Smart Tax Planning Moves with Sean Mullaney #331

In addition to providing a fiduciary financial advice to his clients, Sean also writes over at PHI tax guy dot com, where he blogs, of course about financial independence and taxes. And so with tax season upon us, we wanted to bring Sean on to discuss what listeners need to know about filing their taxes this year. So Sean, thanks so much for joining us today on the podcast. Matt and Joel, thanks so much for having me pleasure to be here. Sean,

We're so glad to have you. And the first question we ask everybody that comes on the show is gives us like a window and the kind of person you are and Matt and I we drink a craft beer on every episode because we love beer and it's one of the things that we're willing to splore john now while we're also saving and investing intentionally for the future. So, um, yeah, what is that in your life? What's your craft beer equivalent?

In my life, it would be travel to Hawaii. So I grew up on the East Coast, and until my honeymoon three years ago, I had never been to Hawaii, and now that I live in California, Hawaii is very accessible and my wife and I have now been twice, and in after coronavirus, I'd like to get back. And these days, actually a little uh side diversion I have is occasionally watching on YouTube some why travel videos. It's just a great place, so many different types of environments

and leisure activities. So in my life, vacations in Hawaii would be my sort of craft beer equivalent. For you guys, I'm jealous because you can get their way cheaper than I can from the East Coast. What's the typical affordable ticket. What's a good price for you? Well, boy, it would be like maybe four dollars would be a good price where we've had some savings is through thank you points. My wife has credit card points that were able to use for accommodations, So that's sort of where we get

the financial savings. In terms of going to Hawaii. Airfare is still relatively expensive though that was certainly true before coronavirus, and I suspect it's going to be true after coronavirus. Well let's not. Let's let's dive into some of this. Some tax talk got quiet and educational and and and work history. How did you kind of like make the jump from the corporate world to doing your own thing to starting your own business. Yeah, so I've always been

been interested in personal finance. It's always been sort of a hobby of mine. And I had a career in corporate tax that really treated me well. It was a great career. I got to travel to different client sites and different parts of our country. Um, but I always had that sort of longing to do my own thing and to go more on the personal individual side of finance. And so eventually I saved up some money and decided to leave big four accounting and start out my own venture.

And I set up my own registered investment advisor firm I've been doing it as of this recording being released a little over two years and it's been a great adventure. And you know, recently I listened to a podcast where it was someone who has their own business and they said, yeah, well we've been doing it for two years, so we're really only just beginning, and that wrung true to me. I said, Wow, isn't that interesting there two years in. I'm not even two years in and there's saying they're

just beginning, and I think it is. There is that piece of your learning the business of the business, right, So you know, I provide financial advice to clients, but I'm also building my own business and there's always lessons to be learned in terms of building your own business, which I'm sure Matt and Joel, you guys learned lessons every day. We like to think, Okay, I know this business and I can run this you know, no problem.

There's nothing new under the sun, And it turns out when you're running your own business, there's a lot of new things to be thinking about in terms of how you run your business, all right, So I totally agree Matt and I were learning every single day about you know, working together too. Especially when you're working for someone else and you're not a solo preneurs. There's an element of

that right of partnership. But yeah, Sean, what have you learned, Like, what are some of the biggest lessons you've learned in the first couple of years kind of getting up to speed. I would say having grace with myself in terms of results. Right. So, I think there's this impression when you work in corporate America, right, that we're always going to be successful, and we're always going to meet our numbers, and we're never going to make a mistake, especially in terms of UM client acceptance.

So I'll give you one example. No is a very powerful term when you're a solo preneurs, right, because there are times where opportunities come to you and it's like, Okay, if I take this opportunity, I'm going to make one X. But if I say no to this opportunity, I'm going to be able to say yes to another opportunity which will pay me two X or three X. I think when you work in W two Corporate America, there's this pressure to always say yes to any new assignment, to

any new challenge. In being a solo preneurs. I've found that sometimes no is the most powerful term, because yes, you're saying no to one opportunity, but by saying no to that opportunity, you're saying yes to something that could get you two or three times the amount of revenue or rate per hour or whatever. Is So the power of no is so important, and it's something we're not conditioned to say. We're conditioned to say yes to our teachers,

our professors, our parents growing up. And then it's like you become your own business person, and you probably better be saying no because if you just say yes all the time, you're gonna take work that probably isn't the

