Episode 62. How 1 Tax Strategy Created a $220,000 Deduction for This 7‑Figure Printing Business

In this Hot Seat Tax Review, I review the tax return of a 7-figure printing business owner and show him 1 tax strategy that could help increase deductions and reduce taxes.

His name is Slava, and he sent in his business returns, real estate returns, and personal return so I could review the full picture.

In this podcast, I walk through what I liked, what I would fix, and what strategies he should review with his Tax Advisor going forward.
The biggest opportunity is his self-rental tax strategy.

He owns the commercial building where his printing business operates. Because the same owners are involved in both the business and the building, he may be able to group the rental activity with the business activity and deduct rental losses against business income.

I also explain how a self rental tax strategy with a cost segregation could create about $220,000 in additional depreciation deductions on the commercial property.

We also cover:
✅ Reasonable compensation
✅ Why I liked that his printing business had no ending inventory
✅ Self-rental tax strategy
✅ Cost segregation
✅ Schedule C mistakes
✅ Hiring your kids
✅ PTET
✅ Retirement planning
✅ Real estate professional status

This is a real tax return review with real business owner numbers, and it shows why tax planning should go much deeper than just filing a tax return.

Before using any tax strategy, make sure you speak with a Tax Advisor who can review your full situation and help you structure everything correctly.

🆓  Download FREE PDF: 7 Write-Offs Every S-Corporation Business Owner MUST Know:   https://7taxwriteoffs.com/?el=podcast&htrafficsource=buzzsprout

*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your attorney, accountant, tax preparer, and/or other advisor regarding your specific situation or your client’s specific situation. The information and all accompanying material are for your use and convenience only.

Transcript

Welcome And Hot Seat Setup

SPEAKER_01 0:00

Hey and welcome to another week of Hot Seat Tax Return Review. This week I reviewed a tax return for a seven-figure business owner that owns a printing company. This individual, his name is Slava. He sent in all of his business returns, all of the real estate returns, and all and the personal return with him and his wife. So I have reviewed it and I came up with a list of things that he can, he shouldn't do, and actually some things that I like that he's doing. Ready? Let's dive in.

SPEAKER_02 0:26

Welcome to the tax reduction podcast for money-making entrepreneurs with Boris Mucheev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using Proactive Tax Strategies. And this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy-to-understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.

S Corp Paychecks And Inventory Choices

SPEAKER_01 0:59

Alright, Slava, so let's talk a little bit about your tax citation. So I did review your tax return. I saw some things that I like, and I have some suggestions as well. So I actually uh numbered this. So we have like seven things that we're gonna talk about. Okay, so if you have any questions, you let me know throughout, and I'll try to go slowly so I can explain that. Uh, number one, I always focus first thing I focus on is salaries. Okay, so Tanya, your wife, is taking out $88,000 from your main business and you get paid $27,000. I'm assuming that's because you already have another job as well, and not you're not putting in as many hours here. So and Tanya puts in probably full time, correct? Close to that, yes. Close to that. So based on the profit that I saw in the business and what she's paying herself, or what you're paying her in the business together, what you guys paying her, $88,000. I'm totally comfortable with that. Okay, I think that's okay. I do think there's a room probably to bring it down a little bit less. I would recommend just assessing the entire uh how many hours and what she does exactly in the business. Based on what I saw, I think you can probably bring it down to $65,000 again, based on the profits and the things that I've seen on your tax return. Okay, so I would probably explore this with your uh with your advisor. Another thing I I like in your um tax return, I didn't see any ending inventory. And I know your printing business, I've seen some printing businesses where they have inventory, and I like the fact that you don't. If you ever switch accountants for whatever reason, I don't know, whatever happens, right? Um, and that accountant puts ending inventory, tell them you don't want to because you have not been reporting it and you already compliant under 9AFS 471c. I can talk to you a little bit more in detail about that after we do this, but the fact that you don't have inventory for a printing business, that's good. Continue that. I saw you have cost of goods sold, everything going into purchases. I was totally okay with that. I was actually happy to see that. Okay, so that's good.

Self-Rental Grouping And Cost Segregation

SPEAKER_01 2:49

As far as the rentals, that's where I put in a lot of focus on. I know you have a couple of rentals, um, and you have losses. Some of the losses are not deductible because if these are passive losses, I saw you had some carryovers in in the past, but you recently purchased a building for one point uh uh one point one million, I think you said, right? Which is a self-rental, which is where you are the only tenant, correct? Absolutely. Right. So you are the only tenant. Do you own that building with yourself and Tanya or just you?

SPEAKER_00 3:19

Uh it's me and my partner, business partner.

