- Hello everyone. Welcome, welcome. I'm Dan Bove from entrepreneur.com and thanks for joining us for today's webinar, top tax tips for entrepreneurs in 2025. So if you haven't noticed, there's a lot of change happening in our government. And here to help explain how some of these changes may affect small business owners at tax time is Jean Marks, a certified public accountant, owner of the Marks Group and longtime contributor to entrepreneur.com. Gene will be happy to answer any of your questions, so please don't be shy about sticking them in the chat. We'll get to as many as we can. He'll also gladly accept any congratulations on behalf of his beloved Super Bowl champion Eagles. He did a great job out there on the field. So let's welcome him in. How's it going, Gene? Hey, Dan, how are you? Yeah, I'm feeling a little sore. That offensive line was really rough on me, I know. But thanks. Congratulations. That's completely fine. And by the way, we're talking taxes today and you know nothing about taxes, right? So I can say anything I want. You're just going to believe me. I'll give you my social security number right now and just Go to town. Fair enough. So, Gene, you know, you and I were talking on the phone yesterday a little bit, just prepping a little bit for today, and you used a phrase that was quite colorful and has stuck in my head. and that is you said so i guess we should talk about the impending tax apocalypse so um that's that's quite a phrase uh do you want to you know explain what you meant by that yeah um you know actually apocalypse is a good i was using the word armageddon i'm not quite sure if there's a difference between those two i think i think we all kind of get the point um yeah i mean this year 2025 dan is is tax armageddon and it is um you know it is a uh going to be a year of significant change uh when it comes to taxes and let me explain why uh you know in 2017 uh during the first trump administration the tax cuts and jobs act was passed uh which had a bunch of tax benefits and incentives both for individuals and for businesses well Well, some of those provisions started to expire a couple of years ago and most of them are going to expire at the end of 2025. So unless something is done by Congress, a lot of things are about to change on our taxes. And let me dig into it just a little bit, Dan, and then stop me if I'm boring you too much, okay? But the highest tax rate right now would go back up to over 39.6% for higher earners. There's a standard deduction that we all take as individuals. So, you know, Dan, when you do your taxes, say you're individual and you're doing your taxes, right now you can, right off the top, you can deduct $14,600 from your income. Well, that number gets cut in half if nothing is done. So that's a big tax deduction that like goes away. For people that plan on dying sometime soon, my recommendation is to do it this year because after this year, the exemption for when you die, the estate tax exemption, the 40% tax rate, it gets applied on much lower numbers. Right now, if you pass this year, $13 million of your assets are exempt. But starting if this expires the next year, half of that about between six and 7 million will only be exempt from that 40% rate. So bear that in mind. This is a business website, a business platform. I run a small business. There is a massive tax deduction, Dan, for small businesses that is on the chopping block. It's called the Qualified Business Income Tax Deduction. It's a pass-through deduction. If you were to pass through, say you own an S corporation or a partnership, which is more than 90% of small businesses out there are that structure. Well, right now we have this huge deduction we get to take. We get to deduct 20% of that income before it even hits our personal incomes, our individual return. That's going away. So what that means is that this year, if I make a thousand bucks in my business, only 800 gets taxed. But if this provision expires the end of this year, the full thousand dollars will get taxed. So higher rates for higher earners, you know, having of the, you know, the standard deduction, having of the exemption for, you know, for for state taxes and then the going away of the small business tax deduction, the pastor deduction, that 20 percent, all that is on the block. I got more, by the way, but I just want let me stop there. Yeah. Well, so these are things that could happen if this expires. So. You know, which way do you think the wind is blowing? Do you see this expiring or what are your thoughts? It's a really it's a really good question. So, you know, you know, Trump, President Trump and the GOP, they want to make these things permanent or at least extend them for a longer period of time. And they want to do that. They're going to be pushing hard for it. It's what he campaigned on. But let's not forget that the GOP holds a very slim majority in Congress, both in the House and the Senate. And the Democrats are asking the very reasonable question of like, well, how's all this stuff going to be paid for when we have, you know, a $2 trillion annual deficit, you know? So it's going to be a battle. And I don't think all of it is going to, you know, is going to get through. I think some of it's going to fall by the wayside. I'll give you some examples. Last week, President Trump came out with his middle-class tax cuts to add to this, to extend some of these things. He also wants to exempt tips from, and overtime and social security from income taxes. That's huge. I mean, imagine exempting tips from all income taxes. So it sounds great if you're a tipped worker, that sounds great. But what about in practice? How is that really going to work? I mean, who's going to pay for that? It's tough. It's really tough to tell Dan what's going to happen. Let me just give you a little bit of insight. So just this is my opinion, not entrepreneur.com's opinion. I