Episode Transcript
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Speaker 1 (00:00):
So I just came back
from a scale workshop with Alex
Hormozy and I met an attorneythere.
Very great attorney do great intheir business, high gross
income, revenue and very highprofit.
And, as a matter of fact, shetells me, boris, my husband runs
operations.
And she said what do you do,boris?
I said, hey, I helpmillionaires keep their millions
(00:23):
instead of giving it to the IRS.
She's like oh, boris, I justwrote a check for $225,000 to
the IRS for the last two years.
I am definitely paying a lot ofmoney in taxes and I think I
want your help.
Anyways, I'm gonna break downthe three most effective tax
strategies that you, as anattorney, can use in your
(00:45):
business and what I have usedfor my attorney clients that
help them save up to $100,000 oreven more by just using these
three top tax strategies.
Let's get started.
Speaker 2 (00:56):
Welcome to the Tax
Reduction Podcast for
Money-Making Entrepreneurs withBoris Mushaev.
Boris has helped entrepreneursacross the United States
collectively save millions ofdollars in taxes with the power
of tax planning and advisory.
The only way you, the businessowner, can save money on taxes
is by using proactive taxstrategies, and this podcast is
(01:16):
all about saving you money ontaxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 1 (01:29):
Let's get into it the
top three tax strategies that
you, as an attorney, can use inyour business to save up to
$100,000 or even more in yourbusiness.
Now, strategy number one thatwe're going to cover is
compensation package.
You, as an attorney, canactually restructure
compensation for yourself andyour spouse if your spouse works
in your business tosignificantly save money on
(01:51):
taxes.
The second thing is that if youare that attorney that also
owns a building in which yourlaw firm operates, this could be
a huge nugget, a treasure, goldtreasure, whatever you want to
call it.
This is called a self-rentaltax strategy and I'm going to
talk about that in a lot ofdetail as well.
And the third one is if youhave a 401k in your business,
(02:12):
then I'm going to show you howyou can actually combine it
together with what's called aprofit sharing and defined
benefit plan to absolutelymaximize your retirement
contributions and really savebig on taxes.
All right, let's get startedwith the first tax strategy,
which is the compensationpackage.
If you are an attorney that hastheir business as an
(02:35):
S-corporation, then the salarythat you're taking out from the
business can be restructured.
Now, if you don't have anS-corporation for your law firm,
I definitely recommend gettingone, because it will absolutely
save you a lot of money on taxes.
Now, what do I mean by that?
Every attorney has to paythemselves a reasonable
compensation.
Now a lot of attorneys theywrite themselves out a check for
(02:57):
a W-2 salary as an attorney.
But IRS says that you have topay yourself a reasonable
compensation for the duties thatyou perform in your business.
So in your law firm you'reprobably not only an attorney
but you're also a paralegalright.
You're also doingadministrative work, maybe some
sales and some marketing.
So you're not 100% attorney.
You're about 50% of the time anattorney and the other 50% you
(03:20):
do all of those things.
So what we do for our attorneyclients is that we take their
salary, we bring it down frombeing a 100% attorney to a 50%
attorney and everything else,and that what allows that to do
for us and for them is to lowertheir salary, which means they
will pay less social securityand Medicare taxes.
Same goes with your spouse.
(03:42):
If you have spouse that'sworking in your law firm, a lot
of attorneys pay their spousewhatever they think that spouse
should get paid, and that'stotally cool with me.
But what we have found that alot of times attorneys and
business owners in the samesituation.
They overpay their spouse andin most cases we've actually
reduced the spouse's salary by50%.
(04:02):
Of course we have a backup forit to prove that, but whatever
the spouse is doing, it is notthe same amount that they're
getting paid and in most casesthat's because you may have not
been educated properly by youraccountant what to do in these
scenarios and you know, if youdon't have a tax advisor and
somebody who's tax planning foryou, you should get yourself a
tax advisor right away.
So what do we do, for ourattorney clients as well, is
(04:23):
that we reduce the salary forthe spouse.
So, number one, we restructurethe owner's compensation, the
owner's salary, we reduce thespouse's salary.
And if you pay for healthinsurance for yourself and for
your employees, what happens isthat, especially if you're an S
corporation owner, you canqualify for what's qualified
excuse me, for what's called aself-employed health insurance
(04:44):
deduction, even though you'vegot employees and even though
you're paying for their healthinsurance.
You add that health insurancenot only on your W-2, not only
to reduce your taxable wages,but also to reduce down your
social security and Medicarewages.
You can do this for your spouseand you can do this even if you
pay for the health insurancefor your children can do this
(05:04):
for your spouse, and you can dothis even if you pay for the
health insurance for yourchildren.
All of that can be part of yourw-2.
Not again, not only reducingyour taxable wages, okay, it's
also reducing your socialsecurity, medicare wages.
So after this, pick up youraccount and be like hey, I pay
for health insurance, right?
Yes, is it part of my W-2?
Yes, is it reducing my SocialSecurity and Medicare wages?
If the answer is no, fire them.
(05:25):
Okay, maybe not that extreme,all right, so just these three
things very easily, somethingthat can be implemented right
away could potentially save you$12,000 to $18,000.
I know it has saved tons of ourclients this amount of money by
just restructuring these littlethings.
Now the second thing that we'regoing to get into is
(05:46):
self-rental, and we're going todo this right after this break.
Speaker 2 (05:48):
If you have a tax
preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Bora's put together a free PDFfor you, the business owner
Seven tax write-offs everyS-corporation business owner
must know.
In this PDF you can find seventax strategies that you can
(06:12):
start using in your business toinstantly start saving money on
taxes.
Click on the link in thedescription below for a free
download.
Speaker 1 (06:19):
All right, cool,
welcome back.
