Tax Season, Zero Panic: Get Organized Early and File Without the Stress

0:00 The topics and opinions express in the following show are solely those of the hosts and their guests and not those of W FOURCY Radio. It's employees are affiliates. We make no recommendations or endorsements for radio show programs, services, or products mentioned on air or on our web. No liability explicitor implies shall be extended to W FOURCY Radio or it's employees are affiliates. Any questions or comments should be directed to those show hosts. Thank you for choosing W FOURCY Radio. Welcome to to Ask Good Questions Podcasts, broadcasting live every Wednesday, six pm Eastern Time on W four CY Radio at W four cy dot com. This week and every week, we will reach for a higher purpose in money and life, as well as a focus on health and wellness. Now, let's join your host, Anita bell Anderson as together we start with Asking Good Questions.

1:01 Welcome to the Ask Good Questions Podcast. I am your host, Benita bell Anderson, and today, as things usually happen in life, something changed. The guests I was going to have on with me today had a family emergency. So as you and me, baby, we're doing this all on our own and we are still going to talk about the topic at hand because I am fully qualified to talk about this as well. So today's title of this episode is called tax season zero panic, Get organized early and file without the stress. So if taxes make you tense, maybe because you're thinking I haven't even started yet, it's usually not the math. It's the mess that you may have unintentionally created for yourself. So we're going to break down exactly what to collect, how to sort it, how to stop second guessing what my matter before you file your twenty twenty five tax return. So we're going to talk about some practical steps sanity saving, document checklists that you can have, and a mindset reset that makes text season hopefully feel a lot more manageable for you. So with that, we are going to be looking at some PowerPoint slides today and so we're going to have some strategy, some tools, and some best practices for you. So here's what we're

2:35 going to be talking about today, understanding some big changes that happen in twenty twenty six. Now I want to direct you to the when did we do it? I think it was in January that I did an episode with Marsha Mantel on the changes specifically for seniors, so that you know, you may have heard about the big beautiful bill. You may have heard there's no TAXNOSM. The whole thing with no taxes is not correct. There's just extra tax credits that you're getting this year. So we're going to talk about gathering and organizing essential tax documents.

3:15 We're going to talk about tax preparation tools and services that you might use. We're going to talk about strategies for tax planning and optimization and avoiding the most common pitfalls and ensuring that you have compliance in all of this because you don't want to get on the wrong side of the IRS. I can tell you that from my life it's been an ongoing journey for learning how to deal with this every year, learning how to make it simpler for myself. And I can tell you that for me, I have used a CPA for doing all of this because of the complexity of personal taxes as well as business taxes. That's kind of changing for me.

4:02 Things are becoming a little bit more simple. In the future, I'm going to be using something called TurboTax, so we're going to talk about that. We're going to talk about brackets, and deductions and credits and exemptions for you this during this time today. So there are some adjustments to corporate tax rates and revise capital gains taxation. You know, what I'm going to tell you too, is that there is so much online. If you go to i'd call them affectionately doctor Google, or if you go to chat GPT, you are going to be able to ask for what is the current federal tax rates. You can go and do this on your own. There's eligibility rules that have changed for key deductions, and there's new reporting requirements spanning compliance expectations for things like crypto and other digital assets.

5:05 I'm not going to get into that sort of thing in depth. I overall want to give you some strategies and some ideas for just starting to pull this all together so that it's easier. So, the standard deduction increased up it was it's up six percent, so they they're calling them inflation adjusted brackets that generally raise income thresholds itemize caps, and it may shift itemization vers standard decisions. So you know what, in many many cases, and I know this applied to us and for me and my husband, we're not really itemizing anymore because the standard deduction that you're getting is way above whatever we might have possibly been able to itemize, and so that's something that should be simpler for you now. So there's other things that you know, they just kind of go up a little bit every year. Childhood dependent care, there's expanded eligibility and a higher maximum credit for families with qualified dependents. You may notice I'm kind of talking about things in more general terms because you know, everybody's situation is so different, and so we're just going to talk about some of the big things that may apply may not apply to you.

6:34 So the Earned Income Credit, there's updated eligibility criteria to allow more low income workers to qualify it, So that's a pretty cool thing. And there's education exemptions. There's higher exemption limits for tuition and related expenses to encourage education investment. So those are all super cool things. So organizing tax documents, probably the easiest thing is throwing receipts into a shoe box. I'm hoping you haven't done that, And really that doesn't really apply anymore, does it, Because if you're not really if you really don't need to itemize that much anymore, than what's that going to do? For you. So hopefully if you haven't done it before, start doing it now.

