He Bought Cows with His HSA—And It Was Genius

Summary

Podcast Summary: Living The Red Life – Episode: He Bought Cows with His HSA—And It Was Genius

Host: Rudy Mawer
Guest: Mark J. Kohler
Release Date: April 8, 2025
Title: He Bought Cows with His HSA—And It Was Genius

Introduction

In this insightful episode of Living The Red Life, host Rudy Mawer welcomes Mark J. Kohler, a bestselling author and renowned tax strategist, to discuss advanced tax strategies that entrepreneurs often overlook. With extensive experience consulting over 10,000 small business owners, Mark shares actionable tips to help entrepreneurs save significant amounts on taxes, build a robust business foundation, and optimize their financial strategies for long-term success.

The Importance of Tax Strategies for Entrepreneurs

Rudy opens the conversation by emphasizing the critical yet often neglected aspect of tax strategies in entrepreneurship. He draws a parallel between ignoring health in one’s youth and neglecting tax planning in business:

Rudy Mawer [00:01:08]:
"It's like your health in your 20s, 30s—you don't worry, right? And then you start getting sick... that's why we're here."

Mark reinforces the idea that proactive tax planning can prevent entrepreneurs from incurring hundreds of thousands or even millions in unnecessary tax expenses over their lifetimes.

Strategy 1: Captain Your Ship

Mark introduces the first strategy: Captain Your Ship. He underscores the importance of entrepreneurs being actively involved in their financial strategies rather than relying solely on accountants.

Mark J. Kohler [00:02:26]:
"Captain your ship... you have to be able to talk about them and make sure that your professionals are doing them. It is your ship. You get to decide where it goes."

Key Points:

Engagement: Entrepreneurs should understand basic tax strategies to evaluate and guide their accountants effectively.
Structure: Developing a clear business structure (operations, assets, and 1040 forms) is essential.
Action Item: Learn fundamental tax strategies to recognize and rectify subpar accounting practices.

Strategy 2: Conversion to S Corporation

The second strategy focuses on converting an LLC to an S Corporation to optimize payroll and reduce FICA taxes. Mark explains how this conversion can lead to substantial tax savings by appropriately managing payroll percentages.

Mark J. Kohler [00:07:43]:
"We get S corporation, as in small... it's allowing us to save on FICA, the number one cost that hits small business owners, which is 15.3% this year on the first 180 grand."

Key Points:

Payroll Allocation: Implementing a matrix (Kohler Payroll Matrix) to determine reasonable payroll percentages based on net income.
Tax Savings: Reducing FICA taxes by adjusting payroll from higher to lower income brackets.
Real-Life Examples: High-profile figures like Joe Biden and Donald Trump exemplify the effectiveness of this strategy.

Notable Quote:

Mark J. Kohler [00:09:15]:
"If your payroll percentage, look at your net, how much you're taking out, should be no more. Well again, as you make more money is going to go down."

Strategy 3: Establishing a Board of Directors/Advisors

Mark's third strategy involves creating a Board of Directors or Advisors composed of family members and close associates. This approach not only enhances asset protection but also unlocks various tax write-offs.

Mark J. Kohler [00:12:19]:
"The board of directors unlocks payment to children, spouses, parents, unlocks travel, unlocks dining, unlocks home, office. It is huge."

Key Points:

Family Involvement: Including family members in the board can lead to significant tax benefits.
Write-Offs: Travel, dining, home office expenses, and salaries to board members become deductible.
Action Steps:
- Organize annual board meetings involving family and trusted advisors.
- Document minutes and formalize roles within the corporate book.

Notable Quote:

Mark J. Kohler [00:14:57]:
"Start with, yeah, you better. And you know what? I challenge you, Rudy. You can do it this weekend."

Strategy 4: Retirement and Savings Optimization

The fourth strategy delves into maximizing retirement accounts through self-directed investments and leveraging advanced savings techniques like the Mega Backdoor Roth.

Mark J. Kohler [00:17:42]:
"Self directing your retirement account is so, so important because you learn to make money tax free."

Key Points:

Self-Directed IRAs: Investing retirement funds in diverse assets like small businesses, real estate, or cryptocurrencies to grow wealth tax-free.
Mega Backdoor Roth: Contributing significantly beyond standard IRA limits through solo 401(k) plans and profit-sharing.
Stacking Strategies: Combining various retirement plans to maximize contributions and tax benefits.

Notable Quote:

Mark J. Kohler [00:19:39]:
"Mega backdoor Roth this year I can put away 70 to 85 grand depending on your age and call it all Roth."

