The HUGE Tax Write Off No One Talks About I Year End Tax Tips #2

Welcome everybody to another live broadcast in our series before year end killer tax tips that'll blow your mind. Whatever. I've got so many different titles excited about talking about year end tax tips. And I have a special guest with me, Bryce Egbert from Sandpoint, Idaho. BCE Tax and accounting.

Accounting and tax. But that's close.

Accounting.

Tax, Tax and accounting.

Yeah, that's it by Schweitzer. An incredible ski resort in northern Idaho. I went there as a kid, I just loved it. So, so he was in town. I'm like, you got to come join us. He's a great CPA on our tax pro network. And I thought, man, whenever I can have an extra hand here to help me out, answer tough questions. Now today we're going to be talking about a killer tax tip on before year end and we're going to talk about board of directors meetings, writing off your travel, dining, hotel, Airbnb, Uber, whatever the case may be, to have a board meeting during the holidays. Every, every small business owner should do this. I know you're teaching this to your clients. We want to answer your questions about this. We're going to both give our favorite tips in regards to this strategy. But the time is yours, everybody. If you're on YouTube, TikTok, Instagram, LinkedIn, type your question down in the description below. We will hit it. Start typing those questions in now. We're going to be pretty tight Today, about a 30 minute broadcast. So we want to get to the meat of it. We really know, we really know this moves the needle for so many small business owners. So let's talk about the family board meeting. The board meeting maybe. Let's describe what this board meeting is about and then why powerful it is. And then we'll talk about the tax deductions that come with it. What do you like about the, tell us about board meetings. How would you describe it to your clients?

First of all, a board meeting is not a boring meeting. Board meetings can be exciting. And so, you know, it's a great opportunity to talk with your family, extended family, about business. And it's just a perfect time to, you know, you can, you can teach your kids, you know, financially, they don't want to be on the board and you don't want them on the board unless they're around 18. But they can still participate and learn the things that they're not learning, you know, in the public education system right now. And that's one thing that I really love about board meetings. You know, aside from the tax savings, of course.

No I think it's great. And let's talk practically here some of the steps to implement it. You're if you have an llc, every LLC we set up at our law firm around the country, you're not going to get this on these online setup, you know, sweatshops. But when we set up an llc, we create a board of advisors and we're going to ask you, who do you travel with? Who do you hang out with? Is it mom, dad, brother, sister, best friend, children, adult children, teenagers? And let's get them on the board officially. So you're going to hold minutes. You're going to say, we hereby call this meeting together and da, da, da, da. And you're going to slide that into your corporate book. You don't need to file it with the stuff state or the irs, you're just going to keep it in your corporate book. If you have an INC or a PC, a professional corporation, you're going to, it's going to be called a board of directors. It's like a corporation. So it's really easy to implement. It's just going to pull out a piece of paper and say, here's our board meeting. This is so good for asset protection too, because you're going to create that, you know, maintain the corporate veil. And tell us about your. What's your opinion on this? I mean, this, that corporate veil protection and the board meeting. What are things you like to see?

I think there's a lot of misnomers out there because a lot of people think just because they have the certificate from the secretary of state that they have a corporate bail or limited liability protection. But one reason why you do want to get that corporate binder is to make sure that you have all the things that an attorney can get for you. And that really solidifies, I tell my clients, it solidifies that corporate veil and really is your limited liability protection.

You mean one sheet of paper doesn't cut it?

You know, unfortunately, in this day and age, it does not, Mark.

No, it does not. No, I love it. And so you're really knocking out two birds with, I'm going to say, three or four birds. Number one, you're going to create better asset protection for your entity. If you're ever sued, you can say, hey, we've got this these minutes and it shows that we respected the veil. And you alluded to number two, even before we get to taxes. It's really an amazing opportunity to talk to your kids or who you love about financial literacy.

Right.

What are things you would like to cover in a board meeting. I'll give you my wish list here in a minute. But what, what do you like, tell your clients to cover?

