Main Street Business

#539 The 4 Best Tax-Write Offs NO ONE Talks About... w/ Karlton Dennis

• Mark J Kohler and Mat Sorensen

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In this episode of the Main Street Business Podcast, host Mark J. Kohler is joined by Karlton Dennis to share essential tax-saving strategies before the year ends. They explain how transitioning from an LLC to an S corporation reduces self-employment taxes and how you can benefit from bonus depreciation. They also cover creative ways to involve your kids in payroll, plus insights on using solo 401(k)s and Health Savings Accounts to maximize deductions.

Here are some of the highlights:

  • Mark and Karlton discuss their roles as tax strategists focused on saving money.
  • The concept of self-employment tax, which includes Social Security and Medicare contributions.
  • How self-directed accounts can be used to invest in rental real estate and other business assets.
  • Mark and Karlton discuss the benefits of switching from an LLC to an S corporation using Form 2553.
  • Mark encourages listeners to backdate the S corporation election to January 1, 2023, to avoid self-employment taxes for the year.
  • How to properly place children on payroll to reduce taxes and provide financial education.
  • Importance of setting up retirement accounts before the end of the year to maximize tax benefits.
  • Karlton introduces the Tax Free Wealth Challenge, a five-day event focused on tax strategies.
Speaker 1:

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

Speaker 2:

Forty-five percent of working Americans have a side hustle. Now I think estimates are now over 100 million side hustles out in America and that's people that are just out there getting a 1099, driving Uber, doing a little upwork, getting a little side hustle, mowing some lawn, doing a little landscaping People. That's the gateway drug. That's a small business and there's a unique tax that's going to nail you right out of the gate. You unpack it.

Speaker 3:

Tell them what this wonderful tax is the best strategies that someone can do who's self-employed before the end of the year is reclassifying their LLC to being an S corporation and filling out the form 2553.

Speaker 2:

Well, my accountant said I wasn't a candidate because you know it's not going to make a difference. And I'm like do you make more than 50 grand a year? Yeah, it makes a difference. This is going to put money in your pocket, save you money, build your wealth. You're going to love this. My name is Mark Kohler. I'm a CPA attorney, bestselling author in the tax and legal space. I've got a special guest with me today Carlton Dennis, enrolled agent, tax strategist, youtube personality. He is crushing it in the tax industry. Out there, talking to people, if you're an accountant, an enrolled agent, a business owner, a real estate investor, freaking A, we are going to rock your world. Today We've got our year-end special, our favorite year-end tax strategies. Carlton, thanks for being here.

Speaker 3:

Thank you so much for having me, mark. I'm excited to talk about some year-end tax strategies and I hope people that are out there listening right now are ready to save some money.

Speaker 2:

I sure love having you here. For those that are regular followers of mine on YouTube, Carlton's been with me before. We just love to riff and go back and forth. He's so intelligent, insightful. I love his energy. So let's get to it. Carlton's got two or three favorites. I got 20 year-end tax tips I've been doing on my lives over the last couple of weeks and I've still got a few more to release. But I asked Carlton, give me a sneak peek. What do you got? And I love them. So, Carlton, you lead. What's one of your favorite tips?

Speaker 3:

You know, I think we need to take this on a progressive scale, from like simple all the way up to advanced, and one of the best strategies that someone can do who's self-employed before the end of the year is reclassifying their LLC to being an S corporation and filling out the form 2553. Mark, I have no clue how many 2553 forms I've done over the years, but I can only imagine how many you've done over the years. This happens to be one of the best ways in which we can help everyday entrepreneurs save money on self-employment taxes. But I first need the entrepreneurs out there to understand what self-employment taxes is before they switch over to the S corporation, so maybe we can go back and forth on that.

Speaker 2:

No, I love it. And people there I think it is now over um well, 45% of working Americans have a side hustle. Now I think estimates are now over 100 million side hustles out in America. And that's people that are just out there getting a 1099, driving Uber, doing a little upwork, getting a little side hustle, mowing some lawn, doing a little landscaping People. That's the gateway drug, that's a small business and there's a unique tax that's going to nail you right out of the gate. You unpack it, tell them what this wonderful taxes.

