February 6, 2024 • 30 mins
In this episode, we delve into the essential world of tax preparation. With tax season just around the corner, we understand the dread and confusion it can bring. But fear not! We're here to transform your tax experience from stressful to successful.
In this comprehensive guide, we cover everything you need to know to get a head start on your 2024 taxes:
- Understanding the Basics: We break down complex tax terms and explain the importance of choosing the right filing status for your situation.
- Creating a Tax Checklist: Learn about the vital documents you need to gather – from W-2s to 1099s, and how staying digitally organized can save you time and hassle.
- Getting Started Early: Discover the benefits of early tax preparation, including how to set achievable personal deadlines and why they're crucial.
- Finding Help: We navigate the resources available for tax assistance, from the IRS website to professional tax advisors, ensuring you get the help you need.
- Filing Your Taxes: Explore the pros and cons of different filing methods, and how e-filing can streamline the process.
- Dealing with Common Issues: We address how to tackle common filing errors and provide tips for handling any tax dues.
- Planning for Next Year: Finally, we offer strategies for year-round tax planning to keep you ahead of the game.
Whether you're a first-time filer or looking to improve your tax filing process, this episode is packed with expert advice and practical tips to help you navigate tax season with confidence. Say goodbye to last-minute rushes and hello to a smoother tax experience!
Subscribe to the channel for more empowering content on personal finance, investing, and self-improvement. Don't miss out on the opportunity to unlock your true financial potential and live a life of abundance. It's time to invest in yourself and create the future you deserve!
IRS Tax Preparer Directory: https://irs.treasury.gov/rpo/rpo.jsf
IRS Refund Status: https://sa.www4.irs.gov/wmr/
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Today's episode is one you will not want to miss as we are tackling tax season
and how to make it stress-free.
I know, tax season, stress-free, not traditionally going hand-in-hand.
Every year as April approaches, millions find themselves in this frenzy of tax
preparation, often leading to missed opportunities and unnecessary stress.
(00:25):
But what if this year could be different?
What if you could approach tax season with confidence and ease?
That's exactly what I want to help you with today.
From understanding the essential tax concepts to organizing your documents like a pro,
we're diving deep into strategies that will not only help you prepare for the
(00:48):
upcoming tax season, but will also save you time and money.
So grab your notepads and let's demystify the world of taxes,
making this often dreaded task a smooth and successful journey. Let's dive in.
Welcome to the Financial Mirror, where future success is reflected in our knowledge
(01:11):
of fixing the one thing we can control ourselves. ourselves.
Welcome to the Financial Mirror and thanks for joining me today as we continue
to work to improve the one thing that we can control ourselves.
Here at the Financial Mirror, it is not about the numbers and spreadsheets alone,
but about transforming and educating you on money so that you can make smarter financial decisions.
(01:36):
If this is the first time you are joining in, don't forget to hit subscribe
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comment as both go a long way in getting this information out to more and more listeners.
(02:00):
So this is all about tax season, and I got this thing for you,
this one simple fact that will get you interested in the rest of this episode.
But did you know each year, millions of Americans file their taxes late?
According to the IRS, in a recent year, over 10 million taxpayers requested
(02:20):
extensions, and many more missed the deadline entirely, right?
Didn't even follow the formal process to actually request the extension.
Just was like, yeah, I'm just not going to do the taxes on time this year.
This isn't just about procrastination, though. So many people are truthfully overwhelmed.
(02:41):
And when we think about how taxes can make people feel, most of the time,
it's not really the overwhelming part, which sometimes it is,
but the overwhelming part of actually doing the taxes. because let's be honest,
you can pay somebody to go and prepare your taxes.
However, it's kind of the outcome, right? And so I'll put this to a perspective for myself.
(03:04):
I personally cannot stand going to the doctor.
It's not because I hate the doctor. It's because I hate the outcome.
Like, I don't want the doctor to say, hey, guess what? You can't do jujitsu
anymore for the next six weeks.
Hey, yeah, that bum leg that you're running through, yeah, you can't run for
the next six months. Hey, you know that thing?
(03:25):
Yeah, that's like a terrible medical thing.
I'm not going to wish any harm on myself by giving anything a name.
But what I'm saying is that I don't like going to the doctor for the outcome.
Tax season is no different. People literally will put off off their taxes,
not for the simple fact of a procrastinating of the complexity,
(03:47):
but kind of around the anxieties that surround the outcome of the tax season.
For many, it could be this false anticipation that they're going to get a refund,
or there's this known fact that they're going to have to pay thousands of dollars this year.
Regardless of what it is for you, it doesn't have to be this way.
(04:07):
And what if I told you that after today's episode, it shouldn't be this way?
I'm not here to tell you that you're going to simply just all of a sudden be
like, yep, I don't owe anything and life goes on.
However, what I am here to tell you is that life will continue and we will put
(04:29):
a strategy in place to help you get through this tax season.
Today, we're going to explore some simple, very simple, yet effective steps
to get you ahead of the game.
I want you to ultimately avoid all those last minute panics and maybe even discovered
you're owed a little more money than you actually think.
(04:49):
So I want to take a couple minutes, turn this often dreaded chore into an opportunity
for you to feel a little bit more financially empowered.
So the first place that I wanted to start was kind of the basics,
kind of just wanted to quickly lay out the basics to get you ready for tax season.
The biggest question that comes up, and this is something that if you're purchasing
(05:10):
a home or if you're going through any other type of large financial purchase,
they're going going to ask you, do you know your AGI or your adjusted gross income?
For many people, they don't even know what that is. They're like,
oh, is that, you know, how much money I brought home and put in my bank account
last year? Well, not really.
(05:31):
This is your yearly income minus certain deductions.
And it's a great starting point for tax calculations.
It determines your tax bracket it and it also determines any other potential
deductions that you qualify for.
So it's something that is very, very important when it comes to taxes.
