Ep: 85: Mastering Tax Season: Your Ultimate Guide to Dates, Deductions, and Avoiding Common Mistakes with Amber M. Storms, EA
THE X'S & O'S
Tax season is just around the corner, and it can be stressful for many.
As tax season rapidly approaches, the mere thought of it may trigger anxiety for many.
But fear not, because in this highly informative episode, you'll hear from tax expert Amber M. Storms, EA, alongside financial advisors Matthew Theal, Brent Pasqua, and Joshua Winterswyk. They’ll equip you with the essential knowledge and valuable strategies to successfully maneuver through this tax season. Get ready to learn about crucial dates and deadlines, potential pitfalls to avoid, and savvy deductions that can significantly lower your tax bill. Don't miss out on this empowering episode to take control of your taxes and feel confident about your financial future.
In this episode:
Discover the latest due dates for filing your tax return and stay ahead of the game
Learn why it’s crucial not to file too early before receiving all the essential forms
Avoid misreporting income and other common mistakes taxpayers often make during tax preparation
Unlock the potential of itemized deductions by exploring the various types of expenses eligible for deduction, including charitable donations, medical expenses, and state and local taxes
And many more insightful tips and tricks to help you make the most of this tax season
Resources:
Retirement Plan Playbook
Connect with Amber:
Connect With RPA Wealth Management:
(909) 296-7977
About Amber:
Amber M. Storms, EA, has been providing tax preparation, advocacy, and planning for 11 years. As an Enrolled Agent, she has the highest credential awarded by the IRS, can practice in any state, and can represent any taxpayer before the IRS.
Amber understands that taxes can be overwhelming, and her goal is to help clients navigate the process by breaking down complex subjects into plain language. She sees each taxpayer’s situation as unique and is intent on finding a personalized solution for each client.
Amber is a member of the California Society of Enrolled Agents, Inland Empire Chapter. She has volunteered for the VA Loma Linda and California Emergency Nurses Association.
Transcript
Welcome to The Retirement Plan Playbook with Brent Pasqua, Matthew Theal and Joshua Winterswyk from RPA Wealth Management. In this podcast, we cover current events, retirement planning strategies. And provide you with the tools to help you build a successful retirement playbook in any political or financial landscape.
Join Brent, Matthew and Joshua as they navigate the issues that can make the later stages of your retirement plan challenging and help you create the best retirement plan playbook. Now let's get to the show.
Welcome to the latest episode of The Retirement Plan Playbook. I'm your host, Brent Pasqua, and I'm joined today by my colleagues Matthew and Joshua. Today we're excited to have a very special guest, Amber Storms with over 11 years of experience in the field. Amber is a certified enroll agent and has the highest credential awarded by the IRS.
This means that she can practice in any state and represent any taxpayer before the I. Her expertise in tax preparation, advocacy, and planning is unmatched, and we're honored to have her on the show as we have had her before. We'll be discussing how to get ready for the tax season and how to maximize your deductions and minimize the taxes that you could possibly have to owe.
So sit back, relax, and get ready for some valuable tips and strategies for your retirement plan with Amber. Amber, how are you? Oh, I'm doing fantastic. Brent, how are you this morning? Doing good, Amber, we're happy to have you back. Um, you know, most of the, we've had quite a few guests and I'm proud to say that you're actually our most downloaded guest, so I'm really looking forward to these tax strategies you're gonna give our listeners today.
It's tax season. Good luck to everybody. . It's such like a, is this such a busy time for you? Is like the phones just start coming in and start ringing at this time of year? Yes. You're exactly right. And may the Osby ever in your favor of this text? Mm-hmm. season saying, with all the different tax law changes, Um, I've received a lot of different questions just in re uh, regards to the Secure Act and the different changes, how that impacts retirement contributions or withdrawals.
So it, this is ramping up to be a very exciting tax season. Can you give our listeners an overview of some of the key dates and deadlines that. You know, they should start thinking about and being aware of as we get into this tax season. Oh, yes, absolutely. Well, everybody's familiar with the classic four 15, April 15th due date, but due to emancipation day, um, falling on the due date, um, this will be moved over to four 18 April 18th instead.
Also, we wanna keep in mind for both our business and individual taxpayers who are. An an area that was affected by a disaster. The filing dates actually been extended to May 15th instead. Um, if you were a victim of a disaster starting December 27th, 2022, and before January 11th, 2023, any kind of, uh, penalties associated with estimated tax payments paid late, or anything of.
Nature that, um, the IRS will abate those penalties. So we have a little more time to get our paperwork together in light of the recent disasters. All right. Can I cut cut you off there? So if I lived in a non-disaster state, do I file on the 18th or do I file uh, in May, like you said? Oh, great question.
