Year-End Tax Strategies to Save you Thousands

Foreign. Welcome, everyone, to the Main Street Business Podcast with Mark Kohler and Matt Sorenson. It's the most wonderful time of the year. It is time for year end tax planning.

Yep. I mean, this is the time of year where actually I'm a hit at the dinner parties.

Everybody cares what Mark thinks. They're like, I. Oh, the cpa. Oh, I want to talk to you now. Yeah, well, actually, what you say matters in a few weeks. Who cares?

Who cares? I mean, I'm just hanging out by the eggnog, you know, portal. Just, you know, just doing my thing.

Yeah, Uncle Eddie, how great eggnog is. I love eggnog.

Oh, I do too. But I drink one cup of eggnog and then I'm shot. Like my body's like, what did you just do? You know, this time of year, too. I've got to throw this out. Well, okay, we'll save some of our little, you know, what do we call it when we.

Yes, yes. That's it. I don't know what we caught, but that's, I think, what other people got.

I thought it was fun interaction throughout the show. We'll say, I've got a few antidotes. There you go. That's right. Yeah, you call it bs. Tomato, tomato, you know. Okay. All right, so we've got. Now, I did a webinar last night for two and a half hours for those that want to catch the recording. It'll be up by the time this podcast is live, I think, and you can purchase it for like 20 bucks, which is way too cheap, but, you know, call me a giver. It's that time of year anyway, you can go pick that up@markjkohler.com if you want to watch the two and a half version of this. I had 24 strategies. You're in ways to save money.

Yeah, so, and I. I think today we're going to hit many of those. We'll see how many we can hit. We're going to scratch the surface. So this is kind of like we're going to give you the menu here, so you know what to pick and choose. You might need to get the webinar, though, to get your free sample, you know, well, $20 sample, you know what I mean? You got to. You got to sample and taste it. A little more content.

That's right. For all you nerds out there, this. This is like scratching the itch, you know, you're like, I know there's something I'm missing. I got to save some taxes. What am I Missing and right now

is when you need to know that because April 15th, it's helpful for 2022, but ain't going to help you on your 2021 return. So there are some things to think about before year end. We're just going to hit those. A lot of this should be reminders and it's also a good list to just keep and think of in your mind for next year. Maybe if it doesn't apply this year, there could be a point where this is a strategy you do want to do. Maybe it's not for this year, but could be for next.

Yeah, good point. I would highly recommend all of you to have a little yellow pad or some sort of journal, note taking ability. See what, see which of this list kind of resonates with you. With you. And keep the list handy for next year. I would remind you, I'll say it a different way, is every one of these strategies we, we have a podcast on it somewhere. Even if in the last few months, certainly this year probably there's YouTube videos of mine. There's chapters in Matt's book, my book, so in the tax and legal library on my site you can deep dive. So don't be frustrated. Like, well, you just told me the tip. You didn't explain how. Well, that's not the purpose of today. It's like running through them.

Right, right. Okay, so now I know you've got different categories for these, so we're going to talk. You know, you've got like some healthcare categories, paying family, kids categories. Well, obviously have retirement account categories and there's strategies within each category.

Why don't you, you bring up a topic and I'll add some filler and I'll check them off our list. I'm going to be mixing some drinks over here. It's afternoon, so I'm going with a Red Bull zero and some Diet Coke.

Oh, giving a little competition to Rockstar, huh?

Yeah, you know, they haven't.

A little hard to get.

Yeah.

Trying to make him jealous, I see.

You know, I was never good. You know, I got, I need to play hard to get. You know, I gotta. You gotta play the bad boy. Gonna go pick up a Trans Am this weekend and cut the arms off my shirt and drive around and, you know, see what happens. All right. Okay. All right, the first topic.

Let's talk about health care.

Well, there went my buzz.

Oh, that bad boy doesn't want to show up anymore. That was health care.

Talk about a buzzkill. Way to lift the, you know, elevate the conversation here, Sorensen. Okay, all right. Healthcare. Now, this is good.

Hey, even bad boys like to save taxes.

That's right. That's right. We're all on a budget. Okay, I'll rattle off a couple. Matt, you can do the same. Whatever. There's three or four in this category of health care that are actually very, very critical. The first one I'm going to talk about is the health savings account. And when I say health savings account, some of you are like, whoa, I have until April 15th to deposit and get a tax write off for 2021. What are you talking about? Well, the strategy here at this time of year is not making the contribution to your hsa. It's making sure you have the right insurance for next year. So that next year when we hold this podcast, you're not kicking yourself because if you don't have a high deductible plan in 2022, you don't get to make a contribution to your HSA for 2022. So it's enrollment period. Now, the December 15th, the deadline was for new enrollment. We have until January 15th to re up your enrollment. Some of you may have a spouse or a day job where you have health care at work, and there's an enrollment period you need to be aware of. Get engaged, make sure you have a high deductible plan, and freaking take advantage of the hsa. One of the most strategic ways to save taxes and build wealth. Yeah, one. Check.

