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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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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/

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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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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/

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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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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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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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Do you know the different types of 1099 forms your business may need to file?

In this episode, host Mike Jesowshek is joined by Christina Wright from Tax Bandits to discuss everything business owners need to know about 1099 forms. The conversation covers different types of 1099s, when they need to be filed, and who is required to receive them. Christina provides insights into the importance of collecting W-9 forms, staying organized with vendor payments, and filing 1099s accurately and on time. They also address changes in 1099-K requirements, discuss the new 1099-DA for reporting digital assets, and highlight how software solutions like Tax Bandits simplify the filing process.

Learn how staying organized and using the right tools can make tax season stress-free!

[00:00 - 04:45] Overview of 1099s and Types

• Christina explains the purpose of 1099 forms.
• She discusses the various types of 1099s, including NEC (Non-Employee Compensation) and MISC (Miscellaneous).
• She also shares the importance of understanding 1099 filing as an IRS requirement for business owners.

[04:46 - 10:27] W-9 Form Importance and Vendor Onboarding

• Christina explains the $600 payment threshold for issuing 1099s.
• The threshold is cumulative over the year, not per individual payment.
• Missing or incorrect information can lead to complications when filing 1099s.

[10:28 - 15:59] Common Issues and Filing Best Practices

• Inaccurate details (e.g., TIN, business name) on 1099 forms can cause IRS rejections.
• Businesses should use processes like TIN matching to verify information early.

[16:00 - 19:20] 1099 Filing Solutions: Tax Bandits

• Christina shares an overview of how Tax Bandits simplifies 1099 filing.
• How integrating accounting software like QuickBooks and Sage can help streamline the process.
• She shares the benefits of cloud-based filing and validation features.

[19:21 - 26:38] 1099-K and Recent Changes

• Christina discusses changes to the 1099-K threshold from $20,000 to $5,000 for electronic payments.
• The IRS shifted towards increasing reporting transparency for third-party transactions.
• She Introduces the new 1099-DA for reporting cryptocurrency assets.
• Key takeaways for business owners: collect W-9 forms upfront and keep good payment records.

Notable Quotes:

"The main thing business owners need to know is that 1099s are used to report payments for a lot of different things to different parties." – Christina Wright

"The $600 threshold is not based on one payment—it’s cumulative over the entire year." – Christina Wright

Check out this episode’s blog post: How Does the Home Office Deduction Work?

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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

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VISIT: www.TaxSavingsTV.com

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Are you missing out on one of the most overlooked tax deductions available to small business owners?

In this episode, Mike Jesowshek discusses the often misunderstood home office tax deduction, breaking down its requirements and benefits for small business owners. He covers the main qualifications, including exclusive business use and regular use, as well as the administrative office rule that opens the door for many professionals to take advantage of this deduction. Mike also compares the simplified and actual methods of calculating the deduction and offers practical advice on maintaining proper documentation to ensure compliance and maximize savings.

Learn how the home office deduction can reduce your tax bill and boost your savings by tuning in!

[00:00 - 05:25] Introduction to Home Office Deduction

• Mike explains the common misconceptions about the home office deduction.
• He stresses that the IRS encourages this deduction as long as it's used correctly.
• The home office must be used exclusively for business and on a regular basis.
• Mike explains that areas like the dining room don't qualify, but dedicated spaces do.
• He introduces the administrative office rule, allowing home offices to qualify even if work is done elsewhere.

[05:25 - 11:03] Calculating and How to Claim the Home Office Deduction

• Simplified method: $5 per square foot, up to 300 sq. ft.
• Actual method: Business use percentage multiplied by total home expenses.
• Mike walks through an example of calculating the deduction using both methods.
• He highlights when the actual method may provide larger savings.
• Mike explains how sole proprietors and S corporations claim the deduction using different forms.

[11:03 - 18:08] Importance of Documentation

• Emphasizes the need for thorough documentation, such as taking pictures and keeping cost records, to protect against audits.
• Mike encourages business owners to take advantage of this deduction before year-end.

Direct Quotes:

"The home office deduction is black and white in the tax code. The IRS wants you to take advantage of it." - Mike Jesowshek, CPA

"Every deduction is worth it. This takes very little time as long as you have the tools to help make it happen." - Mike Jesowshek, CPA

"The key to successfully using the home office deduction is proper documentation and following the rules." - Mike Jesowshek, CPA

Check out this episode’s blog post: How Does the Home Office Deduction Work?

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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 healthcare tax savings as a business owner?

In this episode, Mike Jesowshek discusses health care-related tax strategies for business owners, focusing on tools like Health Savings Accounts (HSAs), self-employed health insurance deductions, and Medical Expense Reimbursement Plans (Section 105). He explains how these strategies can help business owners minimize taxes while optimizing healthcare costs, both for themselves and their employees. Mike emphasizes the importance of understanding tax laws and maximizing deductions to lower tax liability while ensuring business owners can grow their wealth and take care of their healthcare needs.

Learn how HSAs, Section 105 plans, and self-employed health insurance deductions can lower your tax liability while protecting your health!

[00:00 - 05:53] Health Savings Accounts (HSAs)

• Mike explains how HSAs provide tax benefits: tax deduction on contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
• HSAs are powerful tools for both business owners and individuals, acting as a secondary retirement account for future medical costs.

[05:53 - 10:00] Self-Employed Health Insurance Deductions

• Mike details how self-employed individuals can deduct health insurance costs, focusing on sole proprietors, LLCs, and S corps.
• S corp owners must run health insurance premiums through their business and add them to their W-2s to receive deductions.

[10:00 - 19:27] Health Benefit Options for Small Business Owners with Employees

• Mike discusses section 105 plans or Medical Expense Reimbursement Plans, and how it's useful for business owners with high out-of-pocket medical costs.
• These plans turn medical expenses into business expenses, offering significant tax savings.
• He explains the three primary options: group health insurance, wage increases, or QSEHRA/HRAs to reimburse employees for medical costs.
• QSEHRA is a flexible and cost-effective option for small businesses with fewer than 30 employees.

Quotes:

"Think of an HSA as a secondary retirement plan because, at some point, we’re all going to face medical costs." - Mike Jesowshek, CPA

"If you're self-employed, you get a tax deduction for your health insurance, regardless of whether you cover your employees’ costs or not." - Mike Jesowshek, CPA

"QSEHRA allows small businesses to support their employees’ healthcare needs without the burden of a traditional group health plan." - Mike Jesowshek, CPA

Resources:

Blog: Tax Planning and Health Costs
https://www.taxsavingspodcast.com/blog/Health-Costs-Strategies-for-Small-business-owners


_____

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

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

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