5 Critical Tips for Running a Small Business from Home: Q&A with Tax Lawyer Mark Kohler

welcome everybody to this week's facebook youtube live my name is anywhere let me just tell you what this live broadcast is about it's live today july 23rd 2020. i'm here answering questions for you about your small business one in three americans have a small business on the side now that could be driving uber selling something on ebay that's a small business well i'm a cpa an attorney senior partner in a law firm and accounting firm cfo of a trust company where people invest their iras and 401ks the way they want to which is also a small business for your ira all the above of the american dream that's all i do every day and i've got an amazing team around me of let's see seven lawyers and about 15 cpas and a great staff of administrators and paralegals and that's what we do is we help small business owners so today is about you with this covid thing there's so many people millions that are now home hyper focused on their small business or starting a small business from home i want to answer your questions i've written a book called the eight steps to start and grow your business it's been around a couple years um this is not an infomercial for my workbook uh it's there i'll tell you about it you can go get it if you want it's on amazon also on my website i've got i think up to seven books now on amazon there's no other cpa in america that's written more books has more youtube followers more blog posts and more podcasts than me i know that sounds a little bold to say and i say that humbly but i'm here for you so i'm going to try to break this down now if you've been in business 20 years i'm going to share something that's going to wow you i promise you that if you're just starting out i'm going to keep it basic you're going to love it now that's an art it's tricky be patient i'll do my best so if you're starting a small business and i'm going to use these eight steps as a framework to get into this but i've got uh my three helpers here on my marketing team on youtube and entrepreneur facebook and my personal facebook fielding questions so if you give me your first name and the city you're from or the state you're from i that's a requirement i'm not going to assume you're from duluth minnesota i want to know your first name and where you're from and then distinctly write your question is simply stated as you can and we're going to answer those questions so before i go um any further probably the biggest step step one and this could be even any of you that are and by the way in this this little workbook i do an hour and a half live workshop for each step and then embedded in it are over 60 other videos and webinars and podcasts and you just hover your phone or you do it online and you can jump right to that video that article or that podcast so step one and that's what i want to focus on here and for all of you that are already in business it's the same concept if you're going to launch a new product or idea my partner i literally last week in our law firm around 20 years said you know what we need to start doing this and we said let's do a cost benefit analysis let's do a break even analysis let's do a little mini business plan for that idea how much fixed cost is it going to take away from our other operations what are the variable costs producing what's our competition how much are they charging how long is it going to take to get off the ground and we pencil that out it may take an hour it may tend to take 10 hours it may take 10 days i don't know but that's the first step and if any of you are home thinking okay i'm going to sell crap on etsy i'm going to make this get out there and market on social media and sell it on etsy cool break it down for me what do you think your best case scenario is in your worst case scenario that's the business plan now over here and janae take me over to the whiteboard here just for a minute we're gonna try to show how this might uh look when i have a a business owner sound seems to be okay i'm doing right all right so a business owner develops a business plan now you can go to sba.gov and get a business plan they're helpful in my workbook i give you a word document so you can build your business plan and i teach you how to do it but the business plan is a one-time event can they see me today we're okay okay the business plan is a one-time event it's going to tell you if your idea is going to work now some of you like mark i want to get into some more technical questions do i need an llc right away do i need to text i need number i'm coming to it but i just do you know how many people i meet with they're like mark they're pro their business sucks there's a problem and i go well what did your business plan say three years ago when you were putting this idea together what did you see your competition doing and they're like well i never did that and they go i so wish three years ago i would have done what you're saying right now mark it could have saved me thousands of dollars and hours and those are successful business people that are launching even a new idea just because it sounds good doesn't mean you should freaking do it so you do this business plan and it's a one-time event it tells you yes or no and be impartial be objective decide if it's going to really freaking make sense or not and if it does it's going to spin off two little babies here it's going to kick out what's called a strategic plan i call it a strat plan been teaching this concept for years and years and a marketing plan and that's going to what's going to make the phones ring so you've got your marketing plan and your strap plan and this gives you your daily weekly monthly action items for the next year which all play into your master plan of a 10 year plan what are you really doing and why this little this this is mark kohler's brain on what did they say on that commercial they fry the egg on a pan this is your brain on drugs this is this is marc kohler's brain on drug this is this is what i dream about at night this this if my business owning clients could just implement this alone it would save them and make them thousands of dollars so i challenge all of you step one if you get on a