work you should be doing. Yeah, not just from from an income standpoint, but from a just a self fulfillment standpoint to you, right, you know, and Sean, I feel like this kind of leads into maybe your definition of financial independence, which you know you mentioned on your site. It's not about getting rich. So what does financial independence mean to you? What's your what's your definition? Yeah, so my definition of financial independence is arranging your finances so

that other things in life can take the priority. Right, So I believe what you're trying to do in financial independence is get to a place where you have more options for the things that really matter in your life, whether that's your spouse, your children, travel, charity, um, working a more flexible schedule, right, all these sorts of things as opposed to um, Hey, I have a fine number, right, I'm going to get thirty times my expenses every year,

or twenty times my expenses every year, or twenty five times. There's nothing wrong with that, right. There are plenty of people in the fine movement, the five community, whatever you wanna call it, that say, my goal is to get twenty five times of my annual expenses, and that's financial

independence for me. I think that's great. But for me, it's more about let's make good decisions in our financial life that gives us better financial outcomes over the long run, that gives us more options for the things that matter, for our faith, for our family, for charity, for travel, all those sorts of things. Yeah, it's a nice holistic beau Sean. I appreciate your perspective on financial independence because, yeah, sometimes it can be all about the numbers, and you know,

we leave behind real life in the process. Um, And let's let's talk about taxes too. That's what we're gonna spend most of the rest of this episode talking to you about. And the real reason that we want to talk about taxes is because there's a lot of money on the line, and some of the money moves you make will affect your how quickly you're able to reach financial independence, maybe as an end goal, right, but also

in the interim, how that affects your life. So to put things in perspective for folks, how much money could like the typical American household be unnecessarily paying in taxes? How much could poor tax planning actually be costing us? Yeah, so I think it's it's hard to exactly quantify it. I look at it in two buckets, right. One bucket

is what I'll call tax optimization. So folks, for example, I've seen it where folks leave something like a roth ira on the table, right, So they qualified to contribute to a roth ira. They had the money to do it, but they didn't do it. Right, So the money remains in taxable accounts in any one year, that's only gonna cost you a relatively modest sum that will build up over time. Right, So that's going to be very dependent on just how much income you have what your marginal

tax bracket is. But you know, let's just say you for went, you know, for went roth Ira a contributions of six thousand dollars over a decade. That's sixty tho dollars at least that could have been in a rath. That's now in taxable accounts. You know, even at a two percent yield, that's twelve dollars of dividend income every year. That's now going to hit your tax return every year. Even at a qualified rate of say fifteen per cent, we're talking about two hundred dollars of leakage every year.

That's compounding. Right now, That's not the end of the world. Okay, there's still ways to get to say financial independence or retirements if you're not optimized. That's one example. Here's the second example, though, what I'll call um tax problems. And where this is is, hey, you know, um, this isn't a roth Ira. This is I'm going to set up my own business. I'm going to set up my own s corporation and I'm not going to work with a professional, And so what do I miss? Maybe I miss paying

myself a reasonable compensation out of that s corporation. Maybe I miss my solo four O one K, or I what I do is I over contribute to my solo four O one K. Now I have excess contribution taxes. Now I have planned disqualification I have to worry about.

Now I have remediation costs. When the I R S comes in and says your solo four one K is no good or you have to go apply for they call it the voluntary compliance program to solve that or fix that solo four one K, or the I R S comes in and audits you and says you owe all these back payroll tax taxes plus interest on that right.

So that's where it's like, hey, you know, if I'm gonna be a little more sophisticated in my life, that's fine, But that's sort of an addition of you know, wait a minute, I should get a professional involved in my life just to make sure I'm not missing opportunities and I'm complying with the law in such a way that the I R S can't come back to me and say, hey, where's all those payroll taxes you know you owe us?

Where you know you put too much in your soul for one k you know, you have to withdraw that and pay attax and deal with that sort of stuff. So I think it's two buckets Matt and Joel. It's a little hard to quantify because it is so specific to your situation, but you know, I look at it as with some advance planning. You can say, on the right side of the I R S and take advantage of all the legal opportunities you have to build wealth

in a tax advantage matter. Yeah, yeah, it's not just about the savings here now or a month a month, but I mean the amount that you could be kind of screwing yourself over could be I mean, theoretically it could be infinite. You know, Like I guess, it just kind of depends on how let you are earning, because a tax mistake for for Bezos is gonna look a lot different than a tax mistake for Joel. Well, and another thing to think about is just the concept of