7:24 Start having things as you get them, put them into a tax file. Now. I still like to have a paper copy of something to look at, but I have my digital I have my tax file on my computer, and then I have in my file cabinet thing that I have at my desk. I have a taxes folder that I'm putting everything in, okay, and so then I organize things according to income and things that you know, like bank statements that have of the information about interest earned, dividends earned, investment, like year end year end statements for investments is important because possibly for required minimum distributions if you're over seventy two seventy three. Right, So here's some things you know. So let's go into it a little bit more depth. Income and employment records. What does that mean? Well, if you have a job that means you're getting a W two, that company that's that you're receiving that W two from is going to have some statements for the year end. Okay, so you're going to collect that. They're going to be giving you a tax statement that tells you what what the totals are for twenty twenty five.

8:54 Ten ninety nine's are like you know, like if you're self employed, you're going to get what's called the ten ninety nine NEC. Those are four more self employment type jobs that you might have had. You're going to receive a ten ninety nine for that. And then you have things that are like ten ninety nine cake, So there could be some different ten ninety nine type things. So file all of those together or put them all together in one place so that you have that because all of that sort of thing is going to go on your tax form in one place at the very beginning of the form. All right, So the other thing that you're going to have to start trying to figure out is what's going to be taxable and what's not. So one of the things that lower income people have available to them is like going to the library. So if you do not have a bookkeeper, or if you don't want to do it yourself, or if you have some kind of situation where this is just not going to happen for you, contact your local library find out what you can do. A lot of times in the past, the H and R Block have set up times to help people with their tax returns at the local library. Okay,

10:25 so go and see if that's available for you in your area. Okay, deductions If you have a business, I mean I've been a business owner in my whole life. I have had some kind of business ever since I was in my twenties, and so business expenses especially, really that's the only thing you need to keep out of my three seedts for travel and meals and supplies, and you want to have what the business purpose was and the date to each record. All of those things are then going to go on a special tax return for your business, and if it's it should be the type of business where the income and expenses flow to to your personal tax return. But that's one category that if you like, for instance, turbo tax can be a good solution for helping you organize what's a business expense and what is a personal expense? Medical expenses. If you are unfortunate enough to have to deal with some fairly large medical expenses, store those receipts and the invoices and the insurance statements because you never know you might be eligible for some medical and dental costs, So keep track of that.

11:47 The other big area is going to be charitable donations. Again, I'm not going to be telling you about all the ins and outs. There's crazy things you can do, like sending a distribution from an IRA can go to a charitable donation and that doesn't add to your personal income. But I'm not getting into that. I'm just saying for charitable donations again, maintain receipts, acknowledgment letters for those donations and proof of payment for every contribution. You never know when you're going to be able to use a charitable donation on your income tax return. And then of course there's other deductions. There might be deductions for education costs, mortgage interests, and other irs required deductible items. It's hard to tell what I just want to do today and what I do every time with the Ask Good Questions podcast is give you something where you can take some action.

12:49 You're either going to go get some help with like an online tax gathering program like Turbo Tax, or you're going to go to library and you're going to find out what help you might be able to get there, or you're going to gather things yourself, or you're going to you know, find out where you know, maybe maybe you have somebody that can help you with all of this as well. So let's talk about investments. Hopefully you've got afford Hopefully you've been you know, if you've been listening to me, hopefully you've been paying attention to doing investing, making sure that you have all of that. That's going to fall into two big categories. One is going to be bank statements. The other is going to be investments accounts.

13:35 Now like for me, I'm my wealth management company is called ten Cap. We have a custodian called Altruist, and through that custodian we get investment statements. All right, So you're going to gather brokerage and retirement account, your end statements for all of the any type of accounts that you have. Only thing that's really going to matter on investment accounts is those individual retirement accounts. Right. That means that if you have if you are of retirement age and you have been taking distributions from a retirement account, that counts torture income and hopefully you've been sending a little bit of taxes to the irs because they take whatever income you've had during the year, plus those distributions from an ir IRA account. To factor in how much you're going to need to pay for taxes, so it's important to have your investment accounts. And then you've got bank statements. Now, bank statements are going to be like interests ten ninety nine i INT. You're going to identify gains and dividends from banks, and you're going to use those statems the capital gains because those are all at those even though they may be smaller, they're all you know,

