In this episode of the Main Street Business Podcast, hosts Mark J Kohler and Mat Sorensen provide an in-depth discussion on the importance of effective tax planning for individuals with a side hustle or small business. They offer valuable insights into the process of reducing tax liabilities by taking legitimate expenses offered by the IRS.
Here's what you can look forward to:
This episode is a must-listen for anyone operating a side hustle or small business, seeking expert advice on tax planning, and looking to maximize their deductions and overall tax savings.
In this episode of the Main Street Business Podcast, hosts Mark J Kohler and Mat Sorensen provide an in-depth discussion on the importance of effective tax planning for individuals with a side hustle or small business. They offer valuable insights into the process of reducing tax liabilities by taking legitimate expenses offered by the IRS.
Here's what you can look forward to:
This episode is a must-listen for anyone operating a side hustle or small business, seeking expert advice on tax planning, and looking to maximize their deductions and overall tax savings.
The whole game of tax planning here is to reduce that income by taking legitimate expenses that the IRS is offering you. They have told you, track this stuff and we will let you expense it and pay us less taxes like they've given you that option. Don't be freaking lazy and let this go by and volunteer more money to the government. The first thing in this, particularly if you're new to this, you got to change your mindset, and you got to start thinking about, how do I knock this down to zero?
Mark J Kohler:And we're going to give you a this year. So if you need to listen to this later, open notes on your phone, write this down somewhere. We want to give you the hot button items you're going to start looking for and then remind you of things you probably missed last year, that you're going to do better this year. Welcome, everybody, to another episode of the Main Street Business podcast. We are excited today to talk about what millions of Americans are getting in the mail this month. And that is the 1099.
Mat Sorenses:Oh, damn. I thought it was tax refund check.
Mark J Kohler:That might come later, if you're lucky. Now, the estimates are there are over 50 million side hustle workers in America. They're saying one out of three american workers now have an extra source of income as a subcontractor, as a 1099. And that, people, is a gateway drug to small business.
Mat Sorenses:And I love it.
Mark J Kohler:It is awesome. There's so many great ways to play with that 1099. You can hold it. You can pet it, play with it. You can save money with it. I love it.
Mat Sorenses:Okay, Tommy boy. Yeah, that's the nice thing about the 1099 is, like you said, it's the gateway drug to taking some write offs, and a lot of people are used seeing a w two, and there's not much you can do with that. It goes on my 1040. Maybe there are some tax withheld on the 1099. Whole different ballgame. Whether this is your first year driving Uber, you started a small business side hustle, whatever it is. Now you've got that 1099 that has income and nothing withheld. So you got to pony up some taxes. And hopefully you've been preparing for this. But before you do that, make sure you're thinking about all the deductions you're going to be able to take on your tax return, because it's a totally different ballgame than when you get a w two and you can't write anything off. We got a lot to work to do, a lot of opportunity for you to save th.
Mark J Kohler:Yes, so today's show, we want to go through the high income earner that might be doing some consulting on the side and get a 1099 going. Oh, what do I do with this? And they tell their accountant, just throw it on my return and don't take a second thought. And then you've got these poor middle income Americans. And I say poor. And I feel bad for you. Working three jobs, trying to make ends meet, increased cost of living in America, off the chart inflation, high interest rate, all of that. They're having to work this second or third job. What do they do with that 1099? So everywhere in between, there's some techniques, some strategies here. This could be an incredible podcast for many of you to help share with a friend or family member and yourself. Put more money on the table or in the bank, whatever. Food on the table. There's a lot of opportunity.
Mat Sorenses:Yeah. Now, on the other side of this for you, business owners that employ contractors or that engage people that are providing services to your business, you have an obligation to send out these 1099. So $600 or more. Is that still the 2020 number? Yeah, but I was just saying, obviously, so many of you are business owners listening here on the main street business podcast is get yours done. I got mine done last week, which was nice to get done. It's a little early for me to get them done. I just want to get a little credit here. Little proud moment for me. I got them out early. And so we're going to have to January 31 to get these out. And I don't know if you want to get into the rules on then who gets them, who doesn't?
