The Biggest Tax Break for Business Owners | Mark J Kohler | CPA | Attorney

Hey welcome everybody to another Facebook live talking tax and legal It’s gonna make you money now before you scroll past this let me tell me what the topic is here real quick You’re gonna love it now I’m CPA attorney mark Jake Kohler shout out to entrepreneur for making tax and legal strategies Important enough to post on their Facebook page folks. They know what saves you money and makes you money It’s not just about making money every day It’s about saving it – taxes are the biggest cost in your business, maybe there’s some payroll and some rent But generally for most business owners taxes is the number one cost I want to save you money So I help small business owners all the country talk about ways to save taxes now the biggest tax break in the new GOP tax bill signed by Donald Trump in December is what’s called the 199 a 20 percent pass-through now assuming you may think Oh mark I’m just gonna get this deduction at the end oh no no before you scroll past this it is not the same Benefit for LLC’s as escorts or the type of business you’ve got a plan for this You’ve got to know some of these differences and plan now in 2018 or you’re gonna miss out and leave some money on the table you might get some write-off But are you gonna save as much as you could so it’s a big deal now. It’s a little technical I’m gonna do my best to break it down, and I’m taking questions. I want you to type your questions down below I’ve got Annika my marketing director She’s gonna holler him out to me as we go and I’ve got my glasses on cuz this is technical stuff This is cool, Martin Koehler hit This is smart gotta be focused more color, so we’re gonna try and do this so hang with me here now This deduction now. Here’s the basics of it, and then we’re gonna do some examples. I got all sorts of good stuff for you I’ve got the new market Kohler payroll matrix We’re gonna go through this in a minute so pay attention get a pen and paper Andy take some notes Now in this deduction it basically says this is the basic concept and this is for Main Street. This isn’t for Wall Street It’s for you on Main Street. Is that when you make money in your business money in? Expenses out and you net when you’re ready to take money home in your business this year to help stimulate the economy Trump’s trying to do love him or hate him it’s a good thing let’s take advantage of this tax strategy while we can You get a deduction of 20% then you pay taxes so if you make a hundred grand you get a 20 thousand dollar deduction now That’s the basic concept But then it gets crazy because the type of business you may not get it you may get it you may have self-employment tax oh We got to get tricky here, so this is the general rule now I’ll give one distinction here the more money you make and if you’re in a personal service business realtor broker agent dentist doctor attorney engineer CPA actor actress athlete You’re gonna phase out you may not get the right off you may have other types of businesses that do get the write-off That’s where the strategy comes in and I want to say this right now. Just real quick on a call Type it right down below is I’m giving regular updates in my weekly newsletter I’ve been doing it for 12 years every week kicking out a newsletter go sign up for my newsletter It’s free, and if you don’t like it that week. You just closed it out, but scan it I want to be your tax and legal resource so get over mark Jay colder com sign up for the newsletter And I’ll give you updates because if this is too complicated. I’ll be filling in in the future now Let’s go bring a basic example now that I’m gonna take it to the next level First we’ve got two types of income here that are allowed under this rule We’ve got qualified business income this is the one that gets that I’m gonna put business income Then we have what we might call Passive income well. I don’t even know if I want to call to that. I’m just going to say it non per earn income For this strategy, that’s the billet really kind of what we have to call it So with these two types of income you get the 20% deduction here But no 20% deduction here now. Let me give you some examples of what’s not included. This is short term capital gain which means if you’re Doing Bitcoin currency trades or your theater in 3m I can never say a right cryptocurrency and maybe you’re flipping some Type of asset they get you short-term capital gain or long-term capital gain if you’re selling a rental property dividends interest and Basically your day job if you work for someone else or you take a w-2 You don’t get the 20% deduction on that type of stuff no deduction, but here’s where you do get it commissions You get it on your 1099 and yeah If you’re an uber driver you get this deduction if you’re some stuff on eBay Etsy whatever If you’re selling a product if you’re selling a service in This is where again if you’re providing professional services And they engineer the accountant the realtor the contractor you’re gonna get this type of stuff And then here’s what’s interesting you can even get it on your rental income oh? Now that’s cool riding rental income now There’s some strategies there you’re gonna want to stay in touch with me on this for those that are generating positive rental income now I know most of my rental clients that have rental properties with depreciation mortgage interest and all those little tax strategies. You’ve got probably Losses that you’re taking right house on We’ve talked about this before why buy rental real estate and being a real estate professional Well for those of you that have real estate That’s paid off, or you’ve got commercial property