(05:51):
The other thing to also be considerate of is I said the word deductions, potential deductions.
Do you know the difference in a deduction and a credit? Well, let's level set on that.
Deductions lower your taxable income while credits reduce your tax bill directly.
So if your tax bill is, let's say, $20,000 and you you get a $2,000 tax credit,
(06:12):
your new tax bill is $18,000, right?
Deductions actually just decrease the amount of taxable. It kind of lowers your
taxable income amount, right?
Two different things, two totally different things. So.
Last thing for basics, before we jump into everything, is understanding filing status.
(06:34):
You need to know what is your filing status, whether if you're single or married.
If you're single, you have a pretty straightforward status.
If you're married, now you need to figure out if you're doing like married filing
separate, married filing joint, like all these different things.
You need to figure out what is the best fit for your situation.
(06:57):
Now, this is the first plug that I'm going to have, and I'm going to use this
plug multiple times throughout this episode, just so you're aware.
But what I want you to hear is if you are not sure about anything when it comes
to taxes, talk to a tax professional.
Professional okay i'm being honest
(07:18):
if i if i i'm telling you right now i'm not
a tax professional right like i'm here to get
you from start to finish through tax season a tax professional studies this
tax law they change every year i am not up to date on every single like tax
law rule 1.1.a.roman numeral v like i don't know what that new change is if
(07:42):
i'm honest i have no idea idea.
Don't even know if that's actually a tax law. It may not even be in that format.
Maybe they do like wingdings or something for tax law because that's about what it feels.
But regardless, there's a consistency in that.
Once you kind of figure that out, if you ask a tax professional and you kind
of figured it out, you could probably use that same thing moving forward and
(08:03):
not have to go through that professional, especially if you have like a pretty routine tax situation.
Situation, but that's the first thing to figure out, right?
Like these are just some basics, understanding what a deduction versus a credit
is, kind of knowing what your tax, what your filing status is.
All those things are helpful.
Now, I'm going to jump right into this because I want to provide you,
(08:26):
first off, a checklist, a checklist of, first, the documents that you need to get.
Second off, we're going to go through some of the other things that you need
to start thinking about and put together.
But what I like to look at this as is a tax checklist for the simple fact that
before you sit down to do your taxes, if you're doing like an online tax filing software,
(08:48):
or if if you're going to a tax professional or a tax preparer,
they're going to want all these things.
So what I advise people to do is do your homework first.
Do this checklist first. Check
off each of these items as we go through them. Put that all into a spot.
Take that to said tax preparer or get ready to do them yourself online.
(09:12):
No matter what the plan is, no matter where you're going going to do it,
this checklist applies.
And if you will get through this checklist, your life this year for tax season
will go swimmingly. It will be much, much less stressful than it probably has been in times past.
So first thing that you need is pretty straightforward.
(09:33):
Social security numbers for yourself, your spouse, and any dependents you have.
You probably know your social, right? But if you're married,
if you have children, you also need to know their social.
You may not know it off the top of your head. So first things first,
pull all that information together. Pull it all together.
Get it collectively in one location.
(09:56):
Second thing you need to go after, income documents.
So second thing, they come in multiple, multiple forms. I'm going to go over some of the major ones.
The W-2 is the most common form of wages earned for most people.
Most people are going to get a W-2 from their employer.
(10:19):
Those should be coming out here in the next, if you haven't got it already for
those companies that are early birds, you should be getting it here in the next
week, right? It should be ready.
So be on the lookout for that. From your employer, you should get a W-2.
If you're a W-2 employee, you're getting a W-2. The other thing that is a little
(10:42):
bit more nuanced is 1099s. And there's a 1099 alphabet, right?
And there's tons of 1099s out there.
So here's a couple that I think are the most common that you may see and may be applicable to you.
1099 MISC, 1099 miscellaneous.
This is something that independent contractors and freelance folks get.
(11:06):
That is something that you could be on the lookout for.
If you did any freelance work, if you did any independent contracting work,
that is something that you will more than likely see.
1099-INT is interest earned on savings accounts and investments.
So you may get one of those from your bank. You may get one of those from a
(11:27):
brokerage. You may get one of those from all these different places.
If you earn interest on a savings account or an investment, you would find a 1099-INT.
1099-DIV is for dividends. This is for any dividends that were paid in any type
of investments that you earn.
(11:47):
You're going to have to look at that as taxable income, earn money.
That's some of the big ones. 1099-R is another one for distributions of pensions,
annuities, retirement plans, profit sharing programs, things of that nature.
So look for a 1099-R if you're kind of in that boat and you are using that.
(12:07):
And then the last one that is super, super common is the 1099-G,
which comes from unemployment compensation or state and local tax refunds and
1099-B as in boy for brokerage statements.
So this is for all your capital gains and losses statements.
And yes, you should still get a 1099-B even if you had negative returns that
(12:33):
you obviously get a little bit of a break there.
So for all your losses, there's a slight break in there.
So anyways, Anyways, that's all. And then the last one that I'll tell you on is the K1 forms.
You may see some of those not super common.
They're for partnerships, escorts, states, trust, things of that nature.
(12:53):
But a K1, you may get some of those. Now that's for all your income.
If you will put all of those together, that's going to help drive a lot of the
questions that are going to come up.
If you will help put that together, it will help drive a lot of the conversation
and questions that come up.
So just know that.
(13:14):
Next thing is deduction documents. First one, if you own a home and you have
a mortgage, you're going to get a 1098.
That is your mortgage interest statement. Yes, that goes and is highly beneficial
to you as a homeowner to sort of get some reimbursement for some of that piece
(13:34):
from some of your mortgage interest.
The other thing is receipts for charitable donations.
If you donated to your church, if you donated to charity, if you donated to
anything of that nature, you can write that off as a tax deduction.
Medical and dental expense receipts, write those off as medical expenses.
(13:55):
Education expenses, you should get a 1098-T for tuition and related expenses.
