Episode 43. $1 Million S-Corp Tax Strategy

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If you're an S-Corporation owner making over $1 MILLION and you're still using the same tax preparer you started with... you're probably overpaying by six figures.

Let's talk about the BIGGEST salary mistake million-dollar S-Corporation owners make that's costing them hundreds of thousands in unnecessary taxes. Spoiler: If you're taking your entire profit as W-2 salary because your accountant told you to "be conservative," you're literally doing the opposite of why S-Corporations exist.

Here's what we're diving into: The #1 reason you became an S-Corporation was to AVOID self-employment tax — so why are business owners at the $1M+ level still paying themselves massive W-2 salaries? I'll explain why you have to split between salary and distributions when you're making seven figures, and yes, it's completely legal when done right.

We expose why taking everything as salary is the WORST tax strategy at this income level. Your accountant most probably does not understand how PTET and QBI deductions completely change the game for high earners. These tax strategies alone can save you hundreds of thousands of dollars on taxes. 

The harsh truth is you've OUTGROWN your accountant. You need a tax ADVISOR, not just a tax preparer. There's a massive difference, and I'll explain why most million-dollar business owners are getting terrible tax advice.

Advanced tax strategies we cover: How to LEGALLY reduce that ugly tax bill that hits every April. You know, when your accountant says "congratulations on a great year... here's your $300,000 tax bill." The more you make, the more you pay? Not if you know these tax strategies.

For those with million-dollar homes and home offices, the IRS actually WANTS you to take these tax deductions. I'll walk through the Augusta Rule, home office deductions, because you should be maximizing every square foot of your property for tax savings.

The retirement tax strategy section is CRUCIAL: Solo 401(k)s are just the beginning. At this income level, you should be looking at defined benefit plans that let you sock away hundreds of thousands annually in tax-deductible retirement contributions. Yeah, you read that right.

Stop letting

I've put together this FREE resource for you:

7 Write-Offs Every S-Corporation Business Owner MUST Know
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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this ...

Episode Transcript

Speaker 1 (00:00):
Boris, can we talk about some S-Corporation owners
that are making a milliondollars or more in their
business and they need strategy?

Speaker 2 (00:06):
Yes, let's do it.
I know we've got a couple ofquestions coming in, yes, so I
think this is going to be fun.
Actually, if I can just jump ina little bit, go for it Just to
let the viewers know what typeof questions we're getting from
a million dollar S-Corps, okay.
So I think one of the questionslike hey, if I'm making more

(00:30):
than a million dollars in myS-Corporation, what's the
biggest mistake they make whenthey're setting a salary?
I actually have a really coolstory about President Joe Biden
and his salary from anS-Corporation and how you guys
can pretty much use the samething, Same strategy.
It's written in the tax code.
Tax code.
We also have strategies abouthow can a million dollars
corporation legally reduce thebig ugly tax bill and split
between salary and distributionsand advanced retirement

(00:53):
strategy.
So all of these look good.
So I'm going to let you take itaway with some details on these
questions and now let's do it.

Speaker 1 (01:00):
Okay.

Speaker 3 (01:01):
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

(01:21):
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 2 (01:34):
Hey, my name is Boris Mushev.
I'm a CPA and a tax strategist.
This is my lovely wife, Mariana.

Speaker 1 (01:41):
Hello.

Speaker 2 (01:41):
So we have a tax advisory firm here in New York
and we work with a lot ofbusiness owners, saving them
hundreds of thousands of dollarson taxes, and we create this
about tax strategies that youcan use in your business and
start implementing it right awayto help you pay less in taxes.

Speaker 1 (01:56):
So for the first question, we have an
S-corporation owner who's makingover a million dollars and he's
asking what's the biggestmistake that these types of
business owners make whenthey're setting their salary?

Speaker 2 (02:10):
Yes.
So right now we're like on asalary thing, right?
So what's the reason that the Scorporations, business owners,
become an S corporation is sothat they don't pay the
self-employment tax, which is15.3%.
So what happens is that youbecome an S corporation.
Now you can pay yourself areasonable compensation to pay
only self-employment tax on thesalary.