don't want to send you to jail. So this is just me. You guys can come after me. I think that we're going to see way more clarity on this by later in the spring. Right now, the White House is and the GOP are working on a bill. to get into Congress within the next week or two that will start introducing some of these measures to make permanent from 2017. It's going to be a lot of debate, a lot of back and forth. Maybe you and I will come back and talk then, but you're going to see some clarity on this by late spring, early summer. I would huddle down with your accountants as soon as your accountant is done with their busy season in April and pay close attention to what's going to happen because it's a huge impact on our income. Taxes, obviously, is a big expense, and you've got to be able to be in a position to do some tax planning. So that's what I expect that to happen. And some of the things that I... I think the one that's the riskiest... measure is the estate tax one that I talked to you about. I mentioned earlier in this era of we hate the rich, that kind of thing. The estate tax exemption might be one that carries on. It doesn't get exempted anymore. That reverts back and there'll be higher estate taxes. I see other stuff. I do think the small business tax deductive is going to make it through. But at at the same time we didn't have it before 2017 so yeah who knows could be an argument made against it yeah yeah well i wonder as as a cpa do you get a lot of tips so are you really looking forward to being able to uh deduct those So, you know, I don't get a lot of tips, but I can tell you, Dan, and it's funny that you make the joke. Here's what I would recommend. If they don't tax tips, then I think we should all be classifying our workers as just tipped workers. You should be a tipped worker of entrepreneur. That's it. Yeah, yeah. None of your income gets taxed anymore. And entrepreneur doesn't even have to pay your employer taxes. Right, right. That's perfect. I was wondering that if people's returns suddenly we're going to be making $80,000 in tips every year. I know. Can you imagine if the tip thing, if that actually went through and everything, I mean, you think it's bad now being asked to tip workers. Can you imagine you go in there and find out you're going to have to tip somebody for it? So these are all, as we said, we're not sure what's going to happen, but there are some things you are sure about so for those who don't follow gene uh and his writing on entrepreneur.com you talk about this stuff a lot and uh you offer all kinds of ways that small business owners can uh save money particularly at uh tax time um now again uh if anyone has any questions please put them in the chat but you know i think this topic of paying your employees. This is one way, this is one area where you say there's a lot of opportunities for employers to save money on their taxes. You want to get into some of that? Yeah, I want you guys to know who's ever watching this, that the government does have a lot of tax incentives out there to help you hire employees and pay for your employees. And this is especially critical. I mean, we all know that labor is super tight. And it's still unemployment is low. It's still hard to find good people. So let me give you some examples. One example that I've written about, not for an entrepreneur yet, but I did a piece in the Philadelphia Inquirer and I did a piece for the Chicago Daily Herald about the work opportunity tax credit. And if you're an employer, listen up, okay? The work opportunity tax credit is also scheduled to expire this year, but don't panic 'cause it's always been scheduled to expire and it keeps getting renewed and renewed and renewed, okay? Dan, if you hire somebody off of welfare, out of the military, somebody that is formerly incarcerated, recently out of prison, somebody that is long-term unemployed, more than 26 weeks unemployed, you could be eligible, your business, for up to a $9,600 tax refund credit just for hiring that employee. So you have to apply for it in advance and I'm forgetting the form name, but you can Google work opportunity tax credit and you'll see what the form is. The IRS approves the amount in advance after you fill out the form. It's a pretty quick turnaround. And then depending on what you're paying and some of the other criteria about that employee, you can get up to a credit. And what's amazing is that's on your income taxes. I mean, it's not a deduction. It gets taken right off the taxes that you owed and you can use that tax credit both for your income tax or you can use it off your payroll taxes, your employer payroll taxes. And the reason why I bring that up, Dan, is that I recently did again, both of the Inquirer and the Daily Herald, I did a piece about hiring people that are formerly incarcerated. There was a huge amount of prison population, people coming out. Every state has got programs to try and put formerly incarcerated people back into the workforce. They work with nonprofits, so it doesn't cost you anything as a business. They can get training. Most states have workforce development grants that you can use to hire these workers and get paid to train them. The nonprofits will facilitate it, offer counseling. And then on top of all of that, you get this huge tax credit from the federal government for hiring them. And I interviewed probably 20 business owners for these two pieces in Chicago and Philly. And the great majority of them were like, great decisions I ever made. These employees are formerly incarcerated. They're more loyal than my existing employees. These are people that made mistakes when they were younger or whatever and served their time. But you try to get a job with a prisoner. It's hard. So the federal government provides these kinds of tax credits, the work opportunity tax credits, and the states provide fundings too. And that's just