Maximizing Write-Offs

Rudy and Mark discuss the importance of understanding and utilizing business write-offs effectively without overextending or making unnecessary purchases solely for tax benefits.

Mark J. Kohler [00:16:05]:
"Don't spend money on crap you don't need. But when you do spend money, I want to find a business purpose."

Key Points:

Strategic Spending: Ensure that expenditures have a legitimate business purpose to qualify for write-offs.
Comprehensive Tracking: Maintain detailed records of all business-related expenses.
Diverse Write-Offs: Utilize deductions for travel, dining, home office, healthcare, and more to gradually reduce tax liabilities.

Questions to Ask Your Accountant

Mark provides a list of critical questions that entrepreneurs earning between $250K and $1M annually should pose to their accountants to ensure optimal tax strategies are in place.

Mark J. Kohler [00:20:27]:
"If your accountant can't have a good conversation about those, let's upgrade."

Key Questions:

Entity Structure:
- "What entities do I have? Are they organized? Are they making sense?"
Payroll Management:
- "What should my payroll level be? How does it impact my retirement plans?"
Retirement Accounts:
- "Are you utilizing self-directed Roth IRAs and maximizing contributions?"
Real Estate Strategies:
- "How can we integrate real estate investments with my business for tax benefits?"
Healthcare Expenses:
- "How can we write off healthcare costs effectively?"
Family Involvement:
- "Do I have my kids or spouse on payroll or as advisors to maximize tax write-offs?"
Estate Planning:
- "Is my estate plan coordinated with my business and asset protection strategies?"

Final Tips and Tax Season Advice

As the episode concludes, Mark offers timely advice for the upcoming tax season, emphasizing the benefits of filing extensions and preparing returns thoughtfully to minimize audit risks and optimize tax outcomes.

Mark J. Kohler [00:23:09]:
"File an extension, reduce your chance of an audit and then sharpen the pencil."

Key Takeaways:

Filing Extensions: Reduces the likelihood of IRS audits and provides additional time to implement tax strategies.
Refund Strategies: If due a refund, file promptly to reclaim interest-free loans from the IRS.
Intentional Preparation: Utilize the extra time to refine tax filings and incorporate discussed strategies for better financial management.

Conclusion

In this episode of Living The Red Life, Rudy Mawer and Mark J. Kohler deliver a wealth of knowledge tailored for entrepreneurs aiming to elevate their businesses and secure their financial futures. By implementing strategies such as actively managing financial structures, converting to S Corporations, involving family in advisory roles, and optimizing retirement accounts, entrepreneurs can achieve substantial tax savings and build enduring business legacies.

Call to Action:

For those eager to delve deeper into these strategies, Mark encourages listeners to explore his resources:

Mark J. Kohler [00:22:20]:
"Just remember my name, Mark J. Kohler. When you think about tax planning as a small business owner, all you have to do is plug that into your search engine."

Listeners are invited to visit his website, follow his podcasts, attend conferences, and leverage his extensive array of educational materials to maximize their tax strategies and business growth.

Note: This summary captures the essence and key points of the podcast episode, providing actionable insights and expert advice for entrepreneurs seeking to optimize their tax strategies and build lasting business success.

Summary

Podcast Summary: Living The Red Life – Episode: He Bought Cows with His HSA—And It Was Genius

Host: Rudy Mawer
Guest: Mark J. Kohler
Release Date: April 8, 2025
Title: He Bought Cows with His HSA—And It Was Genius

Introduction

The Importance of Tax Strategies for Entrepreneurs

Rudy Mawer [00:01:08]:
"It's like your health in your 20s, 30s—you don't worry, right? And then you start getting sick... that's why we're here."

Mark reinforces the idea that proactive tax planning can prevent entrepreneurs from incurring hundreds of thousands or even millions in unnecessary tax expenses over their lifetimes.

Strategy 1: Captain Your Ship

Mark J. Kohler [00:02:26]:
"Captain your ship... you have to be able to talk about them and make sure that your professionals are doing them. It is your ship. You get to decide where it goes."

Key Points:

Engagement: Entrepreneurs should understand basic tax strategies to evaluate and guide their accountants effectively.
Structure: Developing a clear business structure (operations, assets, and 1040 forms) is essential.
Action Item: Learn fundamental tax strategies to recognize and rectify subpar accounting practices.

Strategy 2: Conversion to S Corporation

Mark J. Kohler [00:07:43]:
"We get S corporation, as in small... it's allowing us to save on FICA, the number one cost that hits small business owners, which is 15.3% this year on the first 180 grand."