with triple net leases and you’ve got positive rental cash flow You get the 20% all right, so maybe I piqued your interest so far right this deduction is a big deal now Let’s go through an example here just A basic LLC basic sole proprietorship, let’s run the numbers now I appreciate your hanging with me, and I want you to ask some questions I’m going to get a lot of questions on this Because I’m gonna wow you here with a minute on this LLC point so what we do is we divide clients lives into two sides so let’s say this is your Rental business you’ve got rental properties here rental business You’ve got all your little properties out here, and or let’s say you have a sales business just I’m gonna just call any regular business, so just business income and You’ve got your sales coming in you’re making money, and let’s just do some rough numbers here. Let’s say you’re bringing in 200 grand Let’s say you’re spending 40 grand on expenses in your net one hundred and sixty thousand dollars when that’d be nice Many of you are doing that much work better. Maybe you’re selling the internet marketing same strategy here now Let’s say you’ve got rental income and you’ve got rental expenses you net 160 on your rental income Same deal you get this 20% deduction so if we’re doing our math here. That’s going to be a $32,000 deduction off your bottom line this is cool, right a $32,000 deduction pretty cool now. There’s a capture you’re gonna. Love it that means you netted 128 so I netted a hundred and twenty eight thousand dollars now if I take an average of Let’s say a twenty five percent tax rate say you’re paying twenty percent fed in five state That means you just saved eight thousand dollars now remember. This is not a tax credit It’s a tax deduction, so you just saved eight thousand dollars in taxes Now guys, this is the number of one tax strategy in 2018 for small business owners, so if you’re swimming a little bit Don’t don’t go anywhere. I’m gonna slow down I’ll repeat this and I want you to ask some questions if you’ve got it so hang tight I know this could be complicated, but again. You’ve got a business you’re making 200 grand you have forty thousand in expenses Cell phone travel dining entertainment Home Office blah blah blah you net 160 you take 20% of that you get a deduction And then you’re only paying taxes not 128. We’d have to say well. What’s the tax savings mark? Well if you’re in a twenty five percent rate that means you save taxes of twenty five percent Times thirty-two thousand which is eight thousand dollars you saved eight thousand dollars in taxes now. Here’s where the problem is Let me say this before any of you pass through this and go under your next post on Facebook LLC’s do not say taxes Did you hear that? I’m gonna repeat this again LLC’s lemon liability come do not save Taxes you know I have meet so many people to think oh if I said on my LLC. I got to have it I’m gonna say taxes. I can’t save taxes till I have an LLC none of that matters guys. I’m telling you as a CPA National expert in tax planning for small business owners LLC’s don’t state taxes Let me tell you why because on this I’m gonna do it in red Before you get this deduction you have to pay self-employment tax on this 160 grand That’s right. You got to pay self-employment tax now I’m gonna give you some other options for this what you’re gonna love and it’s gonna save you Thousands of dollars in this little Facebook line and I’m not selling anything at the end of this There’s not like Oh, buy this package or whatever entrepreneur has more faith in me. I’m not gonna do that to you I’m just here II add value I want you to listen and follow and stay in touch with me Because I love to help small business owners live their American dream, so there’s no self picture. I’m not hiding the ball I want you to ask questions now Here’s the crazy part the self-employment tax on this is fifteen point three percent on the first 130 grand and 2.9 Percent on the rest of that which is thirty thousand the rough math on this You’re looking at twenty thousand seven hundred and sixty dollars in self-employment tax Spirit you saved eight grand, but it cost you 20 grand What the Freak now the cool part here is with Reddit. There’s no self-employment tax So for those out there that own a lot of rental properties commercial rentals You’re gonna get this 20% flow through on the net assuming depreciation and mortgage interest and chew it up But over here the LLC’s cost you people. This is the LLC not good not saving you taxes Alright, now. I got one question here, and then we’re gonna go to the solution what you’re gonna. Love. What do you got on? oh What’s this first name Mike Oh Mike you’re stealing my thunder baby Mike says what happens if my LLC is taxed as an S. Corporation Well, that’s where we’re headed Mike you’re gonna freaking love this and I’ve got a payroll matrix That’s gonna blow your mind so hang tight Mike you’re gonna like this now Let’s say we do the same equation So let’s say we do the same thing and I’m gonna go over here to my escort And I’m gonna do the same business I’m gonna make the same money same expenses They’re the same and an LLC in an S. Corp so I bring in my 200 grand I spend my 40 I net my 160. Oh, but here’s the catch I’m gonna take fifty five thousand of this in Salary, and I’m gonna take a hundred and five thousand in k1 or pass through now if you have an LLC I can make it tiny because it’s an LLC Taxed as an S. Corp when you say I have an LLC taxed as an scorp you have a freakin S. Corp Don’t call it an LLC now. Yeah has that all C at The end of your name, but for all purposes of tax planning. It’s an S Corp, so what we do is we take a salary you pay your FICA