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The year is finally coming to an end. But are you and your business properly equipped for it?

In this episode, Mike shares the tax strategies that should be taken into consideration as the end of the year approaches. He focuses on taxation for small businesses and the use of S Corporations. He also details some information on maximizing deductions and optimizing the benefits of LLC setups, salary considerations, retirement account funding, and board meetings. Mike also offers insights on the value of home office deductions, the importance of reasonable salaries, the benefits of accountable plans, and the 14-day home rental 'Augusta' rule. 

Get everything ready before 2024 by tuning in!

[01:17] Understanding and Utilizing S Corporations

• With an S Corporation, you need to take a reasonable salary as the owner of the business
• Health insurance should be taken as a business expense in the business before the deduction can be taken
• An accountable plan is a way that you can reimburse yourself for items that you paid for

[09:53] Maximizing Deductions and Utilizing Board Meetings

• Every small business owner should have some type of board
• The 14-day home rental rule or the ‘Augusta Rule’

[14:02] The 14-Day Home Rental Rule and Retirement Accounts

• Solo 401k is the best option to put the most toward retirement

[17:30] Summary and Final Checklist for Year-End Tax Strategies

The Time Is NOW To Start Paying Less In Taxes. Join Our Tax Minimization Program (with Stress-Free Bookkeeping Training)! Join Our Tax Minimization Program Today!

Key Quotes:

"If you're operating as a sole proprietorship and you're starting to see some progress and think an S Corp might be in the future, do some legwork now to get that LLC set up." - Mike Jesowshek, CPA

"Every time you're swiping your card, ask yourself: Is there a business purpose for this? Can I back it up? Is it reasonable and necessary in my business to make this purchase?" - Mike Jesowshek, CPA

"Every small business owner should have some type of board. It serves as a great opportunity to again get tax deductions for some of those traveling, some of these meals." - Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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Before you know it, 12/31/23 will be gone, and we will be in 2024. 

In this episode, Mike focuses on year-end tax strategies for businesses. He emphasizes the importance of timely action for implementing various tax-saving measures before the end of the year. Key topics include prepaying expenses, managing income and deductions, using business credit cards for immediate deductions, and considering Roth conversions in low-income years. Mike also discusses strategies for supporting family members in lower tax brackets and making charitable contributions before year-end. 

Leverage existing tax laws and opportunities to optimize financial outcomes by tuning in!

[02:11] Prepaying Expenses

• IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS

[03:52] Stop Billing your Customers, Clients, and Patients

• Customers, clients, patients, and insurance companies oftentimes don't pay until billed
• Not billing customers and patients is a time-tested tax-planning strategy that business owners have used successfully for years

[05:30] Buying Office Equipment

• Bonus depreciation in 2023 is at 80%, but that will be reduced each year

[07:40] Use Your Business Credit Card

• You get a deduction when that item gets put on that credit card
• The day you charge a purchase to your business or personal credit card is the day you deduct the expense

[08:22] Don't Assume You Are Taking Too Many Deductions

• If your business deductions exceed your business income, you have a tax loss for the year
• If you are starting your business, you could very possibly have an NOL

[10:11] Convert to a Roth IRA

• Consider converting your 401(k) or traditional IRA to a Roth IRA, especially if you are in a down income year.

[13:34] Charitable Contributions

• To get an advantage for charitable contributions, you need to be taking itemized deductions

The Time Is NOW To Start Paying Less In Taxes. Join Our Tax Minimization Program (with Stress-Free Bookkeeping Training)! Join Our Tax Minimization Program Today!

Key Quotes:

"If you're running at a loss, you can carry forward those losses to offset future income." - Mike Jesowshek, CPA

"If you know you're going to pay something, rent's a great example, insurance a great example, you're going to need accurate bookkeeping no matter what." - Mike Jesowshek, CPA

"Do not buy things you don't need just to get a tax deduction. That is a lose-lose-lose situation." - Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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You might think that your business is a low-profit business. But is it?

In this episode, Mike Jesowshek discusses vital financial concepts for small business owners, focusing on how businesses are taxed and the importance of understanding profit. He explains that profit is calculated as sales minus expenses and highlights the differences between pass-through entities and C corporations regarding tax implications. The episode also covers owner compensation methods, including owner's draws/distributions and payroll, emphasizing that owner's draws do not reduce business profit and, therefore, do not affect the taxable income.