All right, Check. All right. Next in the healthcare is the HRA for you business owners, small business owners, health reimbursement arrangement. And this is for those of you who are like, guys, the HSA doesn't give me enough. I'm, you know, I'm single and I only put, you know, 3,600 bucks in it, or I'm married and I'm putting in 7,200. I think the limits have gone up a little bit for next year. So it's like, I'm not getting much bang for my buck. I've got more medical than that and I want more write offs.

Okay, all right.

If you're a business owner, you got a side hustle. We got some strategies, and that's the health reimbursement arrangement that can reimburse your out of pocket medical. Now this one is critical for your end, though, because you need this set up in 2021, and you need those expenses if you've incurred them in 2021 reimbursed.

And I'm just saying this would be where you might find in your drawer or email an HRA agreement that. Oh, I forgot to date that one. 1:21. And I need to reimburse myself through a medical reimbursement strategy for this year. That just might happen hypothetically, I don't know. But you've got to actually do the reimbursement. You can't say you did it later. You actually have to move the money. This is how you launder money. You can't just say, I cleaned it. You got to actually clean it. And that was a joke. If the IRS is listening to our podcast today. So just make sure if you're going to have an hra, you actually do the reimbursement procedure. Now, there's a different method if you're married versus single, as Matt said, there's a. There's a lot on this. We have some podcasts on it. It's chapter in my book, get engaged right away in the strategy. You've got two weeks to finish it.

Yeah, but HRA requires a plan. See, there's a document for this is not filed anywhere. It's internal within your company. And we set many up for our clients from prior years. So those you already have your hra, make sure you're doing your reimbursement. If this is a new thing for you, get your crap together. But then the second piece is of the plan is the money needs to move. Okay? You don't have to. April 15th. If you want to write off in 2021, you want to take that expense, the money's got to move. The reimbursement has to actually happen.

What do I say? Ditto. No, what do I say?

Hey, man.

Hey, man. Yeah.

Hey, man. Or amen. What?

Amen. Hey, man. Whatever the hell you said.

Sounds like you said hangman or hey, man.

I did say hangman. I said, hey. Hey. That's great.

Okay. Whatever. Okay.

All right. Okay.

Fsa.

Now, the flexible spending account number three is for some of you that might have a day job. We don't use these in small businesses, but if you or your significant other have a flexible spending account at work, that's the use it or lose it plan. Well, December 31st is the lose it deadline. Okay? Now, this year is $2,750, depending on what your company may offer. They may only offer up to 500 or 1000, but the limit is 2750. Now, there is a grace period where like say you go, I went to the doctor on December 31st. I overdid it on New Year's Eve. Room okay, well, you. I got to get reimbursed. Well, you have until March 15th. You have to. Sorry. Yeah. Feb. Yeah, March 15th. The grace period is up to $550. So it's kind of like that one last receipt that you may have hit before December 31st that you couldn't turn in in time at work. So you have this little grace period, but that's part of the 2750. You have $550 to turn in receipts with your employer. If they have a flexible spending account plan. Make sure you meet with them.

Love it.

Okay. Fourth, health care. You got more? I don't even know.

Okay, keep going. Okay, tell me more.

All right, Pray tell. All right. Health insurance premiums. If some of you have an S corporation, you have to put the premiums you paid on the W2. Now you may say, well, it goes on my 1040 as a self employed health insurance deduction. Yes, but you're not self employed. If you have an S corporation, you are employed.

Part of your S corp. You're employed by yourself. Yeah, well, you're employed by your own corporation, not by yourself.

Nice. Nice catch there. Okay. Yeah, do over. So for those of you that have S corporations, and we're going to be coming back to this as some other important deadlines. You have to kick out a W2 in the next four weeks. Definitely. I would suggest by January 15th, you want to be done. Do not call someone on January 20th and 30th and say, I need help, so get on it. And your S Corporation should be paying the premium, even if you're like, well, it's a personal policy. Doesn't matter. The IRS is getting really aggressive in this area. They've sent out multiple notices. They want the S Corp to pay the premium, even if it's a personal policy for you. You don't have to cover your employees if you don't want to. If you have less than 50 employees, you can just cover yourself. Write the whole thing off that it has to go on your W2 on a specific box. Make sure your payroll person knows this. If you miss it, technically your accountant may not like to write it off because you blew it. Okay, now that. That's my health care year end tips for all of them. Have something to. Something to be done in the next three to four weeks.

Okay, so we did the health care. Now what does the bad boy want to talk about? Because the bad, bad boy didn't like health care.

Yeah, well, this is. This is antidote time. Okay, I want to just point out this time of year some. You may be doing some holiday shopping and find yourself wandering into Walmart. Now. Okay, typically not a feeling you want to brag about, but you're, you may be wandering. I was picking up some stuff. Okay, more. Some of you may be more Target, you know, little upper class, but my small town, you're nobody unless you shop at Walmart. Anyway, I went in there. I am not kidding, Matt. On my walk in, this was just two evenings ago, a guy, I mean, this is a full grown man just out in the evening shopping with his wife was wearing a onesie pajama outfit coming out of Walmart. Wow. And yeah, his wife.

Was there a pattern on there or was it a solid color?

It was a Christmas.

Christmas theme?

Yeah. Christmas themed.

Okay, maybe he was going to a Christmas party.