That will also be something, and you also should pull together your records
for HSAs, your health savings accounts, and your retirement accounts,
like your IRA contributions. So that's all for your deductions.
(14:15):
Remember, deductions are those things that lower your taxable income.
So all of those things I just named, those lower your taxable income. Okay, keep that in mind.
Next is the tax credits, which you remember from our definitions, reduce your tax bill.
So if you had $20,000 tax bill and you had a $2,000 credit, you'd have an $18,000
(14:38):
tax bill. Okay. We're following. We're good.
Pretty straightforward. You just need the documentation for things like childcare
expenses, education credits, energy credits, things like that.
All those things are credits.
They change every year. So if you're going through like an H&R Block,
a TurboTax, a tax preparer, anything of that nature, they should be able to
(14:58):
tell you what some of those new credits are that are out there and take advantage
of those because those do reduce your tax bill.
Next thing. So we've hit all the major ones, the major most consistent for most,
most normal situations is your, all of your income stuff, your deductions and your credits, right?
And your deductions and credits, depending on how much that is,
(15:22):
or your deductions, depending on how much that is, you could,
you could be recommended to just take a standard deduction.
All that saying is that we don't need you to itemize all this stuff.
Everybody gets this standard deduction.
Okay. Just for, for context, I should have put that in my, in my kind of baseline
knowledge thing at the beginning, but you know, now we hit it standard deduction.
(15:46):
So the next, the last, the last couple of things I wanted to just tell you to
think about for our checklist or kind of round it out is prior your tax return. That's always helpful.
Bank account information, just knowing your routing and account numbers.
That's good for the deposit of your refund, health insurance documentation,
the 1095 A, B, or C, and then other income documentation.
(16:09):
And this could be things such as rental income, alimony, foreign income,
things of that nature. So,
Just keep those things in mind. But that's our checklist, right? That's our checklist.
If you go through and you collect all of those things, you will prosper.
You will live a stress-free tax season this year.
(16:30):
Now, start thinking. The biggest thing is to start thinking about those areas
that you can deduct from, like the charitable donations, home office expenses,
things that you spent your money on for a for a small business or think it's
something that you're running. Think about those type of things.
(16:50):
Start thinking about that now, as you're kind of going through these documents,
just spend a little time thinking about what, what kind of things can I write,
use as a tax deduction and, and go ahead and start prepping and thinking about
those and pulling together the evidence you're going to need to kind of show that.
And then the last thing that, you know, as, as we think through this is to figure out an app.
(17:13):
If you don't want to print all this stuff off, there are great options,
you know, in the cloud that you can go in and put these in like online storage locations.
Think about things like Proton Drive, iCloud Notes, Google Drive, NordLocker.
All of these are places you can store and digitally, you know,
(17:35):
organize your documents.
If you don't know, that is not, I'm not affiliated with any any of those things.
If you just look any of those up, they're all reputable companies,
but it's not an exhaustive list.
You could Google encrypted cloud storage and find others.
Just look for something that is a reputable company and encrypt your information
(17:58):
on there just to keep it secure.
Biggest thing about that is that,
You know, as you're organizing things, you can take, you know,
uploads from your phone directly to these locations.
You can password protect them, all these type of things just to keep your information yours.
And the last piece of evidence or evidence, the last piece that I wanted to
hit up was get started early. Start doing this earlier.
(18:22):
Dedicate an hour each weekend to prep. Right.
By the you know, if in a in a few hours, just the month of February in four
weekends. weekends. I think there's four weekends. How many weekends are in February?
There are four weekends in February. Look at that.
So in four weekends, an hour, four hours in a month, you should have everything prepped.
(18:43):
You should, unless you have a very complex situation, even if you did,
you should have at least all your documents prepped in four hours,
but start putting those together.
And then in March, you could kick off and say, yep, I'm going to,
I'm going to start doing it.
The next piece that if you'll finish that checklist, I promise you your stress
fee. The next place I wanted to hit up was where to find help and how to file
(19:04):
your taxes. First off, where to find help.
The IRS website is your go-to for official tax information.
Not TurboTax, not H&R Block, not anybody else.
The IRS is your official go-to tax information place.
And I say that because the IRS is the people that handle your taxes.
(19:27):
If it's on their website, it's legit.
There was no misconception or misdrewing of information.
You go to one of these other ones, it's how they interpreted it.
If they're not putting it out verbatim of what was on the IRS website.
So I'm just precautioning you saying the IRS website is your go-to for official tax information.
Now, that's kind of like where you can find help to these things.
(19:51):
I've put in a link below when we start thinking about where to file your taxes.
The IRS has a directory for certified tax preparers.
Go look that up to figure out if there's someone out there in your neck of the
woods that's a certified tax preparer via the IRS's website directory. directory.
(20:12):
But that's one option. Another option is, you know, filing through like a TurboTax
or H&R Block, doing like an e-filing through them. That's always an option.
But if you are, you know, if you're not confident, if you're not comfortable
with going through any of those sites, just go find a tax preparer.
(20:33):
The peace of mind is sometimes worth it, right? The peace of mind is sometimes
worth the money that it costs for a tax preparer.
If you are going through a good good certified tax preparer and you don't have
a complex situation, it might not cost what you think.
So just get some local quotes and see what that's going to run you.
(20:54):
Now, the last thing that I put in a link to the bottom is just another place
that you can find some information, but it's the where's my refund tool.
After you file your taxes, that is a location for you to go and track where
your, where your, your, your information's at in the process.
So just go there, hit that up and see what is it like, where your stuff's at exactly.
(21:20):
Now, as I kind of wrap this, this, this episode up, we've hit the checklist.
We've talked about how to file it. We talked about where to file it.
We talked about where some good information is for you to file and look at and
bounce your, your questions off of.
I wanted to talk through kind of dealing with with the common issues that happen.
