2020 Business Tax Strategy Update | Mark J Kohler

hey Mark Kohler here and a quick intro for this video I will stay in the video that I wanted this to be 30 minutes and I got carried away there's so much killer content so I just want to warn you now this is almost an hour long but there's a table of contents down below in the description so you can zoom ahead to the parts you may want and this is hopefully going to wow you with a lot of great content here so grab a bowl of popcorn a diet coke and hit it and if you want seven hours of more content for my whole workshop video that I shot in December for 2020 it's only 99 bucks you'll see the link below and it's awesome so enjoy and I think you're gonna find a lot of strategies here they're gonna help you save some big bucks in 2020 [Music] welcome I am so excited you're taking a moment to see what this video is about I promise you right off the bat I want to say this this is gonna be the most comprehensive life-changing mind-blowing I know that sounds bold tax strategy update for 2024 business owners investors real estate Main Street business I got some answers for you now some of you may be thinking man is there really more strategies out there I thought my accountant or tax preparer was doing everything or maybe you're flying solo and TurboTax whatever the case may be I want to give you legit strategies that you can use based on 2020 tax law all right now a quick intro because I just wanted you to feel confident that you're getting a legitimate advice from a licensed professional now I'm a CPA certified public accountant senior partner an accounting firm with amazing staff and partners and we've been doing tax returns for 17 years now around the country and number two I'm a tax lawyer I'm a partner in a law firm I've got an amazing partner Matt Sorenson we've been doing ten entities and tax strategies and planning asset protection for the last 20 years as well helping clients around the country and third I'm a part of directed IRA a self-directed IRA custodian that helps clients subtract their investments into what they know best and they can use their IRAs 401ks on all different strategies on top of that there's no other tax attorney in America that's written more books published more has more blog articles more videos on YouTube than me and I say that humbly out there trying to spread the truth by podcast for the last 10 years has broken down strategy after strategy trying to help people build wealth save taxes and protecting okay now with that said there's gonna be more links below on how to get to the podcast my website and all that this is not a sales promo to call my firm tomorrow some you may choose to do so but I just want to give you some practical tips get a pen and paper handy and we're gonna break this down and then you can go over it with your tax professional your business partner your significant other and see if there's some ways here that you can save in your small business now I've said for years that if you want to save taxes you've got to have at least a small business on the side something that I can work with ways to write-off taxes and I've got to be able to convert personal expenses that wouldn't normally be a write-off to business expenses because they relate to your business now this could be as easy as a rental property many of you watching this or full-time entrepreneurs with maybe hundreds of employees and thousands and millions of dollars of income that's cool everywhere in between it's the same concept and many many of the same deductions and strategies whether large scale or small scale business tax strategies for Main Street America you and me are going to be the same across the board and you're gonna love them now they don't may not apply to everybody based on your facts and circumstances so we're gonna do this in a pragmatic way now I want to tell you this video I'm gonna break down in three ways and it's you may already see down below I'm hoping we keep this under 30 minutes because this is a survey I know you can't handle more than 30 minutes you don't want to you know jump off a bridge or something but get your diet coke and some popcorn and your notepad and I'm gonna break this down in three sections and I've got my whiteboard here to help make it even more self explanatory I've got all sorts of blogs and podcasts and video library on my website where you can study more and even get a personal consult with whoever your professional is but I'm gonna hit the highlights so that you can say ooh I need to look into that or ya won't apply to me so here's the three areas number one we're going to talk about structuring I call it impact structuring because I want your structure to make any impact immediately right when you leave the starting gate because a lot of people have the wrong structure that undercuts their strategies right to begin with and I don't want that to happen so I'm going to go through what structure in 2020 based on the type of business and income is gonna help you save the most in taxes before you even get started number two I want to talk about the hottest tax tips that I know of that I'm aware of now we've got a checklist that might go from 10 to 15 to 20 in our office I'm gonna try to hit maybe in the top 10 or whatever the case may be I'm going to see how this goes as I just feel it here and try to tell you the strategies that really help my clients the most and number three we're going to talk about investing the profits from your business because we want to invest the profits in a tax preferred way when we can get tax deductions that will help us on our overall return or in our business or build money tax-free or tax deferred as the case may be okay impact structuring right out of the gate I'm going to lay out how I like to structure our clients and whether you are calling in from around the country we're gonna share our screen as you meet with one of my tax attorneys and this is what you're going to see and I don't know make sure I move this rock star out of the way I'm sponsored by rock true or at least I'm trying to be spying left Rock star this is the only one to restore zero carbs your sugar no carbonation okay now here we go this is how I try to divide my clients lives into three sections and this is just the foundation we're gonna build upon this today first I want your operations on this side many of you that have followed me before I'm going to just move quickly through this assets on this side over here your for those of you that have an operational business and may have risk or liability exposure or you're making thirty forty fifty thousand dollars or more we're gonna evolve from a sole proprietorship to possibly an LLC but ultimately we want to be in an S corporation my successful clients that are making $40,000 net or more are going to ultimately be in an S corporation and that's going to be one of the key strategies I'm gonna break down here first on the structuring side so this is how my clients will evolve some of you need to be an S Corp already some you're an LLC and I just had a client called one of my Associated attorneys yesterday and they're making a million dollars so proud of them LLC their self-employment tax I'm not kidding you was over sixty thousand dollars between Moe Bhama care so Security and Medicare unbelievable know what they had no idea that could be an S Corp we're gonna save almost forty thousand dollars off their tax return and one fail swoop so I mean this is the type of impact a structure can so we're going to move through the sole proprietorship to LLC to s Corp I'll explain why in a moment and then over on the asset side is really about asset protection let me repeat LLC's do not say taxes LLC's do not save taxes LLC's give us the