You wanna, if you not in an area that is affected by a disaster, and you can find this on FEMA's website as well as the irs.gov website. If you're not in that area, then you wanna file by the four 18. Okay, man. They're just making everything more and more confusing. , the rules change all the time with the irs.
So what does that mean for people in California? Does that mean they have until May? Or does that, does that mean April for California people? Oh no, you're exactly right. They'll have until May. . Good to know. Good for the procrastinators, , . What are some of the common mistakes that individuals make when preparing for their taxes?
And you know, now even with this deadline pushed out, how can we avoid them this year? Oh, there's two things that actually come to mind. Number one, filing too early, especially if you're receiving interest dividends, you're selling stock oftentimes, or even K if you have a K one. Oftentimes those forms.
Correct or accurate, the first type around, so they end up correcting the form if you've already filed your tax return. It looks like you might be filing an amendment to reflect the differences with these corrected forms. And oftentimes people will file too early before getting all of their forms or having all the amounts that they need.
So they might actually be leaving deductions on the table or. Misreporting income and they receive an IRS love. Later, later, later on, an IRS Love LA letter later on asking them, Hey, why didn't you report this income? And that opens up another can of worms that we wanna avoid. So definitely wanna file when you have all of your information to file an accurate and thorough tax return.
And then college kids and parents, we wanna make sure that we're talking to one another when it comes to filing time, because oftentimes, College student will end up filing a tax return and claiming themselves when in actuality it should have been the parent that should have claimed them. So definitely you guys wanna talk to one another and see who's claiming the exemption for that dependent.
When's the earliest you could file a tax return? Like when, when does the IRS start accepting those returns? Actually, the IRS started accepting business returns on January 18th of this year, and they started, uh, they opened for e-file for January 20, on January 23rd. Um, but that's more so for the prior year returns, like people who still had 2021 or 2020 tax.
Um, you should be receiving W2 starting, um, they're gonna be released January 31st, and then folks should start filing then. Yeah. There's a certain like time that there, you can't file any past returns or even present returns, correct? Yes, actually, great point. At the end of every year, the IRS will shut down.
It's called the modernized e-file, so they shut the system down so they can, uh, perform maintenance, make any kind of corrections before they reopen again for the next season. .Yeah. And, and for listeners too, we get a lot of calls into our office asking, you know, for the Schwab 10 99 brokerage statements or the 10 99 Rs.
And if, if you have an investment account, uh, your file time should be March. Uh, yes. Agree. A lot of that was a really good tip. You had a, a few minutes ago. I agree. We have so many clients that, and, and I get it, you want to like be prepared and get all your documents together, but you also, Amber, I think that point was great, which is you could be hurting yourself by filing too soon as well.
You might forget a form or that form might be correct. It's a great, great tip. . Exactly. And it also helps with tax planning too. We don't wanna rush to file because we wanna take a moment to kind of analyze your situation and see are you saving the right amount of tax dollars or. Uh, is there something we can do moving forward for next year?
We wanna make sure we're carefully analyzing the whole picture before we submit that into the IRS and the Franchise Tax Board. Uh, that's such a good point cuz there is a time, um, on one of my returns, um, when I had a big life change coming up the following year and my, my tax preparer recommended just not even taking my refund and leaving my refund with, with the I r s.
Rule into next year's taxes, so I wouldn't have to write a large check. Right. And that's actually a real, that's really good advice too, just to make sure your bases are covered and your projected tax liability is met. I noticed a lot that there are forms that get adjusted after they come out, so, Let's say a custodian sends you a year end summary, and then it gets adjusted or even W2 wages.
I see that these forms will get adjusted, so then it is very important for somebody to go back and refile or re-report those, those adjustments that they got on that tax form if they had already filed. Yes, exactly. Now, if you're able to file a return before the due date has been filed, you can. We can work with you actually to file a superseding return so you don't have to worry about an amendment.
But once we pass that threshold, once we pass four 18, April 18th, then we're gonna end up filing an amendment to reflect the changes from the corrected form. . That makes sense. Can you walk us through the process of itemized deductions and what are the types of expenses are typically eligible for these types of deductions?
Oh yes. This is probably one of the most popular questions that we receive too. Um, the one thing we wanna make sure we're looking out for are, there are a couple differences between. Due to my, not my favorite tax law change the Tax Cuts and Jobs Act. Um, a lot of employee business ex uh, a lot of folks believe that employee business expenses are no longer deductible, but we're not thinking about the state return.