phone call with me say you're going to pay me for one of my attorneys for an hour the first question we may we're going to ask i'm going to make sure the attorneys are reminding this what's your 10-year plan did you do it business plan what's your break-even analysis how much money have you made this year this play like you're on shark tank this is exactly what the team does here mark cuban's like how many sales have you got how much should cost you how far are you into this how much profit you have per product per item in your i know when you watch circade it's like oh those people are bad they know their stuff it's the same thing you're supposed to know if you're gonna get on shark tank play like and i'm gonna get on the phone with you i'm gonna ask you how many items have you sold this year where are you marketing what are your sales look like what are your projections if you don't know those answers you should have no business running your business yet get that crap figured out that's your business plan your strap plan and marketing plan and then play in your mind i'm going to go to shark tank and ask for money for what for what if if they if cochran gave you a million dollars 500 grand 100 grand what would you spend it on what would you spend it on you should know your business better than yourself that's step one and if you're going to launch a new business in our law firm we're thinking of launching a new product we need to know this that's step one now after that i'm gonna go step two it's financials i want you to open a bank account now you may just open a basic bank account in your own name and just start tracking expenses you might allocate a credit card the correct cc credit card that you i don't want to say allocate you designate just for your business you're going to track your startup costs if you're going to open a lemonade stand i want to know every cost that you're spending because you're in startup mode and for some of you at home they're going i'm already in business i'm already making money that's cool okay do you have a dba that's doing business as do you have an official business account at a bank did you set up an ein which is an electronic identification number or taxpayer id number did you do those that's it that's sometimes kind of in fact i'm going to write a little smaller you can kind of go ghetto ghetto is just getting just just designating a bank account and a credit card and you're like i'm freaking gonna put everything on my amex and get this business going all right that's cool you're going ghetto you're just getting off the ground instead of going to step so this is step one instead of going over to step two you might stop at this little truck stop along the way i'll call it 1.5 and you're gonna do a dba and a little business account and you might use your social security number and that's okay and and you're just trying to see how it going this is what most people drive in uber are doing they just make some money they get a 10.99 from uber at the end of the year they write off their mileage and their cell phone and a few things boom that's a small business now i could do a lot more with that what are you uber sorry search on youtube uber tax strategies my videos number one baby i love my uber drivers i want them to be tracking their expenses and using it as a small business but this is this is a pit stop along the way where i really want you if your business is going to grow now we set up a real entity and it could be an llc it could be a corp i don't know don't just think legalzooms got it down 75 dollars for an llc no no that may not be the right move i want you to think and to have a plan and go and click in a butt do not have two full-time employees that all they do is fix my legalzoomanity.com and it's not that legal zoom's bad they're great they do a fantastic job is people calling up saying do this for me and they have no reason to know why so you want to know the why define you before you go set up an entity but you're going to have an entity now you get a tax id number or an ein that's specific to your entity and you have to get a new one when you set up an llc or corporation now you have your company bank account you still might just dedicate a credit card that's your capital one say that's my business card you don't have to have a card in the company name and you're going to start tracking expenses and just like zuckerberg did in the movie social network when they opened facebook up in his dorm room remember he went to his partner and he said hey ed was it eduardo i think it was he goes we need some money call your dad and they drop some money in their business bank account that's okay that's okay that's how it works so you're gonna put some money in your freaking business account and you're gonna start sales i want you to get a venmo i want you to get a square account i want you to take money from people make it easy for people to buy your stuff it shocks me how many times people set up a business i'm like okay i'd like to pay you oh write me a check no who writes checks anymore what planet are you on pluto no make it easy for people to venmo your money square you should be able to swipe cards take money sell people you're going to get your website going at this point you're going to get your shopping cart going and you're whether you're even just selling services maybe you're a consultant can they make an appointment on your website in your schedule and pay for in advance before you even pick up the phone they can when they call my law firm that's what you want efficiency so step one is just deciding does this idea make sense and is it gonna make money and if it is let's go to phase two and start opening the doors for business getting our logo getting our website getting our bank account maybe setting up an entity getting our quickbooks going tracking our expenses going out there and selling our stuff i love in the movie joy when what's her name that's the actress in that jennifer lawrence and joy she's out there and she's in the parking lot of freaking walmart selling her mop i get even emotional see watching that scene it is so awesome and the walmart security comes out as it comes out just get away get out of here like shooting