Tax Prep Tips

you appointment at Loss Financial. It will be complementary to you again their number six oh eight four four two five six three seven. If you'd like to join the show this morning, tell for number to get on the air. Six oh eight three two one thirteen ten. That's six oh eight three two one thirteen ten and joining us this morning our CJ. Closs and Eric Schwartz. CJ, how you doing this week?

with their taxes. You can do yourself a huge favor by doing some planning right now for the years to come. And we'll talk with CJ and Eric about just that this morning. Another great feature of the program is of course the clost Quiz. Question the week your chance to win a fantastic prize. This week, no exception, our friends from Class Financial have provided a twenty five dollars gift card to the Darden. Darden restaurants and those are like

Olive Garden Season fifty two Yardhouse those places. So listen closely to the program because again the question and answer typically come up during the show. Before we actually get rolling on this week's conversation about taxes and tax season, let's actually take a look back at last week's program and get the question and answer there as well.

we begin this discussion. While Eric and I don't individually file income taxes for clients as of twenty twenty four, so this think of this as the twenty twenty four tax filing season. We actually as an organization have started to prepare income taxes for those clients who want us to. Now it's only for our other clients. It's not just the only thing we do. It would be for our wealth management clients who then also want us to.

is April fifteenth of twenty twenty five. Now you can file an extension, and for those who do file an extension, that deadline then it is October fifteenth of twenty twenty five. Again, all these twenty twenty five dates are actually for the prior year's tax return deadlines. One thing we would say is be patient when filing, even though you may have all your tax documents ready to go by January thirtieth and you're just so excited and you send it in and you're like, give me my refund. I want to

remind you. The IRS for the twenty twenty three tax year processed over two hundred and thirteen million tax returns, with almost ninety one percent of those actually being filed electronically. So we actually have a couple of clients who do their own taxes and they still do the long for the kind of the free form wed inc document and send it in, but at this point ninety one percent

of people are filing those electronically. So the reason we say to be patient is as much as I make jokes, and even in meetings clients can attest, I'll be like, oh, if if you don't pay, they'll throw you in jail, but they don't send you back your money very quickly. That's really more tongue in cheek because at the end of the day, processing two hundred and thirteen million tax returns and all the supporting documents and schedules, that's no joke. That is no joke, and it's gonna take some time,

so one thing we would say is be patient. With that being said, by now for those who haven't filed their taxes or sent in all their documents. For most of you, you should have received almost all of your necessary documents from various investments to take to your accountant. And if you haven't, under most circumstances, it's probably sitting on a website somewhere where you could establish a log in and go download it. So we would just encourage you.

If you haven't received, say you're consolidated ten ninety nine from a brokerage account at one of your institutions, or an expected WTI too, most of those should have been prepared by now, and therefore we would say reach out to those organizations where you're feeling like you're missing something. Now, with that being said, here's some tax filing tips, and this is for again the twenty twenty four tax filing season.

Number one should be obvious. Collect your W two's and ten ninety nine's and various other tax documents things like k ones, and as I said, most of those should be ready to go by now. There could be a couple of exceptions for those of you who are expecting a K one. Sometimes k ones can take a little

bit longer. Those can come out in mid March, even in early April, or sometimes things like schedule cues can take longer to receive, so be sure that you have everything pulled together and then provide it to your accountant or start working on your taxes. Another tip would be to maximize your deductions and credits. So check for deductions like student loan interest, medical expenses, or charitable donations. Look into available credits such as the child tax credit or

energy efficient home improvements that you did this year. Often those will have tax incentives or tax credits associated with them. You just have to keep track of it and remember when you go to file your income taxes. Now, for those who do like online filing, if they're doing these on their own, often the like turbo taxes of the

world will prompt you for questions like this. They will say things like did you install any energy efficient you know, furnaces this year or windows or anything like that, and so it kind of prompts you to say, oh, yeah,

that's right, we did do something like that. But if you're filing this kind of long form or free form wet ink you're going to have to remember that, or if you're giving this information to your accountants, you're going to have to notify them because they they can only do what you tell them you did throughout a year.

