love Roth. We love Roth IRAs and Roth 401ks because you put your money in, you don't get a tax deduction now, but that money grows and comes out tax free. This is like the only way you can save and invest and make money in the US and not have to pay tax legally. So that's the Roth accounts. Now Congress gave us more Roth options. A couple quick points. Simple IRAs for small business owners. And many of you may work for a small business as a simple IRA plan. You can now do Roth contributions in that used to only be traditional. Also sep IRAs, some people use them in self employment for self employed persons start sep IRAs had to be traditional dollars only, which means you get taxed on the way out. But now they can be Roth. So first sweet gift in the Roth, you know, stack of presents, so to speak, was SEP and simple Roth IRAs that goes into effect in 2023.

Okay, I'd like to point this out to everybody too, Matt and I. Our general MO modus operandum, if you didn't know that, meaning our normal dog and pony show is you fund your Roth ira, then go to work, put in your money up to the match, have the company match it, and then reassess. Where do I go from here? It's always been kind of Roth or 401k. And if you're a solopreneur with a side hustle or Side gig, you can have your own 401k on top of that. Super cool. But in this vein of between Roth and 401k has been this simple and this sep. And they often kind of been the forgotten Uncle Eddie. You know, they just kind of don't show up until, you know, you don't know where they're at. And but Uncle Eddie showed up with his rv, now he's ready to play.

And so you know what, he cleaned up his act too, because now he's got a Roth option. Everyone's like, big deal, I need a Roth account in this thing. I can't Roth this. Yeah, well, cleaned up his act, he's got a Roth account now.

Yeah. So the, the sep and the simple are something that you want to have a conversation with your tax strategist. We are building a team of certified tax advisors around the country. Now you can get to my website, markjkohler.com and the certification program launches this coming week. And if you're looking for an advisor within the next month, you're going to be able to get on my site and boom, find an advisor that can really walk you through some of these simple sep401k Roth strategies. Because you want to optimize it, you want your engine running at optimum speed and no one cares about your money but you, you've got to take control of your vehicle. So these are great little bells and whistles that I think this new bill offers. So. Okay, Matt number two.

All right, next little present over here on the Roth bundle of presents is employer contributions or your match. If you got a day job, 401k or those self employed that have your own solo K that always had to be traditional dollars. Not anymore. Under the new bill, you can do Roth dollars for your match at your day job or those of you with the Solo 401K. We can do a matching Roth contribution now, which is pretty sweet because again, we do more Roth dollars.

And what this means is that all of you are going to want to as soon as your employer might email you in the next month or so and go, hey, the law changed. Do you want your match traditional or Roth? And we want to tell you choose the box that says Roth, tell your employer because you normally you put in a few thousand dollars, the employer is going to match it. So you want to say, yeah, when you match it, make it Roth, meaning I'll never pay tax on that ever again. Now you may see your W2 show a couple grand more of income because they put that Money on your Roth for you. That's okay. Suck it up. Pay the tax on that few thousand dollars, but let that money grow tax free for the rest of your life. You just got a tax free ATM handed to you by your employer. Take it. It's yours for the rest of your life. Take it with you. So check that box when your employer offers that option. Yep.

And they may not send you the form. You might have to chase it down too. So this is. So this can be a little proactive.

Not all employers are treated equally. That's right.

Yeah. Yeah. So, okay, next one over here in the Roth bucket. And I love this one for Those with solo 401ks in particular, is no RMD required on Roth 401ks. RMD is called required minimum distributions. Basically, some retirement accounts are subject to this where at a certain point, the government makes you start pulling the money out. Roth IRAs have always been exempt from RMDs. But Roth 401ks, this little quirky thing you still have to do. RMD for Roth 401ks, that's now out. No more RMD on Roth 401ks. Pretty cool.

Yeah. Love it, love it, love it. Okay. You know. All right, Matt, next one now, we might do a little Christmas, you know, show trivia here. I might be. I might be throwing down with you, so.

Okay.

All right, I'm ready.

Yeah, I'm gonna throw one out right now. Okay. What movie involves Jack Black and Kate Winslet? Christmas movie. Do you know what it is?

Kate Winslet. Oh, you threw me a curveball on that one. The holiday. I don't know if it's holiday or the holiday.

Very good. There you go.

What is the holiday? Yeah.

What is. Okay. Christmas movies for 400. No. Okay. Good job. There you go. Okay. Some of you might appreciate that. A little Christmas trivia. All right, I'll come to back to you with another one here in a moment. All right, so what's our next. Is there any more Roth presents under the tree? What?

Let me ask you one. What is a Christmas movie with Jude Law and Cameron Diaz?

The holiday.

I'm sorry, we were looking for what is the holiday?

All right, fair enough. Oh, my gosh. All right.

Okay. All right, next one. Unused 529 plan funds can be rolled over to a Roth IRA. So you do a 529 for one of your kids to go to college. They don't go. Or maybe that you don't use the whole thing.

You can roll over.

There's some rules on this, but you can roll over up to a total of 35,000 to their Roth IRA.

Okay. All right. Now the beauty of this is you want to be teaching your kids about saving not only just for college and using that money for college, but you've got this escape hatch and you're going to be saying, let's get that money over into a Roth structure. There's definitely going to be more regulations and guidelines on the procedures. Apparently you have to have the 529 in effect for 15 years and it may substitute the normal contribution amounts, which this next year, 6,500. So there'll be some nuances to that. But rather than your 529 just laying wishing there and some stupid state plan, you can suck that money out to a Roth ira, which I love because I freaking hate Wall Street. Now, in the movie Four Christmases, where was Vince Vaughn and Reese Witherspoon going on their holiday that got that backfired with the weather.

