38. ROI TAX SERIES 2 OF 8- MAKING YOUR 2021 TAX FILINGS SIMPLE

2022-02-09 ROI Tax 2 of 8

Adrian Schermer  00:02

Hello, future millionaires and welcome back to the get rich slow Podcast. I’m Adrian Schermer. I’m joined today by Rob Delavan, Lance Johnson and Sue Hjort. This is part two in an eight-part series on making your 2021, simple tax filings, of course. I want to start off with a nice success story. Sue, congratulations. I know you’ve completed your continuing [Inaudible 00:24]

Sue  00:25

Yes, I did.

Adrian Schermer  00:27

Every year, each of us has to complete a rather lengthy process. It can be difficult to wade through but it really keeps us up to date on all of the pertinent information on our field. So, it’s a good thing, but it’s always a hurdle to be cleared.

Sue  00:43

Yes.

Adrian Schermer  00:46

Also, I want to highlight our different websites. ROI, financial ROI tax, I’m Adrian Shermer directors and then my own Delavan-Realty, all of those links will be down at the bottom of the comments on this episode and the specific event I’d like to highlight that it will be on all of our websites is actually the fact that we have calendered out everything that we’re doing ,client facing, webinars, wind events, and some in person socials. Lance, am I missing anything here?

Lance Johnson  01:24

Yes, the BNI Group. We set up a business networking events at our office. So, we’re excited about that.

Rob Delavan  01:33

Yeah, so all of that is actually calendered out through the end of the year and we will have those linked through our websites. So, just happy to have that done and hey, it’s only February, right? So, we know what we’re doing next December. So, Adrian, what are we going to experience today.

Adrian Schermer  01:52

So, in this episode, we’re going to be speaking with Sue and she’s going to teach us how to make our 2021 filings simple. Like I said, this is part two of an eight-part series. We’re going to do lots of stuff as we move through. In our last episode, we got to know sue a little bit, who she is, what a CPA is, and what it means to work with one who’s a professional like Sue nd now we can dive into a little bit more nitty gritty stuff. So, let’s see.

Rob Delavan  02:27

Okay, so, Sue, thank you again, for being here. With our normal hosts, the three of us, Lance, Adrian and I. We want to warmly welcome. We love your experience, decades, the jazz hands, right and we just we want to specifically talk about a few questions for you. But the background for you, which we already covered last time, but you’ve only been doing this on your third decade now something like that and that’s all no big deal. I would say she’s our expert content witness when it comes to this episode. So, we were excited to learn about how to keep our 2021 filings simple and get some of the questions answered that are coming through. I know you’re hearing them all the time, every day. So, you’re getting a ton of questions in regards to the child tax credit. Do you know if receiving the advanced child tax credit will cause any kind of delay or complications?

Sue  03:37

Only if you don’t report it accurately. So, here’s the deal is most people who were eligible just started getting advanced child credits monthly starting in July of 2021 and it was either, 300 per child if their child was under six, or it was 250 per child if their child was six to 17. As they got that, it reduces what their credit is on the back end. So, for one year, and one year only, they raised the child tax credits to, like I said, 3000 for kids aged six to 17 and 3600 for kids, zero to under six. So, then they gave part of it in advance half of a year. And then they’re putting it on the tax return, but it has to get reconciled, you know, reduced by what you already received. Now, there was a lot of issues last year when they gave the stimulus and people reported what they got. People didn’t remember too well and so; it caused a lot of problems and there’s a lot of backlog at the IRS. So, this year, the IRS sent out letters in January There was letters to people that said, here’s how much we gave you for your stimulus and then the second letter was, here’s how much we gave you in your advanced child credit, as long as you hang on to that and give it to your CPA or use it, when you’re filing and do that reconciliation, then there’s no holdup on your refund and that’s why the IRS said, file early, file electronic, file accurately, and use direct deposit. So, accurately they sent out that letter to help you reconcile and be accurate. So, I think we’ve got a link on the IRS that you can learn more about that if you understand IRS lingo. Yes, Lance.

Lance Johnson  05:49

So, on that link,  because I can see clients, I got the letter, but I moved or I threw it away, I didn’t recognize it, is there a way to individually go and see what letter was sent to you?

Sue  06:07

I believe you can, because there is a place I don’t know if it’s in this link. But there’s a place on the IRS website where you can log in to your own personal account and it’ll tell you those things. It’ll say, here’s how much you got a stimulus, here’s how much you got in advance child credit. I apologise I don’t have that off the top my head. But yeah, if you go on the IRS and say, how much did I get? I think it’s even one of the topics that you can click on when you go to irs.gov and that’s the place to find this.

Lance Johnson  06:42

Maybe we’ll add that link, because people that not sure could go, that’s the one thing that’s going to hold up the return. Now, one thing to tell the clients to do as the IRS moves into the electronic age, is that we can verify and then the happier the client is.

Sue  07:04

Well, the quicker it goes, things move along. smoothly for me and the client.

Rob Delavan  07:14

Just for reference for you guys, the website is, ww.irs.gov/credits/ deductions and then 2021- child tax credit and advanced child tax credit payments topic, a general information.

