Taxanista Podcast

Do taxes sound daunting to you? It may sound very tedious. But let's face it, you probably didn’t prepare throughout the year. If you haven't done anything to get ready for taxes, in this week's episode, Angela Sticca Snyder explains how you should prepare for taxes. Part One of ‘Getting Ready For Taxes’ The first thing you need to do is gather up all of your tax documents like W2s or 1099s. It's tricky because there's a lot of 1099s. Do you have interest or dividends? Do you have a new investment? A lot of them don't mail out their statements until at least middle to end of February. If they rush out, sometimes they have to be amended, which means you have to get an amended tax return done. “If you get a 1099 miscellaneous, it means it's you're getting paid for services or work you did, but you're not getting taxes withheld.” – Angela Sticca Snyder (05:03-05:12) Try not to rush your investment statement, capital gains, and losses. You might have sold some mutual funds as well. Look at your statements and make sure that there is a cost basis on there. You've got what you sold it for. But always look for a cost basis.  If there's isn’t one there, start looking for it. Call your investment advisor to help you. We've done wages, interest in dividends, and capital gains. Think about student loans and mortgage interest statements. These are all documents that you're going to get in the mail or by email. If you don't get it mailed, don't think you didn't get it. Most financial institutions are having you log in for your documents. They want to get away from snail mail. Do you blame them? If you're older and don't know how to get online, or you don't have an account yet, you might have to reach out to your rep. Just because you don't get a statement, don't assume that you don't have anything to report. Investigate and check it out. Some other statements you might get if you have a Health Saving Account, or HSA. There are usually two documents that come if you have an HSA. Start gathering for it. Remember, it can only be used for medical expenses if you use it for something else. Don't do that again, because then it becomes taxable income to you. Keep any statement that says “important income tax document” or a tax return document. Part Two of ‘Getting Ready For Taxes’ If you have a rental property or if you have a small business, they probably sent you a statement. Make sure you gather up all of your rental income. Any deposit money you receive is not considered income. If you received a first and last month deposit, don't add that to your income because technically it's not yours. Hopefully, they're not going to trash your place, and get it back.  “There's a way to gather up all your business expenses that will make it less difficult.” – Angela Sticca Snyder  If you have to travel to that property, you might want to include that as well. If it's in a different state, gather up all of your rental and your small business expenses. If you get a 1099 miscellaneous, it means you're getting paid for services or work you did, but you're not getting taxes withheld. If you get one of a 1099 miscellaneous and there's income in box seven, then that means you're self-employed. Some people may not think they're self-employed, but they are.    If you have the 1099 miscellaneous, then you're going to need to start organizing your business income and expenses. Maybe you are in an office space, perhaps some travel mileage. All of those things are deductible on your business. Now, with your small business, you need to gather up the total amounts that you've spent throughout the year. You don't want to bring to your accountant a file full of receipts. You'll be charged for having them go through it. It's a good idea for you to go through it yourself. How To Connect Taxanista is a leading certified public accountant who offers reliable professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing and developing strategic plans. Do you have bigger issues? Taxanista can help you fight off the IRS. Angela knows how unsettling some of your struggles may be that’s why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/  

How Do Taxes Work? [Tax Brackets & Income Buckets] with Eric Elam of Cal Choice Financial “You should diversify your tax income streams because having multiple means you could control it.” - Eric Elam  How do taxes work in America? Let's break it down simply. Taxes might not seem like an exciting subject, but most people don't know how taxes work. Financial advisors are most guilty of this. It's about time for the facts on different investing you can do. We’ll learn about savings, various tax brackets, and all that cool stuff. In this week's episode, Angela Sticca Synder talks about Tax Brackets & Income Buckets, together with her special guest, Eric Elam. Part One of ‘How Taxes Work’ There's a thing called a progressive tax system. When you break into the next tax bracket, if you go $5 over, that means only five of your dollars are tapped at that next tax bracket. That's why there's also an effective tax. When it comes to savings, there are ways the IRS allows us to save money.  You may refer to these savings as buckets. The first bucket that will enable us to save is called the taxable bucket. It just takes it straight out of your checks now. They allow you to put it somewhere. And when you put it somewhere, any growth you get on it, it's taxable.  Then you invest in stocks, mutual funds, bond brokerage accounts, or any market investments that aren't tax-protected. You get multiple 1099s. It sounds like a tax document. It's like a love note from the financial institution. They’re sending you the best greetings for making money. You know that someone else is investing with you when you are in this bucket. Financial advisors all disagree about a lot of different things, but one thing they could all agree on is the correct amount to keep in this taxable bucket. But at the same time, you can have little in this bucket. “In order to be truly tax-free, you have to be free from federal tax, state tax and capital gains tax.” – Eric Elam The tax-deferred bucket is the most well-known bucket in the American populace right now. If you have a job, a traditional job, or you're with the government or school system you’re used to a 401k. If you're the owner of a company, highly compensated and making a lot of money, it might be something to look at. At least in place of a 401k. Those are some great things that are out there.  