Do you remember where they pretended they were going?

Yeah, they were pretending to inoculate babies. Where were they going?

This is like

he practiced the language.

Where is. Where is? I don't know.

Fiji. It was Fiji.

Where is.

All right. Okay, next. But now there's. You said there was some Grinch. Do we have to go to Grinch now? Like maybe some bad things. Any other good news we can throw on?

There's more good news.

Okay.

Okay, I'll hit them fast. Just so you're here. So RMD we talked about just a second ago, required minimum distributions for this applies to Traditional accounts now. IRAs 401ks or sometimes called pre tax, you got to start pulling that out at 72 is the current rule. That's now moved to 73 for next year and it'll go up to 75 by 2033. That's cool. You get more time to keep that money invested before you have to start pulling it out. Then the next one is bigger catch up contributions. So for those of you that are older or you know, as you're looking into your future, you're going to put more money into your retirement account for a four year window from age 60 to 63. For those four years, instead of putting 6,500 bucks in as a catch up, you actually get to do $10,000 as a catch up. Now that starts in 2025. But that's cool because it's letting us put more money in for those of you that may feel like you're behind in saving for retirement, which I know is a Lot of us, when you're hitting that age 50, you're going to put 6,500 more in. When you hit 60 to 63 for that four year window, you actually do 10,000 additional dollars in per year.

Now here's what I want to say at this point. We want to keep this live. We want to keep you engaged, we want you to feel that you're getting cutting edge information. So I'm going to maybe call an audible here. I want to hear questions from all of you out there on some of these topics. If you had some questions for your year end planning, let me just say this in general down below in the description, there's a link to the most recent article by Matt Sorenson on this topic. Some of you could care less about saving right now. You're young, you don't know you're going to die someday. You don't realize that you're going to need retirement. I get that. But there's some important points here. And as you strategize this coming year, here's the theme. The government's trying to encourage Americans to save more, save more frequently, and to use, believe it or not, the Roth accounts. The Roth accounts are really where the money's at and they want your tax dollars now. That's the funny thing. We'll tax you now and you can put more money in your Roth. So it's really a win win. The government's getting more revenue now and we're building these accounts for the future. So just, I don't know. That's my main takeaway. Matt, maybe we've got some questions that are flying in, but any other major takeaways just for people that you think are critical?

Yeah, I think that I, I think the reason these rules are cool is because those that are disciplined in maxing out their retirement account or doing the most that they can afford are the ones that have big accounts. At the end of the day, it's saving a little bit every year to get enough to get the ball rolling. And then your money's working for you and your money's working for you. Your money that was making money for you is making money for you. It was making money for you. It's this compounding effect. Well, how do I maximize that? How do I do more? Well, you can contribute more to your account. That's what this bill is allowing for. How do I keep.

We literally just went out for about 30 seconds and we're back live again. Unfortunately, we're gonna have to announce that I'm not sure what happened. We lost complete connection.

Okay.

We still have 208 people watching and we are live again.

Okay, well, thanks, everybody. Okay, we're going to get into your questions now and make sure. Do they need to be reposted? James, should we lose our feed or.

We lost all of our questions, so if they can please repost the questions.

Okay, well, everybody, if you had already posted a question, please quickly type it again. And while we're doing that, I'm going to ask Matt another important trivia question since it's Christmas time. In the movie Elf, Elf goes to a restaurant where they are bragging about their world famous. What? Do you remember what that is?

Oh, coffee.

That's right.

World famous coffee. Yeah. I love Buddy the Elf rolls in there and is like, congratulations, you've done it. World's best cup of coffee. And he drinks it and spits it out and it's like, what?

All right, I love it. Okay, well, James, give us a question here. I can see him rolling in already. What do you got?

All right, let's see. So we do have a few questions that came in. We got Watcher 211. When and how do I elect stock trader status for the year it goes into effect? Can I start to deduct my backlog of losses from past years that exceeded 3K?

Okay, now this is a really good question, everybody. And I've been talking a lot about this and you really. Okay, here's the rule, everybody. What's happening out there is a lot not. There's a few promoters that are saying you need active trader status, you need an LLC so you can have active trader status. And if you have active trader status, then you can write off all your losses. All right, I'm going to give you a quick tutorial on this. And I hate to say this, Watcher, but you've been getting some bad information and I've got some bad news for you. But let me just listen to mine and Matt's broadcast on active trader status. If you go to YouTube, I think you can type in Kohler Active trader. And you're going to see a video on that. So, James, let's put that in the description if needed. Okay, so here's the rule, everybody. There's really two levels of active trader status. One is if you can prove that you're doing ongoing trades as active trading is substantial and you have no other job. Okay, Watcher, this is important. You got to first be able to prove I have no other job. All I do is trade. That's All I do all day long, whether it's crypto or stock, and that's how I make my living. Okay, you gotta be able to meet that test. I'm a trader, that's what I do all day long. That's step one. And that allows you to deduct business expenses against your gains. Like I probably put you in an S corp so you could do some home office strategies, some travel, some dining, some electronics, some Internet, some phone. You've got a business being an active trader. So we can take business expenses, but that does not unlock your losses and make them ordinary against your other income. You have to make a special election at the beginning of the year for the year you want to be active trader. So right now some of you are like, well, I, I want to make that election so I can take all my losses for 2022. Nope. That election had to be made on your 2021 tax return by April 15th of 2022. You had to see the train coming down the track. And if you miss that election, you're not getting that lost treatment for all of your trades in 2022. So if you are an active trader, you meet test one and you know you're going to have a bunch of losses in 2023, you can make that election by April 15th in writing with the IRS. And guess what? It's not an easy thing to get out of. The IRS has to allow you out of that in writing. And once you're an active trader status with the market to market election, all of your stocks are considered as if sold on December 31st. Whether there's a gain or a loss, people, this is not a fun status. It sounds really sexy and it sounds really cool. And there's some freaking promoters out there selling LLC used to get it and it's bs. What? Watch out, don't do it. I just, it's not worth it. If you want to trade, trade away. If you've got some capital losses and want to carry them forward and you're, I mean, stuck carrying them forward, sell a rental property. You can cash in capital losses from stock on the sale of a rental property. That's the way out of those. And there's some other methods. We've got all sorts of training on this. Just be careful of the active trader sales pitch. Matt, do you want to add anything to that?