Well, I like to tell them you're going to obviously talk about your business. You're going to, you're going to talk about the challenges that you're having and also celebrate the successes. It doesn't all have to be focused on what, what can I do better? But, but really take a moment, celebrate the wins, definitely talk about the challenges. Get, get a sounding board together, you know, people giving you feedback on how maybe you can overcome some of those challenges. And so those are always good topics to discuss. The board meeting.

No, I think it's great. And so many of you business owners, you're passionate about your dream. You're, you know, what your business is about, why you started it. A lot of kids or our loved ones don't know that. You just, we just put our heads down and go to work and we never sit back to say, you know what, here's why I started this business. I, I did that a little bit with my kids when they became teenagers and they're like, oh, I just thought you disappeared every day. You brought home bacon, whatever. And so I think it really is an opportunity to talk about money because families just don't do it and they don't know when to do it or where to do it or how to do it. And so the board meeting really gets it going. As an aside, our Main Street Business Services, we give you a 25 point questionnaire and you take that into your board meeting, whether it's in the Bahamas or it's in Duluth, Minnesota. Wherever your meeting is going to be, you're going to take that questionnaire and fill it out and it gives you some talking points. And then the staff will type it up, make it look pretty, send it back, everybody signs it digitally, whatever pops it in your corporate book. We charge 300 bucks a year and we do your BOI report at the same time. Make sure you're clean with the state so it doesn't have to be expensive and it gives you something to talk about. Struggling for conversation points now the taxes. Oh, well, it's such a great tax write off. What do you like about it for tax write offs?

Well, first of all, I, I'm going to have a board meeting Christmas time.

Going anywhere special?

Las Vegas. Yeah.

So everybody has board meetings in Vegas. That's perfect.

That's right. That's the perfect place. And, and, and we're gonna have one we're going there for Christmas. We're gonna. Memories not trump up on all the stuff. And so we're looking for it. I know Amy's watching. We're having a board meeting in Vegas.

Baby, I love it. That's the president of the company, right? No, I love it. No, I think that's one of the first things. Think about where you're going to be traveling with your loved ones this holiday season. Are you meeting for Thanksgiving or is it a Christmas trip? Skiing, whatever. Um, craft and tell everybody. We're gonna. You're gonna craft this meeting. Um, it could be just two or three hours or at most. Um, and let everybody know that that's one of the main reasons we're going. And you're gonna take notes and you're gonna talk about the business, and when you prepare for it and make it an effective meeting, they'll never forget it. They. They really. It's a really neat experience for your family to realize how serious you're taking your. Your American dream and what you're trying to do. So you. Now you can write off the airfare to get there, hotel for a couple nights, food while you're there. Any additional expenses that you could. I wish we could write off entertainment. That was a pre Tax Cuts and Jobs act deduction. But food, dining, lodging, travel, Uber, Airbnb, all of that, you're good for two to three days because you got it. You get to write off the day you traveled, the day you held the meeting, the day you traveled back. You can't do 10 days in the Caymans. Now, I think this also unlocks the ability. Now, by the way, I'm going to tell re if you've got a question on this. We've got some questions already heating up. Okay. So we're going to break the questions here in two minutes. But I wanted to ask you this, Bryce. Really. What it also does is unlock putting the kids on payroll because now we've generated maybe an opportunity to have them work with us. And I'm good with a 12 or 13 year old maybe on the board, they know everything. They tell us that we're really dumb parents. They. They could run the company without us.

Yeah. You know? Yeah. Well, I mean, my oldest, he's the one that tells me to get my. I have to ask him questions about my computer. I'm like, what is going on here? I sound like my parents, you know, and so. But yes, I. I would, you know, if you. If your kids old enough and mature enough, it's a great Opportunity to put them on the board. I, you know, typically, you know, I want to say, you know, I say around 18, but, but I think there are exceptions. I. My 16 year old is much smarter than me, so he should be on the board now. So I'll take that home.