Now, all of these accounts have very different IRS tax codes, but they have three areas in which they overlap. First, when you put money into these accounts, you get a deduction. It's a deduction, so you don't have to pay the income tax on the amount you're putting in. Let's count your IRA, 401k, whatever it is. You're then able to pay taxes on $90,000. So, it reduces the reportable income. Work with your tax professional when putting away money. You want to make sure that you stay on that straight and narrow path. You're going to want to pay attention to that. It's going to be relevant to how you save money in these buckets. The IRS has a particular word for the money you take out of these accounts. It's treated as ordinary income because you originally earned it working. You didn't pay income tax on it. Now, you are going to pay income tax on it. You're still receiving that money as income just at a later date. What this means is that you enter a business partnership. The problem with this business partnership is the fact that someone can vote every year on the percentage of your business profits he gets to keep.  Unless you accurately predict your future taxes, you don't know how much money you have. You've saved 1 million bucks, with 30% taxes you've only got 700,000. If taxes go up higher, you have less available to you. The last thing all of these accounts overlap on is that eventually, you will be taxed. That means you have a little bit longer before you have to pull money out of your taxable investments. Do you think taxes will be higher for you in the future or lower for you in the future? Now, if we did know the day taxes were going to be higher, would that be an essential thing to remember? Part Two of ‘How Taxes Work’ It would be best if you diversified your investments through tax-free and tax-deferred, including your tax income streams. As things change, it may be more beneficial to have one than the other. Having multiple means you have control. There are two rules you have to pass to be a tax reinvestment in a qualified fitness bucket. The first thing is that you must be tax-free. This is confusing to a lot of people cause that's the name of the bucket. But in order to be truly tax-free, you have to be free from federal tax, state tax, and capital gains tax. Something that pretends to be tax-free is a municipal bond. We're often told on TV, these are significant tax-free investments, and they are always free from federal tax. But are they always free from state debt? No, they're not. It depends on the scenario; that's why you need to work with somebody who understands taxes.  “There are ways to be able to shift the money between buckets and minimize that tax bill over your lifetime.” – Eric Elam  How many people do you know that don't know a thing about social security? For one, it is taxable if you have other income on your tax return. It's imperative to come up with a great plan at the end of your life. Have money in different buckets. If you have a lot of tax-free money, you can pull that money out, and it doesn't affect the taxability of your social security. If you properly distribute your money among the three buckets, you can pay zero tax on your social security, and that can mean hundreds of thousands of dollars to you in retirement not having to pay that tax bill. So, money coming out of this bucket, it cannot affect your provisional income. Make sure you understand what's truly tax-free. The only other thing that even qualifies under the IRS guidelines for tax-free is life insurance. Still, it only makes sense in certain situations to also consider that as an option. For the three buckets, we have the taxable bucket, the tax-deferred bucket, and the tax-free bucket. Think about where your money is currently. Regardless of where it is, there might be an optimal way to shift your money into the correct buckets to take advantage of a tax sale. Many people are talking about the seed and the harvest. Would you rather pay if taxes never change? If taxes stay precisely the same, it doesn't matter. If taxes are identical, you put it in either. Your tax bill will be similar to the amount you have.  However, if tax has changed 1% up or down, one bucket is better than the other. If taxes go up 1%, then you're better off being in the tax-free bucket. If taxes go down 1% for you personally or for the country, it makes sense for you to be in the tax-deferred bucket. You should be working with somebody who can help you understand what that's going to be. How to Get Involved Every investment firm has principles and a mission statement, and they usually sound exactly the same. CalChoice Financial is different in almost every way, understanding different isn’t always better but being better is very different. Their principles were deliberately created with you in mind. At CalChoice Financial, they utilize relevant and modern solutions to create personalized plans for our clients which are as unique as they are. http://www.calchoicefinancial.com/ Taxanista is a leading certified public accountant who offers reliable, professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing, and developing strategic plans. Do you have more significant issues? Taxanista can help you fight off the IRS. Angela knows how unsettling some of your struggles may be; that's why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/

