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Are you leveraging the right tax strategies to minimize your business's tax liability and maximize your savings?

In this episode, Mike Jesowshek offers a comprehensive guide on tax strategies for business owners to minimize tax liability and optimize financial planning. He emphasizes the importance of understanding the appropriate business structure, maintaining accurate bookkeeping, maximizing deductions, and implementing effective tax planning strategies. Throughout the episode, he shares practical advice and examples to help business owners make informed decisions and avoid common tax pitfalls.

[00:00 - 05:21] Introduction and Business Structure

• Mike Jesowshek emphasizes the importance of choosing the right business structure (e.g., LLC, S Corporation).
• He discusses common mistakes and the impact of business structure on tax liability.

[05:22 - 08:16] Importance of Accurate Bookkeeping

• Mike highlights the necessity of maintaining separate business and personal accounts.
• He also recommends using cloud-based accounting systems like QuickBooks Online or XERO.
• Update your bookkeeping systems monthly to stay organized and plan for estimated taxes.

[08:17 - 12:05] Maximizing Deductions

• What are the concepts of pre-tax vs. after-tax spending?
• Mike provides examples of common deductions, such as home office, cell phone, internet, and travel expenses.
• Documenting expenses properly is important to take advantage of deductions.

[12:06 - 16:04] Tax Planning vs. Tax Paying

• What are the differences between tax planning (strategizing to save on taxes) and tax paying (filing taxes)?
• Mike encourages learning and implementing tax strategies to optimize tax savings.
• He emphasizes the significance of proper implementation of tax strategies for effective tax savings.

Direct Quotes:

"The problem is not that it's hard to structure everything in a way to beat the IRS. The problem is simply that you have not been educated on how to do that." - Mike Jesowshek, CPA

"Bookkeeping is the backbone of your business. Without solid bookkeeping, you don't know how you are performing, and you have increased stress during tax season." - Mike Jesowshek, CPA

"Our goal as business owners is to move after-tax spending into pre-tax spending. Find a business purpose for spending you're already doing and get a business deduction for it." - Mike Jesowshek, CPA

"Tax planning is about learning strategies and then putting them into practice. Implementation is the key to actual tax savings." - Mike Jesowshek, CPA

Resources Mentioned:

• QuickBooks Online
• XERO

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

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Have you ever wondered how to maximize your tax deductions through depreciation without getting lost in complex accounting rules?

In this episode, Mike Jesowshek delves into the concept of depreciation, explaining its importance and application for small business owners. He covers the basics of depreciation, different methods available, and a little-known policy that simplifies the process for assets under a certain value. Mike provides insights into regular depreciation, bonus depreciation, and Section 179 expensing, while also highlighting the significance of having a capitalization policy in place. Additionally, he discusses the rules for when depreciation begins and the implications of selling depreciated assets.

[00:00 - 05:21] Introduction to Depreciation

• Mike Jesowshek introduces the topic of depreciation.
• He explains the basic concept of depreciation and its significance for small business owners.

[05:22 - 10:23] Types of Depreciable Assets

• Mike shares some details on what types of property can be depreciated, such as machinery, equipment, buildings, vehicles, etc.
• How is it that land cannot be depreciated?

[10:24 - 15:34] Depreciation Methods

• Mike shares an overview of regular depreciation, bonus depreciation, and Section 179 expenses.
• Bonus depreciation allows for a significant deduction in the first year, decreasing over time.
• Section 179 expensing permits a full deduction in the first year up to a specific limit.

[15:35 - 20:30] Example and Application

• Mike provides a detailed example of how different depreciation methods would apply to a computer purchase.
• He discusses the importance of consulting with a tax professional to determine the best method.

[20:31 - 25:42] Rules of Depreciation

• Rule 1: Must be in business to take depreciation deductions.
• Rule 2: Depreciation begins when an asset is placed in service.