15:06 little bits of income here and there. So that's all income reporting that you have to do. The other type of I INT not I in T, but ten ninety nine d IV. Those are dividends that might be dividends coming from a regular investment account, okay, And so those are three very likely places where you're going to be looking for some kind of statements, either from banks or investment companies. So you're going to confirm retirement contributions if you've had retirement contributions to a regular ir A though those contributions can be deducted from your income. Right if you have been making contributions to a WROTH, you are not you are being you're being taxed on whatever that income is this year. But then down the road when you start drawing in retirement from a roth iray, then there's no taxes that come out of that. So you're going to confirm what kind of retirement contributions and documents that you need for those types of things, and just you know, try to get yourself into a space where you prepare for these types of things. A lot of

16:38 times when people say I hate taxes, what they're really reacting to is either they don't like doing math, or they have a fear of mistakes, or they're feeling disorganized. So the information in most cases is just likely scattered, right, So what that looks like in real life is going to be not having your everything in one place. So I'm just going to stress that to you that if you haven't been putting all this in one place, you're going to start now, all right, Because the hidden cost of tax stress can be losing sleep over this, You can have arguments with your partner, Procrastination, misd deductions, things like that can all you know, happen to you. So trying to help you so that you don't do that.

17:29 So we're going to talk a little bit about tools. So there's a lot of software options out there. You know already that AI is coming on board in a big way, and so there's a lot of things that should be making your life easier. Like one of the first things I'm mentioning here is guided workflows that reduce effort and errow. So I've already talked about TurboTax, and I've already talked about H and R block. They are strong contenders for helping with a step by step filing process for you. So there's AI is getting into everything in our lives, isn't it. There's a lot of guidance now with AI. AI is kind of being in corporated into all kinds of things, including tax software, so there's accuracy guarantees with those sorts of things. Bank integrations are going to help with making sure that the banks are giving you good information. And TurboTax again is strong on integrations.

18:38 I'm not affiliated with TurboTax in any way safe shape or form. I'm just you know, this has just been my experience. So the cost for things ranges from free for software based you know, up to premium tiers that have to do with helping you with complex business tax reporting. Tax Act is another software that is often a value leader on paid plans. So the thing that we all want to avoid is audience from the irs, and so these things are going to help you with online guidance to help you to avoid anything like that. And H and R Block, like I mentioned, it's possible to go to a library and meet with somebody. So H and R block also has offices where they add optional in person help so you never know. So you know, basically, if you haven't really gotten started on your taxes, but you know, I've got to do it. I've got a month until it's due. We want to have a no panic tax season. We just want to get things organized and go through it methodically. And you want to have some rules for yourself that you just make time to make sure this is done correctly. All right, So here's

20:08 some ideas for self prep versus professional help. Self preparation is going to cost you less. You already know that. Probably it's cost effective and convenient for simple returns, and it offers control and flexibility for straight forward finances. And so self preparation cons is might be a risk of missed deductions because you're not aware of something. Another reason to use some kind of help like TurboTax or having somebody who can check over your work and make sure that you have not missed something. You don't want to have any kind of errors because really, if you're going to get into any kind of unique tax situation, and it's probably going to be best to have some kind of bookkeeper or CPA to help you. Now, what about those are the pros and cons for self preparation? What about professional help? So the pros for using a professional help is expert guidance right for complex returns, maximizing deductions, minimizing audit risk, personalized advice, and really at the end of the day is going to be peace of mind. However, the cons for having professional help is higher upfront cost.

21:39 So if you're going to have somebody helping you, you're just going to have to plan for pain for their surfaces, so you're going to have less hands on involvement, and it may require extra documentation and communication. It's just something that you know, you're going to have to make a decision on what is your suit situation, And like in my case, you know, things are changing, things are a little bit less complex. There's more help that I can find on my own, and so you know, you have to see what's going on now. The other interesting thing is the IRS. That IRAS really has quite a few online tools. You can go like, there's a tax prep sheet if you go to IRS dot gov. There are forms and instructions and interactive assistance that support common filing and compliance needs. It's really there's actually very surprising amount of help that you can just go straight to the IRS and you can look at you can look at your own online account and view records and payment status and IRS correspondence and one secure portal. So I think no matter what you're doing, you should look at what the RS has available. Security is important. There usability upgrades

