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Smart Tax Strategies to Avoid Next Year’s Tax Surprises · The Wealth Cafe

• 0:15
  SPEAKER_00: You're probably wrapping up your 2025 tax season, which means it's time to plan for 2026.
• 0:21
  SPEAKER_00: You heard that right.
• 0:22
  SPEAKER_00: Tonight on the Wealth Cafe, we are going to be diving in how you can prepare for the upcoming tax season so you don't have to relive a lot of the pain points and problems that you had in this previous tax season.
• 0:32
  SPEAKER_00: I specifically record this episode during this time of year because it's fresh in your mind.
• 0:37
  SPEAKER_00: You just went through everything, you just had some fights with your accountant.
• 0:41
  SPEAKER_00: You're trying to reach out to HR and figure out why they didn't withhold more in taxes.
• 0:45
  SPEAKER_00: You're looking at all the different puzzle pieces, thinking, what can we do better next year?
• 0:49
  SPEAKER_00: Well, let's talk about it now so you can make changes proactively throughout the year rather than either scrambling in December of 2026 or waking up on January 1st thinking, oh my gosh, why didn't we do more planning and actually utilize this past year?
• 1:04
  SPEAKER_00: As you are listening to the episode, feel free to take notes, give yourself a to-do list and tasks to either reach out to us and help you plan strategically for next year or to work with your current financial advisor and accountant to make your 2020 tax season that much simpler.
• 1:18
  SPEAKER_00: The problem that so many people face is that they either don't do their tax planning early enough or they don't do it at all.
• 1:25
  SPEAKER_00: I want to make sure you aren't one of those people.
• 1:27
  SPEAKER_00: I don't want you scrambling in December.
• 1:29
  SPEAKER_00: I don't want you waiting until January to make a lot of these moves.
• 1:33
  SPEAKER_00: That is one of the biggest pieces of guidance that I can give you throughout this episode is be proactive.
• 1:38
  SPEAKER_00: Ask questions now, start working on things now, rather than trying to be retroactive and having this time roll around again next year and thinking, why didn't we do this?
• 1:48
  SPEAKER_00: Why didn't we make any changes?
• 1:49
  SPEAKER_00: What so many people try to do, and I say this time and time again, is that they just focus on paying the lowest tax bill in one year.
• 1:56
  SPEAKER_00: They aren't using strategies, they aren't planning for what their entire lives are going to look like.
• 2:01
  SPEAKER_00: We have a previous episode on the tax retirement savings bond that you can check out that really helps to emphasize this problem.
• 2:08
  SPEAKER_00: So many people want deductions in a certain year and they're scrambling when tax time rolls around thinking, how can we reduce our taxes?
• 2:15
  SPEAKER_00: What are things that we can do last minute or before year end?
• 2:18
  SPEAKER_00: And they aren't thinking big picture because they're simply running out of time.
• 2:22
  SPEAKER_00: But right now, you have the gift of that time.
• 2:25
  SPEAKER_00: Sit down, write things out, ask questions, and let's dive into a couple different things that you can do to help you plan for a better tax season next year.
• 2:34
  SPEAKER_00: The first of which is I want you to assess the financial team that you have.
• 2:37
  SPEAKER_00: This includes everybody from the accountant that you use this year to your financial advisor to maybe even your estate attorney if this person comes into play and has an impact on a lot of the different financial choices that you are making.
• 2:49
  SPEAKER_00: I have so many people that will come into my office and ask for a different accountant because they feel like their current accountant isn't providing tax strategies.
• 2:57
  SPEAKER_00: They're simply putting things into some type of tax filing software, whether it be TurboTax or whatever proprietary software they have, filling out the forms and simply moving on.
• 3:07
  SPEAKER_00: They're not sitting down with them and talking about what are strategies that we can use, where areas that we can prove, and they're also not coordinating with the financial advisor and or with the estate attorney to really maximize on all of the opportunities that this client has and to figure things out.
• 3:23
  SPEAKER_00: It's becoming more and more difficult to find incredible accountants for clients to work with, but it is something that I always make sure we are prioritizing to do because I want to be as the advisor for my clients.
• 3:34
  SPEAKER_00: I want to be part of their financial team rather than just working as a silo.
• 3:38
  SPEAKER_00: When you are working as a silo advisor and not coordinating with the estate attorney or with the accountant, it makes things incredibly difficult.
