Accountant Q&A: Watch This If You HATE Taxes

we're hoping to help many many of you that are small business owners side hustles big hustles whatever you're hustling we're going to help you save money on taxes and protect it from criminals out there trying to steal it can I ride off an EV vehicle in which I also receed the EV credit for my vehicle the answer is yes my new CPA recently filed a paperwork for my PLC to be in es Corp in 24 so the old CPA got fired because James probably realized he should have been an escort for 4 years and it cost him tens thousands of dollars people this as very very common James Saw The Light got with the right account and they're Off to the Races welcome everybody to another episode of The Main Street business podcast I'm one of your co-hosts today my name is Mark Kohler I'm here with the illustrious Matt Sorenson author of the book the self-directed IRA handbook I hear a third edition is on the way third edition's on the way I got two other books in the work Mark has four books you know so I'm taking a break so I got to catch up yeah let me catch up for a second but we're just two cool dudes business and tax guys running our businesses helping clients across the country build their wealth save on taxes protect their assets so we have got your questions today this is the open Forum podcast these are our listeners questions and Mark and I have got some answers for you on them I don't know if they'll be any good oh come on I'm always trying they're going to be freaking awesome we're trying to be humble yeah yeah I'm trying to be humble set the expectations low so we can blow you away here um but make sure you always get over to Main busp podcast.com you can submit your questions there and those are the questions we're going to be fiing I've also got some from social that have came in um but before we get started I had a we had a comment on YouTube um this is from the talking board who said who's who I kind of like the pothead versus cokehead chemistry you guys have excellent topics as well thank you so uh yeah who's the cokehead and who's the poe head I think I'm the pothead and you're the coach my guess I don't know I'm like who's who I don't know which one I want to be so what you're saying is yeah I just whatever we got chemistry all right that's just thank you uh at the talking board yeah I mean I can I've seen two Poe heads together chich and Chong yes we've got um The Who Wayne's World Wayne's World yeah but you've never see a pie and a coad hang out they just don't jeel so that's weird usually kind of two different Vibes they are two different okay all right so we're going to jump into our questions today excited to be with you we're going try to keep this light as well we have an incredible team behind us of Main Street tax Pros around the country in our Network and tax holders again with in the estate asset protection wealth building uh tax planning realm that's where we're at we're lovers not Fighters okay first question I'm just going to hit this one real quick EV Vehicles this is from aent town says can I write off an EV vehicle in which I also receive the EV credit for my vehicle the answer is yes the credit is not tax able it's a tax credit against your taxable income if you qualify and you can still either write off mileage or actual rof tends to be a little bit better with actual when you come to an electric vehicle but that's good news I don't know lots of options Like rules of the table like when you're at a restaurant you know uh double dipping is usually not cool that's true sometimes you can get away with it tax you canp if you flip to the like you know the untouched portion you of the bread most people are like okay we'll allow that once yeah there's kind of kind of like a you know depends on the part of the country you're in where that's acceptable but um yeah this that's good news double dipping I was actually I'm pretty sure you could but I wasn't sure so we're good to go there and and it's hard I've got an article on my site Mark J ker.com every January I publish it on multiple ways to write off your auto vehicle for the year so I've got a 2024 updated article seven different options on ways you might want to ride off your vehicle so check that out out but the EV credit's cool all right next question was from veteran bidness uh says I'm a new listener and appreciate all you're doing to inform maxing tax and wealth planning and making it fun and fun and informative is a special gift I like it when they always butter us up before the question yeah yeah that's how you get your question out you know that's how we're going to read it you know you know let us feel good says my spous is my spouse is an author with a sole proprietorship for self-publishing marketing her books through online platforms I buy and sell antiques and collectibles both online and locally at a rented Antique Booth I get a W2 for my day job and also military retirement Rec created a a a member managed LLC yes I know mistake should be manager managed but that's okay we can always fix it in December and we're both 50/50 owners and this is where all the businesses come into the same LLC what his wife's doing what he's doing when forming the LLC I did not elect escorp all right we'll come back to that might not matter although both companies sold inventory last year no profit was made am I still on the hook for self-employment taex so right now what's happening veteran business is as husband and wife this is going to flow onto Schedule C on your tax return I presume when you set up the LLC or got your tax ID you said your sole proprietorship sometimes you could have done partnership because you it is husband wife and you are 