SPEAKER_01 3:22

It's your business partner. Okay, is is that the same business partner uh partner on your business, on the uh printing business?

SPEAKER_00 3:30

Yes.

SPEAKER_01 3:30

So you do have a partner on the on the on there as well?

SPEAKER_00 3:33

Correct.

SPEAKER_01 3:34

Okay, got it. So because you have you and your partner own a business, and you and your partner own the rental property, you qualify for a self-rental. That means you can group these two activities together. Any losses generated from this rental property can be deducted against your business income.

SPEAKER_02 3:54

If you have a tax preparer and you do not have a tax advisor, the only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Boris put together a free PDF for you, the business owner. Seven tax write-offs every S Corporation business owner must know. In this PDF, you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.

SPEAKER_01 4:25

And you do this by basically attaching a statement on a tax return, letting the IRS know, hey, we own 100% of the property, we own 100% of the business, and we're grouping it together as one activity. You can generate close to $220,000 in additional depreciation deduction by doing cost segregation. So think about it this way: when you buy a commercial property, you depreciate it over the course of 39 years. Okay? But about 25% of that of the building value, give or take, can be depreciated up front in the first year because of bonus depreciation. It doesn't matter that you purchased this property in the past, you can still do it this year to catch up on everything that you have missed. In your case, you only bought it a couple of years ago, so that gives you pretty good advantage, okay? So approximately give or take, you can generate additional $220,000 deduction, $100 for you, $100 for your partner.

unknown 5:18

Okay.

SPEAKER_01 5:18

Does that make sense?

SPEAKER_00 5:20

Yes.

SPEAKER_01 5:20

Okay, awesome. Um, so that's where I would speak to your accountant, your advisor, be like, hey, can we do this? I want to do a self-rental. And again, that's because you meet economics tests. You and your partner own the business, and you and your partner own the real estate. Okay, so both of you meet that test, so that's good. And I saw that you have a real estate in a separate LLC, which was also good. So you meet all of those

Schedule C Red Flags And Fixes

SPEAKER_01 5:41

tests. The next thing is that you have something that's called MS Graphics, and it was reported in a Schedule C with a $7,000 deduction for uh whatever, there was a $7,000 deduction, but there was no income reported. Now I'm sure it's a legitimate deduction, not saying it's not, but one of the things you have to be careful is that Schedule C has a very high chance of an audit rate. Okay? So especially if it was uh you uh there was a deduction but there was no income on it. And I'm sure that you were maybe advised, like, hey, put this deduction through here. If I was you, or if I was your accountant, I would advise you is there a way we can use deduction in an already established business, which is an S corporation that you already have?

SPEAKER_00 6:24

Uh this one is we just bought another building, like 500,000 building in December.

SPEAKER_01 6:31

In MS Graphics.

SPEAKER_00 6:34

Yes.

SPEAKER_01 6:35

Okay.

SPEAKER_00 6:37

And no, hold on, no.

SPEAKER_01 6:43

Yeah, but this was on Schedule C, I saw.

SPEAKER_00 6:46

Right. Uh not sure what he meant by that.

SPEAKER_01 6:50

Yes. So take a look at that. Okay. I I see this common mistake is that sometimes business owners don't know what is on their tax return, and whatever, maybe there was a miscommunication with your accountant or whatever that have may have been. But remember, whatever's on the tax return, you are responsible for it. Okay. Now it could have been a legitimate deduction, maybe it just didn't belong on Schedule C, but belong on schedule E, or whatever that may be, because it's a you're saying building property here. I'm just saying it was misclassified. And because it was misclassified, it could trigger some unnecessary things. So that's all I'm saying. So now it's good that you and I discovered that it's just probably sitting in the wrong place. Okay? Okay. Cool. Yeah, and this was only one deduction there. So I figured something was off. So I would say that is it. Okay.

Hiring Your Child For Tax Savings

SPEAKER_01 7:34

Um, another thing, you told me you have children, a 13-year-old boy. Am I correct? Yes. Okay, yes. So you can utilize a hiring your children tax strategy where you pay your children up to $16,100 every year because that is a standard deduction. Okay, and anybody that receives income under the standard deduction, they're exempt from paying federal income taxes on it. So by hiring your children, a 13-year-old in your printing business, which could be very helpful, you can actually pay that child up to $16,100, take a deduction, and your child is not gonna pay any federal income taxes on it. Just before this call, I showed you my 13-year-old, he's sitting right here, right? And he was he's here in uh in the office with me for the summer. He's helping me out in the office, he's making some phone calls to our clients, sending them shirts. We got this uh save 100k now shirts that we're going out going out to our clients. He got their addresses, he's packaging it, and he helped me to set up a studio. So these are all the legitimate jobs that I found him in my business, things that he's capable of doing, okay, and he's helping me with it, and that is hiring your children's strategy, and you can absolutely do it. So, again, if you are in a 30% bracket, just think about paying your child $16,000. That's already $5,000 in tax savings. Okay, but of course, you have to pay them for the work that they actually do, a reasonable amount uh for the work that they do. Does it make sense?