flexibility to maybe make an S election get protection report as a sole proprietor but an LLC limited liability company don't think you're doing anything special except getting protection and maybe some options down the road so over here is where we use the LLC to hold real estate hold investments so we're going to have this all funneled down into our trust we're going to later build into this as we get into the third strategy portion of this video we're going to talk about IRAs 401ks and HSAs and more Roth's the whole nine yards so all of this little smorgasbord of deferred tax strategies are gonna be here rental real estate up here our family trusts down here and this is where we're gonna have our home our life insurance and these different structures flow down in to our family trusts so this is kind of the the three-legged stool operational business holding company trusts and then we have the bells and whistles of deferred tax strategies life insurance home and how it all comes together so now I give one in two day classes in fact is if you're already getting wowed and I hope you well by the end of this video I've got a full day seven eight hours team I think in Orange County I shot it in December for 2020 and it's my business owner workshop you can buy a recording of it video the whole nine yards with workbook for 99 bucks you can get down below get over to the business owners workshop virtual and watch it over and over again I love it but that's where I go into this for six seven or eight hours but I want again just give you the overview in this video now on the structuring we're gonna work on this piece right now now in this structure and phase there's two main tax strategies I want to focus on and we're not worried about asset protection whole other topic I've got a whole just on asset protection here and my tax and legal playbook a28 game-changing strategies this and so much more so if you're a reader it's also on Kindle you get over to Amazon tax and legal playbook my publisher is entrepreneur love entrepreneur magazine I'm their tax and legal expert for their social media every week and they're the publisher of all my books okay now here in the structuring site the two taxes were worried about or the tax strategy sorry or FICA savings and the $1.99 a deduction which is a new animal since the tax cuts and Jobs Act with Trump in the GOP you want to take advantage of this so these two issues impact the structure in a big way so when I have clients that are just I'm just gonna say option one if I have a client that's just getting started just selling on eBay small business maybe driving uber and they're not really making a ton of money yet and I'm gonna say under thirty thousand net now maybe they're doing a little catering business a little food truck maybe they do have some liability mean liability protection needs they're either gonna be a sole proprietorship or an LLC and and I at this point I'm not gonna care because the LLC doesn't give us tax strategy it just gives us protection but they're both gonna go on what's called a Schedule E they're gonna go on your 1040 and you're gonna maximize your write-ups which I'll come to in phase two and in Phase three we can still take advantage of a lot of tax write-offs here but we're not gonna maximize our FICA savings or $1.99 a deduction really until we start making more money that's when it really starts to pay off so right here so prop or an LLC you're not making more than 40 grand net and that's that's kind of I'm gonna put under 40 grand net that's cool you're in this world now for all my other clients and that's many of you watching this that are making more than 40 grand a year you might be a dentist a realtor broker a doctor a plumber electrician tractor an attorney a CPA a financial adviser you're selling on eBay you're doing MLM you're doing affiliate marketing you're doing Amazon marking all that is ordinary income and the first taxes is gonna nail you is FICA and when you're making more than 40 grand a year and I know this strikes fear in the hearts of so many of the CPAs that may be watching this we need to minimize your salary to a safe level so that you're not creating audit risk but you're saving on FICA now it's a subjective analysis meaning one accountant to the other are gonna have to other freaking different opinions on this and you've got to align your risk tolerance with the accountant that you want to hitch your wagon to because they're gonna drive this and I want to give you what my opinion is and then you can figure out how you want to move forward on this so we've got this S corporation that you're gonna work towards because over here you're gonna pay self-employment tax of fifteen point three percent on everything you net but once you start making more than forty grand the S corp really pays for itself and even you Californians that are all upset about the eight hundred dollar minimum tax I get it the S corp will save far more than me and our dollars if you do it right so when your money comes in we're gonna push it through our S corp or an LLC taxed as an S corp we can have that version and we're gonna split the income we're gonna split part into a w-2 and part into a k1 and we want to find the right level of the payroll amount now I've got other videos on YouTube right there in my channel I've got the color payroll matrix when to use an S corp how to maximize the S corp I've got a whole chapter on it here in my tax and legal playbook so I'm just gonna mention to you right now one of the first strategies is making sure you do not take it too large of a w-2 which may range from 50 down to 30 to 20% of your overall net income and some use CPAs are like oh oh my gosh that's too aggressive for 20 years I have been doing thousands of S corp tax returns I'm ex KPMG my partner's Deloitte Arthur we don't want to get audited we don't want our clients to be audited I've interviewed ex IRS agents on my radio show time and time again we have never had a client audited for taking too low of a payroll and sometimes that payrolls lower and well placed that freaks out other accountants so learn about this I study every case on what's called reasonable salary levels and I'm always learning which where we want to be and I've created a spreadsheet a matrix articles on arts preneur comm that you can read on this very topic so that my friends and I'm going to even make a note of it is strategy number one in the structuring phase of things and that is saving on FICA so do your research and make sure this year if you're gonna make more than fifty grand forty grand really is the break-even in my opinion where we can start doing a split now number two I said not only FICA we want to maximize or $1.99 a deduction so for some of you that don't know this when you make profit in your business you get a twenty percent deduction so let's do some math let's say you're gonna bring in seventy five thousand dollars in income and we're gonna spend twenty five grand in expenses and in phase two I'm gonna go through some hot tips and we're gonna write off as much as we can now when we have our net profit 75 minus twenty five so i netted fifty grand what is your one ninety-nine a deduction it is twenty percent of your profit now i'm gonna let's move on to a movie fresh paper and let's zoom in I know that was loud my texts are all you're making too much noise let's zoom in on that escort so let's do it again I've got 75 grand of income selling online services whatever it is I'm gonna spend 25 grand on expenses and you're gonna take home 50 all right that's cool you take the money every week you don't have to wait around for a paycheck easy easy again I teach this over and over again and write books and podcast and personal consultations with