Sue  07:32

But if you go right there view your child tax credit payments, click on that, and away you go and you’ll find it out. Or if it’s the same with the stimulus, execute your stimulus status, it’ll tell you how much you got when you got it, all that stuff. So, it’s trying to help you.

Rob Delavan  07:53

Awesome, love it! So, question number two I have for you, Sue and Lance,  with these changes to child care tax credit, what can be done to proactively make this process easier? You dug into that a little bit Sue with kind of the changes? But how would that affect how you do tax planning and specifically what goes run through those changes again, and you’ll both have your own interesting take on it.

Sue  08:28

Okay, so, we talked about the child tax credit, and, like we said, the advanced credit and all that kind of stuff reconciling, but there were also some changes to the child care credit, the dependent care around 2021. So, they raised those limits to be able to allow to be more realistic. Honestly, for one kid, they only had $3,000, 02 kids were $6,000. It’s like, no, that’s not what people pay. Yeah, I received my daughters for one child this week, not realistic at all. So, they raise those limits so that people can get more credit. Again, I’m not going to give you every detail, but you can find it on the IRS website, we’ll put a link I can put things on our websites as you know, the ROI taxes items that you would be interested in. Your other question talked about simplifying my process and we alluded to it in our last question, but to reiterate, making sure you have all the documents, keeping things that say important tax document or you get an organized or I’ve also started sending out generic tax list. I sent to some people that said, here’s anything and everything you could possibly get just throughout the year, putting things in there that you’ve done, stock sales, donations, all that kind of stuff and these type of things with child care, credits, or whatever and then as soon as possible, uploading that, dropping it off, scanning it in to get to us makes our job easier. So, we’re not chasing after you to get information. If my job is easier, we get your taxes done faster, the refunds on the way or it’s just out of the way, you don’t have to worry about it for the rest of the year and you can move on to tax planning, which is the more interesting and exciting process. So, this is smooth, simple and a no brainer and taxes become not a worry, and a chore and a burden. But okay, here’s what we do. Once a year, it’s a good thing. So, that’s my take on it.

Lance Johnson  11:07

Yeah, and I would add something to that where with these changes, there’s always income phase outs, one person may get the full benefit, another person might not get any of it. So, being on more of the less of the compliance side, more of the planning side, urine tax planning really kind of helps address some of that. So, there’s this game that we play that everybody has a tax liability, and then you match up your withholdings to get a slight refund, or it’s like, oh, but the closer to zero it is with all these changes. We want people to know that in the fourth quarter of the year before. So, they know they’re close. Ideally, we always try to position clients with a slight refund on federal and state. But we’re having that conversation in the fourth quarter of the previous year. So, there’s less anxiety of all these changes coming in. Now, sometimes we don’t know all the changes. But we know they don’t get solidified until after the first of the year. But they’re talked about and then if we’re close on the base stuff, then they’re small enough changes and then in the planning, we look at dependent care, there’s all sorts of questions in the planning side. So how much is that now more realistic, and then how much of it is the dependent care credit versus pretax with your employer, that conversation needs to happen in October, November, or you lose a whole year. So, that tax planning, we have dependent care, we just would encourage you to engage Sue and I in tax planning in October, November during open enrollment,  we can help you make those decisions that have to be done there for a future scenario. So, that’s what I’m good at, planning becomes clients are happier when they know their bill in October and November for the next year in April. They’re just happier, and then they’re able to make adjustments before top 31.

Rob Delavan  13:21

That would be my take. So, the third question I have for you is, how will the stimulus checks affect my taxes?

Sue  13:35

Okay. In theory, it shouldn’t be at all, you either got it or you didn’t. So, here’s what goes on. Everyone who was in the income threshold would have got that last year. So, one for 2021 was $1,400 a person, husband, wife, child, that type of thing. So, the IRS trying to make this easier, has sent out these letters in advance that says, here’s what you got. So, you bring that to your tax person, and they enter that in so that there should be no, no problem reconciling that. Now, I did have a situation just the other day where somebody didn’t get their stimulus because their income for 2020 was well above the limit that they could have got it, 150,000 is the limit for a married couple, and 75,000 for single. But this year, their income was down because they had an unusual capital gains situation in 2020. that causes them to be over 200,000. But this year, their income was back within range, they dropped below 150 and boom, that 2800, 1400 for each of them showed up on their tax return. So, how does it impact? It’s either going to be you got it last year, or woohoo, we got it this year, and you get some extra money. So, it doesn’t play into Oregon, there shouldn’t be any issues with that. For this year, if we’re talking to Oregon people, or I don’t know specifically about other states, but you either got it or you didn’t you get a letter from the IRS, maybe your income dropped and you get it this year, that’s the most that should happen with the status.

Lance Johnson  15:54

So, it’s kind of interesting at that point, I love the whoohoo. Because what happens is, if you got it, then you just got it during the year, and it shouldn’t affect your taxes, you should have gotten it. But you didn’t, because you didn’t qualify but you qualified from the previous year and we did plan and let’s say you just get a slight refund 200 bucks, I’m just making something up. You get the woohoo, I didn’t get it, and I should have gotten it. So, I’m going to get a higher refund and that’s always a psychologically a better scenario.