over here the F word FICA. Yeah, we hate it We’re paying our self-employment tax over here, but not over here now Here’s what’s cool guys you get the double whammy You save on self-employment tax and let me tell you the numbers by only paying self-employment tax on 55,000 rather than the entire 160 my savings on this in this one right here, oh my gosh This is crazy. You’re gonna save twelve thousand Nine hundred and twenty-five dollars Yeah, twelve thousand dollars in savings getting rid of the freaking LLC and electing to be an S corp alright Then I still get my 20 percent deduction on this so that’s twenty one thousand Which is five minute twenty five percent rate? We’re gonna compare apples to apples That means I say five 250 dollars now some of you now, this is where the big confusion is up there people say well mark I’m not gonna do an escort because I want a bigger 20 percent deduction So I’m gonna run my income through an LLC and get a bigger deduction on this 160 But you don’t realize that bet FICA is killing you on the way there, so yeah with an LLC you’ve got a we’ve gotten an $8,000 deduction with an S. Corp you only get a $5,200 deduction, but I say 12,000 and FICA Getting there. That’s why guys every dentist doctor engineer contractor internet marketer MLM direct sales 1099 eBay salesman What do we do we use an S corporation? We maximize the FICA savings we maximize the LLC patent that the pass through that we would have gotten through an LLC But it’s just on a little amount so the combined savings is in the end By doing an S. Corp when I compare the escort to the LLC I save Here’s the bottom line number in this example $175 that’s my savings by doing an escort so if you have a question right now I want you to pose it mark should I do an LLC mark should I do an escort? Which one should I do why does this matter blah blah blah now? I’m gonna give you some more examples here a minute, and we’re gonna go through the payroll matrix, but Annika. What’s our question here Okay, so what’s our purchasing? Okay, so Trenton says mark. Oh my gosh. It’s April have I missed something Well, maybe maybe not so let’s look at a time line here You can kind of look at two or three questions and combine them into one or something, okay, so let’s say we’re right here Right now we’re here in April 2018 okay No What was this first name again? Train sorry, but okay, so Trenton says mark if I missed anything now if Trenton was an LLC starting the year in Any of you that are an LLC If you think you’re gonna make more than forty to fifty thousand dollars this year do the internet sales marketing fix and flips rehabs realtor contractor engineer Dennis I don’t care if you’re gonna make more than forty or fifty thousand credit. We can go back and do an S election and Turn it into an S Corp back in time so I can do this s election back to one one Eighteen our office only charges 125 bucks. That’s it guys get a consult with one of my TAC lawyers You might spend two or three hundred bucks We can do whatever you need to get done and even just in a half an hour with one of my attorneys You can save thousands this year you should have a tax attorney in your back pocket, right? So many people think of market tax attorneys are too expensive hey We’ve built our whole business around you the small business owner, so if you feel like you need some help Give us a holler on a cold type our Website address for the law firm Kos lawyers there so Trenton we can do an S Election back in time now for some of you where your life work This is the first I’ve heard of this. I’m not an LLC at all. I’m just a basic sole proprietor am I screwed Well the first part of the year you would be a spill proprietor, and so I would set up your S Corp immediately probably make it effective May 1st at the minimum and so from here till the end of the year You’re an escort, so what I can do for those of you that are may be late to the game this year I set up an escort now for those of you that are LLC’s already I can backdate you in you get the whole 2018 as an escort pretty sweet Okay, so toddy says mark I’m gonna start a concierge business all right. Let’s think about many of you out there Maybe you’re starting an internet marketing business you’re doing something on Etsy or even maybe you’re driving for uber. Maybe you’re just Starting your service business as handyman any of those businesses tawny your question is good for so many people watching right now What you would do is you’d have an LLC do it just pull the trigger on an LLC but The LLC can be changed to an S. Corp, so what we would do. We’ve got a four hundred dollar set up We’ve got an 800 dollar set if you go online be careful We have literally a fixed line legal Zumanity service not the legal zooms back But people didn’t know what they were checking but be careful get your LLC set up Yet going this year if you only make 20 or 30 grand. We’ll leave it in LLC If you’ve hit it big, let’s say it happens and things go well I can fat date you into an escort But if you don’t set up the LLC. I can’t back it. You can’t call you November ago mark. I made it I made 50 grand help me. I’m like. Uh you’re Sol and I’m not talking statute of limitations You’re still you’re you’re not gonna be able to be an esper. My can’t back date it so get this going That’s the way we want to go and get it started now for those of you that were like mark I’m already making four or five grand a month. I’m already killing it I’m doing better than that then freakin pony up and get your escort on Call my office if you wanna go somewhere, and if they can’t speak the language. I’m talking you got the wrong people, okay, Monica Okay now that’s a good one. What’s your first