It didn't strike me as kind of a, you know, I'm going to get invited to a party.

Didn't look like the kind of guy that got invited to a party.

Maybe he's trying to create his own

little party, you know, party of one,

I'm going to be out in the parking lot by the, you know, cart catcher, you know, anyway. But you just go through Walmart and you find yourself kind of getting dumber and dumber as you kind of just go through and so I left Walmart in a onesie. I just.

Okay, all right.

Join the club.

Okay, all right.

It was pretty fun. That's. That's Walmart. Okay, I'm going to chose to admit

that that's your choice.

Yeah. Okay, let's go to a fun topic here. Since we brought up S Corps, let's stay with that theme for a moment. I wanted to go over to pain family members, but now S Corps. I gave the little dorky. Sorry, I should say the antidote. Many of our listeners appreciate to kind of keep this lively and not boring. Matt, what would you say about S Corporations? And you're in. You go next.

Geez. Well, if you have an S Corporation, there's a number of things you want to be thinking about. But you don't want to talk about paying kids yet.

No. Well, since we brought up the S Corp with insurance, you don't want to

talk about retirement accounts yet. I don't know what categories you have left. I feel like I'm like on. I feel like I'm on like fricking Jeopardy and I don't know the categories. Okay, okay.

I just want. Okay, I'll kick off S Corp payroll for a reason because.

Oh, you want to talk about Payroll.

Yeah, I'm trying.

Retirement, we can get into that.

Yeah, we. Let's go to retirement after this. Okay. Okay. So when we bring up health insurance premiums, which goes on your W2 box, the proper box for that.

Ooh, okay.

I know where you have an S corp. You have to dedicate your payroll amount and determine what it is in the next three to four weeks. Now, by December 31st, you don't have to process your 941 payroll, but you got to have it ready to go. First couple of weeks of January, January 15th, you may be making some fourth quarter deposits. Your 941 should go out. So you need to be thinking about it now.

Yeah.

Because in the next four weeks, you have to submit your payroll. Now, this is where the payroll matrix comes into Play. Plenty of YouTube videos on this and prior podcasts. I'll leave it at that. But if you are an S corporation owner, you might need to increase your payroll a little bit for fourth quarter. You might need to decrease it. Yeah, very common. I get on a phone call with a client, I'm like, what the crap? You took way too much payroll this year. You're going to do zero in fourth quarter. Really? My account said I have to take xyz. Well, your account is an idiot. So we're going to bring it down. And so there are thousands of thousands of dollars left on the table because people just don't think about their payroll in fourth quarter.

So. Yeah. And keep in mind, why are we talking? If I can minimize the payroll you're taking, your taxes are going to go down, bottom line upward. Yeah, yeah. Your FICA taxes. And so we want to push more into the profit category on your K1 now on the converse of that. And this is why this is important right now to be thinking about. I want to minimize how much payroll I got to take. I got to take a reasonable amount. I can't get greedy and throw it down to zero for the entire year. You're going to take a reasonable salary, but dialing it in the fourth quarter is where it always is tricky. Because if you've had a lower income year or a higher income year, you might need to bump it up or down to correspond. So it's fair. And the Kohler payroll matrix lays that out. Prior podcast episodes on that. But here's the problem or the competing factor. Are you contributing to a retirement account on this. Do you have a solo K that you're setting up now or that you already have in place that you're going to make retirement plan contributions on. Because if you are, you may want more payroll because your payroll, your W2 that you are going to take is what drives your solo K contributions or even a SEP ira. And so we want to really make sure that you know what that number is. Because taking too much without making a retirement plan contribution, you're paying more in fica. And taking too little even though you want to contribute to retirement account is going to diminish the amount you want to put in a retirement account. So you got to figure out where you want to be with those competing factors. But remember that W2 on your payroll is going to drive your retirement plan contributions. For those of you with a solo K. Yeah.

Is there any deadline for a retirement plan contribution that people should be worried about in making the contribution? I mean, we got to think about our payroll because we know we're going to contribute in January, February, March or April. Yeah, but, but as for.

No, the nice thing is the actual contribution doesn't have to be made until the company return deadline. So if you're an S corp, you actually don't have to put the money in until March 15th. Right.

Or with extension up to. Yeah.

Now if you. Now here's the caveat to that and I have an article on solo 401k contributions deadline rule and process you have to have on your W2 though, for your employee contribution, which is due in January. So that's why dialing this in right, Mark, saying January 15th, you need to know what that salary is going to be, but you also need to know how much you're putting in. Even though you may not have put it in right now, you may put it in in February or March before your tax return deadline for the company. It needs to be on the W2, the employee contribution part.

Yeah. Now. And last consideration here because some of you are like, well, there's not a deadline with retirement, so I'm not going to worry about it. It's the domino effect of if I don't think about some of these things, it's going to screw up the retirement plan conversation two, three, six months from now. I would throw this out to all of you too. If you want to get a 401k in place before year end, it can be really challenging because the IRS actually shuts down their system for maintenance between Christmas and New Year's. And if you can't get a tax ID number during that period, you don't have a 401k.

Yeah.