away like a dog and and she was just trying to make some money but she was testing out her product she was selling it she was trying to make her business get off the ground that's stage two and some of you with this coveted thing you're home you're out of work you're collecting unemployment and you're seeing august coming down like a train down a tunnel and you're like holy crap what am i gonna do when 38 million americans are going to start popping off unemployment next month what are you going to do are you starting a business right now at home you're starting to make some money on the side you better you're going to regret it if you don't so i'm going to answer your questions that's step one and two that's my workbook that's what i teach i've got hours upon hours of crap in here a business plan a strap plan a marketing plan i've got a weekly podcast a weekly newsletter weekly blogs a weekly podcast on thursday afternoons i'm here for you we're doing our best as our team and if you call and need a console yeah you're going to pay but we're affordable we're not a big huge firm and i love entrepreneur ryan shea and his team and entrepreneur they take care of me i take care of them i wouldn't be here on entrepreneurs facebook without their implicit trust that i'm not going to get on here and say something stupid and crazy and i don't i'm looking out for you guys we're not going to rip you off so kevin i got kevin on the line where so what are we doing jack what's kevin's question our taxes we put real estate professional how do we show proof of the 750 hours okay cool kevin says on our tax return by the way can you grab me a bottle of water somewhere and if you run behind the camera here it's all right it's all good okay kevin says where's kevin from did he tell us to kevin from duluth minnesota appreciate that kevin thanks for the love all right okay so kevin says that he on the tax return checked the box that they're a real estate professional now that's a 467 af6 election i think i'm trying to quote tax code but that election to be a real estate professional allows kevin this and everybody just check this out this is pretty cool and for those of you that are making millions and you're just watching this going who's this color crazy guy and i got clients that are freaking so successful and they learn something every time i try to open my mouth and say something smart it works out here's your trifecta here's your trifecta this is your family trust down here this is your llc and this is your operations your corp we got kevin on the line kevin is probably i'm going to make some assumptions if he's a real estate professional he better not have a day job he's doing real estate full time that means he's going to be a realtor or a fix and flipper or a contractor or a developer and he's in the business of real estate and he's got rentals over here and what kevin wants to do is take the losses from all the rentals because we're talking the big d and i don't mean dallas we're talking depreciation lots of losses on rentals even though you're growing in value and you're making money and you've got cash flow i know it kevin it's awesome right this is why rich people buy real estate because it makes sense my wealthy clients buy real estate i try to buy real estate because i've watched enough of my rich clients get richer so kevin's out there buying rental property and he's getting losses that come through on his tax return so down here on his 10 40 kevin starts to say and it says we so i think he's married i'm just going to go with that kevin says yeah we got it my wife has a w-2 or i have a w-2 or we've got this small business with the k-1 and blah blah blah and he's got all these operations that are making money and what's kevin want he wants write-offs so he checks the box on turbo tax i'm a real estate professional okay that's cool what happens all these losses come over here and they reduce his taxable income and he saves taxes big time we're talking even possible refunds and it looks sexy and kevin's click the box on turbo ding ding ding uncheck the box that's what i see clients do they're gonna cry or they check the box i get a refund okay i'm going to do it now to do this your primary occupation has to be in real estate if kevin is a pharmacist even 20 hours a week and he has three rentals it ain't happening what what are yours your primary occupation now if kevin's spouse qualifies cool they both qualify but number one test is it's got to be your primary occupation then you've got to do 70 150 hours of doing real estate so okay are you a realtor you're gonna knock that out in the first three months that's 13 hours a week as a realtor you're going to do that by tuesday you're a contractor a developer fix and flip your chip and joanna down in waco on fixer-upper i don't know what are you doing oh you've got 35 rental properties and that's all you do okay cool you got two rental properties and you're a full-time dentist um no not happening well i did 750 hours doesn't matter full-time occupation 750 hours 13 hours a week we're talking fixing the rental cleaning the rental painting the rental talking to your tenants showing the rental uh doing the bookkeeping for it showing properties making offers on properties managing the properties you don't have to spend 750 hours doing the rentals you have to just do 750 hours doing real estate then there's seven subtests that show that you're materially participating here if anything that's a third test that you materially participate i've been across the table with irs agents and fought this out i've won this in fact every time i fought with an irs agent on this topic i've won and i love it and the irs agents are like okay i get it and most irs agents are very smart and wonderful people some are just pissed off of the world and that's why they work at the irs but you can do this this is very common kevin so i don't know if i get a review from a licensed cpa that knows this crap or if you're just checking the box on turbo tax watch out be careful all right what do we got maria who's our next caller question is what is the best way to claim 20k and start up the expense and what irs form do i use for that okay alejandro oh sorry alejandra sorry