my legal team for clients all over the country so don't stress about this it actually is very simple to implement so you can take your LLC and tax it as an escort or set up in the ink right out of the gate run your money through it now you made fifty you took it home it's cool take it anytime you want but quarterly we're gonna split it into payroll and in this example I would do a 50/50 split you can read the matrix the more money make the more you save but we're gonna do maybe a $25,000 w2 and a $25,000 k1 that's the net now we don't pay FICA on the net we only pay fifteen point three percent on the w2 that's your Social Security and Medicare the effort thank we hate that so if I did this is just a plain old sole proprietorship or LLC I would make fifty grand and I'd pay fifteen percent in taxes $7,500 routed it right out of the gate but if I funnel it through the S Corp I only pay this fifteen percent on half of the money so I just saved thirty two hundred and fifty dollars by converting to an S corp now to do the tax return and payroll and a little bit of bookkeeping to save three grand and the more you make the more you save this is why every dennis doctor lawyer engineer accountant plumber electrician realtor broker were all escorts this is why the s Corpse are awesome I'll have a drink to that little Rochester her mmm good here all right now this net is where the $1.99 a comes in so I get a twenty percent deduction on this that's going to be a five thousand dollar deduction that's called the one ninety nine eight and this was part of the Trump GOP bill to help Main Street America didn't change the tax rate because there's no tax on an S corp it just flows through to your return instead of fooling around with your an entrepreneurs tax rate versus someone else's it was too complicated they said you know what if you own a small business we're gonna give you a 20% deduction that's the $1.99 a so if I get a $5,000 which is 20% times 25 grand I get a five thousand dollar deduction I only pay taxes on 20 so the bigger your pass-through that bigger the right off the less tax you pay we're not even to tax write-offs yet this is structure so now here's the dynamic and you can imagine why a little bit of strategy with your consultant and if you're a tax professional yourself you want to find the dynamic between how much payroll and how much net now what do you want more of obviously more net bigger deduction less w-2 less FICA mmm but as the IRS going to be okay with that so you've got to find the minimum required salary that you and your accounting professional are comfortable with then push everything else to net after your write-offs this dynamic is absolutely critical and when you put your spouse on payroll maybe you've got kids on payroll you've got a 401k a SEP this thing starts to blow up and get really cool so as a business strategy this is why so many of my clients that have done their TurboTax 1040 for years good go at it I don't even want your tax return we're not gonna save you any money with the 1040 there's nothing we can do but once you start making money with a small business now this whole world opens up this whole new world I won't sing for you where you can start saving taxes so I'm gonna leave that structuring alone now and we can talk later maybe and as you read my book or rather watch other videos on the LLC to escort dynamic payroll versus $1.99 a and all the videos in my library on my website and the business owner workshop you would love it where I really break this down even further all right hot tax tips I have chosen to focus on seven in particular that I think are the most impactful for this year and what we're dealing with and the dollar amounts and the strategies now the first one I want to go over is and there's no particular order here so I'm just gonna burn through but I think it's low-hanging fruit so number one I want to talk about travel now some you mean why are you starting with travel well because I want my business owners wherever they go even if they're gonna go on a vacation or they're gonna go visit grandma I want them to find a reason to make it a business deduction and I'm just gonna give four or five ideas real quick again I've got articles on this chapters in my book and other videos on my youtube channel where you can dive deep into this the first one is why don't you go meet with a vendor go meet with someone that you may be buying product or services from you may even go meet with a client or a customer someone that you might be selling a service to or building a relationship with number three why don't you attend a conference are you gonna I conferences all year around the country I and you can get over to my website down here and look at the workshops this year I'll just quickly say Chicago Seattle I and Orange County Honolulu Philadelphia and I think we're gonna throw in a Dallas and a Minneapolis shortly so and we're doing Phoenix here in a couple months so all over the country you can see it's live and going to a convention or a workshop is a great time to get some training and to make it a business deduction and I talked about in a lot of my material how many days you can write off and what's too aggressive so make sure you're thinking about all these sorts of things next I want you to have your annual meeting your company maintenance meeting even if you have an LLC you should be how about a Board of Advisors and you should be having regular meetings at least once a year or more and some you go why sort of an LLC because it's easy yeah it may not protect you in court if you don't maintain it into a little thing so that's that's another major topic so I'm going to put annual meetings or more so that you can be really getting your family involved and friends or whoever you travel with and then number five the last one I think is really powerful would you come into the third phase of things is visit your rental property where are you buying rental properties G own Vrba's air B&B storage units single-family homes apartment buildings I don't know I want you buying real estate which we're gonna talk about later so travel is a wonderful write-off dig deep make sure every trip I want to be writing off air for airfare as much as the hotel as much as we can uber taxis valet all the things that come with a travel trip now this is not going to be dining or auto or coming to that okay now let's talk about not travel this is driving your car truck SUV RV or motorcycle I want to maximize the write-offs and the bet these are the best auto deduction rules we've had in almost 40 years tax cuts and Jobs Act took away the entertainment expense I love that one too but they boosted dramatically the auto deduction so in their armed structures we talked about earlier left side right side you may have an operational entity so proper LLC or a full-on S corp in your rockin or you may have and you should eventually you're gonna have an LLC for your rentals we can be taking mileage over here riding off one car on this side of the equation and we can also be riding off the car over here in your escort you may have a spouse but the vehicle you may have children with vehicles wherever you have a vehicle even a motorcycle or an RV I want to talk about it I've got some great blog articles on this and my business owner workshop I even filled a lot of questions in the group about this now there's two options when you go to Auto you can do mileage or actual now this year for mileage we're at 57 and a half cents for business mileage deductions so ten thousand and miles is a $5,700 write-off that's gonna be a lot more than you'd pay for in fuel and I do math and a lot of examples in the workshop to go over this but mileage is a lot of times going to be the choice of