5050 that's possible I'm presuming you did sole proprietorship it's flowing onto your schedule seat now all that income coming through from your antique business stuff your wife's book an author business flowing on to your schedule C against all the expenses and at the end of the day you got a zero or a net or loss there's no self-employment tax to pay self-employment tax on Schedule C is only on your net income that's why we recommend once your net income is 40,000 50,000 or more once you're in that little range of 40 to 50K net after all the expenses we want to set up an escorp because that's when you have self-employment tax 15% the the self-employment tax is hitting on that 40 to 50K by doing an escorp you get to minimize that and the tax savings pay off but if you're if you're at a loss you're at zero here you're not paying self-employment tax on anything so no reason to use the S corporation the tax savings aren't going to matter so a lot of people that have a side hustle and maybe you're making 10 20K a year you got your main job or other source of income or spouse and it's just 10 20K a year just do it out of the LLC no reason to add an S selection to it add all the additional paperwork and tax filings you got to do keep it simple but if you're at 40 to 50K or more net income the es Corp lets you save taxes on that self-employment tax so just pay attention to that veteran business as your business grows hopefully you're going to start making profit in it and uh once you're at that 40 50k net give us a call we can help and we just add the selection to this LLC when you need it all right great answer Matt love it uh this is GI doc uh I was thinking of Kramer in uh Seinfeld with his doctor that had the personalized plate asman asman what kind of doctor are you I'm an ass man um anyway good Proctologist oh my gosh so question here from G do I elected escorp taxation status in early 2023 and did not realize that the IRS would subsequently send me a new Ein for the escort it's very odd GI dog as well but rather I thought I would continue to operate my business under the same Ein that I had been using for my soulle prop LLC that's correct I began to pay quarterly estimated taxes and made monthly federal tax under my initial Ein good job but then realized this could be a problem once SS ultimately sent me a new Ein for the escort trying to determine how to figure this out as it seems I may have been may have paid taxes on behalf of the old wrong Ein I've written to the IRS asking them for them to allow me to use my original EI in from es and not the new one they sent me but I've have not heard back don't hold your breath on that letter GI doc okay um GI dog I am glad you called and I'm glad you're being you're taking the bull by the horns and you're hand trying to handle this yourself but let me just give a little example here I'm working on a little Airbnb and literally as of right this moment trying to solve a plumbing problem with a sink that I tried to deal with GI doc I thought I can do this I can go to Home Depot and Lowe's I'm a Lowe's Pro I have a bumper Low's Pro congratulations come to find out they just give those out to anybody did you know that any idiot who spends 100 bucks no qualifications necessary so I'm trying to figure out the sync problem and thought I need to turn to a plumber and so GI do I'm glad you've reached out because you're trying to play accountant and lawyer and you would hope that the IRS tax code would allow a normal taxpayer to deal with it but g doc you've got to get some help so first of all if you're a client of mine we would ask for for power of attorney and in 2 minutes call the IRS on a practitioner hotline which I was on hold with the IRS for a total of 60 seconds last time I called got a great IRS agent solved my client's problem within a half hour and everybody was Off to the Races sending the IRS letters people is not your best use of your time and getting results there's a practitioner hotline use a tax Pro that can call the IRS on your behalf you can get one on my website marching.com we have a network of hundreds of tax Pros certified under our training strategies or your tax lawyer one of our tax lawyers could do it so first and foremost this is not a letter writing campaign next do not use the new Ein you do you should use the Ein in fact I'm going to just say this you got to go to your 2553 which is your S election that apparently you say you elected and you got an an S elction acceptance letter I'm hoping see those match up you got an application on the 2553 you got an accept acceptance letter the Ein on the 2553 should match the Ein on the acceptance letter I've never seen the IRS kick out a new tax ID number unless you filled out a form maybe you shouldn't have filled out also you should have filled out the 8832 and mailed that off with the 2553 so J do I appreciate you trying to do this on your own but stick to being a doctor let the tax lawyers and tax accountants do their job and you got to get someone in here to call the IRS and just get this resolved you should stick with the original Ein confirm you got the status when you thought you got it under the right Ein by simply calling the practitioner hotline through a professional I hate to say it that way but that's going to be your easiest go yeah I mean one of the um nice greatest pieces of wisdom one can learn is when to DIY something and when to have a professional do it yeah it's a lifelong lesson for me and I think that the older and older I get and the more and more wise I get the less and less DIY I do yeah all right Karen's got a great question here says hi guys love you both oh thank you thank you we're a package deal Karen