#538 15 Strategies To Reduce Your Year-End Taxes IMMEDIATELY

In this episode of the Main Street Business Podcast, host Mark J. Kohler shares his more powerful and essential year-end tax tips. From managing expenses to charitable giving and real estate strategies, get actionable insights to wrap up the year right and boost your business savings.

Here are some of the highlights:

• Mark stresses getting books in order for year-end planning.
• Mark lays out the best practices and strategies for paying children 18 and older in your business.
• Detailed considerations and options for paying a spouse in business.
• Importance of 1099 planning for subcontractors.
• Short-term, long-term, and self-rental options.
• An in-depth look at the 529 state deduction strategies for college savings.
• Mark encourages everyone to discuss strategies with expert tax advisors.

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Transcript

Year-End Tax and Legal Strategies

Speaker 1 0:00

Welcome to the Main Street Business Podcast with your distinguished hosts , mark J Kohler and Matt Sorenson . Both are best-selling authors and have over 25 years of industry experience , with 10,000 client consultations , making them the leading tax and legal experts in the nation . Together , they'll unpack the most complex tax , legal and financial strategies crucial for saving more , stressing less and building generational wealth . Today they're your personal advisors , ready to break it down for you and make the tax and legal game easier than ever . Here is Mark and Matt .

Speaker 2 0:34

I'm going deep here . I'm not just giving the fluffy year-end tax strategy of sell , stock , fund your IRA . That's BS . I've got 25 strategies . I want you to do is be able to talk about those with your advisor . A good business owner can at least talk about them . You don't have to understand actually every nuance . You don't have to know how to do your tax return , but you got to own it as your small business owner . Cpas make it more complicated than it needs to be and I love accountants and enrolled agents that are out there just scrapping and making it happen and they're having real conversations with clients . I'm not teaching fringe strategies . I'm not high risk . If you think I'm saying something that's high risk , you've been hearing from someone that's overly conservative and I will stand by that . I am here with you live , saving you money , making you money and protecting your money . This is the conversation more business owners are starving for and want more than any other conversation , but they don't know where to turn . I am so excited to be here with you .

Speaker 2 1:33

Cpa attorney , bestselling author , podcaster , influencer on YouTube , and I've been in the tax and legal industry for 25 years , literally a certified public accountant , attorney , partner in a law firm accounting firm . I've been doing trainings for other CPAs and attorneys for years . People , you can rely on this advice and I promise you right now , many of you are going to have accounts that might go , oh , that's too risky or oh , you don't need that or that won't help you . People , you got to captain your own ship . Write down these ideas and then get a second opinion and see if they apply to you . I've got 15 more I'm going to share with you today . I've already dropped 10 in the last two lives over the last two weeks . I'm like we got to get these out here . There's 15 more strategies that I know could save you thousands and I'm going to burn through these 15 because every one of these 15, . I've got another YouTube video . I got another podcast on this . My Main Street Business Podcast now has over 3 million downloads .

Speaker 2 2:27

If you don't have a tax and legal source that you're using to help manage your American dream your side hustle . This year , there's over 45 million LLCs in America . Over 50% of Americans have a side hustle . That's a small business people . A side hustle is a gateway drug to a small business and that's building wealth , putting that money away for the future , paying off debt , buying real estate , investing in Wall Street , doing what you love to invest and build wealth . So let's get into it . 15 strategies . So let's go over here to the presentation Now on this . 25 different strategies and here we go .

Speaker 2 3:11

I want to just mention the first five that we covered the other day . So we had the retroactive S-selection for any of you that were in LLC and you made more than 40 grand this year . We want to see you go back into a possible go back into a possible S election so you can do that . I've got again other videos on that . Number two nailing down your payroll For any of you that were an S Corp this year . Number three make a sale . Get out of startup mode . If you have a small business , one of the first things you can do is make a sale . Number four hold a board meeting during the holidays . Your Thanksgiving should be a tax write-off . Get your mom , dad , brother , sister , best friends at a board meeting to talk about your business and the money . One . Number five get a health savings account and HSA qualifying plan open during enrollment period . That started yesterday . Okay , the next five we covered last week .