the small-time entrepreneur kind of the side hustle but when we can we want to bump up to actual and this is where you're gonna take depreciation Plus fuel repairs and maintenance and this is where the bonus depreciation is even gotten better and so if you go buy a new or used vehicle in 2020 newer used and it's not an SUV or truck first year deductions can be over $18,000 then if you go buy the SUV or truck and it's a hundred percent business unit or whatever percentage it is the bonus depreciation can be unlimited you can theoretically go out and buy a you ford f350 for 60 grand even on credit zero down and if it's 100% business I can write it off all in one fail swoop now the amount of income in your business and the type of vehicle and what how many miles you're putting on are all considerations so I've got a great youtube video where I have a little grid or matrix on when actual should be compared to mileage and again you want to do that dig deep and dive on that I am on actual I'm just gonna put bonus or depreciation Plus fuel repairs you know that kind of thing and maintenance so this is the big debate which one do you go to and I'll say in general the more miles you put on and cheaper the car we're gonna go miles the more expensive the car the fewer the miles we're going to go actual you want to choose the method and look at your entity structure to pop the vehicles of the whole family in the right spot third dining now there's been changes in the law on this and you want to be aware of what's going on I think dining is highly underutilized because you can write off a lot of meals when you're out talking business with others and even again while you're traveling and I'm going to give a travel example here in a moment but with dining I like to talk about three types and this is really important the first one is going out and talking business with someone very common right you're gonna go out and have a little meal and you might pay for all of it you may pay for just go dutch and pay for your share but if you're talking business with someone another person you get to write that off and you can write out 50% of it and that includes the bar tab that tips the whole nine yards and so you want to write down the entire amount then your accountant will Whittle off half the second ones that we love and this is very common is when you're traveling for business you don't have to have a conversation with anyone you can write off the meal by herself so gosh what was it two weeks ago I was speaking at a workshop in Salt Lake City went out to one of the gas stations picked up a hot dog and a drink maybe rather Stern not sure grab some food I think I went to IHOP for breakfast one point I wrote that off because I was traveling for business so that is also limited to 50% now the biggest change in the law has been the hundred percent food right off which used to be hey if I buy food in the office the bagels the doughnuts the watercooler the coffee or I have a staff meeting and bring in food it used to be a hundred percent right off now that's fifty percent so this is food in the office is a hundred I'm sorry is now 50% no longer a hundred percent now where you can still get on call it the fourth category you can still get a hundred percent is if it's eight an event and you're providing food at the event or it's a marketing presentation and you're providing food in that presentation but there's more than one person and they're not employees and you're doing this kind of presentation think of it like an open house for realtors and they've got wine and cheese for the walk through the house or whatever so when you're doing a presentation or an event you're gonna get a hundred percent the only time you can do with your employees is when you've got this company party and this company party there's an exception where you can do a hundred percent for the food in those instances but if all the employees are family members not gonna happen so what makes for their third party employees but dining is a big write-off make sure you maximize it and here's an example of what it would look like in your books you're getting ready to go on a trip you stop and have lunch on the way to the airport with a client you have lunch that's a 50% write off you get to the airport and you have to pay for parking 100% right off for travel you get on the plane 100 percent right off you travel you stay in a hotel you ever around 100 percent right off you stay one or two days and you do business for a particular reason and one of those days because the days of travel count is business you do your business convention conference meet a client meet a vendor visit a rental property all that travel is a hundred percent but while you're eating on that travel it's 50% so you're gonna write down all the food but the food and the travel are separate and what about the car ride to the airport you drove your car to the airport that's an auto deduction so you have auto to the airport food on the way with a client food at the airport for yourself while you're traveling food while you're traveling 50% and then all that travel is a hundred percent so you want to make sure your categories at categorizing this right and maximizing the write-offs and guys the more money you make the more we can write off because it's more legitimate now the next two are very straightforward and I may not even have to write on the whiteboard the number four strategy I want to cover is home office do not be worried about the home office right off it is an old wives tale that you're going to get audited if you do the home office also there's been the advent of the administrative office and you know what I am gonna go to the whiteboard because there's two that you need to know about when you do the Home Office the rule was before that had to be your primary place of doing business and where you met all of your clients and customers and that it was your only place of doing business now they allow for the admin office due to some lawsuits where people go home at night and still do work even though they had an office across town does that mean they're penalized no you can still take it and do administrative duties so the first point I want to make is it could be your full-time home office or it could be an admin office now once you decide which category you're in which is fine then you're gonna choose either the standard deduction or the simplified now the simplified which I make sure all my clients take even if they have the rental property deal is that you can write off five dollars per square foot up to three hundred square feet that's a 1500 so 3 times 5 thats 3 dollars and 5 but it's limited to this sorry I only want to cut the video I'm gonna make sure I'm correct it is 5 dollars per square feet per square foot up to 300 square feet so we got 300 times 5 dollars let's see I don't to edit everything out of here I'm real keeping it real that's a $1,500 right off and I want to make sure all my clients at least take the low-hanging fruit and grab that 1500 now if you have a bigger office and it you do the square footage of your house and you're like this is my home office area and it's exclusive and it's full-time office lalala and you're in an area where do a write-off should be a lot more than 1500 we're gonna go and start taking a percentage of the home based on the square footage and then we're gonna take depreciation we're gonna take a portion of the utility bills a portion of the mortgage interest and really look for all these extra little write offs and try to get this north of $1500 and everybody's gonna be a little different and we're gonna try to figure out which one is in their best interest but don't be afraid of the Home Office you're entitled to do it