We definitely wanna make sure that we are capturing all of those kind of expenses in, especially say, for example, medical professionals. Uh, you wanna make sure that you are counting all of your scrubs. Um, any continuing education, any tools you had to purchase because. , even though the i r s won't allow you to take that 2% miscellaneous deduction for those unreimbursed expenses, you can take that on your California return and benefit from that too.
Also, I noticed a lot of taxpayers. Will tend to shortchange themselves. When it comes to charitable contributions, you definitely wanna do your homework and go through your records, your check register, um, check your online records and tally up how much you have donated over over the year because sometimes you could end up low balling yourself and not taking the full advantage of that deduction.
So what were the, like an example, like maybe you give a little bit more of the church than you thought, than you thought. When you look back in your checkbook, you see it adds up to, you know, multiple thousands of dollars instead of the 500 that you're estimating. Is that Yes, exactly. You wanna make sure you tally everything up.
Cuz once again, we don't wanna leave any money on the table. So what's a good way that people can sort of figure out ahead of time what deductions they may qualify for? So they have them when they're prepared or as they get prepared for their tax. , excellent question. We actually have a checklist and a tax reference guide on our website, collaborative tax partners.com.
You'll be able to see, um, what your standard deduction is, what common deductions to look out for, um, and it also show you different, um, tax credits that are available for education or retirement contributions. So it kind of gives you a very general overview of things to look out. I, I, I have a quick question, Amber.
This is, you know, more directed at me and Josh with, you know, this has kind of turned into the Mini-golf podcast, but are we ever gonna be able to like, you know, deduct a country club membership or deduct around the golf? How does that work? Ah, I, I only wish, cuz if that's the case, I wanna deduct my vet bills
Unfortunately, they're still considered, uh, personal expenses. However, if you're taking out a client to entertain them, um, you might be able to take an entertainment expense. We could definitely talk about that later. Okay, , um, there's hope, , . How can individuals, uh, best organize their financial records and documentation to really make tac preparation process as smooth as.
I always recommend using the organizer that we send you and we do have a blank one that'll be available on our website too, cuz it's kind of the memory jogger of things to look out for. Also, if you have a copy of last year's return handy, definitely refer to that too. Um, we do have those checklists and the organizers available for you on our website as well.
And in addition to that, we have, um, occupational, um, organizer worksheets. So if you're a pol, uh, police officer, a firefighter, maybe you're a content creator, we created a special organizer worksheet for you to help you identify industry specific tax deductions. . Yeah, it's pretty neat. I didn't, I wouldn't have thought of a content creator, but I guess maybe like, you know, we're doing the podcast of the microphones.
Is, is that what it is? Like, uh, yes. Microphone, any kind of advertising or marketing expenses. Um, you might go to a seminar or you might, uh, have a networking event that you attended. So how do you identify if you're setting stem with somebody fur either the first time or have you known them for a while?
That they may now have expenses that they can write off that maybe they didn't know about. How do you figure that out? This is one of my favorite parts about working in taxes because it's a people business. So you really wanna talk to, you really wanna talk it out and tell me about your business. What do you do?
What's the day-to-day like? What are your goals? What, where have you been? Where are we going? And that'll actually, and the ideas start to kind of pop into my like, ideas of, uh, deductions to look out for that are, that may be industry. , but really I love hearing clients tell me about like their dreams, what they're working on, their goals, um, because that gives me an idea of what to look out for as their tax advisor.
and your organizer's online, right? So you can do it through your computer and it's not like you're filling out a piece of paper like the old school organizers. Exactly. If you wanna go manual, that's totally okay. But we do have the digital, uh, fillable PDF available on our website. Also, if you're already an existing client, it'll be available to you in your client portal too.
I feel like before, like whenever I had my tax experience too, like that, I would dread doing the organizer. But what I've found now, Is like, that is a good kind of, um, task to generate questions for you. Um, it's also a good task to generate, kind of like what I need to collect, right? Yes. So, you know, I got married or I had a child, or you know, I know I'm gonna need some documents to.
Answering yes to some of those questions on that questionnaire. So I think it's a really good preparation tool. Um, so make sure you know, whatever you're, whoever's doing your taxes, take the time to do the organizer definitely, and answer all of the questions to the best of your ability because we're relying on these an, these answers to prepare a very, an accurate and thorough tax return for you.
And if you don't know, I'd love all questions. Please ask cuz I'd be more than happy to. I think you're gonna see a lot of, probably 10 99. Is it the interest form? What's it called? 10 99 I I n t? Yes. Yeah, the i n T form. I think you're gonna see a lot of those in a lot higher than you saw probably for, you know, 10 years in a row.
