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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

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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


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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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Could your business deductions survive an IRS audit?

In this episode, Mike Jesowshek breaks down a real-life case where a business owner lost $2 million due to an IRS audit after attempting to write off a yacht as a business expense. He explains how poor bookkeeping and a lack of proper documentation led to the disallowance of the deduction. Mike emphasizes the importance of understanding and correctly implementing tax strategies, along with maintaining detailed records to defend against audits. The episode highlights the need for business owners to carefully substantiate deductions and avoid shortcuts, even when seemingly successful entrepreneurs do so.

[00:00 - 05:06] Lessons from Poor Bookkeeping

• Mike highlights a case where a business owner wrote off a $2 million yacht as a business expense.
• The IRS disallowed the deduction due to poor records and no evidence of business-related activities.
• Mike stresses the importance of having clear documentation and bookkeeping to defend business expenses in an audit.
• He discusses how many business owners wrongly assume that if someone else gets away with a deduction, they can too.

[05:06 - 07:04] Understanding Business Deductions

• Business deductions must be ordinary and necessary for the type of business.
• It is not enough to claim the deduction; proof must be provided through proper logs and receipts.
• Mike emphasizes the importance of correct implementation, using the home office deduction as an example.
• Even legitimate deductions can be disallowed if not implemented and documented properly.

[10:12 - 14:52] Correct Documentation: A Defense Against Audits

• Having detailed records and logs can protect business owners if the IRS audits them.
• Mike shares an example of a client who successfully navigated an audit by having all documentation in place.
• He also touches on various tax strategies like the Augusta rule, employee entertainment, and travel deductions.

Direct Quotes:

"Bookkeeping is the backbone of a business. Not only does it help your business grow, but it also helps defend your business expenses in the event of an audit." - Mike Jesowshek, CPA

"Just because someone down the road takes a deduction and doesn't get caught doesn't mean it’s right or that you won't get caught." - Mike Jesowshek, CPA

"A business deduction has to be ordinary and necessary for your type of business, and then you need the proof to back it up." - 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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Have you ever wondered how to maximize your tax deductions while staying on the right side of the IRS?

In this episode, Mike Jesowshek provides an in-depth guide on over 30 tax write-offs and strategies that can save businesses thousands of dollars. He emphasizes the importance of understanding pre-tax versus after-tax spending, the significance of selecting the right business entity structure, and how to effectively maximize deductions. Mike also covers strategies such as using an S corporation to reduce self-employment taxes, hiring children within a business, and setting up a board for additional tax benefits. He stresses the need to correctly implement tax strategies to ensure they remain legal and beneficial.

[00:00 - 12:24] Pre-Tax vs. After-Tax Spending, Entity Structure, and S Corporations

• Mike introduces the importance of understanding tax strategies.
• Optimize spending to shift after-tax expenses into pre-tax deductions.
• He discusses how the business entity structure forms the foundation of your business.
• Different types of entity structures: sole proprietorship, LLC, C corporation.
• Choose the right entity structure to ensure proper tax benefits and legal protection.
• Consider S corporation status once your business reaches a certain profit level.

[12:24 - 26:03] Maximizing Deductions

• Mike breaks down the various business expenses that qualify as deductions, including advertising, contract labor, equipment, and gifts.
• Regularly review personal expenses to identify potential business deductions.

[26:03 - 35:18] Accountable Plan and Setting Up a Board for Tax

• Ensure proper documentation and exclusivity in home office use.
• Use a board for accountability, perspective, and additional tax deductions.

[35:18 - 44:47] Additional Tax Strategies: Meals, Travel, Automobile, and Retirement Planning

• Proper documentation and fair market value rental rates are crucial.
• Be strategic in everyday business activities to maximize deductions.

[44:47 - 57:30] Implementation of Tax Strategies

• Mike emphasizes the importance of not only learning tax strategies but also correctly implementing them.
• Correct documentation and cautious implementation are key to successful tax strategies.

Direct Quotes:

"The government doesn't come knocking and let you know when you missed out on an incentive that they gave you." - Mike Jesowshek, CPA

"Every business owner should have a home office of some sort." - Mike Jesowshek, CPA

"The implementation piece is where you start to see those tax savings." - 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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Mike Jesowshek shares how he saved a small business owner over $15,000 in taxes in just 12 months. Mike breaks down the practical strategies implemented, including changing the business entity structure, maximizing home office and vehicle deductions, strategically categorizing business expenses, and more!