Mark J Kohler:No. And we've covered this on prior shows right now on my website. And if we could ask the producer to put this in the link right down below is I have an article in the last two weeks on the rules for issuing 1099s, who they get sent to. How do you handle the w nine? When am I required to issue a 1099? There's the 1099 NEC, the miss, the Int, the div, there. There's so many different mix. They're all there in my article. Check it out. But today's not about issuing the 1099. It's if I receive the 29. I'm glad that you brought it up.
Mat Sorenses:Yeah, we got to say that because there's other people listening. Like, I got to get some 1099 out.
Mark J Kohler:All right, so let's start with rule number one. Rule number one is even if you don't get a 1099, you claim the income you made in your small business.
Mat Sorenses:No, Mark, it was under the table.
Mark J Kohler:Oh, it was.
Mat Sorenses:It was under the table.
Mark J Kohler:You mean if someone pays me in cash, I don't have to claim that's in the tax.
Mat Sorenses:Oh, really? Yeah.
Mark J Kohler:When they come with the handcuffs, just go peacefully. I don't want you to get hurt when they shove your head in the backseat of the car.
Mat Sorenses:By the way, when you use the words under the table, you're like, exposing yourself to saying, I'm doing something illegal. Can you pay me illegally? Just pay me under the table. Like, don't say that. I know so many people do it. Let's be honest. There's probably someone thinking it, but I think that's the big misconception here. And I just want to make sure everybody understands. And like you said, whether you get a 1099 or not, you got to claim it as income, even if it was cash, even if it didn't help your bank account. But, Matt, no one's going to know. That's not how our tax code works, guys.
Mark J Kohler:And find out. And any slight audit for any other reason shows this lifestyle and income that doesn't match, you're going to have issues. And I was just so a quick example. I was just so pissed about this. I was at a farmer's market up in northern California in this little granola town, and I love farmers markets. I'm walking around, I'm like, oh, I'm going to get an apple. I'm going to get this vegetable. I'm going to get a pizza. I mean, just had everything there. And half of the vendors I walked up to, I'm like, okay, where can, you know you got square? You got all these ways I can pay you. Oh, we only take. I just by the third vendor. I was, why? Why are you only taking cash? It's because you don't think you have to pay taxes and you can use America. Enjoy all these benefits. I won't get started here. And I just was so pissed that some people think that's okay. So if I'm offending someone out there, too bad. You live in this country, which I know has faults and weaknesses and problems. It's not perfect, but we have a wonderful way to live an american dream where we can make money, earn money, and we just have to claim that income and pay some taxes. Maybe that's the weird part. These little vendors, we could have actually probably got them a tax refund and they wouldn't have to be scamming the United States, taking cash under the table. So rule number one, whether you get to 1099 or not, own it, claim it. Whether you got it via Venmo, Zelle, PayPal, Apple, pay cash, whatever. Yeah.
Mat Sorenses:Uber sends it to you. Who cares?
Mark J Kohler:All right, that's point number one. Let's talk reporting. Where am I going to put this? And then we get into some strategies.
Mat Sorenses:Most 1099s are going to go on your schedule c. Now, you might have a 1099 div or a 1099 int. You mentioned those might have different spots here. But the primary 1099 you're going to get, if you're providing services or goods, the consulting your typical 1099 you're going to get is going to go on schedule C. Schedule C is for your sole proprietorship. Guys, whether you think you have an LLC or a corporation or not, your 1099s are typically going to go on schedule C. Now, for those of you have an s corporation or an entity, even, I just want to make sure you guys know that. Make sure your 1099s are going to your entity for you to have an S corporation. You're going to pick that 1099 up in your s corporation, and you want to make sure when you fill out the w nine, that's the form that they'll request. Hey, we need a 1099. Where do we send it? You're going to fill out a w nine, not put your social. You're going to put your s corporation's tax id on it. But if you're like, man, I don't have any entities, and we're talking about some of the side hustle people here, it's going to get to your personal social. That's going to fall on schedule c.