Since interest rates were a little higher last year and people started getting some money from their savings accounts, like I saw mine, I was like, whoa, I didn't realize we made that much an interest. , definitely. I'm expecting to see more. 10 99 ints and 10 99 Bs cuz for the number of day traders has gone up now.
Oh yeah. So , you know what, that's a good point because I bet some people too, who weren't receiving any form at all are gonna get one because under the, I don't know the exact dollar amount. In today of what you have to earn to receive that form. Amber, you can help me with that. But you're going from a non-taxable reporting situation to now you're gonna have to report that interest.
Um, people are gonna be potentially surprised this year. Exactly. If it's under $10. They're not going to send you a form if it's over the $10. You should expect to see a form. , I, I would imagine too, um, maybe if someone is low interest or maybe living on like a fixed income with just social security, if their interest bill is high enough, they might actually, you know, end up paying some taxes on it since that is taxable.
That is true because they're gonna take your, um, your social security benefits and um, add that in with your other income to see if there is taxable income. Yeah. So more reason to get a tax plan done. I, I have found also that doing the tax organizer is extremely helpful just cuz like Josh was saying, it gets you prepared for the appointment, but it also creates sort of that checklist of documents that you need to.
And before I used to look at the organizer and all the pages, I'm like, oh my gosh, I do not wanna fill all this out. But it actually makes the tax appointment go much more efficiently just because you have everything organized, you, you've documented it all down. And then once I, when I did it the first time, then I would just go back to last year's and then use it as my template and then go forward.
And it makes that process even more easy to get the, the organizer. . Exactly. It makes it easier and it keeps you involved in your situation. There's a lot of stuff, um, a lot of times we're taxpayers will, they'll have their memory jogged and that will just open up that door to look into other deductions that we wanna make sure that we don't miss.
Or even income. We don't wanna miss that either cuz I don't want anybody to receive an i r s love letter. So, and we talked about how the IRS is always making things more difficult. What are some of the changes in updates to the tax code that individuals should be aware of this tax? , well, I'm sure everybody's seen in the news that they have, um, the increase to the IRS budget, which in which they're expecting to put more agents on the grounds.
Like basically they're going to be enhancing the collection activity so they can increase the revenue from people who aren't paying as much as they should be paying. So we wanna just definitely keep that in mind, like you might, we might. Audit percentages go up or examinations really, like basically IRS is just asking you to clarify some of the items on your return.
I think we're gonna see more of that and that's why I'm stressing even more of that. We wanna make sure we have every, um, all of our documents. We don't wanna ballpark, we wanna try to get as accurate a figure. . So how does that like work the, like the IRS knows everybody's numbers and then they compare what they put on the paper, and then, is that correct?
You know, it's, no, I love this question. There's actually an algorithm that the IRS uses and they, they look at your figures and they say, okay, for folks who fit in this income bracket with similar deductions, where do you fall in in that spectrum? If you're way off the, if you're way off the radar, then that'll cause the irs.
Like an alarm goes off and then they're like, red flag, I caught it. They'll call it like the red flag and I'm using the air codes here. You end up with like the red flag and they'll pull it aside for additional scrutiny by, uh, a live human being. And if they look at it and say, okay, this all makes sense to me, then we move it along the process.
But if there's certain things that don't quite add up, then you might end up receiving a letter from the IRS where they're requesting more inform. . Interesting. Mm-hmm. , . And, oh, and also, I'm so sorry. I wanna make sure I add too. They're still, uh, they'll still pull people at random too, to make sure that they are, um, compliant.
And this is something they do every year. It's under 1% of taxpayers per year. Um, and they'll, yeah, they'll just pull you at, uh, at random. I have a question, but before they hired, like, audit percentages were extremely low, right? Exactly. They didn't, they didn't have the budget to go after. taxpayers who had, who owed a larger tax liability, they only had, and I hate to use the expression, but they only had enough money to go after the low hanging fruit, so to speak.
They didn't have the, the funds to go out after tax payers who had more complex tax situations. Mm-hmm. So are, do you think they're gonna be going after more complex situations? Yes. Now that they have the resources to do it, I think they're going to be, uh, looking a little bit closer. So would that be like more like 10 99 employees and maybe, uh, you know, sole proprietors?
Is that would be considered more complex or what actually yes, that's one of them too. Self-employment is a big one specifically with entertainment, meals and vehicle expenses. Wanna make sure you're very accurate about that. And what about real estate? Like people with a lot of, um, real estate rental properties.
is that what that would be considered? Kind of more complex? Definitely be, uh, that would definitely be a little more complex. Uh, people within investments, um, like stocks, bonds, uh, that also be a complex. Uh, even if you itemize, depending on what is on Schedule A, what, uh, deductions you're itemizing, that could also be considered a complex tax return.