We will talk about maybe some options that we can consider In January. For some of you that are desperate for a 401k, but we're not going to worry about that today. What you need to think about is what Matt just said. How much do I want to put in a sep? Should I use that instead of a 401k and just set up the 401k next year, but do a SEP this year? We just. Matt and I were just sharing some texts on this earlier today. Okay, so we'll move on. We can spend the whole hour on that. Now, let me throw this out. Some of you may have been an LLC all year. Now pay attention. If you have an operational business, you have an LLC all year. And you're just starting to get familiar with our podcast and what we're teaching out there in our workshops, you could be paying self employment tax on the entire net income of your llc. This is where we want to see you do an S election retroactively to 1 121. Well, if you do that selection retroactively, then you've got to do payroll in the next four weeks. So you can't wait until you do your taxes in the spring and say, oh, well, I'll just elect to be an LLC back to 1121 to be an S Corp, take my LLC and elect to be an escort. No, you can't do it. You got to do it now. We had a text this morning again that Matt and I were on a loop with one of our attorneys where we had a client come in literally through zoom today with one of our attorneys that had $1.2 million of net income on a schedule C. Oh, close to 30 to $40,000 in self employment tax that could have been cut by two thirds. And the accountant actually signed the tax return. It's just astonishing to me. I mean, it's malpractice in my opinion. I'd sue someone. So any of you that are an LLC or a sole proprietorship, you haven't made the S election. You make more than 50,000 net, you got to deal with it in the next four weeks. So that'd be strategy number five or six. I don't know where we're at. Okay.

Yeah. And here's a quick tip. Okay. I have an llc, Mark, and I've made money this year. Well, what point do I do that? Okay, if you. This is where. Why good bookkeeping is so important. You need to know what your net income is. If your net income is 40 to 50 grand, you should add that as selection. Now if you're like, ah, After I. All my expenses only had 10,000 bucks. Okay. Don't worry about it. Or this is a side hustle. I made 20 after I write off everything I can. Okay. Don't stress about it yet. But once you get up to 40 or 50 and you know, it's only getting better. Throw the S selection on.

Yep. One of my tax strategies that we talked about in the webinar last night was getting your books in order in the next couple weeks to. Just so you can make an educated decision.

Yeah.

So this is where you just pull out some eggnog. Some. You might spike it a little. Get your favorite Christmas movie. I'd recommend four Christmases. Vince Vaughn. Reese Witherspoon.

Watching that tonight. Yep.

You're watching that tonight?

Yeah, yeah, yeah. Michelle, we're watching it tonight.

Swaddle that baby.

I'm going to be. I'm going to meet her family, you know, before Christmas. So

just remember, you. You can't spell families without spelling lies. So. Okay, just keep that in mind.

I do remember. What's the, what's the brothers names? They're all like named after the city. They were.

He's Orlando.

Orlando, that's his name? Yeah. Orlando. That's hilarious.

I. I think the Taboo scene is my favorite.

Yeah.

His brother Dallas plays Taboo with him and they just kill it. And I mean. Oh, my gosh. So good. All right. Okay, let's do a little layup here. One for everybody. Your board meeting, so powerful. I don't, I don't want to get emotional talking about this, because I do, but I had a client that. It was just so empowering and wonderful to hear. She. At Thanksgiving, their family had had their first board meeting and they got the kids around the table and all the kids are complaining. What's the agenda? What are we talking about? You know, husband's even like, you know, and. And she, I was so proud of her. She, like drove the whole thing. Let's get around the table. We're going to do this. Matt. They were there for three hours and the kids ate it up. So the whole family was just jazzed. They're talking about IRAs and saving and investing and what they're doing with real estate in the family. And she said it was one of our most powerful times as a family in years.

Yeah.

And it was a tax write off. You travel somewhere right off the hotel and the. Or the Airbnb and the airfare and all that. And it's just like you are people, you are missing. Some of you are like, well, I Don't want an LLC or corp because I got to do board meetings. Freak. That's like a blessing. It's a write off. It gives you better asset protection and it can bring your family and friends together.

So. Yeah. Yeah. If many of you feel like you've been in a rut with your business or like you're kind of like overwhelmed and stressed, those things like that are some of the things that like brings new life to it and it also helps your family understand what it takes and they see what you're doing and maybe they can see your passion and the struggle in it. So I, I totally understand. I'm actually, it's. I'm. For next year. I've got a plan with the family vacation with some of my older kids too, and, and doing a little. Our little family workshop. It's going to be cool.

But do you need a speaker?

A guest speaker?

I mean. Yeah, you might be able to book me. I.

All right.

I hear, I hear Mark Kohler's kind of hard to get a hold of, but you know. Okay. I guess I could have you talk to his people.

Okay. All right, we'll see.

See, they don't want to hear you.

Yeah, you know they don't. But I think, you know, this is. Here's what I want to talk about next. And this relates to this with family paying your kids.

Okay, good.

Jump over that because go there.

Yep, we're rocking.

If you want your kids to get engaged and understand money, they need to have it. And we don't want to give it and let them waste it. Let's pay them. Take a deduction in your business and put it in a Roth IRA for them. Now, there's like five reasons why that's smart and awesome. One, tax deduction. You're expensing that in your business. Two, you're going to get them involved in your business, have them do some things, figure out what they can do in your business. I'm not talking about paying your two year old. That can't do anything. Okay.