Mark J Kohler:Self employment, and for those out, and we're going to focus on that primarily today. Is that what do I do with that rogue 1099 and what are my options there if you have an S corporation? I just want to add to this that sometimes you're going to receive a 1099 in your personal name or social. You can essentially 1099 your own s corp is called nominee income. You're going to claim the income on your schedule C and then push it right back out on page two over to your s corp. Very common strategy. The IRS recognizes it. As long as you're depositing the money in your s corp and using it in your s corp and there's 1099 inadvertently gets sent to your social, you're fine. There's a way to deal with that. And talk to your accountant about this. Make sure you don't try to knock this out on turbotax yourself, it could end up costing you a lot in self employment tax anyway. That's the s corporation rule for those that have llcs.
Mat Sorenses:Yeah, if it's an LLC, and even if the LLC has an Ein, but you didn't do an S election to it, you're just an LLC that's still flowing onto schedule C. So even though that 1099 and sometimes even go to the ein of the LLC, if it's the single member LLC sole proprietorship, you haven't made an S election to it, that's going to fall on schedule C.
Mark J Kohler:Okay, so let's review where we're at so far. There's no stress involved and really a lot of opportunity to save money, which we're coming to. But number one, you claim all your income, whether you get the 1099 or not. Make sure you report it on the proper schedule or form. Make sure you understand your entity structuring. We've just did a show two weeks ago on which entity to use. Please get back and listen to that show, and that'll help enlighten you on maybe what some of your plans should be for 2024 in that regard. But you're going to claim this on a form. Now, here's the good part. You get to rub your hands together and go, all right, do I really get to take some write offs against this 1099? Because my w two at work, I don't get to take write offs against that. Bend over, you're done. But with the 1099, it's a whole new world. Just come and see. It's your magic carpet ride, Jasmine. And so we're going to take you through this whole new experience, through. What was the name of the little town of Benedict? Acrobah. Akrabah. Akrabah. So, this is your acrobah tour of all the write offs you can take. And I'll just say, you didn't have to have a bank account. Maybe you've spent for expenses on credit cards or different ways, but now it's about finding those expenses and putting them on the return, and that can seem a little daunting. Matt, tips there, and we can start talking about some specific write offs. But really, it's about kind of gathering data, would be number three. Yeah.
Mat Sorenses:I think the first thing in this, particularly if you're new to this, you got to change your mindset, and you got to start thinking about, all right, how do I knock this down to zero, possibly, or how do I reduce this down? Because if you got a $10,000 1099, not only are you going to pay self employment tax on how this nets out, but you're also going to be paying income tax on this federal and state, depending on whether you're in a state with state income tax. So what, the net number here is what matters most because that's what's going to be taxable. But before we get to that, we get to take expenses. There's a lot of stuff we're going to start deducting here that you might not have thought about as a w two employee. Now on the 1099, I'm thinking about, do you have any travel? Did you have any auto? Did you do any trainings you paid for? Did you go to conferences? Did you have business meetings? Is there any meals and entertainment? Did you buy any equipment? I'm going to start asking these questions. You got to think back through the year if you weren't doing your bookkeeping and actually tracking this, which you need to do. But I know a lot of you haven't. You need to go back and be like, oh, my gosh, I have a lot of expenses here. And now they'll send that $10,000. 1099 is $3,000 because I have $7,000 worth of expenses.
Mark J Kohler:Yeah, $7,000 of expenses you were going to spend anyway, but now they're related to your business. And this is where tax strategy is very ethical. It's honest. The IRS and code section 62 says any expense incurred that was necessary to help your business grow and create income. That's a write off. And so how do you do this? And I've talked to my kids for years as they've gone into adulthood and had small businesses, and they're like, I didn't have quickbooks. I didn't have a set of bookkeeping. What do I do? Open up a spreadsheet on your laptop and then start going through your credit card statements for last year, your bank statements for last year, and just trying to find any expense you paid for that related to your business. And you may say, oh, well, I went to Costco and I bought a new printer. I was going to say fax machine, but many of you don't even know what that is. I had to deal with the IRS this last week, and they're like, can you send us a fax? I'm like, what am I in 1987? I don't have a fax machine. Do you know they have the same on hold music at the IRS they had 23 years ago? That's a classic I even told the agent, I'm like, it brings back memories with this music. And it was funny. I had a great IRS agent this last week. It's a hit.