tax insurance. Right, So the idea of a roth ira, for example, it's such a great idea in part because you lock in today's relatively low tax rates. We don't know what tax rates are going to be in the future. It could be that they come down, but considering the federal deficit and other factors, it may be that tax rates go up, and it may be that you're gonna live years. Wouldn't it be nice to get into your eighties or nineties and just know that you have tax

free accounts that are growing tax free. You never have to worry about requirementum distributions, You never have to worry about tax rate increases. To my mind, it's like, let's get some tax insurance, you know, let's do some good tax planning to get money into tax free accounts if we can. And you know what if tax rates never go up, well, it's insurance, right. It's like when we pay our auto insurance bill every you know year. We hope we never use it, right, we hope it's a

waste of money. Yep, knowing that I don't need the case that yeah, um, we're never going to use this, but very likely we may have to use it at some point, and we're gonna be glad we did that if we ever have to, uh, you know, to be worried about increasing tax rates. Right. Yeah. And so you know, we're talking about some different situations here depending on the person. But you know, for you, as someone who helps other

people with their you know, with their taxes. Can you give some thoughts on like when doesn't make sense then to do your own taxes and when people need to maybe hire someone to help them file their taxes. Yeah. So, if your tax planning is limited to I have a W two, I contribute to my four O one K, I contribute to a roth iarra, I'm well within the income limits of contributing to a roth DIARRAE. That doesn't scream out higher. A tax return prepare doesn't mean you

shouldn't write at all levels of sophistication. You should consider hiring a tax return prepare. But some indisha that you might want to hire a tax return prepare often involved things like self employment, having your own business, possibly having a side hustle. Those are in disha that boy, I might need to um hire a tax return prepare. Another one would be life changes. Right, so I have my first child, I get married, I have a death in the family, some big change in my life. I buy

a house for the first time. That could also be an indisha that you know what, maybe I want to hire a professional to do my tax return this year. Yeah, and Sean on your blog you've written about how looking at your return from the prior year can actually help you when it comes to filing your taxes for the current year. Absolutely, when you're doing that, like if you're trying to d I y uh, one are the things you need to be looking out for from a prior

year's return so that you can do it yourself. So I would look at things like, did I file a Schedule C, right, so that is self employment income? Did I file file a Schedule E that's usually rent and royalty type income. UM. I would look at things like h S A S. Did I take an hs A distribution? Right? If I'm young and healthy and I took an hs A distribution, that could be a planning opportunity that no, I want to in the future keep that money in the hs A to grow tax free for a long time.

I would look at my scheduled D. So their scheduled D is for capital gains and losses. UM. There's a box on there for something called capital gain distributions. While I'm not here to give anyone investment advice on this podcast, i will say capital gain distributions are sort of the boogeyman of the investing world. Right. So these are distributions where you have a mutual fund or an e t F and it generates these things called capital gain distributions

because there were sales inside the mutual fund. Some of them are unavoidable, right, So having some capital gain distribution is unavoidable if you're gonna invest in taxable brokerage accounts, perfectly fine. But if you've got a big number in that capital gain distribution UM box, you might want to think about, Hey, is there a way I could reallocate my portfolio? You know, in in a tax advantage manner, you still gotta worry about gain on the sale of

that would be generated if you reallocate it. But maybe you have a loss in that security and it generated capital gain distributions that can happen. Maybe there's an opportunity to do some reallocation of my portfolio if I've got a big number in that box. So those are just a few examples. Like you said, I blogged about this. It's a little bit of a way of let me take a look at last year's tax return with a critical eye. Maybe there's some planning that that tax return

will reveal to me. That's good, that's good. It's you know, it's good to see who needs to consider maybe some professional help. You know, It's something we talked about here often on the show. How there's a lot of the basics that you need to know that you can figure out yourself, but when it comes to to tax law and how that's kind of constantly shifting and and just all the fine nuances, sometimes that does make sense to

bring on a professional. Uh, you know, and we're talking about the massive impact that doing your taxes can can have on you. And so actually after the break, we're gonna dive into what it is that we need to pay attention to when it comes to filing your twenty twenty taxes. We'll get to that right after the break. All right, we're back and we are one month out from tax day, and that's part of the reason we wanted to have Sean Millennial to talk about smart tax

planning moves and Sean. Before we dive into some of the specifics that people need to think through when it comes to tax specific issues, I kind of want to ask you something. A question is just a little more broad. Uh. If we put I think maybe too much emphasis on tax planning, are we potentially letting the tail wag the dog.