you should take it okay number five and I for sure will not use the whiteboard for this is tech cell phone equipment supplies and this is again where I have clients that don't really think outside of the box most business owners now today have a social media program they have a website they're gonna need cameras they're gonna need computers and laptops and iPads and smart watches they're gonna need cell phones for them their spouse the kids and I want all that tech to be written off almost if possible a hundred percent in fact under IRS rules now you can write off a hundred percent of a cell phone for the business owner their spouse and the kids as long as you can show a home phone line use so whether you've got 18 to u-verse or direct TV or something where you can have a home phone line great then cell phones for all the people involved in the business 100% right off because we need those cell phones in the business I want to write off drones video cameras studio equipment whatever you need to maximize the value of your business I want your thinking write-offs for anything at Best Buy staples Apple Store Microsoft Store all those things should be right off and you need to be thinking outside of the box anything that can be used in the business I'm either going to write it off or the whole thing if I can now the last to get to be quite technical and I'm gonna try to brush over them with as much detail as I can but this really requires a lot of strategy and study and implementation with your tax professional number six is writing off your children as part of your business now some of you don't have kids you can fast-forward this over for a minute or just learn it I'm not going to take too much time on it if you could be the next hero at the dinner party and share this strategy but really we're talking about kids under age 18 and kids over age 18 and if you're a business owner supporting any family member and I want to talk about nieces nephews grandchildren parents we want to integrate them into the business and here's the main principle quit paying taxes only you just play like this is your little 1040 and here's your adjusted gross income quit paying taxes and then giving your family money put them on the payroll and take a tax write-off they're gonna be in a lower tax bracket and there's nothing wrong with it it's been a mainstay of American small business since the foundation of the United States thank you not I mean do you think they're little stable boy that worked for his mom and dad was he part of the business when they were you know leasing out horses or whatever that sound horses back in New England and the 17 owners or whatever and thinking about the New York City deli right now and the kids working after school in the deli can they pay their kids and take it right off sure Oklahoma farm working on the farm and the children in the summer young or old is that a write-off sure and we're and we're out back on the west coast in in a home office and we're cleaning rental properties or were putting up signs for homes for sale or whatever get the family involved in the business even if it's just on the board of directors or advisers not as such an important principle I have a whole chapter in my book on this again in the business owner workshop down below we talked about this for almost an hour and the main concept here is again thinking about kids over age 18 and under age 18 now this is where the structure starts to expand a little bit and here's what it would start to look like so here's your revocable living trust we do a state planning for clients all over the country all over the topic and you may over here have your LLC with rental properties and then over here is your operational business now this could be your S corp or let's say you have a sole proprietor or LLC now if you're gonna be paying kids under age 18 you can pay them as outside labor without issuing a w-2 and I don't know how many times I have to get in an argument with some CPA across the country this would you've got an issue at w-2 let me ask you this what's the penalty for not issuing a w-2 because remember on your own kids under age 18 there is no withholding there's no FICA withholding there's no workers comp now let me repeat that again you can pay your kids helping in the business you don't have to issue a w-2 or 1099 and there's no FICA no Social Security no tsuita futa none of that because you're paying your own children in your business now if I hire someone else's kid I gotta withhold all that now I back all that up with all the support material and writers and what's the penalty the penalty is a derivative of the FICA withholding amount there is no FICA withholding amount I have talked to so many IRS agents over the years that are like this is not an issue I've had clients come to me they're getting audited on on various issues and they and with the IRS agent looks and goes what's this outside labor oh it's for the kids all right done I bet people that have used my strategies and get audited come through with flying colors it's okay to pay your kids now if you want to issue a w-2 to fund a Roth IRA we'll come to that in phase three but you don't have to so chill out and there's no penalty because the penalty is based on FICA and there's no fight cut so we'll leave it alone so if you want to pay your kids for helping with the rental property you're gonna call it outside labor and this is your kid under age 18 then over here you might have a sole proprietorship or LLC you're gonna pay the kid outside labor this is one of the most powerful tax strategies just shave off income on your tax return and so let's say I don't use an example of my own family now if you have an S corporation you got to do what's called a management fee and on this management fee you're going to pay a sole-proprietorship I call this a little soul prop and this so prop is a Schedule C on your 1040 and this so profit will pay the kids down here and these are your kids under age 18 now let me repeat this so it's important an S corp doesn't have children people have children a soul prompt and LLC has children now here's an example when I had four kids under age 18 which I did I have four children and they were all under age 18 at one point trust me so here they are four children under age 18 let's say I was paying my 16 year old oh six grand that was Dylan great kid and I had my twin girls and I was paying each one of them five grand they were maybe 14 years old and then Molly my little paper shredder administrator I was paid her Weber two grand now if you add this up that's $18,000 that's $18,000 of stuff I was gonna pay for anyway soccer school lunch school clothes but what I do in the strategy is I quit paying taxes and giving my kids money and paying for their stuff I would pay a management fee to the sole prop transfer money into their accounts and let him pay for their own school lunch and soccer and music lessons this is totally legitimate if all the kids have jobs now this year in 2020 and this is the big deal no one pays taxes on over twelve thousand four hundred dollars that's the standard deduction and I love this because I can go to my little mark kohler 2020 calendar and you can look at the standard deduction for earn income you still get to claim your kids is dependent on your tax return that you can still take the tax credit for children but they're going to go out and rather than work for McDonald's work for you and now you get a write-off now I could go on and on you want to if this is at all interesting to you and you have a small business and you have kids under age 18 you got to learn this and if your accountant says it's a scam or something I can't even imagine that you got the wrong count and I teach this