Yourself. My two year olds were pretty Amadeus. Yeah. Okay.

Keep three. I like getting it into a retirement account because I don't want to waste it, you know, and neither do you. Let's let this money grow. Let's. And then the fourth thing is teach them to invest, to let them talk about it. Think about what they want to invest into a cool company. Maybe it's a brand they like to buy. Don't dominate the thing. Let them make some decisions. Maybe they like crypto. Maybe they Want you're a real estate person. They want to get on a real estate deal with you. But, like, let them understand how it works and talk through it and get them engaged. Kids actually like that stuff.

Oh, they do. And I don't mean to be a, you know, Debbie Downer here, but you said five. I only heard four.

Oh, five reasons why. This is cool.

Yeah. Can you cough up another one? Because I want, I want completion here. I feel a little anxiety.

Well, here's, here's the fifth reason in the Roth ira. This is the best way to help save for college or a small business or a wedding in the future, okay? Because the money you put into a Roth IRA you can pull back out without tax or penalty. All right? The earnings and all that growth, you pay tax penalty to get it out. But that, that savings account, this Roth ira, which is grows tax free, comes out tax free, is also one you can tap into without penalty for whatever reason you want for the money you put in and contributed.

Kind of a reach, but I'll survey says. Okay, I think we can do it. Okay. Now here's the principle though, people. You can't say, you pay your kids and say, oh, I paid them out of my personal account in the next two weeks. You've got to follow the proper procedure if they're under age 18 versus over age 18. And we have a strategy for grandchildren. So there's three different strategies there. We've done podcasts on these. It's chapter in my book, blah, blah, blah.

Take the seat in your webinar.

Yeah, webinar last night went over it again, but in detail on the procedures. I even have some decent YouTube videos on this. Get a bowl of popcorn tonight, pour yourself some eggnog and just sit down and learn about how to pay your children. So you've given them money throughout the year. Call it a loan now, you're going to pay them through the business in the next two weeks and they're going to pay back the loan you gave them. Now, you just harvested a write off on paper. You properly moved the money. They helped you in the business. You just manufactured a write off. If they're under age 18, no W2, no 1099. Let me repeat that, everybody. If your accountant is trying to 1099 your kids under 18 or W2M so not needed or necessary. Even a directed IRA. You don't need to prove your kid got earned income with a W2. We trust you, believe it or not. Merrill lynch may not trust you and want to see a W2, we trust you, we believe in you. If they're over age 18 or older, you got to kick out a 1099. Now I want to give everybody a little Christmas tip. At this point, it can be hard to find good stocking stuffers. I mean, I had some this week say, just don't buy stocking stuffers that are crap. You know, like they're just going to go in the garbage the next day. Put some quality items in your stocking stuffers dispenser. I think you missed my point. Now here I'm going to give you

a suggestion that wasn't what you were going for.

No. PEZ dispenser was not on the list. Okay. Okay.

And now you are way off.

See, your kids are 2 years old, they're doing PEZ. Mine were like, no, can I have some, you know, six and older Legos, please? Okay. How would it be?

The orange? The orange is stuffed at the bottom of the stock.

How would it be if you're 18 year olds and older, come down for Christmas morning, they go to their stocking and lo and behold, there's a 1099 in their stocking. I mean, talk about a gift.

Yeah.

You know, they're going to love it. They can play with it. It comes back to haunt them in April. I mean, it really is a gift they'll never forget. And like the jelly of the month club. Yeah. Just. Yeah. Give them a 1099 and you get a tax write off. They learn the gift of paying taxes. I mean, which was really, it's a gift they're going to enjoy their whole life.

Yeah. Well, we talk about actually some of the benefits for those over 18 paying them and 1099 them. One, you need to do that to get a legitimate write off for an expense it. But also some of them, if they're your adult kids now, them having some independence and some income that they claim on a tax return can help them qualify for health insurance for themselves. There's a lot of little perks to go to that many times. They're not going to pay tax, they're going to get a refund on it because they're, you know, they're under income limits where they get into high tax brackets. Now if you have kids that have good income, they're going to hate you for it because you're just bumping more tax liability onto them.

But you know, they're in a low bracket.

What's that?

They're in a lower bracket. Well, that's.

I said if you have kids with Good income. I'm just saying, you know, if you have kids, but if you're, obviously we're talking about your kids you're trying to help financially, those are, you know, they're their college years or their early 20s, they, you know, they need some help. Whatever it may be that that's where this is an awesome strategy.

And what I'm trying to say is they're good. Even if your kids have income taxes to pay, they're going to be in a lower bracket than you. Quit paying taxes at your higher bracket. Push the income into their tax returns and help them pay their taxes. Your money ahead. Yeah. Okay. Another little softball here. A good one for a lot of newbies. If you started a side hustle this year and you haven't made any income yet, one of the best year end tax strategies is make a sale. Make a sale. Because if you've got laptop and cell phone and some education or some training and all these expenses in your business but you haven't clocked a some income and booked it and put it in your schedule C or wherever, that's a startup cost. I got to carry it into 2022. I'm not saying you're not going to get the write off, but you ain't getting it in 21. In 2021. So you go out and make a sale. I know that sounds very rudimentary, but it's just like flip the switch. I mean, where's the switch? Flipper. Just call them up and say flip the switch.