23:12 are increasing adoption for do it yourself filers, so just realize that they are trying to be more helpful. They're trying to do what they can to help the regular, ordinary filer of a tax return. So let's see, let's go on PAX tax planning strategies. Well, if you have a small business or if you are working for somebody else, either way you are your own corporation. That's something that I learned a long time ago is I need to take one hundred percent responsibility for myself. So let's look at this time income and expenses. Fore Cast your cash flow, look at what your income is if it's variable, look at and plan for ups and downs with income, and plan spending by month to see timing options you may you know, if you have some some situations where your income ebbs and flows, then you need to plan for the dips with some savings, right so you might. One thing that can happen is you can defer income shift receipts into twenty twenty six or twenty twenty seven when

24:43 it improves bracket positioning or credit eligibility, if that is possible, but that is something that people do. Number three is to accelerate deductions. You can pull deductible costs back into this year's tax return to lower taxable income when it delivers higher value. Sometimes though this type these types of strategies does require a CPA, does require somebody who who prepares tax returns. But the number four thing on here is to recheck tax impact model, timing changes against brackets, credits, liquidity to maximize net benefit. What that means is like if like one example over the years that was very common for me to be helping people with was converting a regular tax a regular IRA into a wroth. Well like if they took twenty thousand dollars out of an irregular traditional IRA to move it into a wroth, that's gonna That means that that you're adding twenty thousand dollars to this year's taxable income. If you have a situation where your income is down in other areas, it might be a good time to do that and then move that twenty thousand into a roth. You pay the taxes

26:15 on it now, and then once it's in the wroth, it's going to grow tax free from then on. So I'm not going to say a whole lot more about that, but that's what I'm meaning is that you can look at what the tax impact is on doing different things and seeing when it makes sense if you have some flexibility on what's going on with your income and how much taxes you pay every year. So deductions and credits maximize your credits. If you can track your tuition, your fees, your related expenses, maybe for somebody in your household if it's not you. There are different things that you can get credits for through the American Opportunity and the Lifetime Learning Credits, healthcare. You know, like I said, at the very beginning. You know, the deduction, the standard deduction is large enough now that maybe it's not going to make sense, But if you've had some significant medical expenses, look at if it makes sense to itemize those to help you with your taxes. Energy credits is another area. So are you getting solar panels on your house, Make sure that you document home improvements and energy efficient purchases to claim

27:49 credits for solar, for wind, other renewable upgrades. You never know if that's something that's in the works for you, then make sure you have all your documents for that because it could make a difference. And then of course retirement contributions we've talked about a little bit, but contributions to iras and four to oh one k's that is all deductions off of your income. So make sure again we'll just say, coordinate timing and amounts to optimize the deductions that you get and the credits that you get. And then there's something called phase out thresholds. Stay aware of income limits and phase out rules for each credit and deductible and deduction to plan eligibility so you can download the levels at what you know, Like there's so much income for the ten percent level, and there's so much for the twelve and there's so much for twenty percent taxations. So look at what your thresholds are for making sure you don't jump yourself into another tax bracket.

29:02 So the last thing on maximizing credits is strategic coordination, all right, align your expenses and your income with the tax your requirements to maximize overall benefit and minimize tax liability. Kind of the bottom line on all of this is just to minimize the tax liability you want to Yes, you're going to pay what you rightfully should be paying, but you're going to minimize the tax liability. So there's gonna be things that you're not sure about, and so if you're not sure about something, have maybe a special envelope that you put things that you're not sure about, and then go find someone to help you figure out what you know, what the questions are that you need answers for. So quarterly planning that's probably been the best thing for me for peace of mind is pain. If you are like self employed, a taxpayer, and anyone with like material non wage income, you should estimate and remit payments quarterly to reduce underpayment penalties, so I've seen that happen before having an underpayment penalty. Just make sure if you if you get things organized so that you pay

30:36 your taxes on a quarterly basis. If you're a self employed person, then that's going to go a long ways towards helping you with peace of mind that you have remitted payments to the IRS and they and they know that you've done it in good faith. So start with your prior year income and your prior year total tax that you paid. Then adjust it for your projected income and your deductions and your credits and the tax law changes. Before setting your quarterly amounts, you can kind of figure out what it is that you need to do and then pay on time. Just make sure that every quarter use IRS online Prime and options. That's all there for you to check out at the IRS as well, and set yourself reminders and alerts to meet those deadlines. And then make sure you retain confirmations to support reconciliation at filing time. Okay, those are all These are all just smart strategies to help you with not making any mistakes.

