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Are you making the most of year-end tax strategies to reduce your tax liability?

In this episode, Mike Jesowshek, CPA and owner of TaxElm, dives into essential year-end tax planning strategies for business owners, focusing on income timing, deductions, and proactive spending decisions. He explains how understanding current and projected income is key for effective tax planning, particularly for cash basis businesses. Strategies covered include prepaying expenses, delaying receipts, utilizing Roth conversions in low-income years, and taking advantage of family support tax benefits through appreciated stock transfers.

Discover how income timing, deductions, and smart spending choices can save you more as a business owner!

[00:00 - 05:08] Introduction to Tax Planning with Income Projections

• Mike Jesowshek introduces the importance of factoring in current and future income for year-end tax planning.
• He discusses the significance of strategic decisions around spending on necessary equipment.
• Effective tax planning requires knowing this year’s financial standings and projecting for the next year.

[05:08 - 10:47] Strategic Planning with Flow-Through Entities

• Flow-through entities impact tax planning based on business profit.
• Mike introduces the goal of shifting after-tax expenses into pre-tax spending.
• He advises against prepaying in low-income years when expenses may be more beneficial in higher income years.

[10:47 - 16:19] Buying Necessary Equipment for Deduction Optimization

• Mike advises only purchasing necessary equipment and aligning those purchases with high-income years for optimal tax benefits.
• He outlines how credit card spending can secure a deduction this year, even if payment occurs in the next.
• Roth conversions can be a way to maximize future tax-free growth during low-income years.

[16:19 - 19:56] Utilizing Appreciated Stock Gifting to Family Members

• Mike advises on gifting appreciated stock to family members in lower tax brackets instead of cash for tax advantages.
• He discusses limitations with children due to kiddie tax but highlights opportunities with other family members.

[19:56 - 25:19] Strategic Year-End Tax Planning

• Mike recaps key strategies for minimizing taxes legally by year-end.
• He emphasizes the importance of strategic planning and using every deduction opportunity as a business owner.

Direct Quotes:

"We always want to take advantage of what’s available to you." - Mike Jesowshek, CPA

“A Roth account grows tax-free and withdrawals are tax-free—that’s a beautiful thing.” - Mike Jesowshek, CPA

“The IRS loves business owners; they create jobs, employ people, and grow the economy.” - Mike Jesowshek, CPA

Check out this episode’s blog post: What Year End Strategies Are Available to Business Owners

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

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

YouTube: www.TaxSav

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Are you making the most of your tax-saving strategies before the year closes?

In this episode, Mike Jesowshek provides a comprehensive checklist of essential tax strategies to implement before the end of 2024. As a CPA and founder of Tax Helm, he emphasizes maximizing tax deductions, making necessary payments, and properly documenting strategies to avoid IRS issues. Mike covers everything from pre-tax versus after-tax spending and utilizing the Augusta Rule to managing self-employed health insurance and year-end retirement contributions. With a focus on practical application, he also offers advice on planning for business expenses, using credit cards strategically, and the importance of completing necessary documentation, like the BOI report, before December 31st.

Discover practical steps to keep more of your hard-earned income in this essential episode!

[00:00 - 05:10] Pre-Tax vs. After-Tax Spending

• Mike gives a reminder that most tax strategies must be implemented by December 31.
• He explains how business owners can convert personal spending to business expenses.
• Utilize pre-tax spending opportunities for valid business expenses like meals, travel, and more.

[05:11 - 11:45] Travel, Augusta Rule, and Implementing Board Meetings

• Business-focused travel, where the majority of the day is spent on work, can qualify as a deductible business day.
• The Augusta Rule allows homeowners to rent their home tax-free for up to 14 days.
• Mike shares the importance of board meetings for accountability and tax deductions.
• Even solo business owners can benefit from holding board meetings and documenting them.

[11:46 - 19:20] Hiring Your Kids, IRAs, and Health Savings Accounts

• Hiring children allows for tax-free income for children and provides eligibility for Roth IRA contributions.
• HSAs offer tax-deductible contributions and tax-free withdrawals for medical costs.