one example of an amazing tax credit to take advantage of to hire people. If you're looking for workers, it's a real source of workers for you. That's fantastic. And I happen to know some people on the nonprofit side of that equation that you're talking about. And yeah, it is an incredible thing. an incredible program. And as you said, some of these people are so thrilled to have a second chance and just, you know, incredible workers. So that's great. So what, you know, you talk about, you know, this is something that a lot of people face, which is dependent care. Yeah. And you have written about or spoken about how, you know, you can help your employees and in turn help yourself. Thank you for bringing that up because it's a giant issue. I mean, we all, you look around and so many workers are impacted by dependent care. It's not just your kids. It could be your parents as well or somebody older that's a dependent on your tax return, you know, and they might be living with you. It's a big issue. And it's a big issue for our employees and it's a huge issue for us as employers because when people are distracted or they miss work because of dependent care issues, obviously that is an impact on their job performance. So the federal government gives us three three, well, two ways, but actually three ways for for incentivizing us to provide dependent care. OK, and and I want to go through what those what those ways are, because they're so important. Number one is you can reimburse for dependent care, just reimburse your employees. Number two is you can build or contract out with a dependent care facility. OK, and I'm going to talk about these in a minute, go into detail. And finally, there's of course the personal tax credit for the dependent care tax credit. Let me double back on this, Dan, and just explain some of the stuff from what I've seen. Okay. So as far as reimbursement, all of us, we can reimburse our employees up to $5,000 per year per employee for qualified dependent care expenses. That's like daycare, summer day camp, babysitters, after school programs. There's a whole list. When we reimburse the employees up to $5,000, and it's up to $5,000, you don't have to do the whole thing. It can just be a grand if you want it to be. But you get a tax deduction for it, and your employee does not get taxed. And you just need to set this up as a formal plan in your business with your benefits advisor, and it has to apply to everybody in your business, and it can't favor the owners and the spouses and all of that. It's gotta be like an equal opportunity kind of benefit plan, but it's a great advantage to give. So number one is you can reimburse, okay? Number two, you can build or contract out. Now, if you want to build your own childcare facility, which is probably not something I would personally do, but I've had clients that have partnered with other businesses in their area to build something out. I mean, you can get a tax credit of up to $150,000 a year for doing that. You can offset a portion of these expenses and get a credit. If you instead say, "Okay, I'm not going to build one out, but I want a contract with a childcare facility. So we're going to pay a childcare facility X dollars a year to provide childcare for my employees." You can get a tax credit of up to 25% of your expenses to do that. If you just want to offer referral services, just to refer your employees out to a a childcare facility, you can get a 10% tax credit as well for any expenses that you incur. So you can reimburse your employees directly for childcare expenses, or you can build a facility, or you can contract out or refer to a facility, and there are tax credits available for you to use to offset those expenses. So number one, reimburse. Number two, build your contract. And then there's the third way to do it. And that's just simple education. So Dan, again, I'm a CPA. So you look at the rules for calculating the dependent care tax credit, the individual credit, And it's like you need a PhD in dependent care. You know what I mean? Yeah. Yeah. A range of income and a range of percentages and like all guys. It's frustrating. And I mean, a lot of people just I mean, they can't deal with it. I mean, it's just it's too complicated. So I've had some clients, they will hire an accountant or benefits expert. They come in once or twice a year and they sit with their workers, both individually or as a group, and they teach them about the dependent care credit. Because if a worker, they can get reimbursed from you, and then anything they're not getting reimbursed from, they can claim as an expense for the dependent care credit, and they can really save a ton of money. And unfortunately, a lot of people don't take advantage of it because they just don't understand how to do the calculation. So anyway, I know I've been speaking a lot and I'm sorry. No, this is great. And I think, you know, But what you're saying, too, is like, you know, you're kind of winning in a lot of different ways. You're you're you're not just saving money on taxes. But I mean, for anyone who's been strapped with any kind of care costs, you know, as you spoke about before, with just the loyalty, the appreciation of people who are being helped out with that is probably incalculable. It really is. And you kind of hit it right on the head about the appreciation part of it. I mean, it's a benefit that shows that you really do care and that your employees themselves, they do get that. Every little bit helps. And listen, you don't have to be the most altruistic person in the world. I mean, whatever you can do for your employees to make them show up for work and be as productive as possible. Again, the more that will benefit your business as well. So just strongly recommend that you offer some type of dependent care benefit and structure it in such a way that you can maximize the tax benefits that are being