Tax Reduction Podcast
Introducing your host, Boris Musheyev, CPA. In this podcast Boris debunks the tax code by teaching you simple and effective tax strategies, so you can keep the most of what you make. His mission is to help you cut taxes and build wealth using the power of proactive tax strategies. Every episode you will gain a better understanding of how the tax code is designed to be in favor of money-making entrepreneurs like yourself.
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Tax Reduction Podcast
Episode 43. $1 Million S-Corp Tax Strategy
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
🆓 Download FREE PDF here: https://7taxwriteoffs.com/?el=podcast&htrafficsource=buzzsprout
Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/?el=podcast&htrafficsource=buzzsprout
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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 ...
Boris, can we talk about some S-Corporation owners that are making a million dollars or more in their business and they need strategy?
Speaker 2:Yes, let's do it. I know we've got a couple of questions coming in, yes, so I think this is going to be fun.
Speaker 2:Actually, if I can just jump in a little bit, go for it Just to let the viewers know what type of questions we're getting from a million dollar S-Corps, okay. So I think one of the questions like hey, if I'm making more than a million dollars in my S-Corporation, what's the biggest mistake they make when they're setting a salary? I actually have a really cool story about President Joe Biden and his salary from an S-Corporation and how you guys can pretty much use the same thing, Same strategy. It's written in the tax code. Tax code. We also have strategies about how can a million dollars corporation legally reduce the big ugly tax bill and split between salary and distributions and advanced retirement strategy. So all of these look good. So I'm going to let you take it away with some details on these questions and now let's do it.
Speaker 1:Okay.
Speaker 3:Welcome to the tax reduction podcast for money-making entrepreneurs with Boris Mushaev. Boris has helped entrepreneurs across the United States collectively save millions of dollars in taxes with the power of tax planning and advisory. The only way you, the business owner, can save money on taxes is by using proactive tax strategies, and this podcast is all about saving you money on taxes. Boris will share with you in-depth and easy-to-understand tax reduction strategies that you can implement in your business within 30 days or less. Let's jump into today's episode.
Speaker 2:Hey, my name is Boris Mushev. I'm a CPA and a tax strategist. This is my lovely wife, Mariana.
Speaker 1:Hello.
Speaker 2:So we have a tax advisory firm here in New York and we work with a lot of business owners, saving them hundreds of thousands of dollars on taxes, and we create this about tax strategies that you can use in your business and start implementing it right away to help you pay less in taxes.
Speaker 1:So for the first question, we have an S-corporation owner who's making over a million dollars and he's asking what's the biggest mistake that these types of business owners make when they're setting their salary?
Speaker 2:Yes. So right now we're like on a salary thing, right? So what's the reason that the S corporations, business owners, become an S corporation is so that they don't pay the self-employment tax, which is 15.3%. So what happens is that you become an S corporation. Now you can pay yourself a reasonable compensation to pay only self-employment tax on the salary. But the mistake that the business owners are making is that when they start their business, they start with a tax preparer. Right, they're working with a tax preparer and once the business grows to a million dollars or more, that tax preparer doesn't know how to plan for that. And in most cases, what I have seen business owners are told by their accountant to completely wipe out the bank account, take the entire money, entire net profit in the business as a salary, and that makes them overpay self-employment taxes. What they need to do instead is pay themselves a distribution and lower their salary to a reasonable amount.
Speaker 2:When President Joe Biden was running for president, I think it was not the well whatever. Recently, when he was running, there was an article in Fox News because President Joe Biden was saying we need to contribute to Medicare and we need to put more 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 yet you converted to an S corporation to pay yourself a lower salary. I mean, his salary was $800,000 compared to millions of dollars in profit. This is from his book sales.
Speaker 2:His team came up, president Joe Biden's team came up this was during the time that he was running and they said you know what? He's paying himself a reasonable compensation. According to what the IRS says, you have to pay yourself a reasonable compensation for the services that you rented to your S corporation. Done deal, he's not doing anything wrong. So if President Joe Biden can pay himself a reasonable compensation, so too you, the business owner, can pay yourself a reasonable compensation compensation. So to you, the business owner, can pay yourself a reasonable compensation. So one of the biggest mistakes I've seen, mariana, is that business owners do not know that they can actually pay themselves a lesser salary, which opens up opportunity to PT, et and QBI deduction. Does that answer the question?
Speaker 1:Yeah.
Speaker 2:All right cool.
Speaker 1: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 said that business owners, when they start a business, they start working with a tax preparer, not a tax advisor. And just to bring it into, you know parenting. You wouldn't ask advice on parenting from someone who doesn't have any kids.