strategy to accountants around the country so get the kids involved and this was an $18,000 management fee in my S corp $18,000 of income $18,000 write-off zero income on my schedule see I just generated $18,000 write-off and if I was in a 30% bracket I just saved six grand in taxes that's not chump that's not chump change that's a big deal now once my kids I've got three of them now over age 18 I just give them a 1099 I give it 1099 to my kids whenever they I helped them out with money because they're all on my board of directors Board of Advisors they're helping out with different business principles they're helping out with marketing and management and all sorts of good things and they may not they're not acting like regular employees in my office every day I do not have to issue a w-2 and so I can give them a 1099 when they're over and I'm going to set 18 for over I'm just gonna issue them a 1099 so really really good stuff and this is very very common and you need to study up on paying your kids now the last hot tip of your strategy if we've still got a third phase of deductions that are going to help save you thousands of thousands of dollars in taxes over the many years to come but in this section to of hot tax tips we've got to talk about health care this is where the strategy of the health savings account the health through your health reimbursement arrangement or the flexible spending account come into play now the easiest way to describe this again lots of information in my business owner workshop on it and other little videos and you can read up I just like to say that because I feel bad at that I'm hitting highlights here but I mean this is why I give a one day workshop so okay there's four ways to write off health care in 2020 you've got do this right boom first one is itemize and this is flat the standard accountant thinks is the way to go terrible 97% of Americans try to itemize and they can't write off their medical expenses because it's a derivative of your AGI so if I make a hundred grand you have to take 7.5% times this which is $7,500 then you add up all your medical expenses you can only write off anything over $7,500 so if I had eight thousand dollars in medical fences then I can only write off $500 stupid terrible I don't want any of my clients itemizing it's a waste of time now if you heard a corporate position where you have what's called a flexible spending account they're gonna give you a certain amount of money that you can use and it is not included in your paycheck but what do we know about the flexible spending account you don't get to take it with you it's a use-it-or-lose-it and the user to lose it is a wonderful way to save healthcare but only to up to a certain amount and then it's gone and if you don't use it you lose it so if you have it for in your corporate scenario you or your spouse take advantage of it but we don't use this in small business so I'm just gonna put a line through it because this is small business tax strategies now what I'd love to use is the health savings account or health reimbursement arrangement this is for the healthy and this is for the unhealthy aka the Kolar family now if this strategy what I want to do is set up a savings account for health care that you can take with you everywhere you go you get a tax write-off to put in money into it and then it can cut grow tax-free and come out tax-free now this year go to my handy-dandy calendar the health savings account is thirty five hundred and fifty dollars if you're single and seventy one hundred dollars if you're married that's the write-off right off the top of the bat so let's write this down thirty five fifty or seventy one hundred if they had a household or married or family then if you're over age 55 you get an extra $1,000 now by the way I should put over here on this flexible spending account this is twenty seven hundred and fifty dollars per person on an FSA so this is a big write-off and the money grows tax-free so you can pull it out for any medical expense at any age you don't have to wait till you're older so for your Millennials out there in your 20s you're like man all fun to HSA maybe I'll get married in five years have children I can dump this out tax-free to pay for that deductible Oh prescription drugs eyes dental chiropractic massage therapy all these wonderful things can come out of a health savings account so while you're healthy you want to get a higher deductible lower premium and pump money into this HSA that you can pull out at any time you know the number one reason for why people pull money out of retirement accounts premature health care healthcare and so we want to build this health savings account so that you're not into that problem of pulling money out of your IRA or 401k with the penalty that's it and maybe even paying taxes on it lets this be careful now the health reimbursement arrangement is a business strategy where you have this arrangement plan and there's two different structures whether you're married or single and it's unlimited for small business owners and there's no account there's no user to lose it so it's very different than the FSA or HSA it's a reimbursement plan and you can reimburse your medical expenses big topic whole chapter in the book talk about it the business owner workshop for nine bucks you can dive deep on that as well on all these topics some more you're gonna love it another drink of a rock star here now that's number seven strategy is maximizing your medical deductions and I'm not talking about medical insurance your insurance there's always a hundred percent right off in your business I'm talking about the co-pays that deductibles the prescription drugs the eyes the dental physical therapy all that stuff again we want to maximize a write-off and a lot of younger people thought well I thought medical was a write-off now not unless you do it properly so that is another twenty twenty update of how to take advantage of the medical deduction now in summary when it comes to hot tips these are the top seven in my opinion and if you add into it the $1.99 a and the S corporation were almost at ten which I love now I've got more write-offs in Phase three here so we well get it we will certainly by the time this is all over B into ten or fifteen tax strategies with updates for 2020 but these are kind of the standard write offs that you're gonna have in your small business and and I wanted just to get here put this into perspective try and left here put this in a perspective of your business and so as we start looking at this overall structure and we start to build it in your small business that may just be on the side or a full-on S corp or an LLC with your rentals and maybe this is for paying kids maybe you don't have children fine but in the seeks its situation what we're looking to do is maximize our write-offs for our rental property and maximize our write-offs in our operational business and these write offs these write offs are so important to make sure we take advantage of we're gonna have income maybe for multiple entities multiple URLs multiple DBAs and this is what you'll learn about my strategies is you can have one S corp in your life for multiple types of businesses that's all I have I only have one s corporate mark colors life it's an easy way to keep it efficient and save a lot on taxes I want to maximize write off to kids for health care Auto travel dining home office pda's equipment all these good things are gonna help you save a lot in taxes and you want to know the numbers this year and make sure you're implementing now let's move on to phase 3 all right phase 3 and this is really the cornerstone of why we're having small businesses is we want to build enough wealth where we're not struggling in our