So when you call the irs, uh, if you're needing to find out something for a. , how long do you have to wait on hold before you actually talk to somebody? Ooh, . It could be anywhere between one hour to two hours. It has gotten better. So, um, lately I'm, I'm seeing like about on average between 30 to 45 minutes.
Uh, I'll usually I'll opt for a call back. , instead of waiting online. Um, I'm hoping this taxis, now that they have more customer service, um, agents, more people to pick up the phones, that the whole times won't be as bad. I do like to encourage all of my taxpayers payers, if you haven't done so already, please go online to the IRS's website and set up your free account.
This way you can monitor what's going on with your tax. Uh, what economic impact payments you'd received. Um, what incomes on your, on your account, what tax returns are outstanding, what tax liabilities you have, you'll have that all at your fingertips and you'll save yourself the call, um, to the irs.
That's a really good tip. I don't remember if I said it the last time you were on, but. When I bought my home, I needed to go back and find out what my basis was for my Roth ira. Uh, cuz I, I had done it years ago and I couldn't remember. Um, and I went, I created my account on the IRS's website and went back to like 20 13, 20 12, and found out how much I had put in my Roth IRA to get my basis so, Perfect.
See, and that's a success story. I'd like to hear Amber, you gave me that tip a couple years ago. That's great. Yeah. And you log on tip and you actually can like find all of that information that you're potentially digging through your old mail or . Yeah, I think you did mention that on the last podcast.
And I did mine also. And I think what it's probably really good for people also is um, I, we have a lot of clients that pay quarter. . Yes. And I'm assuming like sometimes people may go a month or something, not note, did I actually make that quarterly payment? They could just log in, see if that quarterly payment was even went through or if they had sent it in.
Exactly. And that's a common circumstance too, because you're making your quarterly payments every three months. You're really not, it's not the forefront front of your brain. So you definitely wanna have that resource available to you so you can check in and be on top of your tax situation. Also, as a small aside, um, you also wanna keep an eye on your tax situation because of the prevalence.
D theft right now, it is out of control, and I encourage all my taxpayers p. Please be proactive in protecting yourself and your family too. We do have the links to set up an IRS account on our website, as well as one for the Franchise Tax Board of California. In addition to that, if your identity's been compromised, there is a link available on our website for you to go to the IRS and set up what's called an identity protection pin, meaning that no one else can file your return without this pin number.
So basically because like what if someone steals your identity, what they could do is file a false tax return under your name. Is that what they're doing? Exactly. We, I've seen ones where people have filed false tax returns and another taxpayer's name claim their children, claim some other random person's children claim education credits and just really made a mess of things.
And there's just so much work you have to do in order to unravel the damage to do damage control. That's why it's in our best interest to be proactive. Is there any other updates or tax code changes for 2023 or 2022? The biggest ones I'd like to mention is that there should be no stimulus payments.
Nobody should be be expecting any stimulus payments. Um, also, I know quite a few of us were eligible for the, uh, franchise tax boards, middle class tax credit. Please be assured that it is not taxable income. It's that kind of income, much like the stimulus payments uh, last year and the year before and even back in 2008.
Um, , those payments are basically for the public benefit for the greater welfare of the public. So it's not really taxable income, but we won't be seeing any of that. Um, the above the line charitable deduction, if you weren't itemizing before they last year, they let you take $300 off your taxable income as a charitable contribution, uh, to reflecting charitable contributions you made throughout the year.
They did take that back so you can only deduct charitable contributions if you're itemizing for a tax of 2020. What about my Gavin Bucks? Um, I know Gavin Newsom sent out money for, uh, the gas reduction. It, how is, is, have they made a ruling on how that's treated or is it just ignored federally and counted state?
How does that work? From what I've seen, the franchise tax board's not going to be counting that as taxable income. And it's expected that the federal's going to, uh, comply with that too. Okay. It's gonna be in accordance with that. It was trying to save us every tax dollar we can. , can you share any tips or strategies for maximizing deductions in minimizing taxes owed?
You definitely wanna do a tax plan first and foremost. Because we need to see where you are and where, where you want to go. And then we wanna just evaluate all the different factors that are impacting your tax situation. Um, for some folks, uh, making an I r a contribution might be in their best interest.
For other folks, they are considering buying a house. I like to encourage my taxpayers, Hey, try to buy that house at the beginning of the year so you get the full year's worth of mortgage interest and all of that property tax. Try to avoid buying it at the end of the year because you won't get the full value or the full benefit of the deduction.