i thought i was doing pretty well there for a minute that i missed the aro at the end maria my assistant speaks spanish so i have no luck at all pronouncing it properly alejandra from colorado springs colorado okay alejandra says she has startup costs of 20 000 and she wants to write them off okay let's go through the several options here let's go back to our trifecta so we've got our trust let's say we've got an ira over here or 401k in my ira and 401k they have an llc then i've got an llc over here with a little project rentals owned by my trust my trust owns my home this is my primary then my trust owns my s corp over here or maybe i'm an llc waiting to become an s corp all right see if i was doing a consult with alejandra i'd be like where's your business is it rental business is it an operational business what are you doing and she says i have startup costs of 20 grand is that a piece of equipment is it education is it training is it a product or inventory i don't know what could what could all hunters spend it on that's going to play a big role in the decision here of where to write it off but here's the biggest point i want to make for everybody when you're in startup mode i'll use the lemonade stand example i'm going to go out and open a lemonade head stand right here on main street america i'm in one of the smallest towns in america out here and i love it do i rode my four-wheeler here today for my little broadcast how how white trash is that i know but i love it i do not care i make a lot more money than a lot of people in this little town and other places but i just love to ride my lawn mower like little forrest gump and live in the middle of nowhere and then my brain works better and i come up with great ideas to share with you anyway so alejandra i'm going to go out here to main street america i'm going to open up a little lemonade stand and i go by my eyes and my sugar and my blood will buy my cups i'm in storage mode i spend 20 grand i even go to country time lemonade school and i spend 15 grand over there and i learn how to be the best lemonade stand owner in the country you're in startup mode till you sell your first cup of lemonade people so all those costs in alejandra had 20 grand of them until she sells her first cup of lemonade she is in start up mode so that 20 grand the general rule is she can write once she sells one cup of lemonade she can write off five grand the other 15 goes into a bucket and that 15 grand is written off over 15 years it's called amortization amortized but if she ends the business soon she can write it off all at once at that point and she'll get a great write-off someday the point is alejandra you'll get to write it off you may just not get to write it off as fast as you want so the first rule is five grand fifteen thousand of the remaining twenty would be amortized over fifteen years the fifteen don't be deceived here people this fifteen has nothing to do with this fifteen this could be 45 grand it's still 15 years so it's 15-year amortization on startup cost now a lot of people i'm going to share a little example they could be watching this facebook live today i don't know and i and i'm not mocking them or whatever i had some clients a little upset about three weeks ago and they're they're great clients um and we did their tax return and we said you can't write off this whole 20 grand at once you only made like a thousand dollars and you're gonna get audited you can't write the whole thing off we gave them their tax returns they went to turbo tax did it themselves wrote the whole thing off got a big old refund and said we're bad and said mark you cheated us you said we could save taxes and we didn't die and it's sad because it's a startup cost problem and i'm just a messenger this is how it works now if these clients had went out and made a hundred grand in the first year and i could write this off in some other way than startup and it was incurred bef during the time they were making money and there were several variables that could play into this i might have been able to write it off faster all at once but in their example i couldn't and they were really upset and they're like why are we paying for a tax return we could just check the box so just because you can check the box that you're a real estate professional on turbo tax or check the box that it's not startup cost it's all at once and that little corner but you know a little number up in the corner goes ding ding ding and you get a huge refund don't be tempted if you get audited all hell breaks loose so this is how it works now can you write off professional training not as a startup cost for 20 grand all in one shot yes if you're already in business and you're paying for training in your business this could be a great expense it could be continuing education i don't know if i'd use the word education and alejandra there's no form for this there's no form it's putting it down as another expense and making sure you use the right verbiage and if you're playing around with 20 grand on turbotax you're playing with fire girl get a get a a consult with a tax person that knows what they're doing the other way that you might be able to do this and i put continuing education because you already have a business and it's education that helps your business another option it's a piece of equipment and you can use what's called 179 deduction or bonus depreciation i might be able to write this whole thing off in one shot if it's inventory did you do just in time inventory and you sold everything or did you have inventory left at the end of the year we might be able to write off a good chunk of it too so it's going to depend on alejandra's business what the money was spent on and how much money she made this year and what her plans are moving forward and blah blah blah so lots of options okay ali do we have someone online oh sorry what do we got jack anybody more questions mike in houston texas you're running your small business what can i do for you tax and legal people tax and legal questions i'm free right now i'm all yours okay so mike says what is the benefit of an llc i'm currently a sole proprietor okay back to our trifecta so mike if he's an uh a sole proprietor think about this