A lot of financial planning clients require the services of a tax professional. Then there are others whose phase of life and financial situation don’t necessarily require that level of help. But what about those who might be somewhere in the middle? Tune in to hear 5 different personal and/or financial situations where Adam and Ben suggest their clients outsource tax prep services to a qualified professional.
Tracking # T006988
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For more insights on everyday financial planning questions, go to www.haasfinancialgroup.com
Contact Us:
Email us at info@haasfinancialgroup.com
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
A lot of financial planning clients require the services of a tax professional. Then there are others whose phase of life and financial situation don’t necessarily require that level of help. But what about those who might be somewhere in the middle? Tune in to hear 5 different personal and/or financial situations where Adam and Ben suggest their clients outsource tax prep services to a qualified professional.
Tracking # T006988
Thanks for listening!
If you want to be notified when the next episode will be released, you can:
For more insights on everyday financial planning questions, go to www.haasfinancialgroup.com
Contact Us:
Email us at info@haasfinancialgroup.com
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
[00:00:04] Benjamin Haas: Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now!
[00:00:28] Adam Werner: Hello, Benjamin.
[00:00:31] Benjamin Haas: Adam, welcome back.
[00:00:32] Adam Werner: It's good to be back. Every time we record one of these, it feels like we just did it, but then simultaneously it feels like so much time has passed, for whatever reason.
[00:00:43] Benjamin Haas: Well, there's just so much good info to share that it's probably always percolating in your mind, like always. Especially now, tax season, tax podcast. What could be more invigorating than talking about taxes? Yeah.
[00:00:59] Adam Werner: People love to talk about taxes.
[00:01:02] Benjamin Haas: Taxes and financial planning go together. Some would say like spaghetti and meatballs, peanut butter and jelly, but we thought, you know, tax season, let's talk about situationally here when's the right time to maybe have a tax professional and when not. I mean, I think we have clients that have a simpler situation and they'd be comfortable kind of either doing it themselves or using a Turbo Tax, but not all situations are going to warrant outsourcing that work. So. What do you say we just talk about some situations or some reasons when we would say, you know what, maybe you ought to think about having a CPA if you don't.
[00:01:40] Adam Werner: Yeah. I think that one of the obvious ones right off the top is if depending on the situation, but the idea of being more proactive with your tax planning than reactive, I think for a lot of people that have a very, so yeah.
[00:01:56] Benjamin Haas: What do you mean by that?
[00:01:57] Adam Werner: I was gonna say, so with a lot of people that have, I'll say a very straightforward tax return, say they have some W 2 income or some 1099 income, don't really have a lot of deductions, don't necessarily have a complicated tax situation. You know, they don't have a lot of tax forms that they're receiving and that require a higher level of expertise. The reactive tax planning is just that you're filing your taxes seeing where things fall and then maybe there's something that needs to happen, or it's more likely, we didn't catch this fast enough. So the taxes are what the taxes are, but now that we know this moving forward, here's something that you should keep in mind. Got it. Not ideal for a lot of people. That's perfectly fine, but as planners, we like to be proactive. So this is no different, right? The more you can get ahead of things or just think through certain decisions or the tradeoffs or the implications from a tax perspective just gives you flexibility or again, just, I guess, decisions that can be made tradeoffs to everything, but being proactive, you can implement some potential changes for the upcoming tax season.
[00:03:11] Benjamin Haas: Yeah. So I guess I'm with you. I'm thinking if you are the type of person that has investment income. You know, maybe you have non-retirement accounts, right? So it's not just money at the bank that you're collecting interest on, but you want to mock, you want to mock a return to see where your gains and losses may fall. If you want to do a Roth conversion, these are financial planning strategies that if we're going to be recommending that, yeah, we would often say if we're not already working with their tax preparer, like, "Hey, maybe you want to throw this by them or give us an introduction so we can have this conversation that, you know, there's no surprises on what this is actually going to mean to you next March."
[00:03:49] Adam Werner: And I think that's, yeah, I think that's probably the best, that term surprises. I think that's probably the best use case, hopefully for being proactive, right? Just to eliminate those future surprises. I mean, how many times have we met with people around tax time or after tax time and had have heard the comment, I was really surprised and it's usually not a good surprise, how much I owed this year because of X, Y, Z that happened, you know, in that given tax year. So being proactive with and working with a tax preparer or a tax professional, CPA, in advance, is to hopefully eliminate as much of those surprises. In advance as possible.
[00:04:35] Benjamin Haas: Yeah, so I'm glad you use the word proactive. We want to certainly play a role in that, but we would rely on the expertise of someone else to help us think about ways to be proactive, right? If you know you have a taxable event. What are the things that we might be able to do to pair that with a deduction of some sort or, yeah. You know, in, you got situational change, and I don't wanna move to the next point just yet, but we can, it, it may make sense for you to, again, mock, mock some sort of return. Tax preparers have these programs for that reason. You know, if we put some placeholder numbers in there, what would this actually mean for us? And that's not something that you and I are going to do. And I don't think that that's something that somebody would do on their own. You're not going to go into TurboTax, put your whole return in there hypothetically for next year. It's just not something that you would do. So if you want or need to be proactive, then that's number one on the list. A reason to have a CPA or a tax preparer?