Direct Quotes:

"Depreciation is essentially just taking the cost of an asset and spreading it out over time." - Mike Jesowshek, CPA

"Land cannot be depreciated, but buildings, equipment, vehicles, and furniture can." - Mike Jesowshek, CPA

"Bonus depreciation allows you to take a significant portion of the asset's cost in the first year, which can be very beneficial for small businesses." - Mike Jesowshek, CPA

"Every business owner should have a capitalization policy in place to simplify the process of expensing smaller asset purchases." - 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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Are you sure electing S corporation status is the right move for your business in 2024?

In this episode, Mike discusses why some business owners should avoid electing S corporation status in 2024. He provides a detailed explanation of what an S corporation is, how it works, and the primary reason people choose this tax election: to reduce self-employment taxes. However, Mike outlines several scenarios where electing S corporation status might not be beneficial, such as for businesses with passive income, small profits, foreign owners, or unfavorable state and local tax laws. He emphasizes the importance of understanding individual circumstances and consulting with tax professionals before making this decision.

[00:00 - 05:21] Introduction to S Corporations

• What is an S corporation and its tax election status?

[05:21 - 10:42] Benefits of S Corporations

• Mike gives a detailed example of how S corporations help avoid self-employment taxes.
• He discusses splitting income into a reasonable salary and distributions to save on taxes.

[10:42 - 20:18] Reasons to Avoid S Corporation Status

• Passive activities: rental properties and passive investments should not elect S corp status.
• Small businesses: businesses with profits under $50,000 may not benefit due to additional costs.
• Foreign owners: S corporations cannot have foreign owners.
• Unfavorable state or local laws: states like Tennessee and New York City might have laws that negate federal tax savings.
• High W-2 income: if already maximizing Social Security, additional income might not justify S corp status.

[20:18 - 22:27] Conclusion

• Mike emphasizes the importance of consulting tax professionals.

Direct Quotes:

"An S corporation is simply a tax election on an already established structure." - Mike Jesowshek, CPA

"The main reason people set up an S corporation is to avoid self-employment taxes." - Mike Jesowshek, CPA

"Always dot your I's and cross your T's to ensure correct implementation of any tax strategy." - 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/

IncSight Packages (Full-Service): https://incsight.net/pricing/

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

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Are you maximizing your current retirement plans but still looking for more advanced strategies to secure your future and take care of key employees?

In this episode, Mike Jesowshek and retirement expert Matt Ruttenberg discuss advanced retirement strategies for business owners who have maximized basic retirement plans. They explore qualified and non-qualified plans, focusing on cash balance plans and deferred compensation plans, which offer significant tax benefits and flexibility. They emphasize the importance of tailoring retirement plans to individual business needs and revenue levels, highlighting the potential for substantial contributions and long-term tax advantages.

[00:00 - 04:41] Introduction and Overview

• Mike introduces the topic of advanced retirement strategies and welcomes Matt Ruttenberg.
• Matt explains that advanced retirement strategies are not for everyone.
• He introduces the concept of layering different retirement plans.

[04:42 - 10:18] Retirement Plan Stack and Qualified vs. Non-Qualified Plans

• Matt explains qualified plans, including cash balance plans and their benefits.
• He details the cash balance plan, its benefits, and its design for high contributions.
• He also introduces non-qualified plans, highlighting deferred compensation plans.
• What are the benefits of non-qualified plans for key employees and tax planning?

[10:19 - 17:22] Tax Code 7702 and Practical Considerations and Customization

• Matt explains Section 162 plans and the use of life insurance platforms.
• What are the benefits of tax code 7702 for long-term tax-deferred growth and tax-free withdrawals?
• Retirement plans can be customized based on business needs.

[17:23 - 22:51] Customized Retirement Plans and Non-Qualified Plan Benefits

• Matt explains the importance of qualified plan design and customizing retirement plans to fit individual business needs.
• Different levels of revenue unlock various plan options.
• What are the benefits of non-qualified plans for business owners and key employees?

[22:52 - 26:31] Common Misconceptions

• Matt addresses misconceptions about 401K plans.
• He shares the importance of understanding plan documents and options.