[19:21 - 230:20] S Corporations and Self-Employed Health Insurance

• Health insurance premiums must be included on W-2s for valid deductions.
• Mike gives a reminder to organize receipts, log business mileage, and complete the BOI report.
• Proper documentation ensures compliance and peace of mind during IRS reviews.

Direct Quotes:

“Let this serve as your final reminder—implement these strategies by December 31st to keep your hard-earned money.” - Mike Jesowshek, CPA

“A valid tax strategy, incorrectly implemented, becomes illegal. Understanding and correct implementation are key.” - Mike Jesowshek, CPA

“Hiring your kids in your business not only provides a tax deduction but allows them to start growing a tax-free retirement account.” - 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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Podcast Website: https://www.TaxSavingsPodcast.com

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

YouTube: www.TaxSavingsTV.com

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Are you overpaying on taxes and missing out on key deductions that could boost your business's bottom line?

In this episode, CPA Mike Jesowshek shares advanced tax strategies that empower business owners to significantly reduce their tax liabilities while building wealth. Mike addresses common challenges business owners face when minimizing taxes and introduces actionable tactics such as the 14-day home rental rule, implementing an accountable plan, and leveraging charitable contributions. With a focus on proper documentation and compliance, Mike provides insights on transforming potential tax burdens into effective deductions. He also presents TaxElm, a tax software tailored for business owners looking to maximize tax savings efficiently and responsibly.

[00:00 - 05:36] Introduction to Advanced Tax Strategies

• Mike introduces his goal to reveal tested tax strategies for saving significant money.
• Reasons for struggles: not knowing where to start, being overwhelmed by complexity, and spending time without professional guidance.
• Strategy #1: The 14-Day Home Rental Rule (Augusta Rule)
• Key steps: establishing a rental reason, finding a reasonable rate, and documenting proof.

[05:36 - 11:14] Strategy #2: Implementing an Accountable Plan

• Mike details how S corporations can set up accountable plans for reimbursements on business expenses like home office use, automobile, and utilities.
• He shares the importance of a written policy and detailed expense reporting for compliance.

[11:14 - 17:42] Strategy #3: Advanced Tax Strategies for High-Income Earners

• For those earning $350,000+, Mike shares insights on leveraging charitable contributions, business investments, and more to offset income.
• Emphasizes correct implementation to avoid potential IRS scrutiny.

[17:42 - 25:45] Short-Term Rental Loophole and Hiring Your Children for Business Deduction

• Short-term rentals (average stay of 7 days or less) are considered non-passive, allowing business owners to offset W-2 or business income.
• Mike shares the guidelines for hiring children aged 7-18 in the business for tax deductions.
• Compliance essentials: setting reasonable pay, tracking work hours, and direct payments.

[25:45 - 29:43] Conclusion and Introduction to TaxElm

• Mike introduces TaxElm, a software designed to help business owners implement these strategies and maximize tax savings.

Direct Quotes:

"These aren’t just theories; they are battle-tested methods that have saved my clients millions in taxes over the years." - Mike Jesowshek, CPA

"The right tax strategies can transform a business’s financial health." - Mike Jesowshek, CPA

"These strategies can take you from being an anxious and overwhelmed business owner to one who walks around with confidence and a sense of control." - 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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Podcast Website: https://www.TaxSavingsPodcast.com

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

YouTube: www.TaxSavingsTV.com

Send us a text

Are you missing out on key tax deductions by mixing personal and business expenses?

In this episode, Mike Jesowshek discusses the importance of setting up an accountable plan for businesses, especially S and C corporations. He breaks down how accountable plans allow business owners to reimburse themselves for personal expenses with a business use, ensuring that the reimbursements are not taxable. Mike emphasizes key requirements for an accountable plan, such as having a business connection, proper substantiation, and timely payments, while also highlighting common deductible expenses like home office, automobile use, and travel.

Find out how an accountable plan can help you save on taxes while staying compliant with the IRS!