older years we want to have financial freedom as soon as possible in our life we want to have financial flexibility now in my book the business owners guide to financial freedom a very different book from the tax and legal playbook and let me explain why the Taksin legal playbook are these strategies that are all over the board for asset protection and tax savings and a little bit of wealth building but I was just from the outcry from my clients so like well mark I'm having consults with my fan on financial advisor and they don't understand this and when I go to my financial advisor all they want to do is talk about Wall Street products and that's frustrating and I'm not trying to demean those out there watching bitter in the financial industry but you know the word captive and what captive means is that when you work for a bank or a brokerage and which is 97 percent it's ironic I use that number again but it's in that range and even Tony Robbins talks about this in his new book and Warren Buffett as well the fees charged by wall street and the banks in these 401ks and IRAs it's almost criminal and I in mu the financial advisor your captive you're stuck under these big brokerages and banks and you can only sell their products and if you talk about anything else you're risking termination so I am not captive to Wall Street I love Main Street and so I wrote a book titled and it's very these words were chosen very carefully the business owners guide to financial freedom what Wall Street isn't telling you so as you build this business and you start making money where you gonna pay how are you gonna save even more in taxes and how are you gonna build it as fast as possible and I've got some YouTube videos on the million dollar Roth IRA if you haven't seen it get over to my channel and I get some hate mail I'd have literally people livid that I talked about a million dollar Roth IRA and how to get there because I talked about rates of return do you don't get in Wall Street because you can self direct it and and I'm gonna explain that term here in two minutes now so in phase 3 as we talked about investing the profits from your business I need then this is a 2020 business strategy update I want to give you two major principles that I see my successful clients use number one and I'm I I can almost say universally 100 percent and I probably just because I've consulted with thousands of clients over 20 years I better say 99 percent ninety point nine percent of my clients and one of the biggest strategies in 2020 is investing in some sort of real estate that could be single-family homes it could be storage units it could be apartment buildings it could commercial property I know some of you do not want rental property because you see it as a nightmare and you may live in an area where rental property doesn't make sense numerically you could be in Southern California Northern California for that matter San Francisco you could be in Hawaii but why don't we buy rental properties somewhere else in the United States where the numbers are amazing I have clients on the west coast buying in Tennessee Oklahoma Texas Ohio Illinois in suburbs in the breadbasket of the United States getting ten to fifteen percent ROI buying rental property that they can learn how to manage the property manager and have safe investments and I'm going to just summarize with this my wealthy clients buy real estate now here's the tax strategy is you buy real estate and I've got four quadrants two rental real estate and my youtube channel and my business owners workshop I talked about the four quadrants please watch it and I know BiggerPockets has a way that they look at it if you haven't heard of them great podcast I love those guys I have a little different twist on it they love me I love them there it's all friendly but I love the rental real estate benefits because we're gonna get and I'm gonna just mention these four things I want to get tax freeze or tax deferred appreciation meaning the property's going to grow in value over time I'm going to get depreciation and amazing tax deductions to the point where I should have tax free cash flow which is number three tax free cash flow and I'm gonna get mortgage deduction mortgage reduction because my tenants going to be paying down the mortgage so what's happening is the property is going up in value the mortgage is going down and I'm kicking out cash flow tax-free that's why wealthy people buy rental property and it can be commercial triple net where you don't even have to look at it do you know I've had some rental property I haven't even looked at in years and I talked to my property manager I'm not completely hands-off but I don't have to go over there punjah toilet you can learn how to do this if you don't know where to go for good real estate education give me the home I'll make some references for you and it doesn't have to be terribly expensive either where you can learn how to buy rental property and I teach my kids about this my son owns a rental property I am so proud of him he's 24 years old and he owns his first rental property I think that's awesome my dad helped me buy a duplex when I got married my wife will complain about it today we bought a washer and dryer and had a duplex we did not get to go on a honeymoon now maybe those financial decisions had a numerical dollar payoffs but I still recommend honeymoon anyway a whole other story that's what my marriage counselor says I'm just joking I love my love my wife and Jennifer knows I love to joke about that she's like why don't we have a small business on a rental property why don't we go on a big cruise well you know money well spent okay now but that's the benefit of learning how to invest in real estate early on in life and I want you to pass on that legacy I talked about three different strategies in my book in 2020 the benefits of being a passive investor versus an active investor versus a real estate professional and you need to know those three different categories so that you can maximize your rental deductions I call that a tax strategy but it's in the third section of this video series or this video because it's about wealth building and tax savings now the second benefit or the second strategy that I see so many of my clients use not only real estate because I said there's two of them is are using tax deferred structures now we're almost done I promise you but you're watching this video because you want to make money and save money and I'm proud of you that you made it this far and this is the money section when we're talking about taking profits from our business pulling them out of our operations not going out and buy a more expensive car or living high on the hog month-to-month I've got some clients that are making five hundred grand a year and they're one month away from a disability and bankruptcy because they live month-to-month you've got to learn to all have to learn on the importance of getting out of debt prey Dave Ramsey loved him but also using debt and strategic ways to build wealth and that's okay where Dave Ramsey and I did to disagree if you're smart and you're wise and you're careful you can use debt to buy rental property and it makes sense no sorry it distract it again because I could be here for hours with you please get more of my content now the second strategy that my wealthy clients use to build wealth and save taxes are those tax deferred structures so over here off on the side is gonna be our LLC with the rentals and I talked about how many LLC's and what state and all that and other videos of mine but over here what we're going to talk about and I'm gonna just start listening there's so many and in fact I'm going to do it in a strategic way here we're gonna talk about IRAs