The biggest issues that happen with tax returns is clerical errors.
(21:47):
They are the most common. There are defined steps and processes to get through those.
So don't let that stress you out. Don't let that part stress you out.
There's clerical issues all the time, whether it be mistyped SSNs or wrong filing
status or whatever, ever missed a middle initial, whatever the case is,
they're, they're not super crazy to get through.
(22:09):
Just, just there's, there's processes in place and you'll get through it.
The next common issue is not really as much an issue as just something that I want you to be aware of.
If you owe taxes, if this year is pretty common, if this year is pretty common, just know that.
(22:31):
There are some, the IRS does allow you to work with them to put together payment plans.
If this is the first year you've owed taxes, or if you owe taxes and you're
still, and you paid them last year and then you kind of depleted it,
your savings, you haven't been able to get that back up.
I'm telling you this, that the common issue that I see is people ignore the IRS.
(22:55):
IRS don't ignore the IRS call the
IRS work with the IRS put together
a plan to get them paid if you owe them money
don't ignore them and that's a common issue I see is that people ignore the
IRS it doesn't get better face it head on get behind put that part behind you
put a plan in place and now let's execute the last thing that I wanted to tell
(23:19):
you when it comes to like issues around around this time is stay vigilant,
stay vigilant against tax-related identity theft.
Always verify legitimacy of communications. If you get a call and they say,
Hey, I'm from the IRS, hang up and call the IRS back at a known number that's
meant to reach the IRS, right?
(23:39):
Don't trust anyone around tax stuff because people, IRS and tax scams,
are extremely likely during this time of the year. So just know that they are
likely and you just need to be aware of it. Just be aware of it.
In addition to that, there have been times if you get a mail check,
(24:01):
we have seen almost every year that checks get stolen out of mailboxes before
delivery, all these things, not accusing the mailman of doing it.
But what I'm saying is that from IRS to home, they get stolen.
Keep that in mind. Direct deposit is the fastest way to get your refund,
but it's also the most secure way to get your refund because the IRS is going
(24:24):
to put it right into your account.
Keep that in mind. Be vigilant.
Be highly suspicious when it comes to doing anything around your taxes.
Now, where I wanted to close this out was plan for next year. We're in January.
Guess what? Next January, we're going to have this same conversation.
Be more prepared next year than this year.
(24:47):
The only thing that you should at the end of a year and kicking off the new
year, the only thing is if you're a W2 employer or you have investments or you
have all those income things that people have to generate and provide you,
that's the only thing you should be waiting for come January.
All the other things from January to December of the previous year,
(25:08):
all your deductions, all of your receipts, all of your expenses,
all of that stuff should be tracked somewhere.
Somewhere, all those online secure cloud storage solutions that I've talked
about earlier, you can be uploading to those all year, getting all that information,
putting it in the right spot all year. Keep that in mind.
(25:29):
This isn't something that should sneak up on you. We know what's coming.
We know what's coming. Next year is going to be the exact same situation.
So for the next 12 months really prepare be conscious of where you're like where
your money's going and saving saving receipts for for when you're spending on
things that are tax deductible now.
(25:50):
The last thing that I was going to tell you is review your W-4.
Your W-4 is what you put in with your employer and that adjusts how much they
withhold from your check for taxes.
Remember, the goal is no refund. I know most people don't believe that,
but I'm telling you the goal is no refund.
A refund is where the government is holding too much of your money throughout the whole year.
(26:17):
And wouldn't you like to have a bigger paycheck to go towards debt,
savings, investing, whatever your next financial goal is, wouldn't you enjoy
to have more of that check going toward those things?
Well, getting a refund is just offsetting that. It's delaying that.
Remember, if you get a big refund, go update your W-4 so that they withhold less taxes.
(26:41):
That means you won't get as big of a refund.
If you owe a lot, update your W-4 So they withhold more taxes so that you don't
owe so much. It's a complete balancing act.
But think about it every single year when you get your when you figure out what
your refund is, say, OK, I'm going there and just my W-4 to balance it out and figure out.
(27:03):
Now, if this was like an off year and it was just full of shenanigans,
maybe just sit on your hands this year,
even if you got a big refund or you owed a lot, maybe sit on your your hands,
if it was full of shenanigans, like a lot of weird things happened throughout
the year, just wait and test it out next year. If it's still the same, go to update your W-4.
(27:24):
Okay. Go to update your W-4. Well, that's all I've got for tax season.
I hope that that helps you. What I'm telling you is right now is if you'll get
that tax checklist done now, start working on it now an hour every weekend,
an hour, you know, once a week, whatever the case is, an hour every other day.
(27:45):
Whatever the case is, if you'll start working on it now, you will be stress-free
throughout this whole entire tax season. You'll have everything you need.
You'll get it all in place. You'll know where you're going to file.
Oh, that is another thing though. If you are filing with a tax preparer and
you're not going through an online source, just remember they fill up fast.
Go get you an appointment for your taxes.
(28:08):
Call someone, someone, schedule an appointment, be in the, in the loop with them.
So they know you're coming because you're going to show up. They're going to
say, I already have too much to do this year.
And then you're going to be stuck doing it yourself. So just keep that in mind.
Now, I hope that you got something out of this episode. Now hope that this is, this is helpful.
And it definitely lays out a couple of steps and tips that can help you prep
(28:30):
for this year's tax season.
If you do need a little extra support, you need to just talk through taking
control of your finances and make sure you're on the right path to your financial
goals, let's sit down together and do it together.
Head over to thefinancialmirror.org, hit book now in the middle of the screen
and schedule your free consultation.
We'll see what exactly it is that
(28:51):
you need help with, and we'll put a plan together to help you get there.
If you do want to give an extra dose of support to the stream,
head over to thefinancialmirror.org for a slash shop, pick you up some awesome
financial mirror gear. I truly appreciate everyone tuning in today.
Don't forget to subscribe, like, comment and share this episode.