[00:00 - 05:21] Introduction to Accountable Plans

• Mike introduces the concept of an accountable plan and its importance for business owners.
• He explains how separating business and personal expenses is crucial to avoid IRS scrutiny.
• He also mentions that even if personal payments are made for business items, they can be reimbursed with a plan.

[05:22 - 10:37] Key Requirements of an Accountable Plan

• Mike outlines the four main requirements: business connection, substantiation, avoiding excess payments, and timely payments.
• He discusses examples of business-related expenses that can be reimbursed, such as home office use and automobile expenses.
• Turning reimbursements into taxable income can cause risks if not handled properly.

[10:38 - 13:49] Setting Up an Accountable Plan

• Mike walks through the process of setting up a written reimbursement policy (accountable plan).
• Businesses need to create a reimbursement tracker to document expenses.
• Taxelm’s templates and tools can help businesses implement these plans correctly.

[13:50 - 17:43] Common Expenses for Reimbursement

• Mike highlights the most common reimbursable expenses: home office, automobile, cell phone, internet, and travel.
• Business owners should take advantage of available deductions to reduce taxable income.

Direct Quotes:

"The IRS looks at that as being sloppy. So the first key to understand is to always have a separate business bank account and credit card that you run all of your business activity through." - Mike Jesowshek, CPA

- "If you don't have an accountable plan put in place, it will be taxable to us, and that's why it's so important." - Mike Jesowshek, CPA

"The IRS gives us incentives as business owners—home office deductions, automobile deductions—but it's your responsibility to understand and implement them correctly." - Mike Jesowshek, CPA

Check out this episode’s blog post: How Do I Reimburse Myself From the Business? When Does An Accountable Plan Come Into Play?

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

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

YouTube: www.TaxSavingsTV.com

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How could the upcoming election shape the future tax landscape for LLCs, and what strategies can business owners consider now to stay ahead?

In this episode, Mike Jesowshek explores how the upcoming 2024 presidential election could impact LLCs, particularly small business owners. He provides a non-partisan analysis of both the Harris and Trump campaign proposals regarding corporate tax rates, capital gains, and other tax policies. Highlighting potential implications for tax planning and compliance, Mike emphasizes the importance of understanding these policies and the flexibility required to adapt to changes that may or may not pass. This episode offers LLC owners insights into proactive strategies to minimize tax liabilities in light of potential policy shifts.

[00:00 - 01:18] Corporate Tax Rate Proposals

• Mike Introduces the episode focus: exploring potential election impacts on LLCs.
• He clarifies a non-partisan approach, stating the episode’s objective is to inform business owners, not take sides.
• Mike discusses Harris’s proposal to increase the corporate tax rate to 28% versus Trump’s proposal to lower it to 20% or 15% for U.S.-based production companies.

[03:23 - 05:22] Harris Campaign on Real Estate and Trump’s Tariff Proposal

• Harris proposes limiting depreciation and interest for large real estate investors and increasing startup cost deductions to $50,000.
• Evaluating these deductions’ impact on real estate and startup expenses.
• Trump’s campaign discusses imposing tariffs on imports, particularly 60% for imports from China.

[05:22 - 08:48] Capital Gains and Investment Taxes

• Harris aims to raise the capital gains tax for incomes over $1 million and increase the net investment income tax.
• Planning for potential tax adjustments in high-income brackets.
• Harris proposes exempting tips from taxes; Trump proposes exempting overtime pay from taxation.

[07:00 - 11:42] Personal Tax Adjustments

• Harris’s campaign suggests expanding the child tax credit and health insurance credits; Trump aims to make prior tax cuts permanent.
• There are opportunities for individual tax savings depending on outcomes.
• Mike discusses expiring TCJA provisions, like the reduced highest tax rate, doubled standard deduction, and QBI deduction, set to end by 2025.

[11:42 - 16:36] Planning Opportunities Regardless of Outcome

• Mike stresses tax planning adaptability regardless of the election outcome.