Speaker 1:Just you know, like you wouldn't ask somebody who doesn't have a teenager, here's Mariana at her finest, comparing the tax preparer to parenting, because it's true, like you wouldn't, a parent with a teenager isn't going to ask a parent who just has a toddler at home for parenting advice. A parent who, looking for advice for a teenager, isn't going to ask advice from a parent who just has a toddler at home.
Speaker 2:Well, you could. What if that parent had a sibling that was a teenager, but it's?
Speaker 1:so different. A boy parent isn't going to ask somebody who's a parent of just girls for advice on how to raise a boy.
Speaker 2:Notice how the conversation went from the S-Corporation salary to parenting. No, but to your point yes, if you're a business owner making more than a million dollars in your business, okay, and you have 100%, have outgrown your accountant Right.
Speaker 2:And one thing I always say to business owners how can you work with a tax preparer or an accountant that makes less money than you or doesn't comprehend? Your tax bill is probably more than what your accountant makes, so that accountant is not a tax advisor. So get yourself a tax advisor and pay less in taxes. And we are moving on to the next question right after this break.
Speaker 3:If you have a tax preparer and you do not have a tax advisor, the only way you can save money on taxes is by using proactive tax planning strategies that only a tax advisor can give you. Boris put together a free PDF for you, the business owner Seven Tax Write-offs Every S-Corporation Business Owner Must Know. In this PDF you can find seven tax strategies that you can start using in your business to instantly start saving money on taxes. Click on the link in the description below for a free download.
Speaker 2:All right Welcome back After our break. Cool, mariana, let's dive deep. What's the next question?
Speaker 1:Okay, so we have a question from a million dollar S-corporation owner.
Speaker 2:Another million dollar. S-corporation owner.
Speaker 1:They're asking how can we legally reduce the big and the ugly tax bill that they get every single April?
Speaker 2:Big ugly tax bill that they get every single April. Here's the problem with a lot of business owners. This is not your fault. I'm not blaming you for this problem, dear business owner that is making a lot of money on taxes, but what happens is that when the tax time comes in April and assuming that they didn't file for an extension and they have to file their taxes and the accountant says, yeah, your tax bill is $270,000. They're like, okay. The business owner's first reaction is not to panic and like okay, well, what can we do to lower that? That's the question. And the accountant says nothing, we can't do anything. The preparer says you made money and you pay taxes, so the more you make, the more you pay. That's not true, the more you make. The couple of things that you can do before tax planning.
Speaker 2:Number one first of all, for those of you that have not spoken to your tax advisor about the one big, beautiful bill, there's a lot of great tax changes that have been introduced. One of them is that what's been extended the PTET pass-through entity taxation is good to go, because I think they were thinking of getting it out, so that's good. What happened is the SALT deduction you were able only to take off $10,000 as a deduction on your personal taxes for state and local taxes. They've increased that to $40,000, creating a lot more opportunity for business owners, because some business owners still do not itemize their taxes for whatever reason, because the standard deduction itself is already big. So you opt in for a standard deduction and you start paying pass-through entity taxes. You change how you pay your state personal taxes. So if you're in the state of New York, california, which is very, very high state income tax rate New Jersey, for example you can literally stop paying personal state income taxes. Instead opt in to pay business income taxes. Why is this important? Because this creates a business deduction. This is why earlier, when you, mariana, asked the question about the salary okay, this is why I said it's good to lower your salary to a reasonable amount, because now your profit is higher, which you can take out as a distribution. It's not subject to double taxation. But when your profit is higher, your PTET tax is higher, which is okay because you get a deduction 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 to proactively implement this strategy.
Speaker 2:Another strategy you've got a client in California I think I told you about this, mariana. She has a $7.5 million property personal residence personal residence okay, she has a separate office space. She has an office, a business office okay, she has a business office there as well and she has a home office. The IRS says you can take deduction for your home office if you do administrative stuff there. Now, what is administrative stuff? You do your billing. Like you know, you catch me sometimes in the basement. I'm working and doing some administrative stuff at home, right? So that's because now I have a home office and because I do administrative stuff in it, it qualifies as a main, so to speak, place of business and that's why it's tax deductible.
Speaker 2:So if you've got a house, that you have a really high mortgage, guess what? Irs doesn't let you take a mortgage interest deduction on a personal taxes if your mortgage is more than $750,000. They only let you take it up to $750,000. The rest is just Money that you cannot deduct. So when you have a home office, it could be very big for this client in particular. Save the $26,000 tax liability reduction, even though you're making like $5 million in your business and you think home office could be chump change for me. That may not be true for many business owners. In this client's situation, $26,000 is back in her pocket. What would you do with $26,000, mariana?