he could be a sole proprietor landscaper or a consultant or an engineer he could be professional services um he could be doing all sorts of businesses as a sole proprietor this is operational income or he could be doing a rental property that's a business too and that's a sole proprietor we report this on a schedule e on your 1040 report this on a schedule c on your 1040. so we have these two options so when mike gets on the phone with me again people facebook you're running youtube or facebook facebook any questions people write them down here i'm for you these are a sole proprietorship even though it's rentals this is operational business and both are considered sole proprietors for the in in concept here and if i get an llc the only real benefit well i'm not whoa i'm not gonna say only the number one benefit of doing an llc mic is you get protection so if your business there's any possibility of a lawsuit against you personally the llc could be a good choice now if you're just selling jeans on ebay at night i'm not going to care about it if you're just consulting giving people advice on how to do infusionsoft online at night i'm not going to care about it but if you're out selling tacos in a food truck or running a bungee jumping school or skydiving training you're gonna have a problem you could get sued so this llc here could give you great asset protection if you have tenants and you have rental property i want protection from your tenants that's a no-brainer so an llc would give you protection a couple other things you can do mike some people say well why would i do an llc so number one is protection they don't save taxes an llc is not going to save you taxes mike but it gives us the chance to convert to an s corp retroactively so i can turn this into an s corp and backdate it where i can't do it unless i have an llc now some of you have a question on like mark what did you just say get over to youtube and type kohler llc or kohler s corp and i have a video that's titled when do i convert an llc to an s corp it's a great video please check it out the next thing that you can do is start building corporate credit and you can build corporate credit with an llc so you're going to get a tax id number and you can start getting a paydex score get a dun and bradstreet number that could be very helpful i have a lot of clients that want to build corporate credit the next thing you can do is can make you look more legit you've got an official entity and you have the llc name acronym behind your business name so these are the probably the top four reasons mike why you might set up an llc but i don't know what type of business you have how much money you're making now if you're making more than 30 or 40 grand a year i don't even want you to be an llc i got to get you over to an s corp as soon as possible because you're paying self-employment tax out the wazoo and so get over and watch a couple of my videos they're five minutes long ten minutes most on youtube and just type kohler s corp or kohler llc you'll love it all right next question natalia from florida i got an escort with four people i also set up a mentioned company to pay my kids which ira is better to start for my three kids under 18. traditional or raw management companies as a solo llc okay i love it natalia down in florida and she's doing some good stuff she may have been at my miami workshop last year that could be so natalia i love where you're going with this so natalia has a what we call this is the trifecta we're going to take it to another level we've got our little trust down here now for those of you that make tons of money and you're like mark wow me natalia is opening the door to that i'm going to do my best here natalia has what we call a little family management company and it's a sole proprietorship how many kids did you say she had four of them or was it four partners four people and three kids three kids three kids under age 18 and then she had a llc with three other partners okay so she has an llc with three partners and then natalya is the owner down here of her business now we don't know what this business is and that's okay it doesn't matter but why we use this little family management company is she struck a deal uh with her partners that they're gonna 10.99 her little family management company for certain services now this is very common when i've got an llc with multiple partners each partner might be their own s corp or individual and the goal with this llc and that's a great structure in natalia is i can be very flexible so this partner natalia says i got kids i want to write off and they go well we're not going to write them off at the llc but you know what we'll do we'll give you five grand we'll give all the partners five grand for some different things we'll take a ride off up here and then you can do whatever the freak you want with your five grand natalia's like that's great in fact let's make it six grand six grand we give each partner six grand there's four partners and they each get six grand now we're going to write that off as a management fee at the llc level and now we've got this ordinary income down here and we worry about that i don't want self-employment tax but for natalia she doesn't have a problem she's got a little family management company that helps support the business she's got three employees of that business and so we can bring in six grand of income write off six grand in expenses she has zero taxable income she just got six grand funneled to her kids legitimately honestly and effectively and now six grands down to the children who are helping in the business i always want to make sure that's legit and they can get paid this much and we could support that now the kids each have earned income of two grand well the beauty of that is these kids don't do tax returns when they're under age eighteen until this year they make twelve thousand four hundred dollars they don't have to do a tax return this is a schedule c with zero taxable income the llc got a write-off for six grand oh my gosh and it gets better because here's natalia's question she goes now that my kids all have two grand i want to open up what what type of ira oh where's that paperwork can you hand me that