Speaker 2 3:58

I just want to hit the highlights Dissolve or set up any entities . You may or may not need Flexible spending accounts . Use it or lose it . Some of you at work might have some money to turn in for healthcare expenses . That's free money . Third pay kids that are in your business . Any of you have children under age 18 ? That's a chapter in my book . I love to talk about it .

Speaker 2 4:17

Number nine the solo 401k . If you have a small business owner , you can have a 401k at work . You can have a 401k in your side hustle Super cool . And then number 10 , buying a vehicle before year end . All right , so let's bounce over Dylan , let's get off the whiteboard and let's go to number 11 . I just want to talk about this for a minute . Get your books in order . So I'm going to go a little slower here on our next 15 . And these are really important . Next 15 . And these are really important . These were kind of bonus . I threw them out last week but I needed to give them a little more airtime .

Speaker 2 4:51

It's hard to make decisions before year end as a small business owner If you don't even know what your income and expenses are . You don't have to have . I mean , be nice if you had QuickBooks and a good , good little accounting system , but at least get out your Excel spreadsheet , try to throw down what your income is , what your expenses are , and just guesstimate , so that when you get on a phone with a tax advisor and , by the way , I'm going to give you a resource of tax advisors you can find around the country I don't make any money off of them entering into a relationship with you , but they're all trained by me and they can help you do some year-end planning . You want to go into that meeting with at least a ballpark of what your income and expenses are . Next , let's shift income and expenses . Some of you might be able to say , hey , don't pay me until January 1st . Now you're not paying taxes until 2025 on that money . Some of you are like , ooh , I'm going to buy a laptop this Christmas , or a new phone or a new camera or a new tripod , something for your little studio or whatever you're doing . Pay for it on a credit card in December . It's a tax write-off this year . Sometimes you can push five or 10 grand to next year of income and bring five or 10 grand forward on a credit card purchase that you're going to pay off in the first part of January . Anyway , that's a $20,000 shift . If you're in a 30% tax bracket , you just saved close to seven grand in taxes . That's between Fed and state , because you've got state tax to deal with here too , folks . So , shifting income and expenses ,

Small Business Tax and Financial Strategies

Speaker 2 6:14

all right .

Speaker 2 6:14

Number 13 , the health reimbursement arrangement . Okay , now let's go over to the PowerPoint . So this is a strategy for those that are able to take a couple quick notes . The health reimbursement this is a strategy for those that are able to take a couple of quick notes . The health reimbursement arrangement is a plan , effective 1-1-23 . And then you're going to reimburse yourself in your business for medical expenses . Now , however you're structured , it's going to be a little different . If you're a sole proprietor , an LLC , single member , llc or an S corporation LLC taxes , an S corp , married or single , there's going to be some different ways to approach this . I have whole podcasts on this for an hour , so make sure you dive deep . And here's the break even If any of you this is whether you have health insurance or not If you have more than four or five grand in medical expenses this year eyes , dentals , copay , chiropractic , massage therapy , physical therapy , prescription drugs If you've spent out of pocket over and above the health insurance four grand or more and you have a small business . You got to look at this because we could write off that four grand . It's a big deal , all right .

Speaker 2 7:19

The next one is for any of you that have kids 18 or older . I'd love to structure this where you could either W-2 or 1099 your kids that are 18 or older . Now you just can't say you paid them come in January . You've actually got to pay them real money . Now . They may reimburse you for things that you've already given them this year , but show a paper trail from your business Again . I've got videos , but show a paper trail from your business Again . I've got videos , podcasts and chapters in my book on this . Get over to Amazon . Mark J Kohler Gosh over 500 five-star reviews or more on my tax and legal playbook . So study this little one for kids 18 and older . I love to pay them out of your business and then check this out . They could fund a Roth IRA whether you pay them out of your rental property business or your operational business . I love it .