So the, it's a timing thing and looking at the different, um, factors in your tax situation to see how we can save you, uh, money. And also a big one is reviewing your withhold. , you wanna do a periodic review, maybe semi-annually, maybe even quarterly if you, um, uh, high income tax, earn tax, um, a high income earner because your W two or your withholding might be off and you might end up owing at the end of the year.
And there's no sense in paying the IRS or the franchise tax board extra money in the form of a penalty when you could just adjust your withholding in the middle of the year and you've met your tax li. I have one. Um, this one though is not for the 2022 year, but, um, the ira, the Inflation Reduction Act Yes.
Brought back the electric vehicle tax credit. Oh, yes. Uh, for a lot of pure EVs. Mm-hmm. . Um, so right now, depending on how much money you make, most people will be able to buy like a very nice Tesla or, you know, one of the cool Ford Mock EV mustangs, um, for under 45,000 once the tax credit's taken. Account.
So good tip for, you can't use it this year, but you could definitely, if you buy one in 2023, you could use the credit on your next year's. Exactly, and that's where that plan would come in. And I love the fact that they, uh, removed the caps off of the vehicle. So a lot of taxpayers, they'd go out to buy the electrical VE electric vehicle, but then they figured out, oh no, this particular vendor has already met their cap.
So it's this huge list to me. So I'm, I'm glad to see they've expand. Uh, they've gotten rid of the cat, they've expanded it so more people can take advantage of it too. Yeah. Now we know which car's Matt's looking. Yeah. , we've been talking about it for a while. Yeah. Uh, one of the things I thought was really neat when we did tax planning last year for a couple of clients is that it listed out all the items that they could do to reduce their tax liability at the end of the year.
And it was very detailed on how in the steps we would need to take to get the deduction. And I think that's extremely helpful as you're kind of going into the last quarter of the. To know if, hey, if I do these, you know, three or four things, I'm gonna be able to save X amount of dollars on my tax return.
I mean, that way you're prepared. I mean, once you go file your tax return, you've already taken the steps hopefully at that point to do all of those things if you've done a tax plan. Exactly. Being proactive is really what's, you're saving grace. Being able to take action before December 31st of that year, uh, could save you hundreds if not thousands of dollars.
And can you discuss the difference between taking the standard deduction, the itemized deduction? I think people get confused about the differences of those two. Yes, that's a big area of, uh, confusion for a lot of folks with the standard deduction. That's just the, the base amount based on your filing status of, uh, That the IRS subtracts from your income basically saying, okay, this amount, we're not this, we're not gonna tax you, we're gonna subtract this from your income.
It's free money. Yeah, free money, right? , . So the IRS reduces that taxable income for you. Um, and just keep in mind, this is after, um, adjustments, adjustments to income, meaning, um, IRA contributions for example, or student loan interest that you've paid off. So after the adjustment's been in, uh, after your income's been adjusted, the IRS takes that standard deduction, says, okay, for you filing single, we're gonna take $12,950 away from your income to arrive at your taxable income.
Now with itemized deductions, you may realize, and that's also based on your filing status, you might realize that the certain, there's certain expenses that, um, exceed the standard deduction. And in that case, we're gonna itemize and. Um, deductions for, say for example, and this is the biggest one, mortgage interest, real estate taxes, even sales tax on maybe an auto that you purchased.
Um, investment expenses, charitable contributions. , things of those nature. I forgot about the auto tax. That's more reason for me to buy a new car this year. Here we go. Just looking for all the reasons. . . Oh, when it shifts. I, I, I should mention too, my favorite, the salt limit state and local taxes limit, you can only deduct up to $10,000 and state taxes until the law changes in 2025.
I'm hopeful, hopefully maybe this year or next. We'll just change that and people could take more advantage of uh oh. So it is for sure going away sunsetting in 2025. Yes. It's due to sunset in 2025. I've just been crossing my fingers the last couple years that it'll be sooner people in California and New York, Connecticut were gonna be doing back flips.
That's what I thought too. I was like, everyone in these high uh, real estate areas are all hoping that, that that does happen. Because what year was that signed in For 2017. Yeah. So it's been there for a while now. Yeah. And a lot of people. A lot of people are hurting from that one and the employee, the loss of the employee business expenses, not being able to take certain employee business expenses.
Um, on the federal return, as I mentioned previously. Um, with the, with the Tax Cuts and Jobs Act disappearing in 2025, taxpayers be able to reap the benefit of that. Again. So, you know, firefighters, police officers, nurses, doctors, pilots, now you can start incorporating those or adding those deductions back to your tax return and expand your, uh, itemized deductions.
Small, tiny aside to, um, as you know, they eliminated the exemptions amounts. There's certain amount of money. You would be able to subtract away from your taxable income for every person that was in your house. They still use the exemption amount for certain, uh, education tax credit, or to see if the, you can claim someone is the head of household.