Key Points:

Payroll Allocation: Implementing a matrix (Kohler Payroll Matrix) to determine reasonable payroll percentages based on net income.
Tax Savings: Reducing FICA taxes by adjusting payroll from higher to lower income brackets.
Real-Life Examples: High-profile figures like Joe Biden and Donald Trump exemplify the effectiveness of this strategy.

Notable Quote:

Mark J. Kohler [00:09:15]:
"If your payroll percentage, look at your net, how much you're taking out, should be no more. Well again, as you make more money is going to go down."

Strategy 3: Establishing a Board of Directors/Advisors

Mark J. Kohler [00:12:19]:
"The board of directors unlocks payment to children, spouses, parents, unlocks travel, unlocks dining, unlocks home, office. It is huge."

Key Points:

Family Involvement: Including family members in the board can lead to significant tax benefits.
Write-Offs: Travel, dining, home office expenses, and salaries to board members become deductible.
Action Steps:
- Organize annual board meetings involving family and trusted advisors.
- Document minutes and formalize roles within the corporate book.

Notable Quote:

Mark J. Kohler [00:14:57]:
"Start with, yeah, you better. And you know what? I challenge you, Rudy. You can do it this weekend."

Strategy 4: Retirement and Savings Optimization

The fourth strategy delves into maximizing retirement accounts through self-directed investments and leveraging advanced savings techniques like the Mega Backdoor Roth.

Mark J. Kohler [00:17:42]:
"Self directing your retirement account is so, so important because you learn to make money tax free."

Key Points:

Self-Directed IRAs: Investing retirement funds in diverse assets like small businesses, real estate, or cryptocurrencies to grow wealth tax-free.
Mega Backdoor Roth: Contributing significantly beyond standard IRA limits through solo 401(k) plans and profit-sharing.
Stacking Strategies: Combining various retirement plans to maximize contributions and tax benefits.

Notable Quote:

Mark J. Kohler [00:19:39]:
"Mega backdoor Roth this year I can put away 70 to 85 grand depending on your age and call it all Roth."

Maximizing Write-Offs

Rudy and Mark discuss the importance of understanding and utilizing business write-offs effectively without overextending or making unnecessary purchases solely for tax benefits.

Mark J. Kohler [00:16:05]:
"Don't spend money on crap you don't need. But when you do spend money, I want to find a business purpose."

Key Points:

Strategic Spending: Ensure that expenditures have a legitimate business purpose to qualify for write-offs.
Comprehensive Tracking: Maintain detailed records of all business-related expenses.
Diverse Write-Offs: Utilize deductions for travel, dining, home office, healthcare, and more to gradually reduce tax liabilities.

Questions to Ask Your Accountant

Mark provides a list of critical questions that entrepreneurs earning between $250K and $1M annually should pose to their accountants to ensure optimal tax strategies are in place.

Mark J. Kohler [00:20:27]:
"If your accountant can't have a good conversation about those, let's upgrade."

Key Questions:

Entity Structure:
- "What entities do I have? Are they organized? Are they making sense?"
Payroll Management:
- "What should my payroll level be? How does it impact my retirement plans?"
Retirement Accounts:
- "Are you utilizing self-directed Roth IRAs and maximizing contributions?"
Real Estate Strategies:
- "How can we integrate real estate investments with my business for tax benefits?"
Healthcare Expenses:
- "How can we write off healthcare costs effectively?"
Family Involvement:
- "Do I have my kids or spouse on payroll or as advisors to maximize tax write-offs?"
Estate Planning:
- "Is my estate plan coordinated with my business and asset protection strategies?"

Final Tips and Tax Season Advice

Mark J. Kohler [00:23:09]:
"File an extension, reduce your chance of an audit and then sharpen the pencil."

Key Takeaways:

Filing Extensions: Reduces the likelihood of IRS audits and provides additional time to implement tax strategies.
Refund Strategies: If due a refund, file promptly to reclaim interest-free loans from the IRS.
Intentional Preparation: Utilize the extra time to refine tax filings and incorporate discussed strategies for better financial management.

Conclusion

Call to Action:

For those eager to delve deeper into these strategies, Mark encourages listeners to explore his resources:

Mark J. Kohler [00:22:20]:
"Just remember my name, Mark J. Kohler. When you think about tax planning as a small business owner, all you have to do is plug that into your search engine."

Listeners are invited to visit his website, follow his podcasts, attend conferences, and leverage his extensive array of educational materials to maximize their tax strategies and business growth.