(02:30):
But the mistake that thebusiness owners are making is
that when they start theirbusiness, they start with a tax
preparer.
Right, they're working with atax preparer and once the
business grows to a milliondollars or more, that tax
preparer doesn't know how toplan for that.
And in most cases, what I haveseen business owners are told by
their accountant to completelywipe out the bank account, take

(02:52):
the entire money, entire netprofit in the business as a
salary, and that makes themoverpay self-employment taxes.
What they need to do instead ispay themselves a distribution
and lower their salary to areasonable amount.
When President Joe Biden wasrunning for president, I think
it was not the well whatever.

(03:14):
Recently, when he was running,there was an article in Fox News
because President Joe Biden wassaying we need to contribute to
Medicare and we need to putmore money into Medicaid,
medicare, whatever.
That may be right.
What's the self-employment tax?
There's a Medicare tax in it,right?
So Fox News article said well,wait a second, you are for
increasing the Medicare, but yetyou converted to an S

(03:35):
corporation to pay yourself alower salary.
I mean, his salary was $800,000compared to millions of dollars
in profit.
This is from his book sales.
His team came up, president JoeBiden's team came up this was
during the time that he wasrunning and they said you know
what?
He's paying himself areasonable compensation.

(03:57):
According to what the IRS says,you have to pay yourself a
reasonable compensation for theservices that you rented to your
S corporation.
Done deal, he's not doinganything wrong.
So if President Joe Biden canpay himself a reasonable
compensation, so too you, thebusiness owner, can pay yourself
a reasonable compensationcompensation.
So to you, the business owner,can pay yourself a reasonable
compensation.
So one of the biggest mistakesI've seen, mariana, is that

(04:22):
business owners do not know thatthey can actually pay
themselves a lesser salary,which opens up opportunity to PT
, et and QBI deduction.
Does that answer the question?

Speaker 1 (04:29):
Yeah.

Speaker 2 (04:30):
All right cool.

Speaker 1 (04:31):
And the crazy thing is that people are making this
fuss because they don't know.
They really don't know.
That's why they make a fuss.
And to your point, you saidthat business owners, when they
start a business, they startworking with a tax preparer, not
a tax advisor.
And just to bring it into, youknow parenting.
You wouldn't ask advice onparenting from someone who

(04:52):
doesn't have any kids.
Just you know, like you wouldn'task somebody who doesn't have a
teenager, here's Mariana at herfinest, comparing the tax
preparer to parenting, becauseit's true, like you wouldn't, a
parent with a teenager isn'tgoing to ask a parent who just
has a toddler at home forparenting advice.
A parent who, looking foradvice for a teenager, isn't

(05:16):
going to ask advice from aparent who just has a toddler at
home.

Speaker 2 (05:20):
Well, you could.
What if that parent had asibling that was a teenager, but
it's?

Speaker 1 (05:24):
so different.
A boy parent isn't going to asksomebody who's a parent of just
girls for advice on how toraise a boy.

Speaker 2 (05:31):
Notice how the conversation went from the
S-Corporation salary toparenting.
No, but to your point yes, ifyou're a business owner making
more than a million dollars inyour business, okay, and you
have 100%, have outgrown youraccountant Right.
And one thing I always say tobusiness owners how can you work
with a tax preparer or anaccountant that makes less money

(05:53):
than you or doesn't comprehend?
Your tax bill is probably morethan what your accountant makes,
so that accountant is not a taxadvisor.
So get yourself a tax advisorand pay less in taxes.
And we are moving on to thenext question right after this
break.

Speaker 3 (06:09):
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.
Boris 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

(06:32):
start using in your business toinstantly start saving money on
taxes.
Click on the link in thedescription below for a free
download.

Speaker 2 (06:40):
All right Welcome back After our break.
Cool, mariana, let's dive deep.
What's the next question?

Speaker 1 (06:45):
Okay, so we have a question from a million dollar
S-corporation owner.

Speaker 2 (06:49):
Another million dollar.
S-corporation owner.

Speaker 1 (06:51):
They're asking how can we legally reduce the big
and the ugly tax bill that theyget every single April?

Speaker 2 (06:59):
Big ugly tax bill that they get every single April
.
Here's the problem with a lotof business owners.
This is not your fault.
I'm not blaming you for thisproblem, dear business owner
that is making a lot of money ontaxes, but what happens is that
when the tax time comes inApril and assuming that they
didn't file for an extension andthey have to file their taxes
and the accountant says, yeah,your tax bill is $270,000.