• 3:47
  SPEAKER_00: It's how we see so many mistakes happen.
• 3:49
  SPEAKER_00: It's how we see so many missed opportunities.
• 3:51
  SPEAKER_00: And it's something that is just so easy to do and proactively have a meeting that can help sort out so many different problems.
• 3:58
  SPEAKER_00: And this isn't a meeting that should happen right before tax time or as the tax forms are rolling out.
• 4:03
  SPEAKER_00: I'll have a couple newer clients that come in the year before and I'll get an email from them somewhere around February, and they're like, hey, by the way, I forgot to do an intro to my accountant.
• 4:14
  SPEAKER_00: Could you talk to them now?
• 4:15
  SPEAKER_00: And at that point, a lot of the choices have already been solidified, and there's not as much that we can do.
• 4:20
  SPEAKER_00: I always like to remind clients throughout the year, let's sit down with your accountant, let's start talking about things now to make sure we're building out that cohesive team as the year goes on, putting together those plans and those strategies to have things really be fluid and not just be rushing when those tax forms come out.
• 4:36
  SPEAKER_00: In addition, it also a lot of times makes the accountant's job easier because they already know if we've done things like Roth conversions throughout the year, if an inheritance happened, what type of deductions that we're taking on the financial side that they are going to have to look into during tax season.
• 4:51
  SPEAKER_00: And it makes their job a whole lot easier.
• 4:53
  SPEAKER_00: The second thing I want to make sure you are coordinating and planning for are estimated tax payments.
• 4:58
  SPEAKER_00: A lot of people have several different income streams, whether it be rental properties, maybe it's an inheritance that you've received or another job that you have going on, whether it's a 1099 or a W-2, or maybe you simply aren't withholding enough in your current paycheck.
• 5:14
  SPEAKER_00: This could lead you to then have to pay estimated taxes in the following years.
• 5:18
  SPEAKER_00: And if you aren't paying those estimated taxes, you could see consequences like owing interest on the money that you aren't paying in estimated taxes.
• 5:26
  SPEAKER_00: This is when it is essential to be working with your accountant and financial advisor to make sure are we paying enough?
• 5:32
  SPEAKER_00: And if we do need to make these estimated taxes, what do we need to, number one, be setting aside to make sure we are paying that every quarter on the set dates so that we aren't getting hit with penalties and interest?
• 5:45
  SPEAKER_00: And on the other side of that, are we also setting aside enough so we don't get hit with a surprise tax bill on April 15th?
• 5:51
  SPEAKER_00: Or if you're hitting an extension and filing in October, I see so many people that are like, oh my goodness, we didn't expect this.
• 5:58
  SPEAKER_00: And they have to start scrambling to find funds in order to pay that tax bill.
• 6:02
  SPEAKER_00: There are two parts to this calculation.
• 6:05
  SPEAKER_00: Number one, to recap, what can we do to avoid hitting hit with any penalties or interest?
• 6:10
  SPEAKER_00: And number two, what do we need to make sure we have to set aside in case we owe additional taxes come April 15th or October 15th if you're on extension?
• 6:19
  SPEAKER_00: The next thing that I want you to pay attention to is do you have any K1s?
• 6:23
  SPEAKER_00: I have a client of mine who they are both paid, both the husband and wife, are paid as K1 employees.
• 6:29
  SPEAKER_00: Now, this changes how they have to set aside for those estimated taxes, make quarterly payments, and also it impacts when they file.
• 6:36
  SPEAKER_00: So if they are also trying to do things like purchase a home or a second home and they need to have their taxes ready to show to a mortgage company and to prove that they are a qualified buyer, we need to account for that extra time.
• 6:49
  SPEAKER_00: This impacts how we are planning, how we are also setting money aside during the year for them to pay those taxes and making sure that they then have that cash flow should they have any extra taxes that need to be paid.
• 7:01
  SPEAKER_00: With the K1, we can also see fluctuations in what they're being paid because they get different additional bonuses and compensation throughout the year.
• 7:10
  SPEAKER_00: So we are always having constant communication with the accountant to say, hey, we got an extra lump sum of money, we received an extra payment.
• 7:17
  SPEAKER_00: What does this look like for our taxes?
• 7:19
  SPEAKER_00: And are we setting aside enough?
