Most business owners think tax deductions have to happen before December 31st. They don't. In this video, Mark and Ro break down how the retirement system allows you to create deductions tied to 2025 income even though 2026 is already underway, and how your money can keep earning interest while Uncle Sam waits.

Watch the full video to learn more.

Video Transcript

Mark Switaj (00:02.67)

What if we told you that even though 2026 is underway, you still have time for deductions for last year, 2025, and even earn interest while you wait to pay the IRS?

Rohit Punyani (00:18.975)

Yeah, I'd say it's too good to be true, Mark. Most business owners think tax deductions have to happen in real time. The December 31st trap. In this video, we'll show you how the retirement system allows you to create deductions in arrears and turn taxes into a planning tool.

Mark Switaj (00:36.821)

I'm Mark Swytage, two-time founder and CEO of The Owner's Asset.

Rohit Punyani (00:41.501)

And I'm Rohit Pinyani, former chief investment officer and co-founder of The Owner's Asset. Together, we help business owners and 1099 earners design tax-efficient wealth strategies. If this content helps you, hit subscribe, ring the notification bell.

Mark Switaj (00:57.358)

All right, I admit it, it's 2026. I turned the calendar like you, but yet here we are still talking about 2025. And this is so important. One of the most important strategies for small business owners. They didn't even realize that you can still harvest deductions for last year, 2025.

Rohit Punyani (01:18.175)

Yeah, yeah, the handcuffs aren't on you for your 2025 tax planning. We all get that surprise bill from our CPA. Well, there's a way around it specifically how to create deductions tied to 2025 income. That's what we're going to cover today. How certain retirement plans let you control when you fund them and how your money can stay liquid and earning interest while uncle Sam waits for you to get the deduction back to last year.

Mark Switaj (01:43.076)

All right, well, let's drill in. Point one, the common tax timing mistake.

Rohit Punyani (01:49.471)

Here's one of the mistakes we see all the time for small business owners and Mark and I are small business owners. So this is what we do as well. Business owners think deductions only count when cash actually leaves their account. They think their deductions are January 1 to 1231. That mindset comes from the W-2 life, comes from the W-2 lifestyle. Employees live in a real time tax system. Business owners do not. Business owners

don't have to play the same game that W-2s play. The tax code allows deductions based on annual income and plan design, not just the timing of the payment. That's the foundation of deductions and arrears.

Mark Switaj (02:33.372)

All right, let's go to point two.

what deductions in arrears actually means. I'm chuckling because if my mother were standing here, she'd be like, come here, I'll show you what arrear is. When we say deductions in arrears, we're talking about committing to a qualified retirement plan during the year, locking in the deduction, in this case, for last year, meaning 2025, and funding it over time.

Rohit Punyani (02:43.102)

you

Mark Switaj (03:05.868)

Okay, this is a fully built system that we have in the United States. It is part of the retirement system. The deduction is tied to your 2025 compensation, even if the actual funding moment happens later, i.e. 2026. So instead of rushing to spend money just to create a write-off, you're intentionally designing the time. All right, let's join. Yeah, bring us to point three, bro.

Rohit Punyani (03:30.174)

That's exactly right.

Sure. This works. What you're saying that the timing element works because qualified plans are structured based on how much you earn throughout the year. You won't know that until the last day of the year. So Arista 2.0 and qualified plans give a look back provision in 2026 back to 2025. So solo 401ks, SEP IRAs, especially the, the, the Patriarch and Matriarch of, the retirement system, cash balance plans and, and full-blown pensions are calculated.

off of your full year's earnings last year, but can be done in 2026. So for higher earners in particular, cash balance plans are where this becomes a very, very powerful opportunity, tax planning opportunity. These plans can support six figure deductions based on actuary calculations tied to 2025 income. You establish the plan, determine the required contribution, and the deduction is tied to that plan obligation.

We work with you to do all of that type of work. It can be done as late as June of 2026 in arrears to 2025 tax filing.

Mark Switaj (04:38.855)

All right, time for some engagement here. Quick question, are you currently maxing out your retirement options or does it feel like you're always reacting at tax time?