who thought you could have fun while while binging tax videos in podcasts my husband and his friends are creators of a podcast they've been releasing episodes since May of 2023 they have over 50 episodes and are approaching 4,000 downloads that's awesome great good job this isn't one of those businesses you're always telling us you've got to sell lemonade to qualify as a business they aren't sponsored or mzed or have any affiliate programs oh should they have a hobby keep going that's where this is going we saw this one coming down like a train on the tracks I can see this train coming I know where your question's going Karen says we estimate it may take a couple more years before that happens in the meantime they do have expenses for hosting fees equipment and travel and they love to travel to locations and record and have commuting is this a wife complaining about her husband's hobby expenses exactly that's where we're going okay husband's like don't worry babe it's all right off she's like I don't think so I'm call Mark speaking of podcast I listen to one and they're like um at what point can you take to the tax guy and say this is a side hustle and add this to schedule C or wherever it should be reported thanks for all you do okay Karen great question yeah uh who's GNA be good cop who's going to be bad cop coin I'm just gonna hit it to you straight I'll be bad cop okay I'm going to hit it to you I'll give you some love here after mat done with Karen by the way in the office I traditionally am bad C and Mark is good cop okay fair enough fair enough I I'll give you that most of the time I still a bad cop when I need to be yeah I mean I'm just going to cut to the chase these expenses are not deductible you are not going to take these anywhere okay and now Mark's got some good cop coming don't worry I'm going to leave that um because you have not made any income this is a hobby they're having fun they're doing podcasts they might have a future expectation of making money and you're going to get some Revenue you're going to get some sponsors you're going to get some affili income but that hasn't happened and so these are not deductible expenses no and I Karen here's an important question at any point in the filming of this podcast where they sitting on a bass fishing boat I have a feeling these guys this is cover for a different hobby right we're out recording the podcast babe but she can check she can check was there something actually uploaded yeah yeah you know where were you I hear a train in the background okay anyway okay so Karen I want to give you the good news this is a great opportunity to help using this term loosely I don't know where you're at in your relationship there but coach and train and help these guys catch the vision that their little project needs to be monetized make them watch the show social network where Zuckerberg in the show had to come to a realization that his little dream of Facebook being a fun little get popular app had to actually make money and so these guys have to figure out how to monetize and podcast can get monetized usually the podcast is a lost leader for the service or product they're providing as they talk about it on the podcast so maybe talk to them about their funnel what's their overall goals what business do they want to make but it's not a business till they bring in money yeah and yeah and and it's not a business in and of itself and most podcasts aren't I mean maybe like Joe Rogan is you know or like some of these big ones where they have a lot of sponsors and stuff but you know a lot of podcasts like even I'd say are is like you know the business is like we have a law firm like this is an expense in that we have all these other companies that help support this and we you know all the expenses and costs we incur for that are part of it so the podcast itself doesn't have to have sponsorship or something it's selling but some of them needs to have a business where it makes sense as a marketing funnel and lead genen for the business you could they could be into fishing I don't know what podcast this is it could be a podcast about fishing and they happen to have a an outfit fter or they do fishing tours and stuff that's a business all right and that the podcast isn't writing it off you're writing this expense off in the you know the the fishing business or whatever you're selling and it's an expense over there for marketing so that might just be another tip there I'm trying to throw some good cop in myself and and I want to give everybody one last reality check because it is so exciting to see all these different influencers podcasters making big money with ad revenue on Tik Tok to Instagram to Facebook please know that is very rare for every 10,000 people posting on Facebook one might be making money it's it's very very challenging to hit the thresholds of views watch time subscribers on all these different platforms and to help them monetize it's so important to have a funnel where you could make money at but it's it's leading to a greater product or cause for example Matt and I last year we were ranked in the top 5% of all podcasts and top 1% for business podcast yeah top one and um how much money would we make off our podcast dozens of dollars dozens dozens doz now we could monetize we have people that want to advertise and stuff but yeah yeah we're working on it I mean we are trying to work a deal with Viagra and Rockstar we thought it would be very appropriate taxfree growth and deductible energy drinks it not touching that one okay all right stay away from that one all right so next question this is from LNS 11 11124 hey Mark and Matt on January 1st 2024 I rolled 5,000 of my 11,000 rollover