Mat Sorenses:I know there's some good people there.
Mark J Kohler:Yeah. She was like, I'm jamming to some 70s music. Are you cool with that? I'm like, yeah, turn it up. So in the background, she was jamming 70s. I'm like, oh, my gosh. Anyway, the IRS spending their $80 billion on new workers. They're remote, and so I'm listening to dogs bark and 70s music with my IRS agent. That's great.
Mat Sorenses:As long as they answer the phone.
Mark J Kohler:Yeah, they're answering the phone. So here's the point. You're going to build a spreadsheet, go dig up any expenses you can, and we're going to give you a list here. So if you need to listen to this later, open notes on your phone, write this down somewhere. We want to give you the hot button items you're going to start looking for and then remind you of things you probably missed last year, that you're going to do better this year. So last year, Matt, let's start. What would be our list? Like, you're building your spreadsheet. I'm going down looking for expenses. What do you like? Okay, give me three.
Mat Sorenses:Could I say something that might not even be going through your list here? Home office. That's something you're probably, like, not looking for in your statements and everything, but it should be an expense to you. If you had a designated area in your home that you use for your business, that should be definitely taken as a home office deduction and you can take it on your tax return. That's going to give you a deduction.
Mark J Kohler:Yeah. And don't be afraid of the home office deduction. Some accountants that are still afraid of their own shadow talk about the audit risk of the home office people. There's a standard method, a simplified method. There are so many options there. You just need a reasonable approach to it. I've got articles on it on our website, on the home office. Just Google Kohler home office. Don't put Kohler and plumbing. Stick with Kohler and home office and you'll see a good article. Now give me number two. I said three.
Mat Sorenses:Home office. Okay, home office. I want to look at your cell phone. I love know cell phone. Your cell phone. Now, in order for to be an expense, you need to have another business number or a line or another phone in your household that you can be using for personal. But all of us are using our phones in our business. If even you just got a side hustle, like incidental use, you're going to be using that phone particularly for anybody in this gig economy. You're going to be using an amp phone. It's going to be used in the business. We want to take that as an expense because that's usually $1,000 a year just for the service, let alone was it a new phone you had to buy?
Mark J Kohler:Cases, cords, supplies?
Mat Sorenses:Yeah.
Mark J Kohler:Now, let me throw out the exact rule, because I like what Matt alluded to, and we're just going to go through this quickly. We talk about all these write offs and different methods. And by the way, on my website, markjoler.com, I have a 30 strategy ultimate guide that you can download for free. And there are 30 different write offs there, too. But on the cell phone, keep in mind, like Matt said, if you can show you have another line for personal use, that phone is now 100% write off. This is an IRS rule. The cell phone is 100% write off, not as listed property. And the cases, the supplies, the service, all the crap for your cell phone. You crack it, you break it, you go to cell phone repair, 100% write off. If you can show you have another phone for personal use, maybe your spouse, maybe it's just a home line plugged in the wall, a little winona writer, stranger things phone. But the second option is if you're like, well, I use my cell phone for my personal use as well. Okay, then just divide it in half. Take half of that as business and half as personal so it's not all or nothing. So you can find that balance. And I like that on the cell phone. Okay, number, what's your number? Two favorite.
Mat Sorenses:I got to go to number three. Do we need to edit that? Well, I should have been thinking of number three. I was actually listening to you. Let's see. Number three, auto.
Mark J Kohler:Oh, I was going to give you another non cash expense.
Mat Sorenses:Yeah, auto. This could be deceptive, because again, it might not be showing up like a piece of equipment or the fax machines, for example. So now auto is a nice one because the IRS has given us another simplified way to do this. Just track your mileage. And for most of you that are doing a side hustle and you're just getting a 1099, it's not like you're a contractor buying trucks and driving around to job sites, but you're just getting an auto. Now, you could be even a realtor or something like that. I mean, you're probably going to have a lot of mileage you're going to take. And so the nice thing about the mileage deduction is you track your mileage. What's the mileage for 2023?
