Tax Planning for Year-End Part One with Weldon Wulstein
We are talking about getting our financial houses in order and ending the year strong and start the new year off right. The end of the year is coming faster and sooner than we think, so the time to get everything in order is now. We have a very special guest with us today, Weldon Wulstein. Weldon is the CPA and owner of Wulstein Financial Services and Company.
Weldon is going to answer all your tax questions on the show today. He shares about the different tax deadlines and why you may want and need an extension. Weldon also talks about when you would convert an LLC to an S Corp and when a C Corp could be beneficial. Then we wrap up our conversation talking about tax deductions and business trips.
- [01:02] We are talking about getting our financial houses in order and ending the year strong and starting the new year off right.
- [03:20] We have a very special guest with us today, Weldon Wulstein. Weldon is a CPA.
- [04:22] He has liked puzzles ever since he was a little kid. He looks at each different tax strategy as a puzzle.
- [05:47] You need to get your books in order. This includes your bookkeeping and entity structures now.
- [06:36] In a normal year, your tax return is due April 15th for individuals, but it is due March 15th for any kind of business that sends a K-1. You do have the option to extend those. You can do an extension up through September 15th for the entities and October 15th for personal and individual.
- [07:26] People often file before April if they are expecting a refund back.
- [08:34] You should have your taxes in order every quarter and every month of the year.
- [09:04] When or why would you move away from an LLC to an S Corp or C Corp?
- [09:38] You can convert your LLC to an S Corp. There is a little more work, but then you can dictate how much money is paid through salary and how much is paid through distribution as an income tax.
- [10:56] You don’t want to miss out on social security by not having an earned income.
- [11:50] The minimum you want to pay yourself a year is $7,000 assuming you are making money in the company. It is an individual basis.
- [12:28] What is the benefit of extending? By October 15th they have usually selected those to be audited, so you have a slightly less chance of being audited.
- [13:01] If you are investing in some of the alternative investments you’re not going to get your information to file a correct return until that date anyway.
- [15:37] We are dealing with when you have too much money and your tax burden is high. How you invest can reduce some of that burden. Weldon talks about real estate and oil and gas investments.
- [16:48] Real estate can be limited based on your income if you are not a real estate professional. Oil and gas is not going to be limited.
- [17:53] Taking risks really depends on your risk tolerance and what kind of investment you want to make. Oil and gas is not an investment for everyone because you are not going to get cash out of it for a while.
- [19:24] Gas and oil is a true supply and demand commodity. We are always going to need petroleum products. Weldon and Loral both think it will recover, but are not sure on the timing.
- [21:31] As of right now PPE loans will be taxed to you on your bottom line.
- [22:29] Weldon doesn’t recommend transitioning to a C Corp but adding a C Corp to your repertoire of entities can be a very useful and beneficial tool to level as an income.
- [24:55] Privacy is going to become really key.
- [26:01] The operating entity is the most important one to set up first. Then the real estate company would be next and the third priority would be setting up the C Corp. For most people it works better to do these in phases.
- [27:16] The rules for deductions is that it has to be ordinary and necessary and the primary purpose of that expense has to be for the production of income for the company.
- [27:09] Business owners really need to change their mindset. Instead of saying this is not deductible, saying what do I need to do to make this deductible. How do I have to treat this expense to make it deductible?
- [28:19] For business trips to be deductible you have to document what you are doing, and why it’s a business trip. You have to be able to document the primary reason for the trip was for business. You need to keep some documentation.
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