And if you are listening on a podcast platform of your choice,
(29:13):
don't forget to leave a five star review and a written comment as both go a
long way in getting this information out to more and more listeners.
Listeners last plug i'm not a tax professional but
if you'll follow my checklist and get up with a
tax professional you will be stress-free this tax season so
get started today start on those taxes today start prepping the documents today
(29:34):
and you will make it through this tax season stress-free till next week continue
improving the one thing you can control yourself peace well that wraps Wraps
up today's Financial Mirror.
Join us next week as we continue to work on ourselves, change our mentality,
and to commit to achieving the success we always envisioned.
(29:57):
Regardless of your platform, help us grow as a community.
Please like, subscribe, and share with the people in your lives.
Today's episode is one you will not want to miss as we are tackling tax season
and how to make it stress-free.
I know, tax season, stress-free, not traditionally going hand-in-hand.
Every year as April approaches, millions find themselves in this frenzy of tax
preparation, often leading to missed opportunities and unnecessary stress.
(00:25):
But what if this year could be different?
What if you could approach tax season with confidence and ease?
That's exactly what I want to help you with today.
From understanding the essential tax concepts to organizing your documents like a pro,
we're diving deep into strategies that will not only help you prepare for the
(00:48):
upcoming tax season, but will also save you time and money.
So grab your notepads and let's demystify the world of taxes,
making this often dreaded task a smooth and successful journey. Let's dive in.
Welcome to the Financial Mirror, where future success is reflected in our knowledge
(01:11):
of fixing the one thing we can control ourselves. ourselves.
Welcome to the Financial Mirror and thanks for joining me today as we continue
to work to improve the one thing that we can control ourselves.
Here at the Financial Mirror, it is not about the numbers and spreadsheets alone,
but about transforming and educating you on money so that you can make smarter financial decisions.
(01:36):
If this is the first time you are joining in, don't forget to hit subscribe
on YouTube to be notified of all the new episodes as they release.
If you are listening to this on a podcast platform of your choice,
don't forget to like and subscribe to the podcast.
If you're on Apple Podcasts or Spotify, leave a five-star review and a written
comment as both go a long way in getting this information out to more and more listeners.
(02:00):
So this is all about tax season, and I got this thing for you,
this one simple fact that will get you interested in the rest of this episode.
But did you know each year, millions of Americans file their taxes late?
According to the IRS, in a recent year, over 10 million taxpayers requested
(02:20):
extensions, and many more missed the deadline entirely, right?
Didn't even follow the formal process to actually request the extension.
Just was like, yeah, I'm just not going to do the taxes on time this year.
This isn't just about procrastination, though. So many people are truthfully overwhelmed.
(02:41):
And when we think about how taxes can make people feel, most of the time,
it's not really the overwhelming part, which sometimes it is,
but the overwhelming part of actually doing the taxes. because let's be honest,
you can pay somebody to go and prepare your taxes.
However, it's kind of the outcome, right? And so I'll put this to a perspective for myself.
(03:04):
I personally cannot stand going to the doctor.
It's not because I hate the doctor. It's because I hate the outcome.
Like, I don't want the doctor to say, hey, guess what? You can't do jujitsu
anymore for the next six weeks.
Hey, yeah, that bum leg that you're running through, yeah, you can't run for
the next six months. Hey, you know that thing?
(03:25):
Yeah, that's like a terrible medical thing.
I'm not going to wish any harm on myself by giving anything a name.
But what I'm saying is that I don't like going to the doctor for the outcome.
Tax season is no different. People literally will put off off their taxes,
not for the simple fact of a procrastinating of the complexity,
(03:47):
but kind of around the anxieties that surround the outcome of the tax season.
For many, it could be this false anticipation that they're going to get a refund,
or there's this known fact that they're going to have to pay thousands of dollars this year.
Regardless of what it is for you, it doesn't have to be this way.
(04:07):
And what if I told you that after today's episode, it shouldn't be this way?
I'm not here to tell you that you're going to simply just all of a sudden be
like, yep, I don't owe anything and life goes on.
However, what I am here to tell you is that life will continue and we will put
(04:29):
a strategy in place to help you get through this tax season.
Today, we're going to explore some simple, very simple, yet effective steps
to get you ahead of the game.
I want you to ultimately avoid all those last minute panics and maybe even discovered
you're owed a little more money than you actually think.
(04:49):
So I want to take a couple minutes, turn this often dreaded chore into an opportunity
for you to feel a little bit more financially empowered.
So the first place that I wanted to start was kind of the basics,
kind of just wanted to quickly lay out the basics to get you ready for tax season.
The biggest question that comes up, and this is something that if you're purchasing
(05:10):
a home or if you're going through any other type of large financial purchase,
they're going going to ask you, do you know your AGI or your adjusted gross income?
For many people, they don't even know what that is. They're like,
oh, is that, you know, how much money I brought home and put in my bank account
last year? Well, not really.
(05:31):
This is your yearly income minus certain deductions.
And it's a great starting point for tax calculations.
It determines your tax bracket it and it also determines any other potential
deductions that you qualify for.
So it's something that is very, very important when it comes to taxes.
(05:51):
The other thing to also be considerate of is I said the word deductions, potential deductions.
Do you know the difference in a deduction and a credit? Well, let's level set on that.
Deductions lower your taxable income while credits reduce your tax bill directly.
So if your tax bill is, let's say, $20,000 and you you get a $2,000 tax credit,
(06:12):
your new tax bill is $18,000, right?
Deductions actually just decrease the amount of taxable. It kind of lowers your
taxable income amount, right?
Two different things, two totally different things. So.
Last thing for basics, before we jump into everything, is understanding filing status.
(06:34):
You need to know what is your filing status, whether if you're single or married.
If you're single, you have a pretty straightforward status.
If you're married, now you need to figure out if you're doing like married filing
separate, married filing joint, like all these different things.
