Living Corporate Life

Are you currently a W2 wage earner or 1099/Sole Proprietor?

W2 wages are the highest taxed. The taxes come right off the top, leaving you with only about 3-4 deductions such as a 401k or IRA, Mortgage Interest Deduction, and HSAs.

Sole Proprietors have access to 15-30 different deductions that can be claimed on a Schedule C. However, they are also subject to Self-Employment taxes.

Understanding the Tax Code

Did you know there is a vast tax code consisting of 81,000 pages?

You need to live your life like a business. What does that mean? If you operate within a Corporation or LLC or multiple companies, you can take advantage of many more write-offs. The tax code provides Corporations and LLCs with up to 233-305 different write-offs. This allows you to utilize more of your money upfront, ultimately reducing your overall taxable liability. So, what can you deduct? The IRS states that deductions must be necessary and reasonable.

Examples of Deductible Expenses

Below are 43 examples of deductible expenses. However, there are many more:

• Accounting Fees

• Advertising

• Air Conditioning

• Airplanes

• Assistants

• Business Promotion

• Bad Debts

• Boats

• Bonuses

• Bookkeeping

• Alarm Systems

• Business Awards

• Business Consultants

• Disability Plans

• Decorating

• Business Meals

• Legal Fees

• General Business Insurance

• Vehicles

• Corporate Setup Fees

• School

• Health Clubs

• Home Office

• Leasing an Office

• Research

• Medical Bills

• Interest Payments

• Business Travel

• Equipment

• Seminars

• Technology

• Insurance

• Braces

• Education

• Property

• Loans

• Massage

• Gardening

• Logos

• Web Design

• Professional Services

• Team Building

• Paying your kids*

  
  

Through six different deductions, I can show you how to save almost $100k in taxes for your business.

1. Safety and Longevity Awards: $1,600 Each Award

Let me explain these awards. If you are responsible for workplace safety, you could benefit from the Safety Award. If you have been with the business the longest, you could receive the Longevity Award.

However, the Longevity Award cannot be claimed year after year by the same person. If the same individual receives this award again, they must wait five years. The same applies to the Safety Award. These awards cannot be cash or cash equivalents, such as VISA or Mastercard gift cards, and cannot be travel-related. However, if you prefer something enjoyable, like a new set of Callaway Golf Clubs or an Orbea Bicycle, the company can cut a check to the merchant for the item. This can be claimed as a deduction and is not considered taxable income for you.

2. Medical Reimbursement Plan: Up to $10,000 Per Person

A Medical Reimbursement Plan is a self-administered plan established by the company. The company can contribute up to $10,000 to the plan, which is a tax deduction for the business and not considered income for you. If you are self-insured, the plan can cover expenses not included in your health insurance, such as premiums, co-pays, deductibles, and prescriptions.

3. Vehicle Deduction: $7,500 Per Year on Average

I am not referring to the vehicle deduction on your Schedule C. Instead, your Corporation or LLC can lease your vehicle from you and reimburse you based on mileage driven, just like any other employer would. For example, if you drive 1,000 miles per month and the reimbursement rate is 62.5 cents per mile, the company should write you a check for $625 for that month. This is a tax deduction for the business but will be considered income for you. Due to the depreciation of the vehicle's value from business use, this could offset that income on your personal taxes. This money can cover vehicle payments, insurance, maintenance, fuel, and more.

4. Retirement Plans (SoloK): Up to $62,000 Per Person

I am not a qualified plan expert, so this information is for informational purposes only. A SoloK plan is similar to a 401k plan offered by employers. You can establish a SoloK plan for yourself and your spouse through a self-directed administrator. Based on your salary with the company, you can contribute up to $62,000 to the plan, which becomes a tax deduction for the business and helps fund a qualified plan for you and your spouse. The beauty of these plans is that you can borrow against them, unlike an IRA. If your business needs a boost, the company can borrow against it. This type of plan also allows you to invest in alternative investments that grow tax-deferred. This is not investment or tax advice, so if you want to learn more about these plans, consult one of the many administrators available. We work with several companies that provide these services.

5. Education for Business Growth: $5,250 Average

Do you enjoy attending events to learn new strategies for business growth? The IRS code allows you to deduct up to $5,250 per year for tuition to these conferences. You must have a written Educational Assistance Program in place, and there are specific requirements. The plan cannot favor highly paid employees and cannot provide more than 5% of the benefits to shareholders or owners. Employees cannot receive cash or other benefits instead of educational assistance, and reasonable notice of the program must be given to employees. If you are the only employee, this is straightforward. To take advantage of this benefit, you need to draw a small salary from the company.

6. Hiring Your Children: $12,200 Per Year

The IRS allows us to employ our children starting at ages 3-18. The duties must be age-appropriate, and the services must be performed. You need to keep a timesheet of the work they did and how long they worked. This allows you to pay them up to $1,000 per month, which is $1,000 less you need to draw from the company. This money can cover educational expenses, dance, band, sports, and more. You can also contribute up to $6,000 per year to a ROTH IRA established for your child. Imagine the benefits if you have multiple children—this can be advantageous for your family and provide a tax deduction for your business.

Corporation or LLC

With these six deductions, I just showed you how to save $98,550.00 per year in your business. As mentioned earlier, you have access to 233-305 different corporate write-offs!

Corporate Compliance

As I always emphasize, all these benefits come with responsibilities, including Corporate Compliance. You need to maintain Minutes & Resolutions that document these transactions.

You might be thinking, "My CPA handles that." Are you sure? Have you had your tax returns reviewed by another professional? Our experience shows that most CPAs overlook around $6k – $9k in deductions per year. Many CPAs are not tax strategists! I often joke about this. There are two types of CPAs:

1. CPA stands for Certified Public Accountant, which means they are proactive and may offer you ideas to consider.

2. CPA can also mean Cut, Paste, and Attach, meaning they just rinse and repeat. You might hear them say, “This is what I have done for my clients in the past.” This indicates they are creatures of history.

   
   

You need someone who will provide guidance and strategy that enables you to take advantage of all these fantastic benefits I have mentioned. By Living Corporate Life, you can keep more of your hard-earned money and pay significantly less in taxes.

To learn more about how Living Corporate Life may benefit you, call our office at 775-384-8124 or send an email to contact@controllersltd.com. You can also book an appointment with my Sr. Strategist at www.calendly.com/stephan-controllers.