Oh, switch flipper. Flip that switch. Yeah. When you're back home, seeing family make one of them, your first dang customer, be like, you guys got to support me. I need to sell by year end. Who's it going to be?

Sorry, I'm going into the real estate business. I need to wallpaper or paint something. Let me jack up your bathroom. There you go.

Yeah. What else?

Do it in your brother in law's house. They love that. Yeah. Okay, let's see what else we have here.

Okay.

The vehicle. Now this is one of my favorite little cliches. I'm going to give you. I'm going to give you the cliche or the principle that I'm going to work backwards. Don't let the tax tail wag the dog.

All right, now let the dog wag the tail.

Yeah, Let the dog wag the tail.

Okay.

Okay. Hang tight. This is going to come together for you. I know this is really hard. I get a phone call every December 31st. I do. I'm not kidding. For the last 20 years, someone in the family or a client or someone gets a hold of my cell phone and they call me and go, mark, Mark, I'm down at the dealership. I need a write off. Should I buy a truck or an suv? I'm like, if you looked at the gas mileage on that thing.

Yeah.

Do you need a truck or suv? No. Why are you there? I need a tax write off. Okay. See, they're making a dumb economic decision. Not that buying a truck or an SUV is dumb, but if you don't need it, don't buy it. You're throwing good money at bad because you're not getting.

That's an interesting concept. If you don't have the money for it, you don't buy it.

I know it sounds normal. Well, where do you get this saved money?

So we make the money first and then we buy it.

Yes, but I really want it.

I really not very fun.

Why don't I just buy it and I hope I make the money. Okay.

Classic Steve Martin SNL skit YouTube.

Amy Poehler.

If that didn't hit YouTube that golden.

But. But here's the point, people. Some of you might be rushing out now. One of our other strategies. Buy equipment that you might need. Buy an SUV or truck if you need it. The write off in trucks and SUVs is phenomenal. Even on a regular car, I can write off up to.

And it doesn't have to be new. Still. Right. The used. You still can take depreciation. The bonus depreciation on.

Yep. And there's a lot of rules on this. If you go to my blog@markjkohler.com, go to the search bar and just type auto. I've got an article with seven rules of thumb. Which method works for which type of car you have and compares your usage of mileage to which method you should use. So do a little bit of research on this before you just rush out and start looking. Because once you're on that dealership lot. Oh, they get you. They get you.

That's hard to walk away.

No, they're. They're magicians. So make sure you don't let the tax tail wag the dog. See the bigger issue? That's the dog in this example. Matt, let me bring it together. The dog.

My.

The dog. Yeah. Are you the dog or the tail? The dog. The dog is making a good economic decision. The tail are the taxes that come with it. Don't let the tax tail tell the

dog what to do. I think I Get that?

Yeah, I work hard on that one.

Okay.

All right, now, equipment. I had a client this last week, plastic surgeon out of Illinois. Wonderful man, great friends with him. He is expanding into next year and he needs a bunch of equipment. Go buy it right now. Bonus depreciation. So he's going to get some freaking awesome write offs. I want him to try to put it in service, get it delivered, all those little pieces and parts. But get. If there's things you can prepay, maybe some rent, maybe buy some equipment or supplies. If you're going to go to Staples on January 3rd and buy a bunch of stuff, go buy it on December 31st. Accelerate the write off.

Yeah, accelerate the write off and defer income, too. I mean, you know, you may want to like, look at your current sell cycle on certain things. Like, yeah, I'm going to go collect that on January 1st. I'm not going to chase them down yet. You know, just so that's kind of the things you want to be looking at. Your end here is accelerate some expenses, hold off on accepting some income. You know, you got to be legit about it. Don't, don't sit on stuff. Your clients may be trying to expense that on their end. I want to hit a couple retirement plan tips, though, because I know we talked.

Gosh, you and retirement accounts.

Well, you know, it's important. There's $35 trillion in retirement accounts. You know, there's just. It's kind of important. Kind of a big deal.

Okay.

I don't know if you know this.

I want to speak to our listeners.

Kind of a big deal.

Traders here in a moment. Oh, so. Okay, Crypto. I got a tip for you, but go ahead.

Was that the tip I gave you? Maybe.

Okay.

I just want some attribution and a little love on it.

Yes. I'll give you full credit for the tip that I'm going to steal from

you and give our listeners and say it's yours. Okay.

Yeah. Around the office, some of you have come to learn. I'm the good cop, he's the bad cop, I'm Disneyland Dad. What does that make you?

I mean, I don't know. The mom. I'm the mom, whatever that is. The mom that makes sure you do your homework, you know, But.

All right. Okay. What's your retirement tip?