Yeah, no, and I like it because now if your kids are under age 18, we have a proven methodology for paying kids under age 18 through a support company. It may not be directly out of your S corporation. That's a chapter in my book. We have other videos on that. Paying the kids and how to do it. Any of our tax advisors, our tax advisors in our network will help you through that. But if they're 18 and older, then we're going to use probably a 1099. When your kids are at college, this is a great time to fly them back home. Take that as a write off. They're not coming home for Christmas. They're coming home for a board meeting. You see? You see this, people? This is the trick. You got to be thinking, every trip that I pay for has got to have a business purpose, dammit. And that's what we're shooting for.

And you're going to 1099 your kid that's over 18.

Yeah. Put it in their Christmas stocking.

You'd like to do that, don't you? Yeah, it's good.

It's a neat experience. They love to open up their Christmas stocking and. And then I give them a blank 1040 so they can start filling out their tax return right there too.

Oh, wow. Just ruin their year before it even starts.

What?

What?

No, I'm teaching them. I'm teaching them. All right, well, Dana, let's jump over to some questions. And so grateful for all of you listening. This is a real strategy. A real strategy that you can implement right away. And last week we talked about S corporations, your reasonable comp. How to run an S corp, when to convert your LLC to an S corp. Make sure and go back and listen to that one. This is, this is tax tip number two. Holding your board meeting before your end. Powerful, powerful. Dana, first question.

Do board members need to be on my payroll?

No. But you kind of want them to be. That's the theory, but I guess not. Do you want to give an example of when they wouldn't? I'll give one. Or do you want me to go first? I'll give it. Here's an example of when they wouldn't. Let's say it's grandma or you know, you know, a mom and dad and you Just want to honor them and say, hey, I really could use your advice. I'm struggling my business. I'd like you to be on my board and you're going to write off your trip to go visit them. But you don't need to pay them to be on the board. Let's just involve them. It's great.

And your parents will love that. Just, just for that. They'll be tickled.

It's so special. It really is. Now, the reason why you would want to pay a board member is because you're paying them anyway. So if you're helping this college student at college with tuition or housing, you're like, no, I'm not giving you money. You're getting paid for being on my board. You're going to help with marketing, some bird dogging, you're going to be managing that rental problem. You're doing other things as well as being on the board. Now, I can pay you and take a tax write off rather than just pay taxes in my bracket and give you money. That's, that's part of the concept. So sometimes you will pay them, sometimes not.

Yeah, you pay your kids for, for the work they're doing for you and they pay for their school.

Love it. All right, next question,

next question. What would you recommend is an appropriate amount to pay your kids under age 18?

Do you want to tackle that one first? Your thoughts? What do you do?

What's an appropriate amount? Well, in order to, to pay your kids, they have to have a bona fide list of duties. So they, you can't just throw the standard deduction amount every year, Adam. You know, if they're two years old, they can't even shred paper yet. So, so you want to make sure that they, they have job description duties that they can do. And I believe next year it's 14,800 for the standard deduction. I don't see why any of your children that are teenagers should make less than that. Unless, of course, there's not much work to do.

Yeah. So the answer is, and many of you will hate this. It depends. What are they doing? I have clients that have four or five year olds walking around construction sites, picking up garbage, picking up nails, stuff an envelope, shredding paper, cleaning the office. I think once they're five, six years old, they can have a decent job helping in the business. And you might just pay them four or five hundred dollars a month or a couple thousand a year and fund their ira, fund their education savings account. So many ways you could plow that Money into a tax deferred structure. But teenagers. I like that you said that they should be getting paid 1,000amonth anyway, if you can create enough work for them to do.

And that's not hard to do. No, I mean, because we live in a world where just everything's so busy all the time.

Yeah. It was funny last night I had Dylan on our. My son now, who's 30. I have a son that's 30. Oh, my gosh. He started out. I know. I'm so old. When he was 15 years old, I remember. I can almost remember his walking into his bedroom with his buddy who were shooting videos. They were blending Big Macs and drinking them on YouTube. And that was the thing, Whatever. And I was like, hey, I need to shoot some videos on my tax business. They're like, all right, what do you want to do? And I'm like, let's start making a studio upstairs and off the deck. They're like, okay. And so 15 years ago, 2009, I started on YouTube before it was even.