• The idea of a pass-through entity
• Mike Discusses how profit is calculated for small businesses and its importance for taxation

• There is no tax on that entity at the federal level
• Sole proprietorship or a single member LLC with no S corp election: you're going to file that tax return and business information on Schedule C
• Partnership: you're going to file that at business activity on a partnership tax return, which is form 1065
• If you're operating as an S corporation, you're going to have a form 1120S

• You can do an owner's draw or distribution, or you can do payroll
• Owners draw or distribution: Transferring money from your business account to your account
• Owner's draw does not reduce the profit of your business
• With a sole proprietorship, a single member LLC that's not an S corporation or a partnership, you are legally not required to pay yourself W2

• You will be taxed on your profit: Sales minus expenses and payroll
• Owner pay is not an expense!
• Mike emphasizes the need for accurate bookkeeping and understanding of tax obligations

[12:41] Quick Recap
The Time Is NOW To Start Paying Less In Taxes. Join Our Tax Minimization Program (with Stress-Free Bookkeeping Training)! Join Our Tax Minimization Program Today!

 "You're taxed on the profit of your business... that's going to be sales minus expenses equals profit." - Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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Hiring one's children is an often overlooked but incredibly beneficial strategy. With IRS regulations allowing for business deductions for wages paid to those under 18, this can be an effective pre-tax spending and money-saving opportunity for parents. 

In this episode, we'll discuss the importance of having proper documentation in place when utilizing this strategy, as well as creative ways to use your child's skills in your business while teaching them valuable lessons in financial management and responsibility. We'll provide resources to help you create documents and templates valid when dealing with the IRS, including a job description, employment agreement, worksheet tracking task/date/hours worked, payment proof, and W-2. Plus, we'll explore how hiring your children can move after-tax spending into pre-tax spending - so don't miss out on this super informative episode!

[00:27] Hiring Your Kids: Get a Business Deduction and Potentially Pay No Tax

• Hiring your kids is allowed by the IRS and provides benefits that don't apply to other people
• You get a business deduction, and your child potentially pays no income tax on that income
• You can pay your child out of a sole proprietorship without having to withhold for social security, Medicare, or federal unemployment taxes
• Your child can claim the standard deduction of 13,850, and any income over that will be taxed at the lowest bracket

[04:23] Things You Need to Know Before Hiring Your Child

• The child must be age seven or older 
• The child must be paid a reasonable rate for the type of work they are doing in your business
• Track time, tasks, and duties
• Pay to an account in the child's name
• Have a job description, employment agreement, and worksheet
• Mike shares the other benefits of hiring your child

[10:32] S Corporation and Non-Direct Children

• If you operate as an S Corporation, you need to withhold for social security, Medicare, and federal unemployment
• You can also hire non-child family members but would need to withhold for social security, Medicare, etc.

The Time Is NOW To Start Paying Less In Taxes. Join Our Tax Minimization Program (with Stress-Free Bookkeeping Training)! Join Our Tax Minimization Program Today!

Key Quotes

"I've never found a business where their child couldn't do something for their business. And that's as business owners; we need to start thinking, what can our child be doing for our business?" – Mike Jesowshek, CPA

"There's a lot of extra benefits to hiring your children over and above just the tax benefits. Your child's starting to understand working for a living and getting paid, and now they can go buy their things and they start to learn money management." – Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax

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Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale

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It’s been half a decade since we started the Small Business Tax Savings Podcast. In today’s episode, Mike dives into how the podcast has grown and shares an exciting announcement that you don’t want to miss. Our unwavering mission? To help business owners pay the least amount in taxes as legally possible! 

We're on a mission to reach every small business owner in the U.S., and your support is propelling us closer to that vision. Thank you for being an integral part of our journey.

[00:23] Reflecting on Our Journey: 5 Years of the Small Business Podcast

• Thank you for your continuous support over the years!
• What’s happened to the podcast in the last five years?
  • We’ve made over 270 episodes.
  • More than 900,000 downloads.
  • Apple podcast rating of 4.8 from 185 reviews.
  • 13,500 members in the free Facebook group.

[04:31] What’s Next? Introducing TaxElm: Your Ultimate Tax Resource

• Go to https://taxelm.com for your ultimate resource for eliminating taxes and wealth growth.
• With features like a custom tax plan, unlimited email access to accountants, live consultations, and bookkeeping analysis, we provide comprehensive support tailored to your unique situation.
  • Tax Savings Blueprint and Training
  • Unlimited Messaging w/ Accountant
  • Annual 1-on-1 Live Consultation
  • Annual Bookkeeping Analysis
  • Monthly Group Webinars and Training
  • Partner Directory and Discounts

[08:46] How Can You Help Us?