Direct Quotes:

"It's all about how you get the money out of the company and into these more advanced plan options." - Matt Rutenberg

"Not all 401Ks are created equal. It all comes down to the plan documents and how those are designed." - Matt Rutenberg

"Deferred compensation plans are often referred to as 'golden handcuffs' because they incentivize key employees to stay long-term." - Matt Rutenberg

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

Join TaxElm: https://taxelm.com/

IncSight Packages (Full-Service): https://incsight.net/pricing/

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Are you making the most of your tax strategies and deductions this year?

In this episode, Mike Jesowshek provides a mid-year tax savings check-in for small business owners. He emphasizes the importance of reviewing tax strategies, implementing them correctly, and maximizing deductions. Key topics include entity structure review, retirement planning, incorporating children into the business, utilizing the Augusta rule, tracking automobile expenses, and keeping bookkeeping up to date. Mike highlights the need for proactive planning

and correct implementation to achieve significant tax savings.

[00:00 - 06:37] Maximizing Deductions and Accountable Plans for S Corporations

• Mike Jesowshek emphasizes the importance of assessing and implementing tax strategies.
• He shares the importance of setting up an accountable plan for S Corporations.
• How do you evaluate the appropriateness of the current structure based on profit levels?

[06:37 - 12:10] Other Tax Strategies and Correct Implementation

• Mike discusses the importance of setting up and funding retirement accounts.
• He highlights the importance of associating business purposes with travel to gain deductions.
• He also emphasizes the need for correct implementation of tax strategies.
• Year-end rush and errors can be avoided through regular bookkeeping.

[12:10 - 20:51] Tax Payments and the Importance of Bookkeeping

• Mike reminds the listeners to keep up with estimated tax payments and proper documentation.
• Benefits of regular bookkeeping: better tax planning, accurate estimated tax payments, and reduced errors.

Direct Quotes:

"If you're swiping a card, let's see if we can find a business purpose for this." - Mike Jesowshek, CPA

"Correct implementation is key. You can take a completely legal strategy and make it illegal by incorrect implementation." - Mike Jesowshek, CPA

"Bookkeeping is the backbone of your business. It's not just for tax purposes."

"Learning's great, but Implementation saves taxes." - 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/

IncSight Packages (Full-Service): https://incsight.net/pricing/

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

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Ever wondered how hiring your kids in your business could save you money and teach them invaluable life lessons?

In this episode, Mike Jesowshek addresses common myths about hiring your children in your business. He outlines the potential tax benefits, the necessary legal steps, and the educational value for the children involved. Mike emphasizes that proper implementation and documentation are key to ensuring the strategy's legality and effectiveness. He also discusses the benefits of setting up a family management company and the possibility of hiring older children as 1099 contractors.

[00:00 - 04:45] Introduction

• Mike discusses the strategy of hiring children, focusing on tax benefits, and moving after-tax spending to pre-tax spending.
• He gives an overview of legal requirements, such as not withholding FICA taxes if the business is a sole proprietorship or partnership, and age considerations.
• It is important to pay children a reasonable wage for actual work performed and the necessity of proper documentation.

[04:45 - 13:07] Myths about Hiring Children and S Corporation Considerations

• Mike debunks myths such as hiring children being illegal or a form of tax evasion, and the importance of proper implementation.
• He discusses the benefits of teaching children about work ethics and preparing them for future roles in the business.
• What are the differences and additional requirements when hiring children under an S corporation?

[13:07 - 23:14] Hiring Children Over 18 and Finding Suitable Work Them

• Mike explores the strategy for children over 18, including hiring them as W2 employees or 1099 contractors.
• He addresses the concerns about finding appropriate tasks for children in the business and provides examples.

Direct Quotes:

"Hiring your children is legal, and it's not a form of tax evasion." - Mike Jesowshek, CPA

"When we hire our children at a young age, we're teaching them the invaluable lesson of working for a living." - 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/

IncSight Packages (Full-Service): https://incsight.net/pricing/

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Ever wondered if you can retroactively claim depreciation on a rental property or how to effectively structure multiple business entities for tax benefits?