That's before it was even that big of a thing.

Yeah, yeah, I know. I was trying to be the cool kid, but. But I have my kids who. Helping with video, helping with social media, cleaning, janitorial, so lots of options. Find the right dollar amount. Meet with your tax advisor. They'll help you. Next question.

Dana, what is the minimum age a child has to be in order to receive payroll from my llc?

Okay, first of all, do not use the word payroll. I don't like that because you're now alluding to a W2. You would never, ever, ever W2, a kid under age 18 out of your business. Don't do it. Certainly don't pay them directly out of your s. Corporation. And some of you tax professionals out there listening are cringing, going, oh, my gosh, you've got to give them a W2. No, you don't. There is no requirement to withhold FICA Sudafooda Workers Comp on your own kid. It's not a. It's a law that you don't have to go look at circular 230. 230. You can look it up. So you call it outside labor, other expense on a schedule C single member llc, and you pay the kids. So I just want to say don't call it payroll. Now, minimum age. I mean, what do you. I think I've seen people as low as couple years old because they're models in the business legitimately. Yeah. What are your thoughts?

I mean, it's. What can they do for, for your company is what you have to look at. I mean, when my youngest was three, she could shred papers. You know, she, and she can do it a lot better than I can.

Yeah, she get her little fingers cut,

stuck in the shutters, you know, but we, we, we kind of hid that part. You know, we didn't want any workers comp claims with my kids, so it teaches them responsibility. Yeah, yeah, yeah. It's good for him. Definitely.

It's good for him. No, I think that's very. It's not so much. I think it's a combination of what's their age and their duty and what's fair compensation. Yeah, I mean, could you pay a kid 100 bucks a month to shred paper? Yeah. Go out and hire a shredding company. They're not cheap. Could you pay them a thousand a month? Yeah, probably not. So it's kind of a combination of age, duty and making it fair.

Yeah. A fair market value wage.

Yeah, yeah, yeah. They may not think it's fair.

They don't think anything's fair.

That's right.

That's right.

All right, next question.

Dana, next question. Is dining a 100% write off or a 50% of cost during board meeting time?

That word, it depends comes in again. So, you know, you know, if you provide meals for, for your employees at work, that's 100%. If you're, you know, conference travel, you know, meetings, if you're, if you're eating out, that can, that's 100%. Now if you're entertaining people, taking them out, or you're traveling and just eating while you're trying to, you know, eat and quick to get stuff done, then, then you're looking at the 50% bracket. So the question is what, what are the circumstances surrounding the meal? Yeah, and I think, I think this is a missed opportunity for a lot of business owners because on the P and L, there's a line item for meals. And so I suggest putting meals at 100%, meals at 50% and company meetings, so. So that, that those can get put in the right buckets. So you're maximizing your tax savings that way?

Yeah. This is a challenging topic. I might. And even with Matt on our podcast, we'll disagree on some certain topics too. I'll, I'll, I probably would say the way I throw it out is that if it's an event, a training, and it's not a regular recurring issue, it could be for employees or vendors or a workshop, 100% is going to Be a much easier threshold. I think the safe harbor or safe bet is when you're out with family, you're doing a board meeting, especially traveling. I'm going to go 50%. I think it's a little safer. But meet with your advisor. Everybody can find a different tactic or position on this. But, but I like what you said. There are meals that are 100% write off and there's. But the majority of them are going to be 50%. Find that. Make sure you have a definition of which meals are in which column and just follow it religiously. Make sure your tax advisor's on board with it.

And if you're not sure, just ask your tax advisor. It's like, well, how can I determine which which ones are 50%, which ones are 100? You know, but point it out to them. You know, this is important.