I know that that's a concern that some people have, is that maybe they're thinking about out taxes too much, they're overthinking it, They're they're trying to get their tax bill down so hard that they're forgetting some of the other things that are important in life. How much of an emphasis should we be putting on tax planning in our lives. Very much agree that we don't want to let the tax tail wag the dog. Right, So your goal is something like financial independence. Maybe it's retirement at

a certain age, maybe it's funding the purchase of a home. Right, you have financial goals. Your goal isn't to get the latest and greatest tax planning technique and get that on your tax return. Right. That's a tactic that, in many cases maybe a great tactic. I'll give you one example, tax planning for your kids. I see this a lot in the world as I talked to prospective clients social media.

Folks want to do tax planning that would benefit their children, and I think that's okay, But I think you should take care of your own finances first. I think that's the sort of thing if you're a financial independence go ahead, and start thinking about tax planning for your kids. But if you're you know, in your late twenties, early thirties, you've got a four year old and a two year year old at home, and you're doing fine, but you're

nowhere near financial independence. Any tax planning that's for your children I would put off, even if it's for college savings, right, I would invest in your own taxable brokerage accounts. You can mentally segregate that is, that's for junior's college education, but it's in our name, and it's our asset. And if we do really good financially and they turn eighteen and they need money for college, we can tap into that resource and pay for some or all of their college.

But maybe at age eighteen, we aren't doing so well. Mom and Dad's finances aren't so good. Isn't it good that we've put that in our own accounts so that we can help ourselves. The best gift you can give financially to your children is stabilizing your own finances. Your kids have plenty of time to pay for their own college.

You want to make sure your finances are stabilized. And once that happens, you get to say financial independence, then start thinking about maybe some tax planning for your kids if you qualify. And it's the right answer. I love it.

That's a great example, and so shout, let's let's talk. Now, let's shift to right that there are some specific tax issues that have come up because of the year that is formally known as I guess now referring to it down the review, I don't know, but uh so, first, for tax paper payers out there who haven't received their full stimulus payment, how do they go about receiving what they are entitled to? So there is an opportunity to

potentially receive more of the stimulus. Right, everybody thinks of the stimulus as those checks or direct deposits that came from the I R S during but it turns out what it is is it's a tax credit on your tax return that was essentially prepaid by the I R S. And so what you want to be thinking about is how much money did I make in twenty and if I made less money twenty than I did in nineteen, that's one example there might be an opportunity to actually

get more stimulus tax credit. Let me give you a brief example. I've written about this on my blog. But let's just say in twenty nine in you know, it's a married couple no children. They did really well in twenty nineteen, so they had two D twenty thousand of adjusted gross income. Based on that adjusted gross income number, they got no stimulus check from the I R S. Right, Let's just assume that's all true. Let's also say that one of those spouses in lost their job for a

while because of coronavirus. Okay, so they're adjusted gross income went from two D twenty thousand to one fifty six thousand dollars. Okay, when they filed their twenty twenty tax return, they're gonna get a whole lot of that stimulus because they're below the phase out ranges forgetting the stimulus. And not only that, they may have an additional tax planning opportunity. Let's just say they got no stimulus money. There's they've drafted their tax return. It says one fifty six thousand

of adjusted gross income. What could they do? They could if one of them was not covered by an employer retirement plan, which is very possible stay at home spouse. It could be you work for a small employer. They don't have a retirement plan. That couple could write a six thousand dollar check to a deductible traditional I RA that would lower their adjusted gross income to a hundred

and fifty thousand. They would save probably federal income tax because they just have a deduction, but because the way of the way the stimulus was structured, they would save an additional ten percent on their federal income tax because they would get six hundred dollars in that example of

six thousand as additional stimulus. So in though they're in the federal income tax bracket, by writing that six thousand dollar check to the traditional IRA and deducting it before April fift and again this assumes that this is the spouse who is not covered by a workplace plan. They save one thou on their federal income tax orty. That's pretty good. And here's what they could even do after that.