Mark J Kohler:Oh, I knew you were going to.
Mat Sorenses:Ask 65 or something.
Mark J Kohler:Gosh, I broke my calendar.
Mat Sorenses:So let's say you drove. You add up the mileage, you're like, man, I drove 10,000 miles this year for my business. You're a real estate agent. You're driving to properties. You're showing them. If you drove 10,000 miles, let's say the mileage rate is 65 and a half cents.
Mark J Kohler:That was your guess. You were right.
Mat Sorenses:65 and a half cents for 2023.
Mark J Kohler:Yeah.
Mat Sorenses:So for 65 and a half cents and I drove 10,000 miles, that means I'm going to get a $6,550 deduction. All right, that's huge.
Mark J Kohler:Ooch.
Mat Sorenses:If I got that 10,000, 1099 and I was really driving that many miles, and maybe you are. You're a new real estate agent. Let me just give that example, because that's one where you typically would see high mileage. You're driving a lot to properties. Maybe you had one property closed that year, but you went and showed a ton of properties. Well, we're going to take that 6550. Now you're down to whatever it is left. I can't do the math there, but you know what I mean.
Mark J Kohler:Yeah, just give up on the zero point 6506,500. I'm just helping you out there on the 50. Matt's the lawyer, I'm the accountant. We're good. Okay.
Mat Sorenses:I thought it was 65 and a half cents.
Mark J Kohler:Well, okay.
Mat Sorenses:I don't know.
Mark J Kohler:No, this is good. No, you're right. 65 and a half. Let's do our math here.
Mat Sorenses:I don't want to leave $50 on the table.
Mark J Kohler:We got to do our math.
Mat Sorenses:We can get that extra $50.
Mark J Kohler:Yeah, no, you're exactly 6550. All right. Now, I'd like. Okay. By the way, I have an article on the site that I publish every January on seven ways to write off your auto. So make sure you're looking at other actual methods. You might have an suv, you might have a truck, you might have an rv. You might be doing turo. There's all these different strategies. All right. Okay, so we got home, office, cell phone, auto. I'm going to go with dining. I think dining is very underrated. A lot of people are not taking advantage of dining because when you meet with a vendor, a customer, a partner, and you're talking about business. That's now a write off. Up to 50%, and that includes the bar tab, the tip, all that. The valet is 100%. That's going to be a travel expense if you're doing valet.
Mat Sorenses:The American Valet association lobbied hard for that. They were out there on that. The AVA.
Mark J Kohler:Yeah, they're a big deal. Big deal.
Mat Sorenses:Actually, I think Ava is something else.
Mark J Kohler:American Valet association, they join the union. They have a union. So dining is a big one, and it's also going to reflect what your gross or net income is if you brought in a $10,000 1099. I don't think I want to write off $3,000 in dining. But could we write off three to $700? $800 for sure. So you want that tax return look like a of art? Don't get over zealous.
Mat Sorenses:All right, we got dining.
Mark J Kohler:Okay.
Mat Sorenses:I'm not a traveler.
Mark J Kohler:I like travel. Travel is 100%, and travel is different than dining and auto. They kind of go three and three, because if you're driving to the airport to go on a business trip for your side hustle, meet with a client vendor, go to a training. That's auto. Then you get to the airport, and you have parking. That's a parking expense. I don't even think I'd put that on travel. I might, but parking, then I've got 100%. Yeah, that's 100%. Then I get into the airport, and I buy a sandwich. Now I'm traveling, so that sandwich is a write off. I normally don't eat at the airport, so I had to go to the airport to get on plane. So dining at the airport is a write off.
Mat Sorenses:Oh, 100%.