paperwork i gave you to go over with what's funny is this is i'm just going to be uh totally transparent here but right before i walked in and we jumped in the studio here look at this these are ira contribution forms i got a whole stack of them that's kind of weird mark why would you have a big stack of ira contribution forms and i'll tell you to answer your question to tell you natalia said what's the best ira to use for my kids it is a roth ira and i will argue that all freaking day long and here's why that two grand now goes into three roths for the three kids we've got three roth iras two grand two grand two grand natalya got a tax write-off for paying her kids paid zero tax her kids paid zero tax and she funded three roth iras this is a contribution form directed ira and i want to tell everybody that such a simple system you can do it at home online at night it's so streamlined directed ira.com go to the new contribution forms pull down menu and um set up a roth ira for your kids you can be making a contribution within days this form is where's the money coming from so you have to do the application first you can do it online and then two three days later you're ready to put money in via wire via check what and where are we putting it so you can get that money into the accounts really quick so now you've got these roth iras now why i like them for the kids is this two grand can come out tax free for college no penalty no tax when the kids are ready for college just pull it out done anytime but the earnings grow tax free not tax deferred tax-free you want to get your mind blown go over to dave ramsey's video which i love and go over go to youtube and just search i'm going to give you two videos to watch i want you to watch dave ramsey's compound the power of compound interest you go watch that video it's four minutes long make your kids watch it i make all my college students watching my family's watched it 10 times all sorts of times i've watched it a hundred times then you're gonna go watch my video and you're gonna search for mark kohler 1 million dollar ira roth ira my video is like 10 minutes long you watch these two videos one and two it's going to show you that this roth ira how quickly it can become a tax-free atm of a million dollars for your kids to help teach them the principle of saving and life you'll change america this is huge these roth iras in my situation kids family these roth iras are creating an llc and the cell level c is going out and doing business we're talking about buying into a little restaurant flipping some cars or trucks doing real estate selling jeans on ebay doing a uh a hair salon that's what i want to do as a barber shop we can do all these businesses right here my roth ira if it's not making 20 a year i'm doing something wrong i know that sounds great i get to hate i get some serious hate mail on this little video you gotta go down in the comments oh my gosh people are going ballistic a million dollar roth ira and i say you can get a 12 or 15 percent return they think i'm a heretic they want to burn me at the stake if my clients that are self-directing the roths aren't making at least 15 percent they're idiots i'm serious learn how to self-direct your ira so natalia you're going to set up roth iras go over to directed ira.com get them funded get them done boom bang let's form a new entity for your llc with your kids these forms are that easy everybody's off to the races and you're cranking all right what do we got john from where duluth minnesota gosh dawn you're killing me all right what is the recommended minimum ira balance contribution recommended to make the directed ira fees worth it okay john says mark that's a great idea but how much are the fees to do this is it worth it okay let's start out with how much can you put in and i'm going to do a lot of this from memory i don't have my little uh do i have a calendar here do you have all yours anybody have their calendar with them okay um this year you can do a roth ira of six grand or if you're at 50 or over you can do seven grand um if you want to do a 401k you're looking at 19 500 with the makeup of oh my gosh i think it's six it's five or six if you're over age 50 i think we can get this up to uh 24 5. i'm embarrassed some of you like mark you should know this there's a lot going on in my brain in a project like this so very very tricky we've got sep iras and health savings accounts and we've got regular iras so when um john in dallas thank you john says so i'm talking to you right thanks john um he says that the fees worth it now the reason why i'm pausing is because i'm a cheap guy my kids know that i try to be very frugal and i'll treat myself to stuff too but i i generally am trying to be pretty frugal and so the common fees annually for any of these accounts are going to be around 300 bucks so you've got to have an annual fee of around 300 bucks now here's the beauty of this people there's no stock brokers in the mix there's no one taking a percentage there's no percentage at all coming out it's just a flat fee of 300 bucks a year approximately so you may say well mark in natalia's example they're going to put in 2 grand and i got to keep a minimum balance of a couple hundred bucks and then 30 yeah you know this that's crazy the fees are too much well a couple thoughts first of all you can pay for these fees separately from the account so this 300 a year does not have to come out of the roth you can pay that fee so that allows you to keep a bigger balance in your account next it's not about just contributing natalia's two or three grand for her kids this year it's also rollovers because you might have an old 401k an old roth or something and so when you're ready to build this bucket you may say well 300 fee for this small amount isn't worth it well you can roll over money and start building up your bucket that way and the reality is this let me say it this way i like your question john let's say natalia does this she's got two grand she pays for the minimum balance or the fees or she gets works around all that she's got two grand well it's really two grand times three john so now she's got six grand to work with she might do a bridge loan for someone she might do a buy i was talking