SPEAKER_00 8:52

Yes.

SPEAKER_01 8:53

Cool. I

PTET Election To Beat SALT Caps

SPEAKER_01 8:54

did notice also, and I asked you and confirmed with you that you are not paying any PTET taxes. Do you know anything about the PTET?

SPEAKER_00 9:01

A little bit.

SPEAKER_01 9:02

Okay, so it's right, it's a pass-through entity tax. What it means is that your state is letting you pay a business tax. Oh, excuse me, to pay a business tax instead of a state income tax. Because when you pay a business tax, you get a deduction. Okay, when you pay state income taxes, you were not able to in the past, but now with a big beautiful bill act, the limit is now forty thousand dollars. But that doesn't matter. I have tell all my clients to do PTET because once you start making more than six hundred thousand dollars in your business or taxable income overall, that 40,000 cap drops to 10,000. So you always make want to make sure you're paying PTET because that would give you an additional nine thousand dollar deduction. Okay? Okay. So this is something you need you fortunately for you in the state of Minnesota, right? You're in Minnesota, correct?

SPEAKER_00 9:49

Yes.

SPEAKER_01 9:50

In the state of Minnesota, you don't have a deadline to apply for it. You just have to apply for it with a timely file tax returns. With New York State, there's a hard deadline, separate filing in March. Uh, California with like extension filing in June. So your state is one of the states that says, hey, when you file tax return, just check the box to be able to take advantage of this. Make sense? Yes. So the next time you're file in a 2026 tax return in 2027, you can check the box and make that election for 2026.

Adding A Second 401(k) Plan

SPEAKER_01 10:20

Um retirement, I know you have a W 2 job, you're not as much invested in the business as is Tanya, okay? And you have a W 2 job that is paying you a salary and you're maxing out your 401k, you can also open up a 401k account for your printing business, okay? And Tanya can do what you're doing in your work, which is get $24,500 for herself as well. Now I know you have employees, but you can only you can match them, not excuse, not only, but you can match them 304%. If one of your employees says, you know what, Slava, I also want to do 24,500, they can. Your obligation will only be 3% of their salary.

SPEAKER_00 10:56

Yep.

SPEAKER_01 10:57

Make sense? So these are the things that I have identified. You have any questions for me?

SPEAKER_00 11:03

No, so far so good.

SPEAKER_01 11:05

Yeah, all right, awesome. Well, this was easy so far, so good. Okay,

Real Estate Professional Strategy Preview

SPEAKER_01 11:10

cool. Uh, like I said, inventory is good. I like the salary. Oh, one thing I actually did want to speak uh to you. I noticed you have quite a few rentals, right? You're getting more into the rental real estate mindset, which I like very much. The cost aggregation that I showed you here, this we can do this because it's a self-rental, but you can actually do this on a lot of your properties. The problem is that you're not considered a real estate professional by the IRS. So if you have plans in the future to be more invested in real estate, then what's gonna happen is that I don't know who's gonna stop working, either you or Tanya will stop work working in one of the business and put in more than 50% of your time in real estate. Now all of your losses become tax deductible that you produce from this real estate. So right now you told me you bought a property for $500,000 for MS Graphics in December, right? So about a hundred thousand of this can be bonus depreciated in the first year, but it'll be a loss that will have to be carried forward because you're not a real estate professional. So if you have any plans in the future to become a real estate professional, I think you have a very, very good play here, especially because you're building your real estate portfolio.

SPEAKER_00 12:22

Sounds good.

SPEAKER_01 12:22

Makes sense?

SPEAKER_00 12:24

Yes.

SPEAKER_01 12:24

All right, awesome. Well, I was happy to do this uh hot seat tax return uh review for you, and uh awesome, great. Thank you. You're welcome, Slava.

Resources, Booking Link, And Subscribe

SPEAKER_02 12:34

That's it for today's episode. Be sure to check out the description below for some free tax reduction resources that Boris put together for you. If you're ready to work with a tax advisor on your tax planning, be sure to schedule your call by heading over to www.taxplanningcall.com. That's www.taxplanningcall.com. And be sure to subscribe to our podcast to be notified when the next strategy is released.