Ira into a Roth okay now let's correct some of the ver a lot of people say roll over yeah a rollover for everybody out there is a traditional IRA meaning Lauren had a old 401K and she rolled it into a traditional IRA so in her Minds it's a rollover Ira better yet from now on Lauren call that the traditional which you come to later in your comments then she said everybody I rolled 5,000 of my 11 into a Roth not the right term you because you want these terms people cuz when you start talking to professionals they can get twisted around and give you bad advice if you use the wrong terms so you didn't roll your 5,000 you converted so you had an old rollover traditional IRA and you converted 5,000 to Roth so there's the right way to say that everybody practice that this is money that has been there for years some a some after tax and some pre-tax from an A previous employer so what she's saying there is of that 11,000 six of it was still needed to be or no six of it was Roth to begin with or after tax and five of it was pre-tax so she kind of had the math there see 5,000 of the 11 had to get converted I do not need do I need to worry about this on my taxes for this year or can I pay it next year you actually are not going to pay the tax on that conversion until the spring of 20125 because you did the conversion in 24 the tax is not due for another 12 or 13 months Lauren good stuff quick other question or two and I'm going to just summarize these per the pro rule it was my understanding if I were to add money in 2023 for the purpose of rolling into a Roth on day two I would have to pay a portion of tax on this money um and split it proportionally la la la la she's getting into the back door Roth yeah she's talking about the back door Roth where some of you may contribute to a traditional and then turn around and convert to Roth when you do that Lauren there's no tax because you never got a deduction for it so if you have if you put money in a traditional and convert to Roth on day two in 2023 there's no extra tax or penalty or anything it's just you're taking money you already have in the bank that you've already paid tax on so but everybody her old money that was sitting there that she had got a deduction for or on a W2 that's what she needed to pay tax on so they're two different situations last thing is she says it sounds like the smartest goal is to keep the smallest balance in my traditional and grow my WTH and that is correct Lauren the more you can convert convert convert contribute back to a Roth contribute back door a Roth the sooner you'll be living taxfree for the rest of your life yeah so what what I would say Lauren in your situation CU you have this little bit of traditional dollars you have a little bit of Roth dollars just convert the whole rest of those traditional IRA dollars to Roth then every year when you do the back or Roth IRA which you can do 7,000 a year now a non-deductible contribution you don't take a deduction then you convert it to Roth that's the backdoor Roth IRA we've got entire podcast episodes on I got videos on it lots of resources at directed ira.com we have a backdor Roth IRA account specific for this and a team that understands it so but the pr rule is something that only matters if you have traditional dollars now if someone had like 400 Grand of that this matters but you got like six just convert the whole rest of it to ro yes there's a little bit of tax on the six but it's not a lot you don't have to worry about the pro rule okay I got a question question for you Matt I'll pose it to you yeah this is a good one I don't know the I 403bs always throw me off so Tama says I have a 403b and 401K at Vanguard for my former employer I would like to retain the money in retirement account and build real estate is there a way to use this money that is just sitting in order to purchase properties oh I do own a home which I want to rent out and paying on three land plots I want to pass this estate to my children I I do own a home I do have an estate plan trust LLC uh what will cover me da d da for tax paying so her question all this other stuff does not matter to the 403b and 401K question but T good job s you sound very organized so Matt how do you put 403b and 401K from a former employer all in an IRA and bu real estate is that hard to do not hard to do if you're using directed Ira yeah so that's our company direct at Ira where we help clients use their old 401k or 403b to roll to a self directed Ira to invest in real estate and so the 403b is kind of like a government or sometimes a nonprofit 401K but it's traditional dollars typically and it's just like a traditional 401K so you can roll both of those buckets of money the 403b and the 401K to a traditional IRA at directed Ira which can be self-directed and then that self-directed Ira can go and start an LLC that can go by real estate we have that's the IR LLC or that it could buy real estate directly from the Ira but now you could go buy the rental property or flip it or buy land or whatever real estate investment you want to do now your existing real estate you own or land you already own that's not going to get in the mix you can own that and still have that personally but you're not selling that real estate to your IRA you just want to make sure you get that right so absolutely you can use that retirement account dollars there's no tax there's no penalty to roll it to an IRA it's still a qualified retirement account it's just at an IRA now not a 401k or 403b but that Ira can own real estate you can invest and start growing the account through real estate investing as opposed to mutual funds or stocks or ETFs or whatever you might be doing it at Vanguard right