Mark J Kohler:50% dining. Dining is always 50. So I have a dining expense while I'm traveling. But, mark, you didn't meet with a customer or vendor. Doesn't matter. You can write off dining by yourself if you're traveling. So I'm going to a conference all by myself. I'm writing off auto to the airport. My parking. Now I'm in the airport paying for food. Oh, I forgot my charger. Right? I have so many damn chargers in my car because I forget them when I'm traveling. So I walk down the way and I go buy a new charger for my business phone. Yeah, they're cheap at the airport. Now, assuming my cell phone is 100% write off, I'm taking 100% write off of any supplies while I'm at the airport. Then I pay for my airfare 100%. Write off. I get where I'm going. Uber, 100% write off. Hotel, 100% write off. I go to a training for my business, spending at least 4 hours a day and doing business, 100% write off. While I'm there, all my dining is 50%. That's a big deal.
Mat Sorenses:Freaking love. That was a great example.
Mark J Kohler:It's pieces and parts. And so when you're building your little spreadsheet, you're going to get those line items.
Mat Sorenses:But, mark, what if I didn't use my business credit card or my business debit card from my bank account for my business?
Mark J Kohler:That's regrettable, because it's going to create more work for you digging these up. But it's okay. The IRS doesn't care if you paid for it personally or out of your business account or out of your business credit card. They want you to be able to show a receipt that you really did buy it. But the IRS is going to be annoyed with your mess, I think. A stranger than fiction, such a funny show. And when will Ferrell goes into auto, what's her name, at the bakery, she just brings out this box of receipts. He's like, really? And she's like, tax man. I love stranger in the fiction. He's one of my favorite accountants. Will Ferrell.
Mat Sorenses:Yeah. Ben Affleck. I mean, come on.
Mark J Kohler:Well, Ben affleck's a badass and accountant.
Mat Sorenses:But will Ferrell, he's just a great show. That was an underrated show.
Mark J Kohler:It was underrated. Well, let me keep your receipts, travel, and all the little pieces of parts.
Mat Sorenses:Go ahead. Well, here's a lesson that's going to be learned as you hear going through this, and this particularly for anyone new to business or that's gone through the pains of this, is use a freaking separate account for this. Even if you just have a side hustle or that's a. That's going on schedule C. Obviously, if you've got a corporation, an LLC, an S corp, you're gonna have a bank account in the entity name. But even if you just have a sole proprietorship on the side, no entity, nothing. Have a separate account. It could just be one in your personal name. A separate credit card. What it is, it will make it so much easier that way. You remember, oh, I'm going to the airport. I'm using this card for parking. I'm using this card for that charge. I'm using this card for dining. Oh, I need to order something on Amazon. I'm using this card that way. You know, every time you use that card, just pull up those statements. Easy peasy. Easy to track this through the year rather than having to parse out in your personal bank account. Oh, was that Amazon charge the printer I bought or that fax machine I bought? Or was that some shampoo and conditioner I bought at the house?
Mark J Kohler:Love it. And I'm going to give a shout out to my daughter, Sydney, who is a realtor. And this last year, I was like, I need your excel spreadsheet, because I knew she didn't have quickbooks. And she's like, what are my write offs again? And I go, don't you go to my workshops? And she's awesome. She drummed up all of her write offs, but it was a pain. She didn't enjoy the process. And she just told me, like two weeks ago, one of my new year's resolutions, I am getting on quickbooks. I'm going to have the online version. It's simple, it's easy. I'm going to stay dedicated to one credit card, one debit card, because at the end of the year, I can go bink. And for the most part, you're always going to add things.
Mat Sorenses:Yeah. Sometimes you're at Costco and you buy $500 worth of groceries and $50 of it was personal. And so you got it on that card. So you got to sometimes track some things separately. And I do love quick with all this, too. It'll automate a lot of the transactions for you. It's like, oh, that charge for the Internet. We know that's a business expense and how to categorize it. There's some automation to it, too, that it's not as hard as you think. So don't be scared of it.
Mark J Kohler:Yeah. Now my number three. So this will be a total of six. Top six. This is the one that's easy to grab for last year, too, is equipment and supplies. Be thinking of anything you bought for your business. And if you have a business today, even if it's a little side hustle, you probably have a social media page. Do you have a camera, do you have tripods? Do you have additional iPads, a selfie stick. A selfie stick, pelican cases. I'm just looking around the office here, like, little switchboards or headphones, anything that would help. Mouses, iPads, fans, lighting. So anything you're doing to self produce content for your business that's going to help your business in any way, shape or form, that's a freaking write off. I mean, anything you buy at Best Buy or Apple store. You should be thinking first and foremost, how can I use this in my business write off and so really go after those hard. I think those are very important on the return.