name? Kelly Kelly throws in the California twist Which kinda is a bummer? California is one of the most expensive states in the country for those of you in New York City And I’m talking to five boroughs Manhattan Staten Island Brooklyn Queens and Bronx. Yeah, that’s right Maybe I know the five boroughs I used to live in New York to do the five boroughs or you live in California the S corp can be really ineffective or Expensive in in New York it really doesn’t even work in the five boroughs you got to get out of the island I have clients Move to Long Island get into Suffolk County or go to New Jersey to save taxes believe it or not in, California if you’re only making $20,000 this year you don’t have a lot of business exposure like lawsuit exposure I’m gonna probably leave you as a sole proprietor Maybe have you do an LLC but see California has an $800 minimum tax. It’s brutal So I got to pay 800 bucks just to play the game That’s like candy enough at the poker table 800 bucks Just to play so if you’re only gonna make 20 grand um I may keep you as a sole proprietor in California As you start to make more money, let’s get you into an LLC and then make the transition to an S Corp when the time’s right? This is why a little planning session once a year can save you thousands you don’t want to be going around on Google trying to Figure this freaking out we’re here for you okay next question the way we keep going here He says is an independent contractor is an S. Corp the best to maximize deductions well first name again Andy okay, well this is good for everybody here Andy says mark now, this is important everybody listen andy says mark, which entity is best for tax deductions That’s a trick question Andy might be trying to trick me here because guys you get the same Deductions whether you’re an LLC or an S Corp so Andy you don’t even have to set up an LLC an escort to get deductions if you spend money on Marketing and cell phone and Apple watch dining entertainment Home Office PDAs. I’m writing all that off anyway The issue is what’s gonna happen to your net income so Andy I would rephrase the question mark I’m starting out as an independent contractor Which entity is best based on the amount of income I’m gonna make And if you’re gonna make more than 30 or 40 thousand you need to be an S corp That’s the way to go now if you are kind of starting out And you don’t know where you’re gonna be then go with the LLC now I want to hit another major point before I go to questions everybody out there for those of you that are already escorts I’m gonna blow your mind Let’s take it to the next level so you’ve got your S corp And you’re doing your salary dividend split Raggett salary dividend split Well the question that people ask and I know their CPAs out there watching this well mark. That’s an aggressive salary Because you’re taking an aggressive salary the savings make the S corp look better Let me just say this to everybody we’ve been doing tax returns for 17 years I have never had a client audited for taking too little of salary in fact We will sign on its tax return if we help advise you on your salary And if you get audited and your salary was too low you’ll pay the penalty that’s how confident I am that. We’re not in right field now with this new deduction coming down I have improved and better made my My matrix, that’s taking the country by storm It’s called the kohler payroll matrix now We’re going to zoom in on this a little bit So what we want to do people is as your income grows so as you start to make more income and this is your net income in your business So as my income grows My favorable actually goes down as a percentage of net So here’s the example if you’re gonna make 50 grand in your business net Your salary will be 25 grand now what I mean by that people here is this is this is? if you make a Hundred-fifty group if you make a hundred grand or fifty grand your salary would be 25 so I want to find the perfect Salary level based on your income so in in this example of a hundred and fifty grand Your salary is going to be somewhere in this fifty five thousand range 160 fifty five so I’m going to look at the percentage of your income when I have clients making four hundred grand a year where their salary level might be twenty five percent or a hundred thousand and This is a schedule that we found to be very fair and honest with the IRS. I’ve interviewed X IRS agents sitting Currently employed IRS agents won’t come on my radio show but X IRS agents will we’ve been We’ve had every case out there on payroll and we feel that this is the way to go so Folks when you’re determining your payroll if you’re taking too much payroll You’re losing the $1.99 a and you’re paying too much FICA You see the the problems could be astronomical because you’re you’re being way too much in tax But could have your accountants too conservative let’s get your payroll as low as possible without an audit you say fuck up and ramp up to $1.99 a Boo was that sweet so this little payroll matrix? I’m gonna be getting it out there and my next blog article a blog article that comes out next week Sign up for my newsletter at Mark J Kohler calm and if you want to consult with one of my attorneys you can check a box have your team call me Annika will give you a call. I mean we’re not you know there’s not thousands of employees in my organization We’re just a boutique firm helping business owners like you okay, Annika next question Okay Eric says Should you have a separate iin for your operation company versus your holding company great question airy People this is where you have your operation company your operations are on this side your holdings are on this side There’s a wall between