now so but I would say t Mica is get a call with the law firm get to kqs lawyers.com book a call we can help advise you on this we can help with the accountant directed Ira sounds like you need an LLC an estate plan some tax strategy that's all what we're doing every day you are the perfect client for us because we are exactly in your lane of all the stuff you're trying to do we are doing this every every day helping clients across the country love it okay question from IOP on dining so of course I'm going to go straight to IHOP okay because I I like IHOP through waffles they're fantastic uh to take the 50% dining expense do I have to pay for the other individual's meal or can I just pay for myself and deduct it also can I take 50% when my spouse and I go out and talk business over a meal or even with my business partner can I write that off so I cop if you ask me to a business meal and you make me pay that's right oh my gosh I yeah I'm going selling who at this meeting yeah who's yeah who's paying for what so if you go dutch some of you may know that term that's an older term of art that if you go out to dinner with someone you say let's go dutch so everybody pays for their own meal IOP you still get the ride off because you're paying for your meal at a business meeting whether you pay for your person with you or not doesn't matter so any food that you pay for for in that business discussion now keep in mind everybody that traveling if IOP is on the road traveling for business IOP can write off the food by himself 50% of it for traveling for on business trips that's in my article on travel which is a new article just in the last month on my blog so get over and check that out I update that one every year for travel and dining then can I take 50% when my spouse and I go out to dinner yes but you want to be careful what I've done is when I go out to a nice meal like steak dinner kind of a nicer meal of course we're going to talk business that's the meal I write off I'm not going to say you know write off Little Caesars on the way home and just abuse the fact oh we talked business at dinner while we watch Monday Night Football okay now let's then you pigs get fat Hogs get slaughtered so don't be too greedy I love Little Caesars that's a throwback little you don't like Little Caesars I do like little the crazy bread the crazy bread and the crazy sauce now we're talk crazy yeah now we're talk okay so you're good everybody all right Jody's got a great question says does the cost basis of real estate ever change upon death when held in a trust I've always heard defer defer defer die when it comes to passing real estate onto your children wondering how having it in a revocable trust changes that great news for you jod it does not change anything does not okay that step up and basis that your family gets your heirs let's say your kids and you pass on this real estate you bought it for 100 grand and it's worth a million now that $900,000 of gain when your kids get the property evaporates they get basis at a million even if the property is owned in your trust so now they can sell it next month after you pass for a million bucks zero tax that is called Step Up in basis it is not affected by having a revocable living trust it's a great tax strategy dying and passing on real estate to your loved ones we don't get a lot of takers on it but that is a great strategy honestly of the wealthy own real estate build the portfolio maybe pull out debt on it if you need it in retirement but don't sell the property then when you pass away your heirs get all that appreciation tax-free they can sell it no tax love it James asks Mark and Matt love your content I have had a pllc for about 5 years that I use for providing independent contractor anesthesia Services a pllc everybody is a professional limited liability company I have a professional Corp you can have plc's plc's blah blah blah but the point is it's it's a professional designation no big deal everybody okay my new CPA recently filed the paperwork for my pllc to file as an es Corp for 2024 now notice some key words in here first of all an anesthesiologist that's had an escorp for 5 years they better be making more than 50 Grand a year or you really failed in medical school and notice the next thing my new CPA recently filed a paperwork for my PLC to be an escorp in 24 so the old CPA got fired because James probably realized he should have been an escort for four years and it cost him tens of thousands of dollars people this is very very common James Saw The Light got with the right accountant and they're Off to the Races now his question is does this mean that I now have an ESC Corp with its own EI that I can use to start or own other llc's or does the situation mean that only my l c as to files in escorp now would love to have your feedback okay kind of unique question here no offense James does this mean that I now have an escorp with its own Ein yes you have an LLC with an EIN that has not changed but you're now an es Corp so yes the way it's phrased I just want you to know your EIN is not changed and yes you're now taxes in es Corp next he says that I can use to start or own other llc's yes you could but only operational deals so like say you're going to take your escorp and partner in a operation at a surgery center perfect or you're going to go on a speaking circuit set up an LLC for speaking or a book but you're not going to form llc's for rental properties or Investments with that es Corp so just keep that in mind that ESC Corp of yours can yes own subsidiaries llc's but make sure they're operational and then the last thing does this mean that only my LLC is able to file as an escort now well anything