(07:22):
They're like, okay.
The business owner's firstreaction is not to panic and
like okay, well, what can we doto lower that?
That's the question.
And the accountant says nothing, we can't do anything.
The preparer says you mademoney and you pay taxes, so the
more you make, the more you pay.
That's not true, the more youmake.

(07:42):
The couple of things that youcan do before tax planning.
Number one first of all, forthose of you that have not
spoken to your tax advisor aboutthe one big, beautiful bill,
there's a lot of great taxchanges that have been

(08:05):
introduced.
One of them is that what's beenextended the PTET pass-through
entity taxation is good to go,because I think they were
thinking of getting it out, sothat's good.
What happened is the SALTdeduction you were able only to
take off $10,000 as a deductionon your personal taxes for state
and local taxes.
They've increased that to$40,000, creating a lot more

(08:27):
opportunity for business owners,because some business owners
still do not itemize their taxesfor whatever reason, because
the standard deduction itself isalready big.
So you opt in for a standarddeduction and you start paying
pass-through entity taxes.
You change how you pay yourstate personal taxes.
So if you're in the state ofNew York, california, which is
very, very high state income taxrate New Jersey, for example

(08:51):
you can literally stop payingpersonal state income taxes.
Instead opt in to pay businessincome taxes.
Why is this important?
Because this creates a businessdeduction.
This is why earlier, when you,mariana, asked the question
about the salary okay, this iswhy I said it's good to lower
your salary to a reasonableamount, because now your profit

(09:13):
is higher, which you can takeout as a distribution.
It's not subject to doubletaxation.
But when your profit is higher,your PTET tax is higher, which
is okay because you get adeduction and you get a credit
for it on the state income taxes.
So if you've got that big,beautiful bill in April last
year, you still have time toproactively implement this
strategy.

(09:33):
Another strategy you've got aclient in California I think I
told you about this, mariana.
She has a $7.5 million propertypersonal residence personal
residence okay, she has aseparate office space.
She has an office, a businessoffice okay, she has a business
office there as well and she hasa home office.

(09:55):
The IRS says you can takededuction for your home office
if you do administrative stuffthere.
Now, what is administrativestuff?
You do your billing.
Like you know, you catch mesometimes in the basement.
I'm working and doing someadministrative stuff at home,
right?
So that's because now I have ahome office and because I do
administrative stuff in it, itqualifies as a main, so to speak
, place of business and that'swhy it's tax deductible.

(10:22):
So if you've got a house, thatyou have a really high mortgage,
guess what?
Irs doesn't let you take amortgage interest deduction on a
personal taxes if your mortgageis more than $750,000.
They only let you take it up to$750,000.
The rest is just Money that youcannot deduct.
So when you have a home office,it could be very big for this
client in particular.
Save the $26,000 tax liabilityreduction, even though you're

(10:50):
making like $5 million in yourbusiness and you think home
office could be chump change forme.
That may not be true for manybusiness owners.
In this client's situation,$26,000 is back in her pocket.
What would you do with $26,000,mariana?

Speaker 1 (11:04):
What would I do?
Yeah, I would take the wholefamily on a trip.

Speaker 2 (11:09):
I thought you would say you're going to buy me
something fancy.
I don't know.
I'll take you on a trip withthe family.
By the way, can we share withthe audience?
How do we define the trip andvacation?

Speaker 1 (11:21):
Yeah, so we recently came back from a trip.

Speaker 2 (11:25):
No, but define what is a trip and what is a vacation
.

Speaker 1 (11:27):
So a trip is when you are going away with the family,
everybody.
You have all the kids with you,you know, and you're going away
with them.
That's a trip.
So you come back from a trip.
You go on a vacation which isjust you and I, which is coming
up.

Speaker 2 (11:44):
You spend more money on that vacation than you spend
money on the trip with the kids.

Speaker 1 (11:48):
Go figure, when you can save that money, you know
that $26,000, and you put ittowards the vacation.

Speaker 2 (11:53):
That's right.
So that's why tax strategy isimportant, that's right.
So listen, there's a questionhere about the salary split and
distributions, but I think Italked about that, so I don't
want to waste audience's time.
But let's talk about theadvanced retirement strategy.
So this is like a shocker for alot of business owners, right?

(12:13):
So do you want to?
We have to make it official.
You have to read the question,so I answer it.

Speaker 1 (12:19):
Okay, so can you talk about million-dollar
S-corporation owners.

Speaker 2 (12:23):
Oh, million dollars.
Make it rain, make it rain, mrD, make it rain.