Learn how these strategies led to over $132,000 in tax savings for Alex's business over five years.

[00:00 - 03:28] Case Study

• Alex is a former corporate digital marketer who transitioned from a W2 employee to an entrepreneur in the healthy eating influencer space
• Alex's quick growth, generating about $100,000 profit in the first year as a sole proprietorship
• During tax season Alex got hit with an unexpectedly large tax bill in the first year
• He realized he lacked knowledge of tax-saving strategies

[03:29 - 06:18] Tax Saving Solutions Implemented

• We changed Alex’s entity type from sole proprietorship to S Corporation
• We implemented home office deduction through an accountable plan
• We utilized a personal vehicle for business and claimed deductions
• We maximized deductions by finding business purposes for existing spending
  • Meals with clients or business discussions
  • Travel combined with business purposes
  • Office equipment and supplies

[06:19 - 12:01] Advanced Tax Saving Strategies

• Set up a board for the business
  • Created opportunities for travel and meal expense deductions
  • Implemented the 14-day home rental rule for board meetings
• Established retirement savings with a solo 401(k)
• Set up a Health Savings Account (HSA)
• Properly deducted self-employed health insurance
• Implemented estimated tax payments to avoid penalties

[12:02 - 19:47] Results and Key Takeaways

• These strategies saved Alex over $15,000 in taxes in the first year
• Over five years, Alex saved more than $132,000 in taxes
• These strategies are available to most small business owners
• Proper implementation is crucial for realizing tax savings

Direct Quotes

"Implementation, understanding strategy is one thing you do not see any tax savings until you implement that strategy. And I also want to put in the effort that says implementation is one thing. The correct implementation is the key." – 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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Business owners are now facing a new reporting requirement called Beneficial Ownership Information (BOI) reporting. In this episode, Christina from Tax Bandits provides a comprehensive guide on BOI reporting, explaining what it is, who needs to file, how to file, and the potential penalties for non-compliance. Christina shares practical advice and examples to help business owners understand and comply with this new requirement.

Blog: https://www.taxsavingspodcast.com/blog/what-is-beneficial-ownership-information-boi-reporting-and-why-is-it-important

[00:00:00 - 03:59] Introduction to BOI Reporting

• A new requirement for many small businesses across the United States
• Mandated by the Corporate Transparency Act, starting January 1, 2024
• Designed to help law enforcement identify real owners of companies and prevent financial crimes

[04:00 - 06:13] Who Needs to File and Exemptions

• Most small businesses are required to file unless they fall under one of 23 specific exemptions
• Common exemption (21st exemption) for large operating companies:
  • More than 20 full-time employees in the U.S.
  • A physical office in the U.S.
  • Over $5 million in gross receipts reported on U.S. federal tax returns

[06:14 - 09:12] Information Required and Filing Process

• Company information: name, EIN, address, registration location, domestic/foreign status
• Beneficial owner information: name, FinCEN identifier (if available), or date of birth, address, and valid ID
• Filing can be done through services like Tax Bandits or directly through FinCEN
• Tax Bandits offers a user-friendly interface and record-keeping features

[09:13 - 15:25] Deadlines, Penalties, and Costs

• Deadlines:
  • Existing businesses (before Jan 1, 2024): Must file by January 1, 2025
  • New businesses (registered on/after Jan 1, 2024): 90 days to file
  • New businesses (registered on/after Jan 1, 2025): 30 days to file
• Penalties for non-compliance:
  • Civil penalties: Up to $960,591 per day
  • Criminal penalties: Up to $10,000 fine or 2 years imprisonment
• Costs for filing (via Tax Bandits):
  • One-time filing: $49
  • Lifetime reporting: $199 for one entity (recommended option)

[15:26 - 20:50] Final Thoughts and Recommendations

• BOI reporting is not an annual filing, but updates are required when information changes
• Four types of reports: Initial, Corrected, Updated, and Newly Exempt
• Importance of filing promptly to avoid penalties
• Recommendation to use Tax Bandits for easier tracking and management of BOI reports

Direct Quotes:

"The BOI report requires that many small businesses submit this beneficial ownership information report to FinCEN. Basically, submitting this information is helping law enforcement to identify real owners of companies versus, preventing financial crimes that are happening through some not so savory means there.” – Christina Wright, Tax Bandits

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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 leaving money on the table when it comes to your business taxes? In this Q&A episode, Mike Jesowshek answers your tax questions! From S corporation salary conundrums to the surprising deductibility of gym memberships, Mike provides actionable insights that could save you thousands.