Speaker 3:

Oh, you know, self-employment tax. It's so wonderful when you think about that. Typically you're just thinking about okay, there's uncle Sam, and if I'm in a state that taxes, okay, I'll pay my state taxes. But this silent killer, the silent thorn in your foot, is self-employment taxes. And I'll be completely honest with you Entrepreneurs are not aware of self-employment taxes until it's time to file their tax returns. Right now, guys, there's 32 million LLC owners in the United States as of 2023. Of those 32 million, I cannot tell you how many of them know what self-employment taxes are, but I'm going to let you know what it is today, and I want you to lock this in Self-employment tax is a combination of your social security and your Medicare that you have to pay into every single year, whether you're self-employed or you're a W-2 taxpayer.

Speaker 3:

The downside when you're self-employed is that the government kind of taxes you as an employee and as an employer. So it comes out to about 15.3% and even though you're able to deduct half of this self-employment taxes, paying 15.3% on your business income is a lot of money and many LLC owners are just not aware of it. So, mark and I, we like to help out the everyday entrepreneur, the everyday LLC earner know when it's time to switch over from their LLC towards an S corporation, or even from your sole proprietorship into an S corporation, and when you make that transition over into an S corp. One of the forms that you're going to run into, one of the forms you're going to have to know, is the 2553 form, and that's the form that the IRS is going to want to see in order to tax you as an S corporation, and this will reduce your self-employment taxes that you're paying and it'll be converted into payroll taxes and I personally would much rather pay payroll taxes than self-employment taxes on all of my business's profits.

Speaker 2:

No, I love it. And functionally, people, this is something we could unpack for over an hour, this strategy alone, so we're just going to expose you to it. Carlton's got videos on his channel. I've got some on mine. We both write prolifically about this on our blogs. The S corporation allows you to split the income so you can take a little bit of payroll, do your FICA the F word that's social security, medical care and then the other portion you escape that entire tax. And so that's why every dentist, doctor, landscaper, contractor, realtor, broker, dentist, a lawyer account we're all S corporations. And what pisses me off, carlton? I was just at an event yesterday in Houston and, uh, with a bunch of realtors and, and there, and I had several come up and go. Well, my accountant said I wasn't a candidate because you know it's not going to make a difference. And I'm like, do you make more than 50 grand a year? Yeah, it makes a difference. I mean, really, what do you think the break-even point is? When people need to think about this.

Speaker 3:

First off, mark, I am having flashbacks to conversations with clients where their CPAs are telling them, based off of how much they're making, that it doesn't make sense to switch over to an S corporation. I'm talking about LLC owners that have already done six figures, making multiple six figures. It's absolutely criminal to me to hear that these CPAs don't want them to switch over to an S corporation. In my office we have ran the numbers over and over and over again and we know that it makes sense to switch from an LLC to an S corp. When your business profits I want to make sure I say that business profits, because sometimes people get caught up in their gross income when your business profits are over $50,000, the benefits to paying payroll taxes versus self-employment taxes are there, and that includes your tax preparation fees for being in an S-corp versus being a single-member LLC or even a multi-member LLC.

Speaker 2:

Absolutely, and I'll stand behind this. All you know we'll get onto our next tip here, but I'll stand behind this strategy all day long, every day and on Sunday. For 20 years we've been using the S-corp strategy. I have never, ever, had a client audited for taking too little in payroll. So for you accountants out there that are already cringing you don't like what Carlton and I are saying get over it. Reasonable comp can be cautiously aggressive and you have got to get over it, people. And so if clients out there, if you're a small business owner making more than 50 grand a year and you've been an LLC all year long, we can backdate you to an S-corp as of 1-1-23. Get with someone on Carlton's team my team. Get with your tax advisor, the TaxPro network wherever you go. Get an accountant that believes in this and fire your sister-in-law. It's not worth the spaghetti dinner to get your taxes done on TurboTax. All right, let's get it done right up level.

Speaker 3:

Oh, man, your point, mark. You just said something that will probably graze over the average listener. I want to make sure they lock in on what you just said. We can backdate the S election to January 1st of 2023. So that means the income that you've been earning, all of that income, is not going to be subject to 15.3% self-employment taxes If you're taxed as an S corporation for the year of 2023, that means that we can choose to give you a salary with the time we have left in the year which, by the way, many of us have left less than 70 days to give you a salary which will end up resulting you only paying 15.3% on the salary amount you take from your new S corporation. So hopefully that makes sense, and me and Mark have tons of videos on it, as he said, and you can browse through our channel to learn more.