31:48 So you're going to avoid these common pitfalls if you have accurate filing audit, you know, things to avoid audit triggers. The ough it's been several years, many many years ago that I was audited. What a pain that is to have to go back and pull out everything, and it's kind of like you kind of feel like it's your word against the IRS's. So make sure that you have accurate filing, that you're not triggering an audit, and that you have effective responses, and that you have your documentation. It's up to you to have your documentation. So of the tax returns that do experience that, there's there's usually math mistakes, there's missing forms, there's inaccurate Social Security denvers can you believe that? Or unreported income. These software programs that I have mentioned a couple of times here, like TurboTax and others like it, they have error checks. They also usually have an actual person that you can pay a reasonable fee to have a professional review. That is also going to reduce mistakes and avoid processing delays and audits. Okay, that is critical. So you know April fifteenth is coming up.

33:23 Don't wait till the very last day, right, don't do that, get this done. Set the time aside, Double check your amounts, reconcile your income, whatever deductions you think you may have coming, your whatever credits we talked about those credits. Confirm the totals before you submit things, all right. Make sure you have your tax your Social Security number, your taxpayer ID correct, check your names, sold security numbers, and filing status for exact matches for official records, okay, and usually filing electronically.

34:03 And then if you do have a refund coming that's going to come back electronically. That is going to save a whole lot of time too, if you file electronically and save confirmation research receipts, and keep supporting documents for at least three years. Now, me, I keep things for like ten years before I feel comfortable getting rid of it. But a lot of what I have is now online anyway, and so I have digital copies of things from you know, from several years ago, just because once I get rid of any paper, I don't like to it's hard for me to completely let go of it. So I make sure that I keep it because once in a while I've needed to look at something. So you want to keep your nose clean when it comes to the irs.

35:00 How do you take care of audit triggers and responses. A common audit trigger is going to be discrepancies and reported income, unusually high deductions, and mismatches with IRS records. Okay, that's going to trigger things, so make sure that your info is correct. There's red flags to avoid large business losses, excessive charitable contributions, inconsistent reporting. All of this is solved by having realistic, real records, right, what are the risks, Well, the potential risk could be increased scrutiny. You could be subject to penalties and possible reassessment of tax liabilities. Oh what a waste of time that is if you get into those sorts of things. So if you do experience this lovely problem with the I R S, respond promptly, please please, please, and organize your documentation to speed the audit resolution. These are, you know, the people that do audits, they are employees of the IRS. They're just doing their job.

36:17 So try to get through it as quickly as possible. So you want to prevent You know, this is not about perfectionism in thinking that you've got to have everything perfect, but strive for just being accurate. Strive to have things where you know where things are and keeping it, keeping it, you know, sane and in in control that you know where things are. So I'm going to finish up now with just telling you these things. Stay informed. Track the tax law updates if you are of sol security, age, medicare aged. Go back to the podcast episode from January with Marsha Mantel. We discussed in particular the tax law changes for seniors and so you don't want to have any surprises when it comes to this kind of thing, so that you can file with confidence, organize your records.

37:30 Organize your records, organize your records, maintain clean documentation for income deductions and credits. All right, use the right tools to software or professional support that fits who you are, fits your situation right and plan and comply, avoid common errors, follow requirements and optimize your outcomes. Okay, this is just something that you know we have. We have the irs for a lot of things that we take for you know, you know take for granted in this country. You're you're going to pay your fair share, but you don't want to make unnecessary mistakes. So we want to make sure that this can be a process that's faster and cheaper and less stressful for you and so with that, I hope I've answered some questions. I hope that you can if you haven't gotten started, that you start today, get this done, don't wait till April fifteenth. And if you have any questions about this, I am going to have this list on my bonus downloads on my website Benita bell Anderson dot com. You can find the bonus the downloads and I'll have this tax like tax prep tlist here for you. There. So with that, thank you so

39:04 much for attending and listening for our tax prep workshop today on the Ask Good Questions Podcast, and we will see you next time. Today's episode is over. But we need ask good Questions again, didn't We don't miss out as we broadcast live every Wednesday, six pm Eastern Time on W four CY Radio at w fourcy dot com. Joined Nina bell Anderson next week for more conversations with experts on finances, retirement, behavioral finance issues, health and wellness and more. Until then, remember to ask good questions