[00:00 - 07:15] S Corp Salaries and Retirement Accounts

• Can an S corporation owner take only dividends and no salary?
• How to determine a reasonable S corp salary?
• Can I start a solo 401k in my side hustle without breaking control group rules?

[07:16 - 13:30] Deductible Expenses and Hiring Family

• Is a gym membership with business offices tax-deductible?
• How to allocate costs between personal and business use?
• What are the tax implications of hiring my teen in a sole proprietorship?

[13:31 - 21:00] Solo 401(k)s and Bookkeeping

• What are the contribution options for solo 401(k)s for both spouses?
• How to structure businesses for married couples?
• Can bookkeeping be automated? What software is recommended?

[21:01 - 26:30] Accountable Plans and Cash Purchases

• Do husband-wife-owned LLCs need accountable plans?
• How to handle partnership filing in non-community property states?
• How to document and prove business purchases from Facebook Marketplace?

[26:31 - 35:00] Tax Deductions and Management Fees

• What expenses can self-employed pastors deduct?
• Should I set aside taxes based on gross revenue or profit?
• What's a reasonable fee for a family management company?

Direct Quotes:

"Don't invest something just for a tax benefit. Like they always say, ‘Don't let the tax tail wag the dog.’" - Mike Jesowshek, CPA

Resources Mentioned:

• Life Inc Retirement Services
• Xero accounting software
• QuickBooks Online

______

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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Business owners are always hiring new employees, but most of the time they're missing out on potential tax credits just because they’re unaware about what’s available.

In this episode, Mike Jesowshek, provides a comprehensive guide on the Work Opportunity Tax Credit (WOTC) and how you as a business owner might be able to take advantage of this tax credit. He explains what the WOTC is, who qualifies for it, how to claim it, and its benefits. Throughout the episode, Mike shares practical advice and examples to help business owners understand and implement this valuable tax credit.

[00:00 - 03:30] What Is The Work Opportunity Tax Credit

• A business credit available to employers who hire individuals from targeted groups
• Designed to incentivize businesses to hire from specific populations that may face barriers to employment
• A way for businesses to reduce their tax liability while diversifying their workforce and making a positive community impact

[03:31 - 06:45] Targeted Groups and Credit Amount

• The targeted groups eligible for WOTC include:
  • Veterans
  • State assistance recipients under part four of title four of the Social Security Act (SSA)
  • Felons
  • Residents in designated empowerment zones or rural renewal counties
  • Individuals referred following a rehabilitation plan or program
  • Recipients of Supplemental Nutrition Assistance Program (SNAP)
  • Recipients of Supplemental Security Income Benefits under Title 16 of the Social Security Act
  • Individuals experiencing long-term unemployment
• The general rule for credit amount is 40% of the first $6,000 in wages for employees working 400+ hours.
• The maximum credit is typically $2,400 per eligible employee

[06:46 - 09:15] Claiming the WOTC

• Complete IRS Form 8850 before or on the day of job offer.
• Submit the form to the local agency within 28 calendar days of the employee's start date.
• Wait for certification from the local agency.
• Claim the credit using Form 5884 on your business tax return.

[09:16 - 15:00] Benefits, Examples and Considerations

• Benefits include tax savings, a diverse workforce, and community impact.
• The WOTC is a dollar-for-dollar tax credit, not a deduction.

Direct Quotes:

"The truth is that business owners are always hiring new employees, but all too often they're missing out on potential tax credits simply because they don't know about them." - Mike Jesowshek, CPA

"This is a credit, which means it's a dollar for dollar in tax savings. This is not a tax reduction. This doesn't reduce your income." - Mike Jesowshek, CPA

Resources Mentioned:

• IRS Form 8850
• Form 5884

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

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