Yeah, I know. I think this year has been in particular a lot of people have losses on some stock or mutual funds. Of course, we're talking outside your retirement account now. And so some People call this tax loss harvesting. Right. You might want to take some of those losses but use them to offset other gains you might have. We can't use against ordinary income or future gains you're going to have when the market's back and you're making money. So don't think like you. You have to eat up those losses today and get sucked into this active trader rule that has a lot of other baggage. Know those tax losses are going to come back and benefit you. You're going to get the money back out of that and the bank for your bucks loss, whatever you want to call it, it's going to come back. It's going to help you later. You were going to make money back on stocks and that loss is going to help you out. Have a little.

And I'm going to say, and I'm going to say this adamantly, James, and then we're going to. Next question. There is, there is no foundation, no, no law, no backing for the crap. I see on people's websites that you can set up an LLC to be an active trader. That is a scam, it's a lie and it's not true. You have to meet the qualifications of working as an active trader. Having an LLC is freaking irrelevant. If you're on a site that says that, never go to their site again. Okay, James, next question. Oh, we can't hear you, James. Maybe Matt can. I can't.

Next question is from Jonathan Escobar. Can you explain again how to contribute to a mother's Roth IRA if she isn't using it, but to make sure that the money I contribute isn't touchable by her or my stepdad.

Well, if you're contributing to mother's ira, mother. Mother is definitely going to be able to touch it. Stepdad. I mean, if they're married, he might have marital rights to it anyways. It depends on the beneficiary designation. So let me just say you will not have control. So there seems to be some expectation and hope that you could have some control there of helping mother with a Roth ira. Maybe. But not letting mother have control of. Doesn't work that way. The only type of accounts that work that way a little bit are like Coverdell education accounts for your kids, but on a Roth IRA for mom. I don't know how you.

Well, I'm the problem here. I'm the culprit. So let me say where this sliver of strategy might work. I have said before that my mom is widow, my dad has passed away and if I want to help her fund her Roth ira, she needs earned income. And my mom has served the past on my board of directors or board of advisors of my small LLC that owns rentals or whatever. And so I can legitimately pay her for advice she's given. And we want to turn to our parents for good advice. So if I want to pay my mom a little 1099 and have that money go into a Roth IRA, of which I'm the beneficiary, and I can help give her advice on how to invest it, and when she dives, I inherit it. I can't take that control away from my mom. It's her Roth, but I can assist her. I can help contribute to it with her, and it's her ira, and I'm paying her. And so I'm kind of on the sidelines helping mom do this. And then when she dies, I could inherit it. Now, in that fact pattern, that works. But if your mom's married and there's going to be some marital rights that spouse might have, even if the beneficiary is you, and you've got to be careful thinking that it's your Roth, it's not. It's hers until she passes away. So I've kind of had some fun throwing out that idea, but you've got to be careful. And I'm always going to say, make sure you're funding your Roth first. And then if you got extra money, you could play with some things like that. Matt, are you okay with me saying that? I mean, I'm just giving some ideas.

Yeah. I mean, that one's much cleaner and easier, your scenario and example. But again, mom still is in control of that account. If she's like, nah, I'm going to drain it. I'm going to Vegas, you know, she could do that, you know, so you're not going to be in a position of control. You have to have some trust there, obviously. And. And if there's a spouse in the mix, there's some inheritance rights to that for a surviving spouse on retirement accounts. So you got to be careful.

Yeah. Get him to sign a post note.

Yeah, that'll be fun.

Yeah, that'll be a fun conversation.

Bring that up at the New Year's party.

Yeah. There you go, James. Next question. Oh, you're on mute again. Sorry, buddy.

This one's from Russell Thomas. What happened to the prohibited transaction changes to individual asset rather than whole account?

Oh, sorry, Russell. This was the Grinch. This was the Grinch. Okay, now here's what happened on this One, the House passed a bill that fixed the prohibited transaction rule. Basically what the permitted transaction Rule says for IRAs. If you have a $10,000 prohibited transaction and $100,000 account, we're going to blow up your whole hundred thousand dollar account and disqualify. Even though the prohibited thing you did, the mistake you made was only $10,000. Well, the house passed a bill, part of the secure 2.0, that said, no, no, that's not fair. There's $100,000 account, 10,000 pivoted transaction. We only want to assess the penalty on the 10,000 involved in the mistake in the privileged transaction that passed the House. When this thing got made in the final sausage making the grinch from the Senate, I don't know who it was, not going to name names that came in and yanked this out. Okay? This got thrown out at the last minute. I actually worked quite a bit on this and some prior bills that were put in that became part of secure 2.0. So I was particularly disappointed. But sorry, that fix is still not there.