you own 100% of is going to be considered as part of a Consolidated es Corp and you wouldn't want to have more than one es Corp in your life but to say it's your only LLC that it would be an es Corp I mean you could add other es Corps down the road but stick with one for now and build upon it in an operation I would really recommend you're making sure you got a trifecta design and you're working with your accountant and your tax or legal lawyer that's doing asset protection you could work with one of our lawyers do a review get a trifecta have your account and join the call make sure you're all on the same page cuz you want that three-legged stool you want your financial plan your law plan and your accountant all on the same page and we're trying to teach that in our tax Pro Network so uh you're heading the right direction James yeah and Mark and I only have one S corporation ourselves they own different entities we own some stuff together they own stuff separately and it's One S corporation but it can be doing multiple things and it can own businesses all Consolidated on to one return so keep it simple no matter how much you got going on still have one escorp at the end of the day all right happy for Life ask can I transfer my government Thrift Savings Plan account into a solo K my Thrift Savings Account is tax deferred but I do have a small amount of wroth within the tsp I'm very interested in this also the solo K it is for only real estate business or can this work for other businesses thank you okay happy for life so you got two questions in there we just did a lot of solo case here at the end of year for clients we're setting up still a lot of them at kqs lawyers and at directed where we custody the accounts um but we can help you this is very common you can have a Thrift Savings Plan that has some traditional dollars and Roth dollars when you set up the solo 401K you're going to have a traditional account in the solo K that gets the tax deferred dollars and you're going to get the Roth account in the solo K that has the after tax dollars or the Roth dollars and so there's kind of different names and wording for it in a tsp but a tsp is basically think of it like a 401k that has Roth and traditional dollars that go over into the solo 401K into the Roth and traditional buckets so if you want to move both of those pieces of funds into the solo K you'll have a traditional account and a Roth account in the solo 401K now ask your question is this only for Real Estate businesses no you can have any business you can be drrive maneuver you could be like have an eBay store you can be a consultant you could be a real estate broker you could be a GI doctor you could be a what was the other one you could be selling antiques you I mean all these people they talking about it doesn't matter the business we have a lot of real estate clients those come up on a lot of the questions but whatever operational business you have where you're receiving income for goods and services you provide that business can create a 401k for you the employee remember 401ks are created by a business for the benefit of its employees just like the Dunder Mifflin 401k or the McDonald's 401k or the Apple 401K the company creates the 401K plan and the employees that work in it have an account and this you're the same thing you are the business but you're also the employee but it's still a plan the 41 cake the business creates and you have accounts within it okay question from Joseph another S corporation question says Mark Matt love the show I'm trying to understand these Concepts so as a hypothetical let's say you currently have an LLC and are looking to change it to an escorp okay so LLC looking to change to escort first in order to make an S election does the entity have to have been set up all year can you set up an LLC in February and later that year make the S election retroactive to the start of the year the way you ask this the answer is no because you can only retroactively elect your es Corp status back to when you formed the LLC so if you formed the LLC on February 1st then you can backdate it to February 1st you said to the start of the year I think you meant February 1st but I just want to say so you set up the LLC now you have all year to turn around and elect it to be an es Corp when you're ready I call this es Corp Insurance because any of you out there that are starting a business you're like I don't know if I need to be an escorp yet haven't had a big year but I'm hoping to always start as an LLC get your bank account going build your business branding blah blah blah the 100 things you need to do to try and be successful then make that s elction later second question Also let's say you have an LLC already taxed as an es Corp okay hold the phone all right so now I already have an LLC as an es Corp profits are good and you want to open a second business ultimately having both of your businesses owned by an es Corp holding company okay you want to keep the name of the first business as is what are the mechanics to accomplish this do you revoke the S selection on the original LC and set up a new escorp to own it do you have keep the first LLC now as the escorp holding company and just Chang the name of the LLC well I'm going to say this Joseph is it's been a little bit of a theme here first if you're a tax professional and I have many tax tax advisers follow myself and Matt you've got to look at the tax Pro Network these are type of topics that we break down with certificate training ongoing trainings every week very affordable and we give you a designation as a certified Tax Advisor now Joseph if you're just a regular business owner and you're asking what are the