• Leave Us a Review!
  • On Apple Podcasts or wherever you may listen to us.
• Follow Us/Subscribe On Social Media 
  • Facebook
  • Twitter
  • Instagram
  • YouTube
  • LinkedIn
• Tell Family, friends, colleagues, other Business Owners, and continue to tune in every week!

The Time Is NOW To Start Paying Less In Taxes. Join Our Tax Minimization Program (with Stress-Free Bookkeeping Training)!  Join Our Tax Minimization Program Today!

Key Quotes

"Our number one goal here is to help business owners pay the least amount in taxes as legally possible." – Mike Jesowshek, CPA

“Whether you're just starting a new company or looking to optimize your existing business finances, TaxElm offers the tools and guidance you need." – Mike Jesowshek, CPA

______

Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax

IncSight Packages: https://incsight.net/pricing/

Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale

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Podcast Website: https://www.TaxSavingsPodcast.com

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To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questions to us at: [email protected]

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What’s so important about correctly classifying your workers within your business? 

In today's episode, Mike talks about the difference between independent contractors and employees. With the government cracking down on worker misclassification, it's more essential than ever for businesses to accurately identify their workers. Misclassifications can lead to hefty penalties, making it imperative for business owners to understand and adhere strictly to payroll guidelines.

Mike stresses the importance of thorough documentation to ensure smooth 1099 NEC filings at year-end. With the filing deadline on January 31st, this episode aims to give you the knowledge and tools needed for accurate tax reporting!

[01:12] Employee or Independent Contractor: What's the Difference?

• It's the employer's duty to determine the correct classification of workers.
• While independent contractors receive their full payment without deductions, employees have tax and other withholdings deducted from their earnings.
• If classified as a 1099 independent contractor, you are responsible for paying taxes on your business profit.

[06:31] How to Determine an Independent Contractor or Employee

• Who controls the work, from specifics to schedules?
• The IRS focuses on behavioral, financial, and type of relationship to classify workers.
• Whether there's an employment or independent contractor agreement in place can be a clear indicator of worker status.

[14:02] Why Is Proper Classification Important? 

• Incorrectly classifying a worker can lead to severe financial consequences, including back taxes and penalties.
• Just because another business classifies its workers a certain way doesn’t mean it's correct or suitable for your business.
• For both independent contractors and employees, having clear agreements in place helps define and solidify the working relationship.

[17:28] How to Avoid 1099 Pitfalls: Year-End Filing Best Practices

• It is crucial for businesses to know when and why they need to file a 1099 NEC form. 
  • Payments totaling $600 or more to an independent contractor within a tax year necessitate this filing.
• Actively collect Form W-9 from all contractors regardless of the payment amount to ensure they have all necessary information on hand for potential future 1099 NEC filings.
• Take note of situations where a 1099 NEC filing is not required
• Start preparing for 1099 NEC filings well before the year-end to ensure a smooth and compliant filing process.

The Time Is NOW To Start Paying Less In Taxes. Join Our Tax Minimization Program (with Stress-Free Bookkeeping Training)!  Join Our Tax Minimization Program Today!

Key Quotes

"The responsibility of determining an independent contractor or employee comes down to the employer." – Mike Jesowshek, CPA

"If you're classified as a 1099 independent contractor, just know that you're responsible for paying the taxes on any income that you have." – Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax

IncSight Packages: https://incsight.net/pricing/

Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale

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To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 8

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Ever wondered how an S-Corp's retirement contributions differ from a sole proprietor's? Or why the salary of an S-Corp owner is under scrutiny by the IRS? 

Dive into today's episode as Mike answers the questions you submitted! We dive into the intricacies of S-Corp tax strategies, answer questions about ad spends and late S-Corp conversions, and delve into the practicality of hiring children in business. Plus, get tips on navigating errors in transactions and staying ahead with the latest in tax planning. 

[01:12] Insights on S-Corps, LLCs, and Retirement Planning

• As an S-Corp owner with a SIMPLE IRA and $200,000 income, is the 3% match on just the W2 or the total?
• As a sole proprietor, should I get an EIN to pay my 16-year-old for minimal work?
• As a multi-member LLC, can we claim our client's ad spend as an expense for tax categorization?
• Since it's already late in the year, can I still convert my LLC into an S Corp? Or is that an audit red flag?

[11:38] Tax Implications for Home-Based Work, S Corp Salaries, and Business Losses

• If I work partly from home and have an external business location, can adding a home addition be tax-deductible?
• What are the implications of not taking a reasonable S Corp salary and skipping payroll for two years?
• My business has lost money for the past three years, but things are looking to turn around this year. Can I use those prior losses, or are they gone?