For one, they could convert that back to a roth IRA and assuming they are still in the tax bracket, that would come back into income at a two percent hit. That's one thousand, three twenty dollars, so they would save twenty on tax return. They would pay Uncle Sam twenty

on the one tax return. They would net six hundred dollars uh in federal tax savings, and the money winds up in a roth IRA anyway, So there's certainly some planning opportunities to maybe max mise your stimulus if you didn't get the full check back in Yeah, I feel like sean, lowering your adjusted gross income has always been an important tactic, right, Taking advantage of those tax advantaged accounts retirement accounts to lower, you know, the income that

you report on your tax return is a great move to lower your tax burden in the here and now, But it feels like it's it's even more important these days, kind of like you were just talking about the implication that it can have on stimulus payments or healthcare subsidies or you know, maybe what what you're able to qualify for in financial aid from colleges. So yeah, like, can you talk more about maybe how the added importance of

lowering your AGI these days? And then yeah, are there any uh, with a month left to go before the tax filing deadline, how can people um basically lower their a GI even more? Uh? Legally of course? Yeah, So a g I adjusted gross income or a related concept,

modified adjusted gross income. It's sort of test in the eternal Revenue Code for many different benefits, qualification perhaps to contribute to a roth IRA, UM premium tax credit for UM Affordable Care Act subsidies, right, these sorts of things

UM the ability to to deduct certain things. So you know, I think what you want to be thinking about is, yeah, are there ways to advantageously lower my adjusted gross income because that's going to have a sort of a ripple effect on other tax benefits that will help me realize more tax savings. And so you know, there are different ways to do it, but by you know, by now

March of it could be a little difficult. But you want to be looking at things like, hey, did I have a high deductible health plan back in could I maybe write a check to it for any uncontributed amount? Things like do I qualify for a deductible traditional IRA and doesn't make sense in my case? Right, There's all some planning that could be done, something like maybe a set by array or solo for one K if I'm self employed. There's limited opportunities there, but there can be

some opportunities. So there are things that are still available in twenty one for the tax year. But you also want to be thinking about that going forward. Right, Maybe I want to be thinking about that now fore, someone I mean in a even better position for those years I'm thinking too. Does it make sense for folks to file their taxes as soon as possible if they did see their income dramatically declined last year, in order to

show that they're eligible for for any additional stimulus. So let me give you the example of somebody who did much worse in than they did in. Right, there was a layoff that person might want to accelerate filing their tax return for so as to get that to a g I on record with the I R S. And the flip is true too, Right, So it might be that economy change in ways that very much benefited you in your income went way up. Maybe you want to delay filing your tax return. So any stimulus is based

on depends on each person's facts and circumstances. One thing to keep in mind, you can file an extension of time to file your tax return to October fifteen. Everybody is allowed to do that. One thing you're not allowed to do is to delay the payment of any taxes due. So if you want to extend the time to file the tax return. Go ahead and do that, but remember by April fifteenth, regardless of whether you file your return or you extend your return, you gotta pay in to

Uncle Sam and your state taxing authority. So make sure you make that payment. You know, do an estimate of your tax your taxbill, income and your taxes and make a sufficient payment just to make sure you're paid in by April. Well, we've talked here about some of the specifics.

Next here, right after the break, we're going to ask some higher level questions maybe about and you kind of touched on this a little bit earlier and you kind of got us thinking, but we want to talk to you about I guess when it makes sense to pay tax now versus you know, paying tax later. We're gonna kind of get to some of those questions surrounding optimization right when it comes to your taxes. So we'll get to that right after the break. All right, we're back.

We're still talking taxes and tax planning with Sean Mulaney and U. Sean, you did touch on this earlier, but I want to kind of go back to it and dive just a little bit deeper. Most people think about taxes on a year by year basis, like what do I owe this year? What will I own next year? And they're not thinking about it as holistically as they could be. Um, maybe about taxes across a multiple year

span or even potentially across their entire lifetime. Right, But but how can we keep the our future tax liability in mind so that we can make smart tax planning moves? Now, Joel, let's a great question. I like to think about reducing total lifetime taxes, and that's especially true in this new

environment for W two workers. Right, there are some deductions you can add onto a tax return today, but for the most part, it's not about hey, I save so much this year because I got this great new deduction. It's really about what can I do to reduce total

lifetime taxation? And so some of that is retirement savings planning, right, So, whether that's a raw I R, a so called backdoor roth IRA A UH four oh one KS four or three B S four fifty seven's at work things like solo four one case and self employment and those sorts of things. I think what you want to do is think about what are those ways that I can optimize so that later in life when I'm getting passive income, I'm getting distributions from retirement accounts, social Security, those sorts

of things. How can I make sure that later in life I'm in a relatively low tax bracket and so some of that, some of that is opportunistic planning. Right, So maybe I have a low tax year, right, something like happens, I get laid off. Maybe I do some ROTH conversions in that year, right, Um, maybe I just make sure that I'm contributing lots to h S A