Sue  16:36

Yeah, it’s bonus, everybody loves the winds.

Lance Johnson  16:39

There is a situation where  some people have a reluctance of having their refunds direct deposited or taken out of their account and sometimes that is better because I’ve seen situations, and not everybody’s going to agree with me on this. But if you had your refund, or you’re owed taxes come out of your tax return on a certain day, then the IRS knows how to deposit into your bank account and there is a lot less work on the clients and the CPAs part, having that automatically done. Then there’s there is issues where, hey, I had that bank account last year, but now that bank account is closed  or I did the paper thing, didn’t recognize the cheque I moved. There are just all sorts of scenarios, but I know electronically, if that happens, it seems to be a little smoother, if you can set that up.

Rob Delavan  17:45

So, the last question and final thoughts here is, what would you recommend clients do to allow you to serve them better and Lance on the tech side, Sue, and basically to process things more efficiently?

Sue  18:04

Okay. Well, I discussed a little before about that in another question, but just reiterating, of course, is have your documents, have them ready and get them to us as soon as you being able to have them upfront, process them get to, like 90%, and being able to have them come in and do an appointment and we can discuss maybe some other options that they can do, and I can refer them to Lance on the financial side, it just is going to make the process go smoother, and things go easier, and then having some other things to be able to do financially but getting the documents getting them early, getting them processed, that helps things go smoother on RN.

Lance Johnson  19:04

On our side, the CPA is more on the compliance side, getting everything done, obviously, in a timely fashion. We’re on the planning side. So, when somebody does plan and they know they’re going to get a $200 refund, and they were able to utilize all the benefits during the year that has a lot of them have to be done before 1231. Clients feel like we’re being very proactive versus reactive and that always sits better with clients. No client wants to learn that in March or April. They owe money but if they just sat with us on November, and they could do two or three things that reduce their tax liability by 500,000 $2,000. That person is always going to feel alone Better that we did everything we possibly could, it’s just February, March, April is not the time to do that, it means you still want to do it as much as you can, but the choices are a lot less. So, we find that the attitude of a client is much better if we really address that, then when we actually do the taxes, you know, anytime you can get the data beforehand, so that when Sue meets with you, you’re 90 something percent done with your tax return, instead of bringing the stuff to her, I watch clients bring stuff to her on that meeting, that particular half an hour and 45 minutes with Sue is so valuable, I don’t want to waste it with her and the clients with just delivering data. I want to wait, I want to utilize that 45 minutes during February, March, April, where 95% of the tax returns done compared to the urine taxes and we’re just strategizing on what you could do today and what you can do before April 15 and what you can do in the current tax year to change the tax law, that’s the best use of Sue’s time with that client. So, if we can get the data ahead of time, we will have that tax return almost completed and then there’s less backlog of stuff that needs to be completed before April 15 and for any CPAs Health, the less that they have to work 90 hours to do silly stuff versus 90 hours to do impactful stuff. I just watching the clients walk out of there that do that. They are just ridiculously happier.

Rob Delavan  21:44

So, for Sue, for all of those procrastinators out there, it does not serve you well.

Lance Johnson  21:51

So, this is actually a great point. So, not everybody has to file by April 15. So, what happens is if we identify clients that need a little bit more time, because they’re procrastinators, but we did tax plan, and we’re in a position to have a refund, then you’ve covered your liability, you don’t have to file by April 15, you could extend because you already covered your liability, and then you could take a little more time to identify the planning aspect. But if you owe you the pressure is on her to figure out how much you owe to get you to a refund side. I think from a client compliance standpoint, we know that and October November, and you are kind of a procrastinator, then refund or extending is not an issue for those clients. I think it just sets up the expectation a lot better for Sue and the client.

Sue  22:49

I would add one more thing that I don’t even know if I should say is, if you come to me April 1, and asked me to complete it by April 15. It’s like, do you want April 1 Zombie CPA or would you rather I was fresh, like, and I’m happy to see you. I don’t think you want zombie.

Lance Johnson  23:14

Does anyone ever benefit when you’re dealing with a zombie? Has that ever worked out? Well, I don’t know a movie that ever has done that.

Sue  23:25

Protect your brain, yes,

Rob Delavan  23:26

Exactly. I love it. Well, thank you so much for all of this this information. This is huge. Obviously, there’s a theme here, we want to get ahead of the curve. But Sue, this is huge value for our listeners and Lance also. The best way to find Sue is visit her at her website, www.ROI-tax.com. That again will be linked to the notes below and we have another six more episodes on this one. So, please stay tuned a part series, right Adrian?

Adrian Schermer  24:06

Yes, I really am, I wish I could say that I’m joking, but I’m not. It’s good info and it’s going to save you money and save you time and it might save you a little bit of sanity.

Rob Delavan  24:15

So, episode three, just a teaser here. We will be learning what to expect in 22 when it comes to your taxes. So, love it. Thanks all for being here.

Lance Johnson  24:26

Okay, nice job, everybody.

Rob Delavan  24:27

Catch you next time, folks.