[17:24] Questions on 1099 Mechanics, Hiring Minors, and Maximizing S Corp Deductions

• Is anyone knowledgeable about the 1099 for mechanics? I've received mixed information and am seeking clarity. Can it be done without complications?
• I run an S Corp landscaping business and want to hire my children, aged 8 and 10. How can I make sure I'm following all the proper procedures?
• A third-year California real estate agent operating as an S corp LLC expects $250k in commissions with $150k pass-through profit. How can they maximize deductions and reduce taxes?

[22:17] Navigating 1040 ES Payments and Initial Capital Contributions on 1120-S

• Someone with an LLC taxed as an S corp mistakenly paid 1040 ES taxes from their business account. Can this be categorized as an owner's draw?
• LLC (taxed as S-Corp). The owner paid $2500 to the business account on the first day. Where do I need to put this amount on the 1120-S?

[24:20] Final Thoughts

• The Time Is NOW To Start Paying Less In Taxes.  Join Our Tax Minimization Program Today!

Key Quotes

“When we look at retirement plans, look at two things. Who are we looking to take care of? And there can be multiple choices. Is it the business owner or is it their employees or both? And then what is the purpose of the plan?"– Mike Jesowshek, CPA

“Now is the opportunity if you have not started tax planning yet or if you have not completed the implementation of the tax strategies that we talk about every single week on the podcast here. Now is the time to take action." – Mike Jesowshek, CPA

______

Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax

IncSight Packages: https://incsight.net/pricing/

Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale

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To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questi

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How can your health expenses actually put money back in your pocket come tax season? 

We take a deep dive into a topic many of us often shy away from; Health. Today's episode is about how health intersects with your wallet. Specifically, how you can leverage health-related expenses to save on your taxes. 

We dive into self-employed health insurance, tax strategies for high medical costs, employee health options, and health savings accounts. Whether you're self-employed, running an S corporation, or simply an individual trying to navigate the complex landscape of health-related deductions, today's episode promises insights that could potentially save you money!

Don’t Forget! As part of our Tax Minimization Program, we have a full section on how to go about Health Related Tax Deductions 

[00:25] Determining the Health Insurance Deduction Based on Your Business

• Differences between health insurance and medical sharing plans.
• Sole Proprietor or Single Member LLC
• S Corporation Owner
• If you have non-owner employees and provide health insurance benefits, you will get a deduction for your costs for them too

[06:03] Business Owners With No Employees + High Medical Costs

• Utilize a Section 105 Plan to turn personal medical expenses into a business deduction.

[09:05] Health Benefit Options Available For Small Businesses With Employees 

• Check our blog What Health Benefit Options are Available for Small Businesses With Employees?
• Options available: 
  • Group Health Insurance
  • Increase Wages to Cover Costs (Taxable)
  • Setup an HRA or QSEHRA
• For small businesses with 25 or fewer employees, we recommend the QSEHRA option

[12:54] What Is An HSA and How Do They Work?

• Read our article diving into the HSA: What Is An HSA and How Do They Work?
  • You get a tax deduction for the funds you contribute into an HSA.
  • Withdrawals are tax-free if used for qualified medical expenses.
  • Interest or earnings within the HSA are NOT taxed.

[18:45] What Is An HSA and How Do They Work?

• As year-end approaches, our goal is to guide you through strategies to ensure you pay the least amount in taxes for 2023 legally!
• Start planning and implementing now to get deductions in 2023.

Key Quotes

“I recommend everybody, business owner or not, if you have a high deductible health plan and you qualify, you should be maxing out a health savings account in HSA." – Mike Jesowshek, CPA

“We have a lot of S Corp owners that don't think about this. They skip this process and just try to take it out on Schedule 1. The IRS could come back and disallow that.’ – Mike Jesowshek, CPA

“When I first started my business, it was tough to bring on employees because I didn't know how to handle the health insurance piece. I always thought it was complex, and super expensive. I learned about this idea of a QSEHRA, which is a great option where I didn't have to worry about a group plan.” – Mike Jesowshek, CPA

“I would hate to see small business owners avoiding growing their business or avoiding bringing on employees for the fact of health insurance when there is an option that is relatively easy, not as complex, and potentially could save you some money as well.” – Mike Jesowshek, CPA

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Podcast Host: Mike Jesowshek, CPA - Founder

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How should you reimburse yourself for business expenses? The truth is the answer will depend on what kind of business you have. In this episode, Mike dives into reimbursing oneself for business-related costs and introduces an accountable plan; What is it and why you might need it? He also covers the four major requirements for this plan to ensure the IRS will accept reimbursements as legitimate. 

