43. ROI TAX SERIES 7 OF 8 – YEAR-END TAX PLANNING

TAX SERIES 7 OF 8

Adrian   00:02

Hello future millionaires and welcome back to the get rich slow podcast. We’re your hosts, Adrian Shermer, Rob Delavan and today we have Sue Hort with us for some more tax fun.

Rob Delavan   00:12

Good afternoon and welcome, Sue.

Sue   00:16

Thanks, tax fun. I serve that up.

Adrian   00:19

Part seven in an eight part series. We’re nearing the end, which makes me sad. Not the end of tax season, though, because that seems to be Gosh, thanks to COVID I guess I just bleeds all the way through the year at this point, right? Like it’s just a constant so, throw an extension in your two years out. So, today’s episode, it’s about yearend tax planning. So, we’ve talked a bit, I mean, most people attack their taxes right from a what happened before kind of standpoint and I think a big message that we’re trying to push here is that you can plan ahead and you can make differences in how you’re going to operate and it can save you a considerable pile of money, can save you from silly mistakes. I personally have made plenty of silly mistakes. I’ve gotten enormous tax returns before, AKA I gave a interest free loan to the government. Here’s how we can help you dial in what your situation is. So, that you’re not lending the government money, even though that tax return can feel really good at the end of the year. That’s what you’ve done. You’ve let them hold on to your money without interest. So, Rob…

Rob Delavan   01:34

Okay, well, before we dive too deep into that, upcoming events, please go to ROI-FA.com/ events. We have a full list of this year and actually, I think we’re starting to do next year’s. On our website we have of course ROI-FA.com, Delavan-realty.com and directorsmortgage.net. Just search up Adrian Shermer and go from there and then Sue our wonderful co-host for this short series is at ROI-tax.com and Lance is seeing clients today. So, we’ll do our best to make sure that we keep this thing moving. So, seven in an eight-part series, we’re getting close, like you said and the last episode, of course, we got some of our questions answered in regards to real estate and taxes. I think we just barely scratched the surface but it was something and now we’re going to just jump into this tax planning conversation. Okay, so Sue Hort, our trusted CPA and trustworthy all around person and so you’re in tax planning and why it’s important so let’s start out with just the time element, when’s the best time to begin your own tax planning, Sue?

Sue   03:09

Trick question, tax planning is a year round event. So, we start during tax season, because that’s when I see people or talk to everyone in one way or another and so we’ve got your current year taxes going on and we might be able to see some places that we could possibly do things for the last year. But most importantly, we’re looking forward to what can we do different for this year to help this client? So, we’ll start by saying, okay, let’s make you an S-Corp or you started a new business and we want to look at how you’re doing. So, I’ll plan out with my client to let’s touch base in July. Let’s touch base in October and if we need to December to see how they’re doing to see what incomes doing should we do more in estimated payments, have they done better or worse? Just various things or their investments, how have investments been going this year or the year they have a lot of capital gains, let’s harvest some losses, you know, we’ve got the tax planning and it should be all year round some check ins.

Rob Delavan   04:30

And then in that process, are they continuously providing you information or updates or year to date, books, what’s that look like?

Sue   04:44

Most definitely, so they’re providing me information throughout the year. So, we’ve got that first year. I’ve run a business client and I tell them yes, I can give you estimates. We’ll start out with something but I need to talk to you say in July or August, because there’s an estimate coming in September. So, I want to see how the first six months went and then I want to talk again in October or November to see how we’re doing towards the end of the year. So, they’ve got to provide me some of those books. So, they need to have a bookkeeper or be doing bookkeeping and then the same if maybe it’s rental properties or investments, did they sell a property? Did they buy one? Are they doing a 1031 exchange? I’m going to need some up to date things regarding all that so I can make and help them make those decisions.

Adrian   05:38

In my opinion, this is the coolest part of using a CPA. I’ve got anecdote after anecdote of this, Sue, I think we were just working with someone where some parents were going to be gifting potentially equity in a property as they moved it from and there are all these questions. What are the implications of that? What portion of that from a tax perspective is a gift and I can’t tell you the answer to it on this podcast, because it would be different for everybody. It wouldn’t be fair for me to say, oh, do it this way because it just depended on what did the parents make, what did the kids make? What are their sources of income and I know, at least if I’m gonna throw an anecdote under the bus, it’s when my wife started her business, you helped us slide all the expenses into the correct year and it saved us literally 1000’s and 1000’s of dollars, I think we broke 10,000 in how much money was saved because of the consequence of what we were able to write off.