You need to figure out what is the best fit for your situation.
(06:57):
Now, this is the first plug that I'm going to have, and I'm going to use this
plug multiple times throughout this episode, just so you're aware.
But what I want you to hear is if you are not sure about anything when it comes
to taxes, talk to a tax professional.
Professional okay i'm being honest
(07:18):
if i if i i'm telling you right now i'm not
a tax professional right like i'm here to get
you from start to finish through tax season a tax professional studies this
tax law they change every year i am not up to date on every single like tax
law rule 1.1.a.roman numeral v like i don't know what that new change is if
(07:42):
i'm honest i have no idea idea.
Don't even know if that's actually a tax law. It may not even be in that format.
Maybe they do like wingdings or something for tax law because that's about what it feels.
But regardless, there's a consistency in that.
Once you kind of figure that out, if you ask a tax professional and you kind
of figured it out, you could probably use that same thing moving forward and
(08:03):
not have to go through that professional, especially if you have like a pretty routine tax situation.
Situation, but that's the first thing to figure out, right?
Like these are just some basics, understanding what a deduction versus a credit
is, kind of knowing what your tax, what your filing status is.
All those things are helpful.
Now, I'm going to jump right into this because I want to provide you,
(08:26):
first off, a checklist, a checklist of, first, the documents that you need to get.
Second off, we're going to go through some of the other things that you need
to start thinking about and put together.
But what I like to look at this as is a tax checklist for the simple fact that
before you sit down to do your taxes, if you're doing like an online tax filing software,
(08:48):
or if if you're going to a tax professional or a tax preparer,
they're going to want all these things.
So what I advise people to do is do your homework first.
Do this checklist first. Check
off each of these items as we go through them. Put that all into a spot.
Take that to said tax preparer or get ready to do them yourself online.
(09:12):
No matter what the plan is, no matter where you're going going to do it,
this checklist applies.
And if you will get through this checklist, your life this year for tax season
will go swimmingly. It will be much, much less stressful than it probably has been in times past.
So first thing that you need is pretty straightforward.
(09:33):
Social security numbers for yourself, your spouse, and any dependents you have.
You probably know your social, right? But if you're married,
if you have children, you also need to know their social.
You may not know it off the top of your head. So first things first,
pull all that information together. Pull it all together.
Get it collectively in one location.
(09:56):
Second thing you need to go after, income documents.
So second thing, they come in multiple, multiple forms. I'm going to go over some of the major ones.
The W-2 is the most common form of wages earned for most people.
Most people are going to get a W-2 from their employer.
(10:19):
Those should be coming out here in the next, if you haven't got it already for
those companies that are early birds, you should be getting it here in the next
week, right? It should be ready.
So be on the lookout for that. From your employer, you should get a W-2.
If you're a W-2 employee, you're getting a W-2. The other thing that is a little
(10:42):
bit more nuanced is 1099s. And there's a 1099 alphabet, right?
And there's tons of 1099s out there.
So here's a couple that I think are the most common that you may see and may be applicable to you.
1099 MISC, 1099 miscellaneous.
This is something that independent contractors and freelance folks get.
(11:06):
That is something that you could be on the lookout for.
If you did any freelance work, if you did any independent contracting work,
that is something that you will more than likely see.
1099-INT is interest earned on savings accounts and investments.
So you may get one of those from your bank. You may get one of those from a
(11:27):
brokerage. You may get one of those from all these different places.
If you earn interest on a savings account or an investment, you would find a 1099-INT.
1099-DIV is for dividends. This is for any dividends that were paid in any type
of investments that you earn.
(11:47):
You're going to have to look at that as taxable income, earn money.
That's some of the big ones. 1099-R is another one for distributions of pensions,
annuities, retirement plans, profit sharing programs, things of that nature.
So look for a 1099-R if you're kind of in that boat and you are using that.
(12:07):
And then the last one that is super, super common is the 1099-G,
which comes from unemployment compensation or state and local tax refunds and
1099-B as in boy for brokerage statements.
So this is for all your capital gains and losses statements.
And yes, you should still get a 1099-B even if you had negative returns that
(12:33):
you obviously get a little bit of a break there.
So for all your losses, there's a slight break in there.
So anyways, Anyways, that's all. And then the last one that I'll tell you on is the K1 forms.
You may see some of those not super common.
They're for partnerships, escorts, states, trust, things of that nature.
(12:53):
But a K1, you may get some of those. Now that's for all your income.
If you will put all of those together, that's going to help drive a lot of the
questions that are going to come up.
If you will help put that together, it will help drive a lot of the conversation
and questions that come up.
So just know that.
(13:14):
Next thing is deduction documents. First one, if you own a home and you have
a mortgage, you're going to get a 1098.
That is your mortgage interest statement. Yes, that goes and is highly beneficial
to you as a homeowner to sort of get some reimbursement for some of that piece
(13:34):
from some of your mortgage interest.
The other thing is receipts for charitable donations.
If you donated to your church, if you donated to charity, if you donated to
anything of that nature, you can write that off as a tax deduction.
Medical and dental expense receipts, write those off as medical expenses.
(13:55):
Education expenses, you should get a 1098-T for tuition and related expenses.
That will also be something, and you also should pull together your records
for HSAs, your health savings accounts, and your retirement accounts,
like your IRA contributions. So that's all for your deductions.
(14:15):
Remember, deductions are those things that lower your taxable income.
So all of those things I just named, those lower your taxable income. Okay, keep that in mind.
Next is the tax credits, which you remember from our definitions, reduce your tax bill.
So if you had $20,000 tax bill and you had a $2,000 credit, you'd have an $18,000
(14:38):
tax bill. Okay. We're following. We're good.
Pretty straightforward. You just need the documentation for things like childcare
expenses, education credits, energy credits, things like that.
All those things are credits.