• 7:21
  SPEAKER_00: So come October 15th, because they have to file an extension as they receive a K1, we have to make sure that they are prepared and there are no surprises.
• 7:29
  SPEAKER_00: They have an incredible family that they want to be providing for.
• 7:32
  SPEAKER_00: And it's never something where you want to have a massive bill that's going to disrupt your life plans in the middle of the year.
• 7:39
  SPEAKER_00: In addition, we also see that some investment accounts have K1s.
• 7:43
  SPEAKER_00: So keep in mind you want to talk to your financial advisor.
• 7:46
  SPEAKER_00: Do I have any investments, like an alternative investment, that's going to pay out and have the gains reflected on a K1?
• 7:54
  SPEAKER_00: If so, that is going to impact when and how you are filing your taxes in the coming years.
• 7:59
  SPEAKER_00: This is always something, if that's an investment that my clients and I are looking into, I like to make sure I'm warning with them and also coordinating that with their accountant so they know number one, to expect these forms and this change.
• 8:11
  SPEAKER_00: And number two, to talk through is this an appropriate investment for them given their fluid tax situation, everything going on, and how will a K1 fit into their greater plan and also into their taxes.
• 8:23
  SPEAKER_00: One of the other things that you need to consider is any investment moves and choices that you are making throughout the year.
• 8:28
  SPEAKER_00: Now, there are two parts to this.
• 8:30
  SPEAKER_00: In one example, let's say you have sold a large position in a taxable account because you want to buy a second home.
• 8:36
  SPEAKER_00: This is something that I make sure when I am working with my clients that we are talking through and also potentially meeting with their accountant to talk through how we can help mitigate any of the taxes that we are going to see rise as a result of this sale.
• 8:48
  SPEAKER_00: I also am strategically working to see is this actually the right investment that we should be using, or should we be looking at other accounts that wouldn't have such a big tax impact?
• 8:57
  SPEAKER_00: It's also going to depend where is their income falling for that year.
• 9:00
  SPEAKER_00: Are there any other moving parts that we need to pay attention to financially?
• 9:04
  SPEAKER_00: And this is why it's so important for the accountant and financial advisor to work together because every year is going to look different.
• 9:10
  SPEAKER_00: The second part of managing investment accounts is are you taking any tax losses strategically at the end of the year?
• 9:17
  SPEAKER_00: This is something where you could be sitting there saying, hey, you know what?
• 9:20
  SPEAKER_00: We did sell a lot of positions or we had a lot of dividends pay out or capital gains.
• 9:24
  SPEAKER_00: We want to offset this this year by taking some losses, or maybe you want to have them to carry forward for future years.
• 9:30
  SPEAKER_00: This is where it takes coordination and something like that, taking these losses strategically needs to happen by December 31st.
• 9:37
  SPEAKER_00: This is not a rule where you can wake up in February and say, hey, we want to sell to offset taxes for the previous year.
• 9:44
  SPEAKER_00: You can't go back in time.
• 9:45
  SPEAKER_00: December 1st, 31st is a hard deadline for this.
• 9:49
  SPEAKER_00: We've gone over a lot of different parts.
• 9:51
  SPEAKER_00: There are definitely things that I'm sure are popping into your head thinking, we want to make sure we don't do this next year.
• 9:56
  SPEAKER_00: Write them down now while they are fresh in your mind.
• 9:58
  SPEAKER_00: Reach out to your accountant, reach out to your financial advisor, and talk about this.
• 10:02
  SPEAKER_00: Set up a strategy.
• 10:04
  SPEAKER_00: I typically tell people wait till after April 15th so they can get through tax season to and then start to prepare for next year.
• 10:10
  SPEAKER_00: Sit down and have a meeting with them later this year or this summer so you can strategically talk about what changes can we make now, what parts that we talked about this evening can you implement so that way you have an easier tax time in 2026.
• 10:25
  SPEAKER_00: Remember, the goal is always to pay the lowest amount of taxes during your lifetime.
• 10:30
  SPEAKER_00: And it doesn't always mean that you will pay the taxes in any one given year, but it's important to have a strategy and a plan and a solid financial team working all together to create and put all these pieces together.
• 10:41
  SPEAKER_00: Thanks for tuning in to this episode of The Wealth Cafe, and I look forward to seeing you again next time.