Direct Quotes:

"Policy changes can catch many businesses off guard, often leading to missed opportunities or unexpected challenges." - Mike Jesowshek, CPA

"No matter what happens in this election, there’s always room for tax planning." - Mike Jesowshek, CPA

"While a candidate might say one thing, it doesn’t necessarily mean it will actually come true." - 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/

-------

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

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

YouTube: www.TaxSavingsTV.com

Send us a text

Do you know how to unlock the power of tax-free retirement savings using a Mega Backdoor Roth?

In this episode, Mike Jesowshek provides a beginner's guide to building a Mega Backdoor Roth IRA in 2024. He explains the differences between traditional and Roth IRAs, then details how to maximize retirement savings using the Mega Backdoor Roth strategy. Mike breaks down the steps for contributing beyond standard limits, focusing on how business owners can utilize solo 401(k) plans. He also discusses the long-term benefits of tax-free growth and withdrawals, addressing common concerns and mistakes along the way.

Discover the strategies to potentially grow your account to a million dollars in just a few years!

[00:00 - 05:21] Introduction and Basics of Roth IRAs

• Roth IRAs allow tax-free growth and withdrawals in retirement.
• Traditional vs. Roth: Traditional IRAs offer tax deductions upfront, while Roth IRAs grow tax-free with withdrawals in retirement.
• Max contributions for 2024: $7,000 ($8,000 for those over 50).

[05:22 - 11:18] Backdoor and Mega Backdoor Roth Explained

• The backdoor Roth strategy involves making non-deductible contributions to a traditional IRA and then converting it to a Roth IRA.
• Mega Backdoor Roth allows much larger contributions using 401(k) plans.
• Benefits of Mega Backdoor Roth include higher contribution limits, tax-free growth, and tax-free withdrawals.
• This strategy is beneficial for anyone with access to a 401(k) plan, even those in lower tax brackets.

[11:19 - 14:08] Strategy Steps and Example

• Max out employee contributions, then after-tax contributions, and convert to a Roth the next day.
• A business owner can contribute up to $76,000 per year and, with a 12% return, accumulate over $1 million in just 7.5 years.
• The earlier you start, the greater the potential for tax-free growth.

Direct Quotes:

"The beauty behind a Roth is that you take the pain today, but it grows tax-free, and your withdrawals in retirement are tax-free." - Mike Jesowshek, CPA

"The Mega Backdoor Roth strategy allows you to supercharge your retirement savings with higher contribution limits and long-term tax advantages." - Mike Jesowshek, CPA

"Imagine putting away $76,000 per year into a Roth and seeing it grow tax-free — that’s mind-blowing." - Mike Jesowshek, CPA

Check out this episode’s blog post: https://www.taxsavingspodcast.com/blog/guide-to-building-a-mega-backdoor-roth

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

Join TaxElm: https://taxelm.com/

-------

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

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

YouTube: www.TaxSavingsTV.com

Send us a text

Have you ever wondered if you could deduct a mentorship program paid for on your personal card before starting your business?

In this episode, Mike Jesowshek, a CPA, hosts a listener Q&A session addressing various tax-related questions from small business owners. He covers topics such as deducting business expenses, managing mentorship payments, selling a business, and handling high medical costs for business owners. Mike provides clear guidance on tax planning strategies and the importance of keeping thorough documentation for deductions, while also offering practical advice on avoiding issues with hobby loss rules and S-Corp-specific challenges.

Learn how to maximize your business deductions and avoid common tax pitfalls in this Q&A episode!

[00:00 - 00:40] Introduction

• Mike Encourages listeners to submit their tax-related questions via the website.

[00:40 - 05:23] Business Deductions and Selling a Business

• Mike explains that expenses can still be deducted if they’re legitimate business expenses and provides guidance on using an accountable plan for reimbursement.
• He discusses the validity of taking business deductions even when a business has minimal income.
• There is a need for consistent profit to be considered a legitimate business.

[05:23 - 10:23] Section 105 Plans and Ownership Draws in an S-Corp

• Mike details how to set up a family management company to use the Section 105 plan if operating as an S-Corp and hiring a spouse.
• He also emphasizes that distributions must be proportional to ownership percentages in S-Corps to avoid tax issues.