And here's the key, everybody. Most of your core tax like kind of required tax documents come on a tax W two's ten ninety nine s K one schedule cues, but these other things often do not right, like, oh, I gave money to a charity, but I forgot to look for the receipt. Well, unfortunately, if you forgot, you're not gonna be able to even consider a ah, you

know that benefit for the charitable contribution for that itemization. Okay, so so some things in your tax documents you're just going to have to remember and notify your accountant and provide receipts if you have it. Some other tips would be you actually can still contribute to things like a traditional ira or a roth ira up until the tax

filing deadline, which again is April fifteenth of this year. However, any four to oh one K contributions will have had to be completed by the end of last year in order to count towards last year so just remember four oh one k's four oh three b's. Those are employers

sponsored plans. You can only contribute to them, typically out of your earnings, and therefore you can only contribute up till December thirty first, but I raise and wroth irays if you're eligible, those can be contributed to for the prior year, all the way up until the tax filing deadline. And then we would just a couple other quick tips. We would say review prior years returns and tax stocks, because often the easiest way to know if you're missing something is just to go back and look at last

year to be like, oh, that's right. Where is where is my consolidated ten ninety nine from Schwab or Fidelity because I don't have that and I still have that account. And then you know, we would encourage you consider e

filing and opt for direct deposit of your refund. These things will just help to kind of expedite the process when you when you're waiting for a refund or even in the case where you owe money, it's just better to e file, link up your bank account, pull it out of there, and just be done and move on.

then when it comes to do our own taxes? Or maybe we should get a tax professional. And the big question is what is a tax professional? Tax prepare?

the time, sometimes you know more than annually. And an accountant can you know that's their day job. That's what that's what they're reading about. That's what they're making sure to stay up to date on. Another thing here is they can help you maximize deductions and credits, potentially covering their fees. So CJ was talking about, you know some of these these tax preferred things that you're doing that can help you get a deduction or a credit that don't come on a tax form. You don't you don't

think about them. But you know, if your accountant says, hey, I know you did some work on your house. Did you do any you know, energy efficient upgrades or something like that, you know they can help you kind of discover some of these deductions and credits and like I said, potentially cover any additional fee that you're paying them. It definitely saves time. In most cases. The IRS estimates that

the average taxpayer spends thirteen hours on their return. I will say to me, that does seem like a really long time. Those must be some complicated returns. But the accountant can help you cut down some of that. They can they can provide you with expert answers without having to wait for an answer from the I R. S. So if you can ask the accountant rather than trying to get in touch with with.

yourself on the tax return. So if you have someone to advise you throughout the year, there's a lot of value in that. They can also look back at your past returns. They can they can look for missed deductions or potential errors, and all of this is just going to help reduce your audit risk and you know, make sure you're not paying any more than you have to

for your for your annual income tax. Now, from a cost perspective, right, all these things sound great, but what is it costing me relative to doing it on my own? So current trends show us that the average cost of tax preparation varies by you know, the complexity, the firm

you're working with, your location. But according to the National Society of Accountants, the average fee for filing an individual return, so that's Form ten forty without any itemized deductions, is about two hundred and twenty dollars versus an itemized return, which is closer to three hundred and twenty three dollars. And for more complex tax situations so I think, you know, self employed, maybe you have to file in multiple states, the fees can be more than five hundred and fifteen

dollars for complete service tax preparation. Now, what I'll say about these numbers is CGN I work with clients here and well in the Madison market and around the country. I would say these numbers seem a little low to me for our local our local community. But the interesting thing is pricing varies widely. You know, even just here

in our in our local community. You know, we'll have one accountant that works with a certain type of return and it'll cost you know, maybe four hundred and fifty dollars in the same return with another accountant might be eight hundred dollars. Right, It really really varies. So I want to make sure that we're asking those questions upfront and doing our homework when we're when we're looking at

hiring an accountant. Now, there may be some free filing options. Okay, so IRS does have something called the IRS Free File. If your AGI is eighty four thousand dollars or less, you actually qualify for guided tax software through the IRS. There are also just the free file fillable forms, so just fillable PDFs to fill in your your tax information basically like like doing it yourself with a with a pen paper, but it does allow you to file it. This is available for all incomes, but it does require

that you have some tax knowledge. There's no nobody asking questions in guiding you. And then you know H and R Block or TurboTax. They will often have what they call their free versions. This offers kind of basic federal tax prep in most cases. Generally, if you have itemized deductions or self employment income, you're going to sort of quickly move into the paid versions, and you know, when it comes to filing state returns, they'll often they'll often

charge you for that. Now, if you do want to do it yourself, but you do want a little bit of guidance going through the paid versions of a Turbo tax or an H and R block, those will generally cost between seventy dollars and two hundred dollars, although I'll say they're they're kind of adding services that that you can pay more for. So oftentimes you really need to think about how much you're actually saving by paying for a tax software and doing it all yourself.