mechanics to do this again you're doing a DIY project on an island Home Depot that you shouldn't be near I I would think welding I think welding is one welding that's where it crosses the line that's where you cross line if you're in the home Depot it's like light bulbs you know maybe air changing your air filter putting together some shelves yes some shell and then there's welding and you're like a little sign stop here your di it requires a blowtorch and a mask and a tank of gas yeah that's not where you should be playing around so Joseph this is one of these areas please get a consult with one of our tax lers they'll build this out now I will try to answer this still do you revoke the S selection on the original LC I wouldn't I'd keep the escorp the way you have it I know you don't want to change the name of the es Corp LLC taxes and escorp so just leave it alone set up a subsidiary with a new name new URL new brand whatever no one needs to know that your current LLCs Corp owns it you don't have to change the name of your parent company you can just do a Consolidated return now I don't know your exit strategy I don't know the long-term play here I don't know if there's Partners I don't know your Revenue I don't know where you're located I mean there's a lot of factors here that could change my answer quite quickly if you did a consult with one of my tax lawyers you already know you need a new entity we have a comprehensive entity setup package where you get a trifecta with a game plan for the year and a new LLC right where you're supposed to get it and you have a full hour or more with a tax lawyer in that comprehensive consult so please schedule that it'll save you a ton of heartache and pain and save you thousands and you'll be off to the races with your plan but don't revoke and set up now you're having three entities so I don't want you have three I think you could pull this off with two yeah all right maybe I'll hit my last question you want to grab your last one okay all right I'll work on it all right this one is from Martin Giana um love the show and support for small business owners pouring over the tax illegal Playbook that's Mark's book everybody should be doing that says we're based in this is from Martin we're based in Texas and sold operating businesses recently and looking to diversify into some real estate specifically short-term rentals and different States Florida Montana Colorado New Mexico Tennessee places we love to visit so let's try to have some Landing spots that pay for themselves and some more great idea that's the dream do we need to or is there some benefit to setting up llc's in each state where we will buy property or just do it from our home base of Texas separately for our operating businesses we use separate llc's taxes and escorp for each store but for real estate thinking we may not need a separate one for each property depending on the equity this is from your book don't want the complexity of multiple States for ownership but don't know the tax benefit and makes worthwhile okay Martin great question when you're buying rental properties whether these are short-term or long-term rentals in multiple States we are going to look at doing an LLC at least in the different state and we might do let's say a Montana LLC that you also register into Colorado and it's a Montana LLC but it's registered to do business in Colorado and it could own two properties it's the same LLC it's just registered in multiple States now the issue we're going to look at is really not how many states you're in it's really the equity between the properties of each LLC whether that LLC is in one state or whether it's an LLC in Montana that's also registered in Florida Colorado New Mexico Tennessee it could be one LLC registered in all five of those States what we're going to look at is how much Equity you have between the property and this is for everybody this is the same analysis no matter what type of rental real estate you're doing short-term or longterm if you have more than 250,000 of equity and it sounds like you sold some businesses Martin you guys might be putting a lot of cash into these deals I don't know but if you've got more than 250k of equity that's when we're going to set up a separate LLC now you might start off and be like well Montana and Colorado we're going to have 100K of equity between each of those two properties we got one in Montana one in Colorado it's a Montana LLC registered in Colorado cool well the next one you buy in Florida let's set up a new Florida LLC I don't want to register that Montana LLC into Florida you're already at 200k out of equity you're going to start adding more Equity we're going to separate out a new LLC this is purely for asset protection purposes cuz what we do not want is one LLC that you've got registered in five states with five properties that's got a million dollars of equity something goes wrong on property number one in New Mexico you rented it to a school teacher so you thought that was selling meth you get a liability that happens in a lawsuit and now all the equity amongst all the properties is at risk because they can still sue the LLC and get at the equity between all five properties so I would look at the equity we can also help with the tax conso or sorry an asset protection console in the law firm help you get these llc's set up but the last thing I'll say is don't worry about Texas if you're not buying Texas properties do not do a Texas LLC Texas llc's have like a $300 plus State filing fee it's not cheap you got to do an annual filing to Texas we love Texas if you're buying Texas real estate but skip that just go to the states where you're buying the property love now