Mat Sorenses:Okay, man, six. I love it. We hit through six.
Mark J Kohler:Yeah.
Mat Sorenses:Now you said that you have the guide with 30 and make sure you get over markjclohr.com. You can download that because there's so much to this. And what I'll say on those 30. I think the nice thing about those six is that's kind of like bread and butter. Everybody's going to have those.
Mark J Kohler:Yes.
Mat Sorenses:It's weird if you don't have those six now when you get to the other 24, there might be half of those you take. And everybody's tax planning is a little bit different. And that's why sometimes this can seem confusing. But what happens is I think in your business is you figure out what's an expense, what's not, what should I be tracking, what's deductible. And you're going to get in a rhythm. And remember the goal here is to take that 1099 that we got and whittle it down as little as possible. It's going to keep us in a lower tax bracket. It's lesser taxable income. It's less self employment tax. You got to pay less tax to your state. I mean, that's the whole game of tax planning here is to reduce that income by taking legitimate expenses that the IRS is offering you. They have told you track this stuff and we will let you expense it and pay us less taxes like they've given you that option. Don't be freaking lazy and let this go by and volunteer more money to the government. I just think it's crazy that people aren't taking advantage of a lot of these write offs when in the tax code it is offered up to you.
Mark J Kohler:Yes. Now before we give a couple of major takeaways in this whole process because you are now an entrepreneur. When you have that 1099, love it or hate it, you're in the game and you knowing the rules to that game is critical. Now don't hate me. Don't hate Matt. We're just players. Don't hate the player. We'll just help you with the rules to the game. But moving forward, here's one of the easiest ways to wipe it out. The final, I think nail in the coffin. That's just awesome. Is that for any of you that have children, adult children, younger children, if you have a side hustle and you can incorporate the help of any of your family members that you're already supporting. So let's just go with kids under age 18 for a moment. We've got podcasts on this and articles and all sorts of good stuff that you can go back and consume on this. But let's just say hypothetically, you have a 16 year old in your household and you're helping them out with school and soccer and music and supplies and clothing and all these. You're going to spend five grand a year just on basic necessities for your kid. Stop doing it. Stop doing it. And I didn't mean kick them out. Let them pay for those things. So now you take the income from your side hustle and pay your 16 year old to help assist you in your side hustle. Whether it's marketing, social media, cleaning the home office, whatever you can do. If you drive for Uber, have them wash the car every day, whatever it is, get that 16 year old involved. Now, I could pay the 16 year old five grand, take a write off for that. And the 16 year old, in 99% of the time, in most states, for five grand of income, they're not even going to pay tax. They don't even have to file a return. So there's some nuances to that, but that's the general strategy that's very common. So get your kids involved, and then if you're helping a kid above age 18, you're going to 1099 them. They're in a lower tax bracket. They are going to get another bite at the apple with their write offs. So integrate your family moving forward. Now, I can't do that for last year. Got to be proactive for this year. And that's why listening to this podcast embracing entrepreneurship is going to be one of my next tips.
Mat Sorenses:Yeah. And I think if you're kind of transitioning in, I mean, we talked about one of the motivations is to whittle down the taxable income. But a lot of people that have a side hustle and this is going to be main hustle are like, all right, I've got a good income. I'm trying to build wealth, too. Okay, well, how do I do that in a tax efficient way? Are you contributing to your retirement account? Could you do a solo four hundred and one k in your small business here on the side? Could you put in money to a backdoor Roth Ira? If you're high income, could you put money in your kids Roth IRAs and start those and get those going if they are working in your business? Now, we're talking about taking this income you're earning, getting tax deductions or putting it into tax free vehicles like Roth Iras to now build tax free or tax deferred wealth. And so again, that's next level on this. But that's probably the next step of this, is not just getting down your taxable income with expenses, but utilizing that money that you are making in the business or from your side hustle to build wealth.
