Have you ever wondered if you could deduct a mentorship program paid for on your personal card before starting your business?

In this episode, Mike Jesowshek, a CPA, hosts a listener Q&A session addressing various tax-related questions from small business owners. He covers topics such as deducting business expenses, managing mentorship payments, selling a business, and handling high medical costs for business owners. Mike provides clear guidance on tax planning strategies and the importance of keeping thorough documentation for deductions, while also offering practical advice on avoiding issues with hobby loss rules and S-Corp-specific challenges.

Learn how to maximize your business deductions and avoid common tax pitfalls in this Q&A episode!

[00:00 - 00:40] Introduction

Mike Encourages listeners to submit their tax-related questions via the website.

[00:40 - 05:23] Business Deductions and Selling a Business

Mike explains that expenses can still be deducted if they’re legitimate business expenses and provides guidance on using an accountable plan for reimbursement.
He discusses the validity of taking business deductions even when a business has minimal income.
There is a need for consistent profit to be considered a legitimate business.

[05:23 - 10:23] Section 105 Plans and Ownership Draws in an S-Corp

Mike details how to set up a family management company to use the Section 105 plan if operating as an S-Corp and hiring a spouse.
He also emphasizes that distributions must be proportional to ownership percentages in S-Corps to avoid tax issues.

[10:23 - 16:11] Travel Deductions and Consultations

Mike covers travel deductions when charging clients a travel fee and offers advice on setting up tax consultations through his company.
He clarifies that even if a travel fee is charged to a client, the associated travel expenses can still be deducted.

[16:11 - 21:02] Business Expenses and Accountable Plans

Mike emphasizes that while the deductions remain the same, the IRS prefers business-related expenses to be run through business accounts.
Owner draws are not taxed directly; instead, taxes are based on the profit of the business, regardless of how much is drawn from the account.

[21:02 - 24:10] Tax Helm Services and Consultations

Mike highlights Tax Helm’s services, which include consultations and comprehensive tax planning for small businesses, with a guarantee to provide tax savings that cover the cost of the service.

Direct Quotes:

“Just because you paid for it personally, doesn’t mean you lose the deduction—it’s still a valid business expense if it’s related to your business.” - Mike Jesowshek, CPA

“The IRS always wants to see that you're running your business like a business, not like a hobby.” - Mike Jesowshek, CPA

Check out this episode’s blog post: https://www.taxsavingspodcast.com/blog/listener-q-a-with-mike-jesowshek-cpa-10-16-2024

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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Podcast Website: https://www.TaxSavingsPodcast.com

Facebook Group: https://www.facebook.com/groups/taxsavings/

Listener Q&A with Mike Jesowshek CPA