Speaker 2 8:08

Now , for some of you that are married , should you pay your spouse ? This is a big one With the spouse . I want to make sure that you're not putting your spouse on payroll just because you think you have to . If you and your spouse kind of own the business and you're helping out one another , one of you can take the income and then give your spouse some I guess a stipend or a monthly fee or whatever but you don't want to put them on payroll . We don't want to put it on a W-2 , because now you've got to withhold FICA , you've got to withhold Sudafutica , sudafutifica all the withholdings as a payroll and that's not going to be fun , that's going to be expensive . And some people are like well , I want to pay my spouse because I want them to get social security someday . They're going to get the spousal benefit anyway . So don't just be throwing your spouse on payroll because you think you have to . The way , the only reason I'd like to do it is to fund a solo 401k , so now your spouse can put away extra money in a 401k . They can do a Roth , whether you give them a W-2 or not , because again you're married and you have joint income . All right .

Speaker 2 9:14

The next strategy that's fun is paying grandkids , nieces and nephews . For any of you out there that are helping a niece or nephew , you've got grandkids and why pay taxes and give them money . Put them on the payroll . Now the way to do it is to 1099 their parents . They form a little small business that's supporting your business . Pay the kids , zero it out . You don't pay tax , the parents don't pay tax and your grandchild or niece or nephew don't pay tax on the first $13,000 , $13,850 this year . So I'm not saying you pay them $13,000 . I'm saying you can pay them up to that and there's no federal tax on that . Some states have a different level and you can pay them more than $13,000 too . They're going to be in a lower bracket than you . But folks , here's the big deal and again be writing your questions in here . We're going to go over these in a moment and I'll rapid fire and answer questions as fast as I can here in a moment . But here's the deal . Too many family members pay taxes at their bracket in their small business and then give money to support their kids or help their nieces or nephew , help their mom and dad . No , let's get them on the payroll or a 1099 and take a tax write-off . They could very well be in a lower tax bracket , all right .

Speaker 2 10:29

Next strategy I love this Number 17 . Let's go back to the PowerPoint just for fun here . I love the Roth conversion People . If you saw in the news last year Peter Thiel , part owner of PayPal and Facebook , he has over a three to five billion dollar Roth IRA three or five , three to $5 billion Roth IRA and he started with the same six grand you and I can start with by putting away money in a Roth . You can do it at any income , any age and that money grows tax-free for the rest of your life . It is so incredible . But if you have an old IRA or an old 401k , you've got to convert it to a Roth and the deadline is 1231 .

Speaker 2 11:11

So you want to get with your tax advisor and again I'm going to give you a resource here for tax advisors to just have that one hour conversation and go should I be moving more money to Roth ? And there's break points and I call this chunking . You want to chunk it in chunk based on your tax bracket so you don't go up to an extra tax bracket . Super cool . Hey , if you guys are noticing this , I really want you to feel like I'm going deep here . I'm not just giving the fluffy year-end tax strategy of sell , stock , fund your IRA . That's BS . I've got 25 strategies and here we got seven or eight more to go through and this is recorded so you can go back and kind of flip through these . All of them are listed here in this video .

Speaker 2 11:54

So what I want you to do is be able to talk about those with your advisor . A good business owner can at least talk about them . You don't have to understand , actually , every nuance . You don't have to know how to do your tax return , but you got to own it as your small business owner . You can do this , people . It's not that complicated . Cpas make it more complicated than it needs to be , and I love accountants and enrolled agents that are out there just scrapping and making it happen and they're having real conversations with clients . You CPAs out there . I need you to put your guard down . Don't think you know it all . There's great strategies out there .