offered. You will have very grateful employees. And again, we started this conversation about your recruiting and retaining good people. That's the way you do it. Yeah, right. Yep. So, you know, we are in an era where more and more companies are asking or commanding their employees to come back to the office. And I know that commuting costs are an issue, but you have a way to make that work for everyone. Yeah, there is. So there's other costs for your employees that a lot of employers might not be aware of are deductible. And you mentioned commuting costs. So you can pay, you know, you can reimburse your employees for their parking up to $280 a month. You can get a deduction for that and they do not pay taxes on that money. You can also do the same thing for transit. It includes transit and parking. So it's those two things. So, you know, your employees are coming into work. I get it that it's out of pocket. You are going to be paying them something, but you do get a tax deduction for it and your employees don't get taxed on it. So it's a nice benefit to provide. The other thing also we talk about whether it's remote or in-house employees, I love the education deduction. I mean, I have clients now and you are, we're completely allowed. I mean, Dan, if you wanted to learn origami or take up ballet or learn how to like, you know, fly an airplane, you can do all of those things. Does not have to be work related, but your employer can reimburse you for those costs up to 5,250 bucks a year. And you don't have to pay any taxes on that. And your employer gets the deduction for doing that. So it's a way to pay for education for people that's not even job related so that they can have a more rounded, balanced life as it is. And if you reimburse them for this stuff, it's a tax deductible kind of thing. Gene, have you been reading my dream diary of ballet? You nailed it all. It's like you know me. Yeah, I always knew that. I saw a photo of you once in like those ballet tights. I had some comments for you, but we'll leave them for after the session. We had a question in the chat, and I'm sorry that I missed it. So I wonder if... If you want to restate the question, you said, "Please clarify what you just said. You mean as an entrepreneur, you don't need to pay taxes on personal income." I think I missed where that question came in. Gene, I don't know if you're picking up what you were referring to. No, you definitely, yeah. I'm not sure, but maybe, Efima, it was related to the small business, the pass-through deduction. And if that's what you were referring to, then let me just make sure that we're just, you know, completely clarify it. If you have a small business, say it's an S corporation or a partnership, and you earn $1,000 in that business, well, because it's a pass through, your business doesn't pay any taxes, it passes through to your individual return, and you pay your taxes down at the individual level. there is a deduction that's in place right now where you can deduct 20% of that income. So say you earned a thousand dollars in the business, only $800 would pass through to your individual return and you would pay taxes, but only on the $800 that deduction is that is set to expire at the end of this year, unless something is done to extend it or make it permanent. So I hope that that makes sense. So, Gene, I'm wondering, uh, Amir wrote in here that he's a student and a full stack developer. I want to do some business, which made me think about more and more people are doing gig work, side hustles, things like that. I wonder if you could talk a little bit about what someone, especially as a student, maybe just starting out, what things they should be aware of when it does come time for tax time of what they can deduct, but also what they need to save because they may owe something. yeah it's a really great question um there are i just wrote about this for the guardian i write in other places besides entrepreneur.com guys sorry um although i love entrepreneurship i can't believe it i know i cannot believe it very very remorse about that but anyway i did write a piece about uh this very topic just last week on um on on the guardian uh because there are like i think it's something like 60 million now um you know uh 1099 workers independent contractors And the government is trying everything they can to sort of crack down on them in a certain way. It's like they can't keep control over all these people that have side gigs and doing their own thing. So you're part of a big movement if you are a 1099 worker or a gig worker. So what do you do when it comes to taxes? Just so you know, there's two roads you can take. I mean, number one is you can just... Include your income on your Schedule C of your individual tax return. So say you're a contractor, you're doing whatever you're doing. Maybe you're a YouTube creator or maybe you're providing services for somebody down the street or walking somebody's dog or whatever. If you get paid more than $600, the person paying you is required by law to file that with the federal government and give you a 1099. you then report that on your individual income tax return. And on that schedule C, where you report the income, there are some legitimate business expenses you can take. I mean, if you are a professional dog walker and that's your business, you have your income on that schedule C, but I don't know, maybe you've got your leashes that you specifically have for dog food or treats that you're buying for the dogs to make sure they stay in line Those kinds of things that are, if you're buying them specifically for your business, you can deduct them against the income. And then the net of that income gets included on your individual return and you pay taxes on that. If you are doing that to a certain extent where it's fairly significant, maybe more than say two, three, $4,000 a year, you definitely should talk