Speaker 1:What would I do? Yeah, I would take the whole family on a trip.
Speaker 2:I thought you would say you're going to buy me something fancy. I don't know. I'll take you on a trip with the family. By the way, can we share with the audience? How do we define the trip and vacation?
Speaker 1:Yeah, so we recently came back from a trip.
Speaker 2:No, but define what is a trip and what is a vacation.
Speaker 1: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 is just you and I, which is coming up.
Speaker 2:You spend more money on that vacation than you spend money on the trip with the kids.
Speaker 1:Go figure, when you can save that money, you know that $26,000, and you put it towards the vacation.
Speaker 2:That's right. So that's why tax strategy is important, that's right. So listen, there's a question here about the salary split and distributions, but I think I talked about that, so I don't want to waste audience's time. But let's talk about the advanced retirement strategy. So this is like a shocker for a lot of business owners, right? So do you want to? We have to make it official. You have to read the question, so I answer it.
Speaker 1:Okay, so can you talk about million-dollar S-corporation owners.
Speaker 2:Oh, million dollars. Make it rain, make it rain, mr D, make it rain.
Speaker 1:How can they use advanced retirement plans to shrink their taxable income? Shrink.
Speaker 2:Advanced. Okay, so, by the way, every business owner should know. All right, let's very quickly run through some retirement strategies. Right? So we're talking about S-corporation. There are actually some million-dollar S-corporations that I know.
Speaker 2:Business owners is a one-man operation or one-man and husband and wife, right, a couple. So in that case you can open up a solo 401k which will maximize your deductions. Speak to your tax advisor Great, I think. It's like. I mean, these limits change every year. What is it like? $70,000 right now, I think the maximum contribution. Don't quote me on this. Okay, that's a solo 401k. With a regular 401k, you can't do that much because you've got employees. So you put together what's called safe harbor. So you're going to put away $23,500, I think, from your salary. These numbers always change for inflation. But there's another advanced strategy that's called a defined benefit plan, or also known as a cash balance plan, that allows you to put away $225,000, I think, or $200,000 or more into your retirement.
Speaker 2:So I just spoke to a business owner yesterday. Net profit, not a gross profit, net profit close to $10 million. You would think a person like that would have a team of tax strategists, a team of attorneys. Nope, he was on the call. He's just like completely doesn't know any of the strategies, including this defined benefit plans. Like Boris, I'm going to call with you because, like, I don't know anything. So I'm like, hey, we can do this defined benefit plan and you can put away about $250,000. Of course, we'd have to run the numbers, the payroll, census and so forth. He's like wait, he's like what? He's like that's like on top of the 401k that I do. I'm like, yeah, I'm like, again, we have to run the numbers. But you, they always think, oh well, it's only 3% or it's only the salary deferral.
Speaker 1:Why do you think they don't know these things exist, like how does that happen?
Speaker 2:I mean honestly, you can't blame a business owner, like, for example, like if you go to a doctor, right, if a person goes to a doctor and the doctor 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? Like, sometimes we have this pain in the arm or in the leg and we just totally ignore it and we're like it's going to go away, like I speak from personal experience Like it's just going to go away. I'm too busy, I'm running a business right now and I have to go home, I have to do this and this 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 this exercise, take this pill away. But then I go to the doctor like, 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.
Speaker 2:I'm like, oh okay, so like yeah, and then the doctor's like what, well, you know? Like how do I, how was supposed to know? So same thing with business owner like how would they know? Everybody knows 401k, yeah, 401k, retirement I have to do retirement and a lot of people think that if I open a 401k it's just to retain my employees. Well, it is a great strategy to retain employees, but it also can be a great strategy for you to put away into a retirement account, into a pension plan, two to three or even $400,000, depending on your age into a retirement plan. All right, I think this was great, mariana. I think we're good here. Let us know what did you like about this episode so we can make the next one even greater and if you have a tax question?
Speaker 2:hey, drop it below. Make my episodes great again.
Speaker 1:No, what do you mean? Great again, they're always great.
Speaker 2:I take her to nice vacations to say those things. All right, thank you all. And if you haven't gotten a chance to download your seven free write-offs, the link is below and Thank you all. And if you haven't gotten a chance to download your seven free write-offs, the link is below and thank you so much, and we'll see you next time. Yep, that was good, you did great. Thank you. Yeah, you're welcome. You want to share this here? I'm joking. Don't put that in. Don't put that in. Okay, fine, put it in. Put it in.
Speaker 3:She episode.