Let's talk about the strategyas self-rental.
If you are that attorney thatowns a building in which your
law firm operates, this could bea huge tax strategy for you.
Now let's take a step back fora second and let me explain the
strategy for you.
If you have not had yourbusiness in that building, that
you own, the LLC or whateverthat may be it could be a
commercial property orresidential property If your
(06:42):
rental property produces a loss,technically speaking or in
general, you can't take thoselosses because they are
considered passive losses, soyou cannot deduct them on your
tax return.
If you're activelyparticipating in your business
and if you're an attorney, I'mguessing you are actively
participating in your lawpractice and so is your spouse
so the losses generated by thatrental property or commercial
(07:04):
building or whatever that may be, are not tax deductible unless
you are operating your businessin this separate LLC or in that
building.
Now what happens is that you'reprobably paying rent from your
S corporation and I'm assumingyou may be an S corporation,
because most of the attorneysthat I know are an S corporation
If not, speak to your taxadvisor and become an S corp.
(07:26):
Now back to us.
So you're probably paying rentfor this LLC.
Now what happens is that IRSsays look, if you're operating
your business in the propertythat you own in that building,
you can group these twotransactions under quote section
469.
What that allows you to do isthat this LLC in which your
(07:47):
building is located is going tohave a loss and mainly it's
going to have what's called apaper loss, and that's gonna
happen from the depreciation.
And on top of that you can addanother tax strategy, which is
called cost segregation, whichallows you to accelerate your
depreciation.
And on top of that you can addanother tax strategy, which is
called cost segregation, whichallows you to accelerate your
depreciation.
Now this loss typically again,typically it is not tax
(08:09):
deductible.
But because your business isoperating in the same property
that you own, this loss nowgoing to be combined together
what's called, if we use irsterm, it's called group together
with your S-corporation on thecode section 469.
And you would have to make anelection on the tax return and
attach a statement.
(08:29):
So your accountant hopefullyyou have a good accountant that
would know that and what happensis that this loss will now be
deductible against yourS-corporation profits.
So if you are a seven-figureattorney that makes millions of
dollars and has millions ofdollars in profit, this could be
a huge tax strategy for you.
We've seen average savingsanywhere between $20,000 to
(08:50):
$30,000 in just taxes saved.
Again, you don't have to spendmoney to use this tax strategy.
It's a very simple tax strategy, kind of like you have to know
how to prepare a tax return andknow a tax code to be able to
implement this.
So definitely speak to your taxadvisor.
If you're that attorney thatoperates in a building which
your law firm is in, speak toyour tax advisor about grouping
(09:13):
these two activities together.
Now let's talk about a third taxstrategy that could save you
big on taxes, and that is aretirement plan that is combined
together with a profit sharingand defined benefit plan.
Now, if you have a 401k in yourbusiness I'm not sure if you
know this, but you can actually,without doing anything, put
away up to $23,500 into your401k.
(09:36):
That is a deferral from yourpaycheck.
Remember, this is part of thatstrategy where you do
compensation package.
Now let's say, like Boris, I'vegot a lot of money, a lot of
cash coming in and I want to beable to put away a lot more
money.
So what you can do is speak toyour financial advisor, but
together with your tax advisorokay, you definitely need a tax
advisor for this.
So do all the propercalculations for you.
(09:58):
Now what happens is that theycan open up what's called a
defined benefit plan that has aprofit sharing plan in it.
Now how it works is that with a401k, you can do $23,500.
With a profit sharing plan, youcan actually max out your 401k
at $70,000.
Again, we're assuming thatyou're under the age of 50.
(10:18):
If you're over the age of 50,your contributions are actually
higher.
Okay, so 70,000.
Now, with defined benefit plan,actually higher, okay, so
70,000.
Now, with defined benefit plan,your retirement contributions
combined together could be$225,000 or even more.
So I actually pulled out a reallife example for a 37 year old
individual and his contributionsare $125,000 into defined
(10:43):
benefit.
So altogether it's about$225,000 that he can put away
into his retirement.
Entire thing is 100% taxdeduction.
If you have a spouse in yourbusiness that is helping you in
your business, you can do exactsame strategy for your spouse
and this $225,000 contributioncould be double that, which is
(11:05):
$450,000.
Mind-boggling.
Right Now there is some caveatto it.
If you do have employees.
You have to contribute into theprofit sharing for your
employees as well.
So this is a live example Forthis client.
We actually have a requirementto put away $50,000 into the
employee's account as well.
So you might be thinking, oh,that is too much money, I'm
(11:26):
going to have to put away foremployees,000 into the
employee's account as well.
So you might be thinking, oh,that is too much money I'm gonna
have to put away for employees.
That is great question and thatis a good thinking.
But let's do savings right.
So if we have $225,000 in thisparticular client situation,
again your situation may bedifferent.
Times two, that's $450,000 incontributions plus 50, that's
half a million dollar write-off.
At 37 percent tax, federal taxbracket, that's 185 000 in taxes
(11:51):
saved.
So would you pay 50 000 intoyour employee's account to save
185 000?
Most of my clients say yes tothat.
All right.
So these are the top three taxstrategies that you can use in
your business, in your law firm,to start saving a lot more
money on taxes.
But again, if you do proper taxplanning with your tax advisor,
(12:13):
I hope that you do have a taxadvisor and a tax planner,
somebody that you work togetherwith, being proactive, doing it
throughout the year and not atthe end of the year, not hoping
that after you finish filingyour taxes, that you somehow
miraculously will save money ontaxes, because, remember, hope
(12:34):
is not a tax strategy.
Get yourself a tax advisor andI hope that this was super
helpful to you.
Thanks so much.
Speaker 2 (12:41):
That's it for today's
episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(13:02):
next strategy is released.