Speaker 2 12:28

I'm a member of the AICPA . I'm nominated to be on the Arizona Board of Accountancy . I'm not teaching fringe strategies . I'm not high risk . If you think I'm saying something that's high risk , you've been hearing from someone that's overly conservative and I will stand by that . All right . So let's go to our next strategy , number 18 , very common .

Speaker 2 12:48

I'm going to give some money to charity before year end . Some of you might tithe . You might give money to your church or your university that you love . Remember , if you put a donation on your credit card or write a check , it counts for 2023 . Also , if you have appreciated stock or appreciated crypto , you can donate that . Instead . Don't sell it , pay the tax and give it to charity . If you're over 70 and a half , you can be donating your RMDs and not paying tax on that . Those are required minimum distributions , so make sure you talk with your advisor there .

Speaker 2 13:20

The next one guys , this is a big one Now . I know we only have eight weeks left in the year , but that's buying a rental property . This is huge and there's three main options here for business owners . There's the short-term rental you see up there in the top left where you buy a rental property and you put in 100 hours of work and get it on Airbnb before year-end and at least have two renters , so that you have an average of seven days or less . I've got podcasts and videos on this extensively . It could be very hard to pull off in the next eight weeks , but for some of you that might have a project in the works . Let's get it across the finish line .

Speaker 2 14:02

Next is a long-term rental . If you're a real estate professional and you've got a property that you've been looking at or you could close before year-end , you could get some cost segregation and depreciation there that could really pay off . But again , you've got to be a real estate professional . On short-term rentals you don't . You've just got to be able to put that . 100 hours in Self-rentals are super powerful . That's when you rent your own building or warehouse your own business . And for many of you that are just small business owners , you can go and talk to a realtor and talk about a commercial condo space where you actually don't rent from someone . You own your little space in a big building , very , very common . A lot of corporate centers are going to go through a condo conversion because they can't keep the place rented , so they're going to sell the units in a building Very , very common . So be looking at that , all right .

Speaker 2 14:48

Next thing , let's talk about quarterly deposits . This time of year , some of you may or may not have given the IRS or the state enough money . You're going to have a tax bill coming out next year . The IRS and the states like to have you make quarterly deposits and if you don't , there's a penalty . It's not a big one , but I have clients that hate penalties . They just hate it , and so if any of you are like you know what I've made money this year . I remember paying penalties last year . Maybe I should make a deposit , and so making a deposit could be a really good strategy . That's number 20 in my 25 strategies , because before you're in , and especially in January , you're preparing now to make sure it's done by January your quarterly deposits , so that you don't pay any penalties . Love it . Number 21 , a big one .

Year-End Tax Strategies Overview

Speaker 2 15:39

Let's go to the PowerPoint on this one the intangible drilling cost deduction . This is where you invest in oil and gas . Now , for some of you that are higher wage earners and I'm grateful you're listening to this you may want to invest in an oil and gas project before year end . I just shot a video on this last week . This is a topic at my 360 event . I'm sure I'm going to mention that here in a minute . There's a whole class just on this , and it's where you invest in oil and gas and you get to take depreciation on the oil rig and you don't even have to work on the oil rig . You can be just a part of the partnership . This is very , very powerful . Why is the government doing this ? They want us drilling in the United States . They don't want us relying on foreign oil reserves . They want us drilling in the United States . So investing in a drilling project in oil or gas anywhere in the country can be super powerful and I'd love to have some of you look at that . All right .

Speaker 2 16:38

The next one is the 529 state deduction . Now , I'd love to have some of you look at that . All right . The next one is the 529 state deduction . Now I'm going to zoom in on this For some of you that are putting away money for your kids in a 529 plan .