Rohit Punyani (04:53.66)

Yeah, if you're reacting or you find tax time to be what surprise am I going to get this year? Drop a comment below. We read every single comment and we build content around what business act with what business owners actually want us to talk about.

Mark Switaj (05:06.965)

Alright, point four. Earning interest while you pay taxes later. This is the part that changes how people think about taxes. When you delay funding, the money stays with you. It doesn't disappear. That's why I think a lot of business owners file on extension. Gives more time, maybe ability to earn some interest on the money before you pay. That means that it can sit in high-yield savings, short-term treasuries,

or other conservative vehicles earning that interest. So instead of paying the IRS, your capital stays productive while you're waiting to maybe fund the plan. That's not avoidance. That's liquidity management.

Rohit Punyani (05:49.988)

That's exactly right. Small business owners, when we have liquidity, we want to put it towards its highest and best use. And that highest and best use from my perspective is eliminating or reducing that 37 % silent partner you have in the IRS. Okay. So who does this work best for, Mark? I think is the next natural question. This strategy is best for consistent earners. We all have episodic revenue, but if it's literally, you know, 400 grand of EBITDA and zero the following year, you probably don't want to commit to a plan.

But if you have consistent, if you have consistent earnings, business owners, 1099 professionals, partners, and founders with prediction, with predictable income, this works for you. Why pay uncle Sam when you can pay yourself. If you're clearing six figures or more and taxes still feel like your largest expense, this kind of levelized planning is critical to help you understand that you don't have to pay the IRS more as your business grows. Right? If you're a retirement account.

doesn't match the success you have in your business, a cash balance plan or a 412 plan is really something you should consider.

Mark Switaj (06:53.07)

All right, let's jump into some of the common mistakes, pitfalls to avoid. Here's one, waiting until March or April to ask or maybe even react to what's possible.

Rohit Punyani (07:07.132)

Yeah, the earlier you start the better. Let's use the counter to our advantage. The other chip, the other pitfall mark is assuming your CPA is going to bring this up. CPAs are, are, are smart. They're tactical. They're strategic about this. It helps if it's a two way collaboration, our partners, our partnerships with CPAs and our partnership with small business owners thrive when there's two way communication.

Mark Switaj (07:26.282)

what I love that we talk about and you've already brought up is who this works for, who this doesn't work for. One of the pitfalls really setting up a plan without understanding the funding commitment, right? So if your business has been pretty steady in terms of earnings in your business, this is a great play. But as you mentioned, Ro, if it is episodic, you have no income, income, no income, this might not be the path for you.

Rohit Punyani (07:57.246)

Yeah. And where do these things sing? Where, where, where do these strategies shine at the intersection of tax planning, cashflow, long-term wealth strategy. When there are all, all, all are all aligned, there's a tremendous opportunity to get a deduction today, save later and probably pay no taxes on some of the assets on the backend. Right? We can save you multiple checks to the IRS by designing a plan properly.

Mark Switaj (08:21.849)

All right, let's bring it home. The big idea is simple. Taxes don't have to be reactive.

Rohit Punyani (08:30.074)

In 2026, you can still get a deduction for 2025. Business owners still have powerful ways to control timing, deductions, cashflow, and liquidity.

Mark Switaj (08:42.772)

When you understand how the retirement system really works and works really well for business owners, you stop guessing and start designing.

Rohit Punyani (08:53.116)

If you're a business owner, a 1099 earner and want to see whether deductions in arrears make sense for you, we'd absolutely love to help.

Mark Switaj (09:01.085)

Click the link in that description below. Let's schedule a consultation. We'll walk through your income and design a plan around your goals.

Rohit Punyani (09:08.954)

If this video helped, give us a thumbs up. We want to reach small business owners, 1099 earners, partners. We want to, we want to help them. We're here to help them solve their tax problem. Subscribe for more advanced tax planning strategies and share it with your friends. If you think it's valuable.

Mark Switaj (09:23.763)

Thanks for watching.