[00:05:30] Adam Werner: Well, and to, to that end, maybe putting a bow on that point. For people that are using a, a piece of software, I feel like I've typically seen TurboTax. I haven't used TurboTax myself in a while, but I still get the emails. So I've used them in the past and they, they always send these updates that now the filing season is open, you can start to use the tax software. I don't know if you even want it, if you could even mock a return. So yeah, we're in 2024. Can you mock a 2024 tax return in TurboTax? I don't know that you can, but to your point we are, we know enough to be dangerous with the taxes, but this is something so specific as mocking out a return, knowing all the different intricacies when it comes to taxes and all the different moving pieces. That's where we would really want to rely on a professional that is their sole area of expertise.
[00:06:23] Benjamin Haas: Yeah. Well said. So I, I think I kind of alluded to what I would say is maybe the second reason of a second situation, and that's just when, it starts to feel like there's too many moving parts, you know, I don't want to use the word complicated, but you know, I would say situationally, if you're going through some sort of major life transition or a major financial event there's maybe other examples we can go into, but that's a natural time, and it doesn't mean you have to, I think you said this earlier to me, you don't have to use a tax preparer every year, but you have those one-off situations, or it starts to feel like things are piling on top of each other then that's absolutely an okay time to outsource this to somebody that knows what they're doing a little bit more than you might.
[00:07:08] Adam Werner: Yeah. So, so to that end, I think you have some examples here. If you're going through a job change or a location change that you're not only just moving, but maybe you're moving across multiple states and now you're filing returns in different states. Just the, how quickly things can become to your point, not necessarily more complicated, just more complex. Just there's more work involved and there's just more moving pieces. It's one of those areas that even if it is just hiring somebody in that given year, just to make sure you are crossing your T's, dotting your I's, and you're not missing something. That can usually be well worth the expense to work with a professional. Even again, even if it is for that given year, that this is me, you know, personally speaking that. I'll say insurance or that peace of mind of a few hundred dollars just to make sure that, because I'm not a tax expert, I'm sure there are parts of the tax code that I am not aware of that apply to my situation, you know, with complicated moving pieces.
[00:08:12] Benjamin Haas: You didn't read it?
[00:08:15] Adam Werner: No, I have not read the tax code from cover to cover. Yet day is young. But yeah, so many people find us around not only just life transitions, but just financial impacts. So selling of a property or receiving an inheritance that, that comes up a lot for us working with in that retiree space. And things can quickly go from very straightforward for someone's tax situation to something they've not experienced before, and again, people don't know what they don't know, and for a lot of people, they don't want to be the experts on taxes. So there's opportunity at those inflection points where just things feel different to leverage a professional.
[00:08:56] Benjamin Haas: Yeah, no doubt about it. And I think the two other obvious ones that fall underneath here for me when we say moving pieces or things start to feel a little bit more complicated, it's one thing to have like an investment account and you get a 1099. It's another to have assets that are not liquid and reportable that way. Think, now you have rental properties or multiple investment properties, handling depreciation. What's deductible, what's not. And clearly business owners, right? If you're a business owner and don't yet have one, that's weird, but if you're thinking about, you know, starting aside something, you know, you, you have a small LLC, a partnership. It's a whole other ballgame where you have to think about what's deductible, what's not, how you categorize expenses, filing quarterly taxes, maybe you're getting K 1s from partnerships. There's a lot there that I would say if you were thinking about starting a business, you need to pair that with thinking, not thinking, go hire a tax pro.
[00:09:51] Adam Werner: Yeah, definitely. So then, we've kind of hit on this a couple, couple different times already the idea of outsourcing some of this tax prep work to a professional in the hopes of reducing the anxiety around taxes. Taxes fall into that camp where I don't think, I don't think I've met a single person who is happy to pay taxes or happy to pay more in taxes. So the idea of just having somebody on your side to make sure that everything that you are claiming and filing is accurate and you're taking full advantage of what's available to you can take some of that anxiety away. Gives you the peace of mind that you're not just out on an island. And by the way, you're hoping to get some of your own time back by working with a professional so that you're not having to try to figure out, spend the time, not only just entering data because that it's very basic form for even a straightforward tax return. It's still time of data entry and making sure that you're putting things in the right spot, but working with a professional, you can now just focus on gathering the documents, providing some information to your taxpayer. Let them handle the heavy lifting of the actual preparation Give your give yourself some time back if it's not something that you truly enjoy which again for most people I think it's going to fall into that camp of things they don't truly enjoy.