This episode is a must-listen for business owners aiming to navigate the often tricky terrain of personal and business expense separation! 

[00:25] Reimbursing Yourself As a Sole Proprietor or Single Member LLC

• How you reimburse yourself depends on how your business is organized.
• As a sole proprietor or single-member LLC, you simply take the deduction for the
• business portion of an expense on your Schedule C when filing your taxes.
  • For mileage or home office expenses, report them on Schedule C. For others, like an 80% business-used cell phone, add them to Schedule C or transfer the cost from business to personal account and claim it.

[03:45] Reimbursing Yourself As A S-Corporation or C-Corporation

• Remember:Operating as an S-Corp means you’re an employee of the corporation. 
• The IRS requires you to have an "Accountable Plan" in place.
• When you pay an employee, you pay them wages which are subject to both employment and income taxes. With a reimbursement we want to ensure employees (including you) do not get hit with taxes on reimbursements.
• An Accountable Plan lets owners and employees submit expenses for business reimbursement without it being taxable income. 

[05:36] How to Set Up An Accountable Plan 

• A written accountable plan is advised for clarity and ease during audits. 
• It must adhere to four key principles:
  • Business Connection
  • Substantiation
  • No Excess Payment
  • Timeliness
• As part of our Tax Minimization Program we have a full section on the Accountable Plan and we discuss how to: 
  • 1. Adopt a Written Reimbursement Policy (Accountable Plan)
  • 2. Create an Accountable Plan Template / Expense Report 
  • 3. Make the Reimbursement Payment 
• Some common accountable plan expenses include home office, personal automobile usage, office expenses, travel, parking/tolls, business meals, tools, dues, licenses, cell phone/internet, and training.

[12:30] Closing Segment

• Make sure you set up and use the reimbursement system before year-end for timely expense recording!

Key Quotes

“How we reimburse ourself is going to depend on how our business is organized.” – Mike Jesowshek, CPA

“An accountable plan is just a fancy word for reimbursement policy…it’s a tool to make sure that reimbursement is being done according to law and that the IRS will accept it." – Mike Jesowshek, CPA

Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax

IncSight Packages: https://incsight.net/pricing/

Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale

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Podcast Website: https://www.TaxSavingsPodcast.com

Facebook Group: https://www.facebook.com/groups/taxsavings/

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To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questions to us at: [email protected]

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What are the pros and cons of having a business-owned vehicle versus a personally-owned vehicle? In this episode of the Small Business Tax Savings Podcast, Mike dives into the often confusing and overwhelming topic of business vehicles. From selecting, buying, and maintaining a car for business use to proving business use of a vehicle to the IRS. Mike offers up his expertise on how to make sure you’re getting the most out of your vehicle when it comes to tax deductions.  

Mike covers the pros and cons of having a business-owned versus personally-owned vehicle, as well as tips for determining the business use percentage and tracking mileage.  

Tune in now and listen as Mike shares his advice on how to select, buy, maintain, and write off a car for business use!

[00:24] Get The Facts On Mileage Logs And Proving Business Use

• Today’s topic is, “Unleashing Powerful Vehicle Tax Strategies for Small Business Owners”
• Mike talks about never buying a vehicle solely for tax purposes

[07:26] Determining Business Use Of A Vehicle

• The mileage log must be backed up with documentation proving the business purpose of the miles
• The need to prove business use and purpose
• Have a track record of mileage log, appointment book, and receipts
• Calculate business use percentage

[09:17] Understanding How To Deduct Vehicle Expenses

• Consider factors like mileage limits, years of use, and monthly payments when deciding to buy or lease a vehicle
• Vehicles can be in either personal or business names as long as the correct process is followed
• What are the two main options for deduction?
• If you have a leased vehicle, you must stick with the same method for the duration of the lease

[15:34] Closing Segment

• Mike shares the pros and cons of a business-owned vehicle versus a personally-owned vehicle!  
• Final Words

Key Quotes

“Whether you have a vehicle that's in your personal name or your business name and you use it for business, either way, is acceptable. You just need to make sure that you're following the correct process, whichever way you do it.” – Mike Jesowshek, CPA

______

Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join Our Tax Minimization Program: https://www.taxsavingspodcast.com/tax

IncSight Packages: https://incsight.net/pricing/

Book an Initial Consultation: https://app.simplymeet.me/o/incsight/sale

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Podcast Website: https://www.TaxSavingsPodcast.com

Facebook Group: https://www.facebook.com/groups/taxsavings/

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To find out more on this topic and many others visit our website at www.TaxSavingsPodcast.com. You can also give us a call at 844-327-9272 or send your questions to us at: [email protected]