to a friend today literally at lunch that is buying a dump truck and then going to lease it out to some of the construction companies in town and his rate of return is going to be around 20 now maybe he there's a loan maybe it's seller financing he buys a used truck his ira this little llc might be able to buy a truck and i won't even try and draw a truck okay but you can do so there's so much you could do with this so let's say you go well mark the fees are too much i'm going to put 2k in my ameritrade account all right what do you think you're going to get in the next two years six percent average if you're lucky maybe seven probably five let's say five to seven percent rate of return or you can pay the three hundred dollar fee out of your own pocket take the two grand pool it with some other iras now i've got six grand or more because remember you could roll in mom's ira dad's ira grandma's ira we could build an llc with 15 to 20 grand really quick and go out and get 20 percent 20 percent on 2 grand is 400 bucks ooh five percent on two grand is 100 bucks oh boy my math this is sweet okay check out this math okay two grand john you're gonna love this say i've got two thousand dollars and i've got one at ameritrade and i'm just buying and selling tr stocks and i got another two grand at a directed ira and i'm going to go out and self-direct i get a 20 return pulling the money with other iras and an llc doing something that i know i can make a freaking 20 richer buying a mobile home go and buy a mobile home go and buy an rv and put it in a you can do that with your roth ira or i get five percent here i make a hundred bucks or i come out here and make 400 bucks oh but i got a 300 fee okay i'm back where i started it's break even interesting right so if i can get this money getting me a bigger rate of return and getting it growing faster the flat fee becomes irrelevant there's a tipping point maybe it's two grand maybe it's three grand maybe it's four grand i don't know but you're ready to return what's your plan all right anyway i hope that helps sean okay maria we got lydia last question where's she from lydia from duluth minnesota all right lydia what's your both short question and long term are there any tax saving strategies i can use to offset profits and what tax fund do i use and what tax okay so lydia says on her 1040 she has stock trading account and she's got short-term capital gains can you give me my phone can you get me my phone where to go anybody have my phone i got to make a call here while we're talking about this um so i'm going to get a good answer here for you so she's in here and she's got short-term capital gains and long-term capital gains this means she held the stock less than 12 months hey did you find out i'm on the live on youtube right now did you find out if um we can do an opportunity zone on short term capital gain okay i say my answer is no but i just want to confirm so when you're buying and selling stock short-term capital gain is at your ordinary rate whatever tax bracket you're in long-term capital gain thank you so much devon i'm talking to devin muns one of our amazing attorneys at the law offices of kkos lawyers that if you're lucky enough to have an appointment with he's amazing uh and he is looking up the rule on this because i want to give lydia the best answer possible did she tell us where she's from yet capital gains this means you held up more than 12 months this means you held it less than 12 months now let's say i call it devin because he just got a client that he was on a call today that's making some millions of dollars on some capital gain and they asked the same question lydia they said what are my tax saving strategies what could i do to save money on capital gain one of your only well i'm going to go through a number of options but the first one that's hot is what's called this opportunity zone okay do you have any answer yet okay we're gonna do it the rate that they would have paid on okay okay thank you devon we'll go with that for the show and tell people to verify thanks but okay he said that both ordinary rates and short long-term rates sorry short-term capital gain and ordinary rates and long-term capital gain at capital gain rates can both do what's called an opportunity zone now i've got an article on this lydia so you want to go over mark j kohler.com took a lot of research it's a crazy article go to my blog and then down there you're going to put in the search window opportunity zone you probably just could even put the word zone or opportunity it'll come up there's an article on this and what it does is say you any dollars you take i'm just going to summarize quickly let's say you have a hundred grand in capital gain if you go out and buy a rental property real estate a fixer-upper and try to improve an opportunity zone now what congress trump and the his administration did about five years ago with the tax cuts and jobs act it said you know what we're going to go out to the governors of 50 states they can choose areas and come up with 50 properties or 50 zones sorry not properties 50 zones that's 200 that's 2500 zones around the country and they get to choose these zones where we want to give investors a benefit on their tax return if they go out and take their capital gain and go out and rehabilitate an area and some of these areas aren't that bad um i'm going to just say one of these is like the west side of salt lake city so the governor said you know what we're trying to rehabilitate this side of the city and so investors if you go buy a building that fix it up a little bit and rehabilitate it we will defer that capital gain until 2028 so you don't have to pay any taxes for eight years now if you hold it at least it's either five years and then seven or seven then ten forgive me but if you hold it for a certain number of years you can get a you can wipe out ten percent of the capital gain if you hold it for another certain number of years you can get rid of it for up to 15 of the game and if you hold and then you still have to pay the tax but you reduce the amount of tax and you defer it then the cool part is if you hold this building at least 10 years when you sell it you never pay tax on the on the game