Speaker 2:

Yep, love it. And, and I love your last point, this is a year-end strategy, people. You can't call us in march and, freaking, do this you gotta, because you gotta nail the payroll. So okay, strategy number two is it my turn? Can I throw one down?

Speaker 3:

you know it's your turn, I got plenty to talk about, but I'm gonna let you take over okay no, I'm on your channel today no, I would just I want to add to the conversation.

Speaker 2:

You're freaking awesome. Okay, we'll just throw back one or two here. Here's the one I like and it's and it kind of goes in hand in hand with the board meeting. I love people that take care of their LLC and take care of their corporation by doing an annual board meeting. It gives you better asset protection and it's a wonderful opportunity for a tax write-off, because when you hold a board meeting and you can just have a board of advisors with your LLC, a board of directors with your corporation, you should be doing annual minutes.

Speaker 2:

Many of you need a cleanup. I've been talking about it for years. Our law firm, we have paralegals. All they do is clean up people's entities. They set up for one sheet of paper at LegalZoom. Let's get it cleaned up. I love the board of directors meeting because now I can write off travel, I can write off dining, and so now my Thanksgiving trip, my Christmas trip, is bundled with a family meeting and that's a wonderful write-off. Let your company pay for your holiday travel because you're going to sit down with brothers, sisters, mom, dad, children and you're going to have a board meeting and I think it's just a wonderful year end tip that helps your business, helps asset protection and is great write off.

Speaker 3:

You mean to me as a business owner, owner, mark that I have to take board meetings and those board meetings could be during the same time as the holiday season, when I need to go travel to my family and my family could be on my board, which means my travel now becomes ordinary and necessary and reasonable in the pursuit of income, since I have to do this as a part of being a business owner. Is that what you're saying, mark? That's what I'm saying. If I chose not to stay at my parents' house and I chose to stay in a hotel and maybe I have some meals, do I also get to count those as business meals towards this traveling trip?

Speaker 2:

Yes, and you're not going to get in a fight with your mother-in-law, so it's a really good strategy. Get out of the house. Do not sleep on that cat infested couch in the basement. Get a sweet Airbnb right off. There we go. I love that one. Oh man, all right, your turn. What do you got? Give me another strategy.

Speaker 3:

I am thinking about.

Speaker 3:

You know I'm thinking about leveraging tax incentives.

Speaker 3:

Many people out there that are self-employed have not explored bonus depreciation in its entirety, and I'm a big fan of bonus depreciation, not just on the real estate side, but on purchasing things that you need to purchase for your business, If it makes sense for you to purchase large equipment for your business, which could include vehicles.

Speaker 3:

Many taxpayers of mine have come to me this year and they're realizing that bonus depreciation has dropped to 80 percent. But they need a business vehicle and sometimes, rather than going and getting a Tesla Model Y, we can get a Tesla Model X that weighs over 6,000 pounds and be able to write off 80 percent of that purchase price if you're using the car more than 50% business use. So we have some taxpayers that are buying vehicles before the end of the year, placing these vehicles inside of their business, using them for business purpose, and we're able to claim bonus depreciation if the gross vehicle rate ratio is over 6,000 pounds on those vehicles. In return, you're receiving a pretty sizable write-off reducing your taxable income and your business is receiving a vehicle that you could use for the business so great write-off to be able to use bonus depreciation.

Speaker 2:

And what I love about this, too, is people. You don't have to pay cash, you don't have to pay in full. You can buy a vehicle on credit, no money down, and you still get the write-off. And let's think outside of the box. This could be new computers, it could be cameras for your little social media studio, it could be TVs, it could be drones, it could be cell phones, ipads, laptops, anything equipment at Apple Store Best Buy that you need for your business. If you're going to end up buying it in January, february, let's accelerate it, let's get it in this year. And there's another thing out there called one 79. And you, when you can use them in concert, the one 79 and bonus um it, they just work magically. But I love what you said to don't let the tail wag the dog, don't go out and buy crap you don't need. Get stuff that makes sense and it can be great.