the two well Eric you’re gonna have an LLC over here. You’re gonna Have a network over here your daughter rights are gonna separately ions You’re gonna have separate baking accounts this LLC is going to be on tidal chair rentals This one’s gonna run your merchant account for your sales They’re totally different You do not want to have an enmity in the middle trying to do it all you’re going to get into problems It’s going to screw up your asset protection and it’s going to screw up your tax planning Annika next question Okay April says well mark this S. Corp idea is great. Well. Sorry Rachel Rachel. I called you April Maybe it’s because I saw April here Freudian slip, and she’s over on YouTube. Thanks, Dave. I thanks Rachel okay now. Here’s the trick everybody You’re not gonna. Have a regular paycheck We’re gonna do payroll reports quarterly guys. I don’t even get a paycheck in my own business I take money any time. I want then I do a payroll report quarterly. It’s simple It’s easy so Rachel my team is gonna do payroll in April in July in October and then at the very end of the year in January We’re gonna do or payrolls my team will call you up Rachel, and they’ll go hey Rachel. How’d you do in the first quarter? Oh? I made know me okay zero report no payroll You’ve already taken any profit if you’ve got it, then they call you July how much money. Did you make Rachel oh? I was killing it. I took home thirty thousand dollars. They go ooh. What do you expect to happen the rest of you there? I’m not sure maybe another 20 so then they go oh, okay. That’s $50,000. Let’s look at the matrix Let’s come up with what Mark said in the matrix. Okay your payrolls gonna be here. They issue a payroll report You do your deposit to the IRS You’re done finish no paycheck Payroll reports done we charge 125 bucks a quarter to do payroll I think just do it quarterly based on how much money you’re making so Rachel the answer is If you don’t know what it’s gonna come in you know you’re gonna make 50 grand this year Get your S. Corp start on payroll. You’ll just do the payroll throughout the year Based on how much money make no big deal Okay One more question that I’m going to give you another Example because it gets crazy here because something do you want to get more technical and more technical? Okay, so eric says mark. I want to talk about mortgage interest. This is a great question everybody out there listen We’re gonna have mortgage interest in one of two places you’re gonna have mortgage interest on your home Or you’re gonna have mortgage interest for a business purpose You take money out of a key block and you go buy a rental He talks about a sweep account where you’re he’s trying to pay down his mortgage Well Eric the question is I don’t care if you have a sweep. I don’t care if you have a HELOC Whatever the question is what was the money used? For if you’re gonna take out a HELOC and go buy the rental property I’m gonna write off that interest in your LLC with your rental property. I don’t even care if it’s a Ricky lock on your primary residence the loan was used for business therefore the interest is deductible In 2018 and 2019 but for many of you the interest on your primary Residence is going to be an itemized deduction He locks for your primary residence to consolidate debt. No longer a write-off Interest on your primary residence has been limited Itemizing has gotten worse So what Eric’s trying to figure out here is market. I got a sweep account. I got a HELOC I got all this stuff going on Bookkeeping is the key people when you have a HELOC and you’ve got more mortgage interest we need to trace it That’s what us accountants Call it trace the interest and then I deduct it in the best spot Eric you better have one heck of accountant if you don’t give us a call all righty now I want to hit a couple examples, and we’re gonna wrap this up now hang out everybody This is I hate to say this this is the basics. I mean it is really the basics That’s why having a professional on your team when you’re business owner is critical You’re not going to not just crap out on turbo tax for tax later when you have a business elaborate okay now I want to give you an example here. No. This is this is deep. I I prepare some major notes here for you, okay? We’ve got two different types of businesses, and then I’ll do QA for another five minutes, and they’ll catch any of your questions I’ll do my best you might have what’s called a traditional business Or you might have a personal service business Now the IRS is very clear that the rules are different than 2018 so you’ve got to understand this now let me give some examples a traditional business would be I’m Rehabbing property I’m a contractor. I’m a restaurant I sell on Etsy I sell on eBay. I sell a service I sell a product. I do internet marketing I do internet sales That’s a traditional business Personal service is I’m an athlete I work for the NFL. I know that was my prior life Um you’re maybe a dentist a doctor an engineer an architect a lawyer accountant broker agent financial advisor Those are considered personal service. There’s two different rules here Now here’s the rule when you start to make more than a hundred and fifty seven thousand to two hundred and seven thousand Or you’re married Filing joint MFJ married filing joint and you bake three fifteen to 4:15 Okay guidance this is the next level you have to ask yourself if I’m single and I make more than two hundred and seven thousand or I’m married and make more than four hundred thousand You got to know these rules if you make less than that Done don’t stress you can stick around for a little bit more Q&A, but you don’t need to know this crap But if you’re making