Okay, but this means everybody.

I didn't screw up anything else.

Yeah, yeah.

In layman's terms, what this means, folks, is if you have a retirement account that you're self directing and which is so powerful, so many people have found the power of taking my Roth or my traditional IRA or 401k and buying real estate, doing notes, helping a small business down the street and making a bigger rate of return than the Wall street mechanism. That's great, we love it. Please get to directra.com. we'll help you all day long. Some of the best customer service ratings in the industry and reasonable pricing. Directed ira.com. did I repeat that enough, Matt? Okay, yeah, anyway, but, but here's the concern. It's a loaded weapon. You gotta be careful. You can't just point this thing every which way and if you do something dumb, they're gonna take the gun away. And it's the same thing with a Roth ira. If you're using your Roth IRA and not following the rules, you lose the whole Roth, not just what you invested in, in the Roth. So you may wanna have multiple Roth accounts. You gotta know what you're doing. You gotta be careful. If you. And we have a podcast for this, the Directed IRA podcast. So if you get to directed ira.com, click on the education button or podcast button and you're going to have just a litany of episodes to help you be educated and you'll do just fine. Next question.

All right, this One is from Sarah dejarnat. I started a new business in pod, Print on demand. I haven't made any profits yet. Would it benefit me to create an LLC real fast before the end of the year or just file as sole proprietor?

Okay, great. Matt, can I take part of this right out of the gate? Oh, I love this. Okay, so first of all, what's her first name? My last?

Sarah. Sarah.

Okay, thanks. I should have written that down. Sarah, I am so glad. I love your question. Do you know there's now over 50, 50 million side hustles in America? 50 million people with a side gig. And I just love what you're doing. But let's get her terminology down and talk about it carefully. She said, I started this business, but I haven't made profit yet. Okay, Started the business means she had some sales, but she's also taken a lot of write offs, which I love. And she may have a net loss on paper even though she's brought in sales. So everybody, Sarah is in business. Once she made her first sale, she's able to take write offs. And this year she's going to pop all of that progress and all the transactions on a schedule C, as in Charlie, she's going to throw that on her 1040. And if she has a little bit of a loss, she can use that to wipe out some income on her W2 day job, probably get a refund, use that money to put in savings into a Roth or even capitalize her business further. I love that. Then she says, should I start an LLC with this operation? Matt, I'll hand that one off to you. What would you tell her?

No need. I mean, you might do an LLC for some asset protection or to build some corporate credit, but for the tax losses, you're a sole proprietor. Either way, whether you have the LLC or not, you're a sole proprietor. And we only like an entity for tax planning, which is usually an S corp or, or an LLC tax as an S corp when you have 40k of net profit. So because you have a loss right now, we're not in a hurry to go set up an LLC or an S corp. You don't need it, it's not going to change your tax return. This is all flowing on schedule C anyways, so I wouldn't stress out about getting an LLC set up by year end. Like Mark said, you're in business, you're going to have a loss you can use. Either way, it's going on schedule C you can use to offset other income. That's the Good news. Worry about the LLC for other reasons. Do I need some asset protection? Am I trying to build corporate credit? Am I going to make more than 40k net next year? Maybe we set one up for 20, 23. Because you're looking down, you're seeing how things are going, or you want some asset protection. Those are reasons to do the llc. Don't stress about it year end now just for that tax loss.

Yeah, and I like what Matt just said there at the end, because if you were on a consultation with me, I'd say, what do you expect in Q1 next year?

And.

And if you're saying, I got some big contracts, next year's gonna rock, then frankly, I would hurry to get that LLC. Have it ready to go January 1st or the first week or two of January. We have a paralegal service at our law firm that can get it done quickly with all the pieces and parts. You're not guessing what you need on some website. We can get an attorney consultation with you so you can have all your questions answered. You'll be leaps and bounds ahead of everyone else. But I like what just Matt said there. If you think you're going to make 30, 40 grand or more next year with this thing, you want that LLC sooner than later. But if you're like, nah, I'm just going to kind of plug along here and all that, then I'm totally with Matt on everything you just said. Good stuff. So cool. All right, James. Oh, you're on mute again, Matt. James. Got to watch that. Three in a row, man. That's not like you.

I'm telling you, it's on your end. Let's see.

Oh, I don't know.

Oh, okay, here we go. I got one from Rob. You're gonna love this one. It's. I have three minor children that earn under 10k in farm income. Can I set up a roth for each? And do they need to file income tax returns since they earn under 10k?

Okay, I'm gonna let Matt answer the roth. And in meantime, Rob, we need you to type in there what state you live in. We're gonna come. I'll come back on that loop around. Matt, what do you say about kids starting a Roth with 10k of income on the farm?

Yeah. Love it. That's earned income, right? They're working and doing work to get that income. So that's earned income. They don't have to file a tax return to get it. So whether you decide to file or not on the second part, it's not necessary. Now, some providers will ask for that, but the IRS just says you just have to have earned income. You don't have to have a 1040, you don't have to have a W2. They don't have to have a 1099. Because as we know, many of us small business owners, we pay our kids, and there's an exception. We don't need to write them a W2 or don't need to 1099 them. So as long as they have that earned income, you're good. Now you want to make sure they have a bank account and that money actually hit their bank account. And then ideally, we'd contribute from that bank account to their Roth ira. But at directed ira, we have a specific kids Roth ira. That's not a kid Roth ira. We don't have that yet. We're working on Kid Rock.