Speaker 3:

You know what I think about too. Mark is like some of our doctors and physicians who have to buy, like these medical chair or their leasing equipment. Some of them are on these long leases with these interest rates and you can end up paying for the entire piece of the equipment and being able to utilize code section 179 and bonus depreciation and own that equipment for your business. So look look to code section 179 and bonus depreciation as an advantage for your business If you're a doctor or a physician.

Speaker 2:

And I like that. You brought up auto too. I do an article every year in January where I've now got seven scenarios because, for example, I mentioned this Houston realtor conference. There was a woman I talked to after that says I bought a car and my accountant said I should only go mileage, I shouldn't do bonus. And I said, well, tell me what's up. And she goes I keep my cars forever and I put on 20,000 miles a year. Well then, stick with mileage. Then you've got a contractor over here that's like well, I have a construction truck, it's local, it's cost me 80 grand for this F two, 50, whatever, but I don't put on a lot of miles because of the cost of gas. Well then, you're going to go bonus. And so people you're going to be in different situations, get with your tax advisor before you pull the trigger, because leasing, electric, mileage, bonus, they all play into how you're going to use that vehicle.

Speaker 3:

Man. Tax planning is not a one size shoe fits all. Mark, how many people have you ran into that said oh well, my friend did this, so I thought I could solve to. As this happens all too much in the tax and accounting space, you cannot take what your other friend or your other business or other business friends are doing and assume that those same strategies are gonna work well for you. You may have a different circumstance, a different living situation. You may be married, your friends may not be married, so the tax strategies you may qualify for, they may not qualify for, and vice versa. Yep.

Speaker 2:

Now I wanna ask you a question here too, because let's continue to unpack your tip. Your second tip here. You threw out the my favorite word is yours as well or words real estate. For anybody out there that's a real estate professional or has short-term rentals, this bonus depreciation and cost seg could be a really important year-end tip. Still with 60 days left, tell us what you think about that.

Speaker 3:

Okay. So I love real estate more than any other asset class because it has made the most millionaires. When I first decided to become a tax strategist, I got to talk to a real estate investor that was making about 15 to 20 million passively. I have never seen anything like real estate and the tax codes for real estate are just so strong.

Speaker 3:

When you go into rental real estate, you're given depreciation. We know that it's taken over the course of 27 and a half years for residential real estate. Commercial is 39 years. That's all fine. But when you get savvy with real estate, you can perform cost segregation studies to take more of your depreciation up front. It's all just sitting in a bucket for you and you're just choosing to take more from that bucket in the first year. Now, with you leveraging bonus depreciation in combination with the cost segregation study, you're able to leverage five-year properties or improvement properties and even be able to accelerate that into that first year, creating a bigger loss on the tax returns. And Mark and I talk about real estate professional status. We talk about short term rentals and the self-rental rule, and if you're able to utilize this depreciation to offset active forms of income, you can put yourself into a situation where you might not pay any taxes, and that's where I like to have fun.

Speaker 2:

No, I love it. And some may say I've been looking at real estate Carlton and I've been teaching for years that every business owner should be deploying at least some portion of their business profit into one rental a year. Even if it's just partial ownership, let's be looking at and, if you haven't pulled the trigger yet this year, if you can just close on a property and put it in service even for one day. Now the short-term rentals are going to have a little different nuance. But this is another one. To talk to your tax strategist. Our appointments fill up so quickly in November and December because real business owners everybody listen, business owners know tax strategies happen in November and December, not in April. We got to move the money now to make the write-offs happen for 23. So having a conversation about real estate right away with your advisor could be important.

Speaker 3:

Yeah, absolutely. Business owners realize that they literally have until the ball drops in New York to figure it out. They're writing a check right Everyday. Taxpayers file their tax returns in January, february, march and April. If you have a pulse and you make over the standard deduction, you're filing a tax return in January, february, march and April.

Speaker 3:

But if you're savvy, you're going to know that the end of the year is when the buck stops return in January, february, march and April. But if you're savvy, you're going to know that the end of the year is when the buck stops. So you have to be strategic before the end of the year. And, like I said when I got on here, we're less than 70 days before the end of the year, which means most business owners know what they're going to finish the year doing. They know what their profit is going to somewhat look like. Why not plan right now how you can take income off of your tax returns or add depreciation onto your tax returns to reduce your tax bill? So when you get into the tax office come January, february, march and April, all you're doing is just sliding information over to your tax accountant so he can do the job of filing the return. I love it Now.