But the ideas with the tax cuts and job Act was to expand the standard deduction and eliminate exempt. Um, once, uh, 2025, uh, uh, rolls around, we'll go back to rules as normal. You'll be able to itemize and so on and so forth. , what about individuals who are self-employed or have multiple sources of income?
Um, like how do they best prepare for the tax season? Definitely making sure you're reviewing records and this is something you wanna make sure you're doing throughout the year, that you're keeping contemporaneous, um, accurate records and you're going back and reviewing. Because if towards the end of the year that's when we're going to need to kind of get together and see if we need to make any kind of course corrections, but we can't, um, we can't do that without having the right information first.
You definitely wanna make sure you get your bank records together. Business taxpayers, if you are, if you have an accounting or bookkeeping software in place, make sure you've cleaned up all of your accounts for bookkeeping so your business tax return is ready to roll, and then subsequently your individual tax return.
And then what about to, um, maybe the smaller, smaller businesses are taking payments via Venmo still? Um, what's going on with that? Cause I know we had some controversy with the clients that a lot of people are asking. What's going on with Venmo? No, I'm so glad you asked because just recently the IRS has said, okay, okay, we're kidding.
Um, give us a second. We're gonna give everybody some relief this year on the reporting requirements cuz we still have to iron some stuff out and not enough people know about what we're going to do. You still might receive a 10 99 K, but there's, if you're an individual, if it's a personal nature, you won't have to report and back out certain figures or anything like that.
This is our year of grace, while the IRS kind of hammers out. The details, but next year we should expect to see, um, um, a more stringent filing requirement when it comes to the 10 99 Ks. So what are they looking for? Because like, I know, like with my friends, like we'll send money back and forth maybe for a golf round or, you know, you, you owe someone money here or there.
Like are they going after that? Like us just like paying each other back? Oh, no, no, no. Nothing like that. Fortunate. They're just basically looking out, making sure that people are reporting all of their business, um, business income. Now, fortunately, a lot of, um, a lot of the third party, uh, merchants like PayPal, um, Venmo, They have it so you can set up a business account so you can keep, you can draw that line in the sand.
Business versus personal. That's, that's good. There is like a button on there. So it's like for good. They're looking for like the goods and services, right? Like your transaction. You know, I'm buying, you sell trading cards online and you know, that's your form of payment. I think there's even like a radio button on Venmo to be like, was this for goods and services?
Yes. So they can kind of even like you're reporting on yourself, like, yeah, I bought this, you know, baseball card from you or whatever, but like, me and you, but you know, you, you booked the golf round and and now I gotta pay you back. Yeah. Not looking for that. Okay, that's good because there's a lot of confusion about that.
I mean, I was even confused, so thanks for clearing that up. Oh, sure thing. And honestly, I think it was. Causing a lot of unnecessary panic because people had the same question as you, Matt, like, wait, wait a minute, I'm just paying my friend back for in-N-Out the other night. Like, are you guys gonna be scru, scrutinizing that?
So yeah, they're still working out the kinks on the program. And then what about with Zelle? Is that the same way or is that different just because it's bank to bank payments? Oh no. Zelle should be the same way. And then can you discuss the impact of the recent economic stimulus payments on taxes? Well, we definitely wanna discuss, well, let's actually start with the business.
They've expanded a lot of credit credits, like in regards to research and development and energy tax credit. And also on the flip side, for individuals, they've expanded the energy tax credits tremendously. Um, back to the business, like I was saying with the research and development. , they've expanded it so you can take the tax credit and it can flow forward.
Um, you can take advantage of the tax credit sooner so you don't have to slow boat it as much. And like an example of something like that would be from maybe the ira like we were talking about a few minutes ago, the inflation reduction act, maybe putting solar on your home or on your business. Is that what you're kind of hinting at In a way, yes.
Yes. And indefinitely, like with the, um, with solar and there's so many different solar programs out there that you can take advantage of. Uh, we just wanna be careful to stay away from anything. Leased or because the, in that case, the property doesn't belong to you, so you won't be able to benefit from the uh, uh, from that tax credit.
So you're talking about like if you lease the building or lease the solar? Oh, if you lease the solar property. Yeah. And you know, and that's actually a really good point, Josh. Um, there's gonna be qualified improve, um, Building improvements too. They've expanded that so you can, they taxpayers can take a greater deduction for any kind of leasehold improvements they make to any commercial property that might, if, if you like, own maybe a historical office building.