W-2 Vs. 1099 “No receipt, no deduction with the IRS.” -Angela Sticca Snyder  There's a difference between a 1099 and a W2. Most people get W2's. W2 is when you're an employee and you're working for someone else, and they're withholding taxes for you. It's the most common way of getting paid. 1099 on the other hand is when you're doing side work, maybe a gig or some extra work for somebody, or you have your own business and your customers then give you a 1099, that income is not taxed before you receive it. So, when you get your income, it comes to you in a gross format. With that, then you get to write off deductions that go against that income. In this week's episode, Angela Sticca Synder talks about W2 vs. 1099. Part One of ‘W2 vs. 1099’   It is imperative that you save your financial documentation. Credit card statements will not support you in an audit. What you need to have is a receipt that shows what was purchased. So, if you go to a store and they hand you that receipt, you need to make sure you take a picture of it to save it. If you buy something online, set up a folder on your computer that's called invoices or receipts. You want to make sure you have a copy of every item on your tax return. “It’s important to make sure that you report all of your income.” – Angela Sticca Snyder  Now that you're using a 1099 form, you want to make sure that you're keeping track of all expenses involved and carrying out your duties of whatever function you're doing to earn that money. If you're driving for business purposes, then you need to make sure you have a mileage tracking app. That's the second thing that's most important. When you get your 1099 form, there's a lot of good free apps out there. You can turn it on, and it just runs in the background. Technically and legally, you are supposed to have the starting and stopping odometer reading. Also keep track of where you went, who you went to see and the business purpose. Keep your mileage tracked and use an electronic calendar that's got your appointments. Part Two of ‘W2 vs. 1099’ Now if you're audited, you have a backup. If you're organized, do it now. Many business owners have more time to spend on making money than keeping track of this. As long as you've got outstanding support, you'll be fine. With a 1099 form, even if you're a sole proprietor or an LLC, you still report your income and expenses on a schedule C small business form.  It gets filed with your 1040 tax return if you report your gross income. which would be all of the income you received before any expenses. It is crucial that the total gross income on your schedule C at least equals or exceeds the sum of all your 1099. If you have 1099 that's greater than what you're reporting as income, you will automatically receive a notice from the IRS. They have a matching system. If they mismatch and your income reported is last, you'll get a notice.  “Anything that you incur in order to operate your business is deductible.” – Angela Sticca Snyder (4:56-05:02) Once you reported all of your income on schedule C, there are lots of deductions that you can take. Anything that you incur to operate your business is deductible. For instance, things like advertising, marketing, promotion, and anything you're doing to get your name out there. This also includes pins, business cards, or flyers, all that kind of stuff that you are expanding to get people to notice you.    Other expenses that you can incur would be retirement plans. You can set aside money for yourself in retirement: any office expenses or office supplies, your cell phone use, and even your home office. The home office is not the risk it used to be. So, for instance, if you do work out of your house and you have a home office, but you're conservative, or you're unsure, then take the standard home office because you can take that, and it doesn't require any supporting items. Again, the difference between the W2, which is when you're truly an employee and 1099, is that your social security and medicare taxes come out of the W2, and the employer also pays their half. When you get 1099, you report your gross income; you have deductions to come out of your net income, but remember there are no taxes withheld from your 1099.  Since you are considered self-employed, you're both the employee and the employer, so you then pay the self-employment tax, which is 7.65% times two, which is 15.3, so when you're a W2, you pay 7.65, and your boss pays 7.65. When you're self-employed, as a 1099 contractor, you are responsible for both sides. It is possible to have no income tax but have self-employment tax. When you are self-employed, you will always have a balance due on your tax return. If you don't make an estimated tax payment, there will always be tax due when you are self-employed and have any profit because that 15.3% goes automatically on the net profit from your schedule C, which is where you can report your 1099 income.   How to Get Involved Taxanista is a leading certified public accountant who offers reliable professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing and developing strategic plans. Do you have bigger issues? Taxanista can help you fight off the IRS. Angela knows how unsettling some of your struggles may be that’s why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/