Yeah. Now this is a great point, great opportunity to say this. Now, if you're a tax advisor or your best friend is, or your mom or whoever, and they want to become more educated, get to become part of a tribe or a community, please check out the Main Street Tax Pros. This is our logo right up here. Main Street Tax Pros. We this year will finish with over a thousand tax pros around the country. Trained every week. 75 topics, 12 modules. It's incredible. And if you want to up your game and be around a community that's looking for cutting edge strategies, this and not only that, we spend every month working on tax advisory services. How to create engagement letters, build that relationship with your client, onboarding discovery calls. And we've cracked the code. Bryce and I have been in business for 20 years plus. And when you figure out the trick on building an advisory practice, it's changed your life, too.

Oh, it's changed my life. I love this program.

Yeah.

Thanks for not kicking me out.

Oh, my gosh. Bryce has blazed the trail and taught so many other members of how to convert your compliance clients to advisory clients. And so anyway, if you're enjoying our conversation today, this is a topic that a lot of accountants don't talk about, but we talk about it a lot here in our network, so check it out. All right. Couple more questions. Dana, what do you got?

If I issue A 1099, do my kids need to pay FICA?

You want to be the bearer of bad news, right?

Well, okay. You only should be issuing a 1099 if they're 18 and over. If they're an adult. And yes, they will pay FICA taxes, you know, and that. And they are responsible for self reporting those FICA taxes. But if they are under 18, you just write a company check to them. You don't do a payroll check. You don't withhold taxes. Minor children, your minor children are exempt from, from Social Security, Medicare and the state withholdings. And as long as you don't pay them more than the standard deduction, and depending on what state you're in, your state standard deduction, you don't even need to issue a W2. You're just writing them a handwritten check for the services that they provide. And you want to make sure that there's a paper trail there, you know, in case of an audit.

Yep. I love it. And if you do 1099, a kid under age 18. Yeah. They're going to pay FICA because you screwed up. Do not send 1099 to kids under age 18. Now, one nuance here. They're not paying FICA on the entire 1099. They now have a small business. When you 1099, you're, you're a college age student. And they now can write off their travel, their home office, their auto and dining and computers and electronics and cell phones and la la, la la. So they're only going to pay FICA on the net income from the 1099. And some of you are like, well, if they got to pay FICA on the 1099, then what the hell? Why am I doing this? Because they're on a lower tax bracket than you. You're gonna give them the money for college anyway. Freaking get it off your tax return and throw it on theirs. It's about planning together for the lowest tax bracket.

Yep, I agree.

So next question. This one's for you. Whatever the question is, it's yours. I mean, I. This could be wild and crazy.

See all the things you. Great things that come from being in this program.

Yeah. All this pressure.

Yeah.

All right, question.

What is the maximum dollar amount a child can make in order to qualify? Is it true that they can only make state minimum wage?

That's an interesting question. Basically, we, you know.

No, no.

I mean, we want to pay them what they're worth.

Yeah.

Okay. And, and, and we want to pay them, you know, so they can pay for their stuff. They can pay for food, they can pay for their back to school clothing. We write them that check and they can pay for it. So we don't want to hold them back to minimum wage or anything like that. We want to pay them what they're worth and kind of going back to what Mark said Earlier about a few fair market value rate.

Yeah, yeah, hold it. Rephrase the question, too. I want to see where they're going with this.

All right, let's see what I can see how I can do this.

What is the maximum?

The maximum dollar amount a child can qualify is how it's written to get paid.

Okay, now listen to their question. This is very insightful. What's the maximum I can pay my kid? Well, what is the fair market value cost of what they're doing? I don't want to say wage. What's the fair market value of what they're doing? Did you know Miley cyrus was making $300 million a year when she was 16 years old? By the time she was 18, she had brought in a billion dollars. No limit. No limit, people. Now, I don't know if your child is Miley Cyrus, but I'm saying minimum wage is what. The minimum you should be paying has nothing to do with it. So if your kids are really good paper shredder, you might pay him $150 a month rather than 100amonth. I don't. But just don't overdo it. You don't need to get greedy here. Pigs get fat and hogs get slaughtered. So let's not overdo it. So figure out your duties of what your kids are going to do. What's a fair wage for that or compensation, and then use the right method so that way you're skirted around any IRS laws. And I'm going to say this right now. I want to see if you can say this too. In 23 years of being a tax lawyer, CPA attorney, I have never, ever, ever had a client audited for paying their kids. Never. I've had clients get in trouble for 1099 the wrong people, not w2ing people the right amount. Not withholding, not paying overtime, not doing this, not doing that. But the IRS does not care. Family business is what America is all about. So if you don't abuse the law, which I didn't let my clients do, but we would certainly pay the kids to take a write off. We were fine. This is not high risk, people.