Speaker 2:

If some of you okay quick timeout, some of you may be feeling a little overwhelmed. Holy crap, I wish my accountant talked like this. Carlton and I do so much education on tax strategy through our social media and YouTube, but we also teach classes on a regular basis, and so here at the end, I know Carlton's got next week a tax strategy workshop for the whole week that all of you have got it. It's extremely affordable at just an hour and a half a day. I'm going to let him tell you more about it here in a minute, but just hang tight. We've got the resources for you to just spoon feed you some of this next week. You can set aside a little time. You're going to love this, all right.

Speaker 2:

My next one I love getting family on payroll. I love to see kids on payroll. So if some of you have teenagers, children over age 18, that you've been helping throughout the year, there's strategic ways to just not pay taxes and give your family money. Get them up on the payroll maybe a 1099, maybe a W-2. And with kids under age 18, I can skip the 1099 and W-2 altogether through outside labor. There's just some wonderful cases on this and strategies that are not aggressive. Family business is family business. Kids are going to get paid. Don't pay taxes and just give them money. So I just think there's some critical ways to move money before year end too. Your thoughts on that?

Speaker 3:

I love placing children on payroll as a tax strategy, and one of the things that prevents most parents from placing their children on payroll is they don't know how to establish legitimate work prior to the end of the year. It's one thing to hear on TikTok or from one of these influencers that oh yeah, you can place your children on payroll and pay them up to $13,850. It's another thing to know exactly how to do it and to make sure that you're creating the right type of job description for what your child is going to be doing. Now. The deduction of $13,850 should not be overlooked. I mean, if you're in the 30% tax bracket, I mean you're looking at multiple thousand dollars in tax savings, and if you have two children, that's a $27,700 deduction. So this is a strategy that you can claim year over year without having to pay payroll taxes on placing your children on payroll all the way up until they're age 18. And then, when they get over 18, that's when we can get creative and possibly even 1099 them and make them self-employed business owners.

Speaker 2:

I love it. And, as Carlton says, this, $13,000 and change, realize you can pay your kids more than that. You may be paying your kids much more than that. They just don't file a tax return or owe federal tax In some states, with a standard deduction in California around 6,500, they might pay some state tax, but the federal standard deduction is 13,000 and change, and you don't pay federal tax on earned income up to that amount, and so it's not. I don't want anyone out there to go to their account and go oh, I can just pay my kids 13 grand, the 13 grand. No, you can pay your kids 2,000, 5,000, 10,. Pay them for what they do. Keep it legit. Take a write-off, fund their IRA, fund their school programs, their music lessons. Pay them 20 grand for kids that are over age 18. That's fine. Just just know that they're not filing a tax return under under 14,000, which is super cool.

Speaker 3:

So, yeah, and Mark, what would you say is, like some of the common things that you see children Cause there's obviously a wide variety of different business owners out there there's e-commerce, there's truck drivers, there's investors what would you say is some of the common professions that the children are doing inside of their parents' businesses, and I can kind of comment on that as well.

Speaker 2:

Oh, yeah, yeah, see, number one, they're on the board. We just talked about it Board of directors. So any, yeah, 15 years and older, you should have kids on your board of directors and board of advisors. And, trust me people, you want a teenager on your board because they know everything and they will tell you that, and they will tell you that you're stupid, and so you want that high powered, smart person on your board and they'll do a great job. They'll. They'll speak their mind. Um, but I love kids doing janitorial shredding, paper cleaning the office, rental property maintenance, mowing lawns, stuffing the envelopes, marketing. My teenage girls were my social media managers. Holy crap, they were great.

Speaker 3:

So that is definitely the number one that I see is social media managers and janitorial janitorial services. I remember when my mom brought me into her office I geez, I think I was around eight, nine years old and I was literally the staple picker upper. I was pulling from the office picking up staples and loose trash and little pieces of tape in the tax and accounting office and I was the person that was dumping the trash every single week and that's how I got paid. So if you guys are wondering how you can get creative, believe you me, there's tons of ways in which you can get creative with placing your children on payroll, and you can do this before the end of the year.