S four one ks roth dior raise. It's just thinking long term as opposed to that instant gratification of I'm going to go search for the latest and greatest tax deduction. I think long term planning is the best type of tax planning. Yeah, and you know you just you mentioned roth conversions. This is something we've talked about maybe on the show a while ago. And obviously that's when you

convert funds from a traditional IRA to a ROTH. But can you explain to our listeners what the advantage is of doing that specifically, Like you said, if you had a down year, maybe when you didn't make quite as much money. Yeah, So two points on that one is

just a simple tax arbitrage play, right. So maybe you had a coronavirus type year you got laid off off, or maybe you went back to grad school, right, or maybe you're an earlier retirement, and so when you do your tax return, it doesn't show a whole lot of income. Maybe it shows a little part time job, a little interest from the bank, and it's like, oh, actually, I'm not reporting much taxbill income at all. Here. I'm in

maybe the ten percent federal tax bracket. Where I should do before your end is convert some old traditional retirement accounts, usually a traditional irara to a rath I r A. In many cases that's fully taxable, right. But the idea is I'm gonna affirmatively get taxed in a year I'm subject to, say a ten percent or twelve percent federal income tax bracket, so that years down the road, when I withdraw that, it's gonna be tax free as long

as I do it right. But let's assume I'm gonna withdraw that years down the road, I shouldn't have any problem as long as I'm withdrawing it after age fifty nine and a half, and I likely may not even have any problem if I withdraw it before age fifty nine and a half. You gotta threw the needle a little more there. But regard list, what I'm trying to do is move my income into those years when I'm on at a low tax bracket. The other piece of this is growth. Right, So let's say I have a

half million dollars in a traditional retirement account today. Who knows what that thing is going to grow to? Right, Maybe that thing grows to one point five million, two million if I live long enough. That's very possible. Wouldn't it be nice to get that growth outside of taxable, outside US taxation. One of the ways I do that is through Roth conversions, So you know, there it may be, Hey, you know, I'm affirmatively leaning into paying a lot of

tax today to get all that growth out. Now, again, your your circumstances may vary on that, but again, getting that growth out of taxation is also very valuable. Let's talk about like business taxes here for a second, to and business retirement plans specifically you mentioned earlier on in the podcast Solar Foreign Case and set by Raise And you know, Matt and I we've actually, you know, I

I recently left the corporate world. I had the suite access to a Vanguard four oh one K. No longer have that, UM, But now we're talking about what it looks like to have our own business retirement plan. We've batted around solo four oh one K set by RA.

So yeah, I'd love kind of your opinion, Trunks. I think you're actually in the middle of writing a book about solo four one ks and so yeah, how would you suggest businesses think through which plans they which plan the institute UM, A solo preneurs or you know, a joint effort like Matt and I. Yes. So the first

thing you need to think about, Joel is qualification. Right, you are able to do a solo four one K or set by r A as long, generally speaking, as you have no other employees and there's actually there's tax rules on that and their plan rules on that. So there's a tax rule in terms of what an employee is, but it may be that the plan has a different rule for what an employee is. I know of at least one solo four one K. Any non spouse employees

for one minute, is an employee? Right, That's not the taxual, that's a plan rule. So you always want to be thinking about qualification. But let's assume you qualify for both a set BI or A and a Solo for one K. In such cases, I generally prefer the Solo four one K. Why do I say that the solo for one K has both employe and employ your contributions. The SETPI RA

only has employ your contributions. And so it's going to be the case that you're generally able to contribute more to a Solo four one K than you are to a set BI or a other feature. About a solo for one K, it has the Rath option, right, Different plans may not offer that, but you can find solo for one K plans that have the Wroth option. So maybe you do a Roth employee contribution and then a

deductible employer contribution. I've blogged about this issue. There's a blog post on my site that talks about the set BI RA versus the solo for one K. Long story short, If you qualify for both, you ought to very seriously consider the Solo four one K. And here's one last point. October is a big month for this, right If you haven't thought about solo four one case, set BI or

a retirement plans. No later than October. Would I say, all right, let me see how much money I've made, and should I set up a solo four one K for the year. If you have an S corporations, probably earlier than October. But if you're self employed or you have a partnership, maybe it's more like, all right in October. I'm gonna be very intentional around this. I'm not gonna wait to the next tax year. I'm not gonna wait till the filing deadline. I'm gonna get out in front

of this before year end. I'm gonna make my arrangements, make sure everything is in place so that way I'm not scrambling before I file my tax return. So get out in front of this stuff. Especially if you're self employed. October is sort of a good um place or time to do that. For an S corporation, it's probably as early as possible in the year. Um, just a few thoughts on that whole solo four one cave versus set by Ray uh discussion, gotcha, Yeah, that's that's good to note.