But yeah, we're ti. We're talking to him, we're talking to our people, are talking to his people.

Yeah, so they're not talking back to us, but we're talking to their people. But the kids Roth account, we do have that specific app, which is nice because it can get a little confusing setting up a Roth IRA for kids. But we got it here at Directed. And we love that concept because, because this teaches kids about saving and investing, putting that money aside, helping them to invest, maybe putting them in self directed deals, or they can just buy stock or a mutual fund, whatever, but it teaches them to invest. We have a crypto Roth ira if they want to do crypto in a kid's Roth ira. So lots of cool options there. Definitely. If those kids have earned income, which they do in your instance, they can contribute and have a Roth ira.

Do we have what state he's from yet?

Texas.

Okay. All right. Okay, a few. Good. That's good. Lucky man. There we go. Out of our nine states, no state income tax. Let me say a few things too. Your kids can put in up to six grand. They have until March 15th. Sorry, April 15th. Actually this year. Oh my gosh, third try April 18th of this year. They have until April 18th of 2023 to put that six grand in. So there's no rush there.

Before you're in 2022 contribution.

For a 2022 contribution Roth IRA. And I would say they do not need to file a state return because you're in Texas. Now, some of you that are in other states, listening. If you were, for example, in Montana, since I was watching Yellowstone last night, wrapping up season four, the standard deduction is $4,830. So if you paid your kids 10 grand on the Dutton ranch and now they don't have to file a federal return because the standard deduction is 12 plus, they've still got to file a Montana tax return because they've earned more than 4,830. Now if they got Governor Dutton from season five to make a modification to the standard deduction in Montana, you might be able to get around that. But that's. That's a whole other story. Now I would say too, I'm understanding or assuming that you, these kids you've talked about paying 10 grand are under age 18 because if you've issued them a 1099, they do need to file a federal return. There's so know the rules. But generally your question is Roth iras. Go for it. Love it. So, James, next question.

Awesome. We got a question. A question from Tyoga Costa. Hi, guys. I'm a proud client and big fan here. If I opened up. If I opened up an HSA account in December of this year, can I still claim medical expenses for 2022 and how many months would that cover? Thanks.

Oh, man. And this is recorded.

Ouch.

Okay, here's. I'm going to give you the technical answer and then some practical. Okay. And then we're going to have to edit this from the air. Now the technical answer is if you would have just opened up your HSA in January of 2022 and put a dollar in it.

That's all.

I don't care. Once the account is open, then any expense you have. Medical expense under Publication 502. I think it is any expense that's qualified medical expense. You can put money in and reimburse yourself all day long. Even if the money wasn't in the HSA to begin with. As long as the account's open, you're in the game. That's your ticket into the poker table. Just $1 HSA account is opened, you're in. When you open the account in December. Technically, any expense you had before the HSA is opened is not reimbursable. Because think about it. No HSA existed when you incurred that expense. So that's the technical rule. I'll let you think about the practical options.

Yeah, let's. Let's let that wander. Just, you know, or you want to.

We'll let that go into the east dose after that. But I am so glad you have an HSA account and we're. Boy, I would put some money in it. And if you have some medical expenses, I would reimburse those. That's a great general answer there. Okay, okay, let's move on.

All right, we got a question from John Cronin. If I'm an accounting student, should I join your tax advisory group now or wait till I'm finished with school? I do bookkeeping in my free time for a few small businesses in. Hi.

Oh, I love it. Matt, do you mind me answering this?

Yes, you should join. That's a great way to learn. I mean, there's so many experienced people doing tax returns that are already part of the network and signed up. A lot of people, Mark and I know, that are freaking awesome. So it's like a community. It's a great place to learn and honestly provide some of your services to some of their clients who might just need some bookkeeping if you're trying to expand that as you learn. Frankly, bookkeeping and being part of a community like that is the best way to hit the ground running if you want to have your own accounting and tax practice.

Yeah, absolutely. And right now this is live. And so you do, you know, rather than you catching this recorded a week from now up until January 1st, I've got a deep discount because this is our pre launch pricing. That's significant. And so if you get over to markjkohler.com and we even have a payment plan option you can request if you're in school, I get it. So get into that certified program before year end and you'll save some money. Our first Training is on January 5th, next week. And that's going to be a couple hours with me every week and a whole community of tax advisors around the country. We're going to add more classes as needed to keep the class size reasonable on Zoom. And there'll be a discussion board on every topic. 80 topics, 12 modules. 80. And you can get the. And I like what Matt said, too. Not every certified tax advisor in our network does bookkeeping. Not all of them do payroll, not all of them do taxes. Some are just doing it to be advisors. So you're going to be able to network and say, hey, I'm over here doing bookkeeping in, you know, South Florida. If any of you have a client, even over in Seattle, I'll take them and do it remotely. Cool. So I think you're. And we're here at the law firm and directed Ira to support all of our advisors around the country. So I think you're going to be a part of a really good family and community. Thanks, John. Hope to see you there on January 5th.

Yeah, Watcher 211 says thank you for answering my question. You guys are awesome.

Thanks.

Watch.