Sue   06:36

Yeah, it’s all those kinds of things that make it important that we’re doing that planning and there is a charge for tax planning anywhere between 750 and 1200. It depends on what kind of work you have involved and what’s going on. But how many 1000s that I can save you in taxes, because of this planning, just like Adrian’s talking about, you know, is priceless, I guess, I mean, there is a price but it’s well over $1,000, that you would pay me to help you throughout the year to do this and so that’s what I want to do, that’s one of my core values, I want to help people so that they don’t feel so in the dark and so overwhelmed and afraid of taxes and this is the way to do it and we get things set up, you start with one year, but it takes about three to five years to kind of get on a good smooth plan.

Rob Delavan   07:42

I mean, we always have to remember everybody’s results are going to be different, whether it be Adrian and his family versus and what did they say in the financial world past results are no guarantee of future results or something of that effect with that being the case, you’re talking about a serious time savings when it comes to actual tax season, because taxes are basically all but done by the end of the year is one piece, so there’s no scramble in April 13th to try to get things done by it’s just not the case and then of course, if and when it does happen occasionally where somebody says, oh, should I be doing tax planning and their situation super simple. The first thing you’re probably going to say, Sue, I just because I know how you run your business, is you take a quick look and you’re going actually, no, this really isn’t for you. I mean, you’re a W2 employee that just it’s very simple. You don’t need tax planning, it’s not worth the cost that I’m going to charge you but for most people, that’s generally not the case.

Sue   07:55

That’s correct. I mean, if you go anything beyond, I own a house and have two kids say two rentals or even investments or I mean, I’m gonna throw out this one, I was helping a family member and they have way too much withholding because the first year I did it, they were under withheld and they were so upset that they had to pay. So, they went totally the opposite direction. So, I’ve been helping them now with dial it back and then gently doing things like well, look, you could put money into a backdoor roth and you could do more to the 401k and various things. Maybe you do a roth and a 401K combo, so there is some things to be added to people, even if they are W2 but that’s if they’re making good money and they’re interested in retirement and savings and how to not give the government alone.

Rob Delavan   10:07

So the last question for you on this topic, Sue is do you have any recommendations on systems to keep your paperwork and filings in order so that you can do this time, efficiently?

Sue   10:20

So, there’s a lot of different ways and it depends on the individual. So, you’ve got some, I’ll say, people younger than me, who might be more into the apps or the online, there’s various everything from apps on the computer that you can scan in and save tax documents and so I think we might even have a couple of those links at the end of this…

Adrian   10:54

Pretty impressive software has getting better every year too…

Sue   10:57

For sure, I had somebody tell me, they could scan it in and it automatically went into their business expenses like directly onto a financial statement. So, I had to kind of tell them, well, that’s great but you’ve also got your bank feeding into your financial statement information and you could be double counting. So, that’s where we have to kind of have a conversation about that kind of thing but in addition, there’s the good old fashioned paper filing, and, but what’s most important is I tell people have your this year file where you’re putting in receipts or documents or something like that and then once you get the tax return from me and you’re all finished, then you package up the tax return with those receipts, if you have paper copies and put it in the tax box somewhere. I mean, there’s a possibility you might need it someday, especially when people ask me, what do I save? I say seven years only because I have to save seven years and I know there’s a reason and they can only go back three years and audit.

But if you file late, they go back three years from the time you actually filed and sometimes if they audit and they find something, they go back farther. So, I think Oregon, could go farther than Federal and so that’s why I just say rather than three or five, I just say seven and the only documents that you would keep older than that is if you wanted to keep your house purchase or house sale. Most important would be house purchase, really but there’s the old fashioned file where you just put everything in. I also tell people if they’re got a house and they do remodels and improvements have a house file that rolls forward every year because there’s been a lot of people in this past year who sold their house and they’d been there 20 years, 25 years. They can’t exempt the whole game, they can attempt up to half a million, but there’s people I’ve had with a million or 2 million and this people who have a farm in particular, I’m thinking, so you’ve got to have all those improvements to add on to your basis. I could go on but I don’t know how much you want me to go on.

Adrian   13:29

There’s always more that’s one fun thing about this. There’s another was another layer to unpack, but we’ll only go so deep on this one.

Rob Delavan   13:40

Okay, so the final thoughts here, Sue, obviously are pick some systems, go with it and you got to plan ahead, that’s tax planning is incredibly valuable.

Adrian   13:55

That reminds me one of my favorite quotes “the best system is the system you use”.

Rob Delavan   13:59

There you go, that makes sense. So, speaking of systems we use, the best way to find Sue is to visit her at her website at www.ROI-tax.com that will be linked in the show notes along with our disclosures. I think Sue you had a few links to some different articles on ways to save…

Sue   14:23

And how to save things and like Adrian says everybody’s a little different and whatever works for them, I can use.

Rob Delavan   14:33

And then so in our final episodes, so this was number seven. Our next one and final one is episode eight, in eight-part series and we’ll be learning about why your financial advisor and your CPA should be working hand in hand. So, that’s it for today. Thank you both, special thank you to Sue for being here during tax season and you only have about a month left. So, keep up the good work, all right, take care everybody, thank you.