They change every year. So if you're going through like an H&R Block,
a TurboTax, a tax preparer, anything of that nature, they should be able to
(14:58):
tell you what some of those new credits are that are out there and take advantage
of those because those do reduce your tax bill.
Next thing. So we've hit all the major ones, the major most consistent for most,
most normal situations is your, all of your income stuff, your deductions and your credits, right?
And your deductions and credits, depending on how much that is,
(15:22):
or your deductions, depending on how much that is, you could,
you could be recommended to just take a standard deduction.
All that saying is that we don't need you to itemize all this stuff.
Everybody gets this standard deduction.
Okay. Just for, for context, I should have put that in my, in my kind of baseline
knowledge thing at the beginning, but you know, now we hit it standard deduction.
(15:46):
So the next, the last, the last couple of things I wanted to just tell you to
think about for our checklist or kind of round it out is prior your tax return. That's always helpful.
Bank account information, just knowing your routing and account numbers.
That's good for the deposit of your refund, health insurance documentation,
the 1095 A, B, or C, and then other income documentation.
(16:09):
And this could be things such as rental income, alimony, foreign income,
things of that nature. So,
Just keep those things in mind. But that's our checklist, right? That's our checklist.
If you go through and you collect all of those things, you will prosper.
You will live a stress-free tax season this year.
(16:30):
Now, start thinking. The biggest thing is to start thinking about those areas
that you can deduct from, like the charitable donations, home office expenses,
things that you spent your money on for a for a small business or think it's
something that you're running. Think about those type of things.
(16:50):
Start thinking about that now, as you're kind of going through these documents,
just spend a little time thinking about what, what kind of things can I write,
use as a tax deduction and, and go ahead and start prepping and thinking about
those and pulling together the evidence you're going to need to kind of show that.
And then the last thing that, you know, as, as we think through this is to figure out an app.
(17:13):
If you don't want to print all this stuff off, there are great options,
you know, in the cloud that you can go in and put these in like online storage locations.
Think about things like Proton Drive, iCloud Notes, Google Drive, NordLocker.
All of these are places you can store and digitally, you know,
(17:35):
organize your documents.
If you don't know, that is not, I'm not affiliated with any any of those things.
If you just look any of those up, they're all reputable companies,
but it's not an exhaustive list.
You could Google encrypted cloud storage and find others.
Just look for something that is a reputable company and encrypt your information
(17:58):
on there just to keep it secure.
Biggest thing about that is that,
You know, as you're organizing things, you can take, you know,
uploads from your phone directly to these locations.
You can password protect them, all these type of things just to keep your information yours.
And the last piece of evidence or evidence, the last piece that I wanted to
hit up was get started early. Start doing this earlier.
(18:22):
Dedicate an hour each weekend to prep. Right.
By the you know, if in a in a few hours, just the month of February in four
weekends. weekends. I think there's four weekends. How many weekends are in February?
There are four weekends in February. Look at that.
So in four weekends, an hour, four hours in a month, you should have everything prepped.
(18:43):
You should, unless you have a very complex situation, even if you did,
you should have at least all your documents prepped in four hours,
but start putting those together.
And then in March, you could kick off and say, yep, I'm going to,
I'm going to start doing it.
The next piece that if you'll finish that checklist, I promise you your stress
fee. The next place I wanted to hit up was where to find help and how to file
(19:04):
your taxes. First off, where to find help.
The IRS website is your go-to for official tax information.
Not TurboTax, not H&R Block, not anybody else.
The IRS is your official go-to tax information place.
And I say that because the IRS is the people that handle your taxes.
(19:27):
If it's on their website, it's legit.
There was no misconception or misdrewing of information.
You go to one of these other ones, it's how they interpreted it.
If they're not putting it out verbatim of what was on the IRS website.
So I'm just precautioning you saying the IRS website is your go-to for official tax information.
Now, that's kind of like where you can find help to these things.
(19:51):
I've put in a link below when we start thinking about where to file your taxes.
The IRS has a directory for certified tax preparers.
Go look that up to figure out if there's someone out there in your neck of the
woods that's a certified tax preparer via the IRS's website directory. directory.
(20:12):
But that's one option. Another option is, you know, filing through like a TurboTax
or H&R Block, doing like an e-filing through them. That's always an option.
But if you are, you know, if you're not confident, if you're not comfortable
with going through any of those sites, just go find a tax preparer.
(20:33):
The peace of mind is sometimes worth it, right? The peace of mind is sometimes
worth the money that it costs for a tax preparer.
If you are going through a good good certified tax preparer and you don't have
a complex situation, it might not cost what you think.
So just get some local quotes and see what that's going to run you.
(20:54):
Now, the last thing that I put in a link to the bottom is just another place
that you can find some information, but it's the where's my refund tool.
After you file your taxes, that is a location for you to go and track where
your, where your, your, your information's at in the process.
So just go there, hit that up and see what is it like, where your stuff's at exactly.
(21:20):
Now, as I kind of wrap this, this, this episode up, we've hit the checklist.
We've talked about how to file it. We talked about where to file it.
We talked about where some good information is for you to file and look at and
bounce your, your questions off of.
I wanted to talk through kind of dealing with with the common issues that happen.
The biggest issues that happen with tax returns is clerical errors.
(21:47):
They are the most common. There are defined steps and processes to get through those.
So don't let that stress you out. Don't let that part stress you out.
There's clerical issues all the time, whether it be mistyped SSNs or wrong filing
status or whatever, ever missed a middle initial, whatever the case is,
they're, they're not super crazy to get through.
(22:09):
Just, just there's, there's processes in place and you'll get through it.
The next common issue is not really as much an issue as just something that I want you to be aware of.
If you owe taxes, if this year is pretty common, if this year is pretty common, just know that.
(22:31):
There are some, the IRS does allow you to work with them to put together payment plans.
If this is the first year you've owed taxes, or if you owe taxes and you're
still, and you paid them last year and then you kind of depleted it,
your savings, you haven't been able to get that back up.