Is there like any improvements you could do there to get some tax credits? Like, or, or am I just kind of going a little bit too far off base? Actually, there is something for historical preservation. I, I'd like to do some homework for you cause that's a really interesting. Perfect. Are there any resources or tools that individuals can use to make the tax preparation process easier?
And I think this is a problem a lot of people have is like the stuff starts coming in the mail, you put it aside and then you gotta hope it's all still there when you go back to that stack. And there's obviously a lot of documents to collect from a lot of different places. Like what's the best resources and tools that people can use to kind of get prepared?
Definitely check out our website for that checklist. And I'm really glad you brought up the, the stack of papers. You wanna make sure you're keeping all of your records all in that same spot. So when I see you and when I meet with you, we can go through everything all together. Um, you can use the checklist that we have on the website and like I said before, you can even refer to last year's return to see what kind of information, um, you need to compile before a meeting for your tax.
Josh, what do you do with yours? All of our forms. Yeah. I just compile 'em. I have a, I have a file folder that I put 'em all in. Uh, I put mine in my junk drawer. , that's good too. Yeah, that's kind of weird. That's my filing system. I think that like everyone's. Everyone's online portals are pretty good though too.
Yeah, for sure. It's kind of like, you know, just kind of speaking from experience and, and what I would recommend, um, is make sure you can log in and it's also good to just make sure everything looks accurate. Right. It's a good time to reconcile, like, Like you said, your financials or your bank records or, um, even like log into your mortgage company to download your mortgage statement, but also look like making sure everything is correct.
They have your phone number and address correct. And all of that stuff. So I think with the online tools, that does make it easier and it's just good practice to start that, you know, January is that month to get everything together. Um, exactly. But, uh, online is, is now kind of my preference. I like to download.
I do have all my stuff go in a file too. But the one thing I think that is easier for me is just having a checklist of knowing where I need to go get all the forms from and just logging in and downloading those. Because it's either you're gonna scan those and then upload 'em to your vault or your system to, to start the, the, the filing tax process.
Or you can just download 'em all from all the resources or sources that you know you need to get 'em from and then just upload 'em to the vault. And I think that's so much easier than. Hold on to the documents for a month or two while the rest of them come in. Cuz some sent in January, some send in in February, exactly March.
And it's just, it's a long, it's a long stretch. Right. And you definitely want that peace of mind knowing that you have all of your information and you're not left hanging and waiting to see if another form trickles in and you're not sure what form that would be. I think one thing that people can do probably is like if you had a spreadsheet saved or somewhere safe, Where you just had, this is all the places I need to go for during tax time, and then you just go down the list.
It seems like you can make that process a lot more efficient than digging through drawers. Yeah, tech helps. Go ahead. Uh, so you'd think there'd be like an iPhone app. . Like where, why don't they have that already? You open your mail, you snap a picture at your w2, it crops it perfectly and uploads it right into your tax preparers portal.
Like I think it might be onto something here. Yeah, we should start a business. I know that they have, uh, tax scanner. We'll take some of the info, but I don't know if they have it like on the individual level like uh, you're talking about. So yeah, no, it should just be like I get a tax form and I'll. clip a photo that goes right to my tax preparer.
Well, you can kind of do that with our portal. You can take a picture with your phone and just log in and then just upload it to me and I'll get the notification. Hey, you have my business idea already. There you go guys. Amber's got it. There you go. Making it easier for you. Matt. , is there anything else you want to make the listeners aware of?
I've just, just basically that this time of year right now or, um, anything that they can do or helpful hints that you found for people in just preparing at just this time of year. , definitely don't hesitate to ask questions. And a great point that Josh made earlier, just log into your portal, make sure you can still get in, and if you can't, definitely feel free to reach out to us.
Uh, make sure that you have all, um, you have access to all of your documents. Go ahead and pull your organizer and your questionnaire and go ahead and get working on that now so you can get that ball rolling. All right, well, uh, that concludes our show today. Uh, we hope you found Amber's insights and tips helpful as you prepare for the tax.
Uh, we'd like to remind the, our listeners that Amber is currently accepting new clients and is ready to help with your tax preparation, Avis advocacy, and also planning needs. If you're interested in working with Amber, you can visit her website@collaborativetaxpartners.com and you can book an introductory appointment with her.
Uh, thank you for tuning in to the Retirement Plan Playbook. We'll be back next week with more expert advice and tips to help you plan for your retirement. Until then, uh, stay tuned and stay on track with your retirement goals.
Thank you for listening to the Retirement Plan Playbook. Click the following button to be notified when new episodes become available. To get in touch with our team, call us at (909) 296-7977 or visit our website@www.rpawealth.com to schedule a complimentary consultation. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of RPA Wealth Management.
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