to an accountant about that because you may need to be paying in some estimated taxes. Estimated taxes are a good thing. We all hate paying taxes, but this will force you into making a quarterly payment on your taxes, either based on your last year's income or an estimate of this year's income. So when it comes time to do your individual return, you don't get hit with like a huge tax bill and you're like, oh my God, how am I going to pay for this? Because I've spent all my money on pizza. So you can go that way and just do it on your schedule. The way that I recommend though is not that. If it's an ongoing, regular, legit business, say you are a dog walker and it's something you're doing, man, and you're going to be doing it for a while, I recommend that you do incorporate yourself, that you do set up a separate entity like an S corporation, which is a form of a corporation or a partnership. It can be just you as the partner. But what that does is we're a limited liability company. You file a separate return for that. It legitimizes your business and it does offer some corporate shield against potential liabilities that you might have. So I recommend going that route. It's a little bit more expensive because you got to get it set up and probably use a professional to help you. But I think it's worthwhile doing. Hope that makes sense. Yeah, absolutely. And which reminds me to earlier, you know, when you're talking about the standard deduction. Now, do you do you recommend people normally take the standard or are you a fan of digging in and itemizing? Here's what I found when the, that question is going to depend on what happens in Washington this year. The standard deduction is so big this year at 14,600 that unless you have some significant itemized expenses and remember, local taxes are no longer, you know, they're very much limited, but things like medical expenses is what I'm thinking. Unless you're in that situation for most of my clients, they're just taking the standard deduction. you know um because it's been so large now if that deduction gets cut in half this year that is a perfect example dan so it's such a great question of of how you need to be meeting with your accountant you know if you find out late spring early summer like oh man you know the standard deduction is going to revert back to what it was in 2016 um so instead of 14 600 is going to be like 7 7 200 or 7 300 that might make a big difference to you and you might decide you need to itemize this year. That's where you need to pay attention. Yeah. Yeah. We're coming up on the half hour here, so I just want to make sure we get to some of your great advice. If there's anything that you would recommend to people who are watching here, small business owners, maybe they're, as we just talked about, side hustlers, gig workers, Is there anything, can you give them some tax homework to kind of get themselves in shape for tax time, what's coming up and next year? - I do have some advice. Very subjective advice. I'm a big believer in outsourcing. I mean, I just, Putting aside taxes, I mean, just taxes on employees and doing payroll and things like that. I've always thought you hire like a payroll service, like a paychecks or somebody to like do that for you. I feel the same way when it comes to your taxes. I think if you're a legitimate business and you're running a business and it's your main source of income, I think tax rolls are so complicated right now. And I also think that it's just it's not your expertise and the amount of money that you think you're saving by doing it on your own. It does raise the risk that you could be screwing something up and creating more headaches for yourself in the future. So you ask what people should be thinking about. Right now number one thing is I think you should really be thinking about hiring You know a local CPA or somebody that just does this for a living to do your taxes because I think I think the money's real You know is really worth it says number one number two is you really want to be making sure again as a business owner That you're keeping good records. I mean for goodness sake I mean obviously I'm assuming you're using something like a QuickBooks or something You know that that's a mint or a zero, that's a good small business accounting application. You really should be leaning into that because if you hire somebody from the outside and then you hire them garbage, it's going to increase your costs, you know? So invest in a good, you know, accounting software for yourself, even if you're just selling a little bit on Etsy or Amazon, I think you should be keeping your book separate and keeping them in good shape and you'll make your life a lot easier. And finally, if you are deciding to pay your estimated taxes, now's the time to do that, you know, make those decisions. We're having this conversation now in February. Um, so you start making those payments, you know, in, in April and then in June and then in September and um, you want to get ahead of those so that you don't get yourself into trouble. That's great. Awesome. Awesome advice. Gene, you didn't get one congratulations. Must have been a lot of Chiefs fans in the crowd tonight. Unbelievable. There's a tough crowd that's out there. A couple of nice comments on the side I see. Yes. What are you going to do, Dan? I mean, it's not like everybody's like hugging and kissing each other in a conversation like this, you know? That's right. Well, thank you so much for... for all of that great information and I'll courage and thank you to everyone who who is watching and I'll also encourage you all to look for Jean marks on entrepreneur comm and also Jean marks comm he's writing about this and all kinds of topics that are a huge vital interest to small business owners, so I would encourage you all to do that and Thanks again for tuning in. Thanks to Jean. We will see you all again