Speaker 2:

You know I? It's funny you bring that up. That brings back a lot of um memories for me too. As a child, my, my dad owned um, a lab testing facility. He was an entrepreneur. He wasn't an MD doctor, he had a. He was a microbiologist and he opened labs back in the seventies and eighties and did water testing and blood testing and all this stuff before the HMOs came out.

Speaker 2:

But from my earliest age I mean, I'm not kidding from at least 10 years old until I left for college, my job, with my brother and sister my mom would pack us up when we couldn't drive ourselves and we would clean the offices on Wednesday night and on Saturday afternoon and we'd go out for pizza as a family on Saturday afternoon. And we did that so many years. We grew up in Washington State, tri-cities, and that was my job. It was janitorial for years and years and now I didn't see my dad's tax return. I had to go back and audit it and see if he was really rocking it, but he was just teaching me how to work. I don't know if he got the write-off.

Speaker 3:

Papa Kohler was rocking the write-offs even back then.

Speaker 2:

Oh my gosh, all right, your third and final strategy today. What do you got?

Speaker 3:

Let's see. So we talked about income shifting, kids on payroll. We talked about the tax incentive of bonus depreciation. We talked about the 2553 of bonus depreciation. We talked about the 2553 and making the S election.

Speaker 3:

One of the things that we didn't talk about, Mark is, was retirement strategies, and maybe that's something that we should hit on, because most people are like I don't know if I want to put so much money in my 401k if I'm not getting that big of a return. But if you're self-employed, you have the ability to self-direct those funds, and me and Mark like to play some games when it comes to self-directing, because him and I love real estate and maybe some of you guys don't know that you can get better depending on how you wish to get your returns. Some of you guys maybe don't know that you can own rental real estate inside of your self-directed solo 401k or even your IRAs. So the same money that you got a tax deduction for prior to you filing the tax returns because you can make a contribution up until the return is filed those monies could be reinvested back into rental real estate instead of these all being in the S and P or whatever uh reservatives, uh, stocks and bonds that you might be in oh my gosh, I, I, um.

Speaker 2:

I'm so glad you brought this up because, um, there are some, some people get deceived and they're thinking, well, um, and I've got one last tip that just came to me too. I've, I've got one last one. And then I want to hear about your event next week, the challenge. I love what you call it, because you actually give people action items. But, on this note, a lot of people think, well, I have until April 15th, I can put money in my IRA or my Roth or whatever.

Speaker 2:

But people, before year end, if you want to get the most out of your solo 401k, it has to be set up before you're in with an EIN. The deadline in our office is December 15th. We have a special every November to help people get their solo 401ks. They got to be done because you got to peg it with your payroll. So, back to the original strategy of the 2553,. You've got to have your payroll nailed and what you want to do with your solo. That all has to happen before you're in. And don't even get me started on Roth conversions. The deadline for that's December 31st. I mean, there's so much here.

Speaker 3:

How much are we going to unpack Cause we could talk about this one for at least 30 minutes. Yes, oh my gosh. So, first off, just to just to kind of come over Mark on that, cause he's absolutely right If you're thinking, okay, I can save money by switching over to an S-Corp. You're right if you're making over $50,000 profit, so kudos to you. You're already saving money just by being on this call today. The second thing that you can do is take it upon yourself to establish a retirement account and make a contribution to that retirement account prior to you getting to December 31st and be able to receive a second tax deduction. You can head into 2024 and choose to self-direct that retirement account at any time that you want to, and you can jump into rental real estate and guess what? There is depreciation that can flow into that retirement account, and that's what me and Mark love.

Speaker 2:

Oh, you're going to love this, carlton, the way you said that, and you know what. I am not lying. Carlton is in my certified tax advisor program and we do trainings every week and Carlton will pop in and every time he's like hey, mark, there's a case you need to know about. I constantly learn from my people in my program and Carlton on a regular basis. So, carlton, I don't know if you know this, we've researched this out. The solo 401k. It just has to be set up before December 31st and I have to put on my W2 how much I want to defer.