Speaker 2 16:48

Now I'll tell you I'm not a big fan of the 529 . I like the Coverdell better , which is a Roth IRA , if you will , for college , because it grows tax-free , comes out tax-free for any college expense and you can kick it to nieces , nephews and grandchildren . But some people like the 529 because you can put more money away . I don't like that because you don't get to invest the money . It just goes into a state fund and the expenses are buried in there . Try to find out how much their expenses are in these 529s , good luck . But here's nine states that allow you to take a state tax deduction , no matter where the 529 is located . So you could live in Arizona and invest in a 529 plan in New York and you get the write-off in Arizona . So if you live in one of these nine states right here Arizona , arkansas , kansas , maine , minnesota so if you live in one of these nine states right here Arizona , arkansas , kansas , maine , minnesota , missouri , montana , ohio and Pennsylvania you could invest in any plan in the country . Now if you live in New York and you want the write-off in New York , you've got to be able to . You've got to do a 529 plan in New York if they offer a deduction . There's 30 states , if you see at the top there , including Washington DC , they give you a deduction for a 529 contribution for your kids for college . But only these nine states let you invest anywhere . So there's 21 other states that you got to invest in . That state 529 . Anyway , it's out there for those of you . That's number 22 .

Speaker 2 18:16

Number 23 , get your 1099 plan in place Now . This is a year-end tax strategy that's going to save you a lot of heartache . So if you are going to be paying subcontractors in your small business . You've got to issue all of those 1099s in January . Ask them now for their W-9s . Get them now , especially before you give them any money , because once you give them money , they're not going to listen to you as much and if you can't send them a 1099 , you have penalties and technically you're not allowed to take the tax deduction . You've got to be ready for 1099s going out in January . Get them going now .

Speaker 2 18:59

I have articles on this . One of the best , the most viewed article on the 1099 topic on Google is mine . So when you Google how to do a 1099 , you're going to see my article . Of course , it's all over my website . Now .

Speaker 2 19:12

Number 24 , take advantage of any capital losses before year end . Some of you might be selling stock that you have a gain in because you have a carry forward loss . Some of you are maybe selling some crypto at a loss because you have some gains in stock , and so you could take crypto losses , capital gains from stock , capital losses from stock and crypto and just kind of see where you're at . It's number 24 for me , because it's not a big one . Of course , forbes Magazine puts this as top three , which I think is ridiculous , but for us small business owners . This is one where you just want to talk about it and see what you've got going on .

Speaker 2 19:51

And then , number 25 , there's this cool strategy called the Charitable Remainder Trust , a CRT . We have an attorney here in our office , max Merritt . He's fantastic . Out of our Arizona office , consults with clients around the country . Now here's where a CRT makes sense . You've got appreciated property , appreciated business , appreciated stock . You need to sell it before year-end and you're going to get killed with taxes . Throw it into a CRT , get a tax deduction income for the rest of your life , asset protected and no tax on the sale , and all that money goes into a bucket that generates income to you for life . There's an actuarial table that tells you , based on your age and gender , how much money you're going to get for the rest of your life out of that bucket of money . We run the numbers , we take you through it Super powerful . But this is for any of you that have a highly appreciated asset that you want to unload . Let's consider the CRT . Wow . So , my friends , that is 25 year-end tax strategies that I think are just absolutely critical to consider .

Speaker 2 20:58

You can go through the video there . Slow it down . I hope that this has been super helpful in understanding that there are options , there are ways to save taxes and make money and build wealth . Please get to other videos on my YouTube channel . Just type any of these topics in the word Kohler and you're going to see a video or an article on it . Google it .

Tax and Legal Wealth Building Advice"

Speaker 2 21:16

I am not going anywhere . I'm here every week for a live broadcast helping you side hustle small business owners , big business owners all over the country that are starving for tax and legal estate and wealth building advice that's straightforward , legit and makes practical sense . That's where I'd love to be , so thanks for watching today . Please share the video , share it with your friends and keep living the dream . Get over the network , get in , get in an appointment All of you . Your homework is to get an appointment with a tax advisor for just an hour . In the next two months , they should save you twice . Whatever you pay them , don't worry . Well , they're $400 an hour . Yeah , they're going to save you 800 . See what I mean . Rich people spend money to make money . You can do it . Hang in there .