more than one hundred fifty seven or 315 you’ve got issues So if you’re in a personal service business once you make more than this boom No deduction No write-off if you make more than 207 or 415 now if you’re somewhere in the middle I’ll explain that in fact I’ll do it now. Let’s do it right now so find any of those personal service businesses Let’s say I’m a dentist and I bring in 340 thousand dollars all right that’s cool But oh no, I’m married dentist, and I made more than 315 But I didn’t make more than 415 so you’re in the middle so you have to do the math and you say Okay, well I am thirty thousand dollars over the limit So I’m sorry 345, so I’m thirty thousand dollars over the limit Well it phases out over a hundred thousand dollars so thirty thousand divided by a hundred thousand is Thirty percent and that means you get two you have to exclude thirty percent of the benefit So you take your twenty percent of profit? times 0.7 Times your profit. I know this is crazy people hang with me We’re getting on to something fun But I want to give you the details so you take the what you’re allowed in this example is seventy percent times 20% Times three hundred and forty-five. That’s your deduction which adds up to Forty eight thousand three hundred dollars So that is your deduction so you have to look at this Percentage before you know what your deduction is now for those of you in a traditional business. Here’s what’s cool It doesn’t ever phase out if you make more than 207 or 415 Then there’s just a new rule, and here’s the new rule you have to go one of two ways You have to say I’m going to take a 20% deduction or 50% of my payroll in my business so whatever my payroll is in the business, then I get that deduction Which ever is less or if I have very little payroll, and I just use robots in my business, then I get 20% of net or I know this is crazy point o2 5% of my equipment plus 25% of my payroll and So you have to take the lesser of this so this is test one and this is test two And then you take the lesser of the two okay now I know several of you barely made it through that before scrolling on and going to something else on Facebook I’m proud of you for staying with This is technical Maybe that was interesting to go back and watch it I’m writing articles on this on a regular basis and my tax lawyers in my office can consult with you on getting the right structure But this is why it gets very technical But there’s thousands of dollars waiting for you to gather to grab and enjoy okay. Let it go. Let’s get a few questions So what’s this first name again? Michael says I’m doing a set now Let me tell you everybody if you have an escort, and that’s what Michael has and he’s trying to get a write-off for 2017 what he’s gonna do is take his payroll which we already talked about and the other is the k1 and then we’re going to figure out a SEP a sentence like a supercharged IRA, so we’re gonna do a SEP and he gets to take 25% of his payroll and take a tax write-off for last year Even though he may not put the money in until October well he has until September 15th of this year to do it so Michael you bought yourself some time you can do a set as a supercharged IRA for now but let me just tell you I Called the SEP the I screwed up and didn’t do a 401k plan so I’m stuck with a SEP So Michael you want to watch my videos on YouTube as to whether or not I should consider a solo 401k now. Here’s why? Let’s say Michael’s payroll is $50,000 how much could he put in his cell his in his set he can put in 25 percent which is 12,500 well 12,500 is a lot better than an IRA and Michael thinks. He just hit the jackpot But his old-school cpa forgot to tell him in december that if he would have done a 401k he could do 18,000 plus the twelve so he could put in oh my gosh Thirty thousand five hundred dollars and get her right off for last year if he would have done The 401k and it’s a solo 401k. They’re cheap. They’re easy you freaking love it Michael so Dude the set now cuz you screwed up and didn’t do a 401k call me alright So suck He’d said that he set up a new LLC he had a bunch of business costs that total almost fifteen thousand dollars now I know to set up an LLC worst-case scenario were eight hundred bucks, so I we didn’t spend $15,000 setting up as LLC but maybe he had Some business development costs maybe some training some equipment supplies Startup costs so Saheed your accountant should be deducting those as a start-up. Cost you take five thousand dollars this year you ammeter eyes the rest over a 15-year period So you’ll get the ride off It just may be more delayed than you want now the key is that if I was your accountant I’d look at when you spent the money When did you make your first dollar and try to write off as much as hood? Before it was a start-up cost or sorry write up as much as you could before I had to call it startup anyway So hopefully you got the point yes next question Okay, all right folks. We are gonna wrap this up. I got the note for my producer. This is going on way too long We’re having way too much fun. They’re saying pull the plug people are going crazy They’re tearing off their clothes or having so much fun everybody Thank you for watching get over to March a call or sign up for my newsletter. I’m not going anywhere I’m here every week with tax and legal tips follow me on my facebook You’ll get notes of when we’re gonna be here, but I do my facebook lives on entrepreneur. I love Ryan Shay I love the team over there Vanessa. I love you I’ve got a great PR representative or entrepreneur they’re committed to you guys having this tax and legal content Is critical so keep learning keep watching don’t give up and live your American dream