dot com. Telphone number six O eight four four two five six three seven no charge that initial gets to know the appointment deck Class Financial. It will be complementary to you well to your conversation with Cjen. Eric next has money in Motion with Coss Financial. Continues here on thirteen ten Wi b A talking with our retirement planning professionals from Coss Financial CJ. Closs and Eric Schwartz. Of course, you can learn more about Colass Financial on the website

Coss financial dot com. That's Coss k l a A S Financial dot com. Telling for number six oh eight four four two five six three seven. No charge for that initial get to know the appointment deech Loss Financial. It will be complimentary to you again their number six

oh eight four four two five six three seven. Talking taxes this week, talked about some great tips for doing your taxes this year, and let's take a look ahead and kind of, you know, once we get this year taken care of, how can we start looking towards twenty twenty five in the of course this year and next year, and of course simple things to maybe simplify taxes for next year or ways to save more.

tax website was asking me about. I didn't know where to get copies of the things that I had bought. I wasn't saving anything throughout the year, and so when it came to tax time, I would just sweat profusely. Not so much because I was doing anything wrong, but rather I didn't know what to expect. I didn't know if I was going to owe money or get money back. I didn't know where any of the documents were or what it just this kind of like lack of knowledge

or lack of understanding drives fear and anxiety. We've talked about this on the show before, so over time I just kind of paid attention, like, oh, okay, I need to beware of these W two's and these ten ninety nine's and oh, my mortgage interest matters, and if I'm going to give money to charities, I should notate that somewhere, and then I should look for the receipts at the

end of the year. And so I just started creating an electronic fula called twenty twenty four taxes or twenty twenty five taxes, and I would just dump as I got things throughout the year that I knew I would need or even might need. When I go to file my income taxes, I would just dump the electronic file in there. Now, this is the version that worked for me. Your version might be a physical file at home, where it's a physical file called twenty twenty five taxes. So

now we're done talking about last year's taxes. Now we're talking this year. So you might create a physical file and you might just dump some of your papers in there as you do things throughout the year. But here's what I'd say, just to give you hope for those of you who have fear or anxiety around filing taxes. I went from not knowing what to expect, not knowing what documents I needed to now I have zero anxiety.

Zero Legitimately I know within a few hundred dollars if I'm going to get money back or oh, and I know why, and if I didn't want, you know, oh, I know how to pay more. And now I do have an accountant that actually files the tax return for me, but legitimately even the file or the account in doing that is really just I want somebody who's in the industry. I could do it myself and have just zero anxiety. Now some of you are rolling your eyes going, well, yeah,

because you're in the industry, that's true, touche. I'm with you. I get to see more of this and understand it more. But we have walked many of our clients through this just to say, hey, here's the document, set up the folder, do this, do this, and over the course of about three or four or five years, people go, oh.

Security or IRA distributions. There's one simple things. Number two, track your expenses and deductions throughout the year. I kind of already mentioned this, but just do it throughout the year and put it in a folder. Number three, maximize your retirement account contributions if you're still working, and your

HSA contributions if you're still working. And consider because some people will meet with them and they'll go, oh, I'm just I'm always owing at the end of the year and it's just really frustrating, and we go, well, one of two things, either increase your payroll deduction with holdings or number two, oh, you're putting money into the wroth for a one k, just swap that around and put it into the pretax for one K. Now, I'm oversimplifying that decision, by the way, it does have to be

back up by some academic research that you need to do with an advisor. But the point being, we often find the anxiety that people have around their taxes at the end of the year are super super super easy fixes change this change that, boom, We're done. Another one would be stay up to date on tax law changes. Now, Eric and I would both attest, yeah, you do want to do this. I mean, we have to do this professionally.