Mark J Kohler:I love it. Here's my. And we're such huge proponents of this whole system and how wonderful it is. So I'll just finish with this. And taking off where Matt left off is if you're working that second or third job to literally just keep your head above water, I get it. But it doesn't have to stay that way. If your mindset is I'm doing this to start to get above the water and get in the dinghy and then onto a bigger boat and be safe and really navigate those waters rather than just being out there floundering, trying to stay afloat. The side hustle opens up a unique opportunity to be proactive, to do better planning to get out of debt and use the income first to get out of debt if you have a consumer debt issue and then start building that wealth and also start learning how to blow up that side hustle, there are so many unique ways to make money with a business idea that can involve online sources and networking with others and joint ventures, and embrace the opportunity. Think of where you'll be five or ten years from now if you take this side hustle and really let it marinate and become a part of you and embrace this american dream aspect while you keep your day job. Keep the day job if you want. That's cool. But this is such a neat opportunity to build more wealth, build your retirement accounts, get out of debt, and use it as a stepping stone to teach your children, teach your family, and just live a better life. It's exciting.
Mat Sorenses:Dude, I love that. And I love that little analogy you gave, too. If you feel like you're drowning, we're trying to get you on the dinghy to get to the bigger boat. And if you're going to get on a boat, by the way, I just want to say I want you to get on suck my wake with Uncle Roman. I don't want you in a pontoon boat with your dad. You want to go on a pontoon boat with your dad or you want to get on suck my wake with Uncle Roman? Suck my wake. Sorry, dad. Dan Aykroyd John Candy. Great outdoors.
Mark J Kohler:That was a good.
Mat Sorenses:That's the business. I want you to have the jet boat with Uncle Roman. Now we're going ripping know. Now your business is going somewhere.
Mark J Kohler:It's so exciting. And we use this last analogy. We used this analogy last week. Is that when you're navigating in an airplane or on a boat, one degree of change in your navigation software, or you're using the old method, some sort of whatever they call those things, and come home.
Mat Sorenses:Well, there's not a conversation I like. We go back to the Boy Scout orienteering merit badge, Hornblower.
Mark J Kohler:And they'd use those cool little gizmos they'd look through back in the days to navigate. But if you're off 1% or on 1% in the real direction you want to head, once we get you out of that water and you're into that little boat and you're starting to head in the right direction, just a little bit of a change in where you're headed can have a huge result 510 or 15 years from now. So don't think it's a get rich quick scheme. Don't compare yourself to others. We're not going anywhere. We want to be here every week to provide ways to build your business. We need to talk more legal issues that you might be facing. And then the tax issues are constantly integrated into this. So we wish you the best. Don't take that 1099 and use it in a productive way. Yeah, that's the takeaway for me.
Mat Sorenses:Yeah. It's not a buzkill to get the 1090. And think of this, a tax planning opportunity. You got to do it. You made some income. Let's take all these deductions possible and make sure you're clicking on the articles that we have here on the show notes. There's a lot more detail there. And also, you might need a tax advisor, you might need an accountant to help you through this as you're getting into this. And you can get@markjclar.com.
Mark J Kohler:Too.
Mat Sorenses:You've got your tax advisor network there. People are certified, working with small business owners, people on Main street, real strategies to help you save money.
Mark J Kohler:It's crazy. We have over 500 enrolled agents and cpas around the country now, certified just in the last 18 months on every strategy Matt and I talk about on this, and they're a part of our community getting trained every week, and many of them are looking for clients that respect them and want that help and support. They just don't want someone to punch the numbers in and pick it up later after you go grocery shopping at the strip mall. If you're looking for a real tax advisor and you want to build your wealth. Yeah. Get to mark, kcor.com and the tax pro network. Interview a tax advisor around the country that could be in your local area or across five states from you, but they get you. They understand you. And a good tax advisor can save you ten times what you're paying them. So check that out.
Mat Sorenses:All right, guys, we'll see you next week. Thanks for being here. You close?