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61 thoughts on “The Biggest Tax Break for Business Owners | Mark J Kohler | CPA | Attorney

  1. Bravo! Thank you for alerting those of us who are patient and smart enough to watch this video. You're a gentleman and scholar. Please keep sharing the wisdom.

  2. Great Job Mark! Thank you for putting this out for us entrepreneurs who are trying to get through this tax season alive.

  3. Hi Mark, great video. Clarification question RE income phase-outs for people in professional service fields – does one consider income summed from all sources or only specific sources of income? Using the solo example with phase-out of 157-207, beginning at 157k, let's say a service professional has an S-corp (salary/dividend split) but is also an full time employee of another company, and happens to have some passive income from a rental. That person has 4 streams of income: full time job w2, passive rental income on a 1040-schedule E, k1 dividend from s-corp on a 1040-E, and w2 from s-corp. What income streams count against the 157-207K? Is it all of them and anything else that ends up on your 1040?

  4. Very helpful info. How do I transfer business assets from my sole proprietor business to my S-Corp? Thanks!

  5. Are you not being totally transparent by discuss that S Corps must pay a reasonable salary based on the industry?

  6. Most examples I see you do seem to be some with one job or business.
    How do these net incomes and taxes work if you work with a W2 at one job but run your SP or Scorp on the side?
    Example. Teacher with a side professional business. Can income/deductions/etc from teaching salary and side profession be combined?

  7. I government worker make 130k plus I write off a rental property. I want to set up business for my music studio income, income from gigs and selling my CDs. I figure I make 15k-20k. What is best way to do this?

  8. Thank you very much for taking time to break down these tax concepts. As an aspiring business owner, I found this VERY helpful.

  9. Hey Mark-Thanks for the Info about California LLC. I created an LLC in Nov 2017 and yes! California's $800 tax is brutal. My Web design revenue in 2018 will will be less than $21K, so can you help me. I call your office in a few days.

  10. Hey Mark, in your example you saved $10,000 bucks, but won't the additional accounting costs (CPA fees) eat that up every year? Net net, in your example, minus your fees to manage the accounting, is it really worth it? Let's say your fee is $500 monthly (example), that burns up $6,000 per year. Net saving is only $4,000 best case scenario.