All right. Backdoor Roth. Because of all this pending legislation out there. Remember, the House has passed a bill on this. There's a draft now in the Senate. This can pass before your end. It is going to kill the backdoor Roth IRA if it passes. But whether it passes or not, who the heck knows? The next couple weeks. If you want to do a backdoor Roth IRA for 2021, do it now. I know you can do it. Generally up until April 15, IRA contributions are good. Up until April 15 of 2022. For 2021, even Roth IRA, even if generally the backdoor Roth under typical years. But this year is different because there's a bill that could kill this starting 2022 and after. So it's still live. It's 2021 for, you know, 10 more days here. You can still do the backdoor Roth. Get it done now. If you're thinking about doing it for 2021.

All right. For those on YouTube. I'm sorry, I swallowed down the wrong. My windpipe, I guess I was going to say the wrong throat. You only have one throat, wrong passageway, which was my windpipe. And I'm coughing here, so I'm kind of sticking my head off screen. Okay. Can I ask you this, Matt, on the Roth conversion issue? If I have traditional IRA money or traditional money in my 401k, I can still convert that to Roth next year or this year at any income level.

Yep, any income. Even if this dumb bill passes or this pending legislation passes. That's not the name of it. It's, you know, Build Back Better Act. But even if this bill passes, Roth conversions are being cut and they're going to be restricted for everyone. But not until 2032. That's 2032. That's 10 years away. So you're still be able to do your traditional IRA to Roth IRA, your traditional 401 to Roth 401 conversions next year, the next 10 years. Don't stress the backdoor Roth, though. If this passes, is going to get killed on December 31st. If this passes.

And if some of you are like, well, what's the difference between a backdoor Roth and doing a conversion? Listen to the podcast. And I would recommend getting over to our sister podcast, the Directed IRA podcast.

And yeah, let me just say this because we have had a question. If you just have already traditional IRA dollars in an account somewhere that you want to convert to Roth, that's just a regular Roth conversion. The backdoor Roth is for high income people that want to make a new contribution of 6,000 bucks a year, 7,000 if they're 50 or older, and then immediately convert it to Roth.

Those are after you've already converted all your traditional.

After you've already covered all your regular traditional dollars. So it's this a little additional six grand a year you throw in that you don't qualify as a new contribution, that you do this backdoor incorporate? That's the one getting shut out. I had a large client yesterday call me about a spouse wanting to convert to Roth. Totally fine. Don't stress. You'll have until next year on just a regular traditional IRA or traditional 401 sitting around. You want to convert to Roth? Yeah.

Okay, well, for all of my crypto clients and followers, and yes, I've been playing in the metaverse and learning about all those non fungible token options out there.

Did you buy some digital real estate yet?

Oh, I'm so close. Okay, I'm in upland. I'm figuring it out. I just. I've had some problems getting Atlas Coin. I'm trying to get my Atlas Coin from one of my other exchanges and it's kind of a pain. Some of you are like, mark, that's easy. I know, but there's steps I'm trying to take with institution accounts that are a pain. Okay, so I was working really hard for all of you, doing research and studying, trying to find a tip for cryptocurrency traders, and I came up with one completely on my own that I think is really, really helpful. So I'm going to share that now with you.

Mm.

Is it kind of a client?

However this came to you, I mean, it must have been like an angel that appeared to you and just spoke and. I don't know, some.

Some might call him an angel. A woman named Michelle might, but I. I don't know, I just. I just. It came to me, a little voice in my ear, if you hold cryptocurrency and you had some sales during the year, you bought or sold, you traded crypto for stablecoin or a different coin. FYI, that's a taxable event. I've got some. Some viral YouTube videos on taxation of crypto. Please get over there. Also, on January 29, we are holding the first ever crypto taxation summit. And we're a third of the way sold out on just the in person portion. And we've only. We announced it two days ago, so please get over to marchacola.com or cryptotax summit.com it'll link over and carry over there so you can learn about it and get involved. You can also pay for the summit in crypto.

That's right.

We're cutting edge now. For those of you that had gains in trading crypto throughout the year, you might be freaking out going, I've got this huge capital gain. What am I going to do? Well, if you had gains with stock Tom, let's say in years past, you'd say, oh, I've got this loser stock over here, I'll sell it, take a loss and then rebuy it because I know it's going to go back up. So I'm just going to kind of churn it, I'm going to sell it, buy it and I'll manufacture a loss even and end up with the same stock on day two. Well, the IRS shut that down years ago because Wall street tried to do that all the time as a year end strategy. But that was called a wash sale, meaning in the end it just washed out. You had the same stock at the end of the day and you manufactured this loss. Well, the IRS does not allow you to take a loss from a wash sale and purchase reback. But that does not apply to crypto until maybe the passage of this new law. So you have maybe the last chance to take advantage of this. So crypto has been down, you know, the last couple weeks. We get it. We know we're all expecting some good things in the future. We know it will 10 year historical growth. We know we're not going away. Crypto's not going away. So you might want to sell some of your losers and just rebuy it. Just manufacture loss. And you can do that, right? Matt, have you heard of this?

Yeah, I mean this is a genius idea. Let me just give an example. Let's say you bought Bitcoin at 60,000 per Bitcoin two months ago, six weeks ago and then now you sell it at 45,000 per Bitcoin. Well that's a $15,000 loss I can lock in and I could go rebuy the bitcoin the next day at 45,000 because I believe in it that it's

going to go up.