I'm telling you this, that the common issue that I see is people ignore the IRS.
(22:55):
IRS don't ignore the IRS call the
IRS work with the IRS put together
a plan to get them paid if you owe them money
don't ignore them and that's a common issue I see is that people ignore the
IRS it doesn't get better face it head on get behind put that part behind you
put a plan in place and now let's execute the last thing that I wanted to tell
(23:19):
you when it comes to like issues around around this time is stay vigilant,
stay vigilant against tax-related identity theft.
Always verify legitimacy of communications. If you get a call and they say,
Hey, I'm from the IRS, hang up and call the IRS back at a known number that's
meant to reach the IRS, right?
(23:39):
Don't trust anyone around tax stuff because people, IRS and tax scams,
are extremely likely during this time of the year. So just know that they are
likely and you just need to be aware of it. Just be aware of it.
In addition to that, there have been times if you get a mail check,
(24:01):
we have seen almost every year that checks get stolen out of mailboxes before
delivery, all these things, not accusing the mailman of doing it.
But what I'm saying is that from IRS to home, they get stolen.
Keep that in mind. Direct deposit is the fastest way to get your refund,
but it's also the most secure way to get your refund because the IRS is going
(24:24):
to put it right into your account.
Keep that in mind. Be vigilant.
Be highly suspicious when it comes to doing anything around your taxes.
Now, where I wanted to close this out was plan for next year. We're in January.
Guess what? Next January, we're going to have this same conversation.
Be more prepared next year than this year.
(24:47):
The only thing that you should at the end of a year and kicking off the new
year, the only thing is if you're a W2 employer or you have investments or you
have all those income things that people have to generate and provide you,
that's the only thing you should be waiting for come January.
All the other things from January to December of the previous year,
(25:08):
all your deductions, all of your receipts, all of your expenses,
all of that stuff should be tracked somewhere.
Somewhere, all those online secure cloud storage solutions that I've talked
about earlier, you can be uploading to those all year, getting all that information,
putting it in the right spot all year. Keep that in mind.
(25:29):
This isn't something that should sneak up on you. We know what's coming.
We know what's coming. Next year is going to be the exact same situation.
So for the next 12 months really prepare be conscious of where you're like where
your money's going and saving saving receipts for for when you're spending on
things that are tax deductible now.
(25:50):
The last thing that I was going to tell you is review your W-4.
Your W-4 is what you put in with your employer and that adjusts how much they
withhold from your check for taxes.
Remember, the goal is no refund. I know most people don't believe that,
but I'm telling you the goal is no refund.
A refund is where the government is holding too much of your money throughout the whole year.
(26:17):
And wouldn't you like to have a bigger paycheck to go towards debt,
savings, investing, whatever your next financial goal is, wouldn't you enjoy
to have more of that check going toward those things?
Well, getting a refund is just offsetting that. It's delaying that.
Remember, if you get a big refund, go update your W-4 so that they withhold less taxes.
(26:41):
That means you won't get as big of a refund.
If you owe a lot, update your W-4 So they withhold more taxes so that you don't
owe so much. It's a complete balancing act.
But think about it every single year when you get your when you figure out what
your refund is, say, OK, I'm going there and just my W-4 to balance it out and figure out.
(27:03):
Now, if this was like an off year and it was just full of shenanigans,
maybe just sit on your hands this year,
even if you got a big refund or you owed a lot, maybe sit on your your hands,
if it was full of shenanigans, like a lot of weird things happened throughout
the year, just wait and test it out next year. If it's still the same, go to update your W-4.
(27:24):
Okay. Go to update your W-4. Well, that's all I've got for tax season.
I hope that that helps you. What I'm telling you is right now is if you'll get
that tax checklist done now, start working on it now an hour every weekend,
an hour, you know, once a week, whatever the case is, an hour every other day.
(27:45):
Whatever the case is, if you'll start working on it now, you will be stress-free
throughout this whole entire tax season. You'll have everything you need.
You'll get it all in place. You'll know where you're going to file.
Oh, that is another thing though. If you are filing with a tax preparer and
you're not going through an online source, just remember they fill up fast.
Go get you an appointment for your taxes.
(28:08):
Call someone, someone, schedule an appointment, be in the, in the loop with them.
So they know you're coming because you're going to show up. They're going to
say, I already have too much to do this year.
And then you're going to be stuck doing it yourself. So just keep that in mind.
Now, I hope that you got something out of this episode. Now hope that this is, this is helpful.
And it definitely lays out a couple of steps and tips that can help you prep
(28:30):
for this year's tax season.
If you do need a little extra support, you need to just talk through taking
control of your finances and make sure you're on the right path to your financial
goals, let's sit down together and do it together.
Head over to thefinancialmirror.org, hit book now in the middle of the screen
and schedule your free consultation.
We'll see what exactly it is that
(28:51):
you need help with, and we'll put a plan together to help you get there.
If you do want to give an extra dose of support to the stream,
head over to thefinancialmirror.org for a slash shop, pick you up some awesome
financial mirror gear. I truly appreciate everyone tuning in today.
Don't forget to subscribe, like, comment and share this episode.
And if you are listening on a podcast platform of your choice,
(29:13):
don't forget to leave a five star review and a written comment as both go a
long way in getting this information out to more and more listeners.
Listeners last plug i'm not a tax professional but
if you'll follow my checklist and get up with a
tax professional you will be stress-free this tax season so
get started today start on those taxes today start prepping the documents today
(29:34):
and you will make it through this tax season stress-free till next week continue
improving the one thing you can control yourself peace well that wraps Wraps
up today's Financial Mirror.
Join us next week as we continue to work on ourselves, change our mentality,
and to commit to achieving the success we always envisioned.
(29:57):
Regardless of your platform, help us grow as a community.
Please like, subscribe, and share with the people in your lives.
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