and when I say talk about it I talked about it with my clients we're gonna talk about Roth IRAs we're gonna talk about health savings accounts which we already did is one of our other seven strategies because I want to build money in an HSA tax-free and pull it out for medical expenses I want to talk about the 401k and maybe even the DB plan somewhere in here I might use in the short run a SEP for a simple but I'm not a plan I'm not a fan of using these as a planning strategy for the long haul because in fact I've got videos I screwed up and had to use a SEP but I want to get into the 401ks and the Roth's that's where I want to be and I can have a Roth 401k and I can have all these now the reason why I build it like a little pyramid it's not because it's a pyramid scheme and I love when Michael's taught what a pyramid screen is a pyramid scheme is on the office just go Google that it's law YouTube is hilarious but why did this as a pyramid is because the more money you make the more you're going to move up this strategy tower of probably a better word this tower and I'm gonna get into using Roth's and 401ks it may be even a DB plan but I want all my clients using the basic IRA right out of the gate and learning how to safe I love acorns I've got some little links to minish in my social media on using acorns all my kids have 8 horns account I've got an 8 horns account right here on my phone if you haven't heard of acorns it's a great little app they should I should be sponsored by them um but acorns is a great way to have money taken right out of your account out of sight out of mind and fund it into her IRA or Roth now why I bring up all this and you said mark you hate Wall Street oh yeah because I want you to self-direct these accounts do you know my health savings account owns it ll and Illinois LLC and it has a rental property in it my health savings account owns this cute little meth lab I mean it's adorable the guys are great I call them entrepreneurs lots of bling but they're great they pay their rent and cash in a paper bag every week but no what is low income housing but I joke around but this health savings account along with my Roth's and 401ks can own real estate they can own precious metals they can own a small business down the street your retirement accounts can be self-directed they can buy Super Bowl tickets and be sold on StubHub that's right you can get returns that far exceed mutual funds and beginning 10 12 or 15 percent rates of return investing in what you know best and that's a very common situation where I have clients call up it will set up an LLC we've been doing these for 15 years where Roth is an owner an IRA is an owner a health savings accounts and owner before Owen Kaiser donor and this is where we bring this whole picture together so this is the climax of the whole video and I'm glad you made it if I have my S Corp and I've got my little family management company hiring my kids I may put my spouse Jennifer on payroll and give her a w-2 as well as myself so I can fund a 401 K and my kids are on payroll even with the 1099 and they're over age 18 so they can fund a Roth IRA my Molly who is 16 years old has a Roth IRA her Roth IRA is partnered with my 401 K in an LLC to do business what mind and you're building wealth getting incredible rates of return I'm not saying all Wall Street products are bad I just want to say that I mean I've got some mutual funds I've got a money market account but am i putting everything in Wall Street bucket no you want to be creative and strategic so in summary again what I was saying is my successful clients are self-directing their retirement accounts in buckets with their family members but their significant other and doing real estate see these two different things going on I've got real estate in a bucket growing and I've got retirement accounts in a bucket growing these two buckets are what my successful clients use to build wealth we're heating tax deductions to fund retirement accounts we're getting tax deductions to buy rental property and we're building wealth and tax free cash flow boom is that crazy that's crazy so I want to use the profits from my businesses to fund these assets and you can do it so when I summarize this and bring together 2020 business tax strategies and again I'm so so grateful you're watching this because I'm so passionate about this I'm a geek but I hopefully can break down complex tax strategies in an easy-to-understand format where even if you're an uber driver you can pee seriously and I do videos for uber drivers and I love them every time getting a car I'm like hey if you watched my uber video and they're like what a hundred thousand views you know but I want these uber drivers to know that they can incorporate possibly fund a 401k and buy real estate with their uber profits at night they've got their day job but they're not paying taxes on their income and building wealth that my friends is saving taxes and creating tax-free wealth for the future with a side business no one else can do that average income Americans I don't wanna say average Americans that can be making a lot of income in the corporate world need to catch the vision of small business real estate small business online businesses income so that we can build more wealth and have more flex ability more freedom in our lives people don't give up keep studying keep learning talk to your financial adviser talk to your tax professional get my business owner workshop 19 bucks down below watch it over and over again get your family around the table watch it after the Super Bowl during the Super Bowl at halftime whatever and keep learning how powerful a small business ownership can be and all the tax strategies that come with it if you subscribe I do a weekly video I do weekly Facebook and YouTube live answering questions around the country around the world and I'm not going anywhere I'm gonna keep publishing I've got my 2020 business calendar eight steps to start to grow your business with little videos and QR codes you can start watching it immediately get over to Amazon and check it out I'm not going anywhere and I'm not gonna be selling you crap it's highly overpriced I want to help Main Street America I want to help you thanks for watching keep living the dream don't give up thanks so much for watching that video and I want to be your source for tax and legal strategies it's hard enough to live the American dream without being out on the web on Google trying to find answers to complex questions and just click in a mouse hoping you got it right my team and I want to be a huge resource to you the law firm accounting firm by education resources on my site please continue to follow these strategies I know the safety thousands now click here if you want to be a part of my newsletter it's awesome weekly updates and deadlines and strategies and tips also subscribe to my youtube channel you'll love it and make sure to click the bell icon so you get a little ping whenever there's a new video and finally check out my site marketing polar comm with all sorts of videos probably 70 plus videos 30 plus hours of content that'll save you thousands

Channel: Mark J Kohler

Views: 136,919

Keywords: tax, legal, entrepreneur, asset protection, wealth building, save on taxes, impact structuring, health care, real estate, business owners workshop, business owner, refresh your wealth, finacial freedom, ira, roth ira, mark j kohler, mark kohler, tax and legal playbook, kkos lawyers, entrepreneurship, small business, business tax write-offs, business insider, auto deduction, travel deduction, dining deduction, home office deduction, home office, income tax, taxes, finance

Id: cYctvYgjGNI

Length: 63min 54sec (3834 seconds)

Published: Mon Feb 10 2020