But I was able to lock in the loss now that I can take against maybe some of my trades earlier in the year I had gains on. But I. It's just a little gymnastics you did to get a lock in a 15,000 R that can help you now.

And some of you may thought I sit in front of computer all day and I can't do gymnastics. I would pull very critical muscle of some sort. But no, you can do gymnastics with the wash sale so very, very important. I've been trying to think of the name of the guy in Live Die. I mean sorry, Die Hard. Live for your Die Hard. And they go to that guy's house. It's the only one that has power. And he's just like the quintessential crypto trader guy. And I just. He has the ham radio that Bruce Willis uses. I'm going to remember. I wish we had live chat right now. Someone would tell me. I'm going to look it up. Okay, now let's see. Any final strategies? How about business gifts before you're in, giving out some employee or business gifts, vendor gifts.

Where do you expense those? Well, then as a marketing expense, if it's like a business relationship or

I would say this, doing business gifts is an art. Now, here's why. The technical rule that's been on the books for 30 years and the IRS knows it's antidated. And I haven't seen an IRS agent enforce this. You hear cases of it where it's abused. But for the average business owner, there's options. But the technical rule is you cannot deduct a gift to a client that's over $25. Are you kidding me? You can't even get the basic Harry and David box for 25 bucks with three pairs in it.

So if you put. What if you put your logo on it?

Oh, great idea. Matt Sorenson. So we, what I tell clients is, first of all, before you logo anything, just don't go over the top. I had a client that was selling real estate up in Park City, Deer Valley, and they would be selling three, four, $10 million homes. They were making commissions of 50 to 100 grand sometimes. And their gift to their client at the closing was a sub zero fridge.

Yeah.

Now in a $50,000 close, you throw down two or three grand for a fridge for your client. Okay. Not a. That's Lifestyles of the Rich and Famous.

But.

But that's not allowed. You can't. That's just over the top. And so we curtailed that and said if you're going to keep doing that, you can't write it off or you're going to have to put it on the HUD and closing statement and give your client a 1099, but they still got a sub zero fridge.

Whatever.

But the point here is don't overdo it. If you want to do 50 to $100 gift baskets and some things like that at the IRS, I just, they're going to turn a blind eye as long as you don't abuse the principal, but you can get away and know that you're safe as an advertising or marketing expense. If the logo. I like that. What do you have logo right around you there. Lots of options.

Yeah, we got the directed IRA tumblers. We got the kind of like water bottle, but they're like the metallic ones. What are they?

What are they called?

Anyways, we got hats, we got moleskins, we got. We got a lot of stuff. Same with the kickoff Slayers.

I love this at Christmas time because I got a lot of write offs because my kids would open their presents and they're like, why is your company logo on all my clothes? I'm like, oh, that's fine.

That's a cool hoodie.

Yeah, it's a cool hoodie. And they're like, thanks for the hoodie, dad. They all loved it when they got old enough to buy their own clothes. Just like, I'm not a walking billboard.

But

write off for one person is utility clothing for another. I just. So I.

Yeah.

Did you know I logoed my Halloween candy this year?

I saw that on your social media. Yeah.

It freaked out a few kids because I gave them a little live the dream speech at the door. But yeah, logo your Halloween candy, but tax write off.

Love it.

Love it. Okay, I don't have anything else that. I mean, there were some other little minutia here, but alone.

Okay.

I don't have anything else, but. All right, Signing fund. You have any final tips?

No, I think. I think we hit the. I think we hit the main items for year end. There's. There's a lot of things that goes into good tax planning, but some of these things we hit are just things that you got to do by year end if you want to lock in those tax savings that. The strategies we talk about all year, all this stuff we talk about all year. And like Mark said, we have a longer podcast episode or a chapter in a book or an article or a webinar on every one of these things. A lot of good resources out there for you to get a little more detail. The purpose for today was really just for you to figure out what ones do I need to worry about chasing down and get done right now. That's really what we're trying to accomplish today. There's no way we can do justice of the ins and outs and little corporations quirks that can happen in some of those individual strategies.

Yeah, I. Well, I've got one last tip. Everybody write this down. Buy low, sell high. I know, it's life changing.

Buy low, sell high. Are you talking about assets?

Pretty much, yeah.

Investments. Okay. All right.

Okay. Trying to make you guys some extra money. Some of you may have not thought about that, but it's a game changer.

Yeah, well, thanks, everyone. And if you bought high and want to sell low in crypto, remember, lock in those losses. Now for a little tax write off.

Matt, that was really creative. You really brought that around.

I thought that's where you were going with it, but.

Oh, well, gosh, I just complimented you. But thanks for that little stab in the back on the way out.

Maybe it was a layup. Maybe you're setting me up. Perhaps I was letting you take some credit. Maybe. No.

Okay, I threw up the alley oop. Didn't know if you're gonna grab it and go to the hoop, but no,

if anyone is even around, it just threw them all up in the air in the middle of the play. Where's this going?

Oh, gosh, everybody, thank you so much. Enjoy your holidays. We'll probably give you a week off during the Christmas week. So maybe we'll be here. I don't know, we'll debate. Maybe we'll have a good topic it.

All right.

Okay. See you, everybody.

Thanks, everyone.