[00:11:23] Benjamin Haas: Yeah, and we can pair that up with you know, as you're saying, like, hey, save your, maybe it's just, you're outsourcing this to save yourself some time, right. In the same way that you might pay somebody to cut your grass. It's not because you can't cut your grass. You just value your time enough to go, I'll pay you to go do that. Yeah. TurboTax is not always easy. Like I've, I've seen in the program and I've answered questions, you know, I won't mention any names, mom where, you know, it's just, it's asking you questions that get you into this like weird loop and how much of a time save is it really to use. TurboTax for yourself versus, Hey, you paid 150 for this program. You paid a professional 300 bucks. Like it, it may just be that simple to go. All right. Even if you can do it, the frustrations that come with that, the time, look, put it on somebody else, and I would want to give other examples here too, where I know that people who have used TurboTax, you fall into the trap of, you don't really know what you don't know. You know, I'm thinking client situation where she's lovely to do taxes for her mother, but she didn't know that there was like long term care expense deductions. And now she ended up probably paying way more in tax than she needed to. We're going to suggest that she try to remedy that by editing those filings, right? Amending those returns. Now there's even more time going into that. So sometimes you just fall into that risk too, that you just don't, you don't know what you don't know, and the TurboTax is not going to always ask the question that gets you to trigger to that.
[00:12:53] Adam Werner: Well, and I think that's the important part that, so not only do you have to feel comfortable navigating the questions that are being asked through TurboTax, but there are oftentimes where TurboTax is only going to, and we're picking on TurboTax, but any tax prep software is only going to ask you the standardized questions leading you through that workflow. But if you have an outlier scenario, most of the times you need to know that and pinpoint, tell the tool, here's my situation, and then it can lead you through the appropriate workflow. So sometimes to that end, the whole long term care qualified, you know, deductions. If you don't, if the tool is not prompting you for that and you're not aware of it, it can get missed.
[00:13:35] Benjamin Haas: So that's honest mistake. Like, yeah, nobody's at fault here. Yeah. Yeah.
[00:13:39] Adam Werner: So something as simple as keeping track of your capital loss carry forward. If you have investment losses in anonymity, yeah. There's a form right with your tax return if you had it the in that year in which you filed, but you have to remember to actually use that in future years to make sure again that you take advantage of the deduction when you have it. So just those kinds of things. You put that, I don't want to say pressure, but you put that on the professional because that is their job to keep track of all of that and use past returns to help prepare your current returns to avoid those little mistakes that can turn into bigger issues when it comes to filing taxes, not just from the point of saving you money, but hopefully saving yourself the aggravation of a potentially a future audit or just, you know, you claimed a certain deduction or you didn't claim certain amount of income, whatever that may look like, that can certainly compound itself. If the IRS ever comes calling and having a professional to rely on again, just having somebody in your camp on your side, I don't want to say it's priceless, but it's pretty darn good.
[00:14:49] Benjamin Haas: Yeah. So let's call that like reason number four to hire a tax pro. You don't know what you don't know. It's their job to be up on the code. It's their job to ask questions of you that maybe find those outlier situations that we just talked about and help you either take advantage or reduce the impact of. Whatever those updates or changes may be that you didn't really know about, and we can keep it that simple. That's the fourth reason to do it. Have the expert.
[00:15:14] Adam Werner: Yeah. And the last one being, hopefully if you're working with a good tax preparer, they can help reduce your risk of being audited in the future by comparing your returns, right, year over year, just looking for inconsistencies, or at least being able to point out based on their expertise, here are the things that the IRS is looking for. Right, or that could increase your chances of being audited in the future. It doesn't necessarily mean it's going to change what you're filing or how you're filing your return, but just kind of acknowledging that there may be certain items that the IRS is focused on in any given year. Can again, just help that anxiety and add some peace of mind that and you have somebody on your side helping you stay on the up and up. Because if there's anything I know about working with clients in the IRS, you do not want to be on the IRS is bad side.
[00:16:08] Benjamin Haas: Yeah, and I think we could wrap this all up in this really was not meant to be this pitch that, hey, everybody should go get the CPA. That's not it. But I do think when you think about not only the quantifiable ways, but maybe the ways that aren't as quantifiable. Quantifiable being the price that you're going to pay. I feel like we've worked with a lot of CPAs that are just very reasonable with fees, right? So I don't know if it's a mental hurdle for some people to just say, hey, I don't want to outlay that money, but again, until you pay a program or a software, you walk down to H&R block, you're the difference there in the money out of pocket, I don't see as great, you know, so hopefully we're giving some insight on places where you really should be kind of outsourcing. But even if some of those things don't apply to you more often than not, I'm going to suggest that people probably just get the help.
[00:16:59] Adam Werner: Yeah, I agree.
[00:17:01] Benjamin Haas: All right, sir. Well, we're only into like week one of tax season. We've got a couple more months of questions and documents and it's a lovely time of year. So hopefully it goes well for you and I'll hope the same for me.
[00:17:15] Adam Werner: Yeah. Yeah. And with it comes warmer weather.
[00:17:21] Benjamin Haas: Can't wait.
[00:17:22] Adam Werner: Bright sides to all of it.
[00:17:24] Benjamin Haas: Catch you next time. Thank you.
[00:17:25] Adam Werner: See ya. Bye.
[00:17:27] Benjamin Haas: Bye. Hey, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual to determine which strategies or investments may be most appropriate for you. Consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!
Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
Tracking # T006988