Speaker 1 (12:28):
How can they use advanced retirement plans to
shrink their taxable income?
Shrink.

Speaker 2 (12:35):
Advanced.
Okay, so, by the way, everybusiness owner should know.
All right, let's very quicklyrun through some retirement
strategies.
Right?
So we're talking aboutS-corporation.
There are actually somemillion-dollar S-corporations
that I know.
Business owners is a one-manoperation or one-man and husband
and wife, right, a couple.
So in that case you can open upa solo 401k which will maximize

(12:56):
your deductions.
Speak to your tax advisor Great, I think.
It's like.
I mean, these limits changeevery year.
What is it like?
$70,000 right now, I think themaximum contribution.
Don't quote me on this.
Okay, that's a solo 401k.
With a regular 401k, you can'tdo that much because you've got
employees.
So you put together what'scalled safe harbor.
So you're going to put away$23,500, I think, from your

(13:18):
salary.
These numbers always change forinflation.
But there's another advancedstrategy that's called a defined
benefit plan, or also known asa cash balance plan, that allows
you to put away $225,000, Ithink, or $200,000 or more into
your retirement.
So I just spoke to a businessowner yesterday.
Net profit, not a gross profit,net profit close to $10 million

(13:41):
.
You would think a person likethat would have a team of tax
strategists, a team of attorneys.
Nope, he was on the call.
He's just like completelydoesn't know any of the
strategies, including thisdefined benefit plans.
Like Boris, I'm going to callwith you because, like, I don't
know anything.
So I'm like, hey, we can dothis defined benefit plan and
you can put away about $250,000.

(14:02):
Of course, we'd have to run thenumbers, the payroll, census
and so forth.
He's like wait, he's like what?
He's like that's like on top ofthe 401k that I do.
I'm like, yeah, I'm like, again, we have to run the numbers.
But you, they always think, ohwell, it's only 3% or it's only
the salary deferral.

Speaker 1 (14:24):
Why do you think they don't know these things exist,
like how does that happen?

Speaker 2 (14:30):
I mean honestly, you can't blame a business owner,
like, for example, like if yougo to a doctor, right, if a
person goes to a doctor and thedoctor says, oh, you have this
condition, and you're like, yeah, I know, like I've been dealing
with this for like five years,I just thought it's going to go
away.
Like no, if you take this pill,it'll go away.
Like, oh well, I didn't know,well, it's not your job, you
would go to a doctor, right?

(14:50):
Like, sometimes we have thispain in the arm or in the leg
and we just totally ignore itand we're like it's going to go
away, like I speak from personalexperience Like it's just going
to go away.
I'm too busy, I'm running abusiness right now and I have to
go home, I have to do this andthis pain is just will become so
numb to it.
But when you go to a doctor,the doctor's like, oh yeah, if
you take, you know, do thisexercise, take this pill away.

(15:25):
But then I go to the doctorlike, oh well, if you bend like
this, if you lay down like this,you put some cups on the body,
and it's going to go away.
I'm like, oh okay, so like yeah,and then the doctor's like what
, well, you know?
Like how do I, how was supposedto know?
So same thing with businessowner like how would they know?
Everybody knows 401k, yeah,401k, retirement I have to do
retirement and a lot of peoplethink that if I open a 401k it's
just to retain my employees.
Well, it is a great strategy toretain employees, but it also
can be a great strategy for youto put away into a retirement

(15:46):
account, into a pension plan,two to three or even $400,000,
depending on your age into aretirement plan.
All right, I think this wasgreat, mariana.
I think we're good here.
Let us know what did you likeabout this episode so we can
make the next one even greaterand if you have a tax question?
hey, drop it below.
Make my episodes great again.

Speaker 1 (16:06):
No, what do you mean?
Great again, they're alwaysgreat.

Speaker 2 (16:11):
I take her to nice vacations to say those things.
All right, thank you all.
And if you haven't gotten achance to download your seven
free write-offs, the link isbelow and Thank you all.
And if you haven't gotten achance to download your seven
free write-offs, the link isbelow and thank you so much, and
we'll see you next time.
Yep, that was good, you didgreat.
Thank you.
Yeah, you're welcome.
You want to share this here?
I'm joking.
Don't put that in.

(16:31):
Don't put that in.
Okay, fine, put it in.
Put it in.

Speaker 3 (17:02):
She episode.