Tax Brackets Explained for 2020 The IRS revealed the 2020 tax brackets, and it's never too early to start planning to reduce money owed for taxes. You can start thinking ahead about how to handle your 2020 finances in the most cost-effective way. In this week's episode, Angela Sticca Snyder explains tax brackets for 2020 and why they are important. If you had the choice between a 0%, 12%, or 37% tax bracket, which one would you choose? Some of you might respond with, "I'm going to pick the highest tax bracket there is. I'm going to pick 37%. What's 0%?” The 0% tax bracket means unemployed. You want to be at the highest tax bracket you can be at. I'm going to use simple and easy to understand numbers. They're not going to be real tax brackets. For instance, let's say you made $100,000, the tax bracket from zero to $50,000 was 0%. Then, from $50,001 to $100,000, it was 15%. Then from $101,000 on up, on to 90%. Let's say I earned $100,001. I'm in the 90% tax bracket. It sounds horrible, doesn't it? But in the 90% tax bracket, my $1 is getting taxed at 90%. My zero to $50,000 has no tax on it. My $50,001 to my hundred thousand has the 15% bracket. You always want to be in the higher tax bucket because it's only the incremental amount above that is being charged.   It's your taxable income that is important, not your gross income. We've got our wages, we've got our 1099, and our interest, dividends, or capital gains. We've got adjustments that come off. Maybe we have self-employed health insurance, or we contribute to our retirement account and the standard deduction. We itemize our deductions. We have our gross income, then our deductions, and that gives us our taxable income.  That is the number that you look at to determine what tax bracket you're in, not what's on your W2 or your 1099. I hope this helps you achieve the highest tax bracket possible. How to Get Involved Taxanista is a leading certified public accountant who offers reliable professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing and developing strategic plans. Do you have bigger issues? Taxanista can help you fight off the IRS. Angela knows how unsettling some of your struggles are, that’s why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/  

Difference Between LLC and S-Corp “You’re Taxed Where You Do the Work” - Angela Sticca Snyder (01:24-01:27) Finances play an important part in any business. Every business must file tax returns and make payments on income at the state and federal level. It is important to document the cash flow for business analytics. In this episode, Angela talks about the difference between an LLC and S-Corp. Part One of ‘Difference Between LLC and S-Corp’ The first thing I want to know is if you have an LLC. If you don't have an LLC already created, you need to get one. That's the first thing you need to do to move your business on the path of growth. So, we're going to be talking about two different instruments today. Number one is an LLC. An LLC is something you get registered within a state. “You’re supposed to file in all the states where you are present and earn income.” – Angela Sticca Snyder (01:47-01:53) There's a big misconception that where you register your business is how you're taxed. That's not the case. I have clients that will come to me and say that they got their business registered in Nevada. Or, in Wyoming or Texas. There are definitely good legal reasons for that. But there's not always good tax reasons because you're taxed where you do the work. LLC is a limited liability company. There's no such thing as a federal limited liability tax return. If you're an S-Corp, how are you taxed? And that's when I get the deer in the headlights. What I mean is if you created an LLC and you didn't do anything different than you could be what's called a disregarded entity. And what that means is that you'll file a schedule C on your personal return for your business activity. You're going to be considered a partnership if you formed an LLC with an unrelated party by default without any election required. The other option is the S-corporation status. It's considered a flow-through entity. A flow-through entity is where the entity itself gathers and organizes the income and expenses. But it's passed through or flown through to the owners in the form of a K1. So, a partnership and S-Corp are considered flow-through entities. That is the business itself will not pay income tax. The income or loss will flow through to the individual owners. They will report on their own individual tax returns. Many small businesses are interested in forming an S corporation. S corporation can be very helpful for a growing business. You're required to run payroll when you select status at a top-level. You've got two components of your income out of an S corporation. You have wages that come to you in the form of a W2 and that has the social security and Medicare tax on it, which is 15.3% for both the employer, which is your business and the employee, which is you. You also get a K1 which is somewhat like 1099. It’s the other document you get to report your income. If you're an S corporation, that income escapes the social security and medicare tax. That's why people are so anxious to create S corporation returns. Part Two of ‘Difference Between LLC and S-Corp’ Another rule of S corporation is that you're required to file payroll on a reasonable basis and on a reasonable salary. That way you cannot avoid the self-employment tax on all S corporation income. There is no right or wrong way in which to elect the S corporation status.    “Wait until a business has made some income and it is cost-beneficial for the business owner.” – Angela Sticca Snyder (06:38-06:46) We need to start having conversations to determine the best time once your business is netting about 40 to 50,000. Otherwise, the only person that really makes out usually is the accountant. Like myself. For instance, let's say you created an LLC and we put you into an S Corporation right away, but you hadn't started earning any income yet. In that instance, we would still be required to run payroll as a condition of the S-Corp status. We would have to file an S corporation tax return. There would be very little benefit to you and more filing fees that the accountant would collect.   