You make sure you get ahead of this thing before this fall. But you know, set, speaking of scrambling, you know, folks are often kind of scrambling at the end of the year to make tax moves, oftentimes just because we've forgotten to to do proper tax planning throughout the year. And so what can people start doing right now so that they aren't freaking out calm December at the end of the year or even come April, you know, right

before actual tax filing deadlines. A couple of things on that one, like we talked about earlier, is get your tax return file for okay, and let's assume you're able to do that relatively soon. Then take a week or two off, and then review that tax return. Where are the weaknesses? Where is it, Oh, we took distributions from a H S A and that sounds like that might be tax and efficient. We've we have high capital gain distributions or did we not make a raw IRA A

contribution for and why was that right? So I'd say take some time off once you get your tax return filed, then in a couple of weeks, pull it out, look at it strategically, and then you know, I think part of it needs to be a shift away from year end planning to like I said, October is a great time to do tax planning, right, Why don't we get in front of that versus, Hey, we're gonna do this in conjunction with the holidays, in conjunction with year end.

Let's see where we are in October, because at that point we're gonna have of our year in and we're gonna have a pretty good idea of what November and December might look like. Let's do some tax planning then. I think those would be sort of the two big things. Look at your old tax return strategically and move year end up to something more like October where you've got enough information where you could do some really good tax planning. Sean,

this has been an awesome conversation. Lots of helpful and actionable advice for our listeners. Where can work in how the money listeners find out more about you and what're up to. Thanks so much, Um, you can find me my financial planning firm. Website is Moline Financial dot com. My blog is five tax guy dot com. Awesome, well, Sean, thanks again so much, and you know we'll put links to both of those websites in our show notes. And yeah, man,

we really appreciate you taking the time today. Matt and Joel It's been a tremendous honor and pleasure to be with you today. Alright, Joel, So, taxes not the most exciting thing to talk about, right, It's it's something that we have to talk about. It's something and there's a good reason for it too. You know. There's a reason that Sean has dedicated his life to helping people when it comes to their personal finances. When it comes to taxes, is because of the massive impact that it has on

our money. And so even though it's not something that we necessarily want to spend time talking about, it is so important and I'm glad that we were able to sit down here with Sean and talk about taxes. What was your big takeaway from this episode? Man? All Right, So there was certainly a lot to take away from this episode, but I think my big takeaway was about when you should d I y uh. Taxes are not and that was something we covered early on in the episode.

But if you have a basic situation that remains unchanged from last year, and it was basically your W two worker, you have a four oh one K and and really that's the extent of the craziness. Your financial life really isn't all that complex, you should probably be doing your own taxes. And you know he didn't mention this, but in all likelihood you can and should be doing your taxes for free, right and UM, we've talked about that before. To I R S is free file program is one

place you can turn. Credit karma is another place to turn. But the more complex your situation gets, the more likely you're gonna want to hire somebody. And I feel like, especially when we were talking about your A, G I and stimulus payments, UM and all these kind of things, in particular in the tax your twenty, there could be even more reason for you to hire somebody this year than even in previous years. There's more on the line.

So yeah, that was my big takeaway is that, you know, if you have a simple situation, file your own taxes, that's fine. If your situation gets complex at all, you really probably want to start reaching out to attacks prepared to make sure that you're doing it right, that you're not overpaying in taxes or you know, potentially leaving money on the table. Sure, yeah, that's right, and a quicker mind or two for folks, stimulus payments are not taxed,

So just because you received a stimulus payment. Don't think that that overly complicates your situation, right right? Uh one, Okay, So my big takeaway is gonna be towards the end of the episode, he talked about starting to prepare for that year's tax return in October. So before the year even ends, October hits you've had seventy of the year, realizing that it's pretty easy to forecast what you're gonna be making, you know, the next three months. But I

just like how that leaves margin basically, right. It leaves time at the end of the year for you to make any tweaks, any changes, uh that might be better made. Uh you know that year versus waiting until that you know, special period of time between January and April when you can make some tweaks. You can make some changes, you can contribute to a roth ira, right, but there are