[10:23 - 16:11] Travel Deductions and Consultations

• Mike covers travel deductions when charging clients a travel fee and offers advice on setting up tax consultations through his company.
• He clarifies that even if a travel fee is charged to a client, the associated travel expenses can still be deducted.

[16:11 - 21:02] Business Expenses and Accountable Plans

• Mike emphasizes that while the deductions remain the same, the IRS prefers business-related expenses to be run through business accounts.
• Owner draws are not taxed directly; instead, taxes are based on the profit of the business, regardless of how much is drawn from the account.

[21:02 - 24:10] Tax Helm Services and Consultations

• Mike highlights Tax Helm’s services, which include consultations and comprehensive tax planning for small businesses, with a guarantee to provide tax savings that cover the cost of the service.

Direct Quotes:

“Just because you paid for it personally, doesn’t mean you lose the deduction—it’s still a valid business expense if it’s related to your business.” - Mike Jesowshek, CPA

“The IRS always wants to see that you're running your business like a business, not like a hobby.” - Mike Jesowshek, CPA

Check out this episode’s blog post: https://www.taxsavingspodcast.com/blog/listener-q-a-with-mike-jesowshek-cpa-10-16-2024

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

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

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What if you could grow your wealth, avoid taxes, and pass on your assets to your heirs without capital gains?

In this episode, Mike discusses the *Buy, Borrow, Die* strategy—a powerful tax avoidance method used by the wealthy to preserve and grow wealth. By buying appreciating assets, borrowing against them tax-free, and passing them on to heirs with a stepped-up basis, individuals can minimize taxes on both capital gains and inherited wealth. Mike breaks down how this strategy can apply to anyone with appreciating assets and provides a step-by-step guide on how to implement it effectively.

Discover the Buy, Borrow, Die strategy and how it can work for you!

[00:00 - 01:14] Introduction to the Buy, Borrow, Die Strategy

• Mike introduces the concept of how the wealthy use this strategy to appear less wealthy and minimize taxes.
• He highlights the focus on buying assets, borrowing against them, and passing them on tax-efficiently.

[01:14 - 02:35] Tax Concepts: Step-Up in Basis and Borrowing Against Assets

• Explanation of the step-up in basis: heirs inherit assets at market value, avoiding capital gains.
• Borrowing against assets like stocks or real estate doesn’t count as taxable income.

[02:35 - 04:36] Example: Stock Appreciation, Tax Efficiency, Real Estate Borrowing, and Inheritance

• Mike illustrates how borrowing against appreciated stocks allows tax-free access to funds.
• The example shows how holding assets until death can help heirs avoid capital gains.
• Mike shares an example of real estate borrowing and how it affects taxes for heirs.
• He emphasizes holding onto assets until death to maximize tax advantages.

[04:36 - 07:40] Not Just for the Ultra-Wealthy

• Mike explains that anyone with appreciating assets can utilize this strategy, not just billionaires.
• He details how it can apply to people with real estate, stocks, and businesses.
• The steps include acquiring appreciating assets, borrowing wisely, and planning for a tax-efficient exit.
• Mike highlights the importance of planning for your heirs and consulting financial advisors.

[07:40 - 09:32] Final Thoughts: How to Maximize This Strategy

• Mike encourages strategic planning for asset management and borrowing to avoid unnecessary capital gains.
• Mike suggests working with financial advisors for long-term wealth building and minimizing tax burdens.

Direct Quotes:

“The truth is that most billionaires are not paying more in taxes as their wealth skyrockets, like the average person does.” - Mike Jesowshek, CPA

“Borrowing against assets like stocks or real estate doesn’t count as taxable income. That loan money is not income to you, so it’s also not taxable.” - Mike Jesowshek, CP

“In a perfect world, you hold onto appreciating assets until death, ensuring the most tax-efficient exit for your heirs.” - Mike Jesowshek, CP

"Use borrowed funds wisely—invest in other things, grow your wealth, and maximize the opportunity." - Mike Jesowshek, CP

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

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