Women's Money Wisdom

Episode 205: How To Get Organized And Reduce Tax Season Stress

• Melissa Fradenburg, CDFA®️, AIF® • Season 4 • Episode 205

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Join Melissa Joy as she simplifies the often-overwhelming world of filing your taxes. In this episode, Melissa dives into strategies for managing taxes effectively while providing tools to enter tax season with confidence and organization.

Listen and learn:

  • How to get organized and reduce your tax season stress
  • Key points to start collecting important documents
  • Why paying "zero" in taxes may not be the win you think it is

Resources mentioned in this episode:

Links are being provided for information purposes only. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Pearl Planning cannot guarantee that the information herein is accurate, complete, or timely. Pearl Planning makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Pearl Planning financial advisors do not render advice on tax matters. You should discuss any tax matters with the appropriate professional.


The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://stephenPearl Planning.com/

Melissa Joy:

Welcome to the Women's Money Wisdom podcast. I am Melissa Joy, a Certified Financial Planner and Founder of Pearl Planning.

Melissa Fradenburg:

I'm Melissa Fradenburg, Financial Advisor. We dive deep into topics like work life balance, financial planning, personal growth, and the intricacies of the sandwich generation.

Melissa Joy:

Tune in for money conversations that every woman needs to have. Welcome to the Women's Money Wisdom Podcast. It's Melissa Joy here today and I want to talk about one of the most important topics that comes up this time of year. And I really think it's foundational to successful and happy money life. And it may be a shorter version of a four letter word, we're going to talk about taxes today. But I really want to walk you through how to nail the tax season how to get things prepared, get your tax returns out the door. And then I want to talk about what you can identify and find when it comes to tax season, that you can use all years so that you can have less stress in the future. And you can do more and better with your money by making good tax decisions. So this is one of the topics that we hear from people when they reach out to us and want to work with us and have a financial planning engagement, We hear it all the time. Even though we're not taxpayers, we're not CPAs, we hear "taxes are driving me nuts, I had a surprise where I owe money and I don't want that to happen in the future." And we know that there's a lot of stress when it comes to taxes, that's just causes stress and anxiety. If you're in a relationship that bumps up even more. And so I'm really framing this as a way to get through tax season. And then like I said, I want to, you know, for you to have a notebook or jot things down, put it in the Notes app, that you are going to review a few things as we discussed this, so that you will be able to do things better over time. So getting started, we're in early February and you know, you really can't do your taxes much before now, because you tend to get your 1099 toward the end of January. And for many of you who also perhaps have investment documents that are coming, 1099 forms from investment accounts, well, those don't often come until sometime in February. It may even take you more time, for example, if you're a business owner, or you have certain types of investments that result in something called a K1, those might not come out until March. So I really feel like this podcast is timely for right now because you're probably getting your documents over the last couple of weeks. And the first thing I would encourage you to do is gather everything up, create a family folder for tax items, and put everything in one place that's going to help you with your organization down the road. And in many cases, whatever last year looked like is going to look similar this year. So if you had everything you needed last year, by middle of February, then put a date on the calendar for a time that you won't be stressed, you're not running around, you're not in between appointments, or in the middle of a big work crisis, and schedule some time for yourself to review your tax documents. And then of course, either if you're self preparing, you're doing your own tax return through software, then you want to make sure you start entering things or if you are working with a CPA, or an enrolled agent, somebody who's going to file your tax returns for you, then I would encourage you to really think about making that appointment now to meet with them scheduling a time. For many of you, if you're like me, I don't actually meet with my tax preparer, but I do send them forms and I want to have a deadline for myself. So I don't procrastinate because the people that get in line first with their CPA or tax preparer are more likely to get your taxes done on time. Also, if you are thinking right now, you know"I've done my taxes myself, but I'd like to work with somebody this year, a professional" and or if you've been working with someone and you want to work with someone different, do not delay, you need to find that person right now. Because tax preparers tend to shut it down at a certain point of time in the season. There are few and far between. It's a profession where there's more demand, in many cases for personal tax returns than there are professionals. So get to work right now on finding the person that will be preparing your taxes. Don't wait until you have all of your documents at the ready. So you should know who's going to be preparing your taxes and you know, if it ain't broke, don't fix it. So if you've been using a process, whether it's self preparation, or a professional, and it's working, I strongly encourage you to continue and maintain because it can be difficult to make changes in terms of this. Now there there's a few things that