Start with that. So Brett Canny asked the question. I am planning on living and this is one you love. I'm planning on living and working out of my camper van conversion. How should I treat this for tax purposes? I know it's a little sketch trying to write off an RV you live out of.

Yeah. And let me take first stab at this if I could. I love my.

There's always Mark's questions when there's an RV involved. I'm like, I don't know.

I got a Winnebago. I had a Winnebago until my adult children took it down the street and realized that this thing's 15ft tall and there's some lower trees on this street. Anyway, I had to make an insurance claim on that one. So I no longer have a Winnebago. I have a convertible Winnebago for a while anyway. So bless their hearts, no names will be said on this show. Anyway, I love my RV community. Literally last night at 5:00, I did a show. I do not show, but a live call with all of my RV training program out of Texas. They do a great job. If you want to look into that, look up work camper. It's all one word. Work camper.com or RVIC.

The

they're doing vehicle inspections for RVs. It's just fantastic. So here's the deal. When you own an rv, you have to choose door number A or door number B. Is number door A, door B, door number one, door number two. Because if you're going to be have sticks and bricks and a home and then have an RV to go out and do business with and visit your rentals, go to conferences, go to events, go to road shows, go to all sorts of good things and use your RV as a work vehicle, you're gonna be able to ride a lot of that RV off. It's great. That's the sticks and bricks slash RV model. If you're like, no, I sold my home, I'm no longer renting. I am living full time in my rv. The most you're gonna get out of that rv, whether it's a trailer, a fifth wheel, a sprinter van, whatever it is, you're going to get mileage and that's it. Going to these new business locations because you're driving around your home and so we got to be realize that it's, it's a home. And so the deductions are going to be much more limited. So if we were on a consultation, we'd be looking at, what are your options? Do you have the six and bricks? Do you not? And I love the RV lifestyle. You're saving a lot on the cost of property taxes and a home and rent, and you're on the open road. It's an. It's really fun lifestyle, but there's pros and cons. So, Matt, anything you want to. Want to add to that?

Nope. I just know, you know, Uncle Eddie, you know, just don't. Don't empty out the RV in the, you know, storm drain. That's just. Lesson learned from a Christmas video. Don't do that.

You know, I got to get back to my trivia real quick. Okay, Matt, in It's a Wonderful Life, what does Clarence earn when a bell is rung?

His wings.

Ah, there you go. See? Again, you want a harder one. You ready for a harder one? In Christmas Story, Ralphie, what was the name of his little brother? Ooh. Gets stuck in the snow, can't get up. Yeah, I'll. I'll give you a hint. Starts with the letter R.

Okay.

James.

Yeah. Satan.

James.

You know, I don't know.

It's Randy.

Randy.

Randy freaking Randy.

Wow. Who was the bully, though? Who was the bully? What was the bully's name?

Oh, God.

Barcus.

Right?

Thanks for throwing that. I. I have that. There you go. Okay. I feel okay. All right. Okay. What do you got, James? Next question.

This is a good one because I just want to know, Frank Hernandez, if I buy plane tickets for a business trip using miles instead of cash, can I write it off as an expense?

Matt, go ahead.

No. So use those miles for personal travel.

Okay.

Use the business card for business travel because you get to write that off. So awesome. For business owners that get a use and gain points for using your business card, but use those miles for personal expenses because they're not taxable to you. You also don't get to write them off either, so best to use them personally.

Yeah, it's been a fantastic loophole. The IRS has been trying to close this down for years. And the Tax Cuts and Jobs act, when they did the big. The biggest tax reformation in 30 years since Ron. Ronald Reagan, they had this on the table and it got cut out at the last minute. Again, we all love our miles. We love our points. And so they're redeemable. They're tax free. But there's no write off. So use them for personal.

I love that.

And, Matt, how many pizzas were ordered in Home alone by the McAllister family the night before the trip. How many pizzas?

10.

Yes, there you go.

Boom.

From Nero's Pizza. Is it Nero's Pizza?

He knows too much.

All right, and what was the little cousin that got all bent because they didn't have cheese?

Squints, not squints.

Oh, cheese. That was Kevin. Kevin wanted cheese pizza.

Kevin just wanted cheese. Okay.

That's right. Yeah, yeah. And his brother had to barf it up for him and that all mayhem broke loose after that.

That's right.

All right. Okay, next question. James.

So here we got a question regarding the secure act from Magellan. 99. 98. I have an inherited IRA from a deceased brother who has been taking out RMS since he is 70. Plus, what changes are the under the Secure Act?

Ooh, that's a good question. Secure.

One point. It's not RMS, it's RMDs. I'll let Matt gather. Let me repeat the question while Matt thinks here.

So let me say this. This is one that I think might be in the bill somewhere, but I gotta look. So inherited IRAs, basically, if you, if you inherited IRA from a parent or a sibling and they're already in rmd, which they were a required administribution age, you have to traditionally start taking it out. Well, secure Act 1.0 from a couple years ago came and said, nah, we give you a 10 year window. The IRS disagreed with what was in the act and there's confusion about it. And they said, no, if someone was already in rmd, we're going to make you still pull that out. Now the IRS has been like in limbo and said, well, actually we don't know. The whole retirement account industry from, you know, big company to small company went and was like, this doesn't make sense. Irs, you're interpreting this wrong. And they put the brakes on it, but didn't say one way or the other. Now you would think they would have tried to fix that in this bill, but I did not see that section yet. But, but I'm telling you, even like other lawyers, I've been on with some of the biggest law firms in the country on some of the stuff on this. They're still figuring every day there's like, oh, who saw this?