I now I need to fact check your you know uh example there you said meth school teacher that was cooking meth rented the house yeah now I I think it was season 4 they actually set up a fake extermination business so they would go into the home set up their extermination tent and then cook for a week I don't think they were renting the home those could have been short-term rentals it's true could have been some short-term rental jobs you know and they talked about doing short-term rentals yeah okay all right okay I'll give you example checks out example checks out okay we got a fact check there Breaking Bad season 4 okay so I own and ES Corporation and this is DB 2027 last question of the day so I own an escorp woo lots of escorp questions today and I have about 750k that will be used on Capital Improvements next year so you're sitting on 750 Grand inside your sorp not something I'd like you to do we want to pull it out of the es Corp and protect it in an LLC somewhere and invest it which he's coming to here so DB says I have been looking for high yield savings account hysa for the amount that has been reserved uh as the money market accounts just don't give much yield well I'm seeing some great money market accounts and hyas have their own baggage because they can they're adjustable uh well money market rates are too sometimes you have to commit to a longer hold like a CD so just be careful a lot of the hsas are for personal and not business accounts where I would incur the income from the interest on a personal hysa is it possible to apply the interest income from the personal YSA to the business rather than me receiving the $10.99 int if not do you have any recommendations for a business YSA to move and collect the interest all right DB I'll just be blunt you're and don't be offended by this you're making a big to-do about nothing because here's the deal you have an escorp it's a flowthrough entity anyway where the escorp whether the escorp earns the interest or you earn the interest you're still going to pay tax on $199 in income doesn't matter I mean if the Corporation gets the interest they may not issue a $199 to the corporation but you're still going to claim the interest and pay the tax vice versa so don't worry about getting the $199 personally or in the business it's not going to save you tax at all from an asset protection standpoint I'd actually like you to get it out of the escorp whatever your escorp business is appears to be successful you're sitting on 750 Grand in there do you have employees vendors customers contractors clients I don't know I'd rather see you peel that 750 out park it in an LLC invest it for the next 3 months 6 months 9 months year whatever you're going to do and then deploy the money back into the escorp when you're ready for the Capital Improvements any interest income you earn you claim personally no big deal it's not going to save you tax either way and you actually get better asset protection just my take and uh I wouldn't say that to every client to have an LLC for your liquid Investments but when you're pushing close to a mill you're in you're getting into that category I don't know what state you're in I might recommend a cope entity that's a charging order protection en maybe some privacy so it's kind of funny I had we had years ago I had this NHL hockey player I think you've heard me tell he he came to me he had played in New York and was now living in Texas and he had couple million in the bank you know he was successful as an NHL player but he was chasing fast women driving fast cars still and living that life and he knew he needed to get that cash in an LLC where it was protected well an LLC in Texas and in New York was not the place to set up an LLC to hold liquid Investments so we chose a different state at that time that worked for him so when it comes to holding investment accounts we can choose a state that you may not live in and get a little more creative and get better protection when Matt was talking about rental properties you're going to set up the LSC in the state where the rental is located first then we talk about additional protection down the road so it depends on the type of asset yeah yeah if you're a high net worth person we might be looking to those different states Wyoming possibly to get protection of the assets from your personal liability you know we have separate podcast on that it's called charging order protection entities Mark's got a chapter in his book on it too so all right well we had a lot of awesome questions and some awesome answers I thought too yeah yeah and for anybody that's enjoyed the show some awesome ass or you may say so yourself uh I mean for a cokehead and a pothead we did pretty good today cently yeah we were loaded locked and loaded ready to go okay I'll meet you back in the kitchen you bring your stash I'll bring mine so um okay now uh uh please if you enjoyed the show give us a festar rating to help others find the same thing we're hoping to help many many of you that are small business owners side hustles big hustles whatever you get whatever you're hustling we're going to help you launder that money did I just say that out loud we're going to help you save money on taxes and protect it from criminals out there trying to steal it please continue to listen we appreciate you Subs subscribe like post yada yada and we'll see you next week for another episode of The Main Street business podcast see you [Music] then

Channel: Mark J Kohler

Views: 20,105

Keywords: tax, legal, entrepreneur, asset protection, wealth building, cpa, attorney, lawfirm, Mark J Kohler, Mark Kohler

Id: ipjzxvZL_2Y

Length: 44min 5sec (2645 seconds)

Published: Tue Feb 13 2024