But I would just say it's pretty hard to stay up to date on tax law changes because you have to be able to decipher what is a rumor versus what is law. Let me give you an example of this. There is a rumor, you know, based upon fact, there is a rumor that Donald Trump and Kamala Harris when she was running for office, both wanted to remove taxes the tax ability of Social Security at a federal level. I just want to say, soci Security income will not be taxable. That is not law right now. That may

become law, that is not law right now. So this can be a tough one. You've got to be able to separate rumor from reality. And then that's often why we would say you might eventually want to have an accountant who can do this professionally, or at least have your advice. You know, be able to decipher what has been passed and what is not, which leads into the next one. You might want to consider working with a tax professional. I understand it's going to be more expensive.

I understand you might pay three to six hundred dollars for a standard return, somewhere in that range. But my comment would be, if that accountant can help you understand what to prepare file the income taxes, make you prepared for knowing what to expect, I'd say it's some of the best money you'll spend throughout the year. And then, finally, I already mentioned this at the beginning, but let me

just re emphasize it again. Create your twenty twenty five tax file now and start tracking all of your charitable giving all of your purchases that have tax benefits associated with it, for energy efficiency or whatever it might be. And by the end of this year, you will be so thankful that you did.

what about some folks. I know there's probably people listening saying do I actually need to file a tax return? And of course how long should we hold on to those old old tax returns?

not need to file a federal return. But please check with a tax professional before you just decide not to file anything, and get some guidance on your own situation, and even if your income is low, there are certain benefits that can come from filing your taxes. You know, you might be able to claim tax credits that are refundable, which means you know they actually even if you don't owe taxes, they would they would be a financial benefit

to you. And any overpayment that you that you made from withholding throughout the year, you want to make sure you get that back you need you need to file a return to do that. And regarding the keeping of your old tax returns, the IRS tells us that you should keep tax records for three years from the date you filed your original return or two years from the

date you paid the tax, whichever is later. And when I say tax tax records, we're talking about, you know, the supporting documentation for your return, so receipts from a charitable organization or a ten ninety nine or whatever it might be. You should keep records for seven years whenever you're you're claiming a loss on your tax return, and you should keep tax records indefinitely if you did not

file an income tax return. The IRS generally audits within three years, but if they want to they can they can definitely go go back as far as six years.

two five six three seven. We have to the Class quiz close Question of the week and just a moment, but first it's the Money in Motion listener question corner and Coreen right sin she says, I'm retiring next year when I'm sixty two one would be the best time to start collecting my Social Security benefit.

should you draw it? And and if you've listened to our show, you know that the answer is it depends. Every good answer begins with it depends. Now, if you want an individual answer, talk to your account and talk to your financial advisor and they should be able to sit down and look at all. Right, are you still working? So let me just give you high level. Here's why

we have to say it depends. If you draw at sixty two Korean, you're limited on how much you can earn separately from that at a W two paying job. If you earn too much, then they actually start reducing your Social Security benefits. So you know there would be an example of why you have to you know, somebody has to ask some questions about this, and then beyond that, like are you married, is your spouse drawing Social Security? Is there any spousal benefit available, any former widow's benefits?

Is there a value in delaying your Social Security draw D eight till your full retirement age or maybe even up until age seventy to get those delayed retirement credits of eight percent? Of course, things like health concerns come in. Are you healthy or are you unhealthy? How long did your parents live? All of these things, believe it or not impact our advice around around when to draw soal security. Now again, some people go, oh, my goodness, you're over

complicating this. Not really, In about a ten minute conversation, we can boil down to some pretty clear general guidance on when you should draw. So this isn't doesn't have to be an hour long conversation, but in about ten minutes with somebody who knows what they're doing, who has experienced like we do, you can just whittle it down to say, seems like, well, from what you're telling me, somewhere between sixty five and sixty eight would be ideal

and we'll just reevaluate it when you get there. So, Karin, I hope that's helpful. I realize I'm not answering your question specifically because the answer to your question is I don't know. It depends. But for all of you listening out there, make sure you're talking with somebody about when to draw SOL security because it matters.

It works like this, In just a moment, I'll ask you the Class Quiz question the week. You will then have thirty minutes from the today's program to call the Class Financial Office right here in Madison at six oh eight four four two five six three seven. If you are the first call with correct answer, win this week's prize, which is a twenty five dollars gift card to the Darden Restaurants to the Class Quiz question week This week

is this true or false? You can make a twenty twenty four contribution to an IRA up until April fifteenth of this year. Is that true or is that false? Telephone number six oh eight four four two five six three seven first cost correct answer win this week's prize.