Is this.

What do you think about this? So we're still unfortunately digesting this. So I don't have an answer to that. But that you would think that was addressed in the bill. I don't.

I'm, I'm impressed with that answer. And Magellan you'll have to do, stay tuned, do a little research on that. And I was going to buy you some time and just ramble, but you know, I'm glad you just freaking took it bull by the horn.

I've looked at the bill enough that there's no way I was going to find it in there. Yeah, that's a great question. And that is a problem that the industry and Congress knew about. So you think they addressed it, but I didn't see it.

Okay, James, next question.

Okay, so J. Jonathan Escobar again. What tax strategies can I use for my 10 month old baby in my business? Pest control business. Turo, Airbnb, Roth IRA rules, question mark. HSA question mark. Child deductions, question mark.

Well, there's nothing really wrong paying a child as young as 6 months or 10 months or 10 years old for working in your business if it is legitimate work. And there's kids that were working for Disney, Miley Cyrus and whatever that are making money before they're age 3. That's legit. The, the trick is, is making sure that you're not going to get into audit problems, being too aggressive with the amount of and justifying the services they're providing. And so our tax lawyers have this conversation with clients every week, every day with clients that are trying to get the retirement accounts kickstarted for their kids at a young age, getting them on payroll. And we love it. But it's so fact specific. So I just want to say I think there's a window there. There's an opportunity you need to put. Probably use some photography and some advertising type strategy. It could range from the, I don't know about Turo. Maybe you've got, maybe you're providing car seats in your Turo cars and you got a picture of your baby in the back seat with the Turo car ad. Or you've got, you know, we provide car seats. Here's a picture of one being used. You know, I don't know, but. And then pest control. This baby's about to get sung by a black widow and we killed it. You know, you got, you know, but I don't know. So have some fun with it. Make sure it's legitimate in the dollar amount and the services provided.

So.

Yeah, good stuff. Okay, Matt, I got another question for you. What was the movie and probably the best Christmas movie of all time, Die Hard, what was the name of the building that John McClane went to go visit Holly at first? The party. I'll give you, I'll give you Multiple choices.

It was in la, right? It's in la, yeah, yeah.

Was it Mitsubishi Nagatomi or Nakatomi Plaza?

Nakatomi.

You got it.

Fun fact. Fun useless fact. Every single Christmas album out there is actually the Die Hard theme.

I agree with everything you said upset except useless fact. I mean it was just very useful for me. It was just very, very useful. Okay, next question.

I just want to do a shout out real quick for John Purpat. He says this about you guys, you are right on point and give the most accurate tax and business information. Being an accountant, I get calls all day long due to misinformation on the Internet. The latest being the ERTC credit.

Yeah, there's a lot of people chasing down. That's the employee retention tax credit. Mark and I talked about this quite a bit on Entrepreneur and here when that first came out during the, during COVID you know, the CARES act and all that stuff. But man, there's a lot of people out promoting that because they're taking a cut of what the credit you get back. So like, oh, if you get a hundred thousand dollar credit back, I'm gonna take 30% of that. They're like personal injury lawyers out there now basically chasing these down. So there's a lot of self interest in there. Let's just say for them to get paid a lot of money for you to, you know, go bite the bullet and try to get this ERTC credit. So some people playing a little fast and loose with the rules. Unfortunately, yeah.

And the truth is the ERTC is alive and well. We've had some clients get some big money from it and then we've had clients waste hours upon hours trying to figure it out and then get nothing. And so I'm grateful another professional out there is trying to give out, you know, straight good advice on that. So be careful. People get a second or third opinion before someone wants to take money from you for that ertc. Maybe one more question, James, what do you got?

Sir? This one should be pretty simple. Dan. Mortgages, he asks. I have an LLC and made over 40k in net profits. Congratulations. Is it too late to pay myself payroll and elect as an S corp?

Oh, I love this question. Absolutely love it. Okay, so everybody out there, I'm going to repeat this. This is huge. Okay, if you had a side hustle, a side gig, multiple side hustle, side gigs, just like Turo and pest control business, I'd throw those all into one. Frankly for tax purposes it's fine. So if any of you out there had $40,000 of net profit or more in 2022 with your side hustle or side gig. And what I mean is, after all of your expenses, you've got net 40k or more. You can still make an S election back to January 1, 2022. And you've got to immediately to make it worthwhile, start your payroll procedure. I would get with at the very least an ADP or a paychecks or some sort of payroll company. Our accounting services team, they can't handle it right now because we're getting all of our payroll already in the pipe for January for our current clients. So you're going to have to go on your own to get a payroll service company to knock out your payroll. Look at the Matrix and some of my trainings on YouTube on this. Just in general, talk to your accountant. If your accountant says it's too late, never use that account again, they're wrong. You can do a 2553 election by attaching the right revenue ruling and letter to get that retroactive election and get your payroll done. You could save at least three to four grand right out of the gate just doing this. It's not that hard. So anybody in that predicament, I'd make an appointment with one of our tax lawyers for the first week of January. Maybe second week we're out probably a week and a half on appointments. So please call. Their contact information is down below and a tax lawyer can help advise you. But you got to get your payroll lined up. So right away. Matt, any final words on the retro election? You good? Yeah.