The S corporation tax return is due one month before the normal business return. So, it is due on March 15th and an extension would need to be filed. If you can't make that time, the extended due date pushes it out until September 15th. It is crucial that you make sure that you meet those deadlines. The penalty for failing to file by the extended due date is $195 or $200 per shareholder per month. If there's two of you, then it's $400 a month and it does not end. It's super important that you make sure that you have adequate records and file on time. Something also to keep in mind about S corporation is you are required to report the balance sheet. If your gross income is greater than $250,000 more than likely if you're in an S corporation status, your gross income will be above the $250,000 if you have to report a balance sheet. Now's the time to go ahead and get your accounting software started. So, if you're not currently utilizing anything, now's a great time to get going. We personally recommend XERO for bookkeeping and accounting software.   If your business is netting at least $40,000 to $50,000 dollars and you have one individual involved in your LLC, it's time to chat for additional members of your LLC. Then the net income would need to rise to determine the best time for us to chat. Once we do chat, it's super simple. We determine the state you're located in and the state it's best to get organized. Once we do that, then we make the election with the IRS for you to be taxed as an S corporation. Once we make that election, after many weeks or months, you will get a letter back from the IRS. It says, congratulations, we've approved your selection status as of X, Y, Z date. It is super important that we get a copy of that letter that you received back from the IRS. So that we can put it in your permanent file and also make sure that the correct date that we requested was accepted at the end fortunate circumstance that the date where you requested was not accepted. How to Get Involved Taxanista is a leading certified public accountant who offers reliable professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing and developing strategic plans. Do you have bigger issues? Taxanista can help you fight off the IRS.  Angela knows how unsettling some of your struggles may be, that’s why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/

It’s Year-End Close! Are You Ready? “Invest in A Good Bookkeeping and Accounting System.” -Angela Sticca Snyder (06:07-06:10) Are you prepared for the year-end? It’s critical to review your business financials as this information will be used to prepare your tax returns. How else are you supposed to analyze the performance of your business? In this episode, Angela Sticca Snyder will give you some actionable year-end accounting advice that you don’t want to miss. Part One of ‘It’s Year-End! Are You Ready?’ If you’re sitting on a huge profit, you might want to make some asset purchases before the end of the year. For instance, if your highest tax bracket is 30% and you buy a new computer for $1,000. That means you saved $300 on your federal taxes. So, it’s a good time to take a look and see everything that you know you’re going to need to buy soon. It’s a good idea for you to buy it now before the end of the year.   “Keep in mind that you’re technically supposed to have all your taxes paid by the end of the year.” – Angela Sticca Snyder (02:13-02:17) For some reason, I have received notices about penalties. The tax was due back in December or at the latest April 15th, but they didn't get it filed. They filed an extension but only an extension of time to file and not an extension to pay. What you can do is you can go to irs.gov/payments and go ahead and set up an account and make a payment that way. Nobody wants to make a payment to the IRS, but you also don't want penalties or interest. So, that's one thing to keep in mind. If you think you have any balance due or you think you've got an under-withheld for your taxes, do something about it. Make sure that you file on time to cut those penalties or put in estimated tax payment. It's super simple to organize your taxes. We have amazing tools to make your life easier in terms of tax and accounting. Even if you don't do anything with it throughout the year and you have it for tax time, at least you've got it organized. If you don't have some type of checks and balances, something's going to fall through the cracks. Part Two of ‘It’s Year-End! Are You Ready?’ Here’s another cool tip for you. When you get 'frequent flyer points' or 'credit card points', don't use it for business purchases. Your business buy would be deductible anyway. You can use it for other things like Christmas gifts for a holiday item, or for yourself.  “If you’re sitting on any old capital losses or mutual funds, consider selling some of your investments.” - Angela Sticca Snyder (03:49-04:03) There’s another important thing you need to keep in mind. If you have a flexible spending accounts or an HSA, make sure to maximize that before year-end. It’s a good idea to fund your HSA each year because that money can grow, and it comes out tax-free for medical purposes. When you pull it out in your later years with your flexible spending account, you've got to use it or lose it. So, look at your flexible spending account and see if there's anything in there, any stock sales.  Now is a good time to sell some of your investments or your mutual funds if you're sitting on any old capital losses. The market is up so high that you would be able to offset those capital gains with any leftover capital loss. Remember, you're limited only to 3000 a year. So, if you capture some of those gains, then you can offset it with some of those losses and not have to pay it. To end this podcast episode, make sure that you start the year off right with a mileage tracking app. Consider getting some type of good bookkeeping and accounting system. No receipt, no deduction. How to Get Involved Taxanista is a leading certified public accountant who offers reliable professional tax and accounting services. She is a consummate strategist. She loves listening, analyzing and developing strategic plans. Do you have bigger issues? Taxanista can help you fight off the IRS. Angela knows how unsettling some of your struggles may be that’s why she offers private consultations for your business and tax matters. Increase your profit by knowing your numbers. Reach out to her now. https://www.taxanista.com/