Speaker 2:

I have until September to put that money in. So so you kind of said I had to put the money in before December 31st. I want everybody to know you just got to sign the damn paperwork before December 31st. You can put the money in next year and you can self-direct it. If you have a group 401k, hell no, because you got employees and you got to put away their money. But on a solo you're not going to sue yourself, so you can take all the time in the world to put the money in.

Speaker 3:

Yep, you're absolutely right To Mark's point. Me and my wife, we we just put money in right before September 15th into our 401k. So, to give you guys context, I made money all the way from January up until September, right, so I didn't have to take some of that extra money that I had and immediately put it in by December 31st. So I was able to make my money work in different ways and then make a contribution late. And that might be something that you want to do if you want to reinvest those funds into other vehicles before moving the money into your retirement account, or that tax deduction for 2022 if you're on extension, and that same thing can happen for you for your 2023 tax returns if you go on extension.

Speaker 2:

Damn it. I thought I was going to teach Carlton something and he shot me down. All right, now, okay, here's my last tip, and then I want to hear about this challenge next week, and that is the health savings account. Ooh, now HSA. Now the HSA. You can make your contribution up until April 15th.

Speaker 2:

But, people, you have to have the right type of plan and you may have missed the boat on that in 2023. You have to have a high deductible healthcare plan. Well, enrollment period starts in five days. November 1st is enrollment period for your 2024 plan, and so we've got just this quick 70 days about, because it goes till January 15th. You've got this time period where you have to select what type of healthcare plan you want for next year and then, by doing that, it opens the door for the HSA for next year. So don't miss out. That's a year-end tip that's really going to pay off next year and they're so powerful. Love the HSA and, as an entrepreneur, you have more flexibility to choose the type of healthcare plan you want. So go to an independent agent, get to healthcaregov shop it. Get that high deductible. So many people pay for insurance they don't need, so I just love the HSA too.

Speaker 3:

And it's a tax deduction. So wait, hold on a second, Mark. You mean to tell me that I can switch my LLC over to an S corporation, avoid self-employment tax and take a payroll deduction, set up a solo 401k and reduce my tax bill there. And then you just said that I can also create an HSA and move money into that. And is that a tax deduction too, Mark?

Speaker 2:

Yes, it is a tax deduction up to 7,500. If you're married, head of household, or 3,250, and you get to write off that health insurance all on your escort.

Speaker 3:

I just wanted to count all the wins we were stacking out there. Now question before we drop our pen what about the traditional IRA, mark? Could I also contribute to the traditional IRA before the end of the year? Is that a tax deduction for me as well, and possibly even convert?

Speaker 2:

it, yes. So for those of you that have there's oh my gosh, there's so much here we love. What Carlton and I talk a lot about is Roth chunking getting all of our retirement accounts to Roth at the end of the day, and it may take time. We might be chunking a little bit every year, so we want to talk about the backdoor Roth. That's why that Roth conversion before year end could be for a traditional that we're, so why wait till April? Do the traditional now and convert it to Roth and or, if it based on your income level, you could go straight to Roth. There's so much there, carlton, I love what you're doing out there to change America. Help America, help small business owners.

Speaker 3:

We're just trying to change lives each and every day, mark, and I think that, honestly, it's just a combination of giving the right information with coupled with the implementation. There's tons of tax professionals out there, guys, there's tons of influencers and there's a lot of information out there, but you want to learn how to implement tax strategies, because that gives you the confidence, every single year, to save money. I love it.

Speaker 2:

You're a good man. Well, carlton, thanks for being here. We'll have you back again. I'm sure I can't wait to get over on your channel. We'll have some fun over there. I just love our audiences and so many mutual followers and clients. Um, enjoy the holidays.

Speaker 3:

I know I'll be seeing you soon I'll be seeing you right at the 360 event. Make sure you guys sign up for the 360 event if you haven't. You'll be seeing me speaking on stage with mark and oh so many other tax professionals, and I'm excited to be a part of that mark. So thank you so much for having me on. Can't wait to have you back on my youtube channel. So we'll go ahead and set that up and to all of you guys that are out there, good luck saving money on taxes before the end of the year.

Speaker 2:

Thanks everybody for being here. Thank you Carlton again, and everybody. Keep living the American dream. Don't give up. It's hard, we know it's tough, but you know what? There's no glass destiny. Thanks for being here.

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Mark J. Kohler

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