may impact your taxes you could still do right now and we're talking to a lot of clients about this. If you're self employed, then you might have the possibility of putting money in, especially if you're solo self employed, if you just work for yourself, you don't have any employees, then you can put money into either a SEP-IRA, or sometimes a Solo 401K, which is a little more complicated. But those opportunities often exist into the next year. Same goes for IRA and Roth IRA contributions. Or even if you do put money into an IRA, and you're in a higher tax bracket, and then convert it to a Roth, in what's called a Backdoor Roth Contribution. All of those can be done up until when you file your taxes. So you have some time here where you could still have an impact on your returns from last year, or else you're in the amount of money you can put into investments. But also, as you go through your documents, you may notice things. So for example, if you are employed by someone else, and you receive a W2, you may notice that you didn't max out your 401 K. In fact, you would like to do more contributions. And you're able to do more contributions this year in terms of the cash that you have on hand, well do a review of those statements, and look and see how much you were putting in. And if you feel like you would have liked to do more, there is no time like the present to make that change. That is something when you put money into a 401 K or 403 B, that's something you need to do during the calendar year. So if you make the changes in January and bump things up a couple percent, then you would be able to get tax savings in the next year. Also, if you end up owing every year, and then you pay a penalty, because you didn't make enough estimated payments, the now may be the time for you to change things up and withhold more or else start making estimated tax payments. If you're confused on this, then do some research, you would need to typically make your first payment at the same time that you file your taxes if you're someone who owes every year. And then there would be additional payments due in June, September and again in January in many cases. So don't ignore those things and end up paying more through penalties because you have been under withholding. Go ahead and address that with your game plan and it may just be as easy as changing the withholdings on your paycheck so that more money is going to the IRS. Because I know when it goes out from each paycheck to paycheck, it's much less painful than when you have to write a check in April at just the wrong time, because it's a big surprise. So then, as you have everything pulled together, and hopefully you are getting things organized, so that you hand everything over to whoever's preparing your taxes or yourself. And then the time is set aside and you follow up. I would always, if you're using a professional ask, "Hey, do you see any opportunities that I'm missing? Is there anything I should be doing differently?" Some things that may come up in there, if you just have a lot of tax costs that are coming, let's say you have an investment portfolio that's taxable, you have a trust account or a joint account. And that account when you trade in it cost you tax wise in some years. And those costs tend to be creeping up on you. While it perhaps you aren't being tax aware on how you're investing or making the buy and sell decisions in the accounts. This is something that we specialize in and we so often see so many portfolios where taxes aren't being taken into consideration in terms of the way that they're investing. And so if you just have surprises there where you have a lot of capital gains being paid, but there's not a good reason for that, or there's a lot of distributions of dividends or income. Sometimes that can be a good thing and other times it may need a review. So you may need to get a second opinion. And your good CPA or tax preparer may point that out, like, "hey, a lot of this tax surprise for you is coming because of capital gains," and there may be a good reason or there may not be but if you work with a financial advisor that doesn't really get into the tax costs of what you own, then maybe you need to it's time to either have a frank discussion with them about your expectations for tax management or talk to someone else because I really think for the best financial planners and financial advisors, the tax situation is a critical component of their conversations and their thoughts for clients. So I would always be thinking proactively about hey, is there a chance for me to have a conversation with my CPA to say what should I do differently or is there something I'm missing? And you know, the you may need to get additional opinions you may need to explore things but this is a great time because For many tax professionals and CPAs, they really are not during the year kind of planning for you proactively in advance, it's more reactive, they get your information, and then they prepare a return that needs to be sent to the IRS. And so this is an opportunity without extra cost, because oftentimes, tax planning comes with a cost. For that time with a tax professional, this is an opportunity for you to get some insight on what your professional may be seeing. What we do with our clients to is we request a copy of your tax returns. And then we use a reporting system to help you understand what tax bracket you're in, that helps us to understand that too. And we can kind of give you an explainer of what's going on with your taxes. This is especially important if you are in a family where you're both working. And you're both, you know, kind of trying to decide or understand what the heck is going on. Why are we paying so much? Or how much are we paying, all of this kind of comes out in the report and is a great tool that we use to really understand fully your tax your current situation. And then when things change, let's say you have a really high income year coming, or perhaps one of you