so you get a deferral of your current tax bill a reduction in the tax bill the longer you hold it and then if you buy this property and continue to hold it as a rental you'll never pay tax when you sell it that is the opportunity zone if you want to get rid of capital gain this is the first thing we talked about in an attorney group text this morning this is what was on my text this morning was this strategy for a client with a million dollar capital gain that's not a bad idea uh the other idea if you haven't sold the pro sold the capital gains yet i really like is a charitable remainder trust get over to youtube and type charitable remainder trust kohler and just put my name in there and you're going to see a great little video on this basically you put the stock in a trust before you sell it and then when you sell it and yes we have the loudest dump truck in the neighborhood in this town right outside my door during my live broadcast i just love it but anyway so we've got this trust that sells the stock and pays no tax and then the money stays in this crt trust and kicks out cash flow to you so this is that's a pretty cool deal um what forms you use natalya the form when people ask that it scares the hell out of me because i actually think you're going to try and do this on your own tax return not a good idea this is what professionals are for this is like going to home depot saying how do i put in my own kitchen okay i can get going to home depot and maybe switching out your sink or changing out a p-trap or maybe putting tile on the floor but redoing your whole kitchen you're going to need a contractor you're going to jack this up the opportunity zone the chair remainder trust i can't even start to tell you the procedures but they're not terribly expensive and capital gain income is not a business so you can't take business deductions against it those are probably my too hot you cannot do a 1031 with a capital gain with stock it's not a business so you don't get business deductions you can't fund a 401k with capital gain sometimes we call it a backdoor 401k i'll give you one last idea so let's say you've got your stock gain over here let's do our trifecta so you got your trifecta and you've got the stock gain over here if you have a business again you have a business somewhere or if you take this stock gain and go buy real estate and then you hire yourself to run the property as a manager which normally you don't do unless you're trying to fund a 401k this is the back door to a 401k so you take your stock gain you do an opportunity zone you don't pay any tax you buy real estate you hire yourself before the end of the year give yourself a 10.99 which you would never normally do never never ever unless you're doing this strategy and let's say you 1099 yourself for 25 grand then you pay your fica issue yourself a w-2 and drop the whole thing in a 401k we wipe it out so i wipe out this 25 grand you get 20 grand in a 401k and uh times two if you're married get the kids in the mix like uh alejandra down in florida so i mean you can do all sorts of things that's the backdoor roth backdoor 401k anyway i hope that's helpful guys the purpose of this i usually have so many more questions um it's summertime some of you are coveted out or you're sweating in your house and trying to figure out what to do with your life people start that small business on the side develop it have something to fall back on this pandemic is far from over you need as many sources of income as you can find i know i may sound a little boring and crazy talking about tax and legal and llcs and corporations but that's what small business is all about please get over we're going to give away a book do we have the winner from last week or two weeks ago i don't know where it's at i give away a book every year is that it yeah yep all right here's our winner from last week this is chadwick martin from virginia won the tax and legal playbook so what we do when we get back to the office is uh allison here our marketing whiz i'm sorry she has so many titles right now she wants to shoot me so i don't know client resource management system manager and anyway allison's going to look at our viewers today and she is going to choose a winner and giveaway pardon share the video okay gotcha getting direction here for my team i'm going to give away the eight steps 99 value giving it away allison will be in touch with you she will choose a random winner of someone that shared this video so you've got to go out there and share this and she's going to look at all the shares and then she's going to draw your number or name out of a hat and if there's chocolates or flowers on her desk tomorrow you do have a better chance of winning i'm just saying that just throwing that out there okay so eight steps will go to a winner tomorrow but get over there check it out on my website get to amazon i just want to say the american dream is still alive and we live in an amazing country that can give you the chance to go out and make a buck honestly in doing something you love find it deal with it get excited about it i'll be back here next thursday at four o'clock live on youtube and facebook put it on your calendar also every week our podcast is refresh your wealth and you can sign up for my newsletter at my website mark j kohler.com when you sign up for my newsletter i have a free ebook 30 pages top 10 mistakes small business owners make that's free it comes directly to you and down below if you want to check the box you can say you know what mark i want to talk to one of your tax lawyers i need an hour i got to get my crap figured out check that box we'll call you that same day or the next day and make an appointment for you to get a once a year review of your business strategic plan and make sure you got the right entity and you're saving taxes be careful out there turbo tax is great legalzoom is great if you know what you're doing and if you don't get a little help along the way until you feel more confident and educated on these topics thanks everybody have a great weekend

Channel: Mark J Kohler

Views: 22,731

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Id: KV9TbizGPsQ

Length: 54min 57sec (3297 seconds)

Published: Thu Jul 23 2020