Small Business Stimulus Kit - #4 - Net Operating Losses & Saving Money - YouTube

All right, there are a number of things also that benefit the more wealthy individuals.

But you know this also helps the middle class.

Let me mention what the rules were.

You know prior to the new tax reform law, that was passed about two years ago…

If you had a loss in your business and you're self-employed…

You can no longer carry back any losses. You can only carry it forward .

Even then, you're limited to up to 80% of your taxable income.

You did from the future business.

Well, what this law does is it improves losses from your business.

If you have a loss in either 2019, or next year, 2020…

Now you can carry back all those net operating losses up to five years.

And offset the last five years of income that you had…

and get back the taxes that you paid on that income.

You can actually carry it back five years.

And, in case that's not enough…

You then get to carry it forward forever and not have to worry about this 80% limitation.

So that's a huge big deal for those of you starting a business.

And you know if it's the something you might want to consider your home…

You're sitting there. You're looking around. You might say…

You know, this might be a good time to start our home-based business. To be honest with you.

Especially when you look at this major advantage. Okay?

Because this is one that doesn't apply. I mean, this is a one that's just kind of blanket like this happens…

It doesn't have to be like "you have to be in business for some period of time" or whatever.

You know, to start taking at least on the forward-looking stuff.

So it's kind of really a cool thing.

We're gonna probably we're gonna go over a couple other strategies really quick.

And then we'll get some questions.

Some of this is is related to the tax. Some of this is just good common sense.

I'll handle this one Sandy, but if you don't have any lines of credit…

this is kind of when you should have them. Right?

We always maintain 2 or 3 lines of credit just in case something happens.

We need some quick access to cash for some reason.

Let's say you're applying for these loans and need to make payroll. The loans are four weeks out.

It's always good to have…

a line of credit in place. If you don't have lines of credit go grab a couple of lines of credit.

Go to your existing bank. Grab one at a competitive bank in case…

your bank decides to call the loan, and you could just transfer the loan balance somewhere else.

I always recommend you go…

We just did some Google searches for other places like On Deck Lending or Kabbage.

I personally have not got loans from them.

But there are places online that you can do this if your bank is closed.

Get a couple of lines of credit.

That's what they're for, times like this when you need quick access to cash…

that you could maybe float it until some of this grant money comes through or something like that.

Sandy want to talk about the 401(k) draw?

This is really interesting.

Normally if you have a 401k or an IRA…

you basically can't take out any money until you're at least age 55 and a half.

there are some exceptions like first-time homeowners…

and certain medical type stuff.

But under the new stimulus package…

Now you can take out up to $100,000 without that 10% penalty.

Even if you're under age 55 and a half.

So you avoided the 10% penalty. Now the catch is, you have to pay tax on the money.

But they thought about that, and they're letting you stretch it out…

over 3 years. So, you don't pay at all this year…

You can stretch it out over 3 years.

A lot of people I know are gonna use this and maybe fund…

life insurance or annuities, and things like that.

And sock away all this money on a tax-free basis

Which is another way of doing it.

But one really interesting thing… I don't want to teach you how to game the system…

but I I will give you a little bit of tips.

Some states have interesting rules…

like, California you're taxed full-on…

on any thing you receive from your pension distribution.

Some states, like Illinois, you're not taxed.

So a good example like this, and you have to know what your state rules are…

Is you can… Let's say you put $50,000 into a SEP you take an immediate deductions…

for both federal & state purposes…

and then when you take this $50,000 out pursuant to this provision…

It's not taxable. It's taxable for the federal but it's not taxable for the state.

So you've made yourself, you know, $2,000-$3,000.

I'm doing this, because you're not paying tax on the distribution,

but you're getting into the deduction when you put it into the plan.

I mean it's a way of gaming the system, in a sense.

They didn't quite think about the state tax implications when they came up with this thing.

Be aware of that. You want to check out what your state rules are.

Generally distributions from these 401ks or IRAs…

Which I don't recommend if you could avoid it.

…but generally are taxable.

But at least now is to have 3 years to pay it away. To pay tax on it.

Yeah, and avoid that 10% penalty.

it's an interesting strategy. And, you know, you have to prove that you've been…

affected by the Coronavirus, you know and things like that.

I don't know exactly what the proof there is.

I don't think it's gonna be onerous.

I think it's gonna be pretty simple. I think you can probably just state…

It's probably to be stated. "Hey, I've been suffering financially…

and I need some money out of my 401(k).

You can also repay that…

back to the 401(k). If you need it. Just want to take it out and put it back in.

You can also put it back in within 3 years…

and not have any issues.

You can replace it. If you just want to take it out kind of almost as a loan.

It's not officially a loan, but you can put it back in.

If you want going forward for during those 3 years, as well.

So can replenish that thing without any issues.

Mortgages – if you are in a place where you need it…

most places… you'd be seeing this a lot in the news…

but you can also call up your servicer…

and tell them you're having a hard time, and they will work with you to…

Do some things. They can't do foreclosures.

They can't charge you fees.

For late fees, and things like that, and a lot and right now…

if you work with them, a lot of them will defer payments.

So you could free up your mortgage for a couple of months…

potentially to help with cash if you're in a spot where you need…

that money. That's just a good thing to know.

That wasn't in part of this bill, but came down from prior to this bill.

But that is something you can do, work with your servicer.

They all have their own ways of doing that and rules.

Also, free up cash with refinance…

I just, you know, to kind of see the process, I called up…

I refinanced a truck loan in 30 minutes. I was like 3 years into it.

So I just stretched it out. Saved a couple hundred bucks a month.

It's a good idea to do if you're worried about cash or if you're hurting.

Definitely go talk to your banker and try to refinance a few things.

I want to call your attention a couple things…

I have a book and it's called "Achieve Financial Freedom: Big Time!"

A lot of people may not have heard of this.

They know my other book "Lower Your Taxes: Big Time!", but this one has a lot of really cool information.

I wrote this right after the 2008 crash.

So when it was at a horrible time, that's when I wrote this thing.

There's a lot of information in here…

You know, having reserves, what you need to do to negotiate things like this…

But one of the things, one of the chapters I put in here… there's estate planning, and how to get out of debt forever…

It's a really cool, underused book that a lot of people don't know about.

called "Achieve Financial Freedom: Big Time!"

One of the chapters I put in was how to save money.

And I cited about 30-40 different things here…

ways where you can save money, cut your costs. In an era like this…

You're still getting subsidized from the government, you still want to cut costs.

One of the ways, obviously, is to maximize your tax deductions for next year and in 2020, and 2021.

That's certainly a big, big deal.

But there's some other things you can do. For example here…

One of the things I mentioned is you have any spare change? Put it in a piggy bank.

You'd be surprised that over a month…

I tried this for awhile…

You'll probably accrue about an extra 20-30 bucks a month, every month.

Just by putting a little spare change in the piggy bank.

You raise your thermometer in the summer from 73 to 74.

And lower it in the winter, maybe to 68.

A lot of people don't know this, but for every one degree that you change your thermometer…

You reduce your utilities by about 7%.

Think about it.

I mean that's a really, really major deal.

Okay, so you should definitely check out Sandy's book.

There's a ton of great tips in there.

But I want to make sure we get to the next piece…

We've got a ton of questions coming in here.

Real quick. I just want to say, one of the things that we talk about…

we've been talking about, and focusing on here at Taxbot is…

You know, it's a great time, especially if your business is…

may not doing as well to really focus on the efficiency of your business.

One of the things that, you know, where our expertise is tax deductions, right?

It's a great time to start thinking about keeping as much money as you can…

for this year, based on maximizing those tax deductions.