gonna be other things that you cannot do. So I do like the idea of starting to kind of get wrap your head around your tax game towards the end of the year. Uh, not waiting until the next year, and not waiting until December fifte when you're like a chicken with your head cut off trying to figure things out. When you have a couple of months really to to plan things out, you have enough information, you know, at the ready, and you have enough runway to make the

changes that you need to make. I agree when you said that. I was like, that's right. October, of course is the perfect time to do tax plan. That makes so much sense. I mean, I think most people don't think about taxes until they start getting forms in the mail, right, so end of January they're they're not really thinking about taxes at all until then, but in some circumstances, by then it can be too late. So yeah, that's something

that he mentioned that. Yeah, like you said, I was just like, well, duh, of course that makes so much sense. I don't know why I've never personally done that. And I'm gonna sneak in one other takeaway, which was that if you live in California, you can get to Hawaii for four hundred bucks. Oh my gosh, that's pretty good. I mean, yeah, that's that's really good considering I've never been to Hawaii, so hearing him talk about it, I'm like, oh man, one of these days I'm gonna make it

out there. How do money trip, let's do it. I don't know about how do money trip? Hown't like trip with me and my wife. I'll watch you kids. Got a big anniversary coming up next year, so that might be it. We'll see. Are your kids can hang out with us? All four of them? Oh? Yeah, I got this. Would you imagine? That? Sounds like madness? It's just like the Brady Bunch. Man, we can do it, all right. Well, let's get back to the beer we had on the

show too. Man. The beer that we drank on the show today was called Peka Juice Slushy x l x L. So honestly, um, I was saying, my neighbor Mark brought this over yesterday and he was like, hey, yeah, here have a couple of beers. And I was like, all right, we'll have him on the show. And this one is by four fifty North Brewing Company. I've never heard of. Have you ever had any of their beers? No, but I've read about them. I think they're like, they're famous

for their fruit slushy beers. Um. But I will say, man, it looks like a juice box can. And I do not like labels like this. My kids would assume they could drink this and saw in the pantry. Um, and I'm not down with that for your one year old sitting there just like pointing up juice. Juice. Yeah exactly,

but um, yeah, what were your thoughts on this beer? Man? Well, as soon as we cracked it and poured it, I will give you credit for this tasting, you know, but you're like, dude, this most just like a banana runt. I couldn't agree with more. Man as we're pouring it as I mean, the banana and it was overwhelming. That's so it's got lemon, pineapple, and banana in the spear. I don't think either one of us have ever had a beer with banana in it. It's never not your

typical fruit, you know. Raspberry, sure, blueberry, yeah, cherry of course, Banana not so much. Yeah, I don't know about that. And so I think you never both a little hesitant when it came to this beer. But it turns out I like it. It definitely had some over the top banana flavors, but the you know what I pulled out though the lemon. The lemon was clutched, so it kind of ended with almost like this lemon, uh, like pith,

like a lemon bitterness. It reminded me of like a lemon meringue pie a little bit, where like you've got the sweetness from the fruit, but it also kind of finishes and ends with a slight sour bitterness. I think that's a part of what makes it not taste just like a smoothie. So yeah, but yeah, I really liked it. Man, I'm glad, glad we could share this one on the show.

What were your thoughts. I do think the lemon and pineapple saved it from being too banana, But but that was the first taste I got in my mouth, and that was the overwhelming sent too of it. It did smell like banana runs to me, and that's my least favorite hunt no way. Yeah, the banana on a slightly delayed reaction there because I was finishing my beer. Well, yeah, I love the banana runts as a kid, like I would spend I would say this for last because I

love I love them so much. So there's there's a reason we're best friends, because I would have like picked them out and given them to you, and I would have eaten the other one. I would have gladly taken them. Well, yeah, at first it was off putting to me, but then I kind of got used to it, and I was like, you know what, banana in a beer? I guess because I've never had banana in a beer before. I was like, this is this is weird, this isn't normal. And then the more I got into it, I was like, Okay,

I can dig it. Um. It's still probably wouldn't be like a beer that I would grab off the shelf and flock to, you know, on the regular basis, but it definitely grew on me, and I think the lemon and pineapple really salvage this one. And a big thanks to my neighbor Mark for donating this beer to the show. Yeah, thanks Mark and Joel. That's gonna be it for this episode. Listeners can find our show notes up on our website at how to money dot com. No doubt, happy tax preparing.

You got one month left and uh, clocks sticking, clock sticking. So that's it for now until next time, Best friends out, Best of friends out. M