has a gap in employment, whatever it is, then we can look for the right opportunities, whether they be, you know, you're going to be in a lower tax bracket. So we can do some things that might otherwise cost you more in taxes. Or else if you're in a really high tax bracket, we really need to scramble to make sure that we can keep those tax costs down whenever there's a possibility for that. So I always encourage you, this is another you know, kind of thing you can put on your calendar, when you have the tax return done, do a debrief, whether it's with your CPA, or in many cases, I think it's great to talk to your financial advisor or financial planner, about what's going on, give them your information. Because if we're just kind of assuming based on what you've told us versus actually looking at the documents, there's much more information when we can actually look at your tax documents. And then for the most modern financial planners, they even have software like we do, where you're able to then run things through software, that's kind of it's a really good way to reorganize the information in a way that makes sense to you and also is useful for the professional. And then special note for retirees, your taxes may be different every year and your decisions on where you take money out of accounts, is critical in terms of taxes, you could go from always zero taxes and being in the 0% tax bracket, which as a financial planner, we kind of hate to see we I know that sounds ironic. But oftentimes, if you're if you're wealthier, there would have been an opportunity to fill up a lower tax bucket, which we can get into in another episode. But you know, you're gonna have a lot of control, whether you take money out of the money, you've saved, taxable cash and savings are your retirement accounts, the name of the game there is to control and be knowledgeable about and intentional about how you're kind of writing your own paychecks. This may come up with your parents sometimes, and especially if you've, for many of our listeners, I know you're kind of in that sandwich generation where you're both doing your own stuff, as well as taking care of mom and dad's, then in that case, you may need an extra conversation to make sure that you're doing things right. And that can pop up when you look at taxes. Like I said, it may feel like a big win if you were if you have $0 in taxes. But in many cases, that's kind of a cringe for a financial planner, because you could pay just a little taxes on a little bit more if you move some money around, which is a good thing because then over time, potentially you would pay less in taxes. The other thing I wanted to mention is that there can be so much misinformation when it comes to taxes. We've seen big examples of that, for example, in the employee retention credit, which you can hear ads on sports radio and on tick tock about how you may be missing if you're an employer and ERC and, and the IRS is having to crack down on legitimate use of this credit, because there's so much kind of graft and greed and fraud out there. But there's so many people that are on social media nowadays, especially Tik Tok, and sometimes on Instagram, that are saying, Oh, if you do this or that you're not going to pay taxes. I often find that you really need to take those things with a grain of salt, and talk to a professional don't get your advice from social media. Because there are so many people kind of touting strategies that are not legitimate. You know whether it is hey, you should form an LLC and then you won't have to pay taxes on things or expensing things that aren't appropriate to expense through a business. Just be aware, the watercooler talking, your friends, and or, again, social media is not the best place to get information about what you're doing right or wrong. I really feel like this is an arena where you need to rely on professionals. And I guess as I'm wrapping things up, you know, people do have to pay when you use a professional for taxes. And it's not appropriate for everyone, some people's tax returns are really straightforward and simple. And people really have a good understanding of their taxes. If you only have a few documents you need to upload, then that's all good. But if you do need to pay for your taxes to be done, there can be a lot of benefit to that, it can reduce your time, that is necessary to complete your taxes. And it can also significantly reduce your anxiety, which for us, thinking about money, wisdom, investments, and reduction in stress and anxiety is a good thing. But if you use kind of this list, and you decide it makes sense to have a professional don't feel like you're wasting money, oftentimes that can be money well spent. So I think I've taken you through all of the steps that I would suggest in this tax season to really nail it. Make sure you get organized, which right up front, put all your documents in the right spot, then make a plan for when you're going to do the work either getting all those documents in the right order to your professional or doing your returns yourself. And then at the end make sure to take some time to review and reflect because this is a perfect time to make a plan for the upcoming year and make all the changes that you might need to identify opportunities and have an even better tax season in 2025. Good luck with those taxes. I know it's not the most fun topic, but it's one we all have to deal with. Or at least I hope we do because that's you know shows you are dealing with money and keep up the good work as you get through this tax season.

Melissa Fradenburg:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in our conversations, please take a moment to like follow and subscribe. Wherever you're tuning in from helps us continue to bring these valuable insights every week head over to womensmoneywisdom.com. There you'll find tools, tips and a supportive community to help you gain financial confidence.

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