Yeah, no, I haven't. Give me. Boom.

There we go. All right, next question.

Okay, last question. I paid my 7 year old and received a letter from Social Security asking duties of a seven year old and then I never heard from them again. Is that okay?

Well, why you got a letter from Social Security is already interesting because I. They shouldn't even know you were paying your 7 year old.

Now, you probably described the duties paid on a W2. They do know.

Yeah. So I think part of the problem is. Yeah, no harm, no foul. You wrote them a letter back and said, here's what my kid does and they walked away. But they should have never known. See, people, if you're paying your kids under 18, it's outside labor on page two of the schedule C. Done. Social Security doesn't know you even paid your freaking kid because they don't need to know you screwed up and did a W2. And probably withheld. Yeah, that's crazy. All right, well, I'm going to. Okay, before any final words of wisdom, let me mention a couple housekeeping items.

Sure.

You're going to. You take us to, you know, take us out with the best tip on this strategy. Okay. All right. So a couple thoughts. Everybody, please. If you're already seeing some tax savings just with this simple conversation, get over tax and legal360 tax and legal360.com in six weeks we have a three day event, 24 classes, 20 plus speakers, cocktail parties, networking events, line dancing, lunches, and it's where tax advisors meet business owners. Three days in Phoenix. It's going to be a blast. Super affordable. A general admission, tickets under $1,000 and it's a tax write off to come. Bring your spouse, bring your families, bring your business partner. Tax and legal360.com it will sell out. We took the entire hotel down the Scott. Also, if you're a tax advisor and you want some CE continuing education, that actually makes sense, get over to taxprotalks.com

taxpro talk CPE credits do not bore you to death.

Yeah, they're good.

They're really good.

Yeah. So get over to our TaxPro Talk series. I've got four more lunch series in the next four weeks and it's good for an hour of CE every lunch hour for those that are professionals. Okay, any final words here? What do you think? Yes.

I believe you said earlier this was item two for the year end list. Is that correct?

Yeah.

And so I want to encourage all you business owners out there to be pro and contact your CPA now and say, hey, I want a year end planning meeting and they should get you in because the time to prepare for your end is not December 31st because they're probably drinking New Year's Eve. You don't want to bother them, you know. So I would encourage everybody to call their CPA and get a year end tax strategy meeting scheduled now.

And if you are like, nice Bryce, that'd be great if I had a freaking CPA or someone I trust. Get over to markjkohler.com and click on the TaxPro network. It's right at the top. And we have almost 300 now tax advisors around the country that speak Mark and Bryce. Everything we talked about, they understand it, they know it, they believe it. You can do a discovery call with any of them. Hire them, don't hire them. It's up to you. We do not make money off our network. Those are people that have come in here to our program to learn how to be a better tax advisor. And they're going to pass that training and education on to you. That's your relationship with them. But if you don't have a tax advisor, get one. It will save you 10 times whatever you freaking pay them. Yeah. Well, Bryce, thanks for being here.

Well, thanks for the invite.

Yeah, good stuff. We'll be here next Thursday for another live year end tax tip. And I'm not even going to tell you the title because you need to be on pins and needles waiting for that. Make sure you subscribe down below and hit the bell icon. And when we go live next week on Thursday, you'll get pinged into saving money. It's easier to save money than make money.

They're all onto you, Mark. They're going to say you. Oh, we know it's number three.

See you then, everybody.

All right, bye.