The only thing on your W2, this is just important. We talked about this on the Main street business podcast just the other day is Remember on your W2, any of those that are using the S Corp Corp, it's very common. But the most common small business entity is the S Corporation where you need to do a W2 for yourself and take a reasonable salary. But also in the W2 not only need to figure out your payroll, you got to put your health care insurance on there for your self employed deduction on that. And if you're going to do your retirement account contributions, maybe you're doing a solo K or have some other 401k plan for your small business. Those employee deductions. Sorry. Those employee contributions need to be on there too. So important time of year right now for those doing planning to have a W2 US Corp owners.

Okay. All right.

Hey, books away.

Oh yeah, we got to give some books away. I'm gonna put on my Santa Hat here to give away the books. I'm not gonna be naughty. I'm gonna be nice. So we'll give away two books of mine and two books of Matt. And while you gather those names, James, I got one last question for. For Matt. What is Brad and Brad's sister in law in Four Christmases, what is she not allowed to wear to motocross? Taboo and his brother in law and his brother and sister in law were playing against him in Taboo and she was not allowed to wear this to motocross. James, you got it. Okay, I know our listeners got it. Mini skirt.

Mini skirt. I was gonna say skirt.

Dang it. I'm not. I'm not googling this, people. This is. This is up here. That's the useless amount of knowledge in my head. I just want to throw that out. Okay, so who are our winners, James?

All right, so let's. I want to give a book away to John Pora Pat. John Pora Pat. Okay, the next book is gonna go to. Unfortunately, we couldn't get to your question. It was a great question. William A.

William A. And before he gives out the last two names, let me mention if you win a book, email Diane D I A n n e markjkohler.com Diane D I a n n e markjkohler dot com and you will verify who you are and we'll send you out a copy. We're going to do those two books. Let's do. Those two books were for Matt. Maybe the Self Directed IRA Handbook. And the next two books are the Tax and Legal Playbook. Who's our next two winners?

Transformational Leadership and Something to Think About.

Oh, wow. Something to Think About. That's their hand.

I like Trail Crow. Something to talk about. Something to think about.

Okay.

All right, let's give him something to talk about.

Okay. Do you have it? Okay. Do you have one last trivia question for Christmas? Trivia? This is the last show of the year. And one last one for me, Matt. Anything?

Oh, am I giving a tip?

No, no, no. You gotta ask me a trivia question.

Oh, a trivia question.

Can you stop me? No.

Let's see if I can stump you.

I got one.

Okay. Okay.

James is so easy. You should know this one. What's the name of the Sticky Bandits in Home Alone?

The Wet Names.

Yeah.

So that was a trick question. It's not the Sticky Bandits. It's the Wet Bandits. It's both. Yeah. Okay, fair enough.

We're the Wet Bandits.

I didn't know if you were searching for Their first names. I was gonna go, yeah, what's their.

What's their real names? No, no, no. In the movie.

Okay.

The Wet Bandits and the Sticky Bandits. What's their names in the film? Wow.

I want to say Stan. Or. No, no, it's. It's. Oh, man.

It's very easy and cheesy.

Okay, give it to us. Harry and Marvin. Stan, Marv. Same thing.

Okay, well, okay, I got one for you. I got one for you. What does. In Christmas vacation.

Okay.

Clark Griswold's boss, What does he mistakenly call him? Gets his name wrong.

Oh, my God.

Oh, shoot.

Oh, I think you got it. What is it, James?

Is it clerk?

No, I think it is clerk.

Oh, crap.

Now I'm like. Is that right?

What is it? What do you got? Oh, my gosh.

No, I'm like, did I get it right?

I can't believe it. You asked me a trivia question.

We were supposed to know everything. Oh, my gosh. Oh, my gosh. Okay, help me out. Help me out.

Oh, it's at the tip of my tongue. Someone on our list. Chat.

Cliff.

No.

No one in our chat's got it. Anybody? First person. Okay, James, look at our feed.

First person gets booked.

He. Okay, okay, let's see. Let me see. Let me see. Stand by. Who's.

Who's got it?

Who's got it? Wait, wait. Okay, hold on. There's a few here. Okay, okay, let me. Let me verify really quick. Okay. No, not yet.

I hear it. I'll know it.

I'll know it. Who's not. Not yet.

Nobody.

Nobody's got it yet.

Boss's name is Mr. Shirley, right?

Grease Paul. You got to hear these names. Grease Ball, Mark, Clint, Bev. Okay, so it's Mark. So the first one got it was Mark. John Cronin. John Conan. So Mark, Bill, or Carl?

I think he does call him Carl. That's. I think it's Carl. And he does John Cronin, too. John gets his name wrong. Different times. So I think.

All right.

John Cronin.

John Cronin wins the book. John Cronin wins the book. Well, everybody, thanks for letting us mess around. It's the end of the year. Hope you learned something here today. We had a lot of fun with you, and thank you so much. We'll see you next week. Every Thursday, we're trying to go live at some time or another. Please subscribe. Hit the bell icon. Tell your friends if they want tax and legal advice, this is the live broadcast. To post their questions, get some answers, and if you want to become a tax advisor and know this backwards and forwards. Get referrals, get clients and bill more per hour. Get over to markjkohler.com and we'll get you geared up to really help people that want this advice and are starving for it. They're willing to pay for good advice. Let's get you trained. I want to learn from you. It's a whole new tribe and community. The Main Street Tax Pro certification. We'll see you there. Next week's our first meeting on January 5th. Matt, thanks for being with me today.

Yeah. See you next year.