  11. i make $100k/year on W2 , can i save tax by driving uber on the side to and from work ..
    I mean can i deduct milages, tolls, and Car maintenance , phone, bills

  12. On a s Corp or LLC all your gain could you using it to buy another property or when you sell all that money put in there buy more properties instead of paying tax or doing 1031 exchange?

  13. I really liked the video but I have a big question, I'm being paid with 1099 let's say I will make 50,000 dlls in the year, I have to pay 15.3% for selfemployment tax which is 7,650 dlls, that leaves me with 42,350 dlls. My question is, is that it? Do I have to pay more taxes on the 42,350 dlls? Or thats money ready to take home?

  14. This great, a few questions though.

    If my LLC nets less than 150k, do I still get this 20% deduction? Do I still pay 15.3% self employment tax? And how do I write off expenses such as cell phone, home utilities, square footage of home office etc when those expenses are paid with personal finances? Do I need to be paying for all of these expenses through my business account?

  15. This Guy knows his "Shit" and good news his firm will be our CPA and Company Attorney in the near future. As I have 1 Parent Company and 3 little children companies:)

  16. This firm is what you call a Aggressive CPA & Attorney firm wrapped up in one. Excellent What are you waiting for?

  17. Mark,
    I have a question regarding income from real property. I understand that because I manage my own rentals and spend a significant enough amount of time leasing them, repairing, etc. that we could safely argue that the level of activity rises to that of a trade or business, as opposed to a passive investor. Thus, I could enjoy the Sec. 199A 20% deduction. The question is wouldn't the argument be antithetical to the argument that such income is NOT self-employment income s/to the SE tax? It seems to me that the only reason such income was ever excluded from the SE tax was because it wasn't trade or business income from self-employment, (i.e. that it was passive rental income). Thus, are you certain that you can enjoy the 20% redux, and safely avoid the SE tax? To be clear, I'm NOT maxed out from other income on the SE tax, and thus the SE tax in exchange for the deduction would make me worse off. Thank you so much for your time and videos! Lisa Marie

  18. You're so good at what you do make me want to finish my schooling and get my CPA license but.. You are better to listen to than those professors. I guess I'll continue to watch your videos. Great Job.

  19. Isn't only the first $128,400 for 2018 subject for self employment tax? I see your video on 10:16, 160K income for $20,760 self employment tax.

  20. I'm an ebay seller but in 2017 I got killed in se tax. My business slowed after hurricane Irma (I live in fl). I couldn't list anything new the entire month of Sep 2017 and then fallen ill so I'm kind of out of business until my health is better. Is their any tax rules that would help my situation because I still owe the it's about $1,800

  21. I started my online sales business this year and made 414k gross, haven't set up an llc yet or anything, after I calculated deductions my net was about 210k, I'm looking at about 70k in taxes due, it's just me and my brother running the show, I need your services.

  22. If you like paying taxes, stay an LLC. Otherwise go S-corp

    1. You have to elect to be taxed as an S-corp by a certain time in the year.
    2. You can elect to be taxed as an S-corp even if you've been filing as an LLC for as many years as you've been in business, but can only start in the current tax year (can't back date and revise taxes in previous years, unless you want to open the biggest can of worms with the IRS)
    3. For those who have been an LLC the whole year, elect to be taxed as an S-corp from January 1.
    4. For those who are late to the game and find out in November that they want to elect to be taxed as and S-corp…you still can,
    however, you need to submit a letter along with the election letter stating why you are electing late…all this has to be is a simple explanation such as "I wasn't aware that the election needed to be filed by a certain date". It really is that simple.
    5. You MUST pay yourself a "reasonable" salary. If the S-corp is making a million dollars, a reasonable salary isn't $30k. Don't give the IRS a reason to audit you, do it legitimately…pay some taxes, just don't overpay like most Americans!
    6. You have to track your "basis"…its a little confusing but do some research and you'll get it.

    In the end, this is worth learning how to do, and doing it because it only takes some of your time…maybe 20-40 hrs of your time…so if your time is worth $200/hr, it might take $4-$8k of your time, but saves you $10k+ year one…its worth your time trust me.

  23. What’s the best option if you know you are going to sell the company. We are projecting millions. I heard you should used c Corp not s Corp so when you sell you don’t get hit hard with taxes. I am in California

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