In this episode, Mike answers various listener questions related to tax strategies for small business owners. He covers topics including retroactive depreciation for rental properties, structuring multiple business entities, handling business-related vehicles, quarterly estimated tax payments, charitable contributions, hiring spouses, and the benefits of S corporations. He also provides detailed advice, including potential pitfalls and alternative strategies to optimize tax savings and compliance.

[00:00 - 05:33] Retroactive Depreciation and Structuring Multiple Businesses

• Katy asks about claiming depreciation on a rental property retroactively.
• Jeff inquires about setting up a new division within an existing business.

[05:33 - 10:11] Business Vehicles, Quarterly Estimated Tax Payments, and Education Expenses

• Julia asks about transferring a personal vehicle to a business.
• Gigi questions whether quarterly estimated tax payments need to be equal.
• Curtis asks about deducting tuition, books, and commuting costs for his daughter.

[10:11 - 16:19] Charitable Contributions, Hiring a Spouse, and COGS

• Tony inquires about the deductibility of charitable contributions.
• Scott asks about hiring his spouse for clerical work in his financial advisory business.
• Laurie asks about handling tax deductions for unsold inventory.

[16:20 - 21:16] Payroll Taxes for Spouses and S Corporation vs. Sole Proprietorship

• Jasper asks about the benefits of hiring a spouse who works as a real estate professional.
• Angie and an anonymous Facebook group member ask about the benefits of filing as an S corporation.

[21:16 - 25:15] Closing Remarks

Direct Quotes:

"The problem with charitable contributions is that they're an itemized deduction now, and a lot of people no longer take itemized deductions because the standard deduction is much higher." - Mike Jesowshek, CPA

"99 percent of the time, the S corporation plays out as a better option if you're making $50,000 or more per year." - 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/

IncSight Packages (Full-Service): https://incsight.net/pricing/

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

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Are you maximizing your tax savings with the QBI deduction?

In this episode, Mike delves into the intricacies of the Qualified Business Income (QBI) deduction, also known as the Section 199A deduction, which was part of the Tax Cuts and Jobs Act. He explains the basic rules and income thresholds, discusses which types of income qualify, and provides details on how to calculate the deduction. Additionally, he addresses the expiration of the QBI deduction after 2025 and clarifies that the deduction is taken on personal tax returns, not business returns.

Discover the key rules and strategies to ensure you're not leaving money on the table by tuning in!

[00:00 - 05:21] Introduction to QBI Deduction

• Mike gives an overview of the QBI deduction and its origin in the Tax Cuts and Jobs Act.
• General rule: Deduct up to 20% of qualified business income.
• Types of businesses that qualify: sole proprietorships, LLCs, S corporations, and partnerships.

[05:22 - 10:10] Non-Qualifying Income and Income Thresholds

• Mike explains the income types that do not qualify for QBI: investment income, wage income, and income from C corporations.
• Income thresholds for 2024: $191,950 for singles and $383,900 for married couples.
• Calculation changes for those above income thresholds.

[10:11 - 15:00] Specified Service Trade or Business (SSTB)

• Mike defines SSTBs and gives examples such as healthcare, law, financial services, athletics, performing arts, accountants, and consultants.

[15:01 - 20:20] Calculation Examples

• Mike shares step-by-step examples of calculating the QBI deduction below and above income thresholds.
• What is the Impact of W-2 wages and qualified property on the deduction?

[20:21 - 23:03] Conclusion and Resources

• The QBI deduction is taken on personal tax returns.
• The expiration of the QBI deduction is after 2025 unless extended by Congress.

Direct Quotes:

"If you have sole proprietorship income, LLC income, S corporation income, partnership income, those are all the types of income that would qualify for the QBI deduction." - Mike Jesowshek, CPA

"The QBI deduction is taken on your tax return, not your business